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Digital and Print: Delivering a Successful Business Model

June 1, 2011 3 Min Read Media Services
Richard Snyder, CPA, CGMA Director, Audit & Accounting, Media Industry Group Leader

As the digital age plays a bigger part of our everyday lives, newspapers continue to face significant challenges in transitioning their products from paper to digital versions. While they have the technical capabilities and most, if not all, have online versions, they face significant financial hurdles to overcome in terms of costs—production, newsprint, ink and supplies, and labor. For newspaper companies to move ahead and remain viable, they must consider ways to increase revenue streams and reduce costs.

Newspapers advance in the growing digital market, but still need to incorporate ways to get paid for their content. Newspapers pay for the infrastructure (equipment and people) to provide more than half of the originally reported journalism in our country, but have struggled to be compensated a fair value for their investment. While many older generations prefer to read a printed newspaper, more and more people seek digital outlets for their news, whether it’s through a computer, iPad, tablet, or smartphone.

Over the past few years, many newspapers started using pay walls as a method of getting paid by online readers. Pay walls allow the reader to see headlines or view a certain number of articles, but eventually require the reader to subscribe to the online version to view the paper in full.

Advertising revenue is another area in which papers have continued to struggle. The recession that began in 2008 hit newspapers significantly. Since then advertising levels have continued to decline each year in most markets as advertisers have less money to spend and look for alternative sources to distribute their message. In particular, publishers are faced with meeting the advertisers’ demand to deliver to the papers’ readership (subscribers) in both digital and print.

In the past, newspapers successfully reached advertisers within targeted markets because the audience was definable. However, the Internet lacks a definable audience, and therefore, publishers have difficulty telling advertisers with certainty how many people their ads will reach. As papers develop better ways to define and increase their online readership, publishers can better define their audience and improve their advertising revenue at the same time.

With the conversion to digital media, publishers must consider ways to reduce costs associated with print copies. This is a challenging aspect for newspapers because they have significant costs such as press maintenance, depreciation, newsprint, ink, and labor. In addition, printing a newspaper will always require fixed costs, regardless of the quantity printed. A newspaper publisher may want to consider outsourcing the printing, which could reduce production, labor, and utility costs because dedicated commercial printers tend to have less down time and lower fixed costs. Additionally, consideration should be given to outsourcing the distribution and delivery of the papers or to partnering with other companies as an alternative to reduce delivery costs.

The transition of a newspaper’s readership from print to digital will continue to be a difficult one. Publishers must continue to offer their readership digital options while improving their revenue streams, and reducing production and operating costs. Newspapers offer significant value to our society, but must develop a business model that allows them to remain viable entities while serving the public’s interest.

Richard Snyder can be reached at Email or 215.441.4600.

Contact the Author

Richard Snyder, CPA, CGMA

Richard Snyder, CPA, CGMA

Director, Audit & Accounting, Media Industry Group Leader

Media Services Specialist, M&A/ Transaction Advisory Services Specialist, Owner Operated Private Companies Specialist, Private Equity-Backed Companies Specialist

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