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View Diary: Big Media's gambit to protect their profit margins (191 comments)

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  •  75 Web Readers = 1 Print Reader (Ad Dollars) (7+ / 0-)

    A reprint of a previous comment I've posted.  

    You can't have a discussion about the newspaper industry without citing CPMs (cost per thousand impressions of an ad)

    Today, more people read the New York Times than ever before.  Every month, just in the USA, draws over 20M unique readers.

       This is the reason why The Globe isn't viable.

       The San Jose Mercury News was the canary in the coal mine.  About six years ago, that paper began to experience a significant decrease in classified advertising, the most profitable of all advertising.  The San Jose Mercury News went from an operating margin of over 25%, to operating at a loss today.

       Nothing you can do about it.  More people today read the San Jose Mercury News and The Boston Globe than ever before.  The problem, as you'll read below, is that Web advertising is significantly less profitable than print advertising.

             Real Reason Newspapers are Dying: CPMs

             Speak to the CFOs of the NYT or the WSJ.

             They'll tell you that they get as much as US$ 40 per CPM on their print edition.  And they get as little as US$ 0.55 cents per CPM on their Web editions.

             For every print reader they lose, they need 75 Web readers to offset the loss.

             How many of you read Politico?  Politico gets over 90% of their revenue comes from their print edition, even though it is only distributed in DC.

             That's why newspapers are dying.  Internet advertising is structurally cheaper than print.  

             Warren Buffet once loved newspapers because they were virtual monopolies.  Indeed, any business with sustained operating margins (EBIT) of over 25% can be loosely defined as a monopoly.

             Today, the NYTimes (flagship paper) has an operating margin of about 5%.  The WSJ, before it was bought by NewsCorp, had an operating margin of anywhere from 4% to 7%.

    Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project.

    by PatriciaVa on Sat Jun 06, 2009 at 01:34:48 PM PDT

    [ Parent ]

    •  Big deal. (4+ / 0-)

      For some reason, supermarkets continue to live on operating margins of 3%.  

      2009: Year of the Donkey. Let's not screw it up.

      by Yamaneko2 on Sat Jun 06, 2009 at 01:43:33 PM PDT

      [ Parent ]

    •  It won't be long before you're looking at a (1+ / 0-)
      Recommended by:

      flat screen while standing at the checkout counter , instead of all the masgs and tabloids...

      "I still say a church steeple with a lightning rod on top shows a lack of confidence."

      by logsol on Sat Jun 06, 2009 at 01:58:45 PM PDT

      [ Parent ]

    •  Won't web CPMs change... (2+ / 0-)
      Recommended by:
      Jett, PatriciaVa

      ...once the newspapers die?
      With print gone, then all the action will be online. I'm not saying it'll be $40, but won't supply and demand make the numbers a bit better for the web?

      I'm the plowman in the valley - with my face full of mud

      by labradog on Sat Jun 06, 2009 at 02:11:02 PM PDT

      [ Parent ]

      •  Technology enables Cost-Effective Targeting (1+ / 0-)
        Recommended by:

        At one time, it was very difficult to reach the newspaper reader demographic.

        Newspapers were the only game in town, and able to extract monopoly rents (ask Buffet) from advertisers.

        Technology (on the Web and even on Television, using algorithms to determine HH wealth) has enabled reaching that same demographic at CPMs FAR less than the 40 dollars.

        Don't know what the newspaper steady-state CPM will be.

        But I'd bet it's less than 15 dollars.

        Learn about Centrist Economics, learn about Robert Rubin's Hamilton Project.

        by PatriciaVa on Sat Jun 06, 2009 at 02:18:25 PM PDT

        [ Parent ]

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