Not all perils to print media are necessarily entirely digital. Sometimes those perils can come in the form of something that adds to digital’s effect. Veteran journalist and Silicon Valley CEO Alan D. Mutter has a post on his blog Reflections of a Newsosaur looking at a potentially huge loss of advertising revenue to newspapers brought on by a postal rate cut.
The ad revenues in question are for preprint advertising—all those ad circulars that fall out on the floor when you open your Sunday newspaper. One industry insider claimed that these ads account for 70% of Sunday revenues at the average newspaper. And not only are advertisers shifting away from circulars to digital advertising, but the US Postal Service just provided a rate cut to a direct-marketing company that will allow it to mail some preprint ads at a cost of 42% less than newspapers.
Both advertisers and shoppers are moving online, it seems—online discounts entice consumers away from brick-and-mortar stores, and brick-and-mortar stores buy more online advertisements to compensate. Best Buy cut its own preprint ad buying by 75%, or three quarters of a billion dollars, in 2011, while boosting online advertising by 40% to a mere $23 million. The Postal Service’s favorable rate cut could draw $1 billion in advertising away from newspaper publishers, while letting the cash-starved Postal Service scoop an additional $15 million in revenue from the added volume.
Will this encourage papers to move more toward digital publishing? Mutter points out:
Notwithstanding the stated intention of most publishers to migrate vigorously to digital publishing, printed papers remain the primary revenue source for the industry. Print advertising accounts for about two-thirds of sales, print circulation produces about a quarter of revenues and digital advertising generates only about 10% of revenues.
And ad revenues already fell month by month for this year—as they have been for eight years running—they’re now less than half what they were when newspaper ad revenues peaked in 2005. Unless papers can figure out how to make digital pay better, the rock and the hard place they’re in are going to squeeze closer and closer together until most of them go squish.