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January 27 2011

16:00

The Newsonomics of do-over

Editor’s Note: Each week, Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of news for the Lab.

You remember do-overs from your childhood, right? On the playground, something went awry in a game, and you just called do-over: Reset the game, reset the clock. It’s one convenience of childhood that seldom makes it way into adult life. Yet that’s just what newspaper company owners are hoping to do in 2011. I thought of calling this post “The Newsonomics of inflection point,” but that seems too high-minded. Do-over is more apt to the emotions undergirding decision-making in early 2011.

Tuesday, in speaking to a group at USC’s Annenberg School of Communication, one graduate student heard my description of the paid-content landscape and asked a great, simple question: “I don’t understand why now, after news being free all these years, publishers now want to be paid for it. Why now?”

Indeed. Why now?

There are two reasons, I think. One’s economic, and it first got big, public voice at the Newspaper Association of America session in San Diego, two years ago this month. There Rupert Murdoch and Dean Singleton laid down the gauntlet: Google was stealing content, and readers needed to start paying. It was a public expression — pushed to the forefront by the deep recession — of what had become a private realization; the exchange rate of print ad dollars for digital ad dimes didn’t seem likely to change. Simply, there wasn’t — as far as the eye could see — enough money in digital advertising to sustain large news enterprises, long-term. The other reason is emotional: What we do is valuable, so people should pay for it — though as the grad student pointed out, most of the reader payment has gone to paper and distribution costs, not to feeding journalists.

If 2009 was a period of emotional as well as economic depression for those in the industry, 2010 was one of simmering hope, which the glimmer of tablet emergence stoked. Now, in 2011, we’ve got a convergence of factors beginning to create a new sense of where traditional news publishing may go. They may, collectively, provide an inflection point, a point at which the news industry sees itself differently and consumers are suddenly confronted by numerous paying choices. Together, these factors offer a newsonomics of do-over, the ability to unwind what many call the original sin of giving away news content for free, and creating a new business model for how news is distributed and paid for.

There are four factors that have pushed us to this point, in early 2011:

  • Tablets certify the mobile, news-anywhere era: Until recently, if you asked publishers what business they were in, they’d tell you the newspaper business — and online. It’s been a two-part business, anchored in print (still 85 percent of all revenues) and moving at glacial speed “online,” meaning desktop/laptop. The smartphone began to change that mindset, but hasn’t produced significant new revenue for news publishers, even though they’ve made efforts to create some smartphone products. It’s been the emergence of the tablet, with its promise of real new revenue, that certifies what I’ve called the News Anywhere model. Arthur Sulzberger’s outlining of that manifesto Sunday at the Digital Life Design conference in Munich is as good a statement of it as any: “Wherever people want us, we must be there. That’s our commitment to be there on the devices, including paper — paper’s fine — devices and paper for as long as people want.” Now all news publishers, some pushing forward at warp speed, others being pulled along, are moving into a true multi-platform world.
  • A metering system that says you can have your cake and eat it, too: It’s not a paywall, it’s a hurdle, says Journalism Online. Set the hurdle at 10 or 20 pageviews a month, and 80 percent or so of your visitors will never even see it. Capture half the rest of those frequent visitors, and you’re started a new digital reader stream. And, by the way, if you do it right, your digital ad revenue can keep on growing — that’s your own major hope for any ad growth at all — because your traffic won’t decrease by any more than 10 percent. In a nutshell, that’s The New York Times’ strategy, as well.
  • Apple’s push and shove: Unannounced, publishers are moving forward with what Apple has told them. Apple is pushing them to align their web access strategy with their tablet strategy, saying if you want to retain direct customer relationship and revenue, you can’t offer all this stuff for free on the desktop and just charge for the tablet. That’s the push, and the strategy is shoving publishers, both salivating for tablet revenue and afraid that the tablet will hasten print readership decline one way or the other, to align their access strategies, from print to desktop to smartphone to tablet. That’s all-access, and it’s coming to be the prevailing industry model.
  • The rise of public equity: PE owners, as evidenced by their rising influence at MediaNews, are now pushing their publishing enterprises to innovate faster, embrace mobile, and get busy with new revenue streams. The all-access, news-anywhere model is a natural for them as well, offering the potential of enough new money to build new companies of sustainable profitability — and that’s their only ticket to cash out by 2015.

Put it altogether, and the do-over looks eminently reasonable.

