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Nieman Journalism Lab
Pushing to the future of journalism — A project of the Nieman Foundation at Harvard

Where’s the money coming from? Fresh Pew data on the uncertain economics of newspapers

The survey — built on private data and conversations with newspaper executives — shows an industry still clinging to print while moving to digital.

It’s a story that wouldn’t exactly merit a “BREAKING” crawl on CNN: American newspapers aren’t in great financial shape. But a new report from Pew’s Project for Excellence in Journalism fleshes out that fact, showing that within the industry there’s quite a bit of diversity in how well newspapers are adjusting to the disruption of their business models.

Pew found that, while some are doing better than others, the gap between digital and print revenues is still yawning, and that efforts at expanding the digital base — through daily deals, mobile advertising, or other experiments — are only slowly having an impact. Even with digital advertising rising at most newspapers, the report found a 7:1 ratio of print advertising dollars lost to digital advertising gained in 2010.

Perhaps what’s most remarkable about the report is how Pew put it together: using private data from 38 newspapers in six companies, as well as interviews with executives from 13 media companies. At the newspapers surveyed:

  • For every $11 in print revenue, they still earn just $1 on the digital side.
  • Digital revenue is still dominated by display ads and classifieds, which account for about three-quarters of all digital revenue. Daily deals make up about 5 percent; mobil advertising, just 1 percent.
  • Non-traditional business — digital marketing, web services, events, and the like — generated only about $6,500 per quarter at the median newspaper studied.

Aside from the data, the report’s interviews with executives offers some troubling evidence of the industry’s resistance to change. This sentiment from one of the surveyed execs seems to capture it:

“Probably the most difficult thing is to change a corporate culture because you don’t really have the power to do it,” noted one executive. “You can change CEOs, executive VPs, digital VPs. You can wave this magic wand all you want. But at the end of the day, the troops in the field hunker down. From our company, and I would venture for other organizations as well, the most difficult thing to do is change it. “

In order to get access to newspapers’ numbers, Pew promised to keep their identities secret. That’s a very reasonable tradeoff to get access to granular data, but nonetheless, there are points in the report where a bit more background data would be useful in interpreting the numbers. Where Pew provides it, it illustrates that “success” can have different meanings. For instance, Pew notes that the newspaper with the highest growth rate in digital revenue saw that number grow 63 percent in a year — a truly remarkable number. But the study points out this newspaper was a small one (20,000 circulation) where, even with that kind of growth, digital revenue made up only 6 percent of total revenue. And that growth was driven, in part, by a hiring boom in the city’s major industry. In other words, that kind of growth won’t be easily replicable elsewhere.

2011 saw seemingly every decent-sized paper in the country adopt daily deals — either Groupon or one of its clones — as a revenue stream, and they provided newspapers with different results. One paper said deals made up 55 percent of digital revenue — but the average across papers was only 5 percent.

There was one universal truth, and it’s a depressing one: Mobile isn’t big money yet. More than half the papers surveyed told Pew they generated zero ad dollars on mobile platforms in 2011. At least the trend line’s moving in the right direction: Mobile increased from 0.1 percent of digital revenue in late 2010 to 0.9 percent in late 2011. (At least newspapers aren’t alone in struggling to make money from mobile ads.)

One thing the survey does is back up the other recent Pew report that found banner ads make up the bulk of advertising on news websites. What this new study tells us is the reason why: It’s what the ad staff is pushing hardest. Of the papers surveyed, 92 percent said digital display and banner ads were a “major focus” of their sales, versus 40 percent for targeted advertising and zero percent for video advertising. And as much as executives talk about retooling their ad departments, their staffing tells a different story:

On average, papers deployed the largest percentage of their sales staffers, about half of them, to sell both traditional and digital advertising. About a third of the sales staff primarily sold print ads. The fewest number of reps, about one-tenth of the sales staff, were primarily selling digital. On average, of the papers studied, papers had one digital ad rep for every three print ad representatives.

The thread that runs through the report is culture change within newspapers. The executives Pew spoke with offer a kind of dissonance, advocating the virtues of the digital game while bemoaning the state of their staffs. Another excerpt:

The core cultural issue, executives told us, is the tension between the old ways and the new ways — and some of that stems from newspaper leadership that came of age in the days of monopoly newspapers and 20% profit margins. “We haven’t needed innovative people,” explained one executive. “So you get what you need. The kind of people that came into this industry were more operationally focused, executors instead of innovator risk takers.”

Or this:

Another executive described much the same problem this way: His company had too many publishers with “ink in their blood” and too many sales directors steeped in the old days. He added that the newspaper business had changed substantially and that companies had to adjust their traditional ways of thinking. “You’ve got monopolies that are no longer monopolies.”

The report ends on a decidedly gray note, asking executives to look ahead five years. Some predict cutbacks on home delivery days; one said papers would “limp along” and predicted doom if another recession comes. It’s on the second to last page where the report turns shockingly blunt: “Still others said that at this point, they just didn’t know what the revenue structure would look like going forward.”

What to read next
Ken Doctor    Aug. 13, 2014
If newspapers are going to have to survive on their own, the first numbers aren’t encouraging. In southern California, we could see big movement fast.
  • Maura

    I think I’ve seen less “breaking” news get the breaking news tag on CNN, actually. 

  • Bob Mentzinger Jr.

    There is literally nothing new here.

  • Leader825

    It isn’t the gray-headed newspaper industry clinging to the past– it’s the customers. They buy print ads and inserts because they work. They just aren’t buying as many as in the past. At our newspaper, advertisers want the paper. They are wary of the reach and effectiveness of web ads.

  • Jimmelaro

    I recently decided NOT to accept a cutback from part-time ($10 an hour for 20 hours a week) to stringer status ($20 per story with NO mileage). As a sports writer, $20 an hour doesn’t cut it if you spend 5 hours covering two games (softball at 4 p.m. and baseball at 7 p.m.). But what made my decision was easy were the following factors: 1) the Managing Editor at this particulay paper ‘suggested’ that we gather preview information via an e-mail questionaire. I know the digital world is a big part of the industry BUT you need to sit down with coaches to get a true feel for your stories. 2) This same Managing Editor is in the habit of putting his byline on stories that I seriously question are his. Back on Dec. 11 2011, his byline appeared on three stories that ran on our sports break page. One took place in Louisville, Kentucky, one in Conwat, SC and the other in Boiling Springs, NC. How is this possible? 3) About two weeks before my situation came to a head, this Managing Editor could be heard listening to messages left on his phone. One caller wanted to complain about something but before the caller could say anything, the Managing Editor hit the delete button. I question the journalistic ethics used by young editors in the business today who are so focesed on the digital format that they totally ignore the personal side of the business. 

  • guest

     This is so clearly wrong I had to say something.  Digital ads work much better than print ads when the following happen:

    A.  The rep knows how to sell them.
    B.  The art staff knows how to build them.
    C.  The web trafficking people know how to target them.

    I have yet to work at a newspaper that has ever had all three at the same time.  Newspaper cultures are so full of people who have no idea what they are doing that it is a joke.  I know, I was in the business for 31 years.  I’m not any more.

  • Pressman

    “You can change CEOs, executive VPs, digital VPs. You can wave this magic wand all you want. But at the end of the day, the troops in the field hunker down” …

    For the past 32 years I’ve worked for two large metropolitan daily newspapers as one of those troops in the field, and this is pretty typical of the attitude of those running the campaign. When times were good … they strutted around like Prussian Field Marshalls … but when their lack of business foresight and downright incompetence has brought them to the edge of the abyss … they blame the foot soldiers for being outflanked.