Nieman Foundation at Harvard
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Aug. 1, 2019, 1:25 p.m.

Newsonomics: The “daily” part of daily newspapers is on the way out — and sooner than you might think

Seven-day newspapers aren’t just talking about cutting out one or two days a week in print — they’re talking five or six. Is this the only way to accelerate the transition to digital or speeding their own decline?

What do you call a daily newspaper that’s no longer a daily newspaper? “Sunday + Digital” sounds far less poetic.

That’s now more than an academic question. Many publishers — if not most — are now seriously modeling and planning for the transformation of their businesses from seven-day newspapers to something…less, numerous industry sources tell me. And not just a little less — significantly less.

Blame Google and Facebook, blame tariffs and newsprint costs, blame Amazon and Uber for hiring away would-be early-morning newspaper deliverers — it makes little difference. We are on the brink of seeing major cutbacks in daily delivery and daily printing of newspapers, as soon as 2020.

“It is one of the top topics of discussion in the boardroom,” says Peter Doucette, managing director of the Technology & Media Practice for well-used news industry consultant FTI. “The current operating model is under duress like we’ve never seen before. Our point of view is that the daily morning distribution model is no longer going to work in a three- to five-year timeline. That’s broad, of course, and dependent on market.”

“Publishers have been focusing on growing net new digital subscribers” — see Nieman Lab director Joshua Benton’s piece on the difficulty doing so at the L.A. Times — “but they need to think of the transformation event — cutting distribution days — and the effect of moving print subscribers to digital subscribers.”

In essence, Doucette — who joined FTI a year ago after leaving a high-profile role as chief consumer revenue officer for The Boston Globe’s industry-leading digital subscription initiative — is urging publishers to think bigger. That’s the drama playing out in almost every city large and small: timing that inevitable “transformation event” when the seven-day daily moves into a museum somewhere.

What can publishers — under great financial pressure to make shorter-term decisions — do to make this dramatic move from print to digital something more just the next stage of decline for the business?

While dozens of newspaper titles have cut Saturdays (creating a single weekend paper, something the Europeans have done for decades) or Mondays, this next cut would be far more impactful. The big question now on many corporate tables is whether the right number of days to kill is five or six.

There’s the 7/1 model. That’s basically the Sunday print paper — where most of the ad revenue is still generated — plus digital the rest of the week. Newspapers have been pushing “Sunday + Digital” offers to readers hitting paywalls for years now, and you’re going to see it a lot more — except often as the only home delivery option, not the skimpiest one.

There’s the 7/2 model. That’s Sunday plus one weekday — maybe a food-heavy Wednesday stuffed with supermarket ads. (That’s a phenomenon that remains in some markets but has vanished in others.)

And, more conservatively, there’s 7/6. That’s what McClatchy piloted this spring at its South Carolina paper the Myrtle Beach Sun News, which I detail below. 7/6 saves a lot less in the physical costs — newsprint, printing, trucks, delivery — but it’s a way to take one step into the transformation process rather than jumping in all at once. And it’s a test: If you break the longstanding bond between the sun rising in the east and papers hitting doorsteps, will enough advertisers and subscribers accept it to make the economics work?

These are the key metrics publishers are modeling to see if they can get from here to there:

  • Can they retain 80 percent of more of print ad revenue by moving weekday advertisers into Sunday and/or one other day?
  • Can they keep circulation revenue roughly flat while substantially reducing costs? In these models, subscribers typically pay a little less for fewer days than they paid for seven — but not a lot less. Publishers are aiming to keep between 70 and 90 percent of their seven-day circulation revenue.
  • Can they improve their earnings/EBITDA by some multiple of a million dollars per market?

A movement away from daily print, of course, isn’t unexpected. With all the high-level speculation about “the end of print,” it’s been clear for years that we’re heading toward a weekly-plus model. The big weekend paper — on a day when people have time to sit and read — has had much more staying power than the thin weekday editions that people struggle to squeeze into their busy mornings before work.

But the important questions remain (1) timing, (2) execution, and (3) what these newspaper companies, their readers, and their communities will gain and lose in the transition. Rush into the transition with only haphazard prep and it could be a death knell. Get it right and publishers can at least buy some more time to try and stabilize their businesses.

Smiling at all this are the companies that have been publishing weekly newspapers for decades. They’ve long argued that weekly print is a better match for a world gone mostly digital. There’s little doubt that the economics tend to reinforce that view. But at the same time, the impact of a local daily paper on American communities cannot be overestimated.

So how fast is this going to happen?

