Zimpapers: A profitable media company that is in internet trouble

L.S.M Kabweza Avatar

Zimpapers, the government owned media company that owns Zimbabwe’s dominant newspaper titles (The Herald, Sunday Mail ), a relatively new radio station, a soon to be launched TV station, announced its 2016 financial results last week.

The media company competes with the two other major media companies, the privately owned AMH (which owns NewsDay and other titles) and ANZ (which owns DailyNews). These other two do not announce their results because they are not listed. Zimpapers therefore provides much needed data on how media businesses are doing, which gives better perspective on the state of media companies in Zimbabwe and their strategies.

We’re ofcourse mainly interested in the internet component of the results. Unfortunately, Zimpapers didn’t provide any data on this, itself a very telling move, especially since they used to. In 2015 for example, Zimpapers disclosed that internet revenue was about 3% of the group’s total. That they won’t disclose this important number anymore might point to the growth not having happened.

Anyway, the basic numbers are that Zimpapers made a profit of $2.02 million, which is about 26% down from the previous year.

For a company whose market has been heavily disrupted by the internet, them not even acknowledging the internet’s key role in shaping the media industry into the future is interesting. I have no doubt that the board and management at Zimpapers know that the internet is impacting their business in a big negative way so far, and that the rate is accelerating. I suspect though that they haven’t yet found how to deal with this situation, and are so far choosing to kick the can down the road. If it is the case, it is a grave mistake.

The newspaper is ill

I know this has been said so many times in the past it’s starting to sound empty, especially when a company like Zimpapers announces a $2 million profit. However, that it is happening slower than many predicted, doesn’t mean that it’s not happening, and it certainly doesn’t change anything about where print newspapers are headed.

In Zimbabwe, about a decade ago, the internet coming to mobile phones set in motion the slow death of newspapers.

The huge shift that happened was that where the internet used to be a tool for the elite, mobile took it to the people. It was now possible for ordinary people to consume news on a small screen they carry around in their pocket. Yes, it has taken many years for that access to spread to ‘everyone’, but no one can deny that the change is ever accelerating.

In fact it is this deceptively slow shift that convinces the skeptics nothing has changed. And that’s how such change happens; ever so slightly every day for a long time, it is hardly noticeable if you’re not paying attention. Then one day it’s as if everything has changed overnight.

Overnight we moved from access to the internet priced at $100 for 1GB to now $5 unlimited WhatsApp for a month. Overnight, we have free WiFi hotspots dotted across the major cities.

It is now difficult to come across an urban individual of the 18-50 age range that does not use WhatsApp on a daily basis. These are the same people that the newspaper advertising business model targets.

It is easy to assume that on the internet, newspapers will enjoy the same dominance they had offline. But it is a wrong assumption. The internet upends a lot of things about the newspaper business model.

Loss of distribution control

Before the internet, a few licensed media companies controlled distribution. People that wanted to catch up on news had to buy newspapers, tune in to the radio news or sit for the 6 and 8 o’clock news bulletin on TV .

Starting a newspaper (or any of those 3 media platforms) was really hard. You first of all had to raise the money for a printing press, or at least enough money to outsource this function. You needed vans, motorbikes, people and logistics to deliver the paper. Without figuring these out you couldn’t start. Ofcourse you also needed a license, which the government would not give out to just anyone that asked, even if you had the money.

The internet has done away with all this. Today, Zimpapers cannot invest in a new printing press and consider this an advantage over, say, NewZimbabwe.com, or a completely new entrant on the internet. The infrastructure to distribute news on the internet is a free WordPress publishing platform and even free hosting. Literally, anyone that has something to say, and can get a $40 smartphone and a free WiFi hotspot, can compete with Zimpapers for readers and advertisers.

The reality of losing control of distribution is something we covered here some time ago in an article titled Resellers vs Product Builders, or how Econet may miss the internet opportunity. The same free distribution realities above, are affecting the Econet business today especially as they seek to expand into connected devices. Loss of distribution control will probably make the most impact to the group in terms of growth opportunities.

Zimpapers is structured for offline

I brought up NewZimbabwe in the previous section because it’s an interesting example of the threat that Zimpapers faces.

Today, The Herald and NewZimbabwe.com have about the same traffic online. This theoretically means they have about the same revenue opportunity there. The disparity is clear when you look at the staff numbers. I can confidently estimate that NewZimbabwe employs at most 10% of the people resources that Zimpapers puts into a copy of the Herald.

I’m not ignoring that the one targets the diaspora while the other targets Zimbabwe, the point is that both employ journalists that create content for readers, and their revenue model is to sell the size of that reader audience to advertisers.

You may ofcourse argue that The Herald’s employees also produce the very profitable offline newspaper in addition to the online version. That’s actually the point, The Herald doesn’t have an online edition at all – it’s just a copy of the print version. The online edition is based on a cost structure it can’t even support with its revenues. As print revenues decline, the Herald online will also lose its resources, exposing it to the realities of an internet that demands a completely different thinking about journalism business models.

