revenue diversification at the dallas morning news: roundtable 2014 jim moroney
DESCRIPTION
Jim Moroney's presentation on revenue diversification at The 2014 ROUNDTABLE in Vail, CO.TRANSCRIPT
Looking for Love in
Not Enough Places
One Solution to the Newspaper Industry’s Business Model Challenge
1
It’s easy to
describe the
solution to the
newspaper
industry business
model problem:
restart sustainable
year-over-year
revenue growth.
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019$
Re
ve
nu
e
2
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019$
Re
ve
nu
e
HOW to restart
sustainable
revenue growth
is the industry
conundrum. ?
3
The industry has
focused its efforts on
digital advertising
revenue growth.
4
“It’s the realization that newspapers’
digital ad growth, the great hope of
free news, has hugely disappointed.”
Dean Starkman
5
Here’s the
NAA’s revenue
trend for the
industry’s
digital
advertising
revenue. $0
$1
$2
$3
$4
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013B
illi
on
s
6
Here’s the
same trend
expressed in
percentages.
-20%
-10%
0%
10%
20%
30%
40%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
-10%
-20%
7
You’ve seen
this before:
Newspaper
industry print
revenues
2003 – 2012. $0
$10
$20
$30
$40
$50
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013B
illi
on
s
8
And here’s
this trend
represented
in percentage
changes.
-30%
-20%
-10%
0%
10%
20%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
-20%
-30%
-10%
9
Let’s put the
graphs on top
of each other.
First, revenue.
$0
$10
$20
$30
$40
$50
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013B
illi
on
s Print Ad Revenue Digital Ad Revenue
10
-30%
-20%
-10%
0%
10%
20%
30%
40%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Print Ad Revenue Digital Ad Revenue
Now
percentages.
Do we see a
problem here? -20%
-30%
-10%
11
Not sure?
Let’s isolate
on last year.
2013 Revenues $ Billions % Change
Total Revenue $37.59 -2.60%
Advertising Revenue $23.57 -6.50%
Newspaper Print $17.30 -8.60%
Digital Advertising $3.42 1.50%
Direct Marketing $1.40 2.40%
Niche/Non-Daily $1.45 -5.80%
Circulation Revenue $10.87 3.70%
New/Other Revenue $3.15 5.00%
Source: NAA
12
• Whose digital
advertising is going
to grow by 44%?
• The industry’s digital
advertising grew by
1.5% in 2013.
• Now, do we see a
disconnect here?
Print Ad Revenue:
$17.3B x -8.6% = -$1.49B
Digital Ad Revenue:
$3.4B x ? = +$1.49B
Digital Ad Revenue:
$3.4B x 44% = +$1.49B
13
• Let’s say you have $100 million of
advertising revenue
• $74,000,000 is print ad revenue
• $26,000,000 is digital ad revenue
• This means 26% of your ad revenue comes
from digital.
• This means you have 1 digital ad dollar for
every 3 print ad dollars.
14
• Unfair you say?
• The industry’s print
ad revenues have
declined by -8.5% or
more for the past
seven years.
• Do you know a
reason the decline
will attenuate?
15
Print Ad Revenues
2015 -8.5%
2016 -8.5%
2017 -8.5%
2018 -8.5%
2019 -8.5%
2020 -8.5%
2021 -8.5%
2022 -8.5%
16
• Not aggressive enough?
• The industry’s digital ad
revenue growth for the past
four years has been:
Digital Ad Revenues
2015 +10%
2016 +9%
2017 +8%
2018 +7%
2019 +6%
2020 +5%
2021 +5%
2022 +5%
Digital Ad Revenues
2010 +10.9%
2011 +6.8%
2012 +3.7%
2013 +1.5%
ROP Ad
Revenue % Change Difference
2014 $74,000
2015 $67,710 -8.5% -$6,290
2016 $61,954 -8.5% -$5,756
2017 $56,688 -8.5% -$5,266
2018 $51,869 -8.5% -$4,819
2019 $47,461 -8.5% -$4,408
2020 $43,426 -8.5% -$4,035
2021 $39,735 -8.5% -$3,691
2022 $36,358 -8.5% -$3,377
Change 2014 - 2022: -$37,602 / -50.8%
Digital Ad
Revenue % Change Difference
2014 $26,000
2015 $28,600 +10%
+$2,600
2016 $31,174 +9% +$2,574
2017 $33,667 +8% +$2,493
2018 $36,024 +7% +$2,352
2019 $38,186 +6% +$2,162
2020 $40,095 +5% +$1,909
2021 $42,099 +5% +$2,004
2022 $44,209 +5% +$2,105
Change 2014 - 2022: +$18,204 / +70%
17
2022 $36,358 -8.5% -$3,377 2022 $44,209 +5% +$2,105
Result:
$100 million
becomes
$80.6 million,
a $19.4 million
or 19.4% decline. $70
$80
$90
$100
$110
2014 2015 2016 2017 2018 2019 2020M
illio
ns
18
And in the eighth year, digital ad
revenue growth still does not
exceed print ad revenue decline.
