“Newspapers Are Not Dinosaurs; Newspapers Are Changing And Now They Are Growing Thanks To Their Internet Audiences” – Scarborough Research

Philip M. Stone October 5, 2006

With Merrill Lynch and Deutsche Bank issuing new notes lowering their 2007 prognoses for many American newspaper groups, there is some welcome news from the respected Scarborough Research that says newspapers have actually gotten their online act together and there is a fundamental shift in how newspaper readership should be perceived.

The problem for Wall Street, however, is that increased numbers of readers to newspaper Internet sites are not yet producing the revenues to replace what print is losing. So while newspapers may indeed be attracting Internet readers Wall Street asks the same question as Tom Cruise asked in the movie Jerry Maguire, “Where’s the Money?”

The answer is that it won’t show in the percentage amounts Wall Street is looking for (minimum 12% of total revenues) for another two years or so at most newspapers, and that is why Merrill Lynch and Deutsche Bank have reduced their 2007 forecasts for many newspaper groups and predict similar poor results for 2008.

Currently Internet revenues for those newspapers that have their digital act pretty much together ranges from around 5% to 9% of total revenue.

The frustration for newspapers is that although their print circulation may be down a bit and their advertising revenues are pretty much flat, most of them are still turning a 20% plus margin that a lot of other industries eye with great envy. But Wall Street places its values on what companies will do in the future and for the next two years overall newspaper revenues don’t look to be growing.

But for all of that, the new Scarborough Research report has much to bring joy in the publisher’s suite. The new study makes clear that newspaper performance should no longer be judged just on the print edition. “The name of the game for newspaper companies has become ‘multiple platforms’ where the newspaper web site offers another way to distribute editorial and advertising content,” the survey said. Combining the audiences of all the various platforms should create a fundamental shift in how newspaper readership is perceived, the survey concludes.

Scarborough promotes what it calls the “Integrated Newspaper Audience”, a measurement that combines the audience of traditional printed newspapers with the audiences of their web sites.

The survey points out, “Newspaper web sites are contributing significant numbers of readers who do not necessarily read the printed publications, resulting in larger audiences overall.

And there is an even more important point that should bring joy to advertisers.  “The analysis finds that newspaper web site audiences are young and upscale, dispelling a common misperception that young people are not being successfully engaged by newspaper content.”

Studying those who read both the print and online sites, or just one or the other, the survey concludes, “the ‘online exclusive’ audience accounts for two to 15% of the Integrated Newspaper Audience …This represents hundreds of thousands of readers for many newspapers in larger markets.

Focusing on young readers the survey said, “The audiences for newspaper web sites tend to be younger than those of traditional newspapers. The analysis indicated that newspapers across the board are successfully attracting the 18-to-34-year-olds to their web sites.”

And the survey claimed that the readership of newspaper web sites may be even more upscale than their print counterparts. “Not only are newspaper web site patrons just as desirable from a marketing perspective as their print counterparts, but in many instances, they are even more upscale.”

It gave several examples of specific newspapers where this is true. At The Washington Post, for instance, about 60% of its print readership (those who read the paper at least once a week) have a household income of $75,000 or more, whereas the survey said that 73% of the visitors to washingtonpost.com have household incomes in that same $75,000 range.

In that same vein the Newspaper Association of America (NAA) has reported that newspaper web sites averaged more than 55.5 million unique visitors a month during the first half of 2006, up by 29% from the same period a year ago. But perhaps more important than the leap of unique visitors is that the combined newspaper/digital platforms drove a 15% increase in the numbers for the 25 –34 year-olds and a 10% increase for the 18-24 year olds. The Washington Post, for instance, increased its reach to the 25 – 34 year-olds by 60%.

Newspaper web site page views in July were 52% higher than July last year, representing around a third of all web use.

The study also showed that with age we read newspapers more.  Within the top 50 markets, 66% of 18 – 34 year-olds read a newspaper at least once a week, 77% of the 35 – 54 year-olds, and 83% of those above aged 55.