Nieman Foundation at Harvard
The invaluable Rick Edmonds has a useful analysis of Gannett’s latest earnings and comes away with some disquieting findings. Key among them:
Circulation revenues were up for the year (1.1 percent) but down for the fourth quarter (-1.6 percent) compared to the same period in 2012. CEO Gracia Martore explained in a conference call to analysts that the company has now “cycled through” the lucrative introduction of paywalls together with bundled print + digital subscriptions at its 80 community newspapers.
This raises the concern that capturing revenue from new digital subscribers and pairing “all access” print/digital bundles with a big price increase could be a one-time revenue event. Gannett not only failed to continue gaining circulation revenue at the end of the last year, it lost a little, as these subscriptions came up for renewal.
Gannett does have a strategy to get the figure headed back up this year, said Martore and Bob Dickey, head of community publishing. The company has begun including a section of USA Today news as an enhancement at four of its papers and plans to roll that out to most of the rest in 2014. By the middle of the year, Martore said, the expanded content could provide the rationale for another round of price increases.
But even if further improvement is not forthcoming, Gannett counts the paywall initiative as a success. Martore said the company had made good its promise that the move would increase operating income by $100 million.
To sum that up: Gannett did get a boost in circulation revenue by putting up paywalls at its newspapers. But that’s tapped out: Gannett has already made about as much as it will from its paywalls, at least as currently structured. When you announce a paywall, you get a one-time boost from people who are willing to pay. But it plateaus. And maybe some of those subscribers eventually drop off. It’s not a growth model that does anything like replace the ongoing decline in print advertising revenue — which continues to decline somewhere in the high single digits every year. As Jeff Jarvis put it:
Pay walls are a *one-time* boost: http://t.co/IKJcPqvb7u
— Jeff Jarvis (@jeffjarvis) February 5, 2014
So yes, it’s better to have $100 million than not to have $100 million. (The paywall skeptics, I think, generally don’t wrestle with this — that’s real money, and I don’t think there’s strong evidence that paywalls in the main have substantively limited newspapers’ ability to launch other innovations or engage with its audience.) But it is not a long-term “solution,” in any sense, to the real problem: the continuing decay of the print-centric business model that newspapers were built on.
To put it starkly: Barring a significant change, newspapers will make less in 2014 than they did in 2013, less in 2015 than in 2014, and so on. The trendlines are not changing.
Rick notes that the Gannett conference call included a question about the possibility of the company spinning off its newspapers, as Belo, Tribune, and others have done before. “In essence, Martore’s answer was not now, but maybe later,” Rick writes.
That Gannett — the largest newspaper company in America; the company that mastered the profit margin; the amalgamator of family papers — would be thinking of tossing its newspapers overboard tells you all you need to know about where most of the American newspaper business is headed.
7 comments:
It has become obvious to me that those of us who were “raised” as journalists in the daily newspaper business and/or other print media will either have to adapt to the digital model of newspaper publication or produce low volume, low income hard copy papers for local consumption rather than seeking large profits as our motivation. Local newspapers provide a service, however. Whether local advertising will sustain low volume publication at realistic levels remains to be seen.
It’s true that paid subscriptions alone are not a growth model. However, paid subscriptions offer two highly valuable assets to a news company — recurring (stable) revenues and easy marketing. The recurring revenues, especially when retention efforts are conducted according to best practices, help stabilize income. Smart publications make sure the scale their operating costs to below this recurring income figure. Once you have a subscriber base, cross-sells for books, eBooks, events, special publications and even advertising becomes far easier than trying to sell those products without an engaged audience. So yes, subscriptions aren’t a growth strategy in of in themselves, but they are the first step to growing your revenues in a sound manner.
Adding a large helping from a newspaper that people aren’t picking up even when it’s free at a hotel, and expecting to raise prices based on that?
Gannett continues to entirely miss the point of what the “local” in local news is supposed to be.
No surprise here. This is a train on a downhill track. It was clear from the very start of paywalls, before any were even put up, that this was going to be the result.
Make sure your costs are below the level of recurring revenues? You’d be out of business in five minutes.
Not true, Rose. At least not for all. We have a number of Case Studies on our site that prove otherwise. However, I admit it is more difficult for general consumer news sites to pull off than specialized or niche publications, which can often charge more for subscriptions.
I’m not interested in supporting a non eco friendly computer age 100% and especially paying double to read my news! First of all, I pay for the paywall, second I pay for any downloads and internet usage and thirdly I may also have to deal with a computer crashing or interference with internet connection… Reading a newspaper is simple, sometimes simple is best, I pay one low fee, I get to keep my newpaper and take as much time in reading it as I like, I have no problem reading it in the sun! and lastly, paper breaks down quicker when you bin it. Old school journalism and media may die out in favour of social media etc. however, I have a funny feeling, as with most vintage, retro, antique era’s it will remain and or make a come back at some point. Besides, I need electricity for my computer and right now rates are through the roof! Give me a hot cuppa and a newpaper any day. Sure, there is more free speech online and many more stories, but who has time to sift through all this over saturation spending time on trying to figure out fact from fiction? not me…
Trackbacks:
Leave a comment