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Print & digital Business Models in the USA
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.
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Print & digital Business Models in the USA
- 1. 10 – 12October 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 LeadingGlobal 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 −2−
- 4. Select Media IndustryClients −3−
- 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 −4−
- 6. US Newspaper Market/ Case Study Trends Trends and Projections Atlanta / Dallas / Denver / Philadelphia Case Study Participants
- 7. US General StrategicApproaches 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… ? −6−
- 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 −7−
- 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 −8−
- 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 −9−
- 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 − 10 −
- 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 − 11 −
- 13. Print & DigitalBusiness 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 − 13 −
- 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 − 14 −
- 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 − 15 −
- 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 − 16 −
- 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 − 17 −
- 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 − 18 −
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- 21. What Did the3 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 − 20 −
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