Shaping the Future of the Newspaper STRATEGY REPORT ANALYSING STRATEGIC DEVELOPMENTS AND OPPORTUNITIES IN THE PRESS INDUSTRY Volume 9 N°5 JUNE 2010 © WAN-IFRA 9.5 New prospects for revenue- making and money-saving Million abound. Innovative newspaper companies have seized the opportunities Dollar and have earned millions Strategies for in incremental revenue Newspaper Companies www.futureofthenewspaper.com All the strategy reports are available to WAN-IFRA members and subscribers at the SFN Web site Shaping the Future of the Newspaper www.wan-ifra.org A WORLD ASSOCIATION OF NEWSPAPERS AND NEWS PUBLISHERS PROJECT, SUPPORTED BY WORLD LEADING BUSINESS PARTNERS www.atex.com/ THE LEADING SUPPLIER OF SOLUTIONS AND SERVICES FOR DIGITAL, ADVERTISING, CONTENT MANAGEMENT AND SUBSCRIPTION APPLICATIONS. www.man-roland.com/en/p0001/index.jsp A LEADING COMPANY FOR NEWSPAPER PRODUCTION SYSTEMS www.telenor.com/ THE LEADING NORWEGIAN TELECOMMUNICATIONS, IT AND MEDIA GROUP www.norskeskog.com/ A WORLD LEADING PRODUCER OF NEWSPRINT AND MAGAZINE PAPER, WITH 18 PAPER MILLS AROUND THE WORLD © WORLD ASSOCIATION OF NEWSPAPERS AND NEWS PUBLISHERS, 2010 VOLUME 9 REPORT N° 5 MILLION DOLLAR STRATEGIES FOR NEWSPAPER COMPANIES TABLE OF CONTENTS Executive Summary 5 1 The SMART Advertising Department 7 Tools and Training 8 Audience Focus 10 New Product Development 12 Behavioural Targeting 15 Yield Management 16 2 Strategies for Advertising Departments 19 Online advertising networks 19 Local Advertising Strategy 23 Multimedia and Nontraditional Campaigns 25 Power of Newspaper Campaigns Targeted to Advertising Agencies 29 3 Subscriptions, Content and Circulation Revenue 31 Audience Research and Database Marketing 31 Price Elasticity 33 Charging for E-editions 35 Loyalty Clubs 37 Content Subscriptions Online 42 News Outlets Trying Paid Models 44 4 Efficiencies and Cuts 47 Job Cuts 50 5 Outsourcing 59 The Role of Outsourcing as a Money-Saver 59 Outsourcing Companies Discuss How They Can Save You Money 62 Conclusion 69 Cost-cutting 70 3 JUNE 2010 SHAPING THE FUTURE OF THE NEWSPAPER 4 VOLUME 9 REPORT N° 5 MILLION DOLLAR STRATEGIES FOR NEWSPAPER COMPANIES Executive Summary “The profitability that newspapers sustained in its own set of challenges and opportunities. this last century was an anomaly. Newspapers Each strategy is illustrated by case studies were not profitable for most of their lives. And around the world. as Warren Buffett would say, ‘when it was Experts say revenue-making and cuts should be profitable, it was a toll booth,’” Katharine balanced carefully. “It’s not about only cutting Weymouth, publisher of the Washington Post, the cost side, it’s about going to go back to said at a recent Poynter Institute gathering. “It rethinking and reinventing the business model, was a brilliant model. If you were an advertiser operations and manufacturing models, and and you wanted to reach the local audience, asking fundamental questions. How do we you had to advertise in the newspaper. So our distribute the newspaper? Is there a more classified section – for those of us local efficient model? How are our sales teams newspapers – were terrific and brought us in performing? Are they going to use rate sheets, hundreds of millions of dollars.” or is their entire focus on collaborative Newspaper industry experts say that the days selling?” said Sandy Nelson, CEO of Aperio of unbridled profitability with print advertising International, a consulting firm in Washington, are gone forever. Most newspaper publishers D.C., that helps companies rethink their around the world are seeking out new revenue businesses. It has worked with companies models and new business practices that will including the Orange County Register and Apple. sustain their businesses and pay for quality In Chapter 1, we explore five key elements of journalism well into the future. the “SMART” Advertising Department: The “Million Dollar Strategies for Newspapers •Tools & Training Companies” report focuses on three core areas •Consultative Sales Approach of opportunity to regain millions of dollars in •Yield Management this difficult media ecosystem: advertising, •Audience Focus circulation and cost-cutting. Each strategy has •New Product Development 5 JUNE 2010 SHAPING THE FUTURE OF THE NEWSPAPER In order to make millions more in incremental traditional costs of paper, ink, printing and revenue, newspaper companies must employ distribution top the list of tactics that an aggressive “Print Plus” strategy; one that publishers will implement in the next year. focuses on maximising print revenues and Of 500 publisher and top executive adding a focus on multiple digital revenue respondents from 84 countries, materials such streams now and for the future. as paper (48 percent), printing (45 