Yet it’s no slam dunk, and we’ve got to wonder how the theory will play out in practice. The tests are now coming fast and furious. The Wall Street Journal has switched to multi-platform, all-access pricing recently. The New York Times will do the same soon, adding its meter. News Corp.’s The Daily tests out consumer willingness to pay for a new, native news product, while Ongo seems to have stumbled out of the gate with an underwhelming presentation and too small — and haphazard — a list of initial news suppliers as it asks news consumers for $84 a year. The Dallas Morning News will lead U.S. metros into this new world. Journalism Online will power a good five to six dozen newspaper sites — most are metered, most getting ready for the tablet — by mid-year, as well.

Though it all makes good economic sense to the industry, some — how many? — consumers find work-arounds more appealing than publishers expect. As daily publishers have cut back and back, we’ve seen an explosion of new news content, from top-drawer regional startups to hundreds of native hyperlocals and Patches to great niche sports sites and more entertainment and lifestyle feature content (hello, Demand Media IPO!) than anyone can stomach. There’s lots of free news content still out there, and planning to be out there, from the Reuters and Washington Posts to the GlobalPosts and BBCs and U.S. public radio stations/websites. It will be fascinating to see how the non-paywall news suppliers organize themselves — consortiums are in discussion — to offer alternatives to this very do-over strategy.

October 19 2010

14:00

NAA finds a more favorable website stats vendor — but misses the readership shift to mobile news

When last we checked on the Newspaper Association of America’s web stats (and other data) back in April, the monthly website usage information that the nation’s daily newspaper organization was publishing came from Nielsen Online, and it wasn’t all that pretty.

The NAA tried to put the best spin on the data, but as we pointed out at the time, time spent at newspaper sites was in the doldrums and getting gradually worse, with three of the seven shortest attention spans measured by Nielsen occuring in the first quarter of 2010: 34:10 minutes in January, 31:39 minutes in February, and 32:21 minutes in March. For context, consider that at the time, also according to Nielsen, the average Facebook user was spending nearly seven hours on the social networking site.

It looks like NAA was not happy with those first quarter web stats. It published April data from Nielsen but offered no further updates for four months. At that point, I inquired whether NAA had decided to stop publishing the data, and was informed by Jeff Sigmund, director of communications, that “a new methodology” was in the works.

The new methodology turns out be be Comscore. Last Thursday, NAA posted Comscore data for September, and simultaneously wiped all the old Nielsen data off its site. The reason for the switch is clear: Comscore’s results are more favorable to newspapers than Nielsen’s in several categories, as trumpeted in an NAA press release.

As part of the switch, Comscore provides NAA with data specific demographic slices, something it didn’t get from Nielsen. For example, it reports: “More than 55 percent of adults in the 25-to-34-year-old demographic visited a newspaper website in September. During that same time period, 52 percent of this age group visited Yahoo! News Network, 22 percent visited CNN and 24 percent visited MSNBC.” We’d love to drill a little deeper there, but that particular comparison seems to suggest that, with no real statistical difference between Yahoo News and the entire newspaper business in reach among 25-to-34-year-olds, Yahoo offers a vastly more efficient one-stop ad buy than newspapers do.

Similarly, NAA says Comscore found that “one-in-four (25 percent) of adult newspaper website visitors come from households earning at least $100,000 a year, compared to 21 percent of all adult Internet users.” News consumption and newspaper readership have always skewed a bit toward higher income strata, so that’s not surprising — in fact, that four percent advantage is not particularly impressive, and here again, advertisers can easily find sites that are far more efficient in reaching high-income consumers.

When compared with the old Nielsen data, the benefits of the vendor switch are obvious. In March, Nielsen found 72.1 million unique visitors, which was about equal to the average for the previous 9 months. But in September, Comcast identified 102.8 million UVs, “almost two-thirds (61 percent) of all adult Internet users” according to the NAA release. (The release explains that Comcast is now NAA’s preferred methodology because “it more accurately reflects the true size of the newspaper Web home and at-work online audience,” but it offers no explanation of the major discrepancies between the old and new systems. “More accurately” seems to mean “they found more of them.”)

Time spent, or engagement, is the metric that matters most to advertisers these days. Unique visitors, no matter how impressive a slice of the total web audience they represent, don’t deliver customers to advertisers. They key is whether site visitors are engaging — interacting — with the content and the advertising on the site, and that kind of engagement still eludes most online newspapers.

