The document summarizes a presentation given by Ken Harding of FTI Consulting on print and digital business models in the US newspaper industry. It discusses trends showing declines in circulation and advertising revenue for newspapers between 2006-2015. It also analyzes metrics for 4 case study papers, showing drops in daily circulation but stabilized Sunday circulation. Unique visitors and page views for their websites are mostly flat or declining, while digital advertising revenue is also flat to dropping. The presentation then models 3 business scenarios for newspapers through 2015 based on these trends.

1. 10 – 12 October 2011, Vienna, Reed Messe Wien
Media Port
Session: Digital Innovations
Title: Print & Digital Business Models in the USA
Speaker: Ken Harding, Managing Director in FTI Corporate Finance and
leading industry analyst, USA

2. PASSION FOR PUBLISING
Print & Digital Business Models in the USA
How do they compare?
IFRA Expo 2011 / Media Port
Ken Harding

3. FTI: A Leading Global Services Firm
 A $2 billion NYSE traded
consulting firm (FCN)
 One of the fastest growing
companies in the US (Fortune)
 Over 3,500 Consultants in 30
countries
 Media Industry Services
– Organization Design
– Revenue Growth
– Expense Reduction
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4. Select Media Industry Clients
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5. Business Case Objectives / Methodology
Daily Metro Papers
• Model three US newspaper scenarios to gain insight into
potential performance
1. “Continue On “– no significant change
2. Better monetize web/digital while “Retaining Print
Revenues” as long as possible – a runway to let digital
mature
3. “Maintain Sunday/Daily Digital – daily print impact much
more significant than Sunday
• Methodology
• Utilize historic trends for the industry to create a base case
• Analyze four case study newspaper’s key metrics to inform
inputs on the future scenario models
• Develop three scenarios aimed at projecting financial
performance of various framing decisions
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6. US Newspaper Market / Case Study Trends
Trends and Projections
Atlanta / Dallas / Denver / Philadelphia
Case Study Participants

7. US General Strategic Approaches
Daily Metro Papers
1. Free web and digital
2. Monetize web and digital with pay
walls
3. Offer device deals to lure larger
digital audience
4. Push audience to digital – big impact
to print…some are thinking about…
?
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8. US Trends / Projections
Through 2015 US Annual Paid Circulation (millions)
60,000
• Developed using 50,000
NAA, PwC, and FTI 40,000
data and modeling 30,000
20,000
10,000
• Circulation is -
2006 2007 2008 2009 2010 2011P 2012P 2013P 2014P 2015P
projected to be 40%
less than 2006. US Annual Advertising Revenue (millions)
60.0
• Advertising revenue 50.0
is projected to be 40.0
62% less than 2006. 30.0
20.0
10.0
-
2006 2007 2008 2009 2010 2011P 2012P 2013P 2014P 2015P
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9. Case Study
4-Paper Trends Daily Circulation
400,000
• Daily circulation 300,000
generally has 200,000
declined 100,000
– Paper #3 increase 0
2009 2010 2011
results from closure of
1 2 3 4
competitor
Sunday Circulation
• Sunday circulation 600,000
500,000
has stabilized in 400,000
300,000
2011 due to value 200,000
of preprint coupons 100,000
0
and reader habits 2009 2010 2011
1 2 3 4
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10. Case Study
4-Paper Trends Average Unique Web Visitors per Week
2,500,000
• Unique visitors flat 2,000,000
1,500,000
to declining in 2011 1,000,000
– Paper #2 implemented 500,000
pay wall start of 2011 0
2009 2010 2011
1 2 3 4
• Average page views
generally flat except Average Page Views per Week
30,000,000
Paper #2 25,000,000
• Paper #4 with 20,000,000
15,000,000
similar visitors has 10,000,000
5,000,000
much lower page 0
views 2009 2010 2011
1 2 3 4
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11. Case Study
Annual Total Ad Revenue (Millions)
4-Paper Trends
$220,000
$200,000
• Total ad revenue $180,000
$160,000
continues to plunge $140,000
$120,000
$100,000
2009 2010 2011
1 2 3 4
Annual Web/Digital Ad Revenue (Millions)
• Annual web/digital $25,000
$20,000
ad revenue is flat to
$15,000
declining except for $10,000
Paper #3 $5,000
$0
2009 2010 2011
1 2 3 4
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12. Case Study
4-Paper Trends
• Current average unique visitors for iPad and iPhone per
week vary across the 4 papers
• The “digital future” needs a jump-start…
2011 Average Unique Vistors / Week
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
iPad iPhone
1 2 3 4
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13. Print & Digital Business Models in the USA
Business Scenarios
Scenarios
Continue On
Maintain Print / Monetize Web
Maintain Sunday / Daily Digital

