The Economic Realities of Digital-Only Newspapers

Alan Mutter has an incisive analysis explaining why an all-digital strategy would be unacceptably painful for the majority of established newspapers:

Because newspapers on average derive approximately 90% of their sales from print advertising, the only ink-on-paper newspapers that can afford to attempt digital-only publishing are the ones that are irreversibly losing money. Moving to digital publishing is the last, best hope to salvage at least some value from their waning franchises.

But those web-only franchises would produce far less cash than their print predecessors, reducing the value of those businesses by several magnitudes. How much less? A conventional newspaper moving to online-only publishing might produce at best 10% of the cash generated by its print-plus-online predecessor.

This would be catastrophic for any of the newspaper companies that operate today on the premise of selling both print and interactive advertising. This is especially true for the many publishers that borrowed billions in recent years to finance acquisitions that for the most part have not produced sufficient profits to service the loans.

tags: , , , ,