Newspapers Lose $10 Dollars in Print for Every $1 Gained Online(businessweek.com)
businessweek.com
Newspapers Lose $10 Dollars in Print for Every $1 Gained Online
http://www.businessweek.com/news/2012-03-19/newspapers-lose-10-dollars-in-print-for-every-digital-1
40 comments
This title is misleading, the article starts: "U.S. newspapers lost $10 in print advertising revenue last year for every $1 they gained online, a deeper loss than in 2010, as competition from Internet companies increases, a study by Pew Research Center found." Losing $10 of revenue is different then losing $10.
Losing $10 of revenue is different then losing $10
When acquired, the Huffington Post enjoyed margins around 30% [1] versus the New York Times's 9-10% [2]. Deflating based on this datapoint alone implies a profit differential of 3:1 versus 10:1.
[1] http://www.usatoday.com/tech/news/2011-03-07-aol-huffington_...
[2] http://www.google.com/finance?q=NYSE:NYT&fstype=ii
[1] http://www.usatoday.com/tech/news/2011-03-07-aol-huffington_...
[2] http://www.google.com/finance?q=NYSE:NYT&fstype=ii
The alternative, though, is losing $10 dollars in print for $0 gained online.
Exactly. I really struggle to see why companies are often hesitant to cannibalise their own products - because if they don't, somebody else will... The newspapers are lucky to be making that dollar given how slow many of them have been to innovate.
I think Apple's willingness to cannibalise is one reason they're so successful - for example, when the iPod Mini was a very successful product, they stopped selling it and replaced it with the Mini. More industries need to learn from them (especially the movie industry...)
I think Apple's willingness to cannibalise is one reason they're so successful - for example, when the iPod Mini was a very successful product, they stopped selling it and replaced it with the Mini. More industries need to learn from them (especially the movie industry...)
Companies are unwilling to do it because sometimes it means jettisoning people, which is hard to do. Its difficult seeing people who have been with you for 30 years become obsolete, and you have to tell them, "sorry, but you're no use to us anymore." Sometimes you want to try and make the old way work, or just place your head in the sand and let the whole ship go down together.
> Companies are unwilling to do it because sometimes it means jettisoning people, which is hard to do.
The newspaper industry has been quite happy to do this. I survived several rounds of layoffs (plus furloughs and a wage freeze) at Gannett. (Meanwhile, the CEO got a $30M+ retirement bonus...)
The problem is, they've mostly been doing it instead of adjusting to the information era, rather than in conjuction with adjusting.
The newspaper industry has been quite happy to do this. I survived several rounds of layoffs (plus furloughs and a wage freeze) at Gannett. (Meanwhile, the CEO got a $30M+ retirement bonus...)
The problem is, they've mostly been doing it instead of adjusting to the information era, rather than in conjuction with adjusting.
Agreed. Another consideration is that many newspapers suffer from an outdated ownership structure. I'm not sure about Gannet, but I know some of the others, like Tribune before 2007 and NYT had a problem. They were started by famous businessmen or families that then created a structure to keep the holdings within the family. The problem with this is that their descendants owned the trusts that run the company and were unwilling to forgo the dividends that came their way. People outside the publishing industry are often amazed at how much money these companies gave away to shareholders as dividends and for how long, despite it being clear to everyone else in the world that they should have been keeping the money in the bank.
They have a phrase for this in the newspaper industry, "replacing print dollars with digital dimes".
If you're interested in a lot more facts & figures plus a graph this post has them: http://newsosaur.blogspot.com/2012/03/newspaper-sales-slid-t...
If you're interested in a lot more facts & figures plus a graph this post has them: http://newsosaur.blogspot.com/2012/03/newspaper-sales-slid-t...
The graph is apparently not inflation adjusted - so it de-emphasizes the drop in print advertising as compared to 1984- that is, on the graph, a dollar spen in 1984 is equal to a dollar spent in 2012. As a side note - anybody who ever plots $ over time, please add a small caption that either says "inflation adjusted" or "not inflation adjusted" - the educated reader will appreciate that greatly.
Has anyone looked at the impact of paywalls on revenues? Has it led to an increase in online revenues for those who attempted it?
