How sustainable is a business model that, for every one dollar earned through one revenue stream, the company loses seven dollars through another? It's not a trick question.
A new study from Pew Research Centre's Project for Excellence in Journalism reveals that "newspapers are losing seven dollars in print advertising for every one dollar they are gaining in new digital revenue." And even though digital advertising revenue grew by 19% on average in 2011, print advertising declined 9%, bringing the net total deep into the red.
Cultural problems appear to be the core issue, the research suggests. People "tied to old ways" are relying too heavily on an antiquated system; as a result, newspapers across the world are shrinking and even shuttering.
However, there remains rays of hope: "sweeping external trends" are not actually that influential on newspapers, surprisingly. Rather, each individual organization has control over its fate. For example, one newspaper in the study grew online ad revenue by an impressive 63% while still boosting print ad revenue by 8%. However, others saw both digital and print revenue shrink.
It all boils down to executives recognizing and acting on—or failing to—the sweeping external trends. That is to say, the trends themselves are not necessarily detrimental, but outdated company cultures are preventing newspapers from reinventing their business model to retain sustainable profits in the internet era.
One area where newspapers have a shot at redemption is mobile. Currently, it accounts for only 1% of their digital revenue. But smartphones and tablets are still new technology and the market is expanding rapidly. Media can now take the mistakes they learned from the web and apply new tactics to capitalizing on the mobile revolution.
Newspaper organizations should also consider relying less on advertising, Pew offers. Event hosting and consulting are common options to boost revenue as print ad sales dwindle.
One thing's for certain: things will never be the same for newspapers—and the sooner they acknowledge this, the better.