Newsday shares defensive, offensive strategies of its digital transformation

By Paula Felps

INMA

Nashville, Tennessee, United States

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As news media companies look at how to create sustainable business models in this changing world, the role of digital subscriptions inevitably enters the discussion. 

During INMA’s recent Media Subscriptions Town Hall, Pete Doucette, global consulting lead and senior manager for Mather Economics, sponsor of the town hall, explained some components affecting digital transformation and what strategic levers publishers should use to execute their vision.

The revenue mix is changing for news media companies, and Doucette said the future shows a revenue model built around digital consumer revenue, subscriptions, and other consumer monetisation. Digital advertising is still a big piece of that future, and other revenue streams such as events could help improve the economics. But he sees the consumer-centred digital revenue mix as “kind of the guiding principle going forward.”

News media's new revenue mix will be consumer centred and digital.
News media's new revenue mix will be consumer centred and digital.

Equally important, he said, is the cost base, which presently is “supply chain heavy” because of the costs of printing, manufacturing, and distribution. Those costs will change as news publishers move more to digital and eliminate the printing and distributions needs.

“It’s probably not [happening] in the next few years, but the cost structure is going to be very different,” he predicted. “I think one of the big open questions in the industry is, ‘Could a digital-only publishing model provide the same level of bottom-line profit?’ And we think that there is a path towards that.”

Offense or defense?  

The path to get there is a strategy of offense vs. defense, he said, with defense being the acts of “managing down” the legacy building while offense is all about finding and exploiting the growth levers.

Doucette explained defensive transformation levers, like subscriber volume, across teams.
Doucette explained defensive transformation levers, like subscriber volume, across teams.

 

“Some examples of what we mean when we look at the defensive transformation levers are things publishers can do with subscriber volume,” he said. “You can simplify delivery options; with print advertising, you can focus on reducing the cost of sales.”

In every area of print, there are measures publishers can take while turning their focus to a digital-centred model. At the same time, many offensive transformation levers offer opportunities for growth.

“Growing audience and digital subscribers are paramount,” Doucette said. But so is growing digital advertising and looking at other ways to increase offerings that could provide new revenue streams.

“Product portfolio is very topical, looking at when does it make sense to bundle and unbundle and expand your offerings,” he pointed out. “And then of course, leveraging technology as an accelerator is really important.”

Doucette also described offensive transformation levels, which he called growth opportunities.
Doucette also described offensive transformation levels, which he called growth opportunities.

Transformation in action at Newsday

Patrick Tornabene, chief consumer officer for Newsday in Long Island, New York, joined Doucette to share some of his company’s experiences and learnings in its digital transformation journey. 

The independently owned publication in a New York City suburb of about 1 million households has 160,000 subscribers and created a five-year plan for maximising digital revenue without impacting print revenue. 

“It’s very important that we’re not moving the revenue from one channel to another,” Tornabene said.

While the defensive measures meant cutting costs that often yielded rapid returns, offensive measures are predictive, require an investment, and the returns may take some time. When managing down a legacy business, Tournabene said two key factors came into play: variable cost and the longevity of the print product.

“It’s very important that there’s not a large, fixed cost to executing that,” he said. Variable cost includes distribution cost, production cost, and possibly even infrastructure costs if there are distribution centres. He recommended news publishers look at how that cost can be made as variable as possible — and planned out as far as possible, too.

Patrick Tornabene, chief consumer officer for Newsday in Long Island, New York, detailed the company's digital transformation.
Patrick Tornabene, chief consumer officer for Newsday in Long Island, New York, detailed the company's digital transformation.

Newsday wanted to preserve the strength of its print product for as long as possible, so it hasn’t changed the content — in fact, it has only begun to offer more.

“We have several things that we call no fee opt-ins. You could get a restaurants magazine, you can get a puzzle book, you could get classic editions of Newsday, you could get a history series,” Tornabene said, adding Newsday’s Sunday lifestyle features content section was recently redesigned as well. “So we don’t impact that product to fuel the digital business; we continue to invest in that product.”

At the same time, Newsday has invested heavily in its digital content, focusing on how the content fits the audience needs. Using metrics including traffic, search traffic, referrals from social, and more, it has continued finding growth on a site that became hard-gated more than a year ago.

“Our subscriber traffic’s actually up a little bit and doing a little bit stronger in the fourth quarter,” he said. “We attribute that a lot to our aggressive SEO discipline and our aggressive evolving of content.”

Starts have increased 19% year to date, and Tornabene said the second half is up 30%. And when it switched its intro period price from US$1 to just US$0.25, sales jumped 15%.

This year, it launched the streaming Newsday TV service, which has enjoyed a strong launch, and about 75% of people in the market know of it. The company also launched a campaign to humanise its journalists and has done more than 40 one-hour video spots on this that were promoted on multiple channels and platforms — including print.

The efforts are paying off in so many ways: Tornabene said print subscription attrition improved about 1.8% year over year — for the third or fourth year in a row. Now, as the demise of cookies and the decline of search traffic becomes a reality, Tornabene said Newsday will continue looking at how to get (and stay) ahead of that change:

“As that declines, it forces you to invest more in the brand and other channels to get the message out there.”

About Paula Felps

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