“Never allow a good crisis go to waste. It’s an opportunity to do the things you once thought were impossible.” Those words were famously said in 2008 by then-incoming U.S. Presidential Chief of Staff Rahm Emanuel as the United States was moving rapidly toward the worst global financial crisis since the Great Depression.
Like the Great Recession of 2008, the COVID-19 crisis radically changed the way business is conducted and how consumers want to interact with the products they value most. As such, organisations have been forced to both strategically and critically evaluate the optimal path forward in the new normal.
The newspaper industry is no different. The events of the COVID crisis have accelerated the digital transformation of newspapers leaving media leaders across the globe with three key strategic considerations:
- Fast-tracked growth of digital subscriptions.
- Accelerated the shift to programmatic digital advertising.
- Ignited additional cost reduction measures in print- and advertising-related expenses.
Digital subscription growth accelerates
As the COVID pandemic began to grow in scale, so did the digital subscription revenue of many local newspapers in the United States. While many readers had already transitioned from print to digital, individuals who had received the print newspaper on their doorstep every morning became increasingly wary of touching physical objects for fear of contracting the virus.
Suddenly, these readers explored alternatives like the e-edition and desktop or mobile Web site, thereby fast-tracking the growth of digital subscriptions. Additionally, there was a new spotlight on local news that led many non-subscribers to re-engage with local newspapers.
While COVID was a global pandemic, it was inherently a local phenomenon as government response and community issues varied significantly from place to place.
The impact was a considerable shift in the print vs. digital subscriber volume mix between 2019 and 2021.
Furthermore, digital subscription revenue grew by 42% in 2020 and is expected to increase by a similar amount in 2021, while print circulation revenue fell by 5% in 2020 with an additional 7% decline expected in 2021. Volume changes over the two years were similar, as shown in the chart below.
News media companies are now faced with a new opportunity: How do they take advantage of this new influx of digital subscribers? What retention and pricing strategies can be used to maximise the value of these new digital subscribers?
Shift to programmatic digital advertising
COVID proved to be a challenge for newspaper advertising as marketing budgets contracted globally with even more advertising dollars directed to technology platforms. Marketers continued their migration away from print newspaper advertising, instead opting for digital advertising alternatives.
And while the entire newspaper industry is seeing declines in advertising spend, print spend declined more than three times faster than digital spending in 2020.
The impact on news media companies is profound. As the shift toward digital advertising revenue continues, there is also a shift in the way advertisements are fulfilled with more programmatic advertisements and fewer directly sold advertisements.
The impact on the industry, particularly when it comes to the sales apparatus, is significant. According to FTI Consulting data, there was a 12% decrease in advertising sales headcount in 2020.
Why? Despite years of double-digit declines, print remained a significant portion of publishers’ ad sales and most of those sales are directly sold by a direct sales team. As print continues to decline, publishers lose the ability to support and invest in a robust ad sales team.
With a decline in direct sales resources, and given the fact that print and digital advertisements are often sold as a bundle by direct sales teams, digital sales have been impacted as well. With reduced sales teams, publishers are forced to turn to programmatic to sell out an increasing amount of digital ad inventory.
However, as the tides move toward lower CPM programmatic advertising and print continues to decline, leaders are now faced with a difficult question: How can an organisation support a robust sales force as print continues to decline?
Publishers perform necessary cost reductions
The economic strain caused by the pandemic and incremental consumer preferences for national commodity news have forced media leaders to make numerous difficult decisions to reduce costs. News owners have attempted to manage revenue declines through temporary reductions in headcount and salary. But the headwinds have forced organisations to take more permanent measures.
Many publications, like the Tampa Bay Times, have taken steps to reduce production, consumables, and distribution, and delivery expenses by reducing the frequency of print delivery days. Others have stopped publishing all together, creating an increasing number of news deserts where no local news exists.
But COVID has presented new ways to cut costs. For example, as work-from-home culture has become more widely accepted by media leaders, some news media companies have chosen to shift to a remote work model. This has resulted in the permanently closing, consolidating, or downsizing of the physical office to reduce real estate costs, which is one of the larger fixed costs of an organisation, allowing them to become more agile.
The most public example of this is Tribune Publishing’s decision to close several offices, including The Daily News. At the time, Tribune was quoted as saying, “With no clear path forward in terms of returning to work, and as the company evaluates its real estate needs in light of health and economic conditions brought about by the pandemic, we have made the difficult decision to permanently close these offices.”
Other publishers that have closed or consolidated some offices include Torstar, Daily Mirror, Manchester Evening News, Virginian-Pilot, The Staten Island Advance, Charlotte Observer, and The Miami Herald.
Never allow a good crisis to go to waste
Savvy media leaders understand that out of crisis comes opportunity. In many cases, forecasted margins in 2021 are back or better than those in 2019.
It is now clear that while the transformative shifts that we saw in 2020 were already happening in the news industry, COVID likely accelerated that digital transformation glidepath by two years.
In summary, the newspaper industry must leverage the learning of the last year to come out the other side as more resilient with a focus on these areas:
- Digital readiness: Digital readiness continues to lag for most news media companies. However, with better margins and the knowledge that advertising revenue is somewhat uncontrollable, media leaders must more aggressively prepare for digital and continue to transition to a consumer-led business model.
- Subscription investment: Retain the digital subscribers won in 2020 and set aggressive growth goals by improving acquisition of digital subscribers and investing in skills and technology to drive consumer revenues.
- Margin improvement: 2020 changes and new work cultures enabled decreases in costs that have improved margin outlook. Leverage margin improvement and increased flexibility to reinvest in news resources that drive audience engagement and improve consumer experience.
Ultimately, while no organisation wishes for a crisis, it presents a chance for media leaders to reexamine, rethink, and take bigger steps to reinvent their businesses.