How digital are the news publishers? A study of newspaper publishers’ evolving revenues, and how they may support journalism and future newsrooms

Abstract

Digitalisation has fundamentally changed how news is produced, consumed, and delivered. It has also affected newspaper publishers’ revenue models, and building new digital income streams has become critical for the future of newsrooms. Some newspaper publishers have reported substantial growth in their digital-only subscription numbers as well as increases in their digital advertising income. However, at the same time they have continued layoffs, and development in digital revenues has been uneven.
Business models of news publishers are a critical research area for academia, as they affect newsrooms; how they are funded; and how journalism is conducted. In order to evaluate how digital news publishers are in terms of their revenues, this paper examines digital earnings of some of the largest news publishers in the Western economies. The paper also considers the nature of their revenue sources.

The case studies presented in this paper include Gannett, The New York Times Company, News Corporation, Fairfax Media, Schibsted, Axel Springer, Sanoma, and Pearson. These corporations were chosen as case studies as they are some of the largest news publishers globally, or in their regional areas; they have implemented digital subscriptions and have innovated in digital advertising; and operate in different continents and countries including the United States, Australia, Europe, and more specifically in Germany, Norway, Sweden and Finland.
The paper utilises document analysis as its method. The research data is gathered from 2014 and 2015 corporate documents including annual reports, financial reports, market announcements and investor presentations. There are considerable differences between the news publishers in their disclosure, and some of the publishers do not reveal detailed information about their digital subscription and digital advertising income. As a result, some data between the chosen media corporations is not directly comparable. The structure of the companies chosen for this study varies, and this had to be taken into account when comparing the data.
Additionally, the paper considers how patterns of news delivery are changing as the news publishers collaborate more closely with social media corporations, such as Facebook, and technology companies such as Apple. Some leading news publishers, such as The New York Times and BuzzFeed, are collaborating with Facebook’s Instant Articles service in news delivery, while The Guardian, The Economist, and the Financial Times are using Apple News service in their news delivery.
The paper also proposes that journalism scholars need to update business model frameworks identified in the earlier academic research. Current models identified do not fully reflect the complex nature of the contemporary news publishers’ income streams and structures. As the revenue sources of newspaper companies diversify, more sophisticated tools are required to evaluate viability of these models. This paper provides a contemporary revenue model to evaluate news publishers’ income sources, including print and digital advertising, and print and digital subscriptions.

Full text

How digital are they
really?
Exploring news publishers digital revenues and
how they support future journalism
Merja Myllylahti
@MyllyMe
WJEC conference
AUT, New Zealand
July 15 2016

Digital revenues - beyond buzzwords
•This paper explores digital revenues of news publishers,
and how their revenue structures may support future
newsrooms
•There is a lot of hype around newspapers digital
strategies and new journalistic tools, but we need to
look beyond buzzwords to assess the reality
•This research “terrain” is hostile because companies
don’t disclose much information about their digital
earnings, and nature of those earnings

Media landscape is changing dramatically…
As media academic Emily Bell recently noted:
“Our news ecosystem has changed more dramatically
in the past five years than perhaps at any time in the
past five hundred.”
“We are seeing massive changes in control, and
finance, putting the future of our publishing
ecosystem into the hands of a few, who now control
the destiny of many.”
http://www.cjr.org/analysis/facebook_and_media.php

… and what does it mean?
1. Patterns of news production are rapidly changing
2. News delivery has moved to social media and
other non traditional platforms
3. News consumption is changing, social media and
mobile are gaining audience
4. Traditional revenue models have broken down,
and digital first strategies are not delivering

We are The Press: robots and algorithms
•Technology is pushing boundaries:
newsrooms are using live video, virtual
reality tools, instant messaging, chat
apps
•News is produced by ‘bots’ –
Associated Press publishes 3,000
stories by bots in every quarter
•Algorithms have become new editors
http://www.theverge.com/2015/1/29/7939067/ap-journalism-
automation-robots-financial-reporting

Facebook is your news delivery boy
•News publishers have lost the
control of delivery
•Facebook Instant Articles
platform was opened to all
publishers on April 2016
•It seems to expand the reach of
news, but still not clear how
much revenue it offers to news
publishers

News consumed on mobiles and social media
•A recent study by Knight Foundation and
Nielsen found that 89 percent of Americans
with mobile devices use them to access news
•The PEW’s State of the News Media 2016 report
found that 62 percent of the Americans get
their news via social media –figure is even
higher to younger generation –82 percent
http://www.knightfoundation.org/publications/mobile-first-news-how-
people-use-smartphones-acces
http://www.pewresearch.org/fact-tank/2016/07/07/modern-news-
consumer/

Jobs - gone and going with the wind
BBC over 1,000
The Guardian 250 jobs
Al Jazeera America 700
Mashable 30
Gigaom 70
Fairfax 120 jobs
MediaWorks 150

