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Newspapers are swapping dollars for dimes

news press
REUTERS/Zohra Bensemra
Newspapers are losing 10 times in print advertising sales what they are earning in digital ad revenue.

Ever since the newspaper business was blindsided by the Internet in the middle of the last decade, industry executives have searched for a way to increase their own digital revenues. Someday soon, they hoped, “the lines would cross:” rapid growth in digital advertising would start to replace the print advertising that was draining away faster each year.

That’s why a report this month from the Pew Research Center is such bad news. Far from crossing, the lines are diverging.

In 2011, newspapers lost about $2.1 billion in print advertising. Meanwhile, their digital advertising grew by about $207 million. In other words, they lost $10 in print ads for every new dollar of digital ad money.

There’s a phrase for that in the business: swapping dollars for dimes. Needless to say, it’s an unsustainable business model.

Newspapers weren’t the only medium suffering. Local TV news is hurting, too. The Pew report found that the average local TV station has lost more than 27 percent of its revenue over the last five years. Viewership of most local TV newscasts is down, too – even though stations have been adding more and more hours of inexpensively produced newscasts (news at 4 a.m., anyone?).

Are any media doing well? Yes. Pure digital outlets continue to grow rapidly, both in revenue – up 23 percent in 2011 – and audience. And cable TV is doing well, boosting its revenue almost 10 percent in 2011 while stealing local advertising from the over-the-air stations.

On a national level, the big five digital companies – Google, Apple, Facebook, Yahoo and Amazon -- have amassed mountains of cash and overwhelming market share. These five companies now control nearly 70 percent of all digital advertising.

The Pew report speculates that the digital giants might want to use some of their cash to buy high-status, old-line news companies on the cheap. How cheap? Here’s just one example: The Philadelphia Inquirer and Daily News, which sold for $562 million in 2006, are for sale again, reportedly for an asking price in the range of $100 million.

Google and Apple can find that much cash in their sofa cushions. The question is why they’d spend their money on existing news organizations rather than building new organizations that aren’t wedded to old ways of doing things.

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Comments (2)

I love reading the newspaper

and this article makes me sad.

Me, too.

I don't like reporting this stuff, but the facts speak pretty strongly. As an industry, newspapers are in big trouble.

But I hold out hope for the Star Tribune. Based on the reporting of my MinnPost colleague David Brauer, they seem to be doing better than the industry as a whole.