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Re/consider the Economics Of Print To Online

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Re/considering the economics of moving from print to online. A discussion with editors participating in the Spring seminar, *Innovation and the Market - Understanding Users, Delivering Value &

Re/considering the economics of moving from print to online. A discussion with editors participating in the Spring seminar, *Innovation and the Market - Understanding Users, Delivering Value &
Growing Revenue". See: http://www.ukjournalism.org/jleaders

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  • Really useful presentation Francois. Thank you!
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  • The Journalism Leaders Programme François Nel
  • The Post reported a 13 percent decline in print ad revenue for 2007 and an 11 percent increase in online revenue. So plotting that into the future, Scenario #3 (see right) gives us these results: • The Post's total ad revenue would be 29 percent lower in 2010 than in 2006. • By 2015, it would be 37 percent lower than in 2006. • Online revenue wouldn't start to make up for the losses in print until 2015. • Even after that, it would take many years for the total to get back to current levels.
  • The Journalism Leaders Programme François Nel PR4005 TCS Lecture 5 / F Nel What exactly is a revolution?

Re/consider the Economics Of Print To Online Re/consider the Economics Of Print To Online Presentation Transcript

  • A conversation with François Nel Re/considering the economics of moving from print to online*
    • Paul Ginocchio, chief US newspaper analyst,
    • Deutche Bank Securities
    What are some of the common mistakes publishers make that diminish their business in the eyes of analysts? Its focus more on margins than revenue growth . For a long time they thought Wall Street was focused on margins. But Wall Street cares more about profit growth, not margin expansion. I think the market knows now that you can’t cut your way to profitability. It’s not a cost issue, it’s a revenue issue. Growth takes investment.
  • JournalismLeadersProgramme
  • All the news that’s fit to pixel
    • Circulation
    • Display Ads
    • Classifieds
    • (Paid for subscriptions)
    • Display Ads
    • Classifieds
  • JournalismLeadersProgramme Media usage Levels UK ABC1s 15+ (%) Advertising Revenue Source: BRMB Internet Monitor & NRS; group M Report June 2006 (£m) 0 500 1000 1500 2000 2500 2000 2001 2002 2003 2004 2005 2006 2007f Internet National Newspapers 65% 46% 67% 70% 68% 69% 68% 67% 53% 55% 60% 63% 45% 50% 60% 70% 2000 2001 2002 2003 2004 2005 National Newspapers Internet
  • The 20-year Chasm LOW REVENUE How and when do we close the gap between losing print revenues & growing online revenues? How do we time the transition so not to lose print revenues & to continue to grow digital revenues ? Source: Shaping the Future of the News, WAN PRINT DIGITAL HIGH YEILD LOW YEILD HIGH REVENUE HIGHER OVERHEAD/ Lower Margin LOWER OVERHEAD / Higher Margin HIGH VOLUME HIGH VOLUME
  • (Numbers in billions) Source: Mark Potts, at recoveringjournalist.com Newspaper ad revenues falling at about 5 percent per year ONLINE revenue growing at nearly 20 percent per year. Scenario #1: Future of Newspaper Ad Revenue YEAR PRINT ONLINE TOTAL 2007 $45.0 $3.5 $48.5 2008 $42.8 $4.2 $47.0 2009 $40.6 $5.0 $45.7 2010 $38.6 $6.0 $44.6 2011 $36.7 $7.3 $43.9 2012 $34.8 $8.7 $43.5 2013 $33.1 $10.5 $43.5 2014 $31.4 $12.5 $44.0 2015 $29.9 $15.0 $44.9 2016 $28.4 $18.1 $46.4 2017 $26.9 $21.7 $48.6 2018 $25.6 $26.0 $51.6 2019 $24.3 $31.2 $55.5 2020 $23.1 $37.2 $60.5
