How long will printed newspapers be still around? And how low will newsprint consumption fall? These are just some of the questions that speakers and participants at the World Printers Summit 2023 – organized by the World Association of News Publishers WAN-IFRA – addressed in Frankfurt, Germany last October.
A topic that quickly gained attendees’ attention was the steep decline in newsprint demand registered in Europe in 2023 with 30% in Denmark in 2023 due mainly to high paper and distribution costs. In France, newsprint consumption plummeted by 20% year on year to 170,000 tonnes in 2023 due to the Covid-19 pandemic.
Various speakers at the summit highlighted how media companies are still trying to figure out how to remain – or to return to be – sustainable from a financial point of view. Printed newspaper circulation has fallen drastically since the Covid-19 pandemic and digital subscriptions are rising. Still, printed newspapers are providing the highest profit to media companies.
“In 2022, 70% of our gross margin came from print, and only 30% from digital. We believe that printed newspapers’ contribution [to the gross margin] will decrease in the coming years and will stand at 30% in 2030,” Mediahuis COO Paul Verwilt commented. According to Verwilt, printed newspapers are only one distribution channel of journalism, and even if they have become less important over the years, they are still important for some consumers and thus essential for Mediahuis’ business model.
The question of whether the newspaper industry remains a lucrative investment opportunity in today's digital age is a subject of ongoing debate. Despite declining circulation numbers, newspapers continue to hold a unique position in providing credible journalism and in-depth reporting, which many readers still value. Study shows that some newspapers have successfully diversified their revenue streams by embracing digital platforms, offering subscription-based models, and leveraging advertising opportunities online.
Newsprint has been under increasing pressure due to weaker demand and rising costs. How does the future look for this sector of the paper market?
Despite the challenges, publishers are optimistic going into 2024, and even more so in the longer term. According to the World Press Trends 2023-24 survey by WAN-IFRA, 55% of respondents said they feel optimistic about their company’s business prospects for the next 12 months and the percentage increases to 58% for the next three years. Publishers expect that revenues will rise by 15.2% year on year in 2023 and by 18.5% in 2024 because of some elections around the world and the Olympic Games.
The survey also highlighted how print revenues still account for 57% of publishers’ income, even more than in 2022. Digital circulation revenues increased by a mere 2% in 2023, while digital advertising sank by 11%. Overall, most publishers said their profits increased in 2023.
In terms of investments, publishers prioritize reader revenue, product development and other revenue streams, while they will invest much less in print production and distribution. As for technology, artificial intelligence, automation and data analytics and intelligence are the publishers’ top priorities in the next 12 months.
Publishers said 43% of their revenues in the coming year will come from advertising and 35.3% from digital subscriptions, while 21.7% will come from other sources including events, grant funding and partnerships with platforms among other things.
While the newspaper industry is failing in some parts of the world, it is thriving in the Indian subcontinent. A PWC study says newspapers worldwide cost more (on a purchasing power parity basis) whereas in India, Bangladesh and Pakistan, they cost much less. The reason for this is the fact that newspapers in the Indian subcontinent are mostly made from recycled newsprint. Apart from this, the governments are subsidizing newsprint products, which means that on average, newspapers in India and Bangladesh cost less than your average expense for a cup of Tea.
In the West, the situation is opposite to this, as newspapers are not subsidized for their newsprint expenditure as well as the fact that recycling of newspapers does not translate into the same recycled newsprint being used for further printing.
Study shows, still, the print newspaper industry hasn't gone completely extinct. Some newspapers have been able to evolve with the rise of digital media. Here's a small glimpse into how this industry is still surviving in the online world.
Digital Transformation: While the industry is shifting from traditional print to digital platforms, print media still attracts image advertisers and premium readers. Diversifying revenue streams has become crucial for publishers worldwide, and they are embracing digital publishing, strategic partnerships, and convergent platforms.
Print Revenues: Despite digital transformation, print revenues continue to account for over 80% of the market globally. Publishers are creatively adapting to changing dynamics and experimenting with new initiatives.
Consumer-Centric Models: Publishers are focusing on consumer-centric business models to outpace digital platforms in terms of revenue. Trust in journalists and quality journalism is rising compared to online platforms.
Advertisers used to depend on print newspapers to market their products or services. But thanks to the internet, they have multiple options these days — and newspapers are financially feeling the consequences. Still, for some companies, like the New York Times, advertising remains a primary revenue source. In its 2016 annual report, the New York Times breaks down its advertising revenue as follows:
89% of advertising revenues come from display ads, both digital and in print versions of the newspaper.
5% of the newspaper's advertising revenues (both print and digital) are attributable to classified ads.
6% comes from "other" advertising, such as free-standing inserts, branded bags that deliver newspapers and more.
The newspaper industry, in many ways, was the news sector hit first and hardest by the advent of the digital age. As readers began to move online, papers were still producing strong profit margins with the vast majority of revenues tied to their legacy product.
But a 1998 study of 15 publicly traded U.S. newspaper companies found that all but one earned average profit margins of over 9 per cent from 1984-94. According to a 2010 OECD report, newspapers around the world derived about 57 per cent of their revenues from advertising on average, with the other 43 per cent coming from circulation sales. Another 2014 study of North American newspapers examined annual financial reports for publicly traded chains and found that no one was found to be a non-profit organisation between 2006 and 2013. Most UK newspapers are still profitable, but not as profitable as before. The Times, historically a lossmaker, has moved profitability in recent years with the introduction of a paywall for its online content.
Closing several long-publishing U.S. dailies in 2009 brought the “death of newspapers” mantra into the mainstream. It led many to believe that the medium had only a few more years left. Yet despite the predictions of impending doom, no major U.S. daily newspaper has closed since 2009. The death of newspapers was widely predicted at the height of the 2008-09 economic crisis. An examination of financial data for publicly traded newspaper companies in the United States and Canada, however, shows that their business model is highly adaptable, as all remain profitable.
“Some may have suffered a brief period of financial loss, but despite widespread perceptions of fiscal distress, all experienced continued, albeit reduced, annual profits”, according to a Study by Marc Edge, a Faculty Member University of Malta. This study examines the financial reports of publicly traded U.S. and Canadian newspaper companies in an attempt to diagnose their economic health and concludes that the business model for newspapers is robust and should permit the venerable daily to survive in print form for the foreseeable future. However, the profitability of newspapers has been called “the best-kept secret” in the media.
While the advent of digital media has undoubtedly posed significant challenges to traditional print newspapers, there are still compelling reasons to consider investing in this sector. In regions like India where print media maintains a strong foothold and continues to experience growth, investing in newspapers can still yield favourable returns. However, investors must carefully assess market trends, technological advancements, and the strategic direction of individual newspaper companies before making investment decisions in this ever-evolving industry.