Doucette says he “would expect some publishers to start experimenting in 2020. The time horizon is 6 to 18 months. You are going to see publishers trying ‘less than daily.'”

If this is mostly about cutting Mondays and Saturdays — the thinnest and least profitable days for the vast majority of newspapers — the disruption may be kept to a minimum. Seeing a lot of well-known titles drop all the way to 1 or 2 print days would be different. After talking with multiple sources, I believe we’ll see that “transformation event” coming sooner than later — but the more incremental cutting will probably be the main early trend.

The economics of habit

Publishers’ biggest fear is that there’s something holy about the seven-day habit that has long bound together newspaper companies and their most loyal subscribers. Once you tell readers they have to live without a newspaper some days, will they decide they can live without it everyday?

Can you rely on establishing a new print-some-days, digital-some-days habit in a subscriber base heavy on older readers? Newspapers still depend on an incredibly loyal set of septuagenarians who have been asked to pay as much as $1,000 a year for the privilege of reading what has often become a very thin product. Will forcing them out of their daily habit just speed up the industry’s downward spiral?

At least part of the response will be driven by how the move is viewed by those customers, which comes down to how the newspaper is viewed. Is it a group of civic-minded business people working to maintain some semblance of a free local press in a time of great national duress? Is it just a bunch of blood-sucking, hedge-fund-backed operators with no interest in the community and whose eventual departure from the scene will let something better take its place?

Is it part of an industry truly teetering on the edge of existence? (Several sources estimate that as many as 100 of the more than 1,200 daily newspaper titles in the country have fallen into unprofitability but have kept it hidden. Consider the overnight demise of The Vindicator in Youngstown, Ohio, whose owners acknowledged only two profitable years out of the last 22!) Many publishers figure that as many as five or six days in their current publishing week are unprofitable on a standalone basis.

Of course, reality is nuanced. There are indeed a few black-hatted villains, happy to bathe in their villainy; there are a few (too few) white hats too. And there are a lot of people trying on various shades of gray headgear, having a hard time finding a workable fit.

Profits have shrunk dramatically, but by most confidential estimates, the earnings that remain still add up to well over a billion dollars a year. That’s a humbling number for an industry that once took in many multiples of it. But it is, nonetheless, profit, which in business usually can fuel sustainability and at least the possibility of growth. (In any event, a lot of those earnings still go to pay down the debt load accumulated by a previous generation of executives.)

Ken Herts — the director of operations at the Lenfest Institute and a newspaper veteran who talked to many in the industry about day-cutting models — sums it up colorfully: “Many newspapers are like boats at the top of Niagara Falls. Some have more power to pull away than others, and some are closer to the edge. But the strong currents of print decline affect them all, and they need to move before it’s too late.”

The business-model changes required for this print-to-digital transition have befuddled newspaper publishers for more than a decade. Print is still where most of their money comes from; how can they preserve all those great print ad and circulation dollars and build a digital business big enough to support any semblance of truly community-serving newsroom?

Thus far, nothing’s worked. Instead of any radical shifts, perhaps understandably given human nature, we’ve seen straddle after straddle. Some admixture of maintaining what might be enough of print while investing what might be enough in “digital.”

That straddle is what’s coming to an end. Here’s how one industry executive who has day-cutting modeling sums up the arithmetic: “”Everybody knows that print costs don’t come down linearly with volume [the decline in number of copies sold, printed and delivered.] They come down in stair steps when you close press lines, remove truck routes, and take out big cost elements.”

And that’s where a ledger full of logistics kick in — and where you’re reminded that newspapers have always fundamentally been an industrial business, one that buys dead trees and ink by the barrel, one that uses big iron to assemble and trucks to deliver packages of content, at a large scale and on a regimented schedule.

Take the printing press, to start. If a newspaper publisher still owns one, it has pay for an at-least-close-to-full-time staff to operate it. Justifying that requires volume — either a publisher’s own paper, lots of contract printing, or both. (Those still operating presses may have developed a rich in-sourcing business that’s worth maintaining.) That’s why killing one or two print days doesn’t save that publisher much money; the fixed costs will remain stubborn.

If a publisher has already outsourced printing — and can get the external printer to offer a good price on what will be less business — it has more flexibility to cut.

Beyond the presses themselves, contingencies abound. In a Twitter exchange this week, Nieman Lab director Joshua Benton and Community Impact Newspaper publisher John Garrett got into a discussion on day-cutting.

Many publishers still struggle to get their print-based and digital-based subscription CRM systems to play well together. A radical change like this will put pressure on the capacity of a lot of papers.

Other hard questions: How does this change your business-side staffing? How about the infrastructure you have built up for daily distribution? (Doucette notes one very practical consideration: It’s harder to find people in a good economy willing to get up before dawn to pick up and deliver papers. The growing logistics economy — driving for Uber or Lyft, delivering for Amazon — both pays better and allows a more flexible workday.)

Do you have the right skills in your newsroom to do this sort of split in digital/print well? What should your newsroom org chart look like now? How do you maintain your community presence and impact when you’re printing only once or twice a week?

Here’s another one: What do you do with your digital “replica edition” products, which still form a significant part of the paid circulation you report to advertisers? Should you still lay out an imaginary print newspaper every night — for “electronic printing” only — and then just not send it to the press? Does the replica become an even more important transitional product to serve aging readers who still love the print format? Or is it a weird remnant of the past you’re trying to leave behind that will slow down the organizational change you need?

In the end, it’s a lot of calculation and reorganization — and then a roll of the dice.

If breaking the daily habit is what keeps CEOs and publishers up at day, their second biggest fear is execution. Even if the model is right — are newspapers ready to execute the transition successfully?

That’s why there are confidential studies going on right now and why “almost everyone is doing the modeling” for cutting days, one well-connected publisher told me. In fact, the industry — which historically has liked to sing from the same song sheet — would like this movement to be adopted by a number of companies at the same time.

As the preparations continue, the questions about industrial cost savings are balanced with ones on how they’d sell this new proposition. That may seem like Sales 101 — marketing and pricing and a customer journey — but it too requires a lot of decisions.

How much do you charge for Sunday + Digital? How long in advance of throwing the switch do you test the appetite for the new product and new pricing?

How many of your print subscribers actually use any of the digital products you offer today — and how do you try to make reader comfortable with them, quickly, before the switch is thrown?

The argument they’re rehearsing: We’ve told you what Google and Facebook have done to our businesses, and the pile-on damage from unfair newsprint tariffs. Now we’re moving to preserve local news itself. Some will present it to their communities as an existential question; others will be more demure.

In the end, an industry now well versed in “Mathering” — popular price-modeling strategies via industry standard Mather Economics — will need to test.

“You could say: ‘I can lose 20 percent of my subscribers — but if I lower the price 5 percent, then I then only lose 15 percent of my subscribers,'” one industry player well versed in the testing told me. “You can start testing those offers in the marketplace and see if you have reason to believe that you can do that.” Or before you drop a day of print, “you can start selling six-day-a-week subscriptions for your 90 percent of the price. See what your take-up rate is on those. Maybe people are happy to not get the Saturday paper, or at least can be convinced through marketing.”

What did we learn from the debacle in New Orleans?

Wait, is any of this really new? Indeed, way back in 2012, the Newhouse family’s Advance Publications shocked the industry by cutting the New Orleans Times-Picayune from seven days a week to three. Protestors took to the streets, creating the delicious scene of placard carriers demanding more news!

Seven years later this spring, Advance sold off the Times-Picayune to the competitor that it had let invade its market by becoming less than daily in print — the paper in Baton Rouge 80 miles up I-10, The Advocate. That is one worry fellow publishers take from Advance’s New Orleans experience: Are we risking our local monopoly, albeit if it now stands on wobbly stilts?

Newspaper CEOs across the nation would like to learn a lot more about Advance’s experience across the country; along with New Orleans, it has cut print days at papers from Syracuse to Cleveland to Portland. But many complain that Advance, privately owned, remains its usual tight-lipped self. With seven years of experience moving advertisers to fewer days and to digital, at creating digital products meant to engage readers seven days a week and with cost-saving metrics known to the penny, what Advance has learned could be hugely valuable to the rest of the industry, they tell me.

As Advance proceeded with its plan — notably, without a paywall or any kind of charge for its digital news content, which I decried early on — the fundamental flaws in execution were well documented. Over the years, the company moved to remedy as many of those as it could, improving a digital product that would have been weak even for a still-print-focused company. But continued layoffs at Advance papers don’t seem to speak to success — or at least any massive edge over the fate of the rest of the industry. Advance’s strategy didn’t do much to limit the continued shrinkage of its news products, and there’s no indication it’s figured out a sustainable new business model. Its sale of the Times-Picayune — even if you consider it a one-off case unlikely to be replicated in other markets — has caused even more doubt in the trade.

All that said, Advance’s early apparent success in maintaining a high percentage of its print ad business despite day-cutting has encouraged fellow publishers.

There’s also that timing question again. How is cutting print days in 2020 different from doing it in 2012 was?