  • ( Numbers in billions) Source: Charles Layton, extrapolating from Newspaper Association of America revenue figures for 2007 and Goldman Sachs newspaper revenue percentage predictions for 2008. "Frankly, I think people might say that my projections are not cautious enough." - Peter Appert of Goldman Sachs NEWSPAPER AD REVENUE - 9.3 % PA ONLINE revenue growing + 10 % PA. Scenario #2: Future of Newspaper Ad Revenue YEAR PRINT ONLINE TOTAL 2007 $42.2 $3.2 $45.4 2008 $38.3 $3.5 $41.8 2009 $34.7 $3.9 $38.6 2010 $31.5 $4.3 $35.8 2011 $28.6 $4.7 $33.3 2012 $25.9 $5.2 $31.1 2013 $23.5 $5.7 $29.2 2014 $21.3 $6.2 $27.5 2015 $19.3 $6.9 $26.2 2016 $17.5 $7.5 $25.0 2017 $15.9 $8.3 $24.2 2018 $14.4 $9.3 $23.7 2019 $13.1 $10.0 $23.1 2020 $11.9 $11.0 $22.9
  • Scenario #3: Washington Post (Numbers in millions) Source: Charles Layton, extrapolating from figures in the Washington Post Co.'s 2007 annual report In his introduction to the company's 2007 annual report, CEO and Chairman Donald E. Graham writes that an economically successful outcome for the Post in future years "is not at all certain, but we have a much greater opportunity than most newspapers do." Print AD REVENUE – 13 % PA in 2007 ONLINE revenue growing + 11 % PA. YEAR PRINT ONLINE TOTAL 2006 $573.20 $102.70 $675.90 2007 $496.20 $114.20 $610.40 2008 $431.69 $126.76 $558.45 2009 $375.57 $140.70 $516.27 2010 $326.75 $156.18 $482.93 2011 $284.27 $173.36 $457.63 2012 $247.32 $192.43 $439.75 2013 $215.17 $213.60 $428.77 2014 187.20 237.09 424.29 2015 $162.86 $263.17 $426.03 2016 $141.69 $292.12 $433.81 2017 $123.27 $324.25 $447.52 2018 $107.24 $359.92 $467.16 2019 $93.30 $399.51 $492.81 2020 $81.17 $443.46 $524.63
    • US: Print ad revenue down about 30% in the first quarter of 2009 and online advertising slumped over 13% http://www.physorg.com/news163092226.html
    • US : At the end of the first quart of 2009 Gannett (US) reported a 39% year-on- year slump in advertising http://www.holdthefrontpage.co.uk/news/090416gannett.shtml
    • UK: Trinity Mirror ad revenue fell 36% in the first 17 weeks of the year to 26 April 2009 http://www.holdthefrontpage.co.uk/news/090513tmslump.shtml
    • UK: UK publishers predict online revenue to grow by 16% in 2009 http://www.ukaop.org.uk/research/aopcensus2009.html
    What does that mean in light of current* rates of print revenue decline [down 30%+]& growth [or not] in online advertising?
  • What percentage of your total cost is editorial ? … is paper & printing? … is distribution? … is administration? JournalismLeadersProgramme
  • 18-25% editorial 10-15% administration 20-25% paper & print 30-40%% distribution a quick ‘guess-timation’ of newspaper costs… Source: Frédéric Filloux / MondayNote, 28/09/2008
  • 100 Journalists @€60k = €6 m Technology & infrastructure = €1 m Marketing & promotion =€2 Administration =€1m TOTAL = €10m, or €830,000 per month a quick ‘guess-timation’ of online site costs*… * stripping out paper, printing, traditional distribution expenses…
  • Ad revenue per unique user per month = € 0.1 to € 0.25 Ad revenue per reader is around = € 18 to € 20 To support € 830.000 monthly costs you’ll need about 83,000,000 unique users / month
  • * Figures from July–Oct 2008. Sources: Nielsen, ABCe & claimed.Figures used for illustration only.
  • Next: innovation = invention + understanding customer / business models . (Our resource-based view starts with deep market intelligence courtesy of Hitwise UK: http://tinyurl.com/lesu5g ) Where now ? François Nel Questions, comments, collaboration ? Skype or Twitter: francoisnel or FPNel@uclan.ac.uk