Feb 7, 2009

Newspaper: Charging or not for online content? Numbers for 9 scenarios.

>> Direct access to our online spreadsheet.

UPDATE 2 (2/9/09):
We added a new tab to the online spreadsheet with other numbers.

UPDATE 1 (2/8/09):
Based on your feedback (thanks to all), we have updated the numbers and uploaded a new excel file.

The paid model scenario is back into the conversation. Is it a good idea for newspapers to go back to OR begin an online full or partial paid model? We have been thinking about different scenarios, and calculating the revenue outcome. We based our numbers on figures from different newspapers in North America.

Base assumptions:
  • 100,000 print subscribers
  • $14.75 / month for the print version (7-day)
  • Website with 500,000 UV and 10M PV
  • $10 CPM (3 impressions per page)
  • $.20 CPC with .5% CTR
Based on these figures, their actual online revenue is approximately $1.8 M.

Then we ran the numbers for the following scenarios:
  1. No more print version. All print subscribers are subscribing to the website that is 100% behind a paid wall. NOTE: It is very unlikely that 100% of existing print subscribers would sign up for the web version.We are just demonstrating what could be the potential maximum revenue if all 100% did.
    Revenue = $6.1 M

  2. Great direct marketing campaign resulting in 2% of current UV subscribing to the website. 100% behind a paid wall. They pay the same price as the print version. For all of the following scenarios, the print version still exists.
    Revenue = $1.8 M

  3. Same assumptions as scenario 2, except the subscription price is halved to $7.50 / month.
    Revenue = $943 K

  4. Same assumptions as scenario 2 and 3, except the subscription price is again halved to $4.75 / month.
    Revenue = $613 K

  5. Direct marketing campaign resulting in 1% of current UV subscribing to the website. 100% behind a paid wall. They pay the same price as the print version.
    Revenue = $907 K

  6. Same assumptions as scenario 5, except the subscription price is halved to $7.50 / month.
    Revenue = $472 K

  7. Same assumptions as scenario 5 and 6, except the subscription price is again halved to $4.75 / month.
    Revenue = $307 K

  8. Mix of free and paid models. 60% of the site's content is free. There still are 500K UV. 1% of these UV subscribe to the paid part of the website for $4.75 / month.
    Revenue = $1.6 M

  9. Mix of free and paid models. 80% of the site's content is free. There still are 500K UV. 1% of these UV subscribe to the paid part of the website for $4.75 / month.
    Revenue = $2.0 M
You can see these figures on my spreadsheet. You can also download the excel file to play around with the numbers.

We didn't take into account the cost side. However, none of these scenarios would cover the actual costs of newspaper operations. It would be interesting to have the acquisition cost / subscriber and advertiser. It will be another one of the critical factors on the end-decision of whether or not to go paid.

If you think something is missing or doesn't make sense, please share a comment. Update the file and send it back to me at nwang(at)mignon-media(dot)com.

11 comments:

  1. I appreciate your making the effort to explore this issue. Some questions:

    Are you assuming that existing subscribers do or do not get free access to online?

    How did you arrive at your assumptions for how many people would sign up for an online subscription?

    Can you make your model reflect a "tiered pricing" regimen a la the Financial Times?

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  2. Sorry, upon rereading I see you don't include an option where the print model is kept. Why not? It seems exceedingly unlikely any paper would simply abandon print to go online unless that was the only choice remaining. And print subscribers would create a large, engaged base of online readers that should appeal to local advertisers.

    I'd like to see a model run using the FT hybrid system (see http://tinyurl.com/dzgwar).

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  3. @Working Thanks for your feedback. We started with a simplistic approach and wanted to update / improve the numbers with feedback like yours. We've gotten good feedback and have shared an updated online spreadsheet and downloadable excel file.

    To answer your questions:
    1- Yes, existing print subscribers would get free access to online, so the subs are in addition to the print subscribers

    2- We took the average to good return on a successful direct marketing campaign to determine how many people would sign up for an online subscription. We ran the numbers for a 1% and a 2% response rate.

    3- In fact, the print model is kept in all scenarios except Scenario 1. I had put a note in the description for Scenario 2, but it's probably embedded and didn't stand out. I agree that print subscribers are valuable; even if they are generally a different audience than the online one.

    I'll make the model reflect a "tiered pricing" system and post it tomorrow.

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  4. Surprising this exercise isn't taking place inside of more media companies. It's not. My edits would be to the CPMs and the % associated for ad revenue. For your average local tv, mid-market newspaper site, et al, the direct sales of the site is more like 25% at $10 CPM (healthy number, but okay). Local remnant more like $2 av CPM for 20% of inventory. Then 55% goes to the woodchipper at av CPM of $.80. Maybe your expereince is different, but it's funny what a pub will tell you vs. actuals! So many pubs think there is a magic faucet of dollars they can turn on if they get PV up. It's hard damn work.

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  5. @ Matt. Tx for your feedback. We ran your numbers. They are on the tab "Hypothesis 2" in the spreadsheet.

    By any chance, would you happen to have a cost figure for customer acquisition. We usually use $25. What do you think?

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  6. Anonymous1:01 PM

    What you seem to have done with this (interesting) exercise is demonstrate that, no matter how you tweak your assumptions (within reasonable bounds, of course), the various combinations of the advertising and subscriptions are unlikely to generate enough revenue to support a newspaper organization.

    Is that a fair conclusion?

    Terry Steichen

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  7. Very interesting. Would you happen to have the print-only revenue for the same model you're using as an example ? It would be great to compare it with the online revenue hypothesis. That would help answering one key question : would online revenue cover the actual salaries of the same number of journalists/employees, or at least a decent percentage of them ?
    Jean-Paul Fritz

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  8. Hey nice work, thanks. If I may, I believe your hypothetical subscriber and online viewer figures address larger daily newspapers, ignoring the majority of smaller circulation/viewer models.

    Both the Bakersfield Californian and the Ventura Star are smaller than your models, and they are:
    1) on the larger end of the daily newspaper spectrum and
    2) relatively successful in their online sales strategies.

    As far as I can tell, they don't reach your online visitor assumptions (but I know they exceed your revenue models -- go figure).

    And one of the better real world examples of paying for play not working exists in our market with the hapless Santa Barbara News-Press hiding behind a paywall available to subscribers. Their Alexa numbers are less than 1/2 of our visitors.

    Again, I appreciate (and have downloaded) your initiative.

    --Randy Campbell
    Publisher
    independent.com

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  9. @Terry It is a fair conclusion. And this highlights the necessity to find "side door" solutions as Jeff Jarvis said in his book, "What Would Google Do?" to finance news.

    We need to work towards a diversification of revenue streams to support a news organization.

    We also need to better understand the needs of advertisers to help them improve their bottom line.

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  10. @JPF Unfortunately, the print-only costs far exceeds the online revenue in any of the scenarios.

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  11. @Randy You're absolutely right. We wanted to start with real numbers that we had from newspapers. Right now, we are working with the NAA to produce a next iteration of this analysis with lower circulation numbers. This next version should be out by the end of this week.

    We are also taking a look at acquisition cost to begin to understand the effect on margin.

    If you have any numbers that you'd like us to put into the analysis, please send them to me by email at nwang (at) mignon-media (dot) com. You can also call me at 917-940-1749. Of course, the source would remain confidential when we integrate it into the next version.

    Thanks.

    ReplyDelete