Can Going All-Color Help Resurrect Newspapers?

Philip M. Stone February 26, 2008

New York Daily News publisher Mort Zuckerman got far more publicity than one might have expected for his announcement this month that he was making what is thought to be in excess of a $100 million investment to make the newspaper all color by the end of next year. Perhaps because it was one bit of positive news about an industry which is so used these days to nothing but bad news.

Zuckerman, of course, spun the story for all it was worth – after all when the project is completed his will be the first US newspaper with all color capabilities and that really is a big deal, not just for him but the US newspaper industry, and he is looking for a real advantage in America’s number one market. Who will be next to do the same?

He is not alone in the business strategy that going all color is a good investment. In the UK, News International is bringing on-line its three new color printing plants that offers The Sunday Times, The Times, The Sun, and The News of the World all color capabilities in a £600 million ($1.2 billion) investment. Associated Newspapers relaunched  the Mail on Sunday in January with all-color capabilities.

Zuckerman boasted that the new German KBA presses will give the Daily News print quality way better than his main competitor – Rupert Murdoch’s New York Post. “This is very close to magazine quality production, which is remarkable but not just in terms of picture, but also in terms of the various things you can do with graphics. The fact is that in today’s world, which is after all a visual world, it’s all about color.”

And while he seemed to be concentrating on editorial quality his real interest must be with advertisers. Will color increase circulation and therefore advertising rates? Will advertisers continue to pay hefty premiums to advertise in color – there certainly will be more opportunities to do so.

Daily News CEO Marc Kramer spun the strategy, “In one leap we are strategically positioning our newspaper to meet the demands of today’s advertisers and readers. When the new presses are on line The Daily News will be the only major market daily newspaper in the United States with 100% color production quality. Combined with our constantly expanding Web products at NYDailynews.com, we will be positioned brilliantly to maintain and increase our dominance of the New York media landscape.”

The good news for print newspapers in all this, of course, is that at least in this case here is a publisher not giving up on print, instead making significant investments to better the print product to compete in the digital world. And it’s happening in the same market where Arthur Sulzberger of the New York Times says his newspaper’s strategy is to prepare for an all-digital world which could come in five years, maybe longer. Zuckerman, obviously, isn’t having any of that.

Zuckerman says The Daily News has always made a profit, but he told a visiting House of Lords Select Committee on Communications that visited New York last November that in 2007 the paper might not be profitable due to the large decline in advertising revenue, partially brought on by online competitors.

So, he had a choice – invest more in a print product that had been doing well but which now is yet another victim to the print advertising drought, or should he take that investment money and throw it at the Internet, where the smart money says  the money will be made in future years.

Zuckerman made clear to the committee he felt the best business strategy was to stay with print, for making major investments in digital  was “substituting pennies for dollars. “

There’s some truth to that, assuming you believe that print is really going to be with us for many years to come. Advertising currently contributes somewhere between 75 – 80% of a newspaper’s revenue. A basic rule ofthumb is that print earns in advertising revenue anywhere from 20 to 100 times more per consumer than does a newspaper’s web site. That means that a print circulation decline of, say, 2% translates into needing to gain at least 40% more website users just for revenue to stay even. In the US and parts of Europe, at least, print is losing 2% and more a year, but newspapers, while growing their web revenue, are not getting 40% more annually from the web.

So if print is really where the money is then it makes sense to invest to make that product as visually attractive to its consumers (readers) as possible, not to speak of making an attractive platform for an advertiser to best show the product. And the truth is, we no longer live in a black and white world.

Printing in color is more expensive than black and white, but with new presses the manpower numbers are way reduced, so helping to pay for themselves. For instance, in the UK Rupert Murdoch’s News International in 2005 absorbed a £56 million (€70 million, $110 million) charge for the dismissal of about 700 printing staff in the run-up to three new printing sites fully coming on-line this quarter, those presses requiring fully two-thirds less headcount.

With his UK properties, however, Murdoch is playing it both ways. He has made considerable investments in the web sites and other digital operations for each of his newspapers but by no means is he giving up on print. Bringing on-line his three new all-color print sites this quarter is the fruition of a three-year £600 million ($1.2 billion) investment. Already the Sun no longer prints at its Wapping home and is being published all-color on the new Roland MAN equipment located in the English countryside.

The important point is that although there is no question of Murdoch’s belief in the Internet – why not when you note that My Space that he bought in 2005 for $583 million was valued around $10 billion in News Corp’s discussions with Yahoo – the fact is that printing ink still runs in his veins.

His investment in the color presses at News International showed his commitment to print. That was reinforced by his purchase of the Wall Street Journal.

Maybe there is long life left in print after all, if publishers are willing to not just make cost savings, but make the investments, too.