The Economics Of Publishing: Print Fire Sales Indicate Analog Dollars Now Worth Only Digital Pennies
- by Joe Mandese @mp_joemandese, August 6, 2013
It’s a fire sale in the print journalism industry, and to use a popular analogy, those with digital capital are gobbling up prized publishing assets at the equivalent of 10 digital cents on the analog dollar. Well, the math may not work out exactly that way, but there’s no question that the sale of three major publishers -- The Boston Globe, Newsweek and The Washington Post -- in as many days reflects the declining market valuations of important print media, and the rising fortunes of the digital kind.
In the most striking of the flurry of print media sales, Amazon founder Jeff Bezos announced a deal late Monday to acquire the Washington Post Co.’s publishing assets, including flagship newspaper The Washington Post for $250 million.
“Um, WaPo market cap is $4.2 billion,” Yahoo Finance user screen-named “r8h234rs” posted on the Washington Post Co.’s stock ticker (WPO) message board. The user was referring to the current stock market capitalization of the entire media company, which also owns major electronic media outlets and lucrative education industry publisher Kaplan. In recent Securities and Exchange Commission filings, the company has estimated the value of its publishing division at $256 million, so Bezos only got a small break on its current market value, but that is down from what historical high?
No one may ever know that true valuation, although the Washington Post Co.’s overall market value is nearly half of what it was at its high in December 2004 -- a time when its newspaper business most likely represented much more of its total value.
Asked what the Washington Post Co. might do with the rest of its media assets, a Yahoo Finance user screen-named langdonsmith quipped: “Maybe the family is going to take a 3.9 Billion dollar loss in the third-quarter.”
While instant news analysis credited Bezos as being a shrewd investor and speculated he might seek to use the paper’s influence to curry policy on Capitol Hill, or possibly to leverage his personal investment in the paper as part of some ingenious digital publishing strategy, another Yahoo Finance user speculated he acquired the pulp-based publisher because “Amazon needs a cheap source of packing material.”
People have made such jokes about newspapers having such ephemeral value (wrapping fish, lining bird cages, etc.) as long as there have been newspapers, and well before the digital age. But something else is going on here -- something ongoing and longitudinal -- that is reshaping the media industry, and the societies and business interests it serves. And newspapers may just be the canaries in the coal mine.
On Saturday, IAC sold once vaunted weekly magazine Newsweek to a digital-only publishing company IBT Media, the parent of the International Business Times, for lord knows what undisclosed terms, and The New York TImes Co. sold its New England publishing group, including flagship The Boston Globe to Red Sox owner John W. Henry for $70 million in cash. To understand how much these print publishing fortunes have fallen, consider that The New York Times Co. originally acquired The Boston Globe for $1.1 billion in 1993. In other words, it took only 3 analog cents for the current value of digital dollars on that deal.
Without newspapers there will be no real news reported, and without news no democracy...the owners of the newspapers need to try harder ... its a new world.
Bob - Agree 100%. I saw a Columbia Law Review study some time ago suggesting that 90% of the news published on the Web originates with daily newspapers. I am trying to find a link to that now, but stumbled upon this excellent CLR analysis in the meantime:
http://www.cjr.org/reconstruction/the_reconstruction_of_american.php?page=all
The only way out of this fire for any legacy publisher is to begin a rapid transformation to building themselves as a new age publishing company. That means a intense focus on cranking out new digital ONLY publications and retraining sales and marketing teams to engage with advertisers and sell the power of the connection between relevant and engaging content & digital reader. Time is almost over...There is smoke everywhere
90% of the news published on the web originates from daily newspapers. Shouldn't those new sources, who expend the resources to gather and disseminate that news, be able to dictate how it is distributed? And be entitled to the advertising revenues attached to that news? Maybe it's not the newspapers, but rather a case of "theft" on the part of the digital distributors.
Larry, Great question and observation. I think the problem has been that it's difficult to enforce "piracy" of news, because once a story is published, the information in it, more or less, becomes public domain. The original content published by a newspaper may be copyrighted and protected, but the public knowledge of it is not.
Otherwise, every time someone mentioned "Watergate," they would have to pay The Washington Post, in which case they would be so rich, they could buy Amazon.
As a long time (18 years) online publisher of an advertiser supported (sometimes not supported) site the advertising revenue has been difficult to get and almost impossible to charge for what a web site audience is really worth... the ad agencies have demanded that the web be priced as would TV or other mass media...when it really needs to be priced against was used to know as "direct mail"
Original reporting is expensive and after the first publication the news goes viral... eliminating any revenue for the entity that actually does the work and paid for the reporter...
