As newspapers shift from print to
the Internet, they are hoping to significantly reduce production costs. These
companies are trying to offset declines in advertising revenue by reducing the
amount they spend on printing presses, newsprint and delivery trucks.
Reducing offline production costs is
a complex problem to solve.
Most of the industry’s advertising revenue
$21.8 billion in 2012
– still comes from print publications. So newspapers
must maintain that revenue source at the same time they are moving to the
Production costs might be lower on
the Internet, but they are not zero. Newspapers must pay to build and maintain websites
and mobile applications. But Internet advertising and other digital sources accounted
for just 11 percent of the industry’s total revenue in 2012.
Newspapers also face significant competition from digital firms for online revenue.
To make the transition succeed, newspaper
companies must keep digital production costs low enough to be competitive and
attract enough online revenue to cover those costs. Meanwhile, the companies
must continue to produce the print products that generate the bulk of their
revenue for as long as those products remain profitable.
And economic survival isn’t likely
to get easier for newspaper companies that do leave print behind. Those firms
will have to manage new kinds of competition.
There was an important reminder this
week of just how difficult the transition can be. Digital First Media,
which owns 75
newspapers, has a strategy of moving quickly away from print to digital
distribution on the Internet.
One high-profile piece of the
Digital First strategy has now failed. The company is closing a centralized
newsroom that used digital production to provide national stories for its
newspapers across the U.S.
notes the failure is a valuable
reminder that even digital news production is expensive:
It is myth, embraced by digital future-of-news
enthusiasts, that Web publishing is close to free. [Digital First CEO John] Paton seemed of that view early in his tenure when he
asked newsrooms to use mainly free tools to put out their reports for a week.
But in his most recent manifesto/speech to the Online
Publishers Association in January, he said he was looking for another $100
million to invest in the company’s digital activities on top of an earlier $100
Digital First is a private company,
so it's hard to tell what the implications are for
other newspaper companies. There is reason
to be cautious because Digital First has complex finances – it was created by
merging two other companies that had both been gone through bankruptcy. A hedge
fund is a major investor, and that fund may be looking for a quick return on its
Other companies with stronger
finances or different investors might have more flexibility in managing the
transition from print to digital. But it won’t be easy for any company to do.