The Big Shift in Newspaper Revenue
February 27, 2014

Revenue continued to fall at newspapers last year as modest increases in circulation revenue failed to offset bigger declines in advertising, according to the latest earnings reports from the nation’s large, publicly traded newspaper companies.

Analysts say the good news—if there is any—is that the revenue decline is not as steep as a few years ago, thanks to a small uptick in reader payments from digital paywalls and increased subscription prices.

“I wouldn’t call it a renaissance for newspapers, but I would definitely call it a stabilization,” said Gordon Borrell, a media analyst and CEO of Borrell Associates.

Total revenue fell last year at each of five large newspaper companies–Gannett, McClatchy, The New York Times Co., A. H. Belo and Lee Enterprises–according to a review of their latest financial filings with the Securities and Exchange Commission.

Revenue for all five together totaled $9 billion last year, down 3.3 percent from what they collectively reported in 2012. The New York Times fared best, with 2013 revenue down only 1.1 percent; and McClatchy fared worst, with revenue dropping 5 percent. Gannett, the nation’s largest newspaper chain, wound up in the middle, with a decline of 3.6 percent.

Company 2013 Revenue (in millions) % Change from 2012
Gannett $5,161 -3.6
New York Times $1,577 -1.1
McClatchy $1,242 -5.1
Lee Enterprises $675 -4.6
A.H. Belo $366 -2.3


* Note: There was one more week in fiscal year 2012 than in fiscal 2013, which means the revenue comparisons shown above reflect 52 weeks for 2013 and 53 weeks for 2012.

Over the last year of earnings reports, four of the five companies— Lee Enterprises, The McClatchy Co., The New York Times Co., and Gannett Co. Inc. — saw modest increases in circulation revenue, buoyed by a growth in digital paywalls and subscription prices. Those increases, however, were dwarfed by declines in advertising revenue, even though that decline is shrinking.

Analysts say the newspaper industry is undergoing a shift toward greater reliance on circulation, which for years accounted for 20 percent or less of newspaper revenue, but now accounts for 30 percent or more at some papers. But declining ad sales are driving the shift, not increases in circulation revenue, which are so slight they suggest reader payments will not be the saving grace for newspapers.

In addition, many newspapers continue to lose print subscribers, which is exacerbating the overall revenue decline. Borrell said the extra revenue that newspapers are gaining from implementing paywall models at their websites could prove to just be “a supplement and kind of a Band-Aid to eroding newspaper circulation.”

Still, the shift toward greater reliance on reader payments could be significant for the newspaper industry. A comparison of advertising and circulation revenue reported by publicly traded newspaper companies for the fourth quarter of 2013 versus the same quarter a decade earlier shows the growing weight of circulation. It is most evident at The New York Times, where circulation revenue accounted for 27.2 percent in 2003 and jumped to 49.5 percent by 2013. At Gannett, circulation claimed 22 percent of revenue in 2003; in 2013, that share had jumped to 33 percent.

It is unclear, though, how long circulation revenue can continue to climb. And as total revenues keep falling, analysts say newspapers are under pressure to cut back further on the content that keeps readers paying—at precisely the time papers need readers to help pay the tab for ad losses.

Ken Doctor, a media industry expert, said that since its height in 2005, print advertising revenue has declined across the industry by 60 percent. But instead of those numbers bottoming out as expected because “the base continues to get smaller and smaller,” advertising fell again by 8 percent in each of the last two years, and publishers are expecting yet another 8 percent drop in 2014, Doctor said.

“There is some continued growth in circulation revenue,” he said, “but if print revenue continues to go down at 8 percent a year and digital advertising remains flat, news companies will still be below zero revenue growth.”

News companies are reporting some gains in digital advertising, but they are so modest that they can’t stem the loss of print ad revenue. Among the problems news companies face, according to Doctor, are an expansion of advertising outlets online, and the fact that too many advertising dollars are moving to websites like Facebook and Google rather than news sites.

“There is essentially now an infinity of digital inventory, very different than scarcity in print, so you can buy digital advertising anywhere and everywhere,” he said.

Without a way to stop ad losses, analysts say, companies are going to have to cut expenses if they want to remain profitable. And those cuts could make readers less tolerant of price increases, according to Doctor.

