A sustainable business model for newspapers - FTI's Strategic Toolkit for Driving Increased Performance and Sustainability - townnews.com
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A sustainable business model for
newspapers
FTI’s Strategic Toolkit for Driving Increased Performance and Sustainability
CONFIDENTIAL & PROPRIETARY | July 2021
On average, newspapers lost 22% of revenue between Q1 2019 and Q1 2021.
Print Advertising and Circulation losses were the biggest drivers of the revenue decline.
Total industry revenue in Q1’21 was 22% lower than Q1’19 levels. Q2’20 saw the largest revenue impact followed by slight recoveries in
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Q3‐Q4’20. Meanwhile, digital sub revenue was the only segment with growth and more than doubled by Q1’21.
Revenue By Category – Index Q1’19 to 100
Q1’21: 227
2
Source: FTI proprietary sources, public information
FTI’s newspaper industry forecast shows that 2021 likely presents a slight recovery,
but the revenue mix will continue to shift towards consumer‐led
While the likely 2021 recovery is expected to fade, our long‐term forecast shows that as the newspaper revenue mix continues to shift
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toward growth areas like digital subs and away from print advertising, overall revenue declines should mitigate but remain slightly
negative in the base and high case.
US Newspaper IndustryIndustry
Newspaper Historical and
Annual Forecasted
Revenue Annual Revenues
Forecast FTI Annual Forecasted Industry Revenue YoY Growth (Decline)
$ 27,000
$ 25,000
$ 23,000
$ 21,000
$ 19,000
$ 17,000
$ 15,000
2018 2019 2020 2021 2022 2023
Actual Revenue Forecast Revenue ‐ Base Case Forecast Revenue ‐ Low Case Forecast Revenue ‐High Case
3
Source: FTI proprietary sources, public information
Revenue mix changes will push publishers to become more and more consumer‐led.
Digital Subscriptions share of revenue is forecasted to triple by 2023.
In 2021, nearly 50% of revenue will be driven by subscribers, although it is still largely print‐driven. By 2023, that mix is expected to shift
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dramatically with digital subscriptions playing an even more important role with 57% of the revenue consumer.
How the Newspaper Revenue Mix Has Changed and Where it’s Going
57%
Consumer Revenue
37%
Advertising Revenue
4
Source: FTI proprietary sources, public information
What is the current positioning of your newspaper?
Based on scale, vertical and audience type, newspapers vary where they are on the pathway from 1 to 3 . Many realize that is
not possible and long‐term digital subscriptions are a critical destination 4 .13
Historically newspapers’ business model was based on print advertising.
1 And until the last decade print subscriber revenue was low but now much
more robust amid volume losses. Digital
Over the last 15 years digital media advertising went from nascent to now
2 over 70% of total advertising spend; newspapers garnered some of this new 4
CONSUMER
revenue as print advertising began to slide.
The hope of a digital advertising business model has not materialized for
most as growth has ended up with the tech platforms and is quickly moving
programmatic.
3
Most newspapers have moved more and more to digital consumer‐led 2
3 revenue while enjoying significant print subscriber revenue. Publishing a
print paper 7 days per week continues to be evaluated. 1
Print
All newspapers have put up paywalls and many have some form of hybrid
4 meter knowing that digital subscriber growth is the keystone to long‐term
sustainability. Print Digital
ADVERTISING
5
Print‐to‐Digital & Digital Subscriptions Key Learnings
OUR APPROACH: PRINT‐TO‐DIGITAL TRANSFORMATION
Our Print‐to‐Digital transformation proprietary model helps newspapers understand
when cash is improved by less‐than daily print and key levers in the journey
FTI’s scenario planning tool enables clients to understand timing or cross‐over in cash generated by reducing frequency and the key
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levers needed in a sustainable business model.
Based on inputs and assumptions model depicts by
conversion year:
Abandon
Print Digital‐ FORECAST ■ Annual Revenue
Only MODEL ■ Annual Expenses
OUTPUT ■ Annual EBITDA
■ Cumulative EBITDA
■ Revenue Mix
What is our
sustainable
future?
Less‐than‐ ANNUAL EBITDA [Example Output]
Daily Sunday + digital crosses
over baseline in 2021 and
Later | forecasts higher EBITDA
Incrementally
Sunday +
Digital
2016A 2017A 2018A 2019F 2020F 2021F 2022F 2023F 2024F 2025F
7
OUR APPROACH: DIGITAL READINESS
Most newspapers have not focused enough on being digital ready
FTI’s digital readiness scorecard measures digital readiness progress towards minimizing risk at conversion to fewer days of print delivery.
