What Happens When Your Local Paper Goes Online-Only? It Loses Most of Its Staff.
by Peter Kafka
Posted on June 24, 2009 at 6:00 AM PT
Conventional wisdom is that if today’s newspapers want to survive, they’re going to have to ditch their printing presses, delivery trucks, and most of their staff, and learn to do more with less in an online-only world.
OK. But exactly how much less?
I’ve been asking Mark Josephson that question for months, and now he has an answer. Josephson, the CEO of local news platform Outside.in, figures the local, online-only newspaper of tomorrow, for a decent-sized city, will have a staff of 20 people. That’s 20 people, period. Perhaps six of them will be “news gatherers.”
Josephson was kind enough to model his future newspaper in a spreadsheet for me, and I’ll get to that in a minute.
But first, the context. Josephson’s opinion is worth noting because his company is supposed to play a role in creating said future newspaper/news site.
The pitch: Outside.in wants to help local news sites by supplying them with a river of extra content created by local bloggers, Twitterers and lots of people who don’t even think of themselves as content creators, like people who post real estate listings. The local site is supposed to aggregate and filter the stuff and sell ads on it. The people supplying the content get more exposure via links from the bigger site.
The three-year-old company has just rolled out a new tool that’s supposed to make all of this easier for local publishers, which could be a newspaper site but doesn’t have to be. For instance, the company has tested its “Outside.in for Publishers” offering with sites run by local TV stations. You can read more about it here.
Now back to Josephson’s news site of the future: He imagines that the tiny editorial staff of the model newspaper produces an extraordinary number of page views–40 million per month, in this example–and then augments it with twice as many page views from a third-party network (which could be, but doesn’t have to be, supplied by Outside.in).
A sales force of a dozen people sells ads for both buckets of inventory, and uses ad networks to fill in remnant space they don’t sell. Net result: A very healthy 43 percent operating margin, much better than the 27 percent margins the newspaper industry enjoyed from 2000 through 2007, before the business imploded.
Here’s what the math looks like: I’ve broken up the P&L into three sections, and clicking on each of them will enlarge the image. Or you can view the whole thing as a Google document here.
Josephson stresses that his model is a starting point, and he’s happy to tweak any of the inputs.
If you think his assumptions about ad rates are too aggressive (and some local publishers I’ve talked have given me that feedback), you could knock them down. Same thing with page view goals. Or if you decided you wanted to run the business at break-even instead of trying to make a profit, you could do that too, and see how many more people you could afford to hire.
But no matter how you fiddle with the numbers, there’s no way that Josephson’s model gets you anywhere close to old newspaper staffing levels, whereby a paper like the Seattle Post-Intelligencer employed 150 people on the editorial side alone.
But those staffing levels don’t work anymore, which is why Hearst shut down the paper and replaced it with the online-only SeattlePI.com, which has a 20-person edit staff, earlier this year.
So Josephson’s numbers really become an ink-blot test: Do you think they spell doom for news sites in the Web age or an optimistic solution that lets them survive? Let me know in comments below.
Comments
Peter,
Posted by Edward Barrera at June 24th, 2009 at 7:27 amDon’t mean to be crass. But every time I see these models, I look first at the compensation. If I’m reading it right here, it isn’t much.
That’s what going to kill journalism. Pay, for most, was never that good, but at least you could live on it. The future? Interns/newbies and then go get a real job.
Following Mr. Barrera’s comment, what I look for in a paper is the quality of the reporting. Only a few papers like this one meet that criterion. I suppose the new Christian Science Monitor is close to this being a weekly supported by current news on their web page. But if the reporters don’t make much money how long will the reporting remain good enough to attract discerning readers?
Posted by Ajit de Silva at June 24th, 2009 at 7:38 amHosting and ad serving against 500MM PVs should cost $150K at most, or a full order of magnitude less than the estimated $1.5MM.
Posted by Jonathan Marcus at June 24th, 2009 at 8:52 amTo use the Seattle PI as the model for all papers across the country is a faulty analogy. The PI was the second paper in town and was kept alive through a Joint Operating Arrangement, a kind-of sharing agreement. When the economy turned south, there was nothing to share. Most of the big-city papers that have faltered have been in this same situation. The rest of the big-city papers are facing the same problems all businesses are during this downturn. To call a conglomeration of bloggers and twitters a newspaper is a huge overcharacterization of what the social media are all about.
Posted by Mark Stuart at June 24th, 2009 at 9:01 amTo those bemoaning the salary spend– At pegasusnews.com (online only local in DFW) we’ve had as many as 18 people and that spend is in line with what we’ve seen. Might not be NY numbers, but it’s realistic.
