The news media industry is in desperate need of an operational overhaul. Not long ago, millions of people woke up every morning to a physical copy of the morning newspaper at their front door or in their driveway.

In many countries, inside the folds were free-standing insert (FSI) pre-print advertisements that generated a significant amount of revenue and profit for the publishers. As such, the traditional product plan and fulfillment model was largely designed to accommodate higher volumes and the pre-prints.

However, over the past 30 years, there have been radical shifts in daily and Sunday circulation demand — some, driven by price increases — substantially lowering volumes. Marketing preferences continue to move to digital, FSI pre-print penetration is comparably low, and total market coverage (TMC) programmes have been eliminated.

These changes have led to rapidly year-over-year declines in FSI pre-print revenue. Recently, we worked with a publisher that has experienced FSI pre-print revenue declines at a -55% three-year compound annual growth rate with volume declines in high single digits.

Yet, the decades-old operating model of advanced print runs for inserting jackets, key bundles, multiple truck runs, and bulk distribution centres to reassemble the parts and keep track of zoned products remains with consumers. There is little opportunity to be embraced or make choices beyond a customer service call or Web site visit.

Why maintain an operating model that was built for higher volumes, has little consumer flexibility, and accommodates a revenue stream that will soon be obsolete?

Could losing the FSI pre-print business be a good thing?

There is no doubt that the revenue loss will be felt. But if this is the catalyst for a radical reimaging of the operating model, then in the long run this may help the industry.

Loyal home delivery subscribers no longer consume the newspaper in the way they did in the past, yet they are paying increasingly higher prices because the operating model has not changed with the times. Breaking news has moved onto the mobile device. Sports scores can be found instantly instead of the next morning. What consumers want from their local newspaper is in-depth, high-quality, investigative journalism.

How should we think about a new operating model for home delivery?

There is no one-size-fits-all solution for every newspaper. Different markets have different needs, different coverage radiuses, and, therefore, different cost structures. However, the cost mix today is made up primarily of three expense categories: printing and newsprint, packaging, and distribution (trucking and delivery). Consumers have little choice in the model with archaic ways of interfacing with the publisher.

Therefore, when developing a new operating model, we should be thinking about how to reduce these costs and rethink the consumer experience. What does this new model look like?

Think of a world where every night, consumers choose their option for the next day. Based on my day, the e-edition is my best option, and I get charged my basic rate (something very close to the print rate).

On day two, I am driving by my favourite store for my coffee and will purchase my newspaper there using my newspaper app with an increase in rate, as I now have both the e-edition and a printed newspaper.

On Sunday, I am not going anywhere, and I want that wonderful experience of a Sunday newspaper. On my app, I ask for a delivery of my newspaper and I am charged accordingly for that day. My app pings when the newspaper arrives, and I can request a time window for delivery.

What would a model like this do to a consumer’s view of our business when they can control their daily delivery through their phone much like they turn lights on and off and set the alarm remotely?

Balancing print and digital readiness

Clearly some consumers still want print and are paying a high price for it. It is also clear that for many consumers, we have a long way to go to get them digitally ready for a digital or mostly digital future.

Changing the newspaper operating model may be necessary to deliver on consumer expectations in a changing world with increasingly lower volumes. It also advances digital engagement while keeping print.

Newspapers need to consider exploring innovative alternatives that will be economically feasible, maintain value in their product offerings, and give consumers more choices each day. These changes should include utilising new technologies and changing delivery methods while understanding how these decisions affect revenue flow, expense mix, consumer stickiness, and digital engagement over time before deciding on which direction they want to pursue.

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