The NAA release says “the findings point to engagement,” without putting that engagement in context or mentioning the specific per user/per visit “time spent” portion of Comscore’s findings, which are posted in the “Trends and Numbers” section of NAA’s site. There, Comscore reports 3.8 minutes per September visit, and 8.5 visits per visitor, for the month. That’s 32.3 minutes per visitor, total, for the month of September — a result slightly below the first-quarter average of 32 minutes, 43 seconds found by Nielsen. So in the engagement metric, “more accurate” means “almost exactly the same.”

So, while it’s no doubt statistically invalid to directly compare the Nielsen and Comcast findings, what NAA seems to have bought by switching is a larger audience spending about the same amount of time per visitor. And that “time spent” by either method boils down to an average of about a minute per user per day — still only about one half of one percent of all time spent online.

Comscore measured a total of 3.3 billion minutes spent at (U.S.) newspaper websites (compared to an average of 2.3 billion in the first quarter — the increase being due to the improved UV count) which sounds like a lot until you consider that (in August, and globally) we collectively spent 41.1 billion minutes at Facebook. Those figures should not be directly compared, but it’s clear that newspapers, collectively, enjoy just a fraction of the attention the top social network commands.

Perhaps more important than all of this statistical nitpicking, though, is the fact that while the NAA fiddles with methodology and stat sourcing, the audience is in the middle of another major shift in its digital news consumption from web browsers to mobile platforms — smartphones, e-readers and tablets. By sometime in 2012, cumulative sales of iPads, alone, will likely exceed the number of home-delivered newspaper subscriptions. The majority of mobile content consumption is likely to fall on the leisure side of the consumer’s online time — enabling deeper, longer engagement than the fleeting workday news consumption being measured by Nielsen and Comscore. Many newspapers are in fact working to follow their audience in this shift (though few are leading them there), but NAA is still stuck in an earlier mode of touting questionable browser traffic stats.

NAA’s vendor switch may mean a somewhat more impressive monthly press release, but it misses the mark of what it should really be doing to help its members find a digital audience. It’s time for NAA to dig much more deeply and broadly into this shifting landscape — to begin measuring and comparing news consumption in print, in broadcast, on computers and on mobile devices. So far, few news media have found ways to make their digital versions profitable, let alone self-sustaining in the absence of their legacy print versions. Will they ever get there, when their national trade organization is still refining “methodology” for counting its web browser audience, while that very audience is rapidly shifting its consumption to a whole new generation of digital devices in which usage of apps, rather than websites, is what counts?

Image by Eric Skiff used under a Creative Commons license.

April 05 2010

16:43

Is print still king? Has online made a move? Updating a controversial post

A year ago, in a Nieman Journalism Lab post that garnered 88 comments and still has viral life out there, I maintained that just three percent of newspaper content consumption happens online; the rest of it happens the old fashioned way, by people reading ink on dead trees. Given the continuing attention being paid to that conclusion (it was cited just last month by Hal Varian, Google’s chief economist, in testimony to the Federal Trade Commission), let’s revisit the numbers and see whether anything has changed.

With updates or improved data on at least some of the numbers, the general conclusions still hold: U.S. newspapers have not pushed much of their audience to their websites, nor have they followed the migration of their readership to the web. Their combined print and online readership metrics, whether measured in pageviews or in time spent, show that there’s been significant attrition since last year in the total audience for newspaper content, and that the fraction of that audience consuming newspaper content online remains in the low-to-mid single digits.

Here’s how I arrived at the numbers this year (to follow this more closely, or check my math, you can view my worksheet here):

Point of comparison: Pageviews

First, a comparison of pageviews in print and pageviews online. In print, I projected pageviews for newspaper content by taking the 2008 paid circulation reported by the Newspaper Association of America, adjusting it by the average of the two six-month circulation loss figures reported by the Audit Bureau of Circulations (March, September), and multiplying the resulting 2009 circulation by 2.128 readers per copy for weekdays and 2.477 for Sundays. (This is a 2007 Scarborough Research (PDF link) number I used last year also, but readers per copy has been a very consistent figure with little variation for decades.) This yielded total readership for weekdays and Sundays. I then made the same (discussable) assumption as last year: that the average reader of a newspaper issue looks at 24 pages, which means there is a total of 70.602 billion printed newspaper pageviews per month. That’s down almost 19 percent from last year’s 87.1 billion pages viewed. To be fair, my audience numbers last year were also based on that 2007 Scarborough data, so that’s really a two-year decline. (Jim Conaghan, research director at the NAA, tells me they have no data on the number of printed pages readers look at on average, and that there is no update to the 2007 readers-per-copy study.)

