July 24th, 2006

Print Publishing’s Point of No Return


Scott Donaton has a column in Ad Age imagining the inevitable day when the Wall Street Journal will fold its print publication:

I don’t have enough insight into The Journal’s economics to say when (or, with confidence, whether) the day will come when a print-to-digital conversion is economically feasible. Could be two years, could be 10. But most newspapers are faced with roughly the same dilemma: Print dollars are flat or down but still account for the bulk of revenue and profits. Digital is growing by double- or triple-digits, but off a relatively small base, and online advertising isn’t valued as highly as print. Even those who believe a digital takeover is inevitable don’t want to admit it because it puts their existing revenue streams at risk too soon, before they’ve built the ark that will carry them safely to a new business model. [Bold mine]

I’ve always though of the print publishing conundrum in terms of this graph:

Print Is Dying

Scott nails the Catch 22 for print publishers (which I bolded) — how do you shift the business online without going out of business?

Scott does point out — and I concur — “I strongly believe that print has a future; it’s hard to imagine a world without glossy lifestyle monthlies because there’s no better delivery system (yet) for their photos and stories.”

Ultimately, each category of print publishing will live or die based on its own economics — the fixed costs of print publishing will not diminish (and if anything will grow, with everything from paper to postage to the increasing costs of propping up print circulation as media time continues its shift online) — if the revenue is there, then it may make sense to continue publishing. But once the revenue hits the point of no return (i.e. loss of profitability), the top line will cease to matter.

Some publishers may choose to subsidize their print publications until they can finish work on the digital “ark” — but that can only last for so long.

I’ll go out on a limb and predict that a major newspaper will cease publishing in print in the next 5 years — within 10 years feels like a really safe bet, but based on the torrid pace of change, my gut tells me it’s all going to go down a lot sooner than we expect (i.e. next 3 years).

  • The future is micropayments going directly to the producers of content, over a digital medium, and no advertising. I already consume the majority of my content digitally, and that occassionally includes on the laptop in settings that would normally involve a magazine or book. Once electronic ink-based tablets are cheap and functional enough, the print world is doomed.

    What will be really interesting to see is what happens then the tipping point is reached. There will be a time when it is no longer profitable to publish magazines or newspapers, but a large minority of people still don't have access to the internet and/or can't afford reading devices. They will largely be poor, so jacking up the price of paper media to cover production costs for a smaller number of customers won't work. Will we just cut those people off from information?

  • David

    I found Scott Donaton's Ad Age column a good read. I agree and tend to think that the overwhelming efficiencies of online publishing, from a subscriber's perspective, will eventually catch up with print. When I slog out to the end of my driveway in the rain to get my morning newspaper, bring in a wet bag full of ink and paper and plop it down on my breakfast table to read "news" that's already out of date versus turning on my laptop and seeing the latest news plus all the stuff in the printed version, it's a no brainer. Add a user-friendly WiFi-enabled reader that downloads and displays all of my print publications, and forget about it.

    But you really have to follow the money. When advertisers find that they are reaching the audience they want, and it's through online advertising, everything could change pretty quickly--the famous tipping point. Some say we're already there with Google, NYTimes, etc. Electronic will become the norm and subscribers, particularly magazine readers, who want the glossy paper magazine experience, will have to pay a premium for it.

  • Dhyana, I agree -- those variables will determine how long it takes print publications to reach the point of no return -- but most of them will get there eventually.

  • In theory, yes, it sounds reasonable. But who knows what those two lines should really look like? One is probably far too steep, the other far too straight. I wouldn't be surprised to see a print ad revenue curve actually look a little concave.

    And the fixed cost of publishing is really very much up to a publisher's manipulation, in that the size of the publication could be shrunk to reduce costs accordingly.


  • brian

    Scott, why do you believe that print is still the best way to deliver glossy magazines? I am sure most people who are targets of such publications have the broadband connection to download the images display.

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