Emilie Lutostanski • Director, Local News Resource Center
Experts expected local media print circulation and print advertising revenue to decline in 2020, but the stark reality of a global pandemic has accelerated this trend and shifted revenue mix forecasts for the near future.
Pete Doucette, managing director of FTI Consulting, shared an industry outlook that captures key revenue trends for the newspaper business, and what a future business model looks like for many local news publishers. He explained how, with the lifespan of the 7-day print model reduced, publishers must improve and increase digital readiness while navigating through phases of the pandemic.
Through the Google News Initiative Digital Subscriptions Lab, FTI Consulting and Local Media Association developed detailed resources that can empower local media companies to benchmark data and best practices for setting subscription prices, translating print advertising business into digital, and planning for a sustainable future. The Digital Subscriptions Benchmark Report and the Digital Subscriptions Playbook are both helpful companion-reads to these three timely takeaways and tips from Doucette’s recent webinar, “Industry Outlook and a Path to the “New Normal” for Local News.” [Watch the webinar] [View the slides]
1. Long-term unrecovered advertising revenue loss totals 17-28 percent, but digital revenue is faring much better than print, and is expected to recover somewhat next year.
In April, FTI Consulting released its Advertising Revenue Forecast with different scenarios for recovery (“U” and “V” curves in the chart below), noting the preexisting structural decline (dark blue line). Ad revenue loss at 17-28 percent occurs primarily in expected declines in print ad revenue, down 40-45 percent, while digital ad revenue remains more resilient, with forecasted declines at 19-23 percent in 2020. In 2021, digital ad revenue growth is forecasted to return at 8-22 percent.
“Despite big audience gains — I’ve seen publishers with 20 to 40 percent increase in digital audience — digital advertising revenue is still down …” Doucette said. “What that means is there’s a long-term advertising loss particularly in print, so because of this, you’ll never get back to where you were in the previous trends.
“In 2020, we’re looking at 18 to 20 percent down in total revenue for the year,” he said.
2. Revenue mix is inevitably changing, with digital subscription revenue expected to increase up to 50 percent year-over-year.
Through the advertising crisis, publishers can recognize an expanded opportunity in digital subscriptions.
“We think digital subscriptions are such a big part of the future and will see continued growth in revenue of that smaller base,” Doucette said.
FTI Consulting forecasts a change in revenue mix over the next 18 months that shrinks print revenues, as digital subscriptions are anticipated to grow from 6 percent of revenue to 14 percent.
“Where publishers will be at the end of 2021 is in a very different place, in terms of what their business is like, so they should start thinking about how they transform their organization to align with its future revenue mix,” Doucette said. “We may see as high as 50 percent or more year-over-year growth in digital subscription revenue by Q4 2020.” 
3. With an understanding of key metrics, publishers can understand which users bring the most value and align goals accordingly.
When publishers understand and manage subscriber profitability across print and digital, including the ideal number of days per week to distribute in print, they can maximize profitability, Doucette said.
One key way to move the needle is to evaluate the average revenue per user, or ARPU, and utilize value-based pricing to move away from price points that are not profitable and/or that see high churn rates.
“As you’re becoming more of a subscription-centric business, the better you need to understand where you make money by your different customer segments or your different products so you can understand where to put resources,” he said. “It’s time for publishers to get serious about understanding their subscriber economics and fundamentally start aligning their resources where they make money.”
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