Presented by Mather Economics: Matt Lindsay, president; Matthew Lulay, managing director; and Madelin Zwingelberg, senior manager
COVID disruptions. Newspapers have experienced a sharp increase in news consumption, particularly via digital channels; a significant decline in demand for advertising, both online and in print; and a significant decline in single copy draw as quarantine procedures impact traffic.
The result? More publishers are evaluating the number of print delivery days in order to maintain profitable operating expenses.
A four-part approach to finding the right delivery days. Mather’s forecasting tools look at advertising revenue, subscription revenue, expenses and total financial impact.
The digital transfer. Mather’s client partners have seen subscription shifts take place after delivery days were cut, as subscribers substitute that lost day with a digital subscription. A modest boost in digital subscriptions, but still a boost.
What about rates? Should newspapers cut their rates to reflect reduced delivery days? Mather has found that most of its clients keep the same rate, justified by some value additions to the remaining print editions or e-paper.
Forecasting two years out. Mather’s scenario planning tools combine baseline subscription revenue forecasts with estimated impacts from delivery day cuts, under various delivery scenarios. Check out the slides.
A perfect storm, not business as usual. Along with the COVID pandemic has come a very significant increase in the demand for news, while advertising is declining at the same time. Matthew Lulay’s advice: Go back to some point in your forecast where revenue was somewhat stable and trendline from there, while layering in some of the impacts from COVID.
Matthew Lulay’s ad revenue observations. Advertising demand closely tracks the broader economic performance (GDP). Forecasts call for a slow and incomplete recovery from economic slowdown from the pandemic. YOY changes in advertising revenue showed average declines of 9% annually pre-COVID. Small impacts will be felt to advertising revenue from cutting one day, but accelerates as more days are eliminated.
Matthew Lulay said it. “Mather predicts a modest drop in advertising revenue when dropping just one day, but impacts accelerate as more days are cut.”
And, he shared … “The overall advertising revenue also depends on the stickiness of ads at various line items. Some items like obits or classifieds aren’t forecasted to diminish because you can replace it on another day. Days that are sensitive to certain advertisers and retailers will have a larger impact on lost advertising revenue.”
You asked: Are there any days that are better than others to eliminate? The answer is specific to the marketplace, but many find that eliminating Saturday is a good first step, when moving away from seven days. The advertising demand is fairly minimal on that day in many markets. Some have found that eliminating Monday works out well, too. But, think about sports coverage in your market! Demand for sports news on Monday mornings might make that a bad day to cut.
You also asked: What may be holding newspapers back from taking this step? Lulay said it could be a wide range of things, but: “The data that we’ve seen so far … as long as it's managed in a smart way and the communication is there to support the decision and communicate why the decision is being made, the drop in attrition or the drop in volume is fairly muted.” It's important, he said, to be able to profitably operate the business; certainly, the pandemic has accelerated a lot of these decisions.
You asked: Which is the better approach? Is it best to cut more days sooner or should we start by cutting one or two days and then cut more as needed? While this will differ by market, Lulay said the feedback from publishers who have gone down this path show that it’s easier to start small and cut one or two days and then adjust as needed, based on how the actuals come in against your forecast.
And, what are the obvious pitfalls to avoid? From a forecasting perspective, Lulay advised newspapers to really pay attention to their line items in terms of advertising. While there are broad national benchmarks that are useful in terms of the recovery from COVID and what’s happening between print and digital, it’s really important to examine where your advertising revenue is coming from – by line item and by channel. While legals and obits likely won’t go away if you reduce the number of delivery days, other line items (like retail) are very sensitive to the number of days (or the actual days) that are being printed for delivery. Lulay says don’t rely entirely on the national benchmarks for those line items.
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