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Newspapers - Stabilizing, But Still Threatened - State of The Media
Newspapers - Stabilizing, But Still Threatened - State of The Media
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Most digital pay plans are built around three elements. The first is the paywall. Heavy users of a site eventually encounter a notice to pay up for a digital subscription or lose
access. The second is allowance for a large volume of casual traffic that an earlier generation of hard paywalls, like The Times of Londons, would have blocked. This
permits a certain number of free articles each month and free access to articles found through search, links and social media references, and it opens the way for more
skilled computer users to delete cookies or otherwise game the pay barrier.
Even more important is the third element: To stabilize and potentially grow print circulation, digital access is typically offered free or at a greatly reduced rate to print
subscribers. A subscription to just the Sunday paper (by far the biggest and most profitable of the week) normally qualifies. At The Los Angeles Times and some other
papers, digital plus Sunday is cheaper than digital alone.
Early results indicate minimum negative impact on digital audience or advertising.
The New York Times (including its international edition) now has 640,000 digital subscribers, Gannett 46,000.5 But with print price increases, both have had big gains in
total circulation revenue. At The New York Times, a significant milestone was passed as circulation now accounts for a bigger share of revenue than advertising. And
circulation revenue gains have come close to covering print ad losses.
At Gannett, the digital pay plan pushed circulation revenue up 17%, year-to-year, in the fourth quarter of 2012 (fourth quarter 2012 included an extra week).6 It now
generates about a third of publishing revenue. In the fourth quarter of last year, Lees newspapers showed a year-to-year circulation revenue gain of nearly 4%; they get 25%
of operating revenue from circulation.7 McClatchy, which launched its digital pay plan later than the others, gets only 20% of its revenue from circulation, but saw it grow
5.4% for the quarter.8
Taken together, the circulation initiatives are slowly rebalancing the industrys reliance on advertising over circulation as a revenue source. It will be some years still until
the industry comes close to the international norm, achieved in the U.S. by The New York Times in 2012, of close to a 50-50 circulation/advertising split (a small percentage
of revenue also comes from other sources), but others are seeing some measurable success.9
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Looking forward, digital pay plans have an added plus. Getting users accustomed to the principle of paying for content could ensure the plans will function well no matter
what platforms people prefer in coming years, including the growing array of mobile devices.
Some object to digital pay on ideological grounds. Information wants to be free, say theorists like Jeff Jarvis, Steve Buttry and Mathew Ingram and any retreat from full
participation in the open web is viewed as suspect, a turnoff to a younger generation of potential news readers/users.
There are some practical challenges as well. While The New York Times is clearly offering valued content on all platforms, some of the 450 papers with digital pay plans in
place or in the works may be spread too thin for that. Digital subscription growth is typically fueled by deeply discounted trial offers. Converting discounted subscriptions to
fully paid ones is a work in progress. Also, a New York Times executive conceded, in a discussion with industry analysts, that profit margins on the new revenues are
nowhere near those realized by selling additional ads.10
Nonetheless, newspapers often move in a pack when a new business idea shows merit, and the momentum for digital pay plans for papers of all sizes seems certain to
continue through 2013.
News Capacity
This chapter, like those in the nine earlier editions, necessarily dwells on the business turmoil sweeping through the newspaper industry for the last decade. We recognize,
though, that some readers are most interested in a different bottom-line: Will their local paper remain a valued source of news and accountability journalism? Does the
industry still hold top chair at the table in deep coverage of national and international affairs, its investigative fangs still sharp? Or has that role passed on to a networked
agglomeration of digital efforts ranging in scale from potent new entities like Politico and ProPublica to bloggers to citizen observers.
Last year and the start of 2013 offer little that is different from recent trends in news staffing. The American Society of News Editors annual employment census typically is
completed soon after publication of this report. For 2011, ASNE reported a net loss of 1,000 full-time professional jobs in U.S. newsrooms.14 Judging by a string of
buyout/layoff announcements continuing into 2013, another loss of 1,000 seems a reasonable estimate for 2012. (The American Society of News Editors updated the
newsroom census figures in June 2013. For those data, read a brief report here.)
