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Newspapers Attain That Nightmare Scenario – Print Revenues Hemorrhaging Worse Each Quarter With Online Growth Down To A Trickle

The nightmare for many publishers is coming true. Their business plan that relied upon online revenues annually growing by at least 20 – 30% to account as quickly as possible for some 50% of the company’s total revenues while print meanwhile strips away whatever it can to buy the necessary time has taken an arrow to the heart. For many publishers online growth has slowed to negligible while print’s advertising losses are gaining with each reporting month.

wild horsesIt’s said that for every dollar drop of advertising revenue by print it only gains back about 14 cents via the web.  And since online ad revenue growth is slowing way down then this has to be a no-win business proposition.

It’s with that scenario in mind that one can’t help but think about what those former broadcast folks who now manage Tribune newspapers have been saying for the past few months – that newspapers need to reinvent themselves. They have been looking at Tribune newspapers with different (broadcast) eyes and it may just possibly be that while traditional newspaper executives can’t see the forest for the trees that those who were not brought up in that forest may well see things differently.

On purely a financial basis, is it so wrong that a newspaper is only as large each day as its advertisers are willing to support? In the days when newspapers were a license to print money maybe a 60-40 editorial/advertising ratio was affordable, but in today’s world where margins are approaching if not already in single digits doesn’t 50-50 make more economic sense? And, yes, you can argue 40-60, 30-70 as well – it’s just a matter of testing the waters to see where readers draw their line in the sand.

The relaunch of Tribune newspapers – Orlando and Baltimore have already hit the road -- should prove to be a good testing ground for the rest of the industry.  Can newspapers, by complete design changes and just plain changing editorial mindsets, actually attract back readership or will that slippery slope of losing readers to the Internet continue no matter how much the print product changes its looks? After all, can a leopard really change its spots? Once readers are weaned off reading a daily newspaper can they be enticed back?

At least Sam Zell’s new managers are giving it a try – it’s something that needed to be done and if it doesn’t work in their markets then one has to question whether reinvention will work anywhere.  For the reality is that advertising dollars are following eyeballs and also more than ever they are also placed for the most perceived value for money. That means Tribune newspapers have to gain back lost readership after their rebirth. Keeping the status quo doesn’t hack it.

So, if newspapers truly are in the business of reinvention then here is a heretical thought. Maybe that decision by the Philadelphia Inquirer to hold back most of the newspaper’s copy from its web except for breaking news until the newspaper has been distributed has some real merit.  

For if news is really a business, which it is, and for newspapers the bulk of its business revenue comes from the print paper, and since the web model has shown it is not bringing in replacement or more revenue, then does it not make economic sense to complete the circle so to speak and go back to original newspaper-web policy and protect the newspaper’s content?

There are many who will argue that horse has already escaped the barn, but look at what NBC did during the Olympics to protect its prime-time franchise. It made sure that video did not reach the web until after it had hit prime time and it worked, so isn’t that the same concept that newspapers should employ?

The big business news companies – Reuters, Bloomberg, Dow Jones/Wall Street Journal – either keep back from the web the alerts that market professional pay big bucks for by subscribing directly to such financial services, or in the case of the Wall Street Journal, their really “good” stuff is available only behind a pay wall. In other words, these guys know it doesn’t pay to give everything away right away!

The naysayers will say there is so much competition out there anyway so holding back copy from the web is futile, but remember it is newspapers that excel at local coverage and most others steal from that newspaper coverage, so if that coverage is no longer available so timely on the newspaper web site then the competition won’t have much of it either.

Or, conversely, should newspapers just plain throw in the print towel? Just get out of the print business. No more newsprint costs, no more ink, no more capital investments for printing presses and the like, no more delivery trucks, the list goes on. Just have an advertising supported newspaper web site. Then it doesn’t matter if the revenues are so much less because the costs are so much less, too. And that should mean more eyeballs to the web site because there is no print competitor, and that in turn should mean higher web advertising rates.  

It’s a model that magazines publishers seem to have favored more quickly for their print products that aren’t doing too well, but newspapers haven’t really picked up on it. One would think newspaper accountants would be all over that scenario, and indeed some Monday editions are disappearing, but print basically continues on, perhaps smaller and leaner, but still carrying on. The bean counters therefore must still be saying that print still provides the financial goods – just not as much as before – and it remains a better business than going all web. And if that is the case, and the web is failing financially to provide the necessary revenues, then why not protect the print business that does provide the bulk of the revenues?

It could well be one is damned if you do and damned if you don’t, but today’s middle ground of doing both is not working from a business viewpoint.

Another testing ground to keep an eye on is the UK where Rupert Murdoch’s four national newspapers now have the advantage of being able to print color on every page thanks to his £650 million ($1.2 billion, €900 million) investment in his three new state-of-the-art print facilities. Will so many color opportunities entice advertisers? Will that much color entice readers?

Those newspapers – The Sun, The News of the World, The Sunday Times, and The Times -- each have a major web presence but with the exception of The Times, those newspapers are making very handsome print profits. While print circulation has slipped over the years the numbers are still very acceptable.

 At the Sunday Times the first numbers from its remake taking advantage of those color presses saw a 12,000 circulation increase – not much on a 1.1 million base --but it was in the summer and the numbers for other Sunday newspapers were down, so it was at least somewhat encouraging. It’s worth watching for the rest of the year how those newspapers do.

Also in the UK the Newspaper Marketing Agency has released its first report measuring online readership for Britain’s national newspapers, and if you look under the headline figure of 66 million people (70% from outside the UK) the results are very revealing about how people use newspaper web sites. The survey showed that for those readers from the UK some 61% spend less than one minute on the site and just “drop in” to catch up on news; the percentage of those who read both print and the web site ranges from 35% to 74%, and near 30% of web readers do not normally buy or read a newspaper.  So what is the attractiveness for advertisers if the majority of readers spend less than a minute on the site?

Probably the more local news a site has the longer people stick around but there seems to be a real disconnect with the time people spend reading print and the time they spend reading online sites. And that has not gone unnoticed by advertisers.

The current economic climate has obviously pierced business plans that rely on advertising models so print, online, television, radio all are suffering. But for how long can newspapers in particular continue making up for losses with the lean and mean business plan?  

Maybe it’s time to take a step back and ask if the free news horse really has escaped, or can it still, perhaps, be corralled?

 

 


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