With Newspaper Web Sites So Successful and Print Looking For Every Penny Of Savings Possible Here’s A Simple Tip: Start Charging the Web Site Its True Costs Instead of Charging Everything to Print

That could be said to be just an exercise in moving costs from one column to another, but as long as the media intends to judge each platform in its multi-platform strategy as separate entities on how well each does individually, with the knife applied on any platform not performing to budget, then that knife wielding really should be based on true numbers.

As good an example as any in such an exercise is the allocation of news agency costs.

When newspapers started on their web activities back in the 1990s they particularly tried to keep their costs to the absolute minimum because they knew that web operations for a number of years would show losses.

So it was quite natural when buying in news services such as Reuters for the newspaper’s web site that contractually a license was added to the newspaper’s existing news agency contract and an additional fee – around 10% of the newspaper’s then rate paid to the news agency – was charged as the license for web use. Some news agency sales people did it the right way and showed an additional specific charge for the web site; others just increased the rate to the newspaper and issued the license.

In the US it is only in the past couple of years that the AP has told its members they need a license to use AP copy for their web sites. The intent was to charge for that license but there was such a hue and cry on that point that last year – when there should have been the first license fee – there was none and since AP executives are talking about keeping next year’s assessment to even less than this year’s the idea of a separate charge for the web seems to be dead.

So for news agencies today when studying their revenue from newspapers and newspaper web sites almost all of it is shown paid by newspapers. But how are those costs charged today within the newspaper? Most probably the newspaper absorbed the license fee for its web site when it was necessary to keep those web costs down, but that seems to be a policy that now needs reversing.

Today, things are very different. Newspapers are losing circulation to the web, but many of those readers are turning to the newspaper’s own web site. The web sites still don’t make as much as print by any means, but they are strong enough today to be able to absorb their true cost of doing business and that can only help the print product that is struggling to handle its costs and trying to save jobs Changing allocations is an immediate cost savings for a newspaper.

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The trend today is for fast moving news to go onto the web. For newspaper web sites that means they are the ideal carriers of the news agency-supplied international and national news that can change hourly. A case could probably be well made today that the national and international news for a newspaper’s web site is more important there than it is to the print edition.

That’s because the print edition is changing, and will change even more, into a purveyor of local news. There will be less and less international and national news in the newspaper because print readers are telling publishers what they want in print is their local news. And that is good for print since they are pretty exclusive with local news – radio and tv have cut way back on what they cover locally -- so even if that news is eight hours old by the time the reader sees it at the breakfast table it’s no big deal. But if it was an earthquake featured on the front page of print, the casualty numbers will most likely have changed dramatically between print deadline and breakfast reading.

So if the news agency is more valuable to the web site these days than it is to the newspaper, then shouldn’t the web site be paying its own fare share? And if that means transferring costs from the newspaper to the web site then isn’t that exactly what the accountants should be looking for.

Again, if a newspaper’s whole multiplatform strategy was considered one entity then tricks like this aren’t necessary, but since newspapers are cutting their costs like crazy to maintain their 20% plus margins then at the very least the web site should start carrying its own true costs and take those off the shoulders of the newspapers that can no longer afford such a luxury.

The allocation game is nothing new to the media. One of the best examples is when Gannett launched USA Today in September, 1982.There had been a lot of pre-launch buzz that the all-color national newspaper – something new in those days – was going to cost Gannett a fortune, losing money for years, but Al Neuharth its ceo at the time, wanted it launched and launched it was.

At that time this writer was a lowly regional sales executive for UPI in Indiana where there were three Gannett newspapers, none UPI subscribers, and likely never would be because of the very close relationship between Gannett and the AP. But every once in a while UPI sales executives were sent out to hit their heads on walls, and since the Indiana economy was starting to look better it was time for another head-hitting exercise with Gannett.

And what one angry Gannett publisher said at the time was really quite enlightening. The publisher explained that he and all his fellow publishers had to send staff – technical, advertising, editorial, whatever -- to Washington to help with the start-up of USA Today. That staff was going to spend at least half a year in Washington but each member was to continue to be paid by the home newspaper and all such costs—housing, food etc., -- were to be carried on the home newspaper’s books. USA Today was not showing those staff costs in its own books.

Remembering back to the first couple of years of USA Today the financial numbers really were quite horrible – imagine what they would have been if they had showed those true staff costs. Would USA Today be with us today?

That publisher made it clear that in addition to those Washington costs he had to hire temporary help to make up for those temporarily lost personnel and any thought UPI had of the newspaper adding a news service was pie in the sky. And that was that.

The accountants solved Neuharth’s problems then, and then they can help solve some major cost issues today for the global print media that is slowly losing out to the Internet. With circulation and advertising in decline, newspapers cannot afford to carry costs that are really not theirs.

And with the new trend finally beginning to join print and web newsrooms and to combine print and web sales forces, just how are those joint costs and revenues going to be allocated?

This article is adapted from a consultancy program provided by Mr. Stone to the media. For further information on such services please see www.astonesthrow.ch

With Newspaper Web Sites So Successful and Print Looking For Every Penny Of Savings Possible Here’s A Simple Tip: Start Charging the Web Site Its True Costs Instead of Charging Everything to Print

With newspapers looking for savings wherever they can find them, they could do worse than sit their accountants down and get them to look closely at how costs are allocated between their print and web operations.