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between advertising losses and overall revenue loss in a given period. For example, if ad revenues are down 6% for the year but total revenues are down just 2%, that is a
sign of progress in developing replacement sources of revenue.19
Three weeks after initial publication of this report, the Newspaper Association of America released new figures based on areas of revenue that had no previously been
measured from 15 newspaper companies. It found roughly $5.9 billion in new and old other revenues that had not previously been tabulated. Altogether, that makes
newspapers a $38.6 billion industry rather than $33 billion if ad revenue and circulation revenue were the only activities counted.
The data come from an NAA survey of 17 newspaper companies (with revenue data from 15 of them), representing about 40% of industry circulation and 50% of revenues,
also reported that circulation revenue grew 5% from 2011 levels.
(So while ad revenue fell 6% for the year, total industry revenue was off only 2% according to these figures.)
Circulation
The two six-month periods for reporting circulation in 2012 marked the first time apples-to-apples comparisons were possible under new rules adopted by the Audit Bureau of
Circulations (which late in the year changed its name to the Alliance for Audited Media).
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Those results suggested a welcome stabilization. Total daily circulation was essentially even in the most recent report. Sunday circulation, up 5% year-to-year for the period
ending in March 2012, rose only 0.6% in September.25 The slowdown in Sunday growth was largely explained by the waning of the super-couponing craze of 2011, which had
some bargain-hunters buying multiple copies of the print edition on Sundays to maximize savings.
There were some hidden changes in those seemingly static numbers, however. In the most recent report, paid digital accounts for 15.3% of circulation, up 5.5 percentage
points from a year earlier.26 That is good in generating new revenue, establishing that full access is not a freebie and supporting subscription price increases. But for
advertising, trading out paid print for paid digital is a negative for now because the rates are so much lower.
Using total circulation as the summary metric allows newspapers to build their numbers with so-called Sunday Select products, essentially bundles of inserts with little or no
accompanying news, delivered to readers in certain zip codes who request the product.
Also, organizations are allowed to count branded editions, a category that includes free tabloid or foreign language versions of the paper. So, for instance, The Tampa Bay
Times showed a 73,000 daily increase from the previous years report by virtue of counting, for the first time, distribution of its free tabloid edition, TBT.27
The rules also allow some double-counting of digital subscriptions so long as the various platforms are accessed with some frequency. It is unclear how many publications use
that provision. The Alliance for Audited Media is phasing in a new measure, total consumer accounts, that would allow advertisers to subtract out the double-counting.
John Murray, who directs audience research at the Newspaper Association of America, dug deeper into the most recent Alliance for Audited Media report. His analysis
confirms the degree to which digital pay plans bolster the figures and in many cases mask print losses: nearly all the growth came from the largest newspapers, the most
active in signing digital subscribers and offering Sunday Select products. The change is rapid enough, Murray found, that for papers with more than 500,000 circulation, only
64% of Sunday copies counted remain paid print.
This indicates a good-news/bad-news bottom line on audience for the industry. Combined with measures of unique visitors and page views along with market reach across
platforms, the Alliance for Audited Medias new circulation math shows total audience holding steady. On the other hand, the print audience, by far the most lucrative for
advertising, continues to shrink.
Print Advertising
It was another year of losses for this key source of revenue. In 2012, the biggest culprit was soft national advertising, down 11.7% for the year.28 Beginning in the first
quarter, according to industry sources, campaigns for several big advertisers, including telecoms (for a second year in a row) and pharmaceuticals, slowed or stopped.
National advertisers may also be accelerating the shift of their budgets from print to an array of digital alternatives. (Magazines suffered similar declines for the year.)
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Losses in classified advertising were more moderate. Automotive, employment and other categories (such as obituaries and legal notices) all appeared to be rallying by
years end. Real estate classified losses continued at more than 15% for the year (with more than 80% of classified ad revenue lost since its peak in 2000). Retail ads, larger
than national and classified together, were down about 6.5% for the year.29
Cost Cutting
Controlling costs, while trying to minimize damage to the news report and other essential functions, remained a critical component of managing newspapers for profitability
through 2012 and the first months of 2013. Trends we have noted in recent years continued.
As the industry has contracted to 60% of its size a decade ago as measured by revenues, there are plenty of excess capacity and other legacy costs to address.32
We have reported earlier that many newspapers either are farming out their printing or, if they keep their own presses, aggressively seeking contract printing jobs. When
executives from McClatchy or Gannett address investors, they typically note as a sign of progress how many of their papers no longer print on site.
