Ad Revenues at VG, Norway’s Largest Newspaper, Are About Equal Between Newspaper And Its Web Site, But Costs Are A Different Story -- So What, It’s All One Multi-Platform Brand, Isn’t It?

Philip M. Stone April 6, 2006

VG, Norway’s largest newspaper has tried just about everything to keep its print circulation and advertising revenues stable, but that’s a tough act given that the country’s broadband penetration level is one of the world’s highest, about 70% of the population accesses the Internet, and that 60% of its readers have said flat out they prefer to read news on the Internet rather than in the newspaper.
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The situation today, according to Editor-In-Chief Bernt Olufsen is that the newspaper and its web site bring in close to the same amount of ad revenues. But the cost structure, of course is very different. The web site has 40%+ operating profits, whereas the newspaper, well let’s just say it’s not 40% and it’s not going up.

So like newspapers around the world VG, the newspaper, has been told to find some €2.5 million in cost savings that Olufsen says will be launched in May.

“Our main goal is to maintain VG as the leading brand for general news in Norway. Therefore we cannot cut the quality of news journalism. But we can work smarter and be more efficient, and even cut our costs. At least we are learning that this is possible for the time being, and we will launch new plans by the middle of May in restructuring our costs,” Olufsen told ftm.

What everyone will want to see in those May plans is whether print journalists are expendable. Will VG give us the same story as we hear around the world that the editorial count can be cut without cutting news quality? What newspapers need to do is redeploy their reporting staffs to that news their public most wants; getting rid of those journalists is just a big shot in the foot.

So in that vein, here’s an argument that in dealing with a multi-platform strategy – each platform of which is strategic to the overall policy of promoting and protecting the brand -- that the brand’s success should be considered on the sum of its parts, rather than dissecting each part individually and taking a hammer to any part that doesn’t make the grade?

The world over, newspapers are being hammered by the accountants looking to cut costs however possible in order to keep those 20% plus print margins in place. Newspaper web sites are doing great -- each year the readership goes up significantly, but unlike at VG, the ad revenues still pale in comparison to print – in many cases web ad revenue may only be 5% of print’s ad revenues  -- so costs at the newspaper are cut, cut, cut. And so is the quality.

And yet having a strong healthy editorial report in print is vital for the multi-platform strategy to work. There are enough surveys out there to tell editors what their print readers want (local, local, local); there are enough surveys out there telling publishers what their advertisers want (joint print/web packages) so maybe the brand should now be judged not by how well print is doing or how well the web is doing, but rather how well both are doing together.

For one thing there’ll be no more talking of falling circulations. Take print’s traditional circulation before the web came along, add on today’s newspaper web site visits and newspapers have a very healthy message to tell their advertisers. Offer the cross platform sales package and they’ll be very happy. It is just so silly that many newspapers are not doing that.

VG is an interesting brand case study. As Olufsen told ftm,  “VG used to reach 38% of the Norwegian population above the age of 13 on a daily basis. More than half of the Norwegian population today uses the Internet on a daily basis. Most of them via broadband. More than 60% of our readership say they prefer consuming ordinary news via the Internet.”

And here is where he hits the nail on the head. “Readers do not seem to recognize whether the news is coming from print or the Internet. They seem only to recognize the brand – VG.”

When circulation dropped by some 4% in 2004 Olufsen instituted restrictions on the flow of stories from the newspaper to the web site. “VG has reduced publishing of print versions of stories  within general news, sports and entertainment coverage by almost 30% in our Internet edition over the past 12 months, but this seems to have a marginal effect on our (circulation) losses. We do try and keep some stories print exclusive, but these stories are nearly systematically published as general news stories on the sites of our major competitors in so-called counter programming.”

The result of a year of cutting back print stories to the web site? Another 10% loss. And so out comes the knife.

But Olufsen makes the point that the VG web site, that had increased operating losses in its first four years, is now such a powerhouse that its ad revenues are about equal with the newspaper.

Remember that 38% penetration before the web? Today VG reaches 48% of the Norwegian population on a daily basis via its print and web editions. Thus the brand has progressed and is stronger than ever before when combining the print and web activities.

Undoubtedly the web will increase its ad revenues and because its cost structure is so much less than print (no newsprint for a start) its margins will keep soaring. And because people have now gotten used to and like reading news on the web it means circulation at VG may continue to decline unless the newspaper gives readers a real reason to stay with the print edition. But for all that the newspaper still has a very healthy 330,000 circulation -- a lot of people still want that print product!

“In this difficult market we have to reorganize, but we cannot stop speeding up our efforts to counter the new media. If we don’t take dominant positions here we will lose in the longer term,” Olufsen said

At the end of the day Olufsen believes that the joint print/web approach achieves his main goal – “To maintain VG as the leading brand for general news in Norway.”

Newspapers all over the world have only to replace the “VG” brand in that sentence with their own brand, and name their own city or state, or region instead of Norway, and the goal is the same the world over.

If the public is doing what Olufsen says they are doing – looking at the overall brand rather than judging the brand by the particular platform it is being  accessed on, then surely that is a strength that newspapers should be promoting to advertisers to the hilt.

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Norway’s VG and Aftenposten Circulation Down in 2006 - February 16, 2007

The downward spiral at VG and its sister Aftenposten contined for all of 2006. Schibsted has reported that VG’s daily circulation dropped an average 28,000 copies a day to 315,500, down some 9% over 2005. The Saturday edition lost 25,200 copies, down to 341,600 and the Sunday paper was hit worst of all, losing 30,400 to 268,300.

Aftenposten saw a loss of 4,200 for its morning edition, down to 248,500 and a loss of 4,500 for its PM edition with a circulation of 137,000. The Sunday paper lost 2,100 to 221,000.