The United States National Newspaper Industry

The United States National Newspaper IndustryAustin But, Benjamin Wainberg, David Schatz, Jeff GottliebAn InquiryHow do you, Cornell University students, get your news?Why We Chose the National Newspaper IndustryChanging nature of medium makes it excitingOnce-daily format to instant information era (Facebook, Twitter)Dual sided marketNewspapers sell ads to companies AND papers to customersHeterogeneity of firmsPolitical slant, writing styles, coverageMedia affects us!3 biggest players in "an industry of their own"40.80% market share30.49% market share28.71% market share= HHI of 3418.54 (Concentrated)Why These Three?They exert the most power!Highest circulation, by farMost name recognitionHave most national focusHigh Barriers to EntryCapital investments (web presses), etc.NYT spends $63 million quarterly on raw materials (ink, paper)Relationships within distribution networkTrust/goodwillMajor Player #1: The Wall Street JournalSlant towards business and economic news, often thought to be "pro-industry," "laissez-faire" Written to advanced readability levelAverage household income of reader: $236,848!Owned by Dow Jones, and thus News CorporationNews Corporation's 2012 revenues: $34 billion!Major Player #2: USA Today 68% men, and 32% womenAverage age of 4680% of its readers are employedMedian household income of $78,848Easy readabilityCovers general domestic news in full colorNo staunch perceived biasOwned by Gannett--company revenue $5.439 billion in 2010Demographics:Major Player #3: The New York TimesCovers domestic news with slight NY focusOldest newspaper; established in 1851Perceived liberal bias in commentary, possibly reporting2007 survey shows 40% of Americans believe a liberal bias exists (most frequent response)Written to intelligent readership"All the News That's fit to Print"Historical SignificanceThe New York Times Company 2012 revenue: $2 billion!Delivery techniques?Value ChainTraditionally:

Digital age (via the internet and social media):

Content Producers(Professional Journalists)NewspapersAmerican PublicContent Producers(often the public--anyone with a smartphone)Digital technologiesAmerican PublicOverall Industry TrendsShift towards digital media large threat towards stagnant print industryExemplified by recent tragedy in Boston-sources like Reddit, Twitter and Facebook became integralOne-sided content stream archaic; technological advances empower consumersOverall Industry Trends ContdInformation is becoming commoditized and expected to be "free"Government regulation? Minimal, freedom of speech exists (with slanderous exception)Major players having trouble monetizing data in digital eraNY Times paywallCase in point...Pricing StrategiesWall Street JournalMixed Bundling StrategyThe choice of purchasing parts or the entirety of a bundle

Print-onlyBoth!Digital-onlyWSJ - PricingDigital-OnlyWeb + Tablet + Smartphone$21.99 for the first 3 months$21.99/month thereafter

Bundled InWSJ MoneyWSJ WeekendUnlimited Access to ArchivesWSJ Pricing - Cont'dPrint-Only$34.45/monthDelivered 6 days a week

*Prices for print-only subscription were not available online, why do you think that is?WSJ Pricing - Cont'dDigital + PrintAll benefits of Digital and Print subscriptions combined + WSJ MagazineClearly discourages the print only option

Preset Option!Corporate-Oriented StrategyCompanies interested in a corporate WSJ account calls the WSJ Corporate Accounts TeamCompanies provide specific information to WSJ - # of physical subscriptions, company type etc.WSJ uses this information to provide a tailored price quote to the company.Tailored price for each customer.

First Degree Price Discrimination.Student Focus$29.95 for 15 weeksAll digital + print accessStudent per week prices - 70% off Third Degree Price Discrimination.USA Today PricingMixed Bundling Strategy

Print and free E-newspaperE-newspaperUSA Today PricingPrint SubscriptionsPrices set regardless of delivery addressIncreasing monthly cost for longer subscriptions

Incentive for consumers to subscribe for one month and decide if they like it with less of a financial commitmentNo distinct options for weekday or weekend subscriptions

USA Today PricingE-newspaper subscriptionDigital version of print paper One subscription option: $99.00 for 1 yearNote: This is different than access to tablet or mobile apps

Tablet and Mobile AppsFree to download and access content, but with lots of advertisements.NY Times PricingMixed Bundling StrategyCan purchase Digital Subscription or Print/Delivery Subscription with included Digital subscription

Print and free DigitalDigital-onlyNY Times Pricing- Cont'dSecond Degree Price DiscriminationDigital Subscriptions versioned by platform accessibility (e.g. tablet, mobile, pc)Make those who own all types of devices pay morePrint Subscriptions versioned by day of the week (e.g. Weekdays, Weekend, Daily) NY Times Pricing Cont'dSpecial Offers for New SubscribersNY Times Pricing Cont'd1-year Cost Comparison Digital vs. Print

1-year Unlimited Digital Access:($0.99/month) (for first month) + (11 months) ($35/month)= $385.99

1-year Weekday Print Subscription (w/Unlimited Digital Access):($4.05/week)(for first 12 weeks) + (9 months) ($32.40/month) = $340.20

