Pew: Papers' Biggest Revenue Threat Is Inertia; Second Biggest Is Action

Before we get into the results of the latest detailed look at how U.S. newspapers are faring on the digital revenue front, let’s get one serious qualm out of the way: the Project for Excellence in Journalism’s 16-month study that cuts across an intensely active time for experiments in charging for digital content doesn’t cover paid content at all.

The data, interviews and conclusions center on advertising and efforts to create non-traditional digital revenue streams without even a sense of how many of the papers are trying digital pay. The omission is quite intentional, as Mark Jurkowitz, PEJ’s associate director, explained to paidContent via e-mail:

For one thing, we thought many paywall experiments were too new to produce any meaningful data. For another, we asked our participating newspapers to answer 60 questions, many of them requiring research and a calculator. If we had thrown in a bunch more about digital subscription revenue, it would have been too much at one time. So we collected no data on paywalls.

The Pew Research Center unit considers this to be the first of a series on the economic shifts in the news industry and plans to to gather paywall data in the future, according to Jurkowitz. If it is anything like this study, it will be chock-full of anonymized details making for interesting reading — and too late to help any of the companies and news outlets who can’t afford to wait 16 months or even a year to make decisions about their digital future. The Los Angeles Times paywall goes up Monday at roughly the same time this study is being released.

What I might see as a useful bare minimum — whether a paper is charging for digital content, when it started and what kind of model is being used — PEJ saw as not very helpful unless it included how much money was coming in, figures the participants weren’t likely to share at this stage even in an anonymized report. In the report, PEJ explained the decision by saying the number of papers moving in that direction is “still small,” and in many cases, not enough time has elapsed to draw conclusions.” But that leaves the rest of us looking at a detailed study that shows newspapers losing $7 from print for every digital $1, primarily advertising, without even a sense of how they are addressing a key aspect of that transition. It’s an unfortunate vacuum.

PEJ didn’t have any qualms about including the still-nascent coupon/daily deal business. Thirty of the papers that provided detailed results are running “Groupon” programs, most home-grown, that accounted for 5 percent of overall digital revenue in 2011. Is it a blip or a real new revenue stream? Too soon to tell but one paper made 55 percent of its digital revenue that way and two-thirds see that source of revenue increasing this year.

The report itself paints a classic damned-if-you, damned-if you-don’t scenario: move too fast and face the risks; proceed too slow and inertia becomes the greatest risk.

The gist: some papers are less screwed than others right now; all of them face a reckoning but some will postpone it longer than others; some papers have lots of room to grow with digital revenue because they’re so far behind; and some view running a modern newspaper as the equivalent of strip mining.

One exec bluntly states, “There’s no doubt we’re going out of business right now.” (Who said it? Unless he or she comes forward, we don’t have a clue. The same is true for all of the newspaper execs quoted in The Search for a New Business Model.)

The same exec explains: “There might be a 90 percent chance you’ll accelerate the decline if you gamble and a 10 percent chance you might find the new model. No one is willing to take that chance.”

That’s not exactly true but it is fair to say the digital-revenue gamblers are far outweighed by the set that wants to maximize print revenue for as long as possible even if that means missing out on digital.

One of the scarier comments — no way of telling if it’s the same exec — comes from someone who describes his company as just 5-to-10 percent on the road to a new-look business model: “I think as a company we are just getting to a point where we are starting to make decisions about how we are going to move in this new direction.” It is like hearing chalk screeching.

The way PEJ had to proceed to get concrete results highlights the problem. The PEJ team reached out to a dozen major newspaper companies in late 2010, half were willing to participate and allow PEJ to meet with their execs to set up the terms of the study. That was followed by a 60-question designed with Princeton Survey Research Assoc. focused chiefly on digital advertising with some marginalia about non-advertising efforts. About one-third of the 121 papers represented by the six companies took part on the condition that no company or paper would be identifiable. PEJ followed up with interviews about the findings earlier this year, adding execs from another seven companies that didn’t provide details. The idea is to provide 38 “case studies” with enough detail to help other newspapers find solutions.

The 13 companies cover about 23 percent of the U.S. daily English-language market. The bulk of the papers in the data set have circulations under 25,000; as PEJ points out, the majority of the papers in the U.S. fit in that circulation bracket. The reporting papers still get 92 percent of their advertising revenue from print; the smaller ones are on the lower end of digital ad growth — 14 percent compared to 20 percent growth at papers with 50,000-plus circ– but also losing print ad revenue at a far slower pace of about 3 percent.

You can read the full report (it’s also broken down into sections). We’ve pulled some of the charts into a slideshow that gives a sense of the overall results: