The contemporary Western news organizations have implemented ‘digital-first’ strategies, and many of large news publishers regard themselves now as ‘digital-first’ news organizations. However, only a few news publishers are digital in terms of their revenue. These include the German Axel Springer and the Norwegian Schibsted make approximately 62 percent of their revenue from the digital sources. However, their corporate structure differs from legacy publishers such as The New York Times or The Washington Post.
A recent report from the Reuters Institute for the Study of Journalism suggests that this year more newspapers in Europe and the United States will cease to exist. The Journalism, Media and Technology Trends and Predictions 2017 report also predicts that more papers will move from print to digital-only model. However, the report does not give any details or explain why this may be the case. Based on the survey of 143 editors, chief executives and ‘digital leaders’ from 24 countries it finds that “33% of respondents from a newspaper background are more worried about their company’s financial sustainability than last year; just 8% are less worried.”
Are they ready?
Photo by Jon S on Flickr and reused here with Creative Commons license.
I think a more important question to ask is that why would newspapers move digital-only? Are they ready? Would they benefit of such move? Not quite, or not without substantial cost or structural changes.
There is plenty of evidence that the digital march of news publishers is advancing. In my book chapter published in The Routledge Digital Companion to Digital Journalism Studies, I show that digital-only subscriptions and revenue of some leading newspapers have increased substantially since the paywall introduction. For example, The Financial Times gained 359 per cent increase in its digital subscriptions in seven years, The New York Times 36 percent in three years, and The Times & The Sunday Times 53 percent (combined) in four years. However, at the same time, the same newspapers were forced to implement more cost savings, and their newsrooms shrunk. For example, The New York Times Company shed 51 percent of its workforce after the introduction of digital-only subscriptions.
In its recently published report, which outlines the company’s digital aspirations until 2020, The New York Times discloses that in the third quarter of 2016, its digital subscriptions “grew the fastest pace” since it introduced paywalls. It now has 1.5 million digital-only subscriptions, which is an achievement. Yet the paper admits that “for all the progress we have made, we still have not built a digital business large enough on its own to support a newsroom that can fulfill our ambitions.”
I agree. A research paper I presented at the World Journalism Educators Congress (WJEC) in Auckland, New Zealand, concludes that in general, news publishers are still print-reliant in terms of their revenue. Similarly, an analysis by Deloitte for the News Media Association in the United Kingdom found that roughly 88 percent of publishers’ revenue came from print, and only 12 percent from digital. The publishers gained, on average, £89 a year of revenue per print reader, and £15 for a digital reader.
In this context, it is safe to say that moving digital-only would not be a viable option for most of the publishers – yet. The paper presented at the WJEC investigates digital revenue of The New York Times Company (U.S.), Fairfax Media (Australia), Gannett (U.S.) and Postmedia (Canada). The paper confirmed that only 24.7 percent of The New York Times Company’s revenue came from the digital sources. The same number for the Gannett was 35 percent, for Fairfax 16.4 percent and for Postmedia 13 percent. This simply shows that the companies revenue is still reliant on their print and other than digital revenue sources.
More importantly, the research paper found that The New York Times Company could cover 28 percent of its total expenses by digital revenue, and Gannett 26 percent. This demonstrates that news publishers could not move to digital-only without cutting their overall expenses, launching structural changes and/or disposing assets. Nevertheless, they do continue cost-cutting. When announcing the company’s 2016 third quarter revenues, The New York Times Company’s CEO Mark Thompson said its focus was on cost cutting. He commented that “over the coming months, we will take a series of steps to reduce the legacy cost base of the company so that we can continue to invest in digital growth and grow operating profit.”
Would it make sense?
Photo by Rick Harris on Flickr and used here with Creative Commons license.
Would move to digital-only make sense? In Britain, The Independent newspaper went digital-only last year, and it is the only British newspaper making that move. Its owner Evgeny Lebedev says that the paper became profitable for the first time in 20 years after closing the print edition. The company’s year on year digital advertising revenue rose 45 percent after six months of giving up its print edition. However, the move did not occur without substantial job cuts. The Guardian reported that approximately 100 journalists out of 160 lost their jobs in transformation, and other workers were asked to take a pay cut. Lebedev stated that “with a younger staff on lower salaries and no printing or distribution costs, The Independent has a sustainable long-term future.”
There is no doubt that other news publishers are keen to follow The Independent’s example. In Australia, Fairfax Media has indicated that it will start to move its mastheads including The Sydney Morning Herald to digital-only model during the weekdays. In Canada, the National Post is cutting journalistic jobs and remodeling its newsrooms to a digital-only model, and in the United States the Pittsburgh Tribune-Review is considering to abandon its print.
However, there are warning signs and voices. A study by Chyi and Tenenboim of 51 American newspapers suggests that print newspapers reach bigger audiences than online papers: “the supposedly dying print product still reaches far more readers than the allegedly promising digital product in these newspapers’ home markets.” They found that the print newspapers remained the most relevant news sources in the local markets, and “without a single exception, [were] reaching far more readers than the online edition across all age groups. Their findings “raise questions about US newspapers’ technology-driven strategy and call for a critical re-examination of unchecked assumptions about the future of newspapers.”
Yet again, I agree. There is evidence that the digital transformation of some of the Western news publishers is well on its way, but there are still multiple problems still to solve. The digital march is advancing, but it seems that print newspapers, at least in the local markets, may well be more resilient that many have assumed.
Dr. Merja Myllylahti, is a former financial journalist, and she is currently a researcher and project manager at the Journalism, Media and Democracy (JMAD) research center, based at Auckland University of Technology (AUT) in New Zealand. Her research interests lie in media transformation and digital media economies, news business models, paywalls and media ownership. Her most recent publications include a book chapter “Newspaper paywalls and corporate revenues: A comparative study” published in Routledge Companion to Digital Journalism Studies (2017). Follow Myllylahti @MyllyMe.