Advance isn’t the only place to look for experience; we’ve seen daily cuts in Detroit (now a decade old), in Pittsburgh, and in dozens of smaller cities. But their shared experience is hard to know very deeply or to extrapolate from. To paraphrase Tolstoy: Happy newspaper companies are all alike; every unhappy newspaper company is unhappy in its own way.

In any event, audiences’ comfort with changing habits may be radically different from community to community. We don’t know. But we may soon find out.

McClatchy’s little experiment

McClatchy is among the current testers. While like its peers it has its eyes on maximizing print savings, it’s beginning its journey cautiously. McClatchy decided to pick off Saturdays — in general a weak day for both readership and advertising — and then moved through a protocol to see how dropping that day could best (and most profitably) be handled.

In April, the company’s Myrtle Beach Sun News replaced its Saturday paper with “expanded newspapers on Fridays and Sundays.” It then extended the initiative to North Carolina’s Durham Herald-Sun and Washington’s Bellingham Herald. On Tuesday, it announced Saturday print would go away at The Tribune in San Luis Obispo and the Belleville News-Democrat outside St. Louis in Illinois. It’s evaluating its other non-metro markets.

The idea: Do everything possible to reasonably gain some cost efficiencies while absolutely minimizing subscriber loss.

“We’ve lost 18 subscribers, but won back all but two of those,” Sara Glines, the company’s regional publisher for the Carolinas and East Region, told me Wednesday about the experience in Myrtle Beach. With those numbers, the test is a major success. Glines reports results were similar in both Bellingham and Durham.

“This is a win-win-win,” she said. “Costs are down. We lost no ad dollars and digital activations are going up.” Before Myrtle Beach dropped Saturday, only 43 percent of its print subscribers had activated — meaning they had connected their print subscription to a digital account. Today, 53 percent of print subscribers have activated.

Those digital activations are a key metric: How do you get long-time print subscribers to turn to digital more often? A first step has to be getting them attached to a digital account. The next big frontier: getting them to use the digital products more frequently.

That’s part of the playbook of tactics Glines prepared to make the transition work. Another key one: Communicate, communicate, communicate. Glines says the News gave its readers plenty of notice of the change, encouraged them to “activate” digitally, and both anticipated and accommodated the kinds of Saturday content readers might most miss, like crosswords and comics.

All those preparations seem to have worked. But would do they tell us about a potentially more radical switch 7/1 or 7/2?

Even Glines sounds a cautionary, conservative note: “I don’t know that the test tells us anything about other days of the week.” In its early tests, McClatchy’s savings are small, but it is plainly looking at ways to multiply that number.

Collateral damage?

If the longstanding seven-day, early-morning newspaper delivery business across America collapses, what might happen to the nation’s two biggest home-delivered papers — The New York Times and The Wall Street Journal? Both papers still deliver hundreds of thousands of print papers a day, most of them outside New York, and they often contract with local newspapers to handle last-mile delivery.

(When the Pittsburgh Post-Gazette announced it was cutting from five print days to three last month, it said that the change would mean it would no longer be able to distribute the Times, the Journal, or USA Today in its circulation area.)

If the Times and Journal see large-scale disruption in their distribution networks, one option might be good old snail mail. Fewer and fewer of their readers depend on the daily print paper for breaking news; same-day mail delivery (via USPS, likely with earlier deadlines) thus might be a possibility.

The Times says it hasn’t yet seen any impact from the limited cuts we’ve seen so far and believes it has a range of options should newspaper delivery network fall apart. “We will handle things as they come up,” says Mark Weitzel, the Times’ VP of circulation operations.

Vindication or…?

There are so many practical questions pervading this latest change apparently poised to move across the U.S. newspaper industry.

But there’s also a less tangible one lurking in the shadows of all those darkened newsrooms: the standing of the newspaper brand itself.

It’s easy to dismiss what remains of that value — given the extent to which deep cuts in newsrooms, weaker editorial products, and often even the sale of prominent downtown real estate have diminished those brands’ standing. But newspapers, often the oldest businesses in their communities and a bridge from each generation to the next, may be surprisingly stubborn in their public value and awareness.

Will the end of the “daily paper,” as we know it, be a deep blow to that brand value? It’s possible, certainly, that a new, more truly hybrid print/digital brand can create new meaning and value. But that will take reinvestment in more and smarter news coverage and in mobile products that deliver it all well. But “reinvestment,” though, isn’t a word I hear in these day-cutting discussions. “Cost cutting” is still top of mind. If there isn’t at some point a renewed emphasis on building, all the day-cutting you can model might not be able to save the next wave of Vindicators.

POSTED     Aug. 1, 2019, 1:25 p.m.
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