Posted by Mike Orren at June 24th, 2009 at 9:10 amAnybody can create a web site to aggregate the work of content creators. Without a physical newspaper lending some credibility there will be nothing to differentiate a news site from any other web site.
Posted by Robert Robbins at June 24th, 2009 at 9:55 amImagine that news papers en mass go internet in this way. Ignoring all those who read daily news papers but don’t have easy access to the internet, where will the actual content for these sites come from if, in general, journalism has gone the route of aggregation. Furthermore, it seems one of the things that news papers have failed at doing (which has spelled part of their demise) is to actually represent their particular local audience. Papers have moved more and more in the direction of general news items supposedly of concern to anyone at all (national and international items for example). One reason for the success of many blogs is because of their particularity and interest in local concerns. Aggregation can too easily just lead to more general cookie cutter content. There are some great interviews with top journalists about the future of journalism which I have found very useful at http://www.ourblook.com/compon.....y/#catid69
Posted by Bill Svigel at June 24th, 2009 at 12:09 pmI wanted to inform you of a great potential Online Community Newspaper Opportunity that seeks to provide jobs and potentially independent business ownership opportunities to the thousands upon thousands of recently let go journalists, publishers, editors, etc. all across the country. Please check out this useful blog where Tom Masters interviewed the CEO of HometownTimes.com at http://www.futureperfectpublishing.com
Posted by Tiffany Morgan at June 24th, 2009 at 12:17 pmRe: Salary – The Boston Globe’s editorial union just agreed to a pay scale that caps at $70k.
Posted by Peter Kafka at June 24th, 2009 at 12:41 pmRobert, I agree with you that anyone can create an aggregation site. Creating a good aggregation site (new preferred term, by the way, is “curation”) is harder than it looks. And in any case you’re going to have to something other than links to other people’s stuff, and I believe that’s the assumption here. I do wonder if there will be enough people creating enough compelling local content to support an aggregator like the one Mark is sketching out here, though.
Posted by Peter Kafka at June 24th, 2009 at 12:59 pmOh, and I completely disagree re: Physical paper – there are plenty of credible, trusted, online-only news sites already.
Peter:
I love that Outside.in’s trying this out, and I really like those guys.
Looking at the math, though, there are a couple of things that make the “newspaper of the future” analysis a bit dicey:
- 40,000,000 monthly pageviews is a lot for a local news site. http://www.swivel.com/data_set.....et/1008083
You get down to < 20MM monthly pageviews pretty quick
- $7.00 sitewide eCPM is also pretty rich. Now, this is clearly arguable, but I would bet that without a print pub behind it, you’re looking at about half of that.
So, say you are the comment hating Baltimore Sun with 15M monthly pageviews. At $7.00, you are at $105k in monthly revenue. At a more realistic $3.50 you are at $50k
Now, it may be that your brand can carry if you do away with a lot of the print (a la Village Voice Media or other alt weeklies).
But.
No way that most newspapers have the the online presence to run a typical volume sales play here. It’s really really tough to get to 40MM pageviews for a locally focused publication.
Chris Tolles
Posted by chris tolles at June 24th, 2009 at 1:42 pmCEO, Topix
http://www.topix.com
Oh — I filled this out a little on my blog at topix.
http://blog.topix.com/archives/000236.html
Chris Tolles
Posted by chris tolles at June 24th, 2009 at 2:29 pmCEO, Topix
This model is spurring the exact type of discussion we were hoping it would.
We know it isn’t perfect, but it is proving to be a great starting point for conversation!
Wanted to make a few quick points based on some feedback we’ve received today (here and offline):
1) we are not trying to put journalists out of work. our opinion is that these businesses are going to change regardless of what outside.in or others do. we’re just trying to meet that opportunity with a business that is sustainable.
2) chris, to your point above, there may not be a lot of 40mm pv sites out there, but the model still works with fewer. pv reductions reduce the attendant expense and would require fewer people. we got some feedback today that 20 people was way too high. that’s not up for us to decide, though.
3) as to the rpm assumptions, they are based on rates we are seeing and on the rates at which publishers tell us they sell. But the model does include a hefty haircut on that with a sell-through-rate of only 20%.
Chris, maybe you adjust that down to get to what you’re saying — a lower net effective rate?
The rest of the inventory is sold via remnant network providers. IMO, a local publisher should be able to squeeze $5 rpms, or pretty darn close, from networks.
Thanks for the feedback!
Posted by Mark Josephson at June 24th, 2009 at 3:02 pmHey Mark!
I haven’t been seeing those kind of rates for ad network inventory — $5 RPM would totally rock, and for health, tech or biz pages you might see that — news, though seems to be a little harder to get that kind run rate.
