By now, to expect anything else other than a bleak, foreboding future for the newspaper industry would be somewhat of an unusual stance to take. On paper, the most recent numbers only seem to bolster the idea. In fact, 2015 was perhaps the worst year for newspapers since the Great Recession, specifically with regard to advertising revenue. According to the Pew Research Center’s 2016 State of the News Media report, publicly traded newspaper companies collectively suffered a nearly 8 percent drop in ad revenue from 2014 to 2015.
Though digital advertising now composes a quarter of total ad revenue for newspapers, it still failed to match the previous year’s digital revenue total by 2 percent. Meanwhile, attempts by the Toronto Star and Postmedia Network to capitalize on their tablet editions both floundered. Despite having a goal of 200,000 weekly readers by the end of 2016, the Star’s app remained stagnant at 55,000 to 60,000 as of July. Postmedia decided to pull the plug on its evening tablet editions altogether last October. With the exception of major newspapers like The New York Times and Wall Street Journal, paywalls continued to fall as well, prompting news organizations to revisit their digital strategies.
While the data for 2016 won’t be available from the Pew Research Center until next June, newspapers across North America experimented with a number of different non-traditional revenue generators this past year, and in some cases, revitalized conventional methods in a successful manner.
And as far as the future is concerned, newspapers looking for a one-size-fits-all solution for revenue generation will come up empty handed. The most effective recipe for success will stem from a concoction of varying methods as well as a dramatic shift in mentality at every level of a newspaper. Here, we take a look at what revenue generators worked this year and the financial outlook for 2017.
Don’t Just Collect Data, Use It
The notion that newspapers are well behind their competitors in the television and online news spaces when it comes to acting on collected data isn’t just an idea—it’s a fact.
According to a recent survey by the Engaging News Project, a think tank located at the University of Texas at Austin, only around 20 percent of the news outlets it polled were working with researchers to test out different strategies for audience engagement. The study also revealed that newspapers tended to be less likely to have a responsive website than television stations or online news sites.
George Sylvie, a professor of journalism at the University of Texas at Austin, who studies innovation, change, and decision-making by newspapers, noted that the news publishers who utilize data effectively in the coming years will emerge from the rest of the pack.
“Newspapers can answer the question of what their local readers want through focus groups or by partnering with a nearby college to get them to do a readership survey for you,” Sylvie said. “Yes, people may tend to read certain things, but you don’t know why until you ask. If there’s something interesting there, people will read it. The question is how do you stand out?”
While the revenue generated from events and promotions can be extremely beneficial if marketed correctly, the databases they build are the gift that keeps on giving.
“Newspapers still have a long way to go to establish an email relationship with the majority of people in their community but promotions and interactive content are the fastest ways to grow their databases,” said Matt Coen, president and co-founder of Second Street, a private-label online promotions provider for media companies. “They help turn emails into personal consumer profiles with interests and buying behavior so they can be more strategically targeted for editorial and advertising purposes, as well as establish the long-term loyalty of that consumer. It’s the single best way to reveal the critical personal data about your audience that you can use to build future businesses on.”
One of the rising trends from newspapers, Coen said, is using information acquired from quizzes for native advertising and lead generation campaigns.
A New Model for Maximizing Revenue
A report released by the World Association of Newspapers and News Publishers this past June emphasized the need to focus on subscription revenue, particularly in the digital form.
However, the study left a very important question unanswered for newspapers: How could they go about strengthening their subscription revenue?
Researchers from the University of Missouri and University of Miami believe they found a possible answer for newspapers looking to do just that. Following a lengthy and arduous research process, the researchers managed to develop an algorithm that would allow newspapers to maximize their revenues from advertisements and subscriptions by offering a variety of subscription plans.
“We think this model, if applied, can have a sizable impact on the industry. Newspapers need to realize that their pricing strategy must align with the needs of both their readers and advertisers,” said Vamsi Kanuri, assistant professor of marketing at the University of Miami School of Business Administration, who helped conduct the study released earlier this year. “Attracting the right kind of readers through subscription plans will make the newspaper attractive for advertisers.”
In order to utilize the model, each newspaper needs to conduct its own reader and advertiser surveys, then organize the collected data by reader segment and input it into the algorithm.
The researchers’ test of their new model at a major U.S. newspaper indicated a potential increase of more than 17 percent in the newspaper’s profits, though Kanuri cautioned the result was a theoretical one.
