News Corp Australia, FTI Consulting, Advance Local share key strategies in print-to-digital audience transition

By Shelley Seale

INMA

Austin, Texas, USA

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Across the world, the fall in advertising spend amid the COVID-19 pandemic has challenged the business model of news. Many publishers face the dilemma of whether to try to save their newspapers or focus on saving journalism instead.

The leading Australian publisher News Corp Australia was no different. Earlier this year, it stopped printing more than 100 regional and community titles and moved them to a digital-only format. The decision was widely reported as a disaster for journalism — but was it, really?

News Corp Australia not only succeeded in activating its print readers into use of digital subscriptions, it has actually started to expand into new territories, and launch new digital-only titles in the regions they had not previously covered.

In a Readers First Meet-up on Wednesday, INMA Researcher-In-Residence Greg Piechota brought in News Corp Australia’s Brendan Collogan to share some of the lessons the company has learnt in the past months of this journey. Also joining to provide insights were executives from FTI Consulting and Advance Local, both in the United States.

Representatives from several major news publishers discussed their transition from print to digital in a Readers-First Meet-up.
Representatives from several major news publishers discussed their transition from print to digital in a Readers-First Meet-up.

News Corp Australia

Brendan Collogan, general manager for digital consumer revenue for News Corp Australia, discussed his company’s journey moving readers from print to digital.

Across its 45-plus titles, News Corp Australia currently has about 700,000 digital subscribers. Collogan said one of the biggest topics of discussion would be how News Corp Australia transitioned many of its regional audiences amongst titles in which the imperative to move those readers to print was the strongest.

News Corp Australia's roadmap of its transition to digital-only titles.
News Corp Australia's roadmap of its transition to digital-only titles.

“On the 29th of June we announced that we were going to close, or discontinue print, on around 100 regional and community titles,” Collogan said, adding it was a significant decision with an understandably strong emotional response from both customers and staff.

This was accomplished through a letter from the editors of each title, accompanied with an offer of two free months with the digital edition, followed by a paid offer.

The next step in the transition was to notify and transition customers. “As part of that process we developed a segmentation. We first looked at the digital usage and engagement of those bundled customers, and we auto-migrated them to a digital-only product, and offered them a free-to-paid offer.”

For bundled customers who had not been using the digital part of their package and for print-only customers, the decision was to first cancel those subscriptions unless the customer accepted a special free-to-paid offer.

This initial segmentation was important, Collogan said. The auto-migration of those customers who were already getting strong utility from the digital product, combined with deep discounts for customers who had not been using digital, allowed them to drive trial and usage for the new digital-only product.

The next step was to launch an above-the-line promotion designed to convert the retail audience and non-subscribers to digital subscription. “We were able to recapture quite a significant portion of that audience,” Collogan said.

News Corp Australia also launched regional editions of its metro titles where print had been discontinued. Readers were invited into the newsrooms to learn about the decision to move from print to solely digital. It was explained that while a method of distribution was stopping, the content itself would remain. One of the most aspects was to stress that the commitment to quality journalism and the community of readers was still as strong and steadfast as ever.

“Finally, we followed up with a range of health checks, just to ensure the decision would take and was appropriate and that the implications of that decision were in line with the expectations,” Collogan concluded.

The results were encouraging. News Corp Australia retained 82% of its auto-migrated customers who had previously used the digital product.

With the two-month free trial offer for new audiences and previous subscribers who had only accessed their titles via print, News Corp Australia acquired about 10,400 new subscribers from a base of about 50,000 prospects.

“In about six to seven weeks, we were able to acquire about 20% of the current base,” Collogan reported.

For those die-hard print readers, the strategy focusing on retaining that print experience in a digital environment and helping to migrate them. News Corp Australia did this through a bundle that included a Samsung Galaxy tablet and a digital “print” edition that closely resembled the original print newspaper. This offer acquired about 3,400 new subscribers.

The onboarding process was altered and relaunched to focus on the new digital experience and its benefits. Because much of the new audience was older and print devotees, a lot of the onboarding revolved around education about the new product.

Targeted lifestyle communications also prompted digital activation and improved local news discoverability with step-by-step guides. These were focused on two key messages:

  • Transitioning to the new digital-only offering gave subscribers access to special benefits beyond just the news title, such as larger regional and national content.
  • Information on how to navigate the subscription and online content.

“We did a lot of community outreach,” Collogan said. Community engagement sessions were held in six key impacted markets and included editorial integration, meet-the-editor opportunities, and one-on-one subscriber informational and help sessions.

News Corp Australia's community engagement sessions provided assistance with the transition to digital.
News Corp Australia's community engagement sessions provided assistance with the transition to digital.

