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Eggers Q&A about newspapers, Panorama

Discussion in 'Journalism topics only' started by Inky_Wretch, Feb 25, 2010.

  1. Inky_Wretch

    Inky_Wretch Well-Known Member

    In today's Chicago Tribune.

  2. imjustagirl

    imjustagirl Active Member

    I'd love to see his numbers that say that's sustainable on even a limited level for a newspaper. I love the idea of it, but I really don't see how.
  3. The Big Ragu

    The Big Ragu Moderator Staff Member

    Why can't a $16 newspaper staffed mostly by interns pay for itself?
  4. imjustagirl

    imjustagirl Active Member

    Well, he said it would be $1 or $2 an issue for a scaled-down version. But I just don't see it. He says he has numbers, and Eggers is no idiot. But lordy.
  5. JayFarrar

    JayFarrar Well-Known Member

    Eggers is a little bit of an idiot, he did hire me to write for him, and I didn't cash that check for awhile. Kept it in my car and would look at it when I needed some inspiration but that's a whole other story.

    Eggers broke the numbers down in Panorama.
    An average of 48 pages a day, for seven days at an average of 30,000 copies and you can contract with a printer to get your per unit cost down to about 65 cents a paper. Advertising would also make you money as well.
    With only one part-time person selling, Panorama sold $60,000 in ads.

    If you break his numbers down, printing costs work out to about $7 million and circulation revenue works out to $21 million if every person paid full price and every copy sold out. Which isn't very realistic, but if you adjusted the press run based on demand, you could get it close, in theory.
    You could set a budget of $3 million for personnel costs and that would get 50 people an average of $50k a year and still leaves $500k left over for freelance and wire costs.
    He also made a point of how strict boundaries in the newsroom were detrimental to the overall health of the paper. Let me quote, "The point is, a newspaper could probably be run by a few people working in many different capacities, rather than by many people confined to strictly defined roles."
    A point I agree with, even though it makes my head hurt.
    He also added, "forgive us if it seems starry-eyed."

    Getting the paper delivered adds to the cost, obviously, and then you need overhead like office space, computers, utility costs, reporter travel and the like. So that adds to the expense.
    Maybe that adds up to, let's say, $7 million annually.
    Your total costs are now sitting at $17 million, with a wildly optimistic $21 million in circ revenue, but even if you reduced that down by 20 percent, your costs and circ revenue work out to about even, but that's before you get any advertising revenue.
    Panorama made an average of $200 a printed page in ad money.
    Following his model, that works out to about $3.5 million a year, or about $9,600 a day. At my place, that would be about six full page ads out of 48 printed pages.

    The net result is that it works out to about $2 million in profit every year or about 10 percent in my rough math. Eggers formula called for about 12 percent profit and in either case. that's far from acceptable for a giant corporation, "but within a rational expectation of profit, one can still make a newspaper work.

    I say yes. But it has to be an almost perfect fit for the community or area it serves. Meaning a densely packed population (to cut down on circulation costs) and who are educated with disposable income, to be attractive for advertisers, but costs of living are relatively low so your newspaper staff could actually afford to live there and a community/area that isn't currently well-served by a local paper, or large enough to support multiple papers.

    Just off the top of my head, I can think of quite a few places that would fit the bill.

    Fire away, I want to hear what others think of my math and also the reasoning.
  6. HejiraHenry

    HejiraHenry Well-Known Member

    I'll stipulate that your math works. Hell, I'm just excited that he's excited about newspapers, because I'm sure he's smarter than me.
  7. The Big Ragu

    The Big Ragu Moderator Staff Member

    Jay, I don't think the math is that simple. You are comparing what it cost to get Panorama out there -- a niche, one-shot publication with national distribution (the pitch they used when they sold it) that will be bought by a specific demographic (don't know what the typical McSweeney's type is, but I'd guess they sold it on young, educated, hip, etc.) -- to a daily, local newspaper? (I know you aren't, Eggers was).

    I could say a lot about that. Not even sure where to start. But they are not the same thing. Let me see someone publish the scaled-down version of Panorama mentioned, in one locality every day, and then let's see what the ad revenue looks like, based on the different audience a daily newspaper relies on. The 40,000 people NATIONWIDE out of hundreds of millions who bought a one-shot niche newspaper are not indicative of a small city and a daily or a weekly or even a monthly.

    Also, there have to be costs missing in there. I don't know the business of newspapers, but with magazines the biggies are printing and circ development -- direct mail, marketing, buying lists, etc. whatever it takes to get people to subscribe. You can spend a fortune actually getting subscribers. It's what sinks most magazines. With newspapers, I'd think it is different -- paying to get on newsstands with placement? But that is a racket (it's graft for magazines, at least) and it isn't cheap, and as most newspapers in cities have learned, just putting a newspaper out there doesn't mean people are buying and reading newspapers nowadays. Do newspapers in the major cities actually make anything on circulation or is there a net loss? I'd have thought it is a huge net loss, and sell through is inconsistent, but again, I don't know newspapers well.