Especially if presses are gone, but even if not, imposing headquarters buildings, often serving as downtown anchors, are relics. In expansionary times, papers and parent
companies banked land to prepare for future growth. No need for that anymore with the real estate market improving, selling makes more sense.
In January 2013, for example, Gannett announced that it was moving from offices that had housed The Detroit News (and now The Detroit Free Press, too) since 1917.
Gannett will also be selling its 1927-vinatage former headquarters in Rochester, N.Y., where the company was started and grew to the biggest in the industry. The
Philadelphia newspapers have moved out of their iconic white tower into a former department store. That could be the fate of Tribune Tower in Chicago as well, and The
Washington Post is exploring moving from its headquarters.
Other organizations are dealing with excess space by staying where they are and leasing out part of their offices, or in the case of The New York Times and The Boston
Globe carving out room for incubating digital start-ups, which could help their own search for innovations. Other companies are stuck in long-term leases that are difficult
to break.
Underfunded pension plans are another challenge (as for many shrinking American companies), especially in big cities with heavily unionized work forces. Legislation in 2012
pushed into the future some required contributions, but the obligation still is there and threatens to eat up future earnings. Unionized papers may also face staffing levels
and work rules that no longer make financial sense, though managements leverage for negotiating concessions is strong.
Some companies are still working through debt taken on with acquisitions made in the middle of last decade McClatchy for its 2006 purchase of Knight Ridder and Lee for
its 2004 buy of Pulitzer.
On an operating level, we have noted for several years that metropolitan papers are voluntarily dropping circulation outside their core areas, since delivering those papers is
expensive in proportion to the money they bring in.
Last year also saw the continuation of a trend in chains (and The Associated Press as well) to consolidate design and editing in hubs. The idea is to avoid duplication of
efforts and to save money.
Unavoidably, though, staff cuts create a less-is-less impression for readers, whether it be an uncovered news beat or circulation complaints handled by an overseas call
center.
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unprofitable Philadelphia Inquirer threatened to close the paper within eight days (they didnt). With particularly weak advertising and circulation results, The Washington
Post drew sustained criticism from industry Cassandras despite aggressive experimentation launching many new lines of business and its parent companys strong TV and
cable results. The Boston Globe, which drew insufficiently attractive offers when it was put up for sale by The New York Times in 2009, went back on the block again in early
2013.
The biggest national papers benefit from an elite audience and the scale to roll out a variety of content initiatives on all platforms, but they also have distinct problems of
their own. Even as The New York Times reported great subscriber growth and income from its digital pay plans, it missed third-quarter projections because of weak national
advertising and lost 22% of its share value in a single day.33 The ad slump also prompted The Times to eliminate roughly 30 newsroom jobs in early 2013, including some
high-ranking masthead editors.
Speaking to an investors conference in December, The Washington Posts chief executive, Donald Graham said, When you get larger, you get challenged by more forms of
media competition for advertising delivery. Papers in smaller markets, like those Warren Buffett is buying, can remain the go-to source for local news and a strong vehicle
for local advertisers. Nor is the door closed for various new revenue initiatives as a recent Pew case study of the tiny, 12,000-circulation Columbia (Tenn.) Daily Herald
highlighted or the mid-sized Santa Rosa Democrat and Naples Daily News.
The Future
Industry watchers continue to be intrigued by executives like Clark Gilbert at the Deseret News and John Paton of Journal Register and MediaNews who are plunging all in, full
speed, into a transformation in which digital is the core of news presentation and revenue.
Paton lost some of his luster as a sage in 2012 when he took Journal Register into bankruptcy for the second time in four years, though he insisted it was the overhang of
legacy costs, not failures of the digital strategy that made the move necessary. His owners, led by Alden Global Capital agreed, and are completing repurchase of the
company, leaving Paton and his digital strategy in place.
Gilbert and Paton are not alone. As they reduce print frequency, the Advance papers are also placing a bet that with the right focus, digital audience and revenue growth can
be accelerated. The once-sleepy Morris Communications, with papers in Savannah, Ga., and Jacksonville, Fla., has a new generation of family leadership and is putting
digital transformation foremost in its strategy.
So there is a measure of hope in the industry. Newspaper organizations have made progress in getting readers to pay a bigger share of costs and in turning their
competencies into new revenue streams even as print advertising continues to erode and digital advertising continues to disappoint.