percent), “A good media company should have in five administration (42 percent) and distribution years, on the revenue side, probably 30 percent (33 percent) ranked as the top four priorities of the revenue coming from digital, if not 35 for cuts in the next year. Content generation, percent,” said Moritz Wuttke, founder of the key deliverable of journalists, ranked a NextMedia Initiative and former CEO of close fifth, at 29 percent, followed by office PubliGroupe in Asia. On the net profit side space (27 percent), information technology (16 (after costs of goods sold, printing costs, etc.) percent) and content syndication (14 percent). “the gross profit contribution from digital, will Chapter 5 delves deeply into outsourcing contribute 80 percent and print will contribute functions across the value chain, including 20 percent of the total gross profit,” he added. editorial editing and production, advertising In Chapter 2, we hone in on several strategies production, accounting, IT, pre-press and that make millions of dollars for newspaper printing, administration, distribution and more. companies around the world: According to the Future & Change Study, 17 percent of the 500 newspaper executive •Online Advertising Networks respondents said they plan to outsource •Multimedia Advertising Campaigns functions in their newspaper company to •Hyper Local Advertising Strategies achieve greater efficiency and cost savings in •Power of Print focus the next year. Chapter 3 focuses on monetizing content, The potential for making and saving millions through subscription and pricing strategies, of dollars across the value chain of newspaper online content monetization and loyalty clubs. companies is immense, and is limited only by The underpinning to the most successful and the imagination. According to a recent survey innovative content strategies is audience of 1,500 chief executives by IBM’s Institute research and database marketing targeting for for Business Value, creativity is the most analysis, campaigns and product development important leadership competency for purposes. The strategy allows newspaper successful businesses in the future. companies to expand audience penetration Respondents said that success requires fresh with new products and platforms, target thinking and continuous innovation at all subscription offers more successfully, levels of the organisation. A strategy of engender loyalty and reduce churn. creative thinking should disrupt the status quo, Chapter 4 is focused on efficiencies and disrupt existing business models, and disrupt cutbacks. Saving millions of dollars through organisational paralysis, according to the budget cuts has become a top priority strategy study. among newspaper companies around the world. Among the tactics to save money include reduction of employees, consolidation of offices and printing plants, integration of multiple media staff members, consolidation of sub-editing and production units, shrinkage of newspaper widths and number of sections, reduction of publishing on certain days of the week, and so on. According to the 2010 World Newspaper Future & Change Study, conducted by the World Association of Newspapers and News Publishers (WAN-IFRA)’s Shaping the Future of the Newspaper Project, saving money on 6 VOLUME 9 REPORT N° 5 MILLION DOLLAR STRATEGIES FOR NEWSPAPER COMPANIES 1. The SMART Advertising Department Most newspaper companies around the world revenue, newspaper companies must employ typically derive about half of their revenues an aggressive “Print Plus” strategy; one that from advertising and half from circulation. focuses on maximising print revenues and Even in the United States, where advertising adding a focus on multiple digital revenue traditionally represented two-thirds or three- streams now and for the future. quarters of their revenues, newspapers are “A good media company should have in five gravitating toward a 50-50 revenue split as years, on the revenue side, probably 30 percent advertising revenue diminishes and publishers of the revenue coming from digital, if not 35 raise subscription prices. percent,” said Moritz Wuttke, founder of Most advertising departments still earn 90 NextMedia Initiative and former CEO of percent of their revenues from print, despite PubliGroupe in Asia. On the net profit side the swirling cyclical and structural changes (after costs of goods sold, printing costs, etc.) affecting traditional advertising businesses. “the gross profit contribution from digital, will The other 10 percent is earned from digital contribute 80 percent and print will contribute business. As the development of print revenues 20 percent of the total gross profit,” he added. has proven more challenging over time, the In this age of transition and