This'll cost ya...
So, if you take a newspaper and charge for its website, do you get growth or contraction overall? Let’s take The Times and Sunday Times as examples, seeing as we have some figures to play with following our post of this morning, and see what sort of answers you might get. The conclusion is that the print plus digital combination is not pointing the way to much growth yet.
1. Monthly circulation figures.
This is the most positive indicator. Start with the print sales in June. So for The Times, they were 503,642 – down by 11,737. The Sunday Times gave up 32,035 at 1.085 million. Average that out and you get a loss of 14,636 across both titles over the seven days.
Now, compare that to the growth in online sales and iPad sales — 27,500 in total. That looks like victory: overall seven day sales (online gains minus print losses) are up by 12,864. But it does take the charitable view that the online numbers follow a one off high profile launch. It’s unlikely that the 27,500 gain will be repeated in future months.
2. Reversing longer term sales decline?
All ‘broadsheet’ newspapers are in sales decline. The Times sold 503,642 in June — compared to 590,900 in the same month a year ago. But last year’s figure included 51,785 giveaways. So, the real decline is 35,473 or 6.6 per cent.
The Sunday Times sold 1,191,726 in June 2009, with bulk giveaways stripped out. That had dropped to 1,085,724 in June of this year — a fall of 106,002 or 8.9 per cent. That means over seven days (counting The Sunday Times as a seventh of the drop off) circulation fell by 45,448 at both newspapers.
Which means that 27,500 new online paying readers replaced just over a half of last year’s circulation losses. That’s probably a fairer comparison than a single month head to head, if only because the launch of a new service is such a one off event. Or to put it another way, online gains don’t even takes the Times titles back to where they were a year ago.
3. Money.
This is the most important one, and it is the toughest comparison because print readers are so much more valuable than digital ones.
Now, because the audited circulation figures are daily averages, we can fairly assume that every reader counted buys the title every day of the week. So each reader counted is worth £6.50 at the tills for The Times and another £2 at The Sunday Times. That’s £8.50 a week. Strip out the retailer’s take and the distribution fee, and the gross receipt to the publisher would be about £6 – or about £26 in an average month.
Meanwhile, the sensible online reader pays £2 a week (the best deal on offer), or about £8.50 a month. No money is shared with the retailer or distributor, although presumably there are some merchant processing fees, so lets round it down to £8 a month for News Corporation, the publisher. Then factor in that some of the less bargain conscious pay £1 a day several days a month, rather than go for the £2 a week deal, so let’s say the average digital reader is worth £10 a month.
Handily, The Times iPad app costs about £10 a month, although I have no idea how much money goes to Apple/merchants and all that. So, before anybody helps me, I’ll be kind and say News Corp keeps all that tenner. (++ Update: I’m actually told that Apple keeps about 30 per cent; so the true back to publisher number is £7 — which would make a difference to the calculation below ++)
All of which means that the typical print reader (£26) is worth at least two and a half times (£10) the average online reader. And the figure could be more like three times.
So, for those of you still here and having fun, it means that the 27,500 new digital subscribers are equivalent to 10,576 new print readers. Now compare that to the annual sales decline of 45,778 – or even the one month decline of 14,636.
On that measure, at this moment in time, defeat.
Will News Corp release audited figures though?
I suspect the 15k figure is softer than it looks, with fewer repeat subscribers than that, and a lot of people testing whether the online version matches their expectations. It’s probably not an “either-or” consumer choice anyway, with some overlap between paper buyers and online readers. And if that 15k figure includes an uplift from the Mandy book, then the picture is even bleaker than that.
Look at it another way. The Times makes about £300,000 a week in sales, and the ST about £2m. Let’s forget advertising for now (although it ought to roughly double each of those figures). The annual income from Internet sales will probably be about the same figure. So the Internet accounts for about two percent of sales takings and one percent of Times/ST revenue.
The other question will be whether or not the change in model has led to a rise or fall in revenues, as a result of Internet advertising revenue falling to nil. My guess is there is no significant change. IF there is an increase in iPad sales, then other newspapers may take the same route.
Whoops. The Times makes £3m a week, my bad arithmetic. Internet is even less important.
