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Newspapers' future may lie in data

Already cash-strapped newspapers risk losing another third of their ad revenue during the next five years unless they can win more value out of their consumers.

Already cash-strapped newspapers risk losing another third of their ad revenue during the next five years unless they can win more value out of their consumers.

In the latest report to add pressure to the struggling media industry, consulting group PricewaterhouseCoopers says advertising income will plunge 32 per cent for newspapers and 13 per cent for consumer magazines by 2017, despite efforts by companies to digitalise content and capitalise on newly available website data.

The report, which forecasts growth in the media and entertainment sectors overall, says the future of the industry lies in getting more value out of consumers by selling off information about readers to advertisers.

But, it warns, the new data "rivers of gold" come at a risk to the companies, which must now navigate tighter than ever privacy laws that carry hefty fines. Changes to the Privacy Act, passed last year, require companies that collect and store personal data to do so openly and transparently.

PwC expects interactive games, particularly mobile phone applications, to be one of the highest revenue growth areas, driven by mobile internet access.

Free-to-air and pay TV also stand to benefit from their focus on sport and events, along with their ability to tap into what viewers want through social media networks.

Moving to subscriber models meant newspapers had access to valuable new socio-economic information about their consumers that they could align with customer behaviour, PwC executive director Megan Brownlow said.

"The more you know about the consumer, the better you are at targeting exactly what they want," she said. "People are getting a lot of content for free and, in a sense, this is how they pay for it."

But, Ms Brownlow said, newspaper stables were unlikely to recover lost ad revenue through data mining alone and would need to continue to broaden their business model beyond traditional revenue streams.

"The newspaper market, print and digital, is still forecasting decline," she said. "[Cost cutting] has weakened the industry. We need to now look at investment in people and technological skills."

Fairfax Media, owner of BusinessDay, last month committed to an extra $60 million in cost reductions above the $251 million already promised to investors following a restructure of its print and digital operations.

The company will introduce subscriptions for the digital versions of The Sydney Morning Herald and The Age this month, 18 years after the launch of the newspapers' websites.

The media and entertainment market as a whole was expected to grow by 13 per cent during the next five years, the PwC report said, despite other challenges facing the music and film industry such as piracy.

Advertising revenue for commercial radio and cinema was also expected to remain strong.

According to the Music Metric Digital Music Index, Australians are the biggest users per head of illegal digital downloads. Despite this, total revenue from live music rose 2.2 per cent from $690 million in 2011 to $713 million in 2012.

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