Tuesday, June 8, 2010

Subscribers in the driver's seat

In the past five years, the percentage of the Post Register’s total revenue directly provided by you, the subscriber, has nearly doubled, from 10 percent to just under 20 percent.

In other words, subscription revenue has grown at a much faster rate than advertising revenue during that time. Since the beginning of the recession, advertising revenue has actually fallen while subscription revenue has continued to grow.

What does it mean? There are at least two possibilities:
1. It represents a trend, in which paid circulation plays an increasingly important role in the evolving newspaper business model.

2. It’s a short –term phenomenon brought on by a recession that caused retail advertisers – every newspaper’s bread and butter – to reduce spending, while paid readership stayed steady or grew.
The truth, of course, probably can be found somewhere in-between.

The tried and true business model for print newspapers relied on advertising to subsidize the costs of printing and delivering the newspaper. While this is still so, the subscription component of total revenue has become far more than an afterthought, at least at the Post Register.

This isn’t true everywhere. Particularly in larger markets, newspapers are experimenting with free-distribution products and most big-market papers don’t charge for access to their web sites, which generally have much of the same information as the print editions.

Most newspaper markets, however, are more similar to eastern Idaho than to Los Angeles or New York – they are served by one dominant regional newspaper that is the essential provider of news and advertising in the market. In those markets, revenue generated by both print and online subscriptions could become increasingly important as the business model changes.

Newspapers have seen some pretty significant reductions in revenue in a couple of key areas: classified advertising, which has been fragmented by web sites like Craigslist and other regional sites, and traditional retail advertising from large chain stores. While some of this revenue will come back, some of it won’t. In markets like ours, that probably means two things:

First, newspapers will have to learn how to operate on lower profit margins than those of the 20th century. We’re certainly not alone there.

Second, we’ll have to continue producing a product so good that readers are willing to pay a reasonable price for it, whether they read it in print or online. Over time this source of revenue coming directly from the reader will likely become more important, and that means we’d better be good.

Most “experts” now agree that an online news business model based solely on advertising won’t work. The next step might be recognizing that a revenue model that relies more heavily than ever on subscriptions is increasingly likely.

1 comment:

  1. As a strictly online reader, having read the AP wire stories the night before detracts from my enjoyment of them the next morning in the PR. When the AP info goes to subscription, too...hey...you will be that much more valuable to me.

    The extensive in-depth local content is what sets you apart from other online sources and broadcast media, imho. And adding local flavor to the national wire stories wherever possible helps, too.