I’m sure News will want to release audited figures at some point; they do for the Wall Street Journal. There’s been talk (I’m told) of that happening already. — Dan
The bigger and more complex issue to me is what the wall has done to/for inbound links. Links have a real dollar value (or link farms wouldn’t be in business), so any calculation of gains/losses must include links.
When you say to “strip out the retailer’s take and the distribution fee” is this including printing costs?
No: these are gross revenue numbers. There are printing costs on one side and hosting costs on the other. Calculating either is sufficiently complex to be not worth while — Dan
[...] ce temps, ajoute Dan Sabbagh dans un second article, le quotidien britannique a perdu en moyenne 14.636 lecteurs en juin. Mais en les rapportant au nombre de lecteurs gagnés sur Internet et sur iPad (27.500), il conclut [...]
What about the advertising revenues on the website? Don’t know if they were a significant source of income in the first place, but presumably they have plummeted post-paywall.
– I’ve guessed previously that Times/Sunday Times online advertising was about £20 million to £25 million, based on a crude compare with The Guardian which has higher traffic and revenues nearer to £30 million. I wasn’t sure that they had lost much ad revenue initially, but clearly it will be down. — Dan
Really? I do not know what the figure actually is, but are the retail margins and distribution costs that low? If you are accurate then I am surprised.
One thing that you have not done is built in the cost of the paper and ink itself by The Times as well as costs for maintenance and depreciation of the printing presses. These costs are relevant to the bottom line of The Times but would be applicable to print sales as opposed to on line sales.
Anyone who pays for online content is a nutter. I get lots of fun from watching “media and ad people” failing again and again to appreciate the fact that technology – and the techie – always wins.
Awaiting moderation? Well, that’s the last time I’m coming here.
Dan – thanks for the continued coverage of this tale. I find it fascinating. However, I had a couple of questions about your calculations above.
First, it’s not clear whether you included print costs in “retailer’s take and distribution fee”. I assume you did, but no matter – my thought is that every online subscription is largely profit (on the basis that the print paper is being made anyway), making this business model far more scalable than the print business. In the long term, could this be considered more important than spend per current user?
Secondly, I’m not sure the value, as you’ve measured it, takes into account one important variable: the value of online readers to sponsors and advertisers. I don’t have the numbers, of course, but I’ll wager the value of online subscribers far outweighs that of visitors to the free website. Everyone knows there’s very little money in online advertising, which makes the whole Times Plus model make a lot of sense. Do you know whether there is any truth in that?
I work for a newspaper and can clarify a few of these figures. Distribution for us costs IRO of 25% depending on the outlet so the £6 sounds about right. However this doesnt take into account any print costs etc.
Peter makes a good point about advertisers, which is my background. If the Times can gather more information on their uniques they should be able to leverage a higher CPM, and also be in a strong position to merchandise to them.
The problem with Press right now is we’re all trying to protect our current business model rather than just accepting that it is dead and we need to write a new one.
There may be a kink in these figures. After a big push last year, I signed up for home delivery of the Times. So I pay for that and News gets its revenue there. However, as part of the deal, I get free access to the Times and Sunday Times websites – so there is no marginal website revenue coming from me because of the paywall. I suspect that there are a decent number of people in the same situation as me. If we are being counted in the 15,000 figure – it’s not clear if we are – then that figure may be substantially overstated and the actual paywall revenue may be materially lower than the calculations above.
Thanks Alan — I’m not trying to put in print or hosting costs; this is only a gross revenue number. Once you get into trying to cost things, it gets very hard to get the sums even close to right. Dan
To your first point: as I’ve said elsewhere, no this does not include print costs for print or hosting costs for online — it is too complex to try and calculate. I’m talking about gross revenue to the publisher.
As for the value of online readers — paying online readers would, I’m sure attract a higher CPM. But the question, of course is whether the CPM gain offsets the readers lost. The answer to that is probably not. ITV tends to have lower CPMs than, say, Channel 4 (higher price because of its 16-34 skewing audience) but ITV is twice the size because it has so many more viewers. Dan
I wouldn’t put too much faith in many of the iPad subscribers renewing judging by iTunes App Store ratings which should more than 50% are less than happy with the product – as the 1st poster mentioned, a lot of iPad ’subscribers’ will have been checking out the iPad App for the first time.
