Índice

Sponsors

cic flint kodak3

logo-atdl

Asociación Técnica de Diarios Latinoamericanos

Índice

Boletín Semanal octubre 13, 2019

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?

By KEN DOCTOR @kdoctor 

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 joinedFTI 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 littleless for fewer days than they paid for seven — but not a lot 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.