Some realities that we need to recognize and accept

We are not going to sell newspapers to younger adults. It is tough to sell a print newspaper to anybody under the age of 40, and the younger they are, the less likely they are to buy a subscription or a copy from a newsstand. That means that our print audience is old and getting older all the time. Since old people eventually die, it is improbable that our print audience will ever be bigger than it is today, and it is highly likely that it will continue to shrink.

Newspapers’ Internet audiences are large (depending on how you count) but the average Web site user visits a newspaper site only a few times a month and spends but a few minutes on the site when he visits. Reader engagement on our Web sites is trivial compared with the 20+ minutes a day the average reader spends with the paper.

Print classifieds are not going to recover. The Internet is a great medium for selling cars and houses, and recruiting workers, and our best classified customers have increasingly figured that out. Ads on craigslist are mostly free, and they work like gangbusters. We may see some bounceback when the economy recovers, but classified revenues won’t come close to what we used to bring in.

It will be difficult to make much money on the Internet. That doesn’t mean that newspapers should not try, but we need to recognize that scarcity is what kept newspaper print advertising prices high. When we ran the only game in town we could charge high prices. On the Internet our sites are among thousands on which advertisers can place ads, so we can’t command the high CPMs we once thought we’d be able to charge for Internet advertising. And I’m betting that the publishers who try to charge for access to their Web sites will be disappointed. It’s not that the publishers who want to charge for their content can’t make a good case for getting paid, it’s just that consumers are not accustomed to paying for Internet content and there are lots of free sources of news out there.

Our biggest and best advertisers are going to keep whittling away their print budgets while they increase spending on more targeted and efficient ways to advertise. As fewer younger people read newspapers, even advertisers who like newspapers are being forced to buy other media to reach younger consumers. So while Sears and Macy’s will continue to advertise with us, they’ll spend less each year.

The facts paint a picture of a business in decline, and that picture is accurate. The business is declining, but it’s not dead, and it’s not going to be dead for awhile. How long newspapers live will vary by market. The high fixed costs and intense competition the big city dailies face will finish them off soonest, but even they will plug away for years before they can no longer sustain themselves. Smaller market dailies are likely to hang on for many years to come. Publishers need a game plan for how best to operate a business that will disappear sooner or later, but not right now.

Here are my recommendations for how publishers can stay alive longer and more profitably

Keep your belt cinched up tight. Even if revenues start to bounce back as the economy recovers, don’t permit your costs to grow. Remember how hard you had to work to get your costs under control the last time? Given the likelihood of long term decline in revenues and market share, never let your costs grow again. In fact, keep looking for ways to drive costs down, even if the wolf is not pawing at your door right now.

Don’t give up on circulation. In the past few years publishers discontinued expensive circulation practices like discounting heavily and paying big commissions for marginal new starts, and they pruned away unprofitable distribution. Many publishers also raised their subscription and newsstand prices, further depressing circulation volumes. These self-inflicted cuts, combined with the continued slow leakage of paying customers have produced substantial declines in paid circulation. Recent figures I’ve seen comparing 2009 volumes with 2005 show that many dailies have lost 25 percent of their paid circulation and some have lost as much as 50 percent Consolation for this loss is the knowledge that what circulation remains is much more profitable.

Understand your core readers and give them the newspaper they want. It’s time to recognize that no amount of edgy graphics or content aimed at younger readers is going to turn the tide. Newspaper readers will grow older over time. The industry’s attempts to attract young readers have failed, and worse, they have chased away some offended older readers . The best course of action now is to understand what our readers want and expect from their newspapers and give it to them. Don’t just assume that an aging readership wants lame features telling them how to enjoy their golden years. If you ask them I think you’ll find that your readers want a solid local news report, and a good mix of national, international and sports news, enterprise and analytical journalism—good meat-and-potatoes newspapers. But don’t take my word for it; ask your readers.

Most of all, develop reliable new revenue streams. If circulation keeps sliding and advertisers continue to move dollars out of newspapers, revenues will decline, even if the industry sees a brief uptick as the economy rebounds this year. The publishers that survived 2009 know how to cut costs, and can cut some more if they are forced to, but eventually the steady loss of revenue will overwhelm cost cuts and newspapers will plunge into the red. That happened to the weakest or most recklessly overleveraged newspapers already, and is the fate that awaits the rest if publishers cannot find new ways to generate revenues.

• Events. I have seen newspapers create and sponsor events for young families, golfers, brides, investors, business leaders, gardeners, homeowners, boaters and fishermen. The opportunities to create profitable events will vary by market, but every market has them. Publishers profit from events by selling booths and advertising to exhibitors, selling tickets to attendees, concession and merchandise sales. Events are great branding opportunities for newspapers. Events burnish newspapers’ reputations as community leaders, and as authoritative sources of information and advertising on specific matters.
• Targeted publications. Newspapers’ mass distribution is useful for advertisers selling groceries and hardware and cars, but specialty retailers often do not use newspaper advertising because it is too expensive and wasteful. Some newspapers have successfully launched targeted publications that are direct-mailed to a highly select list of consumer households. These publications focus on a specific interest (golf, investing, food and wine) or a specific demographic target (seniors, affluent women), or both. They provide content relevant to the target audience and an efficient, attractive vehicle for advertisers who want to reach the target audience. And because the publications are mailed to a select audience, the publisher does not need to print or distribute large quantities, keeping costs relatively low. We have launched a number of these targeted publications in Daytona Beach and found that they attract new advertisers who are not regular newspaper customers, and the advertisers who try these new publications report good sales results from their ads. Such publications build on existing newspaper assets—creative talent to design and execute the publications, a rich consumer database, and an enterprising sales force—to attract new customers and build new revenues.
• The Internet. Publishers have learned that the Internet is not the magic elixir that will save newspapers. Too much Internet competition and too little pricing power limit the upside, but newspapers can generate new revenues with Internet advertising, and those new revenues can make up for some lost print dollars. Over the last couple of years newspapers have lost much of the Internet revenue they earned from marking up print classifieds. When the print business evaporated, so did the derivative Internet business. But newspapers have gotten increasingly better at selling Internet-only advertising, and have become increasingly creative at developing formats and platforms that attract new business. The behavioral targeting capability offered by newspapers in the Yahoo consortium is beginning to produce new revenue. Small retailers and service providers—the typical retail territory accounts—are particularly good prospects for newspaper Web sites. They want to have an Internet presence but lack the resources or expertise to do it themselves. Unlike the big guys, who have their own sites and experts, the territory accounts really need the kind of help and exposure newspapers can provide.
• Alternate delivery. I’ve heard it said that in the future every newspaper will deliver others, or will be delivered by another newspaper. Newspapers are making delivery deals all over the place. It is customary for the dominant paper in a market to deliver the others, and the delivery business is a profitable sideline for circulation directors looking for ways to boost revenue. In Daytona Beach, for example, the circulation department delivers nine titles and drops an additional million dollars to the bottom line. Managing the complexity of daily starts and stops of nine different publications would be a brain-buster without the aid of Routesmart, a very snazzy and affordable software package.

None of the additional revenue streams I mention here will, by itself, offset the revenue declines caused by a continuing loss of advertising market share, but together they might. And my list is anything but exhaustive. Publishers with any imagination can find new opportunities in their markets to convert ideas into revenue. The point is, publishers can no longer view these activities as supplementary to their main business. Because the core print business will continue to slip away, these additional revenue streams will be central to the continued success and survival of the publishing enterprise. Newspapers may never again be the impregnable profit machines they once were, but newspaper companies can still prosper if creative and energetic leaders can develop multiple additional sources of new revenue.