My biggest issue is the pageviews, though.
Most newspapers just don’t have enough inventory to make the sales work. If you have 10M monthly pageviews, you really can’t do a CPM model.
So, I agree that you could support 20 people with $500k a month in revenue, and I believe the whole thing scales down to some point…but at 20MM pageviews, I don’t know if you can do $250k in revenue with a news product — lots of folks out there matching that description, few making that kind of money.
Anyway, agree that this is a good discussion
-CST
Posted by chris tolles at June 24th, 2009 at 4:55 pmHey Chris!
The model assumes 2 impressions — so two units doing $2.50. That should be attainable, right? Even if you aren’t seeing that today, you’ve got to believe that a smart in-market team can get there in the not too distant future. (More advertisers coming online, more channels, better targeting, more inventory, etc…)
The other component of the model is the network piece. The model has the assumption that the site is only a third of the total inventory in a network of other sites too.
I guess that would only exacerbate your concerns about the inventory, though.
But we’re seeing signs that this is achievable.
Anyway, fun thread!
Posted by Mark Josephson at June 24th, 2009 at 5:27 pmHi,
This is a really interesting post and debate.
In my opinion, this model needs to take into consideration some more marketing investments, even small. In a competitive, fragmented audience, landscape competition is wild and you may have a local media with poorer content getting more traffic (or traffic you could get) because they are marketing their product more aggressively.
On the other hand, I am also in the group that believes revenues are to some extent over estimated.
What about traffic acquisition costs?
I would love this model to work, but I think you can still cut to less employees with higher productivity.
About the opinions on quality given by some people here. I have to say quality is limited because we are human. It is limited by our time and resources, so, quality has to be the maximum we can reach with the freely allocated resources by society to this end. Markets are demand driven and it is demand that decides how much, when and how to invest for producing.
Greetings!
Luis
Posted by Luis Galán at June 25th, 2009 at 3:09 amYou get what you what pay for, and the quality of material shows it.
Posted by mike diaz at June 25th, 2009 at 3:10 amNewspapers and print media are becoming extinct because of digitization, and newspapers business models reflect it.
If the industry doesnt adapt quicker, they will lose their IP to other competing industries.
I think Mark is off by a factor of about 5X on the traffic, and at least 3-5X on the RPMs.
No way most papers are doing 120MM– not by themselves, not with additional network traffic from Outside.in. Think about it– how many pageviews is the entire Outside.in network turning per month now? Now divide that by 20 for a city like Seattle– how much additional traffic can that really add to the paper?
And regarding RPMs– $15 sounds high to me for local news brand ads, but let’s accept it. But $5CPM for remnant? Google is providing $0.20 CPMs for local remnant ads (presumably targeted as well as they can be by Adsense). Let’s more than double that to $0.5CPM– even then, I think you’d end up with about $500K in ANNUAL revenue.
How many employees (editorial, admin, ad sales, tech, etc) can that support? 5? 7? And what kind of product will they turn out? And separately, if your business plan is to sell services to them like Outside.in, how much can they afford to pay?
Posted by jake dobkin at June 25th, 2009 at 11:39 amThis many monthly pageviews on the “main” site would mean you’re in a market at least the size of, say, Dallas. Why would you only be shooting for direct revenue of $1.4 million from a market that size, with millions of local ad dollars available? What it suggests to me is that a “Web site only” news business model in a decent-sized city doesn’t make sense, or at least, that it doesn’t scale. A local publisher should be looking at all sorts of other local ad revenue opportunities — online lead-gen, e-mail marketing, events, local print weeklies and directories, all the other services and media that local advertisers need. Just because metro dailies are dead doesn’t mean local advertisers only want a Web site.
Posted by Tom Baker at June 25th, 2009 at 7:47 pmWhile this article has sparked a great conversation there is a vital answer to the question you pose at the start of your article that no one has touched on yet. In considering the impact of news moving exclusively online we have to be aware of the fact that roughly 40% of America still doesn’t have access to high-speed internet.
While I have no doubt that more and more journalism will be moving online, and in general I think this is a positive move, in the short term we need to ensure that we are not cutting people and communities off from the news and information they need.
In our report Saving the News: Toward a National Journalism Strategy (http://www.freepress.net/node/57076), we develop a set of policy recommendations for the future of journalism and discuss the importance of expanding broadband access to foster innovation and support the future of news gathering. As news moves online we also need to address policy issues like Net Neutrality, to ensure the web remains a level playing field for all news outlets.
Posted by Josh Stearns at June 29th, 2009 at 8:04 am