New Study Finds Some Papers Succeeding With Digital Revenue;
But Many Executives Report Struggle to Change Business Culture
March, 5, 2012—Though
the newspaper industry generally is making only halting progress in the
search for a new revenue model, some newspapers are beginning to
distinguish themselves and may finally provide
signs of a path forward, according to a new study by the Pew Research Center’s Project for Excellence
in Journalism.
The report,
based on PEJ’s analysis of private financial data from 38 newspapers
and in-depth interviews with senior executives from 13 companies that
own a total of 330 dailies, found that the papers studied
are losing seven dollars in print advertising for every one dollar they
are gaining in new digital revenue—a ratio that shows the pace at which
newspapers are shrinking.
But unlike
the usual aggregate industry data, the report’s 38 case studies also
reveal enormous differences among newspapers, which suggest different
management approaches can make a significant difference in
performance.
Some papers
that shared proprietary financial data with PEJ are coming close to
matching their losses in print with gains in online advertising. While
the papers studied on average grew digital revenue by 12%,
one paper studied saw online ad revenue grow by 63%—and grew print
advertising revenue by 8% as well. Another grew online advertising
revenue by 50%, and came close to matching its print declines. But some
papers are failing to grow digital revenue at all.
One paper studied saw digital revenue fall 37%; another fell 25%.
“The study
suggests that the future of newspapers, rather than being determined
entirely by sweeping external trends, can be substantially affected by
company culture and management—even at papers of quite different
sizes,” said PEJ Director Tom Rosenstiel.
- Papers studied are losing seven dollars in print advertising for every one dollar they are gaining in new digital revenue.
The papers providing detailed data took in roughly $11 in print
revenue for every $1 they attracted online in the last full year for
which they had data. Thus, even though the total digital advertising
revenues from those newspapers rose on average 19%
in the last full year, that did not come anywhere close to making up
for the dollars lost as a result of 9% declines in print advertising.
- Only 40% of papers say targeted advertising is a major part of their sales efforts.
Most papers are not putting major effort into selling “smart” or customized digital ads,
the category expected to soon dominate local advertising.
- “There’s no doubt we’re going out of business right now.”
Executives interviewed for the study were candid that cultural
problems inside their newspapers are making the transition to digital
more difficult. They talked about their people being tied to old ways,
and the challenge of attracting digital sales people
to the newspaper industry. Some predicted papers will continue to
shrink, that more papers will close and that many papers will soon home
deliver print editions only a few days a week, perhaps only on Sunday.
·
The majority of papers studied focus most of
their digital sales efforts on conventional display (such as banner ads)
and digital classified.
Those categories account on average for 76% of digital revenue at
the papers studied, but they are not growing. These are the same two
categories that provide most of their revenue in print. And 92% of the
papers studied said display was a major focus of
their digital sales effort.
·
Daily deals accounted for 5% of overall digital revenue in 2011 at the papers studied.
One of the bigger innovations in the last year, the move toward coupons
or daily deals (such as Groupon), accounted in the end for only
a small amount of digital revenue in 2011. A majority of all the papers
studied—30 of them—have adopted such programs, and most created their
own programs. But there are widely varying views in the industry on the
future of this category. Some executives are
convinced it represents a solid revenue source going forward. Others
see the deal gold rush as a bubble that has already reached its peak.
·
Of the papers sharing private data, advertising on mobile devices accounted for only 1% of the digital revenue in 2011.
Executives are generally excited by the prospects of mobile, but for
now it accounts for a tiny amount
of revenue. Executives also believe that due to its ubiquity in the
market, the phone ultimately could be more important to mobile revenue
than tablets, a sign perhaps of some growing uncertainty about the
ability to charge for apps, though some executives
are already skeptical about how much money newspapers can make with
smartphones.
·
Almost half (44%) of the papers that shared data
reported that they were trying to develop some form of nontraditional
revenue—such as holding events, consulting or selling new business
products.
In most cases, the dollars involved are minimal—less than $10,000
quarterly. Some executives also expressed concern that their companies
don’t have the resources or competencies for such undertakings. Still,
there were a few cases of remarkable success
here.
·
Among the papers that provided data, the number
of print-focused sales representatives outnumbered digital-focused reps
by about 3-to-1.
A large majority of the newspapers sharing data with us reported
that they had implemented a digital sales training program and had made
it a priority to hire sales people with digital experience. But their
sales force remains primarily focused on print,
reflecting again that print ad revenue, which is shrinking, still makes
up the bulk of the overall revenue—an average 92% in the study’s
sample.
worked at Saalfield Publishing, Firestone Bank and the Akron Public Schools (West, Jennings).
worked at Saalfield Publishing, Firestone Bank and the Akron Public Schools (West, Jennings).
