Following the Paper Trail
Posted: 9/23/2013 | By: Toni McQuilken
August was a wild month in the world of newspapers, with Boston Red Sox owner John Henry buying the Boston Globe and Amazon founder Jeff Bezos purchasing the Washington Post family of products.
In a memo he immediately released after the purchase to the staff and public, Bezos noted that the business of newspapers is changing – the first and most important goal remains producing high-quality, accurate news, but the form that news takes is rapidly evolving as technology continues to advance.
Does that mean the print product is dead? Not necessarily.
Thad McIlroy, a publishing industry analyst and principal of The Future of Publishing (www.thefutureofpublishing.com), notes that the publishing landscape has indeed changed. In the late 1990s and early 2000s, the price of newsprint fluctuated wildly, making it essential for publishers to have a solid plan in place to keep costs at a manageable level.
“In the old days, newsprint experienced rapid price swings and newspapers suffered. (It was treated as a commodity, like pork bellies, and hence was subject to speculator’s playful moves),” noted McIlroy. “Back then, newspapers wanted circulation revenue to more or less cover circulation costs. Most newspapers had a competitor in their local market so there was pronounced retail price sensitivity. The wholesale price of newsprint heavily impacted profitability.”
But today, he noted, competition has rapidly consolidated or disappeared. The demand for newsprint in a local market has either remained stagnant in recent years, or has actually decreased, as publishers have closed properties, or reduced page counts or days mailed.
In fact, newsprint prices today are at some of the lowest levels in recent memory, and are remaining stable. In the United Kingdom, recent reports noted that manufacturers—who have decreased capacity over the last few years—came to an agreement with publishers in that country that raised newsprint rates an average of 7-8 percent. But even with that hike, the rates remain exceptionally low when compared to historical figures.
That isn’t to say that publishers can just ignore newsprint pricing altogether. While it has become less important in the day-to-day managing of a publisher’s bottom line, it still plays a strong role. “We watch and attempt to anticipate newsprint increases closely,” said Rick Sant, vice president of operations for The Orange County Register, in Santa Ana, Calif. He went on to note that, this year, he has not seen much movement in the pricing, however.
Strategies that Sant has used to help keep those costs low and steady include being part of a large consortium, and watching his waste carefully. “We monitor it daily,” he noted.
A look at the historical numbers back up what Sant has noted in his daily operations —prices dropped, and then stabilized. According to RISI (Resource Information Systems Inc.), a company that tracks information about global forest products, prices have dropped considerably over the last two years in the United States. The drop was seen across all grades and regions.
Across the board, newsprint pricing in the United States dropped from a high two years ago in the mid-high $600/ton, to, today, in the high $500/ton to low $600/ton. That’s a drop of roughly $100/ton on newsprint in just the last two years. Prices fell slightly between January and February of this year, but overall, the pricing in 2013 to date has been very steady—a welcome change from the past, where it could and did fluctuate wildly on a monthly, at times, basis.
Going forward, most forecast models show the price of newsprint either remaining stagnant, or continuing to decline. There might be slight upswings along the way, but on the whole, as newer technologies are brought in to compliment the traditional print versions, the demand will continue to erode.
Smart publishers will continue to firm up relationships with either the mill directly, or with consortiums, such as the one The Orange County Register uses, so as to take advantage of lower prices as the opportunity arises. But the best strategy is the one Sant and many other publishers are already using—continuing to keep an eye on waste and usage, and adjusting accordingly. Not allowing newsprint costs to skyrocket from attention being turned elsewhere is going to be key to keeping those costs where they are today—low and steady.