Mid-year report: The newspaper industry's billion dollar challenge
Here is one way to look at the business-model challenge for newspaper organizations: every year that print advertising revenues fall a billion dollars or more, the companies need to generate a billion or more in other revenue growth to stay even.
Mid summer, 2015 is shaping up as another such year, and it again seems unlikely that that much new revenue can be found. The math is daunting.
Consider paywalls. Phased in at different times over the last five years at different companies, digital subscriptions and price increases for print seem to typically have generated a 10 percent circulation revenue gain, even as print circulation volume declines.
Project that 10 percent industry wide on total circulation revenue of about $11 billion and that's enough to cover a billion or more in print advertising losses. But it's a one time event -- so that's not where the next billion will be coming from.
Companies will begin reporting second quarter/first half financial results later this month, and the tea leaves do not form a pretty pattern:
- After losing 5 percent on the first day of trading June 29, shares in newly independent Gannett have fallen some more. They were down 20 percent the middle of last week before rallying nicely late Thursday and Friday.
Meanwhile McClatchy shares have lost two-thirds of their value since the start of the year and are trading barely above $1. Shares of A.H. Belo -- essentially the Dallas Morning News and associated enterprises -- are off 50 percent for the year.
- The Newspaper Association of America has yet to report industry revenue figures for 2014. Last year they were out by mid-April. I recently asked if the number were ever going to be released and did not receive a reply.
My hunch is yes, but I can understand how other priorities for the industry association -- finding markers of progress --- may be pushing a final 2014 tally to the back of the line.
Absent the NAA figures, public company reports suggest print declines in the 6 to 9 percent range continued in 2014 and this year. With a print advertising base of $17.3 billion in 2013, that remains more than $1 billion annually.
- Similarly the American Society of News Editors annual newsroom census for 2014 has been delayed until August. A net loss of 1,300 full-time editorial positions took place in 2013, and the downward trend surely continued last year with plenty more layoffs and buyouts logged so far in 2015.
- The industry can only glance enviously at local broadcasting counterparts where business is booming.For instance, Sinclair Broadcasting Group, with the largest collection of stations, is projecting revenue growth of 20 percent plus for the first half of 2015. That's in an off year for political advertising, but auto ads and retransmission fees are more than making up the difference.
There is a counterpoint to this big picture gloom. The newspaper industry remains quite profitable on an operating basis. Even with start-up capital scarce, new digital news products are being launched regularly as are digital lines of business like marketing services for local advertising customers. Commitment to digital transformation and an accompanying newsroom culture change has never been stronger -- together with the recognition that the work will take years not months.
But the payoff appears years away as well. The next round of earnings reports may help point the way forward -- but I have a hard time seeing this year's crop of new revenues adding up the the requisite $1 billion. So for the business, that's a formula for more running fast to stand still.