For online pageviews, NAA offers a precise number based on research by Nielsen Online. Nielsen’s methodology changed in June 2009, so I’ve used the average of the nine months from June 2009 to February 2010, which was 3.382 billion online newspaper site pageviews per month. So for print and online combined, we have a total of 73.985 billion pageviews (versus 90.3 billion last year). In other words, as measured in pageviews, 95.43 percent of total readership for newspaper content was in print; 4.57 percent of it was online. So while it appears that the online fraction has grown from 3.5 percent in the previous analysis, the bad news is that the total content exposure has dropped by about one fifth.

Point of comparison: Time on site

Some commenters to last year’s post maintained that print and online pageviews weren’t comparable. And certainly, the current wisdom says that pageviews and unique visitors don’t count nearly as much as “engagement” as measured by time spent on site as well as interaction with content. So, as I did last year, let’s look at time spent — both in print and online, print engagement versus online engagement with the newspaper content:

For the print side of the ledger, I began with the readership counts derived as above, and assumed average time spent with printed newspapers to be 25 minutes on weekdays and 35 minutes on Sundays. Now, this assumption got considerable comment flak last year, and no doubt will have its doubters this year. For those who say “I don’t know anybody who reads a newspaper at all, so how can the average be 25 minutes?” let me say that more than 40 million newspapers are still sold every day and someone is reading them, whether you know them or not. Anecdotally, half the people I see at Amy’s in Brattleboro are spending more time that that just with the New York Times. But let’s avoid the anecdotal evidence — here’s (PDF link) some U.S. Statistical Abstract data on time spent with various media, sourced from Veronis Suhler. It claims that the average person in 2009 spent 159 hours a year with newspapers (including newspaper websites), which is 26.1 minutes a day. While this tends to support the controversial pass-along factor, it’s for the average (adult) person. Since only about half the population actually reads printed newspapers (on average per day), that would mean newspaper readers spend an average of 52 minutes a day — which just strikes me as way too high. So I’m going to stick with the happy medium of 25 minutes weekdays and 35 on Sundays until someone can improve that data. (As an additional data point: According an NAA print newspaper “engagement” study (PDF link) presented a few years ago, on weekdays 45 percent of readers spent more than 30 minutes, 34 percent between 16 and 30 minutes, 21 percent under 15 minutes. Higher times were reported for Sunday editions.)

That yields total time spent with printed newspapers of 78.471 billion minutes per month. The online side is easy: averaging the last 9 months of NAA data, we get time spent at newspaper websites of 2.535 billion minutes per month. And combining print and online time spent, we have a total of 81.006 billion minutes per month spent with newspaper content. The engagement measure, therefore, says that 96.87 percent of time spent with newspaper content was in print; 3.13 percent of time spent was online. This is almost exactly the same as last year, when I found that 3.0 percent of time spent was online. But printed newspapers have lost a big chunk of total engagement as well: this year’s numbers are down 18.9 percent from last year’s analysis, which, again, really is a two-year drop of about one-fifth, with the loss occurring on the print side.

The conclusion that the overwhelming share of newspapers’ audience remains on the print side of the ledger is supported by Scarborough’s 2008 ratings of what it called the “Integrated Newspaper Audience” (PDF link) in selected markets. Measuring the cumulative 5-day audience rather than daily averages, that data showed that the incremental audience at newspaper websites added only a few percentage points to their print reach.

NAA and Nielsen are clear that their pageviews and time-spent stats since June 2009 can’t be compared with earlier months because of methodology changes, so I’ll refrain from doing that; but clearly the print/online audience split was enormously skewed last year and remains so — and most importantly, the online side is not growing. Back in June, NAA reported 3.469 billion pageviews and 2.701 billion minutes spent; in January (to avoid the short month of February), there were 3.452 billion pageviews and 2.485 billion minutes spent. Time spent per unique visitor has fallen gradually from 38:24 minutes in June to 33:09 minutes in January. In other words, while newspapers are losing readership on the print side, that disappearing audience is not following them online; at best, the online audience for newspaper content is static.

The purpose of this analysis is not to compare all “offline” news consumption with all online news consumption; it is to dissect the newspaper content audience. But as several commenters noted last year, this really means that as the audience moves online, it is getting most of its news from non-newspaper sites.

