PEST Analysis for Newspaper Industry

Using the PEST analysis to assess the macro environment of the newspaper industry
shows that the technology and recession are two of the major factors that have been
affecting the newspaper industry as well as the socio cultural side.

Technology

The Internet, a powerful and advance technology, has changed the model of mass
communication. The Internet has had a major impact on the external environment of the
newspaper industry and has been gradually substituting the prints. It has also increased
competitiveness with easy entry barriers requiring low capital cost and resources, which
has been a threat for many established prints publications.

With Internet connection in almost every home, readers open sites that offer nearly
everything found in the newspapers. Many newspapers, such as Guardian and Verdens
Gang (Times, 2009), have had to compliment their daily prints with online version and
further updates throughout the day, instead of waiting for updates till the next day’s
print. Online news medium has also attracted incremental readership from other
countries that were not as accessible to news in the days of prints.

The technological progress and internet has changed readers’ habits and their
perception of news, reduced readers’ demand to prints and resulted drop in circulation
that has affected newspaper industry’s economy and drop in advertisement revenue -
23% drop in 2008, according to Newspaper Association of America (The Economist,
2009).

According to Levine (Time, 2009), media integration, such as audio, video and text
transmissions, is a fresh angle to the traditional communication model. It is an
opportunity not only for the newspaper industry, but also for readers as information
consumers and citizen journalist.

Economic Environment
Technological progress has impacted the economic side of the industry’s external
environment. It has been a threat for many companies that have failed to keep up or
went out of business and lost their market share that resulted in a high rate of
unemployment in the U.S. and Europe. The newspaper industry has faced high copy
prices, declining advertisement sales, loss of classified advertising, falling margins and
drops in circulation, especially during the current financial crisis.

The internet weakened the advertising revenue of newspapers and became a

convenient medium for classified advertising. Free services, such as Craig's List , have
had a negative impact on the classified advertising departments of many newspapers,
some of which depended on classifieds for 70% of their ad revenue, according to
Fitzgerald (Editor & Publisher, 2009).

Despite the threats, such as difficulties facing newspapers in online advertising,

shrinking staffs, and declines in readership, circulation and revenue; the Internet is an
opportunity to expand a newspaper's reach and increase production and revenue.

Socio Cultural Environment

The Internet integration into the industry has impacted the social factors a newspaper’s
external environment. It has influenced its customers’ reading behavior and taken up a
significant part of their daily news habits. Low internet subscription cost and search
engines have changed readers’ perception and value of prints, enabled readers to
access and scan Internet news faster and in more topical and visual way.

Demographical change is another threatening factor to the newspaper industry. The

number of news readers has grown between different age groups and noticeably in the
age of 18 to 24, as per Pew Research Center (The Economist, 2009); however fewer of
them pay. In the next few decades old-school readers of the prints will be replaced by
technology driven news consumers and the printed page will become something of the
past.

Political
The impact of political change on newspaper industry is no less significant than it is on
individuals – perhaps even more so. An unexpected resignation, a terrorist act, or
election can completely transform the political landscape and draw readers’ interest.
According to the Economist (2009), different political parties affect the readership
interest based on their political power and beliefs such as readership increased during
the 2008 U.S. presidential campaign. The peaks and valleys of the political environment
have also had a significant impact on social and economic environments of the
newspaper industry.