Also, The Times could structure the iPad App to avoid having to pay Apple 30% on each subscription renewal if they’d just do what the FT did and tweak it so that the iPad App becomes part of the online subscription (sign-up for an online subscription to the website, plug your account details into a ‘free’ iPad App and voila).
[...] about that, seeing the tongue-bathing he was getting in those papers. Speaking of those papers, the Times site isn’t doing very well, is it? Herp derp, Murdoch. Anyway, enough of this. I’m off to sleep. I’m working on a rather [...]
I take your point that it would be very difficult to determine the respective publishing costs associated with print and online. But conventional wisdom tells us that the cover price of a newspaper doesn’t come near covering the costs of printing and distribution. Compared to this, I would imagine most of the paywall fee paid by web users is clear additional income. There may only be 15,000 of them, but those web customers could provide a significant new stream of income. This is certainly an extremely high risk experiment by Murdoch, but I think it’s far too early to write it off as a commercial mistake.
“conventional wisdom tells us that the cover price of a newspaper doesn’t come near covering the costs of printing and distribution.”
This is certainly true here in New Zealand, where I now live, but I doubt it is true in the UK. When I was growing up the Fleet Street papers rarely carried advertising and yet were hugely profitable. The marginal print cost of one extra paper is effectively zero (the paper may cost a penny or two) and distribution is extremely efficient.
interesting article, but absurd to rush to a judgement like defeat after ONE MONTH.
whatever your take on the paywall experiment (and i’m anti) it’s just plain silly to make any sort of declaration in this way.
look at the history of any new publication or platform. did ANYBODY get it right in month one?
I actually suspect the real figures are even less encouraging than you state here, but at least they are in there, trying, discovering, experimenting. Unlike many other media companies who manage the remarkable feat of losing tens of millions of pounds while simultaneuosly pontificating to others about the true meaning of digital.
give the digger time.
If newspapers stopping filling their pages with non news drivel (particularly pontifications about Beckams et al’s navels etc), then more copies would be sold.
I have lost count of the times mainstream broadsheets have no real news at all in their first three pages.
They are a real turn off.
Also the vast acreage of drivel is a turn off. Newspapers are utter rubbish today, compared with a few decades ago when journalistic standards were infinitely higher.
Er, this data has nothing to do with the paywall… misleading.
This is interesting analysis but I feel that without including the costs of production it is nigh on impossible to draw upon any conclusion in relations to profits.
To produce a physical paper, The Times requires a huge operation, many direct and indirect employees, buildings and equipment all with a considerable amount of write off due to production errors. This finished paper then requires a huge logistical operation, warehouses, drivers, retailers etc. News Inc may choose to outsource some or all of these elements but regardless, all of these elements within the supply chain will erode the underlying margin.
In comparison, the online business requires buildings, server farms, engineers and network connections. The difference herein is that Joe Public shares the costs of production with New Inc, Joe supplies the PC, pays for the energy, pays for communications and any required software. On top of this News Inc may outsource AND offshore the digital production thus reducing the entire production costs to just a fraction of the physical print.
Therefore, to summarise, when you view a physical newspaper, News Inc has borne the full cost of production, when you view a news website Joe Public participates in the costs of production. This significant element requires assessment when drawing any profit analysis.
[...] impact at the The Times (UK) thetimes.co.uk …and statements like “Sabbagh goes on to calculate that the typical Times print reader is worth ‘at least two and a half times’ the [...]
15,000 paying customers is about 1% of the previous on-line readership of The Times. So it seems that an on-line reader of The Times was worth less than 2 pence per week, otherwise losing 99% of your readers for a mere £2 paid by 1% would not make sense.
It seems extraordinary that a reader is worth so little. A single Google Adwords impression often costs 20 pence. How is The Times so disorganized that their sales of on-line advertising is worth so little compared searching on Google?
I think you have over-estimate the print value.
I understood that the retailer took typically 50% of the over price; the distributors 25%; and the publisher 25%. The main money of the publisher is the advertising, not the direct sales. On that basis each web reader is directly equivalent to a print reader. But for the advertisers – ad blockers, no skimming over pages while turning to a section of interest – the rates ought to be less than a comparable print reader. Do you have ads on your page? I haven’t noticed!