US newspaper publishers can't find a digital business model

http://www.guardian.co.uk/media/greenslade/2012/mar/05/advertising-digital-media

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A report published today by the US-based Project for Excellence in Journalism (PEJ) makes for grim reading.

It discovers, as if we didn't know it, that the search for a new business model to revive the newspaper industry is making only halting progress.

The central revelation is that, on average, for every $1 earned by newspapers in digital advertising revenue, they lose $7 in print ad revenue.

This fact emerges from the PEJ's survey of six companies that own 121 newspapers, which were persuaded to share private data about some of their papers' financial performances.

"Executives at the 13 companies involved in this report confirmed that closing the revenue gap remains an uphill and existential struggle," writes Tom Rosenstiel, the project's director.

"The most optimistic projections saw digital gains overcoming print losses within a few years; the most pessimistic held that it would never occur. A number of executives said they did not know when it might happen.

Of the 38 papers that provided detailed data about their operations, not all were achieving growth in digital revenue. Seven of those studied suffered declines for the last year for which they had full data. One stayed the same year to year.

Beneath these broad numbers, however, are papers that buck the trend in significant ways."

Rosenstiel told the New York Times: "Some of those we talked to seem frustrated and even uncertain about how to proceed. But we also found signs that, if you can break out of old cultural patterns, there is another way."

He explained that papers showing signs of success "are those that have pushed harder to change their sales staffs, have pushed digital even at the risk of putting less effort into the old categories that pay the bills, have taken more risks — have fought against the deep 'inertia' that many of the executives describe."

The report identifies no shortage of challenges for newspapers on the sales side. Some of the papers it studied have struggled to sell mobile ads, recruit digital advertising sales representatives and profit from so-called daily deals similar to Groupon coupons.

According to the report, "only 40% of papers say targeted advertising is a major part of their sales efforts. Most papers are not putting major effort into selling 'smart' or customised digital ads."

PEJ, which is part of the non-profit Pew research centre, considers its survey to be the first of a series on the economic shifts in the news industry. It plans to to gather paywall data in the future.

Staci Kramer of paidContent argues that the report "paints a classic damned-if-you-do, damned-if-you-don't scenario" because if you move too fast you have to deal with risks but if you go too slow then "inertia becomes the greatest risk."

She cites one unnamed executive [no company is identified] as telling the researchers: "There's no doubt we're going out of business right now... There might be a 90% chance you'll accelerate the decline if you gamble and a 10% chance you might find the new model. No one is willing to take that chance."

That chimes with views I've heard among British publishers too. I'll return to that theme when I look at Trinity Mirror later this week.

<em>Sources:</em> Pew/New York Times/paidContent