The problem with the metric used in the article is that it doesn't say much. Was it less online revenues that cause the ratio to drop? Was it an acceleration of people unsubscribing from the paper version? Are print ads now worth less than they used too by impressions?
The problem with the metric used in the article is that it doesn't say much. Was it less online revenues that cause the ratio to drop? Was it an acceleration of people unsubscribing from the paper version? Are print ads now worth less than they used too by impressions?
Don't know how much I an really disclose, but, for us (small-ish daily, ~20k circ), once we went to a (partial) paywall, circulation defiantly went up. Our model is that you must be a subscriber to get through the paywall, all print subscribers get online as well - you can get online e-edition/pdf access without home delivery, but it costs the same.
Our circulation is higher than it was two years ago. Not sure many papers can say that.
Our circulation is higher than it was two years ago. Not sure many papers can say that.
That's a good point that I don't think most people pick up on immediately. The pricing of the NYT in particular, is focused primarily on reducing the loss of print subscriptions (print subscribers get full access) more than it is on maximizing digital revenue. Once the print subscribers drop off enought that they don't have that much revenue to protect, you'll see a quick drop in NYT digital subscription fees so that they can maximize their revenue there.
This headline is implies that it is their shift to digital strategies that is causing the loss, when in reality that shift is mitigating it.
If the one local area newspaper did more investigative reporting, I'd subscribe. Currently, it's 90% AP national news and advertisements with one a couple investigative articles every week or two.
I wonder if there's a business model there -- in joining up with a larger paper and producing a regional section. Way back when, town newspapers would receive preprinted interiors, showing national news from AP or similar, and print their own local news on the front and back. I'd rather have two reporters local to my town putting stories in the online edition of the major city paper, than to completely lose the local news when the paper shuts down, as seems inevitable in a year or two.
Suppose the articles from investigative reporters were rated by readers. The most valued articles would receive the most views and votes so a newspaper (i.e. local or regional news aggregator) would see articles that are in demand. Reporter pay rates could be tied to ratings, encouraging articles that people like.
God, no. Any investigative report involving a political figure would receive a 2.5/5 star rating as the right and left wing trolls on the comments section battle it out.
View and rating based journalism is what's turned CNN et. al. into the "look at our hologram! water could cause cancer in your children!" channels.
View and rating based journalism is what's turned CNN et. al. into the "look at our hologram! water could cause cancer in your children!" channels.
This is what happens when supply goes up. It's really hard to feel bad for them.
They key part of this research is that newspapers failed to personalize advertising. That, more than anything is why their online ads aren't worth as much.
Newspapers existed before advertising was invented, and they did just fine. The problem they're facing right now has everything to do with the tragedy of the commons and nothing to do with technology or the Internet.
Advertising has been bound to newspapers for a long time. Check out the front page of 1st edition of the Manchester Guardian (now the guardian) from 1821 http://www.guardian.co.uk/news/gallery/2007/jun/08/1?picture...
In those days the business model was to cover the front page with small text ads! (as pointed out by currybet here: http://www.currybet.net/cbet_blog/2009/05/happy-birthday-to-...)
In those days the business model was to cover the front page with small text ads! (as pointed out by currybet here: http://www.currybet.net/cbet_blog/2009/05/happy-birthday-to-...)
The Tragedy of the Commons refers to the overuse of a shared commodity that takes time to renew. I do not see how this applies to newspapers.
* Any individual newspaper can make more money by giving their news away for free and selling advertisements than they can by charging readers.
* If any one paper gives their news away for free, it makes it effectively impossible for other newspapers to charge money.
* If all newspapers give away their news for free in exchange for advertisements, they all lose money.
I guess the prisoner's dilemma would technically be a better term, but it's basically the same thing in this case, at least if you think of advertisers as an over harvested resource.
* If any one paper gives their news away for free, it makes it effectively impossible for other newspapers to charge money.
* If all newspapers give away their news for free in exchange for advertisements, they all lose money.
I guess the prisoner's dilemma would technically be a better term, but it's basically the same thing in this case, at least if you think of advertisers as an over harvested resource.
