Why newspapers can’t stop the presses
Although some analysts have interpreted these expense-cutting tactics as a repudiation of the print newspaper business by publishing companies, they are anything but. Publishers have undertaken these measures in an effort to keep their traditional businesses as strong as possible to fund the transition to digital publishing.
But they have a long way to go. Fifteen years after the commercial debut of the Internet, publishers on average still depend on print advertising and circulation for 90% of their revenues. Stop the presses and newspaper companies are out of business. It’s just that simple.
So, I have to take issue with the likes of Rick Edmonds, the well-regarded business guru at the Poynter Institute, when he says that Gannett’s layoff of 700 employees last month was “a vote of no confidence in the future of print by America’s largest newspaper company.”
Far from being a vote of no confidence, the latest in years of layoffs, furloughs and other stringent economies at Gannett and many of its peers are aimed at staying healthy long enough to build truly robust and sustainable digital publishing businesses.
There’s no time to lose. As Frédéric Filloux reported at Monday Note, a just-completed study in France found that news consumers spent 37 minutes a day browsing digital publications, as opposed to 22 minutes a day perusing print.
Unfortunately, as you can see from the graphic below, U.S. newspapers have made only the barest progress in the last 10 years in migrating to the digital media. Here are the details:
Back in 2000, when the industry collected $48.7 billion in advertising revenues, digital sales were so insignificant that they were not even broken out as a separate category in the data published by the Newspaper Association of America, the industry-funded trade group. The NAA reports that subscription and single-copy sales in 2000 produced another $10.5 billion in sales. Put those two revenue sources together and the industry had $59 billion in revenues from print publishing in 2000.
By 2010, print-related revenues dived to approximately $38 billion, or 36% less than in 2000. With ad sales down by 44% in the 10-year period, many publishers chose to offset some of the drop by aggressively hiking circulation rates in spite of a decade-long slide that cut circulation volume by some 30%. Consequently, circulation fees today generate about 28% of total newspaper revenues vs. 18% in 2000.
But the shift to circulation revenues from advertising revenues has not reduced the dependence of publishers on print. After more than a decade of struggling over what to do about the digital media, publishers on average still count on print to deliver 90% of their total sales. Digital revenues, which were not even on the radar for NAA statisticians until 2003, were $4 billion in 2010.
To make things even more challenging for publishers, the preponderance of digital revenues at newspapers come from packages sold to print advertisers.
Prior to the economic meltdown in 2008, digital revenues rose at impressive double-digit levels as publishers persuaded such print want-ad buyers as car dealers, real estate agents and employers to add digital advertising to their schedules.
With the economic meltdown and low-priced competitors eroding those categories in recent years, publishers for the most part have been relying almost exclusively on selling banner ads to retail advertisers.
The problem with banners is that it they are the lowest form of digital advertising. Because untargeted banners generally have click-though rates of less than 0.5%, marketers don’t want to pay much for them. Prices are further depressed because the web is awash in page views, creating far more inventory than the number of banners vying to appear on them. Last but not least, such big banner-ad networks as Google’s Double Click have learned to squeeze pricing by combining sophisticated bidding algorithms with just-in-time ad delivery.
With their legacy Internet ad strategies looking increasingly threadbare, publishers know they have to find bold, new ways to leverage the power of their brands, content-creation capabilities and large local sales teams to win in the digital world. Smart publishers are working on this as fast as they can.
Until those new initiatives achieve critical mass, however, print will continue to be the lifeblood of the newspaper business.