The United States National Newspaper Industry

1. The United States National Newspaper Industry Austin But, Benjamin Wainberg, David Schatz, Jeff Gottlieb

2. An Inquiry How do you, Cornell University students, get your news?

3. Why We Chose the National Newspaper Industry • Changing nature of medium makes it exciting • Once-daily format to instant information era (Facebook, Twitter) • Dual sided market • Newspapers sell ads to companies AND papers to customers • Heterogeneity of firms • Political slant, writing styles, coverage • Media affects us!

4. 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)

5. Why These Three? They exert the most power! • Highest circulation, by far • Most name recognition • Have most national focus

6. High Barriers to Entry • Capital investments (web presses), etc. • NYT spends $63 million quarterly on raw materials (ink, paper) • Relationships within distribution network • Trust/goodwill

7. 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 • News Corporation's 2012 revenues: $34 billion!

8. 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: • 68% men, and 32% women • Average age of 46 • 80% of its readers are employed • Median household income of $78,848

9. Major Player #3: The New York Times • Covers domestic news with slight NY focus • Oldest newspaper; established in 1851 • Perceived liberal bias in commentary, possibly reporting • 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" • Historical Significance • The New York Times Company • 2012 revenue: $2 billion!

10. Delivery techniques?

11. Value Chain Traditionally: Digital age (via the internet and social media): Content Producers (Professional Journalists) American Public Newspapers Content Producers (often the public--anyone with a smartphone) American Public Digital technologies

12. Overall Industry Trends • Shift towards digital media large threat towards stagnant print industry • Exemplified by recent tragedy in Boston-sources like Reddit, Twitter and Facebook became integral • One-sided content stream archaic; technological advances empower consumers

13. Overall Industry TrendsCont’d • 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 • NY Times paywall

14. Case in point...

15. Pricing Strategies

16. Wall Street Journal • Mixed Bundling Strategy • The choice of purchasing parts or the entirety of a bundle Digital-only Print-only Both!

17. WSJ - Pricing Unlimited Access to Archives Digital-Only • Web + Tablet + Smartphone • $21.99 for the first 3 months • $21.99/month thereafter Bundled In WSJ Money WSJ Weekend

18. WSJ Pricing - Cont'd Print-Only • $34.45/month • Delivered 6 days a week *Prices for print-only subscription were not available online, why do you think that is?

19. WSJ Pricing - Cont'd Preset Option! Digital + Print • All benefits of Digital and Print subscriptions combined + WSJ Magazine • Clearly discourages the print only option

20. 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.

21. Student Focus • $29.95 for 15 weeks • All digital + print access • Student per week prices - 70% off Third Degree Price Discrimination.

22. USA Today Pricing • Mixed Bundling Strategy E-newspaper Print and free E-newspaper

23. USA Today Pricing Print Subscriptions • Prices set regardless of delivery address • Increasing monthly cost for longer subscriptions • Incentive for consumers to subscribe for one month and decide if they like it with less of a financial commitment • No distinct options for weekday or weekend subscriptions

24. USA Today Pricing E-newspaper subscription • 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.

25. NY Times Pricing • Mixed Bundling Strategy • Can purchase Digital Subscription or Print/Delivery Subscription with included Digital subscription Digital-only Print and free Digital

26. NY Times Pricing- Cont'd Second Degree Price Discrimination • Digital Subscriptions versioned by platform accessibility (e.g. tablet, mobile, pc) • Make those who own all types of devices pay more • Print Subscriptions versioned by day of the week (e.g. Weekdays, Weekend, Daily)

27. NY Times Pricing Cont'd Special Offers for New Subscribers

28. 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

29. NY Times Pricing Digital more expensive than Print • Discourage current print subscribers from switching to digital only • Preserve ad revenues from print

30. NY Times Pricing Cont'd Third Degree Price Discrimination • Education Rates • Students and Faculty get 50% off Digital Subscription, Smaller discount off Print Subscription First Degree Price Discrimination • Corporate Rates • Pricing determined on individual basis • Available for Print and Digital Subscription • Billed on annual basis only

31. Advertising Pricing Strategies

32. Advertising: The Other Side of the National Newspaper Industry • Advertising has historically been a crucial revenue generator • Trends: • Major decrease in overall advertising revenue over the last decade • Huge decreases in print advertising revenue • Gradual increases in digital advertising revenue not sufficient

33. An Advertising Problem, Not a Circulation Problem

34. Total Ad Revenues, 2003 - 2012

35. Upon Closer Examination: Print vs. Digital Ad Revenue, 2003 - 2012

36. Putting It Into Perspective... Source: The Atlantic

37. Scary Ratio Getting Scarier • 2011- Newspapers lost $10 in print advertising revenue for every $1 earned in digital advertising revenue • 2012- Ratio now 16:1

38. Who's Responsible for the Advertising Revenue Decrease?

39. Digital Advertising Pricing Strategies Among the Three Newspapers • NO 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

40. More Similarities • Among 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 not

41. Print Advertising Pricing Strategies • All 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 Sunday

42. Wall Street Journal's Print Advertising Pricing Strategies • WSJ Franchise Net Revenue Contracts • Advertisers receive discounts if they sign contract to spend a certain amount on advertising

43. The Value of WSJ Contract- Example • Advertiser is contracted to spend $2.5 million in advertising • Full-page color ad in Global Edition = $279,523.79 • Advertiser is contracted to spend $5.2 million in advertising • Full-page color ad in Global Edition = $261,304.89 • Advertiser has no formal contract • Full-page color ad in Global Edition = $379,597.53

44. WSJ: Third Degree Price Discrimination • Based 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: $62,611.92

45. USA Today's Print Advertising Pricing Strategies • Discounts based on advertising spending commitment- similar to Wall Street Journal Source: USA Today Rate Card

46. USA Today's Unique Strategy • Different prices for Friday Edition than for Monday - Thursday Editions Source: USA Today Rate Card

47. New York Times's Unique Strategy • 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

48. Because 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

49. Highlighted Data • USA Today • 36 pages measured • Mean proportion of ad space per page = .093 • New York Times • 54 pages measured • Mean proportion of ad space per page = .239 • Wall Street Journal • 40 pages measured • Mean proportion of ad space per page = .285

50. ANOVA Table 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