NY Times PricingDigital more expensive than PrintDiscourage current print subscribers from switching to digital onlyPreserve ad revenues from printNY Times Pricing Cont'dThird Degree Price DiscriminationEducation RatesStudents and Faculty get 50% off Digital Subscription, Smaller discount off Print Subscription

First Degree Price DiscriminationCorporate RatesPricing determined on individual basisAvailable for Print and Digital SubscriptionBilled on annual basis onlyAdvertising Pricing StrategiesAdvertising: The Other Side of the National Newspaper IndustryAdvertising has historically been a crucial revenue generatorTrends:Major decrease in overall advertising revenue over the last decade

Huge decreases in print advertising revenue

Gradual increases in digital advertising revenue not sufficientAn Advertising Problem, Not a Circulation ProblemTotal Ad Revenues, 2003 - 2012Upon Closer Examination: Print vs. Digital Ad Revenue, 2003 - 2012Putting It Into Perspective...Source: The AtlanticScary Ratio Getting Scarier2011- Newspapers lost $10 in print advertising revenue for every $1 earned in digital advertising revenue

2012- Ratio now 16:1Who's Responsible for the Advertising Revenue Decrease?Digital Advertising Pricing Strategies Among the Three NewspapersNO PRICE QUOTES READILY AVAILABLE!

All potential advertisers need advertisements submitted and approved before price quote

With this power over advertisers, all three newspapers can engage in First Degree Price Discrimination

Charge different advertisers different prices for potentially same digital advertising option

More SimilaritiesAmong Wall Street Journal and New York Times

Across-platform multimedia packages and sponsorships

Bundling- advertisers may end up paying to advertise on a platform they otherwise would notPrint Advertising Pricing StrategiesAll three national newspapers charge different prices for different sizes

Sizes vary from 1/16 of a page to full page

Different prices for Black-And-White and COLOR advertisements

Higher prices to advertise on SundayWall Street Journal's Print Advertising Pricing StrategiesWSJ Franchise Net Revenue Contracts

Advertisers receive discounts if they sign contract to spend a certain amount on advertising

The Value of WSJ Contract- ExampleAdvertiser is contracted to spend $2.5 million in advertisingFull-page color ad in Global Edition = $279,523.79

Advertiser is contracted to spend $5.2 million in advertisingFull-page color ad in Global Edition = $261,304.89

Advertiser has no formal contractFull-page color ad in Global Edition = $379,597.53WSJ: Third Degree Price DiscriminationBased on edition's geographic circulation

Example: price of full-page color ad for a non-contracted advertiser

Eastern Edition: $116,610.48

Central Edition: $96,907.86

Western Edition: $62,611.92USA Today's Print Advertising Pricing StrategiesDiscounts based on advertising spending commitment- similar to Wall Street JournalSource: USA Today Rate CardUSA Today's Unique StrategyDifferent prices for Friday Edition than for Monday - Thursday EditionsSource: USA Today Rate CardNew York Times's Unique StrategyThird Degree Price Discrimination- charge different prices based on advertiser's industry and even the product(s) advertised

Grocery products: $927.00 per column inchDrug stores: $411.00 per column inchAutomotive: $859.00 per column inchHealthcare: $1,254.00 per column inchBecause We Were Curious...We decided to investigate whether there was a significant difference in the mean amount of ad space per page among the three national newspapers

We measured the amount of ad space per page of the April 16th, 2013 editions

We used an unbalanced completely randomized design to test for differences

Highlighted DataUSA Today36 pages measuredMean proportion of ad space per page = .093

New York Times54 pages measuredMean proportion of ad space per page = .239

Wall Street Journal40 pages measuredMean proportion of ad space per page = .285ANOVA TableSourceSSdfMSFTreatment0.7662.3834.163Error11.691127.092Total12.456129SS(T) = 18.339 - (27.654)2/130 = 12.456

SS(Tr) = (11.389)2/40 + (12.931)2/54 + (3.333)2/36 - (27.654)2/130 = 0.766

SS(E) = SS(T) - SS(Tr) = 11.691

Hypothesis Test1. Ho: USA = NYT = WSJ HA: not all means equal2. alpha = .053. Fcalc = MS(Tr)/MS(E)4. df1 = 2, df2 = 127Reject Ho if Fcalc > 3.06755. Fcalc = 4.163 Reject Ho at alpha = .056. There is a significant difference in the mean proportion of ad space per page among the three newspapers.

Multiple Comparisons Technique: Tukey-Kramer MethodNewspaper:USA Today NYTWSJMean: .093 .239 .285_____________________________

Conclusion: USA Today has a significantly lower mean proportion of ad space per page than the Wall Street Journal.RecommendationsMixed OpinionsNew York TimesGannettConcerns about decreasing advertising revenues are partially offset by optimism in the growing digital business segments of these companies.Source: MarketWatch.comDigital, Digital, Digital

"Our all-access content subscription model and digital business - two initiatives that underpin our growth plan - continued to gain momentum during the quarter." - Gracia Mortore, Gannett CEO

Strategic RecommendationFocus on digital streams of revenue!2013 2Q Earnings Report:

57% Increase in Net Income29% Digital Revenue Growth35% Increase in Digital segment operating cash flow

Questions?