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Summary:

Anna Tarkov calculates that the Chicago Tribune’s Groupon deal – two years of the Sunday ‘bune for $20 – works out to 19 cents an issue. Wha…

Newspaper Waste
photo: Flickr / Julian Stallabrass

Anna Tarkov calculates that the Chicago Tribune‘s Groupon deal – two years of the Sunday ‘bune for $20 – works out to 19 cents an issue. What’s at work here is the myth of legacy media, that every reader sees every ad thus every advertiser pays for every reader … thus every reader is equally valuable and it’s worth losing money holding onto any reader.

Those aren’t the economics of online, where advertisers pay only for the readers who see (or click on) their ads, and where abundance robs publishers of pricing power over their once-scarce inventory.

My favorite illustration of this is the Star Ledger killing its stock tables in 2001, shaving $1 million of costs and losting only 12 subscribers.That means that prior to this, the paper was spending $83,000 per reader to hold onto them. Papers had been scared of losing one reader because, in their economics, every reader was equally valuable. But no longer. I keep urging papers to calculate the net future value of readers and decide who’s worth keeping and serving and who’s not, economically speaking.

The Tribune is losing much money on every one of those Groupon readers – not only the lost retail value of every discounted sale but also the fact that the paper no doubt was already published at a lost – that is, it costs more to produce a copy than its sold for because each reader is valuable to advertisers. But is she?

What the Tribune is also trying to do here is hold onto its critical mass. When its Sunday circulation falls below a certain level, certain lucrative advertisers – coupon and circular advertisers – will stop using papers as their means of distribution. That will be a kick in the kidneys almost equal to the creation of craigslist and it’s coming any day. In fact, it’s already starting … that, surely, is why the Tribune is so desperately trying to hold onto every reader.

But those economics will quickly disintegrate. Watch it happen….

Jeff Jarvis is author of What Would Google (NSDQ: GOOG) Do? and blogs about media and news at BuzzMachine.com. He is associate professor and director of the interactive journalism program and the new business models for news project at the City University of New York’s Graduate School of Journalism. He is consulting editor and a partner at Daylife, a news startup. He writes a new media column for The Guardian and is host of its Media Talk USA podcast.

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This article originally appeared in BuzzMachine.

  1. Ian Betteridge Friday, August 26, 2011

    “What’s at work here is the myth of legacy media, that every reader sees every ad…”

    Jeff, that’s nonsensical. If papers thought every reader saw every ad, there would be no differential pricing for position in the paper – every ad would be priced solely according to size, not position in the flatplan.

  2. You pick around the edge of another, more important issue, but don’t say it… and so missed the real point entirely.  

    It doesn’t say how many people signed up, but let’s guess 1,000 people took advantage of the offer.  The real value of those 1,000 readers isn’t in the money they pay for subscriptions. To make a point, it’s in the additional $100,000 or so in preprint revenue that comes with the 1,000 subscribers, and the ability to keep rates on ROP at a slightly higher level.  (That’s a little hard to calculate, but can be done.)  All the 19¢ does essentially is get the thing delivered to the doorstep and cover a little bit of the cost of the newsprint.  That’s always been the case with the cost of a subscription, this is just a more extreme case.  But it does make the point that each subscription is worth, say, $220 for the two years rather than $20.

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