Newspapers desperate to shift their businesses online are earning $1 in digital advertising revenue for every $7 they are losing in their print products.
The Pew Research Center's Project for Excellence in Journalism studied 38 newspapers in the United States, and cited "cultural inertia" for the papers' inability to seize new revenue opportunities.
The industry is caught in a trap, the report states, where declining print revenues provide most of the money but digital revenue is the only category seeing growth.
It's reflected in their sales forces – where print ad reps outnumber digital ad reps 3-to-1.
"The shift to replace losses in print ad revenue with new digital revenue is taking longer and proving more difficult than executives want and at the current rate most newspapers continue to contract with alarming speed," the report stated, adding that the executives they interviewed considered replacing print revenue an "existential" issue.
The biggest challenge, the report stated, is that managers are convinced the "old way" of doing things will salvage what's left of their ad bases.
"Newspaper executives described an industry still caught between the gravitational pull of the legacy tradition and the need to chart a faster digital course," the report stated. "A number of them worried that their companies simply had too many people – whether it be in the newsroom, the boardroom or on the sales staff – who were too attached to the old way of doing things."
The study focused on smaller papers, since most U.S. papers fit in that category – 22 have circulations under 25,000, seven have circulations between 25,000 and 50,000, and nine have circulations of 50,000 or more (including three with circulations more than 100,000).
While the study focused on American papers, Canadian newspaper owners face the same challenge.
When Torstar reported quarterly earnings last week, it said while digital revenue accounts for 10.6 per cent of its total media revenue, "growth in digital revenue was not sufficient to offset print advertising and distribution declines."
PostMedia – owner of the National Post and several large city dailies – is further along with 37 per cent of its revenue coming from online operations.
The privately held Globe and Mail doesn't release financial data.
Other findings, taken from the report:
- “There are roughly 1,350 surviving U.S. English-language daily newspapers, down from about 1,400 five years ago. The vast majority of these papers are smaller, less than 25,000 circulation. There are 70 papers remaining in the U.S. with circulations more than 100,000.
- The papers providing detailed data took in roughly $11 in print revenue for every $1 they attracted online in the last full year for which they had data. Thus, even though the total digital advertising revenues from those newspapers rose on average 19 per cent in the last full year, that did not come anywhere close to making up for the dollars lost as a result of 9 per cent declines in print advertising. The displacement ratio in the sample was a loss of dollars by about 7-to-1.
- Only 40 per cent of the papers that provided data say targeted advertising is a major part of their sales effort. Even though many newspapers are not focusing on it, smart or targeted digital advertising – in which ads are customized based on consumer online behaviour – is expected to dominate local digital revenue by 2014.
The majority of papers studied focus most of their digital sales efforts on the two categories of digital advertising that are the largest but are not growing-conventional display (such as banner ads) and digital classified. Those categories account on average for 76 per cent of digital revenue at the papers studied. These are the same two categories that have provided most of their revenue in print. And 92 per cent of the papers studied said display was a major focus of their digital sales effort.
Daily Deals accounted for 5 per cent of overall digital revenue in 2011 at the papers studied.
- Of the papers sharing private data, advertising on mobile devices accounted for only 1 per cent of the digital revenue in 2011.
- Almost half (44 per cent) of the newspapers sharing data for this study reported that they were trying to develop some form of nontraditional revenue, such as holding events or consulting or selling new business products. In most cases, the dollars involved are minimal-less than $10,000 quarterly.