September 15, 2022

Pageviews and uniques are not the favored digital metrics they used to be, but as they fell roughly 20% earlier this year at local newspaper sites, the decline sent a chill through the industry.

In a year of soft advertising and rising newsprint and delivery costs, reduced traffic creates an unwelcome added challenge. Programmed ad placements are still sold by total impressions, so less traffic translates to less revenue. A traffic decline also reduces the number of prospective customers who can be started on the path to paid digital subscriptions.

Matt Lindsay, whose Mather Economics is a leading consultancy on strategy for building digital revenue, told me the situation is not quite as dire as it may look. “The fact that pageviews are down is not a bad thing,” he emailed, “if the long-term value of their users … is going up. We did some math a while back and the breakeven point was about 4:1 — that is, you can lose four anonymous low-value users if you get one high-value known user.”

Lindsay also did not think that tightening paywalls were the culprit for the plunge. “For most publishers, premium content is less than 25% of all articles and paywall rules are only impacting maybe 11% of users. These factors have some effect … but they are likely not a major reason for lower pageviews. The news cycle is the No. 1 reason.”

Several publishers I spoke with (who asked that their papers not be identified) saw more cause for worry. Fewer soft prospects coming to view an article or two will work over time to slow digital subscription growth, they said. And while programmatic digital advertising is not a huge revenue source for most, if it goes missing, already painful financial pressures increase.

Also, if interest in news post-Trump, post-COVID has waned and news avoidance is on the rise, it is not clear when or whether a news cycle comeback will follow.

Regional papers seem to be seeing the worst of it. Lauryn Warnick of Chartbeat told me that for their client base, which also includes magazines and broadcast sites, pageviews were down about 8.6% so far this year compared to the same period in 2021.

The Press Gazette survey of unique visitors at large national sites in July found a majority of the top 25 down, but typically only 6 to 15%

All this hits as print revenues — both subscriptions and advertising — are falling fast at local newspapers and digital gains continue not to make up the difference. That was evident in Gannett’s bleak second-quarter earnings report six weeks ago and layoff of 400 employees.

Gannett CEO Mike Reed was candid about the shortfall, but Gannett saved some of the more alarming numbers for an Aug. 4 Securities and Exchange Commission filing.

The report showed for the quarter:

  • Print advertising revenue down year-to-year $27 million
  • Print circulation revenue down $44 million
  • Digital advertising revenue down $13 million
  • Digital-only subscription revenue up $8 million

Gannett may be an extreme case, but Lindsay and other experts say the average local newspaper still gets 85% of subscription revenue from print. At a minimum, as CEO Reed said in the second-quarter earnings conference call, his company now faces a lag of at least a couple of years before its transformation to a business model based on growing digital subscriptions pays off.

I found in conversations that those newspapers that started early on paid digital and are doing well have a different concern. As the number of subscriptions pushes or exceeds 100,000 for metros — or a lower milestone at smaller papers — they worry that growth numbers will either slow or stop.

Several such papers have collaborated with the News Media Alliance and FTI Consulting (long a go-to source for newspaper business model intelligence) on a study exploring whether they can determine a “ceiling” for a potential digital subscriber level.

Rebecca Frank, vice president for research at NMA, told me that the study did include defining a possible ceiling but was a little broader. “There is not much understanding of what a (digital subscription) target should look like,” Frank told me. “The first step is to define a total addressable market and how to calculate it.”

That in turn leads to consideration of which factors a publisher can control and which they cannot. For instance, high levels of education and income or huge interest in sports are positives for paid circulation — but are givens a publisher cannot change.

As digital subscription efforts mature, retention strategies should naturally get equal weight with acquisition strategies, Frank said. But another preliminary finding will cheer journalists who think round after round of cuts is making news reports too thin to satisfy readers.

“There appears to be a high correlation,” she said, “between newsroom size and digital penetration.” Which is to say that more investment in news goes with better subscription results. Frank cautioned, though, that this is a case where correlation may not be the same as causation — papers that are prospering can afford bigger newsrooms.

One of my publishing sources agreed that news quality was a key variable that could be controlled. “We have to be interesting (to readers) every day with something worth looking at,” he said. “We are looking again at each type of coverage — politics, culture, sports and business — and finding that a lot of time (our approach) is kind of stale.”

Add to that the prevalence of early deadlines, which mean that most sports results and other evening news won’t make the next day’s paper, and keeping print relevant to that segment of subscribers keeps getting tougher.

The expense side is relevant, too, as local papers look to get back to financial equilibrium.

Among the attractions of digital subscriptions is that the cost of serving each additional customer is close to zero. Not so with print. Each additional customer runs up printing and delivery costs. Passing that on with aggressive price increases, in turn, pushes subscribers away and lessens appeal to advertisers.

I would look for more papers to consider dropping days of print delivery and focusing their best content (especially for an older print reading base) in Sunday editions and other remaining days — as The Atlanta Journal-Constitution has been reportedly planning. That’s a partial cure with its own risks, however, since not all print loyalists will embrace the alternative of an e-replica edition.

The tough times coincide with slow progress on proposals for federal help for local news outlets to hire more journalists. There seems general consensus now that local news is in trouble, but Congress is still a step or two away from doing anything about it.

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
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