Digital transformation is affecting news media companies worldwide.

During a recent INMA Readers First Webinar, Greg Piechota, researcher-in-residence for INMA, shared results from two recent studies INMA was involved with and explained what it means for the future. And he left INMA members with many reasons to be optimistic about where the industry is headed.  

What drives sustainability?

The first study, conducted in collaboration with FT Strategies and the Google News Initiative, surveyed 400 news publishers around the world to better understand the key drivers of their sustainability. Some clear common factors emerged:  

1. A differentiated and engaging product.
2. A viable revenue model.
3. The foundation to operate effectively and be able to adapt to market changes.

“These all influence the financial resilience and stability of a company,” Piechota said, “but there is also an X factor that we found. And that is a favourable market context in which to publish policies, the state of the economy, and the trends in the society that influence the political situation.”

News media companies that check all four of those boxes, he said, show greater sustainability. By compiling and comparing data from publishers, the study found that, not surprisingly, news media companies in North America, Europe, Australia, South Pacific, and Southeast Asia are in better positions than those in South Asia, Africa, the Middle East and South America.

This, Piechota said, shows just how much the context of each market influences a media company’s ability to have a strong business model.

A change in funding

As the industry’s digital transformation continues, revenue sources are changing. In every region, more than 50% of revenue now comes from digital sources.

“It is absolutely amazing how quickly it has changed in the past 10, 20 years. Reader revenue is still a minority, but it is very much growing,” Piechota said, noting that in most countries, the average advertising revenue was “much higher in the past.”

This shows how important reader revenue is becoming to companies, and publishers said they expect that growth to continue.

To capitalise on that growth, publishers must diversify their revenue streams, and Piechota said the research found that the companies with the highest profit margins have four revenue streams. But the second most profitable segment has just one revenue stream.

“So it seems that there is a value in focus, but there is also value in diversity — but not too much diversity,” he said. “There is a certain number of revenue models that you can actually handle; otherwise it probably becomes no longer that profitable.”

Rapid subscription growth

Piechota shared data from the INMA Subscriptions Benchmarking Project that showed a linear growth in digital-only subscriptions for the past four years. The growth is more impressive when considering the conditions news media companies are facing, Piechota said:

“I saw a substantial increase between 2018 and 2022. So despite more competitors on the market, publishing is growing. This is a growing business.”

One concern for publishers is when they might hit the ceiling with digital subscriptions, but Piechota said he doesn’t see evidence that will happen.

Using internal data from a Reuters Institute survey about behaviours such as paying for news, then comparing it to the proportion of people who paid for print newspapers 20 years ago in those same countries, he found a correlation between the two: “In countries where more people paid for print news, more people also pay for digital subscriptions,” he said.

Penetration for digital in these companies remains lower than it is for print, with an average gap of 4x.

“So if you think about 300 years of print newspapers and something like 10 years of digital subscriptions, this suggests the ceiling is far away.”

Using historical data to predict where the industry is heading, Piechota said he feels encouraged for the future: “We are quite confident that publishers will continue to grow.” 

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