“If they’re more dependent on reader revenue year-by-year-by-year, then those readers who are paying more expect a good product,” he said.

There may still be grounds for optimism, though, if newspapers can continue to reduce losses, move toward revenue stabilization and eventually find new sources of revenue.

“It’s one of those things that’s a half glass full, half glass empty kind of scenario,” Doctor said.

Growth may come, he suggested, as companies expand into “third, fourth, and fifth” businesses, in addition to the first two, advertising and circulation. Newer revenue sources include digital marketing services, sponsoring events and conferences, and in-house publishing activities to help other papers looking for publishing services.

If new businesses can grow to about 10 to 15 percent of the total revenue share, Doctor believes they could effectively counteract advertising revenue losses.

* Note: This story has been updated to reflect the fact that the 2012 fiscal year had one more week than the same reporting period in 2013. Had the two periods both contained 52 weeks, these revenue declines would have been less.

  • SocraticGadfly

    Per the third-last graf: “Growth may come, he suggested, as companies expand into “third, fourth, and fifth” businesses, in addition to the first two, advertising and
    circulation. Newer revenue sources include digital marketing services,
    sponsoring events and conferences, and in-house publishing activities to
    help other papers looking for publishing services.”

    Digital marketing services? In small towns, papers may have a partial edge on this. But, big cities? Nahhh. That’s what public relations companies do, Ken. Thousands of them, both newer and older, flood Monster, Indeed, and other job sites with “SEO specialist wanted” ads all the time.

    So, scratch No. 3.

    No. 4? Conflict of interest grounds. What happens when the “partner,” whether Chamber of Commerce, economic development agency, or private folks, make ill-advised spending decisions? Or worse? We’ve already seen this backfire with the NYT and WaPost. And Politico. The possibility of this becoming pay-to-play is bad.

    No. 5? Given that more media companies are already consolidating printing
    services, and the long-term future points digital only, how can you even
    offer this one?

    Even the gurus get ’em wrong at times.

    • jongnagy

      As major news vendors (in print or digital editions) like the NY Times express its biased opinion in articles, readers are coming to realize that and are dropping interest in opinion instead of hard facts.

      Matt Seaton, staff editor for The New York Times opinion section said that the NY Times will not scrutinize Palestinian racism “until Palestinians have a sovereign state of their own.” (Algemeiner, Oct 30, 2014)

      Will the Times also refrain from covering ISIS, Al Queda, Hezbollah, Moslem Brotherhood, etc., militants racism because they also don’t have a sovereign state?

      Arthur S. Brisbane in his final column as The New York Times public editor (ombudsman, a position solely created in the wake of the Times 2003’s Jayson Blair scandal) said this, “Across the paper’s many departments, though, so many share a kind of political and cultural progressivism — for lack of a better term — that this worldview virtually bleeds through the fabric of The Times.”

      The American Council for Judaism was formed in 1942 solely to fight the creation of a Jewish state—while 20,000 Jews were being sent to the Nazi gas chambers every day.

      One of its founding members was NY Times owner Arthur Hays Sulzberger.

      Now we can understand the Times anti-Orthodox, pro-Palestinian (almost anti-Semitic) stance these past decades.

      Just as it has Muslim writers on its staff, it’s time for the Times to hire professional Orthodox Jewish writers to write about articles on a subject the Time’s editors and writers have absolutely no knowledge of.

      • SocraticGadfly

        By your logic, then, the NYT needs to also hire someone who’s a fundamentalist Christian, someone who’s a Hindu nationalist vetted by the BJP, someone from the 969 Buddhist movement in Burma, etc.

        Otherwise, you’re conflating Jewish ethnicity and Israeli nationalism with Judaism the religion.

        Not me. I ain’t going down that road.

  • Mitch McCrimmon

    Newspaper publishing is in a sad state. I, for one, will never pay for online information when so much is available for free. The argument that a good paper offers more “in depth” coverage has no impact on me because I don’t want “in depth ” coverage – just the barebones news, thank you very much. The bottom line is that newspapers are an obsolete technology that emerged before radio and TV and should have gone away when they arrived. Anyway, there is definitely no place in the internet age for them. Time to say good bye and move on to newer, freer sources of news.

    • SocraticGadfly

      Then why do radios and teevee have AP feeds on their websites? Ooops.