

Newspapers: 30% print revenue decline; 16% online revenue drop - jrwoodruff
http://www.niemanlab.org/2009/08/can-newspaper-publishers-survive-this-revenue-freefall-perhaps-if-they-embrace-a-digital-future/

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jrwoodruff
This article contains some interesting analysis of second quarter Newspaper
industry financials. Among them: \- Adjusted for inflation, the newspaper
industry is now half of what it was in 1986. \- Newspaper share of the ad
market is less than 15%, compared to >25% in 1989, despite a steady ad market.
\- When analyzed against personal consumption expenditure, newspapers appear
to be in a free fall unrelated to the economic downturn.

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natrius
I don't agree with the common diagnosis of what ails the newspaper industry.
If newspapers focused primarily on their online products, people would
probably enjoy them more.

What would that cause? Existing online readers would generate more page views.
Many print readers would switch to the digital version. Attracting _new_
readers is unlikely. Local publications have about as much market share as
they could ever hope to have[1]. The rest of the market probably just doesn't
want their news via text, or doesn't care about news at all.

If most of the effects from improving online content are from moving readers
from print to online and increasing page views from existing users, _you've
just lost money_. Print ads are more profitable than online ads, so losing a
print reader to the online version is a loss. More page views from existing
readers isn't much of a gain. Newspapers rarely sell out their online ad
inventory. From my understanding, that gives us two scenarios for advertisers:

1) The advertiser has bought as many ads as they can afford.

2) The advertiser has bought ads for their entire desired audience, and would
buy more if it were available.

Advertisers in group 1 can't afford more ads at all, so there's no hope there.
In group 2, increasing page views of existing readers accomplishes little to
nothing. The advertisers already advertise to those readers, and are unlikely
to want to show more ads to them.

That leaves us with few significant avenues for increasing revenue. You can
try to kill Craigslist, or increase ad yield by targeting and delivering ads
more effectively, both of which seem rather difficult.

Improving the online news experience would be cool, but it's not profitable
enough to save the industry as so many claim.

[1] For example,
[http://www.statesman.com/search/content/advertising/media_ki...](http://www.statesman.com/search/content/advertising/media_kit/audience.html)

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jrwoodruff
This is exactly the problem. After 5 years in newspapers and being very tech-
oriented, I cannot see a way that any major newspaper company (McClatchy,
Gannett, et. al.) will be able to transition print revenues to online
profitability. The print model is the heart and soul of every newspaper out
there, and profiting in online news (or at all, for that matter) is not as
straightforward as simply turning off the presses or 'improving' web content.

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darien
The nail in the coffin occurred the moment it became illegal for newspaper
companies to telemarket. The US government granted no exception to newspapers
when passing the 'National Do Not Call Registry' and thus signed newspapers
death warrant. It is worth nothing that Canada DID grant exception to their
newspapers when passing similar legislation. More here
[http://www.washingtonpost.com/wp-
dyn/content/article/2005/05...](http://www.washingtonpost.com/wp-
dyn/content/article/2005/05/02/AR2005050201457.html)

~~~
jrwoodruff
That's a piece of the puzzle, but I don't think it was the final one. A
confluence of circumstances seems to be the cause, a proverbial death-by-a-
thousand-cuts, so to speak. I would cite the conglomeration over the last few
decades of most newspapers into large, profit hungry corporations that became
used to solid profits with little investment in development required. An
industry steeped in decades of pride and tradition (What other industry still
measures things in picas?) has further dampened innovation. There are many
other things I could point to, but I think the do-not-call registry is nothing
if not another industry scapegoat.

~~~
darien
I don't completely disagree with you here. But I think a distinction needs to
be made between national papers and local papers. I find it completely
plausible that small city papers, such as the AnnArbor and RockyMountain
Newspapers, could have continued operating profitably if it were legal to
telemarket. If the stats are correct, newspapers were suggesting that 60% of
their print subscription sales were generated using telelmarketing. Let's be
real here, there is an entire (older) generation of people who don't yet feel
comfortable reading news online. Since these old newspapers did not adjust
well to the operating on the internet in the first place, it can be assumed
that their core market for print must have still existed only their sales
channels were murdered. What do you think?

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jrwoodruff
Yes and no. The core market was indeed still there, and there is in fact still
a very significant core market for print products. I don't think the sales
channel was 'murdered,' and frankly, telemarketing (and 'house ads,' for that
matter) are not the only sales channels. Radio, television and outdoor
advertising are all channels that newspapers, in my experience, are reticent
to utilize, preferring their own in-house methods instead.

Also, the one major flaw in this argument is that the article states: "As a
result of the registry, newspapers have cut that figure down to 50 or 55
percent..." from 60-65% Significant? Sure. Dead? If newspaper executives let a
10-15% drop in ONE method of obtaining subscribers kill their business, they
probably shouldn't be a newspaper executive.

~~~
darien
I think you won me over. I'm not a journalist, but I do work as a web analyst
for a conglomerate of local newspapers. Not having access to real financials,
I've always convinced myself that there had to be a definitive reason behind
the decline of print newspapers, apart from the growth of the internet. But
the collapse does seem to be a complex cause. If I may ask, what are your
expectations for the newspaper industry in the next 5 years?

~~~
jrwoodruff
Yea. If there is one definitive cause, I would vote for the internet, or even
more broadly, the information revolution. The newspaper model was profitable
because of scarcity. Before, say, 1995, the primary information channel was
the newspaper. Need to sell used car? Newspaper classifieds. Need to sell a
widget to everyone in town? Newspaper display ad. Need to buy a car?
newspaper. Need to find out when a city council meeting is? newspaper.

Problem is, information isn't scarce anymore. We can do all that and much much
more online. Businesses can publish their own information and sell their
widgets around the world online, consumers can buy and sell on craigslist,
advertisers can advertise cheaply and effectively on AdWords and many other
sites... add it all together and the monopoly newspapers held on a relevant
and unique information pipeline is gone. They're simply hanging on by the
thread of the luddites who haven't jumped to the information era. Yet.

As for the next five years I think major newspaper companies will be sold off
and split up. Watch for more individual newspapers for sale. Smaller papers
might make the transition, particularly smaller independent papers. They've
likely maintained local ties, have a good reputation in the community and are
able to react to change quickly. The deciding factor for them will be whether
or not they react and how. Unfortunately, many of the luddites I mentioned
earlier seem to be running these organziations.

Otherwise, I think in a year, maybe two, there will be a LOT of heavy
competition from very serious local-news web sites. They'll be lean, quick,
aggressive and employ some of the reporters currently getting laid off in
droves right now. The smart ones will use technology as a tool and competitive
edge instead of tripping over it and outsourcing their development. Industry-
wide, it'll look more like the 1920s publishing landscape than the 1980s.

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ivankirigin
Recent stats from a reporter friend at a city business publication with a
strong web presence: 50% of overhead is in printing, while >50% revenues are
from print ads. hits to the site are increasing, while circulation is
decreasing. They'll have to, at some point soon, to take out printing
altogether.

This is the story of every print publication in the united states.

