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Consultancy Report to the Daily Sun on how it can compete in a declining market

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EXECUTIVE SUMMARY

This report examines the challenges facing Nigeria’s Daily Sun newspaper as an agent of change and watchdog of the society. It reviews the survival strategies adopted by the company in its strategic business of nation-building and interfacing between the people and government in a largely uneducated, poverty-stricken society. In addition, the Nigerian economy has been scorched by global recession, and the increasing impact on the Newspaper industry makes Daily Sun a good choice for this study. Admittedly, the daunting obligations of nation-building and challenges of achieving sustainable competitive advantage are most likely to annihilate profitability and push the publishing house out of business if adopted solutions continously prove ineffective. This study therefore assesses the viability of print advertising, consumer-oriented marketing strategies, responsive business models and downsizing, as tools for reducing production cost and creating stakeholder value.

INTRODUCTION TO THE REPORT

This study weighs possibilities that the Daily Sun (also referred to as the Sun) will survive beyond 2030 only if it embraces mergers and acquisitions, changes in traditional ways of gathering and circulating news, and experiment with publications in local languages, among others. The discourse is intended for the Chief Executive Officer (CEO), with focus on brief analyses of the company history, its business framework, and past achievements, including structural loopholes and workable recommendations.

CLIENT BRIEF

As a media organization, the Sun plays the role of a public umpire but is also a business venture which employs suitable and contextual business models for sustainability (Chesbrough and Rosenbloom., 2002). Interestingly, findings from the media in intermediate and developing countries show that the newspaper/broadcast industry is booming whereas facts from developed countries suggest a contrast (Bagdikian., 2000). Although most researchers believe the disparity is an outcome of choices in adopted business models, many other scholars point to the use of multimedia outlets and new media technologies (e-Readers, tablets and smartphones etc.) as distribution channels by internet companies such as Google, Twitter, Blogs, WhatsApp and Facebook that deliver information in formulaic manner. Although developments in these global media platforms have been criticized for the plunge in print advertising income since early 2017, this trend has continued with many previously Daily Sun advertisers switching to other competitive online podiums. From this backdrop, finding ways through which the Sun can compete favourably in a declining economy forms the basis of this research (Collins., 2011).

Lack of critical research on workable business models tend to be paying off for traditional media in intermediate and developing economies as earlier asserted. Therefore, this study seeks to identify some of the business models employed by media organizations in India, China and South Africa for further examination and to convince the Sun newspaper CEO that there are still viable business opportunities for Nigeria’s newspaper industry (Tuchman., 1973).

BACKGROUND

Nigeria is one of the world’s most populous countries, with an estimated population of over 170 million and about 250 multi-cultural ethnic groups who speak more than 40 dialects and have diverse religious backgrounds. Its background is that of a heterogenous makeup with multiplicity of cultures and interests which presents the media, and particularly Daily Sun, with an uphill task of educating, informing and entertaining the masses in line with its objectives as a business venture: building relationships, sustaining profits, and participating in social and civic activities (Wood., 2006).

According to Udoakah (2012), information has enormous powers, but in spite of the media’s colossal position, championed by Daily Sun in Nigeria, the newspaper industry has experienced stunted financial growth, with worse impact from unfavourable governmental policies, poor reading culture and the abysmally low disposable income of an average Nigerian citizen. In addition, the global economic recession which manifests in dwindling oil prices and reduced Gross Domestic Product (GDP) forcefully increased the cost of Daily Sun newspaper productions thereby requiring a dynamic business strategy that ensures value creation and sustained profits in a society with about 60% literacy level (Ekeanyanwu., 2015).

The Daily Sun gradually moved from a phase of prosperity to decreasing fortunes in the last five years and is facing a chronic existential crisis that demands new survival strategies against imminent bankruptcy. This economic situation has forced the news outlet to lay off staff and grapple with other measures to remain in competition. Moreover, several newspaper houses around Nigeria and the world have experienced drastic changes in their business operations thanks to new developments in technology and social media which significantly changed the nature of news delivery and consequentially thinned advertising revenues in print media as advertisers seek better visibility and audience for their messages (Weezle., 2010).

With newspaper circulation strength of about half a million in a country inhabited by over 170 million, there is no doubt that Nigeria’s print media is currently in crisis and requires reliable, productive and sustainable business models to compete from a position of strength.

This research aims at providing answers to the following questions:

  1. Is value creation important to the newspaper industry?
  2. What is the current situation of print media in Nigeria?
  3. How will the Daily Sun achieve competitive advantaged?
  4. How will the media house sustain profits in both short and long-term?