“Every firm needs to collect data independently and use our algorithm to identify their own profit-maximizing subscription plans,” Kanuri said. “But the fact that a newspaper could increase its profits by that much gave us renewed hope that newspapers can potentially break free from the vicious revenue cycle that they got into in recent times if they follow our systematic approach.”
Avoiding Short-Term Solutions for a Long-Term Problem
According to futurist Amy Webb, the central challenge within newspapers revolves around immediate, acute problems, though reasonable solutions require long-term investment in energy and capital.
“The tension between the two always results in short-term fixes, like swapping out micro-paywalls for site-wide paywalls. In a sense, this is analogous to making interest-only payments on a loan, without paying down the principal,” she said. “So publishers must learn to adopt a new kind of strategy––one which addresses both those immediate financial needs while simultaneously addressing the problem of financial sustainability in the long term. To be fair, this is difficult to do.”
In other words, publishers and their investors must get comfortable taking a risk on real research and development, the kind that may not yield any result for a while.
Though Webb noted “great content, hosting terrific events and giving advertisers a reason to partner with your newspaper” as the biggest revenue generators for 2017, she emphasized that the most important revenue stream in the long-term revolves around distribution.
“For example, one-to-one publishing at scale, through messaging and bots. Another model is what I call ‘Journalism as a Service,’ Webb said. “How can newspapers become the modern information layer that powers all facets of our everyday lives, whether we’re at home, or at work, or riding around in a driverless car?”
For George Sylvie, the value of the print product isn’t going anywhere—at least in the short term.
“The biggest revenue generator in 2017 will still be the print product, since most typical-sized papers of the world haven’t yet figured out how to get most of the profits from digital just yet,” Sylvie said. “But they’ll get there eventually because they have to. Maybe by 2018 or 2019.”
The Monetization of News Aggregation Sites
Could the new proposals being brought forth by the European Commission, which would grant news organizations in Europe the ability to charge internet aggregators like Google to link to their content, offer a blueprint for struggling newspapers in North America?
Perhaps, but the previous results aren’t too encouraging. In October 2014, after Spain approved a new law which forced aggregation services to pay news sites for their content, Google responded by shutting down its news service in the country. In Germany, multiple news companies stopped charging Google after suffering large drops in traffic.
However, Webb asserts that many people including herself, are still more than willing to pay a small fee for personalized news apps such as Nuzzel, which is currently free to use.
“Newspapers aren’t empathizing with everyday humans and our biological constraints. Nuzzel, on the other hand, is solving that pain point,” Webb said. “I spend more time with that app than I do with any other website or publication. And it is completely free even though I would gladly pay a regularly subscription fee––I might even pay $15 or $20 a month––for the service that currently brings no revenue in to newspapers. What a huge missed opportunity.”
Seth Lewis, Shirley Papé Chair in Electronic Media at the University of Oregon’s School of Journalism and Communication, said he agreed with the idea that apps like Nuzzel could be monetized in the future.
“Perhaps through a freemium model, or a subscription approach, or another means of deriving payment from its most avid customers. That’s a basic model of internet commerce, which has worked to varying degrees,” Lewis said. “The problem, of course, is that none of the content producers or the distributors are getting paid for their contributions. But regardless, with or without news media participation or payment, Nuzzel is creating a value-added service, and an important one at that. And while people are notoriously unwilling to pay for online news, they are willing to pay for time-and labor-saving services.”
Furthermore, as newspapers shift their approach from a “product” mentality to a “service model” from simply publisher to something more akin to information brokerage, Lewis said, they can develop tools and techniques that respond to people’s everyday needs.
If You Build It, Revenue Will Come
As tempting as the idea of a single solution for the ongoing decline in revenue may sound, newspapers can ultimately find new revenue streams in the coming year through internal improvements as well.
Jim Hart, a newspaper revenue consultant, said he has analyzed transaction data from more than 150 newspapers, and on average, 80 percent of newly acquired accounts do not come back the next month, while 90 percent fail to return the second month.
“The number one place newspapers can get revenue in 2017 is retention. There is no one product that going to save them. They need to stop being so product centered and work on establishing an effective strategy for their clients,” Hart said. “Strategy should always be before tactics. When you sell traffic, impressions or eyeballs to a local business that has no strategy in place to convert that into customers, they see no change in their business and they leave very quickly.”
