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Search for Growth in the Digital World

June 27, 2014 3 Min Read Media Services
Richard Snyder, CPA, CGMA Director, Audit & Accounting, Media Industry Group Leader

Newspapers search for growth in the digital worldAre newspapers on the verge of extinction? Not necessarily. While the newspaper industry is often perceived as a dying industry, many papers still have a strong brand name in the communities they serve. That said, there are many hurdles for newspapers to overcome, most notably, maintaining current revenue while growing digital revenue to a level that can support the business.

Some very smart people think they will be able to pull this off. In the past few years, Warren Buffett of Berkshire Hathaway, Jeff Bezos of Amazon, and John Henry, owner of the Boston Red Sox and Liverpool Football Club, have all made significant investments in newspapers. In his annual Berkshire Hathaway shareholder newsletter, Buffett wrote, "Papers delivering comprehensive and reliable information to tightly bound communities and having a sensible Internet strategy will remain viable for a long time." Investments in the industry by Buffet and these individuals and others reflect positively on newspaper media companies and the value they offer the communities they serve.

Since the great recession of 2008 and 2009, newspapers have focused heavily on reducing costs as a way to become competitive and profitable. With today’s lower headcounts and a limited number of areas in which to reduce overhead, newspapers now must reexamine their revenue streams. The Newspaper Association of America (NAA) reports that overall newspaper revenues increased in 2013, despite a continued decline from traditional print advertising revenue. What this means is that the newspaper industry is starting to do a better job of taking advantage of technological developments, social media trends, and consumer behaviors to grow readership and audience – reflecting an evolving business model.

According to the NAA, digital revenue now accounts for 19 percent of all advertising revenue. Pure-play (digital only) revenue increased by 14 percent. Mobile advertising revenue, though relatively small in comparison to total revenue, increased 77 percent. These figures indicate that growth opportunities lie in the digital world. These opportunities will continue to grow as society continues to push for more digital products. Readers want their information quickly, and they are becoming accustomed to picking and choosing the news that interests them.

Here are a few strategies newspaper companies can implement and enhance to ensure the capture of digital readership and revenues:

  • Refocus and invest efforts toward digital products. Newspaper media companies’ future growth will be in digital advertising, circulation, marketing services, and other products.
  • Hire and train sales people who understand and promote digital products and generate digital revenue (advertising and circulation). This is key to a newspaper’s success. A sales staff that does not embrace digital products creates barriers to growing these revenue streams.
  • Be proactive in social media. Whether it is Twitter, Facebook or another type of social media, it is important that newspapers understand how prominent a role these social media outlets play in society.
  • Continue to seek ways to be paid for products and content, especially on the digital front. Many papers now have pay walls that require readers to subscribe digitally in order to read articles online.

For newspapers to survive in the future, their business models need to change from the traditional models used in the past. In order to attract new readership, which translates into higher circulation revenue and increased advertising dollars, newspaper media companies must embrace digital revenue-generating sources as a way to grow their businesses.

Richard Snyder can be reached at Email or 215.441.4600.

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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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