 

CLIENT PROFILE

Company History

The Daily Sun is a Nigerian daily print newspaper company incorporated on 29th March, 2001 and headquartered in KiriKiri Industrial Layout, Lagos. It started production, initially as a weekly newspaper, on 18th January, 2003 and by 16th June, commenced operations as a daily publisher. In 2011, the company reported a daily print run of 130,000 copies and around 135,000 on weekends, with a record of 80 percent average sales which crowned it as Nigeria’s highest selling newspaper (Stanford., 2011).

The Daily Sun appears in similar format as the U.K.-based popular Sun newspaper and has a target audience made up of young adults between 18 and 45 years old, spread across the B and C social economic class (op cit.). Readers are treated to fresh reporting perspectives on sports, arts, culture, religion, crime, economy and politics, among others. Though considered as relatively young, the newspaper house has won several awards for disseminating quality information through Facebook, Twitter and its website.

THE COMPANY TODAY

Dr. Orji Uzor Kalu, the ex-governor of Abia State, holds position as Chairman of the publishing house. Mike Awoyinfa was the first Managing Director/Editor-in-Chief until January 2010, when Tony Onyima took over reins of office. In the same year, Dimgba Igwe (former Deputy Editor-in-Chief) was replaced by Femi Adesina but Dimgba and Mike retained positions as members of Daily Sun board of directors. In December 2013, Adesina replaced Onyima as MD/Editor-in-Chief, and in June 2015, Eric Osagie took over from Adesina and has taken gigantic steps to relaunch Sun newspapers Daily, Saturday and Sun publications in line with acceptable international standards.

The Sun newspapers has made a significant impact on the Nigeria’s cultural and political scenes, having maintained a consistent and unshakable commitment to excellent journalism in both local and international spheres, also issuing honorary awards to deserving individuals, groups and organizations in different sectors of the Nigerian economy (Jide., 2018). It has won numerous awards too, one of which include the Pan-African Investigative Journalism Awards, issued by the Forum for African Investigative Reporters (FAIR) in October 2009.

To boost its reputation as Nigeria’s true King of the Tabloids, the Daily Sun in 2005 merged with Soccer Star, one of Nigeria’s widely read sports newspapers.

The Sun newspaper presents its contents in bold, objective, dramatic, and appealing style that makes it “the people’s voice” and consequentially generates returns from stakeholders and the society at large. Its core values are innovation, integrity and leadership. The company has 42 out stations around the country and boasts of solid partnerships with local and multinational enterprises like Globacom, Nestle Nig. Plc, MTN, Union Bank, Coca-Cola, Nigerian Breweries Plc, Diamond Bank etc.

THE BUSINESS AND MARKET ENVIRONMENT

The Sun newspaper is a limited liability company, and as such, is not listed on the Nigerian Stock Exchange (NSE). It is not also required to publish its financial statements in the media. However, Bimbola Oyesola (2016) reported a total of NGN143.1 billion accruing to Nigerian newspapers as advertising income between 2006 and December 2015. Further analysis from the financial statement showed the year 2014 recorded NGN25 billion as the peak earning, with a slight decline of NGN23.7 documented at the end of 2015.

According to a special edition of media facts from MediaReach spanning over a ten-year period (2006 – 2016), Bimbola added, earnings from advertising in Nigeria’s print media stood at NGN4.4b in 2006, NGN4.8b (2007), NGN4.9b (2008), and skyrocketed to NGN15.8b in 2009. Between 2010 and 2014, the ads income leaped from NGN16.5b, fell to NGN 15.4b, slipped further to NGN9b, increased again to NGN18.5b before reaching the highest point, NGN25.8b respectively. The figure plunged by NGN2.1 in 2015, with Lagos and the northern part of Nigeria attracting the highest expenditure on advert placements year after year. Glo, Guaranty Trust Bank and MTN, among Daily Sun’s business partners, occupied the top three list on press advertising in the period under review.

 

Image 1: Global media advert earnings between 2001-2017 (Source: GroupM)

“Extinction is most unlikely for the print media,” said Phil Myer, a Knight Chair in Journalism, School of Journalism and Mass Communication at the University of North Carolina. In his opinion, the most successful applications of the Internet will be coming from unexpected digital sources in recent years and current trends prove that traditional media organizations are facing risk of closure only because they have shown unwillingness to invest enough in new technology-based business models (PRC., 2006). The loss of revenues from classified advertising and increasing internet media competition poses difficult challenges to the Daily Sun despite its application of effective strategies in content creation, customer engagement and marketing.

