Nieman Foundation at Harvard
HOME
          
LATEST STORY
Show Me The Next strips down online reading and discovery to their most basic components
ABOUT                    SUBSCRIBE
Aug. 5, 2010, 10 a.m.

The Newsonomics of the fading 80/20 rule

[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

Jim Moroney thinks he may be on to a new formula. It’s not as great — not nearly as profitable — as that old newspaper formula, but it’s one that may sustain his company into the future.

“The Dallas Morning News now gets 38 percent of its revenue from circulation, 54 percent from advertising, and 8 percent from contract printing plus,” the Morning News’ publisher tells me.

Those numbers are a far cry from the way it used to be for newspaper companies. They long used one of the many 80/20 rules out there: 80 percent of their revenue came from advertising, and 20% came from circulation.

Now, as ad revenue has been on a precipitous decline — down from almost $50 billion in 2000 to $24 billion in 2009, and still sliding a bit more — that old formula is out the window.

While the digital news world seems consumed with conversations about paywalls and memberships, it is old-fashioned print circulation revenue that is the gainer in the post-80/20 formulas. Sure, advertising’s ski slope decline has greatly altered the 80/20. So has, though, the significant up-pricing of both subscriptions and single copies over the past three years.

At the Morning News, Moroney — aided by research from consumer products company The Modellers — took monthly subscriptions from $18 to $30, in one fell swoop. Many other publishers have upped prices, though most have done it more gradually. Pick up a slim copy anywhere in your travels, and you see it now costs 75 cents or a buck; it used to be the “25-cent or 35-cent?” discussion that consumed executive committees.

The impact of the pricing moves is still uncertain. Short-term, they seemed to work. Though circulation continued to decline, circulation revenue was mildly up. The central notion: Get those with the newspaper habit to pay more of the freight, figuring that few would drop the newspaper because it cost two Grande Mochas more.

As we look at last quarter’s financial reports, we have to wonder how the up-pricing of circulation will work. As many companies showed a decline in circulation revenue in the second quarter as showed an increase.

A few of the numbers:

  • McClatchy: down 2.5%
  • Lee: down 4.4%
  • Gatehouse: down 2.5%

Moroney’s own company, A.H. Belo, of which he is an executive vice-president, reported a 6.6-percent increase. Additionally, The New York Times Company reported a 3.2-percent increase and Scripps a 4.5-percent increase (from 1st quarter data; 2nd not out until Aug. 9). Significantly, I think, each of those companies may have done a better job of minimizing newsroom cuts and reinvesting — at least a little — in that now higher-priced product.

While the jury is out on the stickiness of price increases, it’s clear the old 80/20 rule is gone.

Broadly, in research I conduct annually for Outsell, we track the global moves in ad, circulation and digital revenue. In 2009, circulation revenue was up more than a point over 2008 to 41 percent. Significantly, Japanese publishers continue to get a majority of their revenue from circulation, while much of Europe and UK see their percentages in 35-45 percent range.

ln the U.S., let’s just pull some data from the second-quarter reports. They show:

  • New York Times: Circ: 40%, Ads: 53%, Other: 7%
  • Scripps: Circ: 28%; Ads: 67%; Other: 5%
  • Gatehouse: Circ: 27% , Ads: 71%, Other 2%
  • Lee: Circ: 24%, Ads: 70%, Other: 6%
  • McClatchy: Circ: 20%; Ads: 76%, Other: 4%

Several factors will continue to push and pull the new ad/circ breakdown.

For one thing, we’re moving into an era of “reader revenue,” one that will roll up print subscriptions, single print copies, digital pay per view, digital subscriptions, all-access (across platform) subscriptions, memberships and more. For a next generation of reader revenue, tablet access is the big prize in the sights of publishers; witness, for instance, the likelihood of a News Corp. “iPad division.” Further, advertising will continue morph greatly, as digital marketing replaces some of that spend, enlarging and changing definitions.

Finally, don’t forget “other.” For A.H. Belo, it’s 8 percent now, but growing at at 35-percent clip. As news companies find “other” ways to make “other” revenue, we’ll see new formulas begin to make sense.

POSTED     Aug. 5, 2010, 10 a.m.
SHARE THIS STORY
   
Show comments  
Show tags
 
Join the 15,000 who get the freshest future-of-journalism news in our daily email.
Show Me The Next strips down online reading and discovery to their most basic components
“I think there is room for niche, monkish austerity.”
From Nieman Reports: Why news outlets are watching India’s next billion Internet users
“I can think of a billion reasons why it’s in the interests of news outlets to overcome barriers of language, literacy, and relatively low-end tech.”
Newsonomics: 10 headlines we may see this fall about the future of news
From pipes to platforms, overseas to over-the-top, the shifts we’ll see in the remainder of 2015 will set the stage for 2016 and beyond.
What to read next
2577
tweets
The New York Times built a Slack bot to help decide which stories to post to social media
The bot, named Blossom, helps predict how stories will do on social and also suggests which stories editors should promote.
1310Jo Ellen Green Kaiser: Do independent news outlets have a blind spot when it comes to ethnic media?
The head of the Media Consortium argues that, by defining themselves in opposition to mainstream media, independent progressive outlets miss out on the power of ethnic and community journalism.
1029Newsonomics: 10 numbers on The New York Times’ 1 million digital-subscriber milestone
Digital subscribers are proving to be the bedrock of the Times’ business model going forward. How much more room is there for growth — and at what price points?
These stories are our most popular on Twitter over the past 30 days.
See all our most recent pieces ➚
Encyclo is our encyclopedia of the future of news, chronicling the key players in journalism’s evolution.
Here are a few of the entries you’ll find in Encyclo.   Get the full Encyclo ➚
The Daily
Dallas Morning News
Sports Illustrated
La Nación
O Globo
Upworthy
Investigative Reporting Workshop
The Wall Street Journal
Gannett
Seattle Post-Intelligencer
INDenverTimes
Newsmax