March 5, 2012

The Search for a New Business Model

The Industry Looking Ahead

Given the uncertainties of the moment, we asked the newspaper officials to project what their industry might look like five years down the road. There were a variety of answers.

The most common scenario was that the newspaper would be printed and delivered to people’s homes less frequently, perhaps as little as two to three days a week-or even just on Sunday. This has already occurred in some markets, such as Detroit.

Newspapers do not make money evenly through the week. The largest share of revenue comes on Sundays-as much as half of all ad revenue  at some papers. The next largest day of the week is usually the day the food section appears. Printing only Sunday or a few days a week would be a way for newspapers to capture some of the cost savings of going digital while retaining the bulk of their print advertising revenue.

What holds papers back from this mixed approach is the fear that if the print paper largely disappears most weekdays consumers might turn away from the lucrative Sunday print paper as well, which would hasten the end of the enterprise before digital revenue grows sufficiently.

Some executives also predicted that the editorial product would be further diluted. In our annual accounting of the state of the news industry, PEJ has tracked that the newspaper newsrooms have shrunk just under 30% since 2000. Several executives predicted that shrinking will only intensify. One foresaw a looming era of significantly downsized newsrooms. Another suggested the papers would inevitably get "thinner and weaker."

A few executives also envisioned grimmer scenarios. One thought it would be possible for papers to "limp along," but that another recession could be catastrophic to the industry.  

Another flatly predicted that all of these scenarios could occur in parallel, that some papers would go out of business in the near future, that surviving dailies would go to three-day-a-week distribution and that most of newsrooms would shrink even further than they have already.

While there wasn’t much talk of a scenario that seemed popular a few years ago-that print newspapers would, in the words of one executive, "be an elite [more magazine-like] product for the elderly and people with a lot of time on their hands"-at least one executive said the print product would become more expensive.

That push has already occurred, with newspapers trying to derive more revenue from print subscriptions to compensate for losses in advertising.

PEJ asked executives how far they thought that trend would go and what the revenue split might look like in a future business model for news. There was a rough general consensus that subscription would carry a higher burden in the future.

"On the pricing side, I think traditionally circulation pricing has been 20% forever," said one executive. "I think circulation pricing is going to be 50%."

Several others indicated that the magic number for subscription revenue was around 30%.  

Still others said that at this point, they just didn’t know what the revenue structure would look like going forward.

The differences over pricing reinforce probably the strongest underlying finding of this study. The people who run the newspaper industry are unsure of where it is heading or what it will look like.

These executives stand on the front lines of a business that is also a civic institution, that has a larger purpose than making money, and that prospered for so long that its success was an impediment to innovation.

All that has been radically transformed in less in than a decade. The high water mark for newspaper employment and profitability came in 2000, a mere 12 years ago. The change since then is breathtaking by any measure, and it was hastened by the worst recession in 80 years, a recession that for newspapers has not eased.

The leadership that remains in these companies is trying to innovate while also protecting the old business that pays most of the bills, and each year newer technologies pose yet more challenges. It should be no surprise, then, that the dominant perception about the future is uncertainty.

Cite this publication: Tom Rosenstiel, Mark Jurkowitz and Hong Ji. “The Search for a New Business Model.” Pew Research Center, Washington, D.C. (March 5, 2012) http://www.journalism.org/2012/03/05/search-new-business-model/, accessed on July 23, 2014.