The United States
National Newspaper
Industry
Austin But, Benjamin Wainberg, David Schatz, Jeff Gottlieb
An Inquiry
How do you, Cornell University
students, get your news?
Why We Chose the National
Newspaper Industry
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Changing nature of medium makes it
exciting
o
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Dual sided market
o
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Once-daily format to instant information era
(Facebook, Twitter)
Newspapers sell ads to companies AND papers to
customers
Heterogeneity of firms
o
Political slant, writing styles, coverage
Media affects us!
3 biggest players in "an industry of their
own"
30.49%
market
share
40.80%
market
share
28.71%
market
share
= HHI of 3418.54 (Concentrated)
Why These Three?
They exert the most
power!
Highest
circulation, by far
Most name
recognition
Have most
national focus
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High Barriers to Entry
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Capital investments (web presses), etc.
o
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NYT spends $63 million quarterly on raw materials
(ink, paper)
Relationships within distribution network
Trust/goodwill
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Major Player #1: The Wall Street Journal
Slant towards business and economic news, often
thought to be "pro-industry," "laissez-faire"
Written to advanced readability level
Average household income of reader: $236,848!
Owned by Dow Jones, and thus News Corporation
o
News Corporation's 2012 revenues: $34 billion!
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Major Player #2: USA Today
Easy readability
Covers general domestic
news in full color
No staunch perceived bias
Owned by Gannett-company revenue $5.439
billion in 2010
Demographics:
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68% men, and 32% women
Average age of 46
80% of its readers are employed
Median household income of $78,848
Major Player #3: The New York Times
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Covers domestic news with slight NY
focus
Oldest newspaper; established in 1851
Perceived liberal bias in commentary,
possibly reporting
o 2007 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"
o Historical Significance
The New York Times Company
o 2012 revenue: $2 billion!
Delivery techniques?
Value Chain
Traditionally:
Content
Producers
Newspapers
(Professional
Journalists)
American
Public
Digital age (via the internet and social media):
Content
Producers
(often the public-anyone with a
smartphone)
Digital
technologies
American
Public
•
Overall Industry Trends
Shift towards digital media large threat
towards stagnant print industry
o
•
Exemplified by recent tragedy in Boston-sources
like Reddit, Twitter and Facebook became integral
One-sided content stream archaic;
technological advances empower consumers
Overall Industry Trends Cont’d
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Information 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 era
o
NY Times paywall
Case in point...
Pricing Strategies
Wall Street Journal
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Mixed Bundling Strategy
o
The choice of purchasing parts or the entirety of a
bundle
Digital-only
Print-only
Both!
WSJ - Pricing
Digital-Only
Web + Tablet +
Smartphone
$21.99 for the first
3 months
$21.99/month
thereafter
Unlimited Access
to Archives
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Bundled In
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WSJ Money
WSJ Weekend
WSJ Pricing - Cont'd
Print-Only
$34.45/month
Delivered 6 days a week
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*Prices for print-only subscription were not
available online, why do you think that is?
WSJ Pricing - Cont'd
Preset Option!
Digital + Print
All benefits of
Digital and Print
subscriptions
combined + WSJ
Magazine
Clearly discourages
the print only
option
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Corporate-Oriented Strategy
Companies interested in a
corporate WSJ account calls
the WSJ Corporate Accounts
Team
Companies 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
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$29.95 for 15 weeks
All digital + print access
Student per week prices - 70% off
Third Degree Price Discrimination.
USA Today Pricing
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Mixed Bundling Strategy
E-newspaper
Print and free
E-newspaper
USA Today Pricing
Print Subscriptions
o
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Prices set regardless of delivery address
Increasing monthly cost for longer subscriptions
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Incentive for consumers to subscribe for one month
and decide if they like it with less of a financial
commitment
o No distinct options for weekday or weekend
subscriptions
USA Today Pricing
E-newspaper subscription
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Digital version of print paper
One subscription option: $99.00 for 1 year
Note: This is different than access to tablet or
mobile apps
Tablet and Mobile Apps
Free to download and access content,
but with lots of advertisements.