As far as "Any individual newspaper can make more money by giving their news away for free and selling advertisements than they can by charging readers.", that is absolutely NOT true. Advertisers pay much more for ads in paid publications. Has to do with reader engagement.
Maybe they make more per ad, but how many newspapers are making more money than Facebook or Google? The only reason that newspapers can't make that much money is they don't have enough volume, and the reason they don't have enough volume is that every other newspaper is free also.
It's the free-rider problem. Prisoner's dillemma refers to making antagonistic decisions with incomplete information about other actors' intentions.
Tragedy of the commons?
Perhaps you could explain a bit as to how this is the case?
Perhaps you could explain a bit as to how this is the case?
Can you elaborate? How did newspapers thrive before the current traditional business model?
Charging people. But then the industrial revolution created massive economies of scale for the first time, which lead to companies that were global in scope. So suddenly newspapers could make more money from advertising than from charging. And this put all of the paid newspapers out of business, because it's hard to compete against a free newspaper. So essentially what's happening now is that the corporate newspapers are getting put out of business by their own business model, the one they used to kill off all the working class and liberal newspapers. So long and good riddance.
By selling the paper (broadsheet).
As they should. Print newspapers made their money by exploiting the high barrier to entry in the publishing industry to create local advertising monopolies. They compete in a much larger market for online advertising, and very few local papers have anything to distinguish themselves from other local or national papers. There will probably need to be a wave of bankruptcies and consolidation around a handful of national papers before print journalism stabilizes.
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As someone who works with Newspapers and direct mailers daily (advertising agency) I can confirm that things are not looking good for the industry. There is a palatable desperation in their marketing and they are fighting tooth and nail for business. There was a recent article of how they dropped from 60bil in revenue to just over 20bil, the worst numbers since the 1950s.
Newspapers probably gather data for $10 Dollars in Print for Every $1 Gained digitally
I guess I'll trott this out again:
The problem is that the newspaper used to be a communications conduit and newspapers grew to identify with that role. A proper newspaper reprints national and international news, and the weather, and sports, and it has a classified section and a comics page and a crossword and a jumble and an oped page. And the fantastic thing about reprinting wire reports and cathy cartoons and classifieds was that it was so very, very profitable compared to the effort required.
But a lot of that is obsolete today. That wire report is less accessible and less timely than it is to read the original online. Same goes for the weather. Etc. Today newspapermen are like hoarders. The amount of strictly original material in a paper has always been shockingly small, but today that is the only leg that they have to stand on. But papers don't have the guts to cut off the rest of their body and run lean and mean in the rough and tumble online world. Partly because in some cases they can't due to labor agreements, and partly because they are afraid that their original reporting alone isn't enough to be successful. But mostly because they can't stomach the idea of being something else, something that in their eyes is diminished.
Pay no mind that not serving as a broadcast medium for marmaduke strips, crosswords, and omnipresent wire reports hardly counts as a diminishment. It's their conception of their world and their role and they will live or die by it (spoilers: it's the second one).
The problem is that the newspaper used to be a communications conduit and newspapers grew to identify with that role. A proper newspaper reprints national and international news, and the weather, and sports, and it has a classified section and a comics page and a crossword and a jumble and an oped page. And the fantastic thing about reprinting wire reports and cathy cartoons and classifieds was that it was so very, very profitable compared to the effort required.
But a lot of that is obsolete today. That wire report is less accessible and less timely than it is to read the original online. Same goes for the weather. Etc. Today newspapermen are like hoarders. The amount of strictly original material in a paper has always been shockingly small, but today that is the only leg that they have to stand on. But papers don't have the guts to cut off the rest of their body and run lean and mean in the rough and tumble online world. Partly because in some cases they can't due to labor agreements, and partly because they are afraid that their original reporting alone isn't enough to be successful. But mostly because they can't stomach the idea of being something else, something that in their eyes is diminished.
Pay no mind that not serving as a broadcast medium for marmaduke strips, crosswords, and omnipresent wire reports hardly counts as a diminishment. It's their conception of their world and their role and they will live or die by it (spoilers: it's the second one).