Changes hit hard the newspaper industry
•According to PEW, the 2015 was the “worst year for
the newspapers since the Great Recession” in the
US
•Advertising revenue experienced a greatest drop
since 2009
•Both print and digital advertising revenue declined
•More newspaper companies turned into a loss
•Newsroom workforce continued to shrink
http://www.pewresearch.org/fact-tank/2016/06/15/state-of-the-news-media-2016-key-
takeaways/

What about digital-only? Is that an answer?
•This year, The Independent
in the United Kingdom
became this year first
newspaper in the country to
move digital-only
•In Australia, Fairfax Media is
expected to abandon print of
its flagship newspapers

A case study of 8 large newspaper publishers
•The aim of the study was to examine if the news
publishers are ready to move digital-only, and if
they are able to fund their news operations with
digital income
•A document analysis of 2015 annual reports and
other financial reports was conducted
•The companies include Axel Springer, Schibsted,
News Corp, Gannet, Postmedia, Sanoma, The NYT
Co and Fairfax Media

Measuring the ‘readiness’
Digital-only ‘readiness’ was measured by comparing digital
and print revenue as well as expenses
1. Company is more ready to move digital-only when its
digital revenue makes 50 percent or more of the
company’s total revenue
2. Company is more ready to move digital-only when print
contributes less than 50 percent to its total revenue
3. Company is more ready to move digital-only when its
digital revenue covers its expenses

Total digital income

Test one: Digital revenue of total revenue…
1) Digital revenue < 50% of total revenue:
Axel Springer and Schibsted 62%
2) Digital revenue 20-50% of total revenue:
Gannett 35%, Sanoma 31%, The NYT Co. 25%
3) Digital revenue > 20%:
Fairfax 16.4%, Postmedia 13%, News Corp 8%

Test two: print revenue of total revenue
•Some publishers don’t disclose their print
newspaper revenue –report paid circulation
revenue
•In some cases, the print revenue is still high:
84% of Postmedia’s revenue still comes from print
Approximately 69% of The NYT Co. total revenue
comes from print products - despite the fact that
the company has been hailed as a leader in
digital transformation

Test three: digital revenue versus expenses
•Only Schibsted could move to digital-only model if its
“readiness” would be assessed by its digital income in
relation to its expenses
•Schibsted’s digital revenue is 4X bigger than its total
expenses
•Axel Springer’s digital revenue would cover 63% of its
expenses, Sanoma’s 49% and The NYT Co’s 28%

Company
Digital revenue would cover
% of
expenses
Axel Springer
63%
Fairfax
14%
Gannett
26%
News Corp
14%
Postmedia
13.5%
Sanoma
49%
Schibsted
441%
The NYT Co
28%

No, in the most cases we are not there…
1. Only Schibsted would be ‘ready’ to move digital-only
when evaluating ‘readiness’ by digital/print income and
expenses
2. Based on its digital revenue/expenses ratio the company
could cover the costs of its newsroom operations
3. Seven out of eight news publishers could not cover their
expenses with digital income
4. This suggests that they need to keep cutting the cost as
print revenues are most likely continuing to shrink
5. Six out of eight publishers still print reliant in terms of
their revenue making digital-only move unlikely

Prediction: newsrooms continue to shrink
•Despite the fact that the news publishers have started to
diversify their revenue streams, cost cutting is likely to
continue in those papers which are most print reliant
•To further exemplify, in 2014 The NYT’s digital revenue
would have supported 200 journalists –this is only about
20 per cent of the current total
•In 2016, The Washington Post’s digital revenue was
reportedly below what it needs to operate newsroom

Digital outlook bleak, print is still strong
•WAN-IFRA: Global newspaper market
figures show that more than 92 percent
of all newspaper revenues still come from
print
•PEW Research Centre: In 2015, digital
circulation accounted 22% of total
circulation
•As the print reliance continues, and print
revenues continue to shrink, more jobs
are likely to be cut

Major challenges ahead for us
•Rapidly evolving news business models offer plenty of
challenges for us
•Do we really know how sustainable the news
organisations are and how they revenue structures
support newsrooms?
•How do we teach and research these models?
•How do we get more information about the income
streams?
•Do we really understand where the newspaper’s revenues
are really coming from or are we stuck in the past?

The revenue model of the past…

… and for the future?

Business models enable journalism (Spotlight)

Thank you for listening!
•Myllylahti, M. (2016). What content is worthy of paywall?
Digital news commodification in leading Australasian
financial newspapers. Digital Journalism [Online].
•Myllylahti, M. (2016). Evolving business models of news
media, including public service. Nordicom Information
1(38), pp.25-29.
•Myllylahti, M. (2016, forthcoming). Newspaper Paywalls
and Corporate Revenues; A Comparative Study'. Book
chapter in The Routledge Companion to Digital Journalism
Studies, edited by Bob Franklin & Scott Eldridge II.