The current offline/online Zimpapers structure doesn’t incentivise the internet business unit to innovate because that business is not paying any costs. That business likely doesn’t know if it’s doing well or not. This is not an effective way to prepare for a future where print circulation and revenue will continue to decline.

On the internet, Zimpapers is competing with Facebook and Google for ad dollars

And so far they are losing that competition. Unless some radical changes are made to the business ofcourse. In its current state, Zimpapers is offering advertising real estate that’s not differentiated. Banners are banners whether they are on The Herald, NewsDay or random US based website.

In terms of effective targeting of adverts, Google and Facebook provide a better service than publishers. Unless the publisher’s content and audience is special enough that brands in niche industries want to associate their message with that publisher’s content, a banner is a banner.

To put it in other words, there has to be something special about the Zimpapers content to make advertisers want to directly place their ads against it. If all an advertiser wants is to target someone in Zimbabwe in the 24-35 age group, who is interested in accessing financial services, they are better off going directly to Google and letting the search company’s algorithms find those Zimbabweans whatever website they are on.

And a lot of local brands are already doing this. Again, unless the content is highly differentiated, a banner ad slot on the internet is just a commodity, and there are 10s of millions of such slots that Zimpapers is competing with. Ad slots are not the scarce commodity that newspapers used to own before the internet.

In fact, on the internet the Sunday Mail’s banner slots are as undifferentiated as H-Metro’s

This ‘internet ad slot as a commodity’ reality is already playing out at Zimpapers itself.

Consider the case of the Sunday Mail. Offline, it is a strong sunday weekly with advertisers paying significantly more than any other Zimpapers print publication, to reach its audience. The paper’s advertising real estate is scarce and demand for it is relatively high. There’s only one Sunday Mail print edition and if, as an advertiser, you want your message heard in Zimbabwe you have to pay dearly.

On the internet however, The Sunday Mail’s advertising real state is just a commodity as good as the other Zimpapers publications. Or, as bad as the 10s of millions of undifferentiated slots that Google sells. Or the millions of Facebook user newsfeeds in Zimbabwe.

It’s no wonder therefore why The Sunday Mail is visibly struggling to get any meaningful advertising revenue online. Just browse through the site on any given day. Today for example, all its ad slots are given over to Google clearly because no direct advertiser will buy them.

The local companies with ads on the site bought them through Google. My estimate is that Zimpapers gets a maximum of $5,000 a month from Google ads on The Sunday Mail. And that’s a very generous estimate. Such an amount is way too small to support the journalism work that goes into that site.

Essentially, the group’s most efficient money making title offline is easily one of the company’s biggest loss makers online.

Just to relate it to the earlier example; I am confident that on the internet NewZimbabwe.com is more profitable than the Sunday Mail.

Where Zimpapers is investing tells a story

If Zimpapers had launched a couple of new internet-only media ventures by now, and even if all had failed, I’d be confident that the company knows what is going on and is trying to figure the internet out. I have seen no sign that the company is at least attempting to innovate to remain relevant in the internet era.

What I have seen are new projects premised on the traditional media business models that have already been disrupted by the internet. Two new key projects the company has invested in over the past couple of years are the Radio station called StarFM, and the upcoming traditional TV station called ZTN.

To be clear, I’m not saying there’s no opportunity to be profitable in these new traditional ventures. In fact, based on the results last week, StarFM made about half a million in profit. Future looking investment should be in figuring out mobile and the internet because those are the growth areas. Traditional media models like radio and tv maybe profitable in the medium term, but are surely being eaten slowly by the internet.

Not Just the Zimpapers

While I focused on Zimpapers, this is actually an industry wide problem. Zimpapers just happens to be the publicly listed media company locally. I do suspect though that Zimpapers has more to lose than other players, if they don’t adapt quickly to the new internet realities. Especially because their mandate is more than just a business one, and 2018 is here.

6 comments

  1. Tinashe Nyahasha

    Hey Limbikani this is one of the best articles I have read this year. A great analysis of business models there. I wish all business leaders will take these lessons including those that are at the helm of ‘internet businesses.’

  2. Keith

    When LSK writes, you have to read!

  3. Richwell Phinias

    Well thought out. You should write more boss!

  4. L.S.M Kabweza

    thanks @Tinashe @Keith @Richwell

  5. Tindo

    What you didnt tell your readers is that 100% of all the news on Newzimbabwe.com and shifted word for word from herald, sunday mail, newsday. You find one or non story the whole week which is Newzimbabwe.com original. They always wait until herald update their website around midnight. I actually like the model of Dailynews.co.zw, they dont rush to put their news stories on line. They update well after 2PM. This makes it sure that lazy publications who survive on other peoples work are starved

    1. L.S.M Kabweza

      I’m confident they don’t steal stories.
      You say 100% of their articles are stolen. I opened NewZimbabwe and the first story there is http://www.newzimbabwe.com/news-35485-ZRP+evicted;+fails+to+pay+rent+7+years/news.aspx which looks original. Can you point me to where it was stolen from?

      To be clear, even stealing 10% would be a problem. Can you post a link to a story they took from another publication?

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