Digital newspapers for the masses aint gonna work, unless Jeff can use the Post as a vehicle to promote his uber profitable busisness without concern for CPM and ROI... Go Jeff!!!!!
People want news - but not paper. That trend is clear. New buyers that focus on "fixing" the old model inevitably fail as costs simply are too high in today's world. Bezos, by bringing tech thinking and processes to WaPo could likely transform the organization into a news organization that moves beyond its history to become something great. Good insight at Forbes.com http://onforb.es/14hmQpy
Bob...I ran both print and digital businesses at Ziff Davis for over 13 years and have sold media for longer than that. Biggest issue here is that publishers need to start retraining their salespeople and spending more time with clients as opposed to agencies. We are never going to get the value that is warranted for the intersection between content and consumer if we rely on ad exchanges and RTB...99% of our selling was client direct. Solid salespeople should know how to make a solid argument for the value of the connection with your audience. If they don't know how to do that...then you need to train new ones..
To build on Al D.'s and Bob G.'s points (sort of)...it's OK that analog sells out to digital at 10 pennies per dollar, cuz that's about the equivalency of digital's % CPM of analog CPM. And will only go lower. So, now everyone loses - readers, publishers, and advertisers.
Obviously, the digital players realize their models cannot be sustained without content. And, content is still coming mainly from the analog world. At some point, Joe... people are going to have to pay attention to your quote, "I pay,you pay, or someone else pays." Trading analog dollars for digital pennies and then buying analog assets with digital pennies cannot afford a viable content ecosystem in the long-term. Scary...
@Kevin - Digital or analog, the CPMs at issue here are for impressions presumably "reaching" the exact same people. There is no logical explanation for a price differential. And therein lies the problem, because if we were using logic, we'd realize that no one outside our industry wants or cares about the ad load, and to tie a business model to a work product no one wants -- and then argue its relative value -- is a fool's errand.
Al is right, it's a creative sales challenge,
Judy, thanks for remembering that quote. In full disclosure, I stole it from Shelly Palmer, who once used it while moderating an OMMA event.
After reading the collection of comments I would like to pinpoint what I believe is the economic problem that all content creators are facing.. "Barrier to Plagiarism". Before the web an original news story that appeared in print had the protection of time on the publishers side that allowed them to benefit from their labor and investment...If anyone wanted to "Read All About It" in a timely manner they had no choice but to buy or borrow a copy of the publication that "originated" the story, giving it a saleable audience that allowed it to make a realistic and fair ROI. Today with the ubiquitous web, 24x7 news stations and instantaneous social networks, every major story "goes viral" and becomes free for the clicking... so the originator of the news is left out in the cold, and the plagiarists sites get free content and a no cost audience which is priced at a CPM that reflects an unfair cost for content...This problem will soon eliminate ad supported media and professional journalism...without ad money to pay reporters and overhead, there will be no unbiased, stand up entities to watch over our democracy.. how sad.
Bob...There will always be a segment of the marketplace that wants/needs a packaging of content around special interest topics. Coming from the "Auto Channel" my sense is that your content can be found in a number of different venues on the web. Your readers/viewers are engaging with your content because you have aggregated and assembled core content in a easy to digest package. Advertisers want to target relevant consumers within relevant environments..That's why they advertise on Auto Channel. As it pertains to News...The news outlets need to do a better job of packaging and delivering news and insight via the digital distribution network. If they packaged this for digital distribution rather than throwing it together...they might find a core group of readers that want that package more than they want to be scrambling around the web for the information that they need. Advertisers want and need to be more efficient with their media dollars. The industry needs to transform itself into a digital delivery communications strategy that is engaging and effective to the reader..NOT just a repackaging of web and/or print content. If we build this new digital publishing model both the readers and advertisers will come.
Let's say I had a paid subscription to digital content. Would it be served up in a reader-friendly manner? Or would it still jump all over the screen while I'm trying to read it, take lots of work to navigate, and be interrupted with self-starting video and spontaneously blaring audio? And would advertisers still stalk me all over the place?
I won't consider paying unless the "connection" will take place on my terms, just the way it does on paper. Exclusivity isn't enough; I want respectful delivery. No publisher has made me such an offer yet.
hi Al.. the front door to the web, Google Search, show no love for content in context... an auto manufacturers new product release should become more important on The Auto Channel for all the right contextual and relevant reasons... but no....and most advertisers are too busy with footing their data to pay attention to the content surrounding their ads..