As far as the future is concerned, newspapers looking for a one-size-fits-all solution for revenue generation will come up empty handed. The most effective recipe for success will stem from a concoction of varying methods as well as a dramatic shift in mentality at every level of a newspaper.
By now, to expect anything else other than a bleak, foreboding future for the newspaper industry would be somewhat of an unusual stance to take. On paper, the most recent numbers only seem to bolster the idea. In fact, 2015 was perhaps the worst year for newspapers since the Great Recession, specifically with regard to advertising revenue. According to the Pew Research Centre’s 2016 State of the News Media report, publicly traded newspaper companies collectively suffered a nearly 8% drop in ad revenue from 2014 to 2015.
And as far as the future is concerned, newspapers looking for a one-size-fits-all solution for revenue generation will come up empty handed. The most effective recipe for success will stem from a concoction of varying methods as well as a dramatic shift in mentality at every level of a newspaper.
Here, we take a look at what revenue generators worked this year and the financial outlook for 2017.
Don’t just collect data, use it
The notion that newspapers are well behind their competitors in the television and online news spaces when it comes to acting on collected data isn’t just an idea – it’s a fact.
According to a recent survey by the Engaging News Project, a think tank located at the University of Texas at Austin, only around 20% of the news outlets it polled were working with researchers to test out different strategies for audience engagement. The study also revealed that newspapers tended to be less likely to have a responsive website than television stations or online news sites.
George Sylvie, a professor of journalism at the University of Texas at Austin, who studies innovation, change, and decision-making by newspapers, noted that the news publishers who utilise data effectively in the coming years will emerge from the rest of the pack.
“Newspapers can answer the question of what their local readers want through focus groups or by partnering with a nearby college to get them to do a readership survey for you,” Sylvie said. “Yes, people may tend to read certain things, but you don’t know why until you ask. If there’s something interesting there, people will read it. The question is how do you stand out?”
While the revenue generated from events and promotions can be extremely beneficial if marketed correctly, the databases they build are the gift that keeps on giving.
A new model for maximising revenue
A report released by the World Association of Newspapers and News Publishers this past June emphasised the need to focus on subscription revenue, particularly in the digital form. However, the study left a very important question unanswered for newspapers: How could they go about strengthening their subscription revenue?
Researchers from the University of Missouri and University of Miami believe they found a possible answer for newspapers looking to do just that. Following a lengthy and arduous research process, the researchers managed to develop an algorithm that would allow newspapers to maximise their revenues from advertisements and subscriptions by offering a variety of subscription plans.
“We think this model, if applied, can have a sizable impact on the industry. Newspapers need to realise that their pricing strategy must align with the needs of both their readers and advertisers,” said Vamsi Kanuri, assistant professor of marketing at the University of Miami School of Business Administration, who helped conduct the study released earlier this year. “Attracting the right kind of readers through subscription plans will make the newspaper attractive for advertisers.”
In order to utilise the model, each newspaper needs to conduct its own reader and advertiser surveys, then organise the collected data by reader segment and input it into the algorithm.
Avoiding short-term solutions for a long-term problem
According to futurist Amy Webb, the central challenge within newspapers revolves around immediate, acute problems, though reasonable solutions require long-term investment in energy and capital.
“The tension between the two always results in short-term fixes, like swapping out micro-paywalls for site-wide paywalls. In a sense, this is analogous to making interest-only payments on a loan, without paying down the principal,” she said. “So publishers must learn to adopt a new kind of strategy – one which addresses both those immediate financial needs while simultaneously addressing the problem of financial sustainability in the long term. To be fair, this is difficult to do.”
In other words, publishers and their investors must get comfortable taking a risk on real research and development, the kind that may not yield any results for a while.
For Sylvie, the value of the print product isn’t going anywhere – at least in the short term. “The biggest revenue generator in 2017 will still be the print product, since most typical-sized papers of the world haven’t yet figured out how to get most of the profits from digital just yet,” Sylvie said. “But they’ll get there eventually because they have to. Maybe by 2018 or 2019.”
The monetisation of news aggregation sites
Could the new proposals being brought forth by the European Commission, which would grant news organisations in Europe the ability to charge internet aggregators like Google to link to their content, offer a blueprint for struggling newspapers in North America?
Perhaps, but the previous results aren’t too encouraging. In October 2014, after Spain approved a new law which forced aggregation services to pay news sites for their content, Google responded by shutting down its news service in the country. In Germany, multiple news companies stopped charging Google after suffering large drops in traffic.
However, Webb asserts that many people including herself, are still more than willing to pay a small fee for personalised news apps such as Nuzzel, which is currently free to use.
If you build it, revenue will come
As tempting as the idea of a single solution for the ongoing decline in revenue may sound, newspapers can ultimately find new revenue streams in the coming year through internal improvements as well.
Jim Hart, a newspaper revenue consultant, said he has analysed transaction data from more than 150 newspapers, and on average, 80% of newly acquired accounts do not come back the next month, while 90% fail to return the second month.
“The number one place newspapers can get revenue in 2017 is retention. There is no one product that is going to save them. They need to stop being so product centered and work on establishing an effective strategy for their clients,” Hart said. “Strategy should always be before tactics. When you sell traffic, impressions or eyeballs to a local business that has no strategy in place to convert that into customers, they see no change in their business and they leave very quickly.”
“What Aftenposten illustrates is that sometimes, the most innovative new revenue models are really a matter of addressing existing problems in a more sophisticated way,” Webb said. “If you can plug a significant leak in revenue, it will allow you to focus on the critically important work on the future of news.”