The start of a new year seems to be a good time to rehash the old question: What if newspapers just gave up their print editions and went digital-only? Could they survive?

As many had done before, in 2012, Frédéric Filloux (digital operations director of Groupe Les Echos and co-proprietor of the estimable Monday Note) took a crack at the question in a column on how to make money from digital news.

My friend Bill Densmore, who supplies me with a pretty good news stream of emailed articles about digital media, reminded me that I had sent him back some reactions to that piece back then and suggested doing an update of that thinking. So here goes.

First, to summarize the digital news business model Filloux suggested: He imagined a 200-person newsroom, powering a digital news platform that gets 100 million pageviews per month, which would generate $24 million in digital advertising revenue. He also envisioned 500,000 paying subscribers (10 percent of the operation’s global unique visitors), at $10 a month. After accounting for taxes, production costs, marketing, and administration, his operation nets $1 million in profit on $68 million in post-tax revenue — a margin of less than 2 percent. Certainly not a scenario that would be likely to get buy-in from investors. (But hey, stranger things have happened.)

Just at a glance, there are some broad guestimates in Filloux’s post (as there are in my take, below). And that 2 percent margin itself is questionable — Filloux himself acknowledges some of his assumptions are ambitious. (And to be fair, time has shifted the economics of digital news since 2012.)

In particular, the amount of subscription revenue he assumes is far more than what’s realistic to expect. The New York Times reported 875,000 paying digital subscribers as of September 30, 2014; those subscribers paid $42.8 million in quarterly subscription revenue. The Times has has a digital audience of about 28 million unique monthly visitors. So it is currently converting about 3 percent of its audience at about $16 per month, with an annual digital subscriber growth rate of around 15 percent.

If The New York Times is converting only 3 percent of its uniques to monthly subscribers, nobody else with a general news operation should assume they can get to 10 percent. Better for anybody other than the Times to assume something like 1 or 2 percent, at half the monthly price.

But here’s my major beef: Filloux assumes a total transition to digital, no print at all, which is not necessary. People have been trying to model this digital-only scenario for years, but it’s not realistic, because today’s daily newspapers are not going directly to that model.

More realistically, people running a daily printed newspaper should be constructing the intermediate model, in which the paper is still printed once a week (or maybe twice, or three times), and subscribers are willing to pay for the combination print/online package. I think that’s a realistic goal to aim for, and any publisher is derelict in their duties if they haven’t worked out the numbers. And let’s not even worry about the ultimate digital-only scenario, because it’s quite a few years down the road. For the likes of the Times, it may not come in our lifetime.

I’ve been saying this since 2008. But, let’s try it again, looking at the entire United States newspaper business as if it were one company. Right now (at a 2014 run rate), the U.S. daily newspaper industry looks like this:

• Print ad revenue: $16.40 billion. (Based on the Newspaper Association of America’s 2013 revenue report, reduced by an assumed 5 percent loss rate, which is consistent with reported results from publicly-traded newspaper companies through September.)
• Online ad revenue: $3.90 billion. (Assumes the same 14 percent growth rate NAA reported for 2013.)
• Circulation revenue: $11.0 billion. (A slight uptick from NAA’s reported $10.87 billion, with paywall revenues offsetting print subscription losses.)
• Other revenues as detailed by NAA: $6 billion. (This includes affiliated weeklies, direct marketing programs, commercial printing, and miscellaneous sources like royalties and scrap sales.)
• Total revenue: $37.30 billion. (Down slightly from $37.59 billion in 2013.)
• Operating expenses: $29.84 billion. (Assumes 80 percent operating costs, 20 percent cash flow margin, which is around the median of what the publicly reporting publishers net.)
• Cash flow or EBITDA: $7.46 billion.

A thought experiment

Now, let’s wave the magic wand and convert every subscriber and single-copy buyer to a paid weekend edition (printed Friday, delivered Friday night and Saturday, on newsstands all weekend and into next week), still chock-full of preprints and display ads, plus an all-access digital package (phone app, tablet app, facsimile edition, website access), at about 40 percent of the circulation revenue. (It’s going to vary a lot by size of paper. My six-day Brattleboro Reformer subcription at $134 per year might turn into a $6.70-per-month weekender-plus-digital package — 60 percent of the six-day rate. But at The Boston Globe, it’s around $15 per month for Sunday plus digital — a package they offer today — which is about 30 percent of the seven-day rate.)

