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