Time to stop printing the newspaper? It would be tough
After the third set of layoffs at my employer, a colleague and I started musing about where the business model for the newspaper industry might be headed. I’m not smart enough to figure it out. But I wondered whether we really need to print a newspaper anymore. Why not sell the presses, close the circulation department and just report the news — distributing it electronically?
I was curious enough to do a back-of-the-napkin experiment to see if it would work. This exercise, by the way, has nothing to do with my employer. I have no idea what any news organization plans for its print strategy. This is simply spit-balling. My experiment says it would be tough to make it work — not without making more newsroom cuts. I couldn’t make it work.
Could we do good journalism, but stop with the overhead of newspaper production? Others are already giving it a try — including The Capital Times in Madison, Wis., and The Batavian, Gatehouse Media’s online-only launch.
And let me confess this: There’s a ton of wild assumptions in my experiment — not unlike the confession Jeff Jarvis made in his “Newsroom Economics” post (where he posited a 30 percent reduction in newsroom staffing at a 100,000 circulation paper).
For my expense numbers, I used the expenses Philip Meyer outlined in his book “The Vanishing Newspaper” (University of Missouri Press, 2004). He used a hypothetical newspaper with a circulation of 100,000. His numbers were from 2001, so I adjusted them to 2007 dollars. Then I used the 15.6 percent profit margin for newspapers cited in the 2007 Frontline documentary “News War.”
From that, I extrapolated a revenue number — and took 9 percent of that for online-only revenue, based on a report of the national average of newspapers’ online revenue by the NAA.
So, before you let me have it, did I mention that this is full of wild and crazy assumptions?
I took the newsroom staffing plan Jarvis outlined — and cut it from 70 to 60. And I took a crack at putting salaries on all those positions. I also put four positions in “production” — programmers. The expense number for advertising is a wild guess. It’s probably too low.
And for my final trick, I guessed on how to revise Meyer’s figure for Administration and Depreciation. I had no clue how to guess that. His original number was 25 percent of revenue. I used that number — then cut it by a third.
The result: I lost 9 percent, with $4.7 million in revenue on expenses of $5 million. And, of course, there was no money in my plan for circulation, newsprint and ink. A huge weakness: Online revenues still depend heavily on upsells on print classifieds.
Now, I’d love to know how anyone else would tweak my assumptions.
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View Comments on Time to stop printing the newspaper? It would be tough
Kurt, When you migrate the print product to the web, many print-only advertisers will be forced to go with you. Not all of them will be convinced, but many will have to. Many will surely turn to other media, including direct mail, but you will very likely cover that 9% or more.
If you had no print product, then presumably audience and usage would increase by some amount online. Advertising should increase by that amount plus some since the print outlet doesn’t exist, no?
Frankly, you could cut staff more. Publishing online is more efficient than print, so a properly trained staff can be more efficient.
Even 30 seems fat.
That 9 percent of revenue that online gets now — 80 percent of it is whole dependent on the print product, such as up sells from classifieds. It’s debatable whether you would have to go to a free classified model. Even so, you’re likely to see a huge disruption to online revenue once print is dropped. You could even argue that many of the advertisers buying banners now, even though not an up sell, do so because of the relationship with print. Once print’s not around, will the relationship last?
So, while expenses could be reduced significantly more, there are still gaping questions about retaining sufficient revenue.
http://www.crosscut.com/business-technology/9536/How+an+electronic+newspaper+could+become+profitable/
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