Go digital and reduce costs by 65%

by Jason Preston on November 25, 2008

This chart comes from Edward Roussel at the New Model for News conference (incidentally, Edward once answered questions on changes in the newsrooms for Eat Sleep Publish).

Looks like a big drop, doesn’t it? That’s because it it.

There are a lot of legacy costs involved with a print product that will not plague online-only publishers, and on-balance, if a company is smart about it, “dramatically lower costs” can quickly become “profits.”

All the statistics I’ve seen indicate that companies expect to continue spending more in online advertising, despite the economic climate.

{ 4 comments }

1 Ari Herzog 11.25.08 at 10:28 am

This is on par with a recent talk I heard by Popular Science editor-in-chief Mark Jannot, that the entire consumer magazine industry is plagued by an approximate 13% increase this year in printing, paper, postage, and distribution (what he called PPP&D). So, he’s slowly shifting to digital-only, with a 5-year plan.

2 Digidave 11.25.08 at 7:30 pm

What is the loss in revenue though?

Most newspapers get 80% or more of the revenue from print advertising.

Net loss = -20%

Not saying we shouldn’t consider this, just trying to put into perspective the challenges.

3 Elliott 11.25.08 at 11:13 pm

There are a lot of legacy problems with pulp and a large, no huge amount of readership problems to web only. You need to get hits and clickthroughs to make this work and that isn’t that easy to accomplish. This would really work well IF you can sell ads and maintain “readership” to make the ads work. This can’t be done in small papers or even larger papers in small markets.

4 Jason Preston 11.26.08 at 10:20 am

Ari – Sounds to me like Mark Jannot is a smart man. If you manage the transition properly, I think it can be profitable.

Digidave – You’re right about the ratios, I’m pretty sure, and you raise a sentiment that has been echoed to me both in person and through e-mail.

I think the trick is threefold:

1. there is no instant transition. “flipping a switch” *would* lead to an immediate loss.
2. automated ad systems. small businesses need to self-serve their ad campaigns on your site.
3. metered content. get extra revenue from your brand’s biggest fans.

Elliott – Online ads, as a business, are still growing (not shrinking). Also, I think you can charge readers for certain content.

Also, my understanding is that for most newspapers, the web audience is much larger than the print audience, even though it’s harder to track who is and who is not a “subscriber.”

I think the chances are good that a small newspaper can find a viable business through an online audience, even if it’s not gargantuan.

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