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NY Times Pricing
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Mixed Bundling Strategy
o
Can purchase Digital Subscription or Print/Delivery
Subscription with included Digital subscription
Digital-only
Print and
free Digital
NY Times Pricing- Cont'd
Second Degree Price Discrimination
Digital Subscriptions versioned by
platform accessibility (e.g. tablet,
mobile, pc)
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Make those who own all types of devices pay
more
Print Subscriptions versioned by day of
the week (e.g. Weekdays, Weekend,
Daily)
NY Times Pricing Cont'd
Special Offers for New Subscribers
NY Times Pricing Cont'd
1-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 Pricing
Digital more expensive than Print
Discourage current print subscribers from
switching to digital only
Preserve ad revenues from print
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NY Times Pricing Cont'd
Third Degree Price Discrimination
Education Rates
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Students and Faculty get 50% off Digital
Subscription, Smaller discount off Print
Subscription
First Degree Price Discrimination
Corporate Rates
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Pricing determined on individual basis
Available for Print and Digital Subscription
Billed on annual basis only
Advertising Pricing
Strategies
Advertising: The Other Side of the
National Newspaper Industry
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Advertising has historically been a crucial
revenue generator
Trends:
o
Major decrease in overall advertising revenue over
the last decade

Huge decreases in print advertising revenue

Gradual increases in digital advertising revenue
not sufficient
An Advertising Problem, Not a
Circulation Problem
Total Ad Revenues, 2003 - 2012
Upon Closer Examination: Print vs.
Digital Ad Revenue, 2003 - 2012
Putting It Into Perspective...
Source: The Atlantic
Scary Ratio Getting Scarier
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2011- Newspapers lost $10 in print
advertising revenue for every $1 earned in
digital advertising revenue
2012- Ratio now 16:1
Who's Responsible for the
Advertising Revenue Decrease?
Digital Advertising Pricing Strategies
Among the Three Newspapers
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NO PRICE QUOTES READILY AVAILABLE!
o
All potential advertisers need advertisements
submitted and approved before price quote
o
With this power over advertisers, all three
newspapers can engage in First Degree Price
Discrimination
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Charge different advertisers different prices for
potentially same digital advertising option
More Similarities
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Among Wall Street Journal and New York
Times
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Across-platform multimedia packages and
sponsorships
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Bundling- advertisers may end up paying to
advertise on a platform they otherwise would not
Print Advertising Pricing Strategies
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All three national newspapers charge
different prices for different sizes
o
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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 Sunday
Wall Street Journal's Print
Advertising Pricing Strategies
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WSJ Franchise Net Revenue Contracts
o Advertisers receive discounts if they sign
contract to spend a certain amount on
advertising
The Value of WSJ ContractExample
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Advertiser is contracted to spend $2.5 million
in advertising
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Advertiser is contracted to spend $5.2 million
in advertising
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Full-page color ad in Global Edition = $279,523.79
Full-page color ad in Global Edition = $261,304.89
Advertiser has no formal contract
o
Full-page color ad in Global Edition = $379,597.53
WSJ: Third Degree Price
Discrimination
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Based on edition's geographic circulation
Example: price of full-page color ad for a
non-contracted advertiser
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Eastern Edition: $116,610.48
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Central Edition: $96,907.86
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Western Edition: $62,611.92
USA Today's Print Advertising
Pricing Strategies
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Discounts based on advertising spending
commitment- similar to Wall Street Journal
Source: USA Today Rate Card
USA Today's Unique Strategy
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Different prices for Friday Edition than for
Monday - Thursday Editions
Source: USA Today Rate Card
New York Times's Unique Strategy
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Third Degree Price Discrimination- charge
different prices based on advertiser's
industry and even the product(s) advertised
Grocery products: $927.00 per column inch
Drug stores: $411.00 per column inch
Automotive: $859.00 per column inch
Healthcare: $1,254.00 per column inch
Because We Were Curious...
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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 Data
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USA Today
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New York Times
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36 pages measured
Mean proportion of ad space per page = .093
54 pages measured
Mean proportion of ad space per page = .239
Wall Street Journal
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40 pages measured
Mean proportion of ad space per page = .285
ANOVA Table
Source
SS
df
MS
F
Treatment
0.766
2
.383
4.163
Error
11.691
127
.092
Total
12.456
129
SS(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 Test
1. Ho: µUSA = µNYT = µWSJ
HA: not all means equal
2. alpha = .05
3. Fcalc = MS(Tr)/MS(E)
4. df1 = 2, df2 = 127
5. Fcalc = 4.163
Reject Ho if Fcalc > 3.0675
Reject Ho at alpha = .05
6. There is a significant difference in the mean proportion
of ad space per page among the three newspapers.
Multiple Comparisons Technique:
Tukey-Kramer Method
Newspaper:
Mean:
USA Today
NYT
WSJ
.093
.239
.285
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Conclusion: USA Today has a significantly
lower mean proportion of ad space per page
than the Wall Street Journal.
Recommendations
Source: MarketWatch.com
Mixed Opinions
New York Times
Gannett
Concerns about decreasing advertising revenues are partially offset by optimism
in the growing digital business segments of these companies.
Digital, 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 Recommendation
Focus on digital streams of revenue!
2013 2Q Earnings Report:
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57% Increase in Net
Income
29% Digital Revenue
Growth
35% Increase in Digital
segment operating
cash flow
Questions?