The days are becoming shorter, the nights a bit cooler, and soon summer will be a distant memory. What that means for many of us is dusting off the multi-year strategic plan and preparing the detailed budget for 2013.
While it’s been tough in the media game in recent times, I feel even larger financial issues loom as I look ahead to the next three to five years.
Despite dramatic revenue losses, many media companies have been able to remain profitable at the EBITDA (earnings before interest, taxes, depreciation, and amortisation) line, through a diligent focus on the cost side of the business. Some have done it very strategically, while others have used more of a blunt approach to rapidly reduce their cost base.
There is little doubt that newspapers of the 1990s had serious legacy costs that needed to be reduced. Ten years after the cost cuts began, we find ourselves facing a future where cost reduction opportunities are limited, while traditional revenues remain under immense pressure.
Over the past few years the focus has been on digital revenues to grow the top line. In fact, most newspaper organisations were convinced a digital news business was their future. It wasn’t that long ago that many senior newspaper executives were convinced the free-content model was the way to go, with revenues from advertising paving the way to a bright future.
But that was before the explosion of Google, Facebook, Craigslist, and others.
Now we see a world where digital CPMs (advertising costs per 1,000 views) are falling and even large metro newspapers pale in comparison to the size of the big guys, such as Google. The Pew Research Centre recently revealed that newspapers are gaining only one digital advertising dollar for every US$25 lost in print.
Clearly it’s time to rethink the business model. However, we may not have to look all that far to better understand a possible area of relief.
For years we’ve relied on a B2B business model. Now maybe it’s time to better monetise the relationship we have with our audiences. The opportunities are endless, but here are a few discussion starters:
The newspapers that can do so have taken advantage of pricing opportunities over the past few years. But if we think creatively, there may be a few more levers to pull. Later in this article I will speak to third-party content agreements that allow you to bring new products to your customer base as an opt-in, pay-more offering. These same products may be used to build your single-copy pricing, as well.
At the Toronto Star, we have been able to double the single-copy price on selected days from C$1 to C$2 by building the product at the newsstand. The revenue increase was significantly higher than the lost sales volume. We have another product under investigation that we may add to our Wednesday single copy, also bringing it up to the C$2 level.
Paid digital content
Not new but on fire. I read recently that 300 newspapers in the United States now have some type of paywall in place.
In a recent INMA blog posting, I wrote about the four most common approaches to paid digital content, with metering becoming the most popular. Newspapers of all sizes and shapes are entering into this arena, many with very different pricing strategies.
When you look at paid digital content plans on their own, the revenue prize may be very small. But if you think broader and consider bundling with print, bringing new products into the fold, acquiring more customer data such as credit card information, the revenue extensions can be quite impressive, offering significant opportunity to your media company. When it comes to paid content, think big.
Subscriptions/clubs and memberships
For years, newspapers have talked about converting subscribers to members. At last, we may have some traction on this front. The L.A. Times has launched a new membership club. The Pittsburgh Post-Gazette and Politiken, the leading newspaper in Denmark, have taken a similar approach to subscriptions. Apparently, even The New York Times has studied the possibility of tiers for its subscriptions.
On the clubs front, we see weight-loss and insomnia clubs in Europe. My newspaper, the Toronto Star, recently launched a small business club. Inside our large audiences we have specialty groups that can be monetised. Investigate your opportunities. You may well be leaving significant revenues on the table.
Content license agreements
Your reader base, be it in print or digital, has deep content interests across a multiplicity of titles and content subjects. Take, for example, the Chicago Tribune’s offering of Economist content to paying digital subscribers, or the Toronto Star offering a 26-page insert of The New York Times international news and book reviews to print subscribers for an incremental fee.
These opt-in opportunities can be very profitable and low-risk for your organisation. Research shows both print and digital newspaper readers have content interests they may be willing to pay for across a number of categories. They include, but are not limited to, international news, personal finance, gaming, sports, and lifestyle issues such as health and fitness. A weekly section on any of these topics can become profitable at very low opt-in levels. Run the business model and you might be surprised at the possibilities.
Direct-to-consumer product and service sales
Have you ever thought of taking your subscribers on a wine-tasting tour in the south of France, or maybe a cruise to Alaska? It can be done and maybe even be a profit centre. Newspapers have the audience and the promotional power to take products and services to their consumer base and actually turn a profit at it. Wine clubs in the U.K. have been popular for years, and travel is a natural.
In the past year, a number of newspaper publisher companies have entered the space of e-books. It’s a tough and competitive business, but the right product line and a solid strategy might open up a business opportunity.
I believe the pitfall here for many companies will be trying to sell single titles. The margins are too slim and the effort too high to ever really make a business out of it.
But what if our marketing team and our newsroom staff could work together to bring a regular selection of titles together that would offer members custom content, edited by a news professional? Imagine this sold on a subscription basis and you have a business model.
These concepts might or might not work in your market. Either way, the concept of growing consumer revenues is something that should be in your long-term business plan. If 70% of your revenues today come from B2B efforts (advertising), then set a goal of 50/50 (B2B/B2C) within three years.
I believe you will be happy that you did.