The Thirsty Dog Blog by Jason Price | Seattle

page contents

Print Media Doom Part 1: Is Ad Revenue Decline the Beginning of the End?

The Scene: two MBA students are sitting in a meeting room trying to come up with the next big business idea to make money.



Student 1 – What kind of off the wall idea can we come up with?  I mean – let’s do something so unorthodox that it’ll leave people shaking their heads!

Student 2 – How about we build a new app?  It’s where it’s at these days and we can even have some offshore company do it for cheap.

Student 1 – Nah – come on man.  Everyone has been there, done that.  I built an app last weekend for my grandma to use to remind her when to take her pills.

Student 2 – OK.  What then?  Day jobs? (borrowing from Pulp Fiction)

Student 1 – No – I’ve got it.  Let’s start a company that people will laugh at from day 1.  We’ll go all old school on the world.  You know – keep it simple.  And we’ll market it to an aging population that doesn’t know how to use fancy things like smartphones and tablets.  It’ll be a throwback type of thing that will make them feel warm and fuzzy all over.

Student 2 – Didn’t someone already start marketing the Snuggie?

Student 1 – No dude – I’m talking about starting a newspaper company.

It sounds like a stupid idea right?  That’s because it is.  Who in the world would start a brand new newspaper company right now?  Unless they needed a tax write off.  It’s reminiscent of the opening scenes in The Producers when Zero Mostel and Gene Wilder realize that they could make more money off a flop that a hit Broadway show with ‘Springtime for Hitler’!

Now, Jeff Bezos might disagree with me as well as some other pundits lauding his recent purchase of the Washington Post – but he has the right ideas.  Innovation, investment, experimentation – these are the things that can revive the traditional print news media business.  And old school companies mired in the ways of doing business 25 years ago will be sinking in the quicksand while other companies – with a fresh influx of intellectual and financial capital – will find new ways to innovate and move forward into profitable digital-centric territory.

How do Print News Media Companies Make (most) of their Money?

By and large, print news media makes its money in two ways – via Advertising Revenue, and via Subscription revenue.  Since 2003, Print and Online Ad Revenue for Newspapers has fallen from $46B+ in 2003 to just over $22B in 2012.  That’s a 52.2% drop for those of you keeping score at home.

Newspaper Print Ad Revenue Decline

Newspaper Print Ad Revenue Decline

And if you thought for a minute that Digital Ad revenue was going to somehow replace the massive losses in Print Ad revenue you’d be dead wrong.  In the face of Print Ad revenue dropping some $26B in the last 10 years, we’ve seen Digital Ad revenue increase by a measly $2.2B.  In a report released in March 2012 by the Pew Research Center – Print ad losses outnumbers Digital ad revenue gains by 8:1!  Why?  Because by and large, Newspapers do not know how to sell digital advertising.  Nor do they have the technology capital to compete with the likes of Google, Facebook, Yahoo and Twitter among others.

In addition, the Print vs. Digital ad revenue split is in the neighborhood of 80:20 so as advertisers move more of their dollars to digital advertising the newspapers suffer given that there are better options for advertisers to spend their money with.  By and large, newspaper’s digital sites are not yet robust enough (overall) for advertisers to spend their valuable dollars on them.  There are many other, better outlets to spend these funds which will drive much greater customer engagement.  Ideally they lead to improved pull through on revenue than traditional print media advertising.

The graphic below is a clear indication of where digital advertising dollars go.  The market is dominated by a top 10 that garners nearly 50% of all digital ad revenue.  To compare, Yahoo is projected to make more in digital advertising revenue this year than every US-based Newspaper combined.

Digital Ad Revenue Share 2013

Digital Ad Revenue Share 2013

This is one of the primary reasons why newspapers are failing.  As print ad revenue dries up, and digital ad revenue goes elsewhere (Search Engines, Social Media, et al.).  The newspapers get left behind as they haven’t poured resources into innovation enough to develop robust portals, analytic tools, and a user experience that subscribers are engaged with.

Parallel Declines and Changes Also Seen in Print News Magazines

The same trends can be seen in magazines which focus primarily on news and current events.  According to a recent study by the Pew Research Center, ad pages are declining by a stunning percentage dropping an average of 18% Year over Year in the first six months of 2013 for the top 5 major news magazines: TimeThe EconomistThe AtlanticThe Week and The New Yorker.  As noted in their research, ad pages are a better indicator of financial health than ad revenue for magazines given that rate card pricing rarely reflects what advertisers actually pay assuming discounts for volume, revenue and term commitments, etc.

Ad Page Count Declines in Magazines

Ad Page Count Declines in Magazines

According to the Association of Magazine Media, since 2012, the total number of ad pages across the top 5 publications listed above has decreased from 7848 in 2002 to 1997 in 2012 – a whopping 74.5% decline!  Assuming that ad revenue accounts for 1/3 of total revenues, we can derive at least a 25% drop in total revenue alone just due to the effects of advertisers migrating to alternate marketing methods (or reduction in spending).

