By: Seth Sutel
As newspaper publishers build up their online operations and struggle through an advertising slump, one group is worried about being left behind – the folks who make printing presses and other equipment used to make newspapers.
Hoping to allay some of those concerns, a panel of four CEOs of major newspaper companies addressed a group of equipment vendors Sunday at an annual convention of industry suppliers called NEXPO.
“We, too, are feeling the pain,” said panel moderator Dennis Nierman, president of AlfaQuest Technologies Inc., referring to the steady revenue declines that are plaguing the industry.
Nierman, whose company makes a product that allows printing plates to be made from digital files, said it was “discouraging” to see the exhibition floor relatively empty, as it was for part of the day Saturday, the first day of the show.
George Irish, president of Hearst Corp.’s newspaper division, noted that his company had $250 million committed to printing press updates, with more on the way. Dean Singleton, CEO of Denver-based MediaNews Group Inc., said his company spent $500 million on press-related products over the past three years.
Still, many publishers are increasingly focusing their efforts on building up online advertising revenues, which are growing rapidly even as print advertising declines.
So far, the gains in online ads are far from making up the shortfalls in print advertising. Making up the difference is currently the No. 1 topic in the newspaper industry.
Last year, overall newspaper advertising fell 7.9 percent, including a 9.4 percent falloff in print advertising, offset somewhat by an 18.8 percent increase in online advertising, according to the Newspaper Association of America, an industry group.
The NAA is holding its own conference concurrently with the vendors’ exhibition in Washington, which also coincides with the annual meetings of The Associated Press and the American Society of Newspaper Editors.
Gary Pruitt, chief executive of The McClatchy Co., the No. 3 newspaper company by circulation, told the audience that the online business held particular allure for publishers since it doesn’t require gas for trucks or other expenses needed to distribute physical newspapers.
Singleton, whose company owns The Denver Post, San Jose Mercury News and other newspapers, said he expected online advertising to make up 20 percent of his company’s revenues by 2012, up from 7.5 percent today. Singleton is also chairman of The Associated Press.
All four CEOs on the panel, which also included Michael Reed, the CEO of GateHouse Media Inc., participate in a consortium of publishers cooperating with Yahoo Inc. in an effort to build up their online advertising.
Singleton, a principal driver of the industry’s effort to work with Yahoo, said one of the factors holding newspapers back from making more money online is the difficulty they have in offering highly targeted ads.
Under the Yahoo system, which is starting to roll out over the next several months, ads could be targeted to, say, a female reader who is shopping for a specific kind of appliance. Currently, that kind of targeting is difficult for newspapers to do on their own, Singleton said.
As a result, the standard rates that newspapers can charge for reaching 1,000 readers of printed newspapers are “many times” higher than reaching an equivalent amount of online readers, Singleton said.
Also, newspapers have relatively few competitors in a given market for print advertising, while there are many competitors offering online ads.
One of the ironies of newspapers’ current predicament is that even while their revenues shrink, their total audience – including both print and online readers – is growing. The trick is figuring out how to make more money online.
“While ad revenue may be the best predictor of short-term performance – and that’s lousy; there’s no way around that, it is lousy,” Pruitt said, “longer-term, I’m quite optimistic, because total audience is growing, and we will be monetizing that.”