After years of cost cutting, why are some newspaper publishers actually staffing up their in-house digital production operations and investing in technology and tools for new interactive services like video advertising, deals-of-the-day, social media services, etc.? As newspapers rethink and reinvent their business model, they should engage business process outsourcing to generate profitable revenues that will sustain their businesses and pay for quality journalism well into the future.
In 2010, advertising revenues for newspapers continued to fall, about 6.3% for the year. Print circulation also continued to decline (5% daily and 4.5% for Sunday), according to The State of the News Media 2011, Pew Research Center's Project for Excellence in Journalism. On top of that, the past year saw a surge in expenses, which puts limits on funding both for experiments and for maintaining editorial quality in print and digital formats.
Declines of last year weren't as horrendous as those in 2009, and publishers have moved decisively to increase digital revenues (in some cases charging online readers and in others branching into new businesses like e-commerce). New business models are proliferating as news organizations search for novel sources of revenue and cost reduction ("Bulletins from the Future", The Economist, 7/9/11).
Although revenue from online advertising is growing, it's not fast enough to fill the gap opened up by declines in print ads and circulation. As The Economist notes, "Online advertising typically brings in less than 20% of a newspaper's ad revenues and rates on all but the most prominent pages are falling." As a result, online ad revenues will not be enough to cover the cost of running traditional new organizations.
Now this August 22nd article in the Wall Street Journal, "Newspapers Edit Down Outlooks," indicates there might be a return to job cuts and other belt-tightening moves.
The obvious point: it is absolutely critical to diversify, build new revenue opportunities and develop compelling options for advertisers to be competitive.
Along these lines, in April of 2010 Journal Register CEO John Paton instituted the Ben Franklin Project, an attempt to focus the company's papers on being "digital first, print last." Earlier this year, Editor & Publisher listed three of the Journal Register newspapers on its annual "10 Newspapers That Do It Right" list.
The project seems to be working: unique visitors were up 58% and page views up 31% in the first quarter of 2011 for Journal Register sites, compared to the first quarter of 2010. There was a 67% increase in digital ad revenue and digital sales accounted for 15% of all ad revenue (before Paton, ad sales had been only 6% digital).
What's different about the approach at Journal Register? As John Paton says, "We're outsourcing everything. If it doesn't have anything to do with the creation of content, marketing and research . . . then we're either outsourcing it, reducing it, stopping it or selling it."
Paton and other publishing executives have good reason to act, as digital revenues just surpassed newspaper print revenues for the first time. More money was spent on online advertising than on newspaper advertising in 2010. Online advertising overall grew 13.9% to 25.8 billion, based on data from eMarketer. Pew Research Center estimated that newspapers took in $22.8 billion in print ad revenue in 2010.
The problem with other publishers, in the opinion of Martin C. Langeveld in his News after Newspapers blog, is:
Most newspaper groups pay lip service to "digital first," but in reality they're focused on the daily print edition. And that's why audience attention will continue to go to new media unencumbered by print, like Huffington Post, the Daily Beast, Patch, Gawker Media, and hosts of others.
While working to expand digital revenues and increase audiences, publishers should stick to the core of what newspapers do best: content. In an American Society of News Editors and American Press Institute survey, editors identified three major challenges for the next 18 months:
- Maintain quality writing and editing despite budget and staffing cuts
- Redefine roles, strategies and tactics for moving newsrooms from once-a-day to continuously updated, 24/7 news and information
- Exploit mobile opportunities as a way of distributing content and building audience
Notice that increasing working capital and capital expenditures associated with hiring digital designers, buying new software and hardware, establishing video ad production teams, training in new media and the like don't make the list.
As Paton noted, publishers also need to market. Small- to medium-sized business advertisers could benefit tremendously from bundled digital offerings to establish their visibility and attract customers. Newspapers have strong reach through their direct sales forces and credibility among this audience. They should leverage it by consulting and offering new interactive services.
But they should keep in mind that most of the advertisers can't or don't want to have to do it themselves—produce videos, design coupons, create directory listings or set up social media sites and ads. In fact, the American Express OPEN Small Business Monitor asked small companies what new hire would most help their business and 9% said a social media expert, making it the second most popular choice after bookkeeper.
Newspaper companies shouldn't be setting up entirely in-house operations to deliver these new services themselves either. Outsourcing of various non-core functions transforms operations. This was proven with print ad production for newspapers over the past several years. Now it's time to transform newspaper companies into true multi-media publishers. And the best way for them to do that is to partner with qualified production resources such as Affinity Express.
By being agile and moving in real time with advertisers and readers, newspapers can survive and even thrive in the digital age. After all, they are the pros at publishing.