Beyond examining the split between readers of printed and online newspaper content, I also noted in another post last year that newspaper websites attracted less than one percent of all U.S. web traffic — 0.69 percent of pageviews and 0.56 percent of time spent, to be precise, in June 2009. Updating those stats with February 2010 Nielsen Online data (also detailed in the spreadsheet linked above), over the last nine months newspapers have actually lost share in both pageviews and time spent: pageview share dropped to 0.63 percent, and time spent dropped to 0.50 percent of total web traffic.

Meanwhile at newspapers, much effort and much dialogue continues to focus on getting readers to pay for content and battling aggregators — energy that might better be spent figuring out how not to lose the sizeable remaining audience for newspaper content, not by “protecting print” but by keeping the current print readers in the fold as they, too, gradually migrate to reading news online.

March 25 2010

13:39

NAA chief on Q4: “Velocity of ad decline is moderating”

The Newspaper Association of America has quietly updated the “trends and numbers” section of its site with fourth-quarter 2009 revenue, showing a 14th consecutive quarter of overall revenue loss and only a few indications of slowdown or reversal in the downtrend.

Counting online revenue, the industry’s total revenue came in 23.73 percent below Q4 of 2008. In the first three quarters of 2009, the losses were 28.28 percent, 29.00 percent and 27.94 percent. While the lower loss rate in the Q4 results could be considered an improvement, the only category with a significant improvement was online advertising, which lost just 1.00 percent in Q4, compared to drops of 13.40 percent, 15.90 percent and 16.92 percent in the first three quarters. (For the full year, total revenue came in at $27.564 billion, which is a mere $64 million over my prediction made back on September 22.)

Putting the best possible spin on the situation, NAA President and CEO John F. Sturm said in a statement: “The velocity of the advertising decline for print classifieds continued to moderate, and adverse trends for national advertising and newspaper Web sites lessened considerably as last year came to a close.” He added that he had been hearing “buzz” that this “ad trend improvement” was continuing in the first quarter of 2010.

Indications from a few of the firms for the first quarter of 2010 do point to a smaller loss, perhaps in the low teens. Since the downtrend began in 2006, the industry has lost more than 44 percent percent of its revenue, including nearly 48 percent of print revenue.

In most categories, Q4 provided no particular relief from the downtrend. Some details:

Online revenue, as noted, was down just 1.00 percent, perhaps an indication of better days ahead. Part of the problem for online has been that for many, if not most publishers, a good fraction of online revenue is directly tied to printed advertising, with the online component sold as an “upsell” or added value proposition. This means online volume drops right along with print, even if there’s growth in ads sold on an online-only basis. As I mentioned a few weeks ago, at E.W. Scripps, this linkage of online and print covers about half of all online advertising, and I’m finding similar levels at other firms.

Retail revenue (the largest category) was down 24.33 percent, continuing precisely the track it was on for the first three quarters (which were off 23.68 percent, 24.92 percent and 23.98 percent, consecutively). And keep in mind that while retail sales have not rebounded much, we’ve had GDP growth since mid-2009. Every retail category measured by NAA showed a decline, which has been the case all year. Not surprisingly, the worst drop was in the building materials category, which fell 36.58 percent, a tad better than losses in the 50 percent ballpark for the first three quarters.

Classified revenue was down 31.72 percent, falling less than the first three quarters (42.34 percent, 40.42 percent and 37.90 percent), but that may be because there’s just not much left to lose. In Q4, total classified revenue was $1.757 billion, compared with $5.243 billion in Q4 of 2005, the best quarter ever in classified volume. In other words, in four years, more than 66 percent of classified revenue has evaporated.

As in retail, every classified category (automotive, real estate, recruitment and other) was down in every quarter of 2009. The slight reduction in the rate of decline can be attributed to slowdowns in the loss rates in automotive (down just 37.0 percent in Q4 versus losses in the low 40s during the first three quarters), and “other,” which was off just 8.0 percent (versus 16.1 percent, 11.7 percent and 8.8 percent earlier in the year), but that “improvement” is probably due to the growth in foreclosure notices, which are generally counted in this category.

National revenue fell 19.80 percent, compared with losses of 25.87 percent, 29.61 percent and 29.84 percent in the first three quarters. National saw small upticks in automotive (based on spending by manufacturers to support the cash for clunkers incentives), food, household furniture and furnishings (which almost doubled), and medical and toiletries. While most categories were down, at least there is evidence of a few actual trend reversals in spending by national brands.

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