19
Sorry, I forgot.
Digital-only
subscription revenue.
That will be the
difference maker.
20
So, let’s see: • You have 100,000 print
subscribers.
• You achieve a 40% digital-
only subscriber to print-
subscriber ratio.
• This yields 40,000
digital-only subscribers.
• You charge $9.99/month.
21
Your annual
revenue from
digital-only
subscriptions is
$4.3 million.
Is that a game
changer?
22
Scale it.
300,000 home delivery
subscribers, at a 40%
ratio means 120,000
digital-only subscribers,
paying $9.99/month =
$14.4M
That’s 17% of TDMN
print circulation revenue.
23
Hardly
a game changer.
24
I forgot about mobile
advertising revenue.
Our mobile audience
is growing like
wildfire. That’s going
to save us!
25
The
good news:
Look at
these growth
percentages!
Paid CPM
Paid CPM
vs. Pr Yr
Qtr
$1.75 -32%
$1.97 -28%
$2.19 -1%
$2.90 +1%
Ad
Revenue
vs. Pr Yr
Qtr
Ad Imp
vs. Pr Yr
Qtr
Sell
Through
Q1 2013 +54% +60% +75%
Q2 2013 +67% +93% +74%
Q3 2013 +93% +60% +74%
Q4 2013 +91% +67% +76%
The bad news:
Look at these
CPMs!!
26
• Page views per month: 100,000,000
• Ads per page: 1
• Sell thru: 100%
• CPM: $2
• Annual Revenue: $2.4 Million
Mobile Reality Check
27
What do you
believe about the
next eight years?
? Your pre-print and TMC
revenue will remain flat.
? Your print home delivery
revenue will remain flat.
? Your print single-copy
revenue will remain flat.
? Your niche product revenue
will remain flat.
? Your commercial printing
revenue will remain flat.
? Your commercial distribution
revenue will remain flat.
28
Really?
Conclusion:
Digital advertising
revenue growth
(including mobile!)
and digital-only
subscription revenue
growth, even taken
together, will not be
sufficient to offset
print advertising
revenue declines.
29
Begin to further
diversify your
sources of revenue.
NOW!
30
Goal: We will attain consistent year-over-year growth in total revenue that at
least stabilizes EBITDA at present levels by 2017.
Strategy: We will diversify our sources of revenue in two ways:
• Organically by establishing a dedicated, staffed and funded
sustaining innovation process.
• Through acquisition by having a dedicated, staffed and funded
business development process.
31
At The Dallas Morning News, our revenue growth strategy
is based on these assumptions:
• Print circulation volumes will continue to decline over time.
• Therefore, it follows that print ad revenues and print circulation
revenue will decline over time.
• Digital ad revenue is an important but insufficient source
of revenue growth.
• Digital only subscription revenue can be an important,
however still insufficient, source of revenue growth.
32
• We can leverage our brand and our resources to build and acquire
new sources of revenue.
• It is easier to upsell a current customer than to acquire a new one
(can I offer you fries with that shake?).
• Marketing is and will continue to be increasingly a multi-channel
discipline.
33
Establish a process for “sustaining innovation”
in order to improve current products and to
launch new ones. You need organic growth.
34
Organic Growth
35
Organic Growth
36
Organic Growth
37
Organic Growth
38
Organic Growth
39
Organic Growth
40
Organic Growth
41
Organic Growth
42
Organic Growth
43
Establish a permanently staffed and funded
business development unit to make acquisitions
of additional channels of marketing.
44
45
• Acquire businesses that give you more ways to reach consumers in
order to help your current and new customers sell more goods and
services.
• Select businesses to which you provide a competitive advantage in
the market place: a larger sales force, a larger base of customers,
marketing muscle, etc.
• Select businesses with successful track records and which have an
owner who wants to continue to run the business but wants to “take
some chips off the table.”
• Organize, hire and train a sales force that can efficiently sell cross-
channel marketing campaigns.
• Sell audiences – not products. Audiences are the common
denominator that bind together cross-channel marketing campaigns.
• Provide targeting, measurement and attribution.
• Demonstrate ROI.
Become the company in your DMA that
businesses go to first to invest their marketing
dollars in order to profitably sell more of their
goods and services.
Do this by becoming the undisputed leader in
your DMA in providing owned cross-channel
marketing capabilities supported by targeting,
measurement and attribution.
46
Acquisition Target Categories
• Data analytics
• Direct mail
• Out-of-home
• Hispanic media
• Mobile web/app development
• Video production
47
Pinky:
“Gee Brain.
What are we going
to do tonight?”
Brain:
“The same thing
we do every night,
Pinky, try to take
over the world.”
48
“Gee Jim.
What are
we going
to do
today?” “The same
thing we do
every day,
Bob. Save
Democracy.”
49