 

The Meta Model

Barriers presented by administrative rednecks, complexity of bureaucracies, and incompetence on the part of managers will likely forestall a company’s adaptation to new business culture or adoption of effective changes in grammar and inner dynamics when factors from outer dynamics have been altered (Beinhocker., 2006). The Daily Sun CEO will be used as the subject of this study to ascertain how administrative barriers impact of the newspaper company’s growth strategies in a dwindling economy, including how its current corporate culture can be transformed to an innovative one (Obijiofor and Green., 2001).

The meta model, as a higher order analytic framework, offers a comprehensive picture of factors with direct impact on an organization’s structure and functioning (Matthews., 2017). This model will be utilised in analysing the current situation of Daily Sun newspaper. See image 2 below:

 

Image 2: The Meta Model (Source: Matthews Robin)

As Matthews’ meta model shows, outer dynamics are divided into two factors: the competitive (co-competitive) dynamics and macro dynamic factors. Explained from a political perspective, the macro dynamics factors refer to effects from the conservative parties’ opposition or challenges posed by their followers, including technological factors created by competition from social media giants like Google, Facebook etc.

On the other hand, competitive/co-competitive dynamics factors address issues on the company’s customers, particularly readers. These outer dynamics with impact on the Daily Sun’s sales margin can as well be summarised with PEST analysis, which evaluates the company’s business environment to identify its strength and weakness-inducing factors. View image 3 below:

 

Image 3: Pest Analysis (Source: Aguilar)

Value based management (2016) opines that the competitors utilize outer dynamic forces, which are pivotal in determining a company’s competitive advantage and profitability by influencing prices and investment strategies (Porter., 1985). See Porter’s 5 Forces below for more explanations:

 

PEST AND SWOT

Image 4: Five Forces Model (Source: Porter M. E.)

As shown in Porter’s 5 forces analysis, the Daily Sun is competing against equal and better placed contenders that maximise resources and capabilities such as investment in technology, product differentiation, change of marketing strategies and news dissemination methods, among others, to create value and sustain profits.

Inner Dynamics

The inner dynamics, as shown in image 2, present Daily Sun’s core capabilities. They include tangible assets such as property and funds, together with intangibles resources like mobile apps, website, brand appeal, structure of business operations etc. The media house is facing extinction from its declining sales of newsprint caused by outer dynamics: macro and competitive (co-competitive) dynamics factors. The internet revolution is evident with an increasing number of authoritative online media powerhouses such as Sahara Reporters, Nigerian Village Square, Gamji, and other Nigerian websites based in the U.S., not to mention a growing number of blogs within the country. Moreover, Nigeria ranks among the top five countries with sizable number of mobile device-based internet usage, a trend which poses great challenges to the Nigerian newspaper industry. In addition, an improved power supply and huge technological investments by major telecom operators in the country signifies a likelihood that a majority of classified ads audience will switch loyalty to more attractive, reliable and responsive websites. These factors stress the need for Daily Sun to migrate from print to internet advertising for prominence.

Secondly, another threat to Daily Sun’s survival is the ability of advertisers to exploit the power of editorial contents. Records show that corporate bodies and politicians, in some cases, have hijacked the newspaper editorials, and, for fear of losing ads earnings, the news outlet has lowered its standards for financial gains. One of the adverse effects is loss of credibility in the market (Shafiu., 2011).

 

Image 5: Mobile Apps Browsing in Nigeria (Source: Naija Quest)

The graph shows the competitive nature of Nigeria’s mobile app browsing for news articles. It also highlights the possibility of Daily Sun maintaining frontline position in media advertising and multiplying profits by offering quality staff training and embracing technology-oriented and consumer-friendly business models. In furtherance, the company will be better off at maximising its resources by embracing innovative culture against its highly unproductive corporate traditions and utilizing its core capabilities to increase earnings from local and international media audience rather than investing in print media distribution channels or promoting literacy among Nigerians. Online advertising is the surest roadmap to overcome a complete decline in the hostile media business environment (Wirtz., 2001).

Payoff

This refers to benefits offered by the company to its employees, customers, shareholders and interest groups. Contributions made towards improving quality of lives through social/civic responsibility, high-quality products or services and increased wages, among others, are regarded as “payoffs or outcomes” and can be categorized into quantitative and qualitative (Creswell., 1994).

Lack of social corporate social responsibility programs from Daily Sun is a major reason for its 12% decline in the print and media sectors of the industry although it still competes favourably against Punch and Vanguard newspapers. However, this consultancy report aims at proffering lasting solutions with capabilities of bourgeoning the CEO towards achieving profitability in the declining market.

