Focusing on digital ads and subscription growth to make up for rising print costs

At a time of soaring costs across the world, industries are feeling the pinch. News publishers remain stuck in the middle of this crisis. Print production costs are going up along with energy bills and more. Publishers are seeing success with growing digital revenues, but finding the right balance between digital ads and subscriptions in the shift from print to digital is complex – but the 2 can work in tandem. How are publishers solidifying their focus on digital ads and subscriptions?

The financial struggle for publishers examined

Publishers are increasingly planning to divest in print according to WAN-IFRA’s World Press Trends Report. Examining the latest financial reports from 3 US publishers shines a light on the growing print cost difficulties of 2022. Lee Enterprises recently announced a Q2 loss of $6.7 million, citing a decline of print revenue as part of the reason for the losses. The publisher has laid off dozens of employees and reports confirmed this week that 400 more have lost their jobs.

Gannett’s finances told a similar story with a $54 million loss. Along with the decline in print revenue seen at Lee, Gannett were also hit by overall print costs increase. The cost of newsprint is up 31% compared to a year ago. Growing newsprint costs also impacted Dallas Morning News, whose news print prices also increased 31%. This combined with other factors including a $800,000 decline in print circulation revenue led to losses of $2.4 million in Q2.

It is important to note that struggles have also been seen in engaging readers in digital. At INMA’s recent webinar some hard-hitting stats stood out. Heavy users of news products have declined 1/3 since their pandemic peak. Overall user sessions are also down 14% since Q1 2021. Perhaps the most worrying statistic presented by Greg Piechota was that cancellations of news subscription are up 34.4% since Q1 2021.

It’s not all doom and gloom, there is digital hope

Despite the problems with print and perceived digital struggles, there remains a sense of hope. Just 7% of attendees to INMA’s webinar said they were pessimistic about news engagement and subscription growth going into the autumn and winter, with 81% having mixed feelings.

Source: INMA Webinar

Gannett’s Phil Schroder provided optimism. He believed that news can continue to grow for the rest of this year and beyond, particularly with the upcoming midterms in the USA. Aleksandra Sobczak from Gazeta Wyborcza also explained that newspapers had faced many crises in recent years, but people still need good journalism to explain things. She fully believes that in times of economic slowdown readers will stay with publishers to receive the information they need.

At the centre of their optimism is digital growth. Gannett’s Q2 financials reported a 1.5% growth in digital revenues compared to Q2 2021, representing 35% of total revenues. Lee Enterprises also reported digital growth of 33% year over year with digital making up 31% of total revenue. With digital clearly becoming more important, what is the balance between subscription and advertising?

Digital subscription revenue continues to grow despite cancellations, focus on retention is needed

Despite increased cancellation rates and doom and gloom surrounding subscriptions following Netflix’s losses at the start of the year, digital only subscriptions have continued to grow linearly since 2019. Subscriptions may not be the things people will cut straight away according to Greg Piechota. This is because they are a way of making delayed purchases.

Source: INMA

Publisher’s greater focus on digital subscriptions has borne success. Gannett reported a Q2 digital paid subscriber number of 1.87 million, a 35% growth figure year over year. Dallas Morning News added 2053 new digital subscribers in Q2 to take their figure to 62,688 up 18.4% from end of Q2 2021. Digital-only subscribers at Lee Enterprises now total 501,000, up 49% year over year. Digital subscription acquisition is clearly working well for publishers, but increased cancellation rates suggest a need to focus on subscriber retention.

Gannett’s Phil Schroder highlighted success in focusing on this. Their most important retention tactic was to keep reminding subscribers of benefits through a monthly benefits newsletter pointing out stories, apps and other features like the ePaper. These newsletters have a high level of open rate and CTR compared to their daily newsletters. In August, Gannett launched their first engagement campaign purely to app users. It saw 3x click through rate compared to other campaigns through the app. Perhaps the most interesting retention experiment Gannett plan to launch is direct mail via post (yes real mail!) to unengaged users on the digital side. According to Phil Schroder, studies have shown younger audiences miss getting physical mail, so it is now more effective than 10 years ago. The publisher will launch the test with their 3 lowest cohorts of users.

After acquisition efforts were at the forefront in the pandemic era, clearly retention is most needed now.

Subscriptions and their data are putting publishers in the strongest position for digital ad revenue

Investing in your subscription business will also pay off in your ad business. The cookie is crumbling but thanks to registrations and subscriptions, publishers are in a good place with data. According to Adobe, first party data acquired by publishers is the foundation of strategic partnerships. These partnerships are increasingly set to be with advertisers according to Innovation Media Consultancy. With other industries not able to leverage first-party data from their users, publishers are now a central part of the ad tech ecosystem. They have a golden opportunity to use their data.

The focus on ads is worth it for publishers looking to replace print revenue. Digital ad money can supplement subscriptions. Digital advertising on the whole grew by 33% in 2021 and ad spending is poised to grow 9.7% to $836.9 billion in 2022. Zenith predicts digital advertising across all channels will exceed 60% of total global ad spend for the first time in 2022. When looking at digital advertising for publishing specifically, WAN-IFRA found that revenue grew by 16.5% in 2021. With the growth expected with the digital advertising market, clearly there is room for this revenue to grow.

Source: WAN-IFRA

Some publishers have begun to find success with their digital advertising strategies to start to move away from problematic print. Despite their losses, Lee Enterprises reached the digital inflection point in advertising, with digital ads now bringing in 51% of overall advertising revenue. Gannett also still see success with ads for subscribers. Their digital all access subscription with ads is cheaper for subscribers and remains more popular than the premium priced digital product without ads. In Europe, Ouest-France operates a freemium model with Edition du Soir. Once readers hit the registration or subscription wall, they can watch adverts to read more.

Subscriptions and ads can work hand in hand and finding multiple revenue sources to replace print offers a greater chance to replenish revenues. Publishers must work to find this balance.

Matthew Lynes
Media Innovation Analyst @ Twipe

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