Print & digital Business Models in the USA
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10_– 12 October 2011, Vienna, Reed Messe Wien Session: Digital Innovations Title: Print & Digital Business Models in the USA Speaker: Ken Harding, Managing Director in FTI Corporate Finance and leading industry analyst, USA Media Port
Transcript of Print & digital Business Models in the USA
10_– 12 October 2011, Vienna, Reed Messe Wien
Session: Digital InnovationsTitle: Print & Digital Business Models in the USASpeaker: Ken Harding, Managing Director in FTI Corporate Finance andleading industry analyst, USA
Media Port
Print & Digital Business Models in the USA How do they compare?
IFRA Expo 2011 / Media Port
Ken Harding
PASSION FOR PUBLISING
FTI: A Leading Global Services Firm
A $2 billion NYSE traded
consulting firm (FCN)
One of the fastest growing
companies in the US (Fortune)
Over 3,500 Consultants in 30
countries
Media Industry Services
– Organization Design
– Revenue Growth
– Expense Reduction
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• Model three US newspaper scenarios to gain insight into
potential performance
1. “Continue On “– no significant change
2. Better monetize web/digital while “Retaining Print
Revenues” as long as possible – a runway to let digital
mature
3. “Maintain Sunday/Daily Digital – daily print impact much
more significant than Sunday
• Methodology
• Utilize historic trends for the industry to create a base case
• Analyze four case study newspaper’s key metrics to inform
inputs on the future scenario models
• Develop three scenarios aimed at projecting financial
performance of various framing decisions
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Business Case Objectives / Methodology Daily Metro Papers
US Newspaper Market / Case Study Trends Trends and Projections
Atlanta / Dallas / Denver / Philadelphia
Case Study Participants
US General Strategic Approaches Daily Metro Papers
1. Free web and digital
2. Monetize web and digital with pay
walls
3. Offer device deals to lure larger
digital audience
4. Push audience to digital – big impact
to print…some are thinking about…
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?
US Trends / Projections Through 2015
• Developed using
NAA, PwC, and FTI
data and modeling
• Circulation is
projected to be 40%
less than 2006.
• Advertising revenue
is projected to be
62% less than 2006.
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-
10,000
20,000
30,000
40,000
50,000
60,000
2006 2007 2008 2009 2010 2011P 2012P 2013P 2014P 2015P
US Annual Paid Circulation (millions)
-
10.0
20.0
30.0
40.0
50.0
60.0
2006 2007 2008 2009 2010 2011P 2012P 2013P 2014P 2015P
US Annual Advertising Revenue (millions)
Case Study 4-Paper Trends
• Daily circulation
generally has
declined
– Paper #3 increase
results from closure of
competitor
• Sunday circulation
has stabilized in
2011 due to value
of preprint coupons
and reader habits
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0
100,000
200,000
300,000
400,000
500,000
600,000
2009 2010 2011
Sunday Circulation
1 2 3 4
0
100,000
200,000
300,000
400,000
2009 2010 2011
Daily Circulation
1 2 3 4
Case Study 4-Paper Trends
• Unique visitors flat
to declining in 2011
– Paper #2 implemented
pay wall start of 2011
• Average page views
generally flat except
Paper #2
• Paper #4 with
similar visitors has
much lower page
views
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0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
2009 2010 2011
Average Unique Web Visitors per Week
1 2 3 4
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
2009 2010 2011
Average Page Views per Week
1 2 3 4
Case Study 4-Paper Trends
• Total ad revenue
continues to plunge
• Annual web/digital
ad revenue is flat to
declining except for
Paper #3
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$100,000
$120,000
$140,000
$160,000
$180,000
$200,000
$220,000
2009 2010 2011
Annual Total Ad Revenue (Millions)
1 2 3 4
$0
$5,000
$10,000
$15,000
$20,000
$25,000
2009 2010 2011
Annual Web/Digital Ad Revenue (Millions)
1 2 3 4
Case Study 4-Paper Trends
• Current average unique visitors for iPad and iPhone per
week vary across the 4 papers
• The “digital future” needs a jump-start…
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0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
iPad iPhone
2011 Average Unique Vistors / Week
1 2 3 4
Print & Digital Business Models in the USA
Business Scenarios
Scenarios
Continue On
Maintain Print / Monetize Web
Maintain Sunday / Daily Digital
Aggressive Print Pricing
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Key Aspects Continue On Maintain Print
Maintain
Sunday /
Daily Digital
Moderate Moderate Daily
No Yes Yes
No High Usage Moderate
Usage
No No No
No No No Device Subsidies
Digital Pay Wall
Print / Digital Bundles
e-Commerce
• A key model variable is the
pricing - yield - assumed for
print, bundled print/digital and
digital only subscriptions.