Hart alluded to the Coeur d’Alene Press, a community newspaper based in Idaho, as an example of a publisher that made significant process bringing in more customers by improving the value they offer with print.
“Ironically, it’s becoming novel that papers actually improve the value of their print products to the level that they produce ROI for their clients. Everyone is so busy chasing the next shiny orb that they’re neglecting the money at their feet,” Hart said. “Not saying they shouldn’t be exploring ‘what’s next’ of course as they should but it just doesn’t have to be at the expense of reaping what’s already there.”
Webb emphasized that publishers would benefit from studying the recent success of Aftenposten, Norway’s largest newspaper. The news company managed to develop a churn prediction model that used their own data to classify its subscribers into different segments, and then identify the risk factors for each, allowing them to build new ways to keep those readers subscribed.
“What Aftenposten illustrates is that sometimes, the most innovative new revenue models are a really matter of addressing existing problems in a more sophisticated way,” Webb said. “If you can plug a significant leak in revenue, it will allow you to focus on the critically important work on the future of news.”
What Worked in 2016
Events and Contests
The newspaper hosted its first-ever Forsyth County Media Day for local high school football teams, which brought in “significant sponsorship revenue,” according to publisher Vince Johnson. It also ran a city-wide “Best of Forsyth” readers choice contest that generated $100,000 for the paper.
Richmond (Va.) Times-Dispatch – Circulation: 108,559
Through the end of August, the Times-Dispatch has averaged 11 to 13 new contests each month for free items such as concert tickets and sporting events, providing a steady stream of alternative revenue, according to community engagement director Laurie Mavica.
The Daily Herald (Arlington Heights, Ill.) – Circulation: 145,000
It began creating customized events specifically designed with a sponsor in mind, including gardening events at a local nursery or cooking events at a local retail store. This year’s Fittest Loser competition, which consists of a community fitness and weight loss program, brought in $52,000 from advertisers, said director of strategic marketing and innovation Eileen Brown.
Finding Your Niche
San Francisco Chronicle – Circulation: 167,602, Sunday circulation of 252,088
The Chronicle continued to take advantage of its location, hosting its third annual wine competition, the largest of its kind in the country, which brought in a healthy stream of sponsorship revenue, said marketing director Sarah Morse Cooney. This month, it will launch The Press, a stand-alone online interactive guide to Wine Country.
46Mile, a regionally focused marketing agency funded by the Hearst Corp., which also owns the Chronicle, will help the newspaper generate revenue in the high single digit million dollar range in 2016 with anticipated growth of 50 percent in 2017. Overall, the Chronicle is pacing at mid-single digit percentages above last year in overall advertising revenue, with 19 percent growth in digital advertising revenue.
StoryStudio, which has published over 500 stories to date in 2016, is expected to grow 35% to 40% this year.
According to Alison Pfaff, director of creative services at StoryStudio, plans for 2017 include releasing StoryStudio 2.0, a content solution system which will give advertisers two ways to consume content, and continuing to grow its boost program to allow for a more targeted reach.
The Journal launched its own weekly real estate publication called HomeStyle earlier this year, creating a new monthly revenue stream of about $26,000, according to Joseph Leong, vice president and chief revenue officer for the Albuquerque Journal. HomeStyle lists all the open houses in the surrounding area for free while providing an outlet for advertisements. The Journal projects the monthly revenue to increase to nearly $40,000 by the end of the year.
The Journal also partnered with the Albuquerque International Balloon Fiesta to create an official app. Though the newspaper expects to break even this year, it anticipates $40,000 to $50,000 in sponsorship revenue beginning in 2017.
Since La Presse decided to ditch the daily weekday print edition of its newspaper at the start of the year and focus on its La Presse+ tablet app, the company has seen significant growth in revenue and readership, said publisher Guy Crevier. At the end of August, total advertising revenues from our digital platforms (tablet, desktop and mobile) made up 83 percent of La Presse’s total advertising revenue. Sixty-three percent of its tablet readers are aged 25 to 54, compared to 46% for the print version.
Classified Ads Remain Relevant
The Columbus Dispatch expanded the number of pages of employment ads from one and a half to nine after redesigning its print and online products and changing its sales approach, said Janet DeGeorge, president of Classified Executive Training.
The San Francisco Chronicle also recorded double digit growth in its classified revenue streams due to “innovative ad units coupled with compelling content,” said marketing director Sarah Morse Cooney.