Newspapers' Costs Shift To Consumers

by Luke Jones  on Monday, Sep. 16, 2013 12:00 am  

Print publications that traditionally relied on advertising for the bulk of their revenue have watched that money stream slowly dry up even as the demand for news — more often and in more formats — has grown. Newspapers are now asking, “Who will pay the cost of news if advertisers won’t?”

And because you are reading this news story, the answer is fast becoming: You.

Evidence of this trend is everywhere.

  • In 2012, the year after the New York Times adopted a “metered pay” model for its digital versions, its consumer revenue surpassed its advertising revenue for the first time.
  • The Arkansas Democrat-Gazette, an early adopter of the “pay wall” model that requires online readers to subscribe, further shifted the burden to readers last year when it increased the price of a print subscription by 75 percent.
  • The Arkansas Times, which remains a free weekly print product, on Aug. 1 imposed a metered pay model for its popular online blogs.
  • Halifax Media Group of Daytona Beach, Fla., controlled by Little Rock financier Warren Stephens, is in the process of converting its 20 daily newspapers to online pay models.
  • Arkansas Business Publishing Group, owner of this publication, is studying online pay models as changing reader habits that hurt general audience newspapers early on have finally begun to nip at the niche publishing industry.

“Content creation is a very expensive endeavor,” Mitch Bettis, publisher of Arkansas Business said. “So there is no question: We consumers are going to be paying directly for that more in the future.

“I think most media and most content providers recognize that we made a mistake when we bought into the premise that Internet equals free. Our content is way too valuable to give away if we are creating something that is distinctive, unique and specialized.”

The Business Plan

Advertising and newspaper readers have always had a symbiotic relationship, with advertisers subsidizing the cost of a product that could attract potential customers.

“The industry has typically had a ratio of 80 percent advertising revenue to 20 percent circulation revenue,” said Nat Lea, vice president and general manager for the Democrat-Gazette. “The reason for this was that each subscriber was valuable to publishers because they could sell circulation to advertisers. Advertising revenues allowed publishers to keep subscription prices artificially low.

“We see the industry looking in the next few years — in light of the increased use of pay walls, decreasing advertising revenue and increasing subscription pricing trends — to reach a ratio of 60 percent advertising revenue to 40 percent subscription revenue.”

The Newspaper Association of America reported that ad revenue for the industry as a whole in 2012 was $22 billion. That number sounds huge, but according to Rick Edwards, a media business analyst for Poynter Institute, a journalism think-tank in St. Petersburg, Fla., it’s less than half as huge as it was in the mid-2000s.

The same trend line isn’t true for dollars coming from readers. The dollar amount is much smaller — $10 billion in 2012 — but much more consistent, Edwards said.

“Circulation revenue has held much more steady than advertising has,” Edwards said. “It has been going down slowly for the last several years, and of course the numbers have gone down steadily over a longer period of time. But that trend reversed in 2012.”



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