2015P shown in graph $0
$100
$200
$300
$400
$500
$600
$700
$800
1 / Continue On 2 / Maintian Print 3 / Digital Audience
Modeled Scenario Audience Yield
Print Bundled Digital
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
2006 2007 2008 2009 2010 2011P 2012P 2013P 2014P 2015P
Sunday / Digital Daily
Print only Bundled Print Digital only
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
2006 2007 2008 2009 2010 2011P 2012P 2013P 2014P 2015P
Maintian Print - Audience
Print only Bundled Print Digital only
Audience Compare
• Total audience and Sunday-
only print audience nearly
the same in all models
• Daily print audience much
lower in “Sunday/Daily
Digital” vs. “Maintain” model
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Continue On
Maintain Print Sunday / Daily Digital
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
2006 2007 2008 2009 2010 2011P 2012P 2013P 2014P 2015P
Continue On - Audience
Print only Bundled Print Digital only
62k Daily 149k Daily
Revenue Compare
• “Maintain Print” has highest
2015 revenues
– However, operating costs are
much higher vs. “Sunday/Daily
Digital” due to larger daily print
audience
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Continue On
Maintain Print
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
$400,000,000
$450,000,000
$500,000,000
Revenues vs. Operating Costs
Revenues
Operating Costs
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
$400,000,000
$450,000,000
$500,000,000
Revenues vs. Operating Costs
Revenues
Operating Costs
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
$400,000,000
$450,000,000
$500,000,000
Revenues vs. Operating Costs
Revenues
Operating Costs
Sunday / Daily Digital
Revenue Mix
• “Continue On” relies on
94% print-related revenue
– Maintain Print = 88%
– Sunday/Digital = 80%
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Continue On
Maintain Print Sunday / Daily Digital
-
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
400,000,000
450,000,000
500,000,000
2006 2007 2008 2009 2010 2011P 2012P 2013P 2014P 2015P
Revenue by Category
Print Circulation Print Advertising Online Subscription
Online Advertising Mobile Subscription Mobile Advertising
-
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
400,000,000
450,000,000
500,000,000
2006 2007 2008 2009 2010 2011P 2012P 2013P 2014P 2015P
Revenue by Category
Print Circulation Print Advertising Online Subscription
Online Advertising Mobile Subscription Mobile Advertising
-
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
400,000,000
450,000,000
500,000,000
2006 2007 2008 2009 2010 2011P 2012P 2013P 2014P 2015P
Revenue by Category
Print Circulation Print Advertising Online Subscription
Online Advertising Mobile Subscription Mobile Advertising
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
Web/Digital Revenue % of Total Advertising
1 / Continue On 2 / MaintainPrint
3 / Digital Audience
Web/Digital Revenue
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0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Web/Digital Revenue % of Total Revenues (incl. Circ Revenue)
1 / Continue On 2 / Maintian Print
3 / Digital Audience
• Web/digital revenues in
the most aggressive
“Sunday/ Daily Digital”
scenario = 42% of
advertising revenue
• Web/digital revenues in
the “Maintain Print”
scenario = 30% of
advertising revenue
-15%
-10%
-5%
0%
5%
10%
15%
2009 2010 2011P 2012P 2013P 2014P 2015P
Margin Comparison
1 / Continue On 2 / Maintian Print
3 / Digital Audience
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Modeled Margin Results
• “Maintaining Print” scenario projects negative margin in 2012
• “Sunday/Daily Digital” stabilizes and grows margin once high
printing and delivery costs reduced
Final Thoughts
What Did the 3 Scenarios Suggest to Us?
The scenarios clearly demonstrate the challenges
in maintaining /growing margin. Traditional
legacy production costs pose a heavy burden on
the move to digital
• “Continuing On” is not sustainable
• For the dynamics modeled – e-commerce not included –
monetizing digital audience is critical
• “Maintaining Print” underperforms “Maintain
Sunday/Digital Daily” due to higher legacy costs with
much higher daily circulation and lower circulation yield
per copy
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