HOME
          
LATEST STORY
The Upshot uses geolocation to push readers deeper into data
ABOUT                    SUBSCRIBE
Sept. 16, 2010, 1:30 p.m.

The still-evolving Newsonomics of digital transition

[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.]

It seems like a simple enough question. If newspaper companies could make the switch to digital publishing, how much would they save in costs?

Newspapers have been Big Iron companies, operating on a industrial manufacturing cost basis, as the information revolution has developed all around then. They’ve participated, triumphed here and there, yet seen their business model effectively cut in half, as first the classified business cratered and then other ad lines shrank.

Surely, as newspaper companies go digital-first, multi-platform and tablet-ready, there’s a financial path from here to there. Surely we can see how the old costs of physical production, printing and truck-based distribution can be winnowed, replaced by hyper-efficient digital creation and distribution.

I’ve been plumbing around in those numbers for a couple of weeks, and I can report back that the print-to-digital transition is at best a work in progress. Sometimes it seems more like an exercise in the pseudoscience of numerology. There are all kinds of intriguing numbers — but they just don’t add up yet.

The numbers we know, though, tell stories, and offer pointers.

Take this one: 4.1 percent. That’s what Warren Webster, president of AOL’s newly expanding Patch, recently told me it costs his company to match the content production of a “like-sized newspaper.” Meaning that Patch can produce the same volume of content (quality, pro and con, in the eye of the beholder) for 1/25 the cost of the old Big Iron newspaper company, given its centralized technology and finance and zero investment in presses and local office space. (Staffers work out of their homes.)

That’s an astounding number, which even if tripled, gives a legacy publisher or editor pause.

Yet the second sentiment coming out of that publisher’s or editor’s mouth is this: Tell me exactly how is Patch going to make enough just to be profitable, even if it only pays one very full-time reporter, plus freelance, per community.

For Dave Hunke, publisher of USA Today, which has just announced a major restructuring to get itself “ready for the next quarter-century,” such cost questions are very much on his mind. Yet asked how much cost could be cut out of the legacy enterprise if it went wholly digital, he pauses, laughs and says, “That’s honestly one of the few questions we haven’t looked at. You could have a reasonable number if you had a business model around the digital business.”

Hunke’s point is a big one. You can have a business model that supports a wholly digital news enterprise — it just won’t be a very big one. Take SeattlePI.com, supporting about 20 editorial staff and flirting with profitability. For Hunke, the question is how you keep a big news staff and a big news footprint as you transition. That’s the still-looming question for metro newspapers, who see the many startups forming around, under, and near them. And, at this point in the digital evolution, there’s simply nowhere near the money necessary to pay for big newsrooms.

Still, the question of digital transition economics is one that’s on many minds.

If you could flip that print to digital switch, what might it mean in numbers?

Start with 60 percent. That’s the rough percentage of costs that might come out of an enterprise, as print production, printing, circulation and distribution expenses, along with those jobs, were eliminated. The 40 percent or so remaining? Figure about 20 percent of costs are newsroom, and 10-15 percent are ad sales. Add in a reduced (from print heyday) number of finance, HR, marketing and management jobs. As one publisher told me: “There are still way too many managers around, managing lots fewer people and lots less money.”

That 40 percent or so number gives a notion, though, of where this is all headed, though it’s only a marker. Hunke announced a 9-percent staff reduction with the restructuring, and, of course, everyone wanted to know where those cuts were coming from — production, circulation, advertising or elsewhere. He says he couldn’t say because he doesn’t yet know.

“Nothing’s a clean cut,” he says. He makes the point — one familiar to many publishers — that he’s leading a digital transition, but one that includes maintaining (and maybe growing) a print product along the way. His multi-platform, segmented audience approach means that job descriptions themselves are in flux. That, of course, makes budgeting even more difficult in the transition.

The notion of continued care and feeding of the print product — Hunke, correctly I believe, sees it as a niche product for a certain group of readers — is key. Remember that daily newspapers still depend on print for 85-percent-plus of their revenue. My sense is that the tablet will accelerate a print-to-digital transition — especially for baby-boomer readers — and that hastening will favor newspaper companies that manage products, costs, and revenues smartly.

There’s no template, though, and no formulae that anyone can share. The transition road is too dark and bumpy at this point, without map or GPS.

POSTED     Sept. 16, 2010, 1:30 p.m.
SHARE THIS STORY
   
Show comments  
Show tags
 
Join the 15,000 who get the freshest future-of-journalism news in our daily email.
The Upshot uses geolocation to push readers deeper into data
The New York Times story changes its text depending on where you’re reading it: “It’s a fine line between a smarter default and being creepy.”
Elise goes East: How NPR’s new Seoul bureau chief is using Tumblr to complement her reporting
Since moving to South Korea in March, Elise Hu has been using Tumblr to document everything from the serious to the silly — and expand her voice beyond the NPR airwaves.
When disgusting goes viral: Strong negative emotions can push social sharing through the roof
In this excerpt from his new book, Alfred Hermida explores the connection between moral violation and Facebook likes.
What to read next
900
tweets
The State of the News Media 2015: Newspapers ↓, smartphones ↑
The annual omnibus report from Pew outlines a story of continued trends more than radical change.
579What USA Today Sports learned covering the Final Four on Periscope and Snapchat
These new platforms are optimized for realtime news on phones, but there are lots of questions for news organizations — from what content to share to how to measure their effectiveness.
410Journalists shouldn’t lose their rights in their move to private platforms
The shift to distributed content means concepts like fair use are increasingly in the hands of private companies — like SoundCloud.
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 ➚
Facebook
Next Door Media
The Seattle Times
ABC News
Mashable
GateHouse Media
Chicago Tribune
Forbes
Ann Arbor News
The Chronicle of Higher Education
NBC News
New York