As we already know, in October 2012, Newsweek announced that it was dropping its print edition at the end of 2012 after experiencing a 60% decline in ad pages over the previous ten years.  Kudos to their publishers for seeing the writing on the wall and making a reasonably proactive decision to move to digital only before the walls fell in on them.  However, in a bizarre turn of events, Firstpost reported just last week that Newsweek will resume print production in 2014.  Ostensibly, they believe they can generate enough ad revenue from the ‘old model’ to maintain the viability of a print edition.  Either they see the void created by the migration of media to digital and have some advertisers already lined up or they are delusional.  Either way, I want what they are smoking.  After all, it’s legal now in Washington!

Smaller publishers are seeing the light.  In August, the American Medical Association announced that it was suspending publication of its bi-weekly medical industry news magazine this month.  The American Medical News, has a current circulation of 230,000 and was 95% advertiser revenue driven according to a news release and supporting data in Michael Rondon’s article published in Folio.  It’s safe to assume that many other print news media outlets will see the writing on the wall sooner than later and will migrate quickly to digital models in order to survive.

Subscription Revenue – Where’s the Beef?

Subscription revenue is a much less significant, yet still critical component of newspaper revenue.  Based on the most recent data available from the Newspaper Association of American; Circulation/Subscription revenue is only 27% of the pie in 2012 based on a sample of 15 leading newspaper companies.  As you can see, the lion’s share of revenue still comes from Advertising in the form of Print, Digital and Niche/Direct Marketing inserts.

Composition of Newspaper Revenue Stream

Composition of Newspaper Revenue Stream


Subscriber numbers continue to dwindle for multiple reasons.  For one, the age demographic for consumers is not on the side of the newspapers.  Nor is it getting any better.  People ages 55 and up are the only relatively strong segments for Subscriptions and they are converting to digital solutions or moving on to a better place for their content needs.  Readership in younger generations is declining more rapidly from an already weak base as the propensity to leverage digital solutions for news is more prevalent.

Readership Decline by Age

Readership Decline by Age


There is some good news.  Consumption of newspaper content on digital platforms is increasing as evidenced in this graphic released by the NAA.  The primary driver behind these increases in digital readership comes from the 18-24 and 25-34 year old segments.  This bodes well for the newspapers that have adequate portals in place with plans for investment in R&D in the future.  However, it doesn’t help those which do not and are not capable of innovating.

Newspaper Mobile Audience

Newspaper Mobile Audience

Unless investments are made to create a genuinely good user experience that delivers quality content and value, subscribers will assuredly migrate to other news sources and platforms with better technology.  This will effectively be a double whammy for the newspaper companies in losing both subscription revenue and customer impressions which advertisers so dearly crave.

Is the Paywall a Savior?

Probably not.  But at this point it’s a necessity to survive in the near term while the concept is piloted.  There is hope in that digital subscriptions are starting to make a dent in offsetting print subscription revenue decline.  However, it’s likely not enough on its own as there need to be more compelling reasons to keep advertisers on board – especially in the digital arena where the bulk of the revenue is at.

Newspapers need to become leaner and to find the right balance between quality, high value local content and news from wire sources such as AP and UPI.  Newsroom staff has been cut significantly and will continue to be as long as current trends prevail.  The Newspaper of the future will be lean, mean and agile.  Emerging will be fewer, more efficient, technologically proficient news media companies that provide a ‘configurable’ user experience (such as Flipboard) and high value, targeted marketing opportunities for their advertisers.  These companies will make less money but will be profitable due to their efficiency, ability to target content towards user preferences, and ability to leverage business intelligence and data to support more effective advertising.

The concept is taken a step further by Henry Blodget in his article suggesting that Jeff Bezos bought the Washington Post as a content marketing engine with an eye towards leveraging the Post’s existing technology and subscriber base to market Amazon’s products.  If it pays off, we could see further purchases by the likes of Mr. Bezos.  High traffic, captive audience = easy targets for product advertising based on their profiling and preferences.

Where Do We Go from Here?

In order to survive, Newspapers must place focus on, and invest in technology and innovation.  There is little doubt that they can survive merely through cost cutting measures without severely deteriorating their product and brand.  Focus must either come from within (unlikely) or be hired from the outside – from a new breed of people in touch with today’s digital marketing/social media landscape.

An area of immediate focus would be looking into further data mining opportunities.  There is a great deal of information available to Newspaper companies about their subscriber base.  And that data pool has the ability to grow with the use of implicit profiling of subscriber behavior as well as further ‘personalization’ of their user experience with newspaper websites.  However, their ability to collect, mine and analyze this data is nascent and both human and technological resources must be invested in to take advantage of this opportunity.  Bottom line – Advertisers will not buy digital ads unless they are targeted to the users they want to reach

All that being said, most small to mid-sized U.S. based print-centric newspaper companies don’t have the capital required to invest in the future.  So, they are forced to spoon feed their customers (Advertisers and Subscribers) with a slow drip of technology catch up.  Or wait for Jeff Bezos or Warren Buffet to come along to rescue them.  All the while, other fungible companies like the New York Times, Gannett and likely the Washington Post in the near future, stretch their lead over all the smaller players making them obsolete and quickly worthless.

For more, check out Part 2 in this series – Lack of Strategy and Vision = Epic Fail