“This was a very successful programme. Across those sessions we had between six and seven hundred attendees, and 87% of those attendees felt more confident using their local masthead product.”

Collogan said that the News Corp team was very happy, and even pleasantly surprised, at the success of the transition. When the transition was announced, they had about 44,000 digital subscribers. Three weeks later, when print was discontinued, they had 47,000 digital subscribers. Since that time, they have continued to grow the digital subscriptions. Collogan attributed that to three factors:

  1. Auto-migration of subscribers who demonstrated utility and usage of the digital product.
  2. Acquisition from the existing retail base with a low introductory offer.
  3. Leveraging the digital print edition as a reason to subscribe.

News Corp also wondered if they could recapture some of the lost print audience by introducing retail editions of some of its metro pages. This proved to be effective.

“What we did was, we created two or three pages of content each day, and we would wrap the closest metro paper with that content,” Collogan shared. “What we found was that we were not only able to transition these customers to digital subscription, but also recapture 40% of the retail circulation by introducing these regional editions. We were quite happy with recapturing that portion of the audience.”

The process was not an easy one, Collogan said, but it has enhanced their commitment to journalism, particularly local journalism. The team has been “heat mapping” Australia to find pockets where there is a high propensity to pay and low penetration and is hiring journalists in those areas where the opportunity for a high digital-only revenue outcome is strong.

News Corp Australia is heat mapping the country for market opportunities for digital-only publishing.
News Corp Australia is heat mapping the country for market opportunities for digital-only publishing.

“We believe there’s a huge runway for this strategy, and digital-only local remains a significant part of our growth plan for the years ahead,” Collogan said.

FTI Consulting

Pete Doucette, managing director of FTI Consulting, presented next on his firm’s research amongst publishers and how their models are oriented towards legacy print revenue and expense categories.

“We work with dozens of publishers around the world, and we’re trying to answer that fundamental question: Is there a digital business model?”

To address that question, Doucette shared a case study of one particular publisher FTI has worked with that is fairly representative of the typical news publisher: 80% of this company’s total revenue came from legacy print streams — home delivery, single copy sales, and print advertising. All of these revenue models are in various degrees of decline and have been accelerated by COVID-19.

To support this print model, more than 32% of total expenses for the publisher are dedicated directly to print production and distribution  — a figure that could be closer to 50% for many publishers. Most of these expenses are highly fixed, leading to profit margin erosion as revenue declines.

“As we all know, there’s huge cost tied up in the print business,” Doucette said.

He then sped forward to a forecast of a 2025 revenue and expense mix that is likely if current trends continue with the print-to-digital transformation.

“If we were to shift to a digital-only model in 2025, and we are able to continue to grow digital subscribers at a certain rate ... we would expect the revenue to be significantly less when you go from a print model to a digital model,” he explained. “Only about 45% [of revenue] from where the current model would be.”

However, the cost structure plays a huge role in net profits.

“Based on our modelling with different publishers and clients, we believe that there’s significant cost restructuring you can do,” Doucette said. The cost of a seven-day production period for the example publisher in 2020 is more than US$81,000 — but in the 2025 forecast, that same seven-day cost would go down to just under US$34,000. A major part of that cost reduction is in PP&D.

“If all of these assumptions were to be true and play out this way, it would actually show an improved EBITDA, or profit margin, in 2025,” he said.

So, what does that proposed 2025 business model look like? Doucette explained that the operating model shifts heavily towards the digital consumer, both in terms of revenue and investment. Reader revenue would account for nearly 80% of total revenue.

After eliminating production and distribution related expenses, the cost structure is reallocated towards areas that support digital content and product.

A typical legacy publisher sees 80% of revenue and 32% of costs driven by print.
A typical legacy publisher sees 80% of revenue and 32% of costs driven by print.

“We think that this kind of structure can work to fund the newsroom and be what I call a vibrant digital subscription-first news publisher,” Doucette said.

The rule-of-thumb target, he added, was that digital consumer revenue should be about twice that of the newsroom cost.

Moving towards 2030, total revenue and EBITDA would continue to grow by scaling digital subscriber volume.

“When you do the transformation in 2025, you see the large drop in revenue, then you see a move towards a consistent revenue growth period because you continue to build on your digital subscription base.”

When it comes to costs, because the costs for producing digital after the restructuring remain rather low and fixed, the revenue continues to grow exponentially as subscriptions increase. This is unlike print, in which as the numbers of subscribers grow, the costs to produce more print newspapers also grows in tandem — thus, profit margins stagnant or increase only slightly.

“As your subscriber base grows and your revenue grows, your profit margin grows, because the cost for new subscribers is close to zero,” Doucette explained. “Almost all publishers we work with are looking at this decline in the legacy business profit margin.”