Grammar

Once a powerful institution, Nigeria’s newspaper industry has been caught up in the web of inclement business environment presented by technological advancement and more aggressive marketing strategies adopted by dynamic global media companies. The Daily Sun’s decision to reduce its number of staff was born out of the need to balance huge cost of print advertising, citizens’ low purchasing power, below-average reading culture, and dependency on imported materials for its productions, all of which have lessened profits and thinned circulation figures, but one important aspect of growth it neglected is grammar.

Daily Sun’s grammar refers to its adopted ethics, administrative structure, employee mindset, operational agreements, formal and informal relationships as well as culture, which either moves the company forward or creates loopholes for failure. Every organization needs a culture that shows value for people without discrimination based on sexual orientation, gender, status, race, age and beliefs. This is explained in the meta model diagram.

However, the Daily Sun grammar emphasizes a business culture that favours politics and profits, with its attendant negative impact on the company’s public image. At the moment, majority of news readers in Nigeria are swarming Facebook, Google and Yahoo for their daily briefs whereas the minority share their loyalty between top local companies for both print and media supplies. In this case, pricing becomes very important, especially for the aged readers who are less conversant with smartphone uses. This is one of the determining factors of who gets what share of Nigeria’s print media industry but creating consistently appealing and valuable information and strategically transforming it into profits through calculated advertising, which should be relatively cheap, is a better way of capturing value (Uwosomah., 2010).

Proposals for the Daily Sun

Despite the setbacks in print advertising, newspapers around the globe will continue to be profitable in the future if they understand the need to diversify income sources and communication outlets. The Daily Sun can successfully prove its value and resilience by shifting to a multiplatform media house in the following ways:

  1. Understanding that content is the key source of revenue for most thriving newspapers that leverage on quality journalism to win back the waning trust from readers. This can be achieved by focusing on relevant, interactive and inclusive contents as well as staying active on social media outlets.
  2. Embracing digital advertising which recorded 6% rise in newspaper revenue in 2016 but has a projected 32% increase in the next five years. Also, digital circulation skyrocketed by 20% between 2015 and 2016, and is a pointer that digital advertising holds a central position in the sustainability of newspaper houses.
  • Offering discounts for new subscription orders. This increases reader base and ensures suitable adverts are delivered to the right audience and at the right time.
  1. Using free papers to gain wider circulation, particularly in this global recession. Though paid-for newsprint newspapers and online papers are yet at their early stages as marketing strategies around the world, they do remind readers that news is and should be free no matter the platform.
  2. Expanding for global circulation is a necessity for Daily Sun considering that print circulations in developed countries declined by 5% in 2016 and will fall by another 21% in the next 5 years, according to WPT Database (2017). The idea for global reach stems from an increasing print market share in India, China and other parts of Asia, where over 2.8 billion people still read newspapers in print. From a record 385.2 million copies of print newspapers sold a day in 2016, Asia is expected to reach 414.7 million daily sales in 2021.
  3. Opting for paid digital circulation which now provides backup earnings for newspapers in many countries where understanding the audience and creating suitable contents attracts consumer loyalty.

Implications of Failure to Implement Proposals

To survive the declining market, there’s great need for Daily Sun to combine the proposed options in order to maintain significant brand value and achieve sustainable growth. Failure to implement proposal will lead to:

  1. Further decline in operating profit margins and subsequent loss of finance to service its debts. This will pave way for closure.
  2. Downsizing of staff members to cut its way to “expected” profits. This will not provide competitive advantage against technology-based firms in the industry.
  3. Inability to find buyers who rather prefer to patronise newspapers that are driven by fierce marketing strategies and know how to retain consumer loyalty by delivering the right ads to the right customers.

Recommendations

Newspapers, without doubts, have played invaluable roles in political and socio-cultural transformations since the colonial era (Corden., 1952). They are still relevant in our world today, and to this backdrop, the Daily Sun should:

  1. At all times, produce quality contemporary editorials, feature articles, as well as launch other genres that most print and media competitors may not consider productive.
  2. Reach out to customers for relationship-building through corporate responsibility programs such as events sponsorship, public relations, marketing promotions, and calculated adverts.
  3. Sponsor and conduct research to uncover customers’ needs, complaints or suggestions and ascertain the brand’s market position as well as make prompt efforts to cater for the needs.
  4. Lastly, government subsidies should be maximised on importation of necessary raw materials and machinery until those assets can be locally-manufactured.

 

REFERENCES

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