Survival News for Newspapers 2017

Where will newspapers go from here? Newspapers with properly managed circulation operations can keep their audience revenue level by keeping average rate growth in line with the natural rate of decline in print circulation volumes. In other words, if print subscription volumes decline an average of 5% per year, the growth in average rate of 5% per year (plus the addition of digital audience revenue) can offset the loss of print volume.

In many cases, this increases operating margins because the paper gets the same amount of revenue, but reduces production and delivery costs. This trend cannot go on forever, but it can extend the timeline newspapers have to transition to a digital-dominant business model.

Print advertising revenues will likely continue their 8% to 9% declines per year unless the industry can adopt strategic pricing practices in that market, as they have with audience pricing.

In conversations with several newspaper executives, we find that they have projected their trends in audience and advertising revenue for five years and estimated the revenue gap that will exist to keep their operating margins the same. Increases in audience revenue are the most common solution to filling that gap. How will newspapers generate additional audience revenue? The answer lies in developing new products and services that can be sold to consumers.

Digital data capture tools enable newspapers to understand their customers’ interests in more detail than was possible with the print platform. Using these data, newspapers are beginning to identify new products that appeal to their potential customers.

Sports products are a common first step in this direction. Cox Media Group, for example, has launched Dawgnation and SEC Country, products targeted at fans of the University of Georgia Bulldogs and the Southeastern Conference.

Many newspapers are becoming premium products with brands that span the print and digital platforms. The print product adds credibility and maintains the brand, providing a competitive advantage relative to pure digital products. We believe that print products will continue to play a role in the newspaper business model for this reason and that they will remain excellent vehicles for targeted insert advertising.

Paying audiences also create data for targeted advertising. First-party data, information on their audience that the newspaper captures, is an under-utilized asset. Using these first-party data in digital advertising campaigns can save money newspapers are currently spending on third-party data providers—and it can generate additional revenue by selling these data to other companies for targeting advertising.

The best practice for managing audience revenue involves segmenting the audience, estimating a customer’s sensitivity to prices and how that sensitivity changes over time, applying price changes in an A/B testing program and reporting on the pricing performance.

One metric that comes from this process is the incremental revenue per incremental stop. Net incremental revenue from a price change is the revenue increase that remains after revenue losses from stops and other customer reactions to the price change are netted out. Incremental stops are the stops directly due to the price increase, and they can be determined by comparing total stops from the target price group to the total stops from the non-priced statistically representative group of control accounts.

If the incremental revenue received per incremental stop is not sufficient to replace the lost circulation volume, then the price increase is not adding operating margins to the newspaper.

Remember that subscriber pricing strategy and tactics are a process and not a destination. Understanding a newspaper’s pricing power is a powerful tool for revenue growth that will provide incremental operating margins for years to come.