He added that most legacy publishers are not in a position to immediately transition to digital-only today, which is why FTI looks at 2025 as a good goal for the transformation, and then improved profitability going forward from there.

How, then, does a legacy brand make this all work?

The future news publishing model is based on the digital consumer and reader revenue.
The future news publishing model is based on the digital consumer and reader revenue.

“Between print and digital over time, we expect subscriptions to drop — you’re not going to move all your print subscribers when you stop printing and become digital,” Doucette said. “It can work if you continue to scale digital subscribers. It can work if you leverage pricing of digital and price at a fair market value for the journalism. Some publishers, from our perspective, don’t charge enough for a digital subscription.”

He added that if publishers are prepared and get “digital ready,” they will see greater success at moving a higher percentage of digital subscribers: “There’s a business model there. Every publisher is different, but some of the key things are the same.”

Advance Local

Pam Siddall, co-president of Advance Local, shared how her company addressed the strategy necessary to move from print to digital.

Advance Local began its transition back in 2011, when it was facing accelerating declines in print advertising and circulation, along with massive changes in how people consumed news.

“I think it really came down to, do we want to continue to see the print ad revenues decline and print circulation decline and slowly build digital ad revenue — or do we want to just blow it all up?” Siddall told the INMA audience.

Rather than continuing to be disrupted by external forces, her team decided to disrupt themselves and chart a new course. The question then was, how would Advance Local transition to a robust, digital-only model?

In response, the team carefully crafted a step-by-step strategy, Siddall said.

Advance Local's transformation strategy required a massive culture change.
Advance Local's transformation strategy required a massive culture change.

Advance Local launched its first digital-only market in 2012. For the next two years, the company reduced the number of its print publication days — but the transformation consisted of much more than that. Siddall said that the team completely changed how they did business, including:

  • New culture.
  • New content model.
  • New sales strategy.
  • Production and facilities road map.
  • Audience development strategy.
  • Talent management.

There was a complete restructuring of the team, which included eliminating roles, hiring new talent, and bringing people back. The print publication process was taken completely out of the newsroom.

“If you were a journalist, you didn’t even think or write for print,” Siddall said. “We created what we called a ‘pub hub,’ which we now call a print lab. It’s worked extremely well from a focus standpoint.”

All of this required a massive culture change, particularly given that at the time, each of the different titles and brands under Advance Local were run as completely separate companies.

In 2018, Advance Local disrupted itself again by consolidating all of its various sub-companies. Leadership changed, and Siddall said they started to pivot to thinking about the next phase and becoming digital-only. They knew that digital ad revenue alone would not enable them to do this.

Digital subscriptions rolled out across all markets in 2020 in the midst of the COVID-19 pandemic. “We have made the pivot, and this year COVID presented an opportunity for us,” she said.

“We just went all in, and we moved to what we call a voluntary subscription programme. But not only have we gone to a paid digital subscription model across most of our markets, we also have launched a new tool we are selling, called Subtext.”

This has allowed them to leverage audience engagement as each Subtext is focused on a particular topic. They’ve had 205,000 total Subtext signups, with an average open rate of 91%. In addition, more than 250,000 people across Advance Local markets signed up for a special coronavirus newsletter.

“The question most people ask is, did it work?” Siddall said.

In terms of total unique visitors, Advance Local is now third in the United States for leading local news organisations. She also shared some of their key audience engagement highlights:

  • No. 1 in reach in the markets they serve.
  • Currently have 35,000 subscriptions and that’s growing by 3.1% weekly.
  • Growth since January 1, 2020 (as of September) is 616%.
  • More than 15 million social media fans and followers.
  • Held five of the top 12 positions for audience engagement on Facebook, amongst major American daily news publications.
  • Advance Local social accounts account for more than 174 million total engagements on social platforms in 2020 (through August).
  • Podcasts drew 764,000 listens in August 2020.
  • Digital advertising revenue outperformed its peers by 24% in the first half of 2020.

“Yes, we absolutely need to pivot to digital subscriptions,” Siddall said. “But we are also innovating in different ways.”

Media brands such as “It’s a Southern Thing,” an automotive platform Zerosum, and financial, film, and content marketing businesses are all part of these initiatives — all of which are investments in growth opportunities to diversify revenue, though Siddall also still sees space for a digital advertising business. Data informs everything they are doing.

Next, she shared what the team has learned during these transformational years.

“We absolutely had the right strategy in 2012. I think we executed on that strategy well. I think now it’s time for us to pivot to [digital only]. We are actually looking at moving one of our markets to a digital-only company, and the numbers look promising for us.”

About Shelley Seale

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