And let’s assume that the current Friday-Sunday editions carry 60 percent of the week’s advertising, and that all of that can be retained in the Weekend package. You could also assume some migration from Monday-Thursday ads, but let’s be conservative at 60 percent. Meanwhile, because this setup drives a lot more online pageviews as more of those daily print readers get into the digital news habit (and with some more focus on digital sales by those print-bound sales departments) we’ll assume that online revenue doubles. So here’s the new model:

• Print ad revenue: $9.90 billion. (60 percent of the current $16.40 billion.)
• Online ad revenue: $7.80 billion. (Double the current $3.90 billion.)
• Circulation revenue: $4.40 billion. (40 percent of the current $11.0 billion.)
• Other revenues: $3 billion. (That’s half the current $6 billion, because as detailed below I’m suggesting all hard assets like presses be sold, so commercial printing is out the window — but things like affiliated weeklies and direct marketing can be retained.)
• Total revenue: $25.1 billion. (This is down 33 percent from the 2013 actual of $37.59 billion reported by NAA.)
• Operating expenses: $17.57 billion. (In the digital world, you want a 30 percent margin, not 20 percent.)
• Cash flow or EBITDA: $7.53 billion.

A miracle: Cash flow went up! Of course that’s because I picked a 30 percent margin rather than 20 percent. But let’s see whether that kind of margin is feasible: Can this magically transformed business run on $17.57 billion of expenses rather than the current $29.84 billion? (Or on $20.08 billion if you accept the same 20 percent margin?) We’ll need to chop somewhere between $9 billion and $12 billion in expenses. Those reductions will include the following, less the appropriate outsourcing expenses:

• All of the printing, packaging and distribution seven days a week, less the cost of outsourcing what you really need for just that one day per week (at least $4-5 billion)
• All the costs associated with commercial printing (a couple of billion right there)
• Most of the circulation department (outsource telemarketing, order fulfillment, subscription management, etc. — another billion)
• Some of the ad department (fewer editions, but we do need digital salespeople — let’s not overdo it, just a quarter of billion)
• Much of the ad production department (fewer print ads, but online ad designers are needed — at least half a billion, much of this is outsourceable)
• Some of the business office (fewer transactions to deal with, smaller overall size — another quarter billion)
• Most of the cost of buildings, industrial equipment, utilities, parking lots, etc. (sell the buildings, move into rental quarters appropriate for the newsroom plus the ad department and not much more — a half billion in operating costs)
• Some of the management overhead (this is a much leaner operation and doesn’t need pantheons of executives — another billion or so)

All of that should get us into the needed $9–$12 billion ballpark, which is 33 to 41 percent of current costs. And if it doesn’t, a 15 percent margin is better than going out of business. Looking at it another way, notice that in Filloux’s original print model, 75 percent of the expenses are production, sales/marketing, distribution, and administration. Basically we need to slice that in half with a once-weekly cycle.

Moreover, as the model is refined it’s possible there are other new revenues besides the doubling of online ads — for example, content distribution revenue via other channels, and online-only subscriptions separate from the print/online combo. Each of those could be worth a billion, after a few years. And you could recalculate this this model with a twice- or thrice-weekly print product, in which case, you might retain as much as 90 percent of the current print advertising rather than 60 percent, and you’d also keep more of the circulation revenue. In fact, that might be the most immediate intermediate step for many papers.

One other benefit: As soon as you print less than 4 days a week, the FCC’s cross-ownership rule no longer applies, and every such newspaper is free to buy a local radio and TV station (or to be bought by one), which could bring some nice news and advertising synergies.

Why not?

If this makes so much sense, why hasn’t it been done, outside of a few of the Newhouse-owned Advance newspaper markets and Digital First Media’s Oneida, New York paper?

I would say inertia plays a big part. What you’re doing right now always seems safer than the unknown.

Early in the current newspaper market crisis, in 2009, in private meetings I heard newspaper executives at major publishing companies acknowledge that frequency reductions were an obvious solution to the precipitous revenue declines they were seeing (and which have continued unabated since then). But back then, digital subscriptions were rare, and most of the major chains were saddled with debt which hampered their flexibility. A frequency reduction at that time would have required “restructuring events” to get out from under bank covenants. Since then, most of the major groups have either done just such strategic bankruptcies to shed debt, or managed to sell off enough assets to significantly reduce their debt-service expense. So today, the bankers looking over their shoulders are no longer an issue.

Another reason I’ve heard for avoiding frequency reduction is the worry that traditional readers would not make the switch to digital reading on the non-print days. But even if that’s a valid concern, isn’t it better than the status quo, in which the traditional readership (which is all that most newspapers have left) is dying off with nobody replacing them from younger demographic groups? And even traditional readers are cutting the newspaper cord — I have geezerly neighbors who are telling me they’re letting their subscriptions expire and will find the news on their iPads.

With a good chance of actually increasing cash flow, a good chance of building additional digital revenue streams, a good chance of actually picking up new, younger readers, and a good chance of building a new business model that can be viable in the long run, why aren’t more seven-day newspapers contemplating the switch to a one-, two-, or three-day per week print publication schedule, coupled with a robust online presence? Every publisher who reads the tea leaves knows the seven-day print model is doomed. Heck, every reader looking at a flimsy Monday or Tuesday paper knows it. Why not take the plunge now, strategically, rather than sometime down the road, out of desperation, when it’s too late?