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Progress Digital Volume | Digital Engagement | Print Sunday Volume Print Subscriber
Early Ready Revenue Conversion | Revenue Engagement
Innings
Dig. Sub UV
1 Penetration 6.3
/ 12.5 4 Avg. Monthly
Starts Per UV
3.8
/ 7.5 7
KEY LEARNINGS | DIGITAL SUBSCRIPTIONS
Newspapers need to continue the COVID growth in digital subscription revenues.
Here’s what we’ve learned from working with a broad array of publishers…
Key Learnings from our work with dozens of publishers in driving acceleration in digital subscriptions
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■ Pay Model Types: Standard Meter, Premium Content, Locked Content, Hybrid, Dynamic
There is no one‐size‐fits all pay model ■ Consider the optimal customer journey from discovery to sampling to conversion
■ Minimize the opportunity costs to advertising and balance needs to register and gather email users
■ Managing print‐digital pricing relationship
Bundling strategy should consider both the
■ Activate & engage print audience into digital through delivering the right user experience
legacy print business and digital growth goals
■ Preparing for digital‐centric future
■ Post‐COVID traffic has already begun to decline with most publishers seeing double‐digit declines
Build content & product around those users
■ As publishers have reduced costs, double‐down on content that drives subscriptions rather than page views
with willingness‐to‐pay
■ Invest in the product to deliver a customer experience worth paying for, the ceiling is higher than you think
■ Don’t get hooked on just volume, sustainable model requires $15+ monthly ARPU for most publishers
Pricing to the sustainable model and focus on
■ Consider how deep discounts are impacting brand value
customer lifetime value
■ Maximize CLV when setting offer and bundle strategy
Retention becomes more critical as digital ■ Survival curves to understand where the key pain points of the subscriber journey are
subscriptions gain momentum and exceed ■ Propensity to churn models to re‐engage and stop churn before it starts
print subscriptions by volume ■ Understanding key reasons for churn and developing win‐back campaigns
9
MONETIZING DIGITAL REVENUE | DEVELOPING A DECISION ENGINE
As newspapers become more sophisticated on monetizing audience using premium
content, understanding the next best action pathway for digital visitors is critical
Potential Revenue per Unique Visitor varies across the entire audience demand curve. To maximize yield per UV, it is critical to segment audience
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appropriately by willingness to pay and drive user behavior through a clearly defined customer journey.
Customer Targeted Share Premium Membership | Subscription
5
Journey Model of Users
Total Revenue per Unique Visitor
HIGH
Paid 1x Ecommerce or Experiential (Events, Courses, Community, etc.)
1 Anonymous Traffic 75% ‐ 85% 4 Affiliate Revenue
3 Registered User Targeted Advertising [1st party data]
Monetization
2 Newsletter Subscriber 5% ‐ 10%
2 Newsletters Advertising | Sponsorship
3 Registered User 5% – 10%
Branded Content
4 Non‐Recurring Purchaser 1‐2%* Video
LOW Display
1
5 Premium Subscriber 2‐5%
HIGH Level of Audience Engagement LOW
FEWER Number of Consumers Monetized MANY
* For those publishers with eCommerce or Affiliate revenue. May not be mutually exclusive with other parts of the customer journey 10EXPERIENCE & CREDENTIALS
We have deep expertise in print‐to‐digital modeling and digital subscription growth strategy
FTI has worked with magazines, newspapers and digital native publishers to accelerate digital subscription growth with the goal of
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building sustainable business models while understanding the print‐to‐digital time frame
Representative Print‐to‐Digital Modeling Clients Representative Digital Subscription Growth Strategy Clients
Our Differentiators
North American Digital Subscriptions Lab Asia‐Pacific Digital Subscriptions Lab
INDUSTRY DEPTH HANDS ON BEST‐IN‐CLASS EXPERT DRIVEN
We understand client Our teams are deeply We have proven Our experts provide
challenges and integrated with and processes and tools that seamless execution of
opportunities understanding of our allow our clients to solutions that effect
clients effectively and immediate change while
efficiently achieve focusing on long‐term
desired outcomes sustainability
11Experts with Impact ™
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