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As for news, the industry has yet to break the decade-long cycle of doing less and less of what it does best. But while fully evolved digital information do-it-yourselfers see
newspapers as pass and irrelevant, there is still substantial demand for original reporting and synthesizing the flood of available content. Doing that well on multiple
platforms now seems in reach, making the rise of all things digital plausibly an opportunity, not just a threat.
Endnotes
1. N.A. Papers with Paywalls (http://www.newsandtech.com/stats/article_22ac1efa-2466-11e1-9c29-0019bb2963f4.html) . News & Tech. March 4, 2013. And Chuck, Moozakis. Email to
the Pew Research Center. March 4, 2013.
2. Newspaper Association of America. Trends and Numbers (http://www.naa.org/Trends-and-Numbers.aspx) . Fourth quarter projections by Rick Edmonds.
3. Bercovici, Jeff. Gannett Building Paywalls Around All Its Papers Except USA Today. (http://www.forbes.com/sites/jeffbercovici/2012/02/22/gannett-building-paywalls-around-all-itspapers-except-usa-today/) Forbes. Feb. 22, 2012.
4. Brown, Lisa. Lee Newspapers Will Soon Charge for Online Access. (http://www.stltoday.com/business/local/lee-newspapers-will-soon-charge-for-online-access/article_204da3b8-736c-11e18ee9-0019bb30f31a.html) St. Louis Post-Dispatch. March 21, 2012. And Beaujon, Andrew. McClatchy to Expand Paywalls Across Chain in Fourth Quarter.
(http://www.poynter.org/latest-news/mediawire/183028/mcclatchy-to-expand-paywalls-across-chain-in-fourth-quarter/) Poynter. July 27, 2012. And Monk, Dan. Scripps Newspapers
6. Gannett Co. Reports Strong Fourth Quarter Results. (http://www.gannett.com/assets/pdf/5Z20029524.PDF) Gannett press release. Feb. 4, 2013.
7. Lee Enterprises Reports Earnings for First Fiscal Quarter. (http://www.lee.net/newsreleases/pdf/LEE%20Q1%20Earnings%20012213.pdf) Lee Enterprises press release. Jan. 22,
2013.
8. McClatchy Co. Reports Fourth Quarter 2012 Earnings. (http://www.mcclatchy.com/2013/02/07/3107/mcclatchy-reports-fourth-quarter.html) McClatchy press release. Feb. 7, 2013.
9. The New York Times Co. Reports 2012 Fourth Quarter and Full Year Results. (http://phx.corporate-ir.net/phoenix.zhtml?c=105317&p=irol-newsArticle&ID=1782779&highlight=) The New
York Times Company press release. Feb. 7, 2013.
10. The New York Times Co. Reports 2012 Fourth Quarter and Full Year Results. (http://phx.corporate-ir.net/phoenix.zhtml?c=105317&p=irol-newsArticle&ID=1782779&highlight=) The New
York Times Company press release. Feb. 7, 2013.
11. Newspaper Association of America. Trends and Numbers (http://www.naa.org/Trends-and-Numbers.aspx) .
12. Wells, Carlie Kollath. Times-Picayune Publisher: This Is Chapter Two. (http://www.poynter.org/latest-news/top-stories/204743/times-picayune-publisher-this-is-chapter-two/)
Poynter. Feb. 19, 2013.
13. The Search for a New Business Model. (http://www.journalism.org/analysis_report/search_new_business_model?src=prc-headline) Pew Research Center. March 5, 2012.
14. American Society of News Editors. Newsroom Census (http://asne.org/content.asp?pl=140&sl=129&contentid=129) . April 4, 2012.
15. Figuring the Cost of Custom Mobile Business App Development. (http://www.formotus.com/14018/blog-mobility/figuring-the-costs-of-custom-mobile-business-app-development) Fomotus.
Nov. 11, 2013.
16. Newspaper Association of America. Trends and Numbers (http://www.naa.org/Trends-and-Numbers.aspx) .
17. McCarthy, Alison. US Ad Spending Forecast: Fall 2012 Update. eMarketer. Oct. 2012.
18. King, Steve. ZenithOptimedia Worldwide forecast. Presentation at UBS media investment conference (http://www.static-ubs.com/global/en/investment-
bank/conferences/previousconferences/_jcr_content/par/table_46a1.823164240.file/dGFibGVUZXh0PS9jb250ZW50L2RhbS9JbnZlc3RtZW50QmFuay9kb2N1bWVudHMvR01DQ18yMDEyX0FnZW5kYS5wZGY=/GMCC_2012
. Dec. 3, 2012.
