New revenue model elusive for US papers

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New revenue model elusive for US papers

New revenue model elusive for US papers

Monday, March 5, 2012
  • pap
At the current rate most newspapers continue to contract with alarming speed.

WASHINGTON: US newspapers are searching for a new revenue model in an era of falling circulation, declining print advertising dollars and free online competition.

 

A study published on Monday suggests they have a long and difficult road ahead -- although there are a few encouraging signs.

 

The 16-month study by the Pew Research Center's Project for Excellence in Journalism looked at private financial data from 38 newspapers and included interviews with executives from 13 companies that own a total of 330 dailies.

 

On average for the last year for which they had complete data, the newspapers studied lost seven dollars in print advertising for every one dollar they gained in new digital revenue.

 

While digital advertising revenue rose an average of 19 per cent at the papers during that period, it did not come close to matching the revenue lost from an average nine per cent decline in print advertising.

 

"In general, the shift to replace losses in print ad revenue with new digital revenue is taking longer and proving more difficult than executives want and at the current rate most newspapers continue to contract with alarming speed," the report said.

 

"Some (executives) 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," it said.

 

The newspapers involved were not identified but they were drawn from across the United States and included three dailies with circulations above 100,000.

 

The study's authors said they did not examine digital subscriptions such as those charged by The Wall Street Journal because only a few papers have started charging online and it is too early to draw conclusions.

 

According to the study, there are currently 1,350 English-language daily newspapers in the United States, down from 1,400 five years ago.

 

The industry is making only halting progress in the search for a new revenue model but some individual newspapers are faring much better than the industry overall and may provide signs of a path forward, the report said.

 

"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," PEJ director Tom Rosenstiel said.

 

One newspaper studied grew online ad revenue by 63 per cent and bucked the general trend by growing print ad revenue by eight per cent.

 

But seven of the 38 newspapers failed to grow digital revenue at all with one seeing digital revenue fall by 37 per cent.

 

"Most papers are not putting significant effort into the new digital revenue categories that, while small now, are expected to provide most of the growth in the future," the report said.

 

Mobile remains a largely untapped arena with advertising on mobile devices accounting for only one per cent of digital revenue last year at the newspapers studied.

 

"No other subject during the interviews (with executives) seemed to generate as much enthusiasm as the prospects for mobile," the report said, although they "have not yet figured out how to mine it."

 

Most newspapers are also not yet putting major effort into selling customised digital advertisements, which the report said was the category expected to soon dominate local advertising.

 

The majority of papers studied focus most of their digital sales efforts on conventional display (such as banner ads) and digital classified, which account on average for 76 per cent of digital revenue but are not growing, it said.

 

In addition, print-focused sales representatives outnumber digital-focused staff by about 3-to-1, it said.

 

"To accelerate the transition to digital revenue, executives at nearly all of these newspaper companies agreed on one thing: Their advertising sales staff needed to change," the report said.

 

Thirty of the papers studied have daily deals programmes like those offered by Groupon but they accounted for only five per cent of overall digital revenue last year and executives are sharply divided on their prospects.

 

Nearly half of the papers studied were trying to develop non-traditional revenue streams such as holding events, consulting or selling new business products but in most cases, the dollars involved are minimal.

 

"Overall, the research reveals an industry that has not yet moved very far down the road toward a business model to replace the once-thriving legacy model -- even though overall newspaper ad revenue has fallen by more than half in just a few years," the study said.

 

As for the future, the people who run the newspaper industry are unsure of where it is heading or what it will look like, the study said.

 

"The dominant perception about the future is uncertainty."