14. Maintain
Key Aspects Continue On Maintain Print Sunday /
Daily Digital
Aggressive Print Pricing Moderate Moderate Daily
Digital Pay Wall No Yes Yes
Moderate
Print / Digital Bundles No High Usage
Usage
e-Commerce No No No
Device Subsidies No No No
• A key model variable is the $800
Modeled Scenario Audience Yield
pricing - yield - assumed for $700
$600
print, bundled print/digital and $500
$400
digital only subscriptions. $300
$200
2015P shown in graph $100
$0
1 / Continue On 2 / Maintian Print 3 / Digital Audience
Print Bundled Digital
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15. Continue On - Audience
Audience Compare 450,000
400,000
• Total audience and Sunday- 350,000
300,000
only print audience nearly 250,000
200,000
the same in all models 150,000
100,000
• Daily print audience much 50,000
0
lower in “Sunday/Daily
2006 2007 2008 2009 2010 2011P 2012P 2013P 2014P 2015P
Print only Bundled Print Digital only
Digital” vs. “Maintain” model Continue On
Sunday / Digital Daily Maintian Print - Audience
450,000 450,000
400,000 400,000
350,000 350,000
300,000 300,000
250,000 250,000
200,000 200,000
150,000 150,000
149k Daily
100,000 100,000
50,000
62k Daily 50,000
0 0
2006 2007 2008 2009 2010 2011P 2012P 2013P 2014P 2015P 2006 2007 2008 2009 2010 2011P 2012P 2013P 2014P 2015P
Print only Bundled Print Digital only Print only Bundled Print Digital only
Sunday / Daily Digital Maintain Print
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16. Revenue Compare Revenues vs. Operating Costs
$500,000,000
$450,000,000
• “Maintain Print” has highest
$400,000,000
$350,000,000
$300,000,000
2015 revenues $250,000,000
$200,000,000
Revenues
Operating Costs
– However, operating costs are
$150,000,000
$100,000,000
much higher vs. “Sunday/Daily
$50,000,000
$0
Digital” due to larger daily print
audience Continue On
Revenues vs. Operating Costs Revenues vs. Operating Costs
$500,000,000 $500,000,000
$450,000,000 $450,000,000
$400,000,000 $400,000,000
$350,000,000 $350,000,000
$300,000,000 $300,000,000
$250,000,000 $250,000,000
Revenues Revenues
$200,000,000 $200,000,000
Operating Costs Operating Costs
$150,000,000 $150,000,000
$100,000,000 $100,000,000
$50,000,000 $50,000,000
$0 $0
Sunday / Daily Digital Maintain Print
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17. Revenue Mix 500,000,000
Revenue by Category
450,000,000
• “Continue On” relies on
400,000,000
350,000,000
300,000,000
94% print-related revenue 250,000,000
200,000,000
150,000,000
– Maintain Print = 88% 100,000,000
50,000,000
-
– Sunday/Digital = 80% 2006 2007 2008
Print Circulation
2009 2010 2011P
Print Advertising
2012P 2013P
Online Subscription
2014P 2015P
Online Advertising Mobile Subscription Mobile Advertising
Continue On
Revenue by Category Revenue by Category
500,000,000 500,000,000
450,000,000 450,000,000
400,000,000 400,000,000
350,000,000 350,000,000
300,000,000 300,000,000
250,000,000 250,000,000
200,000,000 200,000,000
150,000,000 150,000,000
100,000,000 100,000,000
50,000,000 50,000,000
- -
2006 2007 2008 2009 2010 2011P 2012P 2013P 2014P 2015P 2006 2007 2008 2009 2010 2011P 2012P 2013P 2014P 2015P
Print Circulation Print Advertising Online Subscription Print Circulation Print Advertising Online Subscription
Online Advertising Mobile Subscription Mobile Advertising Online Advertising Mobile Subscription Mobile Advertising
Sunday / Daily Digital Maintain Print
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18. Web/Digital Revenue
Web/Digital Revenue % of Total
Revenues (incl. Circ Revenue)
• Web/digital revenues in
25.0%
20.0%
15.0%
the most aggressive 10.0%
5.0%
“Sunday/ Daily Digital” 0.0%
scenario = 42% of
advertising revenue 1 / Continue On
3 / Digital Audience
2 / Maintian Print
• Web/digital revenues in Web/Digital Revenue % of Total
Advertising
the “Maintain Print” 50.0%
40.0%
scenario = 30% of 30.0%
20.0%
advertising revenue 10.0%
0.0%
1 / Continue On 2 / MaintainPrint
3 / Digital Audience
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19. Modeled Margin Results
• “Maintaining Print” scenario projects negative margin in 2012
• “Sunday/Daily Digital” stabilizes and grows margin once high
printing and delivery costs reduced
Margin Comparison
15%
10%
5%
0%
2009 2010 2011P 2012P 2013P 2014P 2015P
-5%
-10%
-15%
1 / Continue On 2 / Maintian Print
3 / Digital Audience
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20. Final Thoughts

21. What Did the 3 Scenarios Suggest to Us?
• “Continuing On” is not sustainable
• For the dynamics modeled – e-commerce not included –
monetizing digital audience is critical
• “Maintaining Print” underperforms “Maintain
Sunday/Digital Daily” due to higher legacy costs with
much higher daily circulation and lower circulation yield
per copy
The scenarios clearly demonstrate the challenges
in maintaining /growing margin. Traditional
legacy production costs pose a heavy burden on
the move to digital
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22. Thank You
Ken.Harding@FTIConsulting.com