19. Moroney, James. Dallas Morning News publisher and Newspaper Association of America Chairman. Interview with the Pew Research Center. Dec. 4, 2012.
20. Pew Internet & American Life Project. Trend Data (Adults). (http://www.pewinternet.org/Static-Pages/Trend-Data-%28Adults%29/Device-Ownership.aspx)
21. Alliance for Audited Media. 2012 Digital Publishing Survey: How Media Companies Are Innovating and Investing in Cross-Platform Opportunities
(http://www.auditedmedia.com/media/182933/aam2012survey.pdf) . Dec. 17, 2012.
22. Filloux, Frdric. Mobiles Rude Awakening. (http://www.mondaynote.com/2012/12/16/mobiles-rude-awakening/) Monday Note. Dec. 16, 2012.
23. The Demographics of Mobile News (http://www.journalism.org/analysis_report/demographics_mobile_news) . Pew Research Center. Dec. 11, 2012.
24. Nielsen, Rasmus Kleis. Ten Years that Shook the Media World. (https://reutersinstitute.politics.ox.ac.uk/fileadmin/documents/Publications/Working_Papers/Nielsen__Ten_Years_that_Shook_the_Media.pdf) Reuters Institute for the Study of Journalism. October, 2012.
25. Little Change in Newspaper Circulation Numbers (http://www.usatoday.com/story/money/2012/10/30/largest-us-newspapers/1669117/) .Associated Press. USA Today. Oct. 30,
2012.
26. Kantor, Susan. E-mail to the Pew Research Center. Oct. 30, 2012.
27. The Top U.S. Newspapers for September 2012 (http://accessabc.wordpress.com/2012/10/30/the-top-u-s-newspapers-for-september-2012/) . Alliance for Audited Media. Oct. 30,
2012.
28. Newspaper Association of America. Trends and Numbers (http://www.naa.org/Trends-and-Numbers.aspx) . Fourth quarter projections by Rick Edmonds.
29. Newspaper Association of America. Trends and Numbers (http://www.naa.org/Trends-and-Numbers.aspx) . Fourth quarter projections by Rick Edmonds.
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30. Fourth quarter and full-year earnings reports of companies. January and February 2013.
31. Fourth quarter and full-year earnings reports of companies. January and February 2013.
32. Newspaper Association of America. Trends and Numbers (http://www.naa.org/Trends-and-Numbers.aspx) .
33. Haughney, Christine. New York Times Company Posts a Profit but Advertising Falls, Lowering Revenue. (http://mediadecoder.blogs.nytimes.com/2012/10/25/times-company-posts-aprofit-but-revenue-slips/) The New York Times. Oct. 25, 2012.
34. Vega, Tanzina. Times Co. Agrees to Sell Regional Newspaper Group. (http://mediadecoder.blogs.nytimes.com/2011/12/27/times-company-sells-regional-newspaper-group/) The New
York Times. Dec. 27, 2011.
35. Saba, Jennifer and Berkowitz, Ben. Warren Buffett to Buy Media General Newspapers. (http://www.reuters.com/article/2012/05/17/us-mediageneral-idUSBRE84G0M920120517)
Reuters. May 17, 2012.
36. Doctor, Ken. The Newsonomics of Aaron Kushners Virtuous Circle (http://www.niemanlab.org/2013/01/the-newsonomics-of-aaron-kushners-virtuous-circles/) . Nieman Journalism
Lab. Jan. 31, 2013.
37. Laudner, Adam and Adams, Russell. Philadelphia Newspapers Sold Yet Again. (http://online.wsj.com/article/SB10001424052702303816504577319640194855170.html) The Wall Street
Journal. April 3, 2012.
38. Harrington, Jeff. Tampa Tribune Sold to Revolution Capital Group. (http://www.tampabay.com/news/business/corporate/tampa-tribune-sold-to-revolution-capital-group/1255396)
Tampa Bay Times. Oct. 8, 2012.
39. Lee, Edmund and McCracken, Jeffrey. Tribune Said to Want to Sell All Newspapers as One Deal. (http://www.bloomberg.com/news/2013-03-04/tribune-said-to-want-to-sell-allnewspapers-in-one-deal.html) Bloomberg. March 4, 2013.
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