According to a new study by the Pew Research Center’s Project for Excellence in Journalism, newspapers in the United States lose $7 in print revenue for every dollar earned in digital revenue. Will a new business model appear?
Many newspapers in the United States and Canada are starting to adapt to the digital age – some may be faster than others. Some publications have attempted the paywall structure, while others publish their news online for free. But are these business models working?
By analyzing financial data of 38 American newspapers and conducting interviews with senior executives from more than a dozen companies that own 330 dailies with circulations between 25,000 and 100,000, Pew Research Center’s Project for Excellence in Journalism has published a new study that finds some very interesting figures for the newspaper industry.
The most important statistic to report on is the fact that newspapers lose $7 in print advertising for every $1 earned in digital revenue. The research found that digital advertising revenues rose on average 19 percent, but suffered from nine percent losses in print advertising.
“Only 40 percent of the papers that provided data say targeted advertising is a major part of their sales effort,” the report stated. “Even though many newspapers are not focusing on it, smart or targeted digital advertising—in which ads are customized based on consumer online behavior—is expected to dominate local digital revenue by 2014.”
Newspaper executives admitted in their interviews with the institute that cultural difficulties are making it harder to transition from print to digital. One challenge that newspapers face is that their employees are too keen on their “old ways.” Another trouble newspapers face is that even though they may be attempting to shift towards digital revenue, they are having a tough time trying to convince digital salespersons to the newspaper sector.
Upon further analysis, Pew found that the daily deals offerings (e.g. Groupon, DealChicken, etc.) accounts for only five percent of digital revenue. Meanwhile, mobile device advertising only tallies one percent in digital revenue.
The future seems desolate, according to some of the interviewed executives, who maintain a morose outlook. They believe that many newspapers will shrink, shut down and only provide print editions that would be delivered a few times per week.
“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 Tom Rosenstiel, PEJ director, in a press release.
Although the study primarily focused on U.S. publications, Canadian news outlets face the same issues.
It was announced that Torstar Corp., owners of the Toronto Star, Workopolis, TheStar.com and others, reported better-than-expected profits in the fourth quarter. Although executives say advertisers are remaining cautious, digital revenues were up 22.8 percent year over year – digital revenue maintains 10.6 percent of its total revenues.
More than one-third of PostMedia’s revenue comes from online operations. It does not, however, publish its financial data.