As Newspapers Desperately Seek New Revenue Streams They Should Have Their Marketing Folks Concentrate On Something Already In-House – The Distribution/Circulation System

Philip M. Stone July 18, 2007

It’s no secret how desperate newspapers are for new revenue streams – witness Tribune’s decision to run front page ad strips in all its newspapers which it believes could be worth millions in new money – but maybe newspapers should look closer at their circulation distribution systems for there are some bright ideas out there how newspapers can earn a lot of money by selling and delivering more than just the daily newspaper.

Sure, newspapers have made money off other people’s inserts seemingly forever, but who says inserts have to be limited to third-party paper ads? How about something small and compact like DVDs, CDs, thin books and other items that could easily fit in a plastic wraparound?

What brings this to mind is the brilliant success by the UK’s Mail on Sunday that distributed at no additional fee to its readers the latest Prince CD. In this particular case the newspaper paid through the nose – some £250,000 ($500,000, €365,000) in royalties and license fees plus a similar amount for promotion and the like but at the end of the day it distributed about one-third more newspapers (around 2.8 million) than its average.  The important point not to be lost is that 2.8 million CDs got distributed and that is more CDs than all of Britain’s record shops move in a week.

Now put aside the actual terms of the Prince deal and that the newspaper paid heavily for its distribution privilege – and start looking at this as a proven distribution method for delivering added items.

Added sales are particularly successful in continental Europe where some publishing groups earn in the hundreds of millions of Euros from such promotions while their British and American cousins just see their revenue line declining all the time. Perhaps the major philosophical difference is that in the UK the emphasis is on growing circulation (thus growing advertising rates) by giving items away whereas on the continent the emphasis is on directly growing the bottom line by selling something additional with the newspaper.

Can this really produce meaningful additional revenue? Many European newspaper houses now budget for up to 20% of their revenue to come from such added-on sales. Folks, we’re talking really big money here!

Two good examples of publishing houses doing this are Italy’s RCS and Gruppo Editoriale L’Expresso. RCS publishes many titles including the leading Corriere della Sera and in Spain the dominant El Mundo.  Gruppo Editoriale L’Expresso publishes such titles as the Rome daily  la Republicca and L’espresso magazine.

A couple of years back when Milan’s famed La Scala Opera House reopened after a giant three-year facelift,  Corriere della Sera produced six opera DVDs,  a new one available each week which could be bought optionally as an add-on to the newspaper. In opera-mad Italy you just know a scheme like that works if the cost to the consumer is seen as a bargain, and RCS makes  hundreds of millions of Euros annually doing such things right.

Other schemes have included producing a series of poetry books, each one an option at additional price for the usually slow Monday edition. Figures showed that about one-third of its customers spent the extra money for that poetry.  The company also produced a 14-volume History of Italy that close to 50% of its customers bought each week in addition to the newspaper. 

The newspaper’s culture department wrote reviews about the add-ons, which might be stepping across the fine editorial line in the US although not so in the UK -- just take a look at the long bio promotional piece the Daily Mail – sister to Mail on Sunday – gave to Prince the day before the CD distribution.

Most of the Italian promotions are books, based on the simple philosophy that since people buy newspapers to read, then perhaps they might buy something else to read, too.

Just how big can all of this be? Back in 2003 Gruppo Editoriale L’Expresso, said it sold in such promotional add-ons to their regular publications some 34 million books, 2 million DVDs, and 1.6 million CDs, resulting in a net profit increase of 47%.  Since then things have declined -- in 2006 newspaper circulation was down 1.6%, due to a reduction in the sales of the add-on items to 22 million from 26 million in 2005.  But while it’s not as big a business as it once was, the group is still making in the hundreds of millions from the add-on business.

Obviously these schemes are easier to handle with newsstand sales than they are with home delivery, but that is not unsolvable. Print subscribers, for instance, can be told ahead of time the add-ons available and they can be ordered and paid via the Internet.

And there are other systems worth looking at. The new affiliation program started by the Washington Post compels close watching.  As publisher Donald Graham said recently, he doesn’t know if the discounts offered to readers are sufficient but at least the readers and advertisers are signing up for the program at rates higher than the business plan, and time will tell.

 Another example -- in Geneva, Switzerland, take out a home subscription to the Tribune de Genève and you become a Tribune club member. The club offers discounts on travel, cheap movie tickets and the like with savings that are heavily promoted within the newspaper, and the club is a money spinner. When you’re fighting two free newspapers, plus two paid-fors  in a fairly small town you need something to give you the edge!

The main point being made here is that newspapers have various ways to deliver additional product to their consumers and it can be on the newspaper’s own behalf or for third parties. Publishers need to start thinking what else they can deliver with their newspaper, at an additional charge, that they can offer as extra value. If it’s CDs and DVDs and the like then perhaps local advertisers selling those products won’t be happy, but it’s time publishers had their money people work out the economics of what is best for the newspaper.

These are changing times – just look at Sprint recently “firing” those customers who bothered customer service too much and the company deciding it’s just not worth the cost or bother to service them, and who would have thought of any company doing something like that? – so why shouldn’t newspapers think even more out of the box about what products they can deliver, for a tidy profit, along with the morning or afternoon read?

Remember, the idea here is not to figure out an avenue for a newspaper to give something away – which is the British tradition – but rather come up with systems to sell something extra and earn addition revenues, big-time.

Start thinking, for instance, the youth market. The Prince giveaway showed the kids were willing to pay for a newspaper to get the free add-on. What if the newspaper charged a couple of pounds/dollars/euros – might it not have worked just as well? It still would have been a great bargain.  Or what if each day the newspaper prints a coupon hidden on a different page or section  that can be used as discount for buying a video, game  or somewhat  in a local store by handing over the full page with the coupon at the cash registrar, etc.  It may not get the kids reading very much but at least it gets the newspaper in their hands and they are turning the pages, and that’s a start. 

There’s an old saying – keep the best and leave the rest – and so it is with these thoughts,  but the underlining principle in all of this is very solid – newspapers need to think outside of the box and come up with new ideas on how to improve their bottom lines.

Waiting for the digital revenues to flow through in a timely manner isn’t going to do it soon enough, relying just on editorial content is resulting in continually declining revenues, so newspapers need something more -- some radical marketing thinking.

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