US Newspaper Circulation Continues Down, Down, Down -- It’s Time To Stop Giving Everything Away For Free On The Internet

Philip M. Stone October 28, 2008

The new audited figures for US daily newspapers are out and try as one might it’s difficult to find any good news in there except, possibly, that the figures aren’t worse and that some of the losses were intentional because of cutbacks in distribution and bulk sales. But as it is, total daily circulation in the six-month period to September 30 declined 4.6% and that compares to a 2.6% drop for the same period last year, so the pace of the rot is increasing.

Are They Soon Going To Be Out Of  A Job?

The last numbers, for the period to March 30, showed a 3.6% drop, so now with September’s 4.6% drop it’s obvious the plateau has not yet been reached. Now if you listen to the industry pundits, these numbers don’t really mean anything because what we should be talking about these days is total readership-- the number of people who not only read the print product but also the various digital products, too, and then the industry can point to publications showing some single digit total increases over the period.

And to that end the Newspaper Association of America (NAA) proudly trumpeted last week that usage of newspaper web sites increased by 16% in Q3 – no doubt some of that coming from the financial crisis --  attracting more than 68.3 million unique visitors which is about 41.4% of all Internet users.

But we all know there is a basic flaw with the total readership concept and that is that advertisers don’t pay the same price to reach readers on all platforms. They pay much more to reach the print readers and everything else amounts to not much more than petty cash.

So given that the circulation trend is down and given that it is print that still brings in the big money for newspaper companies, and that Internet advertising  revenue growth has also stalled, it’s time to take a step back and review the business model. 

So here’s our sacrilegious thought -- It’s time to stop giving everything away on the Internet; it’s time to implement an Internet policy in which a newspaper’s web site’s primary mission is to support the print product, not detract from it.

Remember the basic rule of thumb -- print earns anywhere from 20 to 100 times more per consumer than does a newspaper’s web site. That means that as circulation continues to decline even a loss of 2% translates into needing a gain of at least 40% more website users just for revenue to stay even and, in the US and parts of Europe, at least, print is losing 2%+ a year, but it is not gaining 40% additional revenue annually from the web – in fact Internet ad growth has slowed down appreciably this year. And remember that advertising currently contributes somewhere between 75 – 80% of most newspaper companies revenue.

So having given the Internet its chance to replace print revenues, and it has failed miserably at doing that, the time has come to reverse course  and accept that the advertising supported model of giving everything away for free on the Internet just plain does not work for newspapers.

What does work? Take a look at what the Wall Street Journal is doing. The Journal, you’ll recall, was out there alone for so many years with its subscription model and yet it is still going strong, in fact it gets stronger each year. Take a look at what the Journal does today -- some stories are free but to get to others you need a subscription. And for regular newspapers, that basically translates into still giving away the public domain stuff -- national and international news – but your real premium product, the product people will be willing to pay good money for – your local news – you put under lock and key; that is, of course, depending on whether you have kept enough local reporters to put out that premium product.

Newspapers for some reason have forgotten their roots that people are quite willing to pay for information, even though the very basic newspaper print model is built upon it. Indeed many newspapers recently have been raising newsstand prices and if you look at quarterly earnings reports you’ll see that circulation revenue is on the up. People are still willing to pay for news and information so why, why, why, give that information away for free on the Internet? If advertisers were paying the same money for Internet placement as they do for print placement it would be another matter; but they’re not so adopt a business model that takes that into account.

So, still give away the news everyone has, but your local news is your premium product that people will pay for and that should be put under lock and key opened only by a subscription. Some newspapers offer free use of their Internet site to their print subscribers and that’s fine. But why on earth would anyone provide free your premium local news online to a non print subscriber?

Going a step further, why not use the newspaper web site as an advertising sign board for all the stories readers will find only in the print edition. Make those Internet eyeballs realize the coverage they are missing. And as for the advertisers why not offer the likes of Macys and also local advertisers free display advertising on the newspaper web site that said – “see our display ad in today’s newspaper for all the great values in our one-day sale.”

If you watch the TV news networks they are all using their broadcasts to cross-promote their web sites. It’s about time newspapers used their web sites which the NAA tells us are now so popular to cross-promote the print product. One way or another you want people to use print and the Internet can be formulated to become a great extension of what is done in print. Obviously, the Internet is not going to go away, and yet  the money now being made from it is far below what is needed, so, instead, harness the Internet’s great power to drive people to the product that really makes money– print.

All of this, of course, goes against the accepted theories of the day. Why even the New York Times last year gave up $10 million in annual Internet subscription revenue by getting rid of Times Select so the entire web site would be open for the advertising supported model. But have you yet heard a Times executive say they are making up that $10 million annual income by opening up the whole site. And at The Times, which is about as heavily into digital as you will find any newspaper, digital is still only about 12% of total revenues, so even they have a long long way to go to get to that 50-50 level everyone is looking for.

What is really worrying is that we don’t really have an accurate handle on how the Internet is doing for newspapers these days, but the hype is to make it seem as though it is doing better than it really is. Quarterly statements will talk about increases in web revenue, so that’s pretty easily measurable, but then they’ll come out with statements such as digital now makes up , say, 10% of total revenue as if to say, “Look how good the web is doing,” but that is really misleading.

What’s really going on there is that print’s revenue losses still far exceed the Internet’s gains, so what is happening is that the print pot has a whole lot less revenue, the web pot has a bit more revenue and they mix the two together and then come out with the hype of look how well the Internet is doing when in fact what the numbers really say is look how badly print is doing.

The failure over the years for the Internet to provide newspapers with the revenue they had hoped for is proof positive that the real money is still with print; print still deserves all the investment that publishers can afford, and publishers who forget that do so at their peril.