    Also, those numbers you threw around look great on paper, but speaking as someone who has done business plans for publications and has seen a ton of them, numbers like those don't leave as much room for error as you'd think. $2 million or what you think is going to be a 10 percent profit is pretty thin to be playing around with. It always costs way more than it did on the restaurant napkin and it never makes nearly as much as you figured. You have to do your worst case projection and then double it. Again, I don't know newspapers, but I do know that even in the best of times magazines were a shitty business. You don't do them because they are the best business ideas, you do them because you love them. It's seemed to me that newspapers suffer from many of the same problems and those problems have been getting worse, which is why newspapers are struggling. For years they were cash cows, but readership is down (because of a changed world) and without readers, the ads aren't there (and the ad dollars are actually going to other places that didn't used to exist -- particularly when it comes to classified advertising which were the lifeline of many newspapers). If I am wrong about all of this, I'd love to hear from others who know the business better than I do.
  8. Inky_Wretch

    Inky_Wretch Well-Known Member

    Panorama also benefited from being filled with big stories and features. A daily version wouldn't be as, well, interesting from front to back.
  9. The Big Ragu

    The Big Ragu Moderator Staff Member

    Right. Which is why it should be compared to a long-form magazine with national distribution and infrequent issues, not to a newspaper.
  10. TheSportsPredictor

    TheSportsPredictor Well-Known Member

    Panorama : newspapers :: Taylor Swift : country music
  11. JayFarrar

    JayFarrar Well-Known Member

    The two lessons I take away from Eggers:
    1) Don't be so quick to write off circulation revenue. It can be a pillar, but it seems that most publications would rather take a loss to get another set of eyeballs. Let me use a personal example. I subscribe to Esquire. The first year cost me $5. I got a renew letter, and one year was $10, two years was $14.99 and I could also subscribe for four years at $29.95. So that works out, roughly, 60 cents an issue. That doesn't cover postage. And, clearly, Hearst is taking a loss to get the magazine in my mailbox.
    Now, I also like to read Outside. Newstand cost is $5 an issue, and you can subscribe for, and I think the best deal is, two years for $24. At the Esquire rate it would be about fifteen bucks.
    So, clearly, Outside places a greater premium on circ revenue. Now, if I wanted to subscribe to Cook's Illustrated, the subscription is about the same as the news stand price and no free loaders online either, Cook's is behind a paywall.
    Eggers seems to be saying, at least the voice in my head I attribute to Eggers, is that people should pay a fair price to read your publication. You shouldn't have to sacrifice what could be a significant portion of your revenue just because an ad agency said it was the right thing to do. It might not be the right thing to do for your publication and I really think that's key. In the case of a newspaper, a legacy publication that comes with a certain amount of built-in readership, the last thing you should be doing is throwing money down the drain to get people cut-rate deals and a giant amount of money in the churn or by chasing new readers.
    Why not cater to the exisiting core by giving them what they want? Something to read.
    And, yeah, it may not make as much money as it used to, but the end result is a loyal readership who will view the pub's advertising as carrying the paper's halo and that's a good thing for advertisers, at least the local ones.

    2) Newspaper are incredibly misguided in its approach to staffing. Too many editors, not enough reporters. At my shop, the ratio is about 1 to 1 and that's insane. Now some of that is because with a title, it allows them to be salaried, and so that makes it an unfair comparison. Also, people can have multiple roles in the newsroom. Especially in smaller shops, but I think that's also true at larger places as well.
  12. The Big Ragu

    The Big Ragu Moderator Staff Member

    Jay, Let's say Esquire is deriving 60 cents an issue on average for issues it mails (and I don't know that to be true). They mail a bit more than 600,000 copies (average about 100,000 newsstand copies). I can't run a good guess on postage costs on a subscriber circulation that high because it's a stratosphere I can't imagine playing in (postage is affected by a number of things -- weight of the magazine, dimensions, how you sort, where you mail from, etc). But that would cover postage (based on the weight of the Esquires I have seen lately). I've never mailed a publication in those numbers (the rate goes down markedly depending on the number of issues you are mailing), but at mail/catalog rates, 60 cents per unit is a lot if you are mailing more than half a million of something.

    Either way, the type of math you are trying to do isn't the right math. Where you get nailed on circulation isn't postage costs. It's the cost to actually GET your subscribers. It's the buying of lists. It's the marketing. The phone calls. Every one of those letters they had to mail to you prodding you to re-up before you finally mailed them a check (which is why they would rather lock you in for four years at a drastically reduced cost than have to spend a lot of money trying to get you back every year. It saves them way more than you realize).

    Publications like Esquire and Outside are under pressure to maintain a guaranteed rate base. And they are audited to make sure they do. For Esquire the number is 700,000. For Outside it's 675,000. Every time they have had to decrease those guaranteed rate base number, it tells advertisers their readers aren't as interesting their magazines anymore, and makes it harder to sell ads -- where traditionally you can make a ton more money than you can possibly make on circulation revenue, because of the costs of circulation development.

    When I first learned some of these lessons in the 90s, I was kind of shocked to learn that Newsweek, Time and US News (which all had millions in circulation), would spend insane amounts of money on mailings and direct marketing to try to keep their rate bases really high. One new subscriber on the margin might cost them $50 or more (the response rates on some direct mail pieces are low -- 4 or 5 percent is considered great and they were doing tons of buying of lists and mailings and marketing). A bit of it was ego driven, but it was still profitable for them, because they made back that cost on advertising and then some, when things were going well.

    Put in those terms, few magazines on the scale of Esquire or Outside is worrying about revenue from subscribers. It's so piddly after you have spent so much on marketing and mailing and newsstand placement (so people can buy single issues and hopefully subscribe to your magazine) that whatever you make back from subscribers is a drop in the bucket.

    The problem these publications have now are different. The ad revenue isn't there, so they can't afford to spend that much on circulation development and know that the ad revenue will pay for it and still make a nice profit. But it's a catch 22. If you can't get readers and keep your rate base up, it looks bad and you can't sell as much in ads and your overall revenue declines. And at a certain point -- 250,000 readers if you have killer demographics in your subscribers, half a million readers if you are doing anything (here's a copy for a nickel) to get anyone to take an issue -- big consumer advertisers just aren't interested in magazines. They can reach more consumers at a lower cost per eyeballs in other mediums.

    The New Yorker came up on another thread. It’s a bit different story. Maybe they care about circ revenue. But the magazine has a gold mine compared to a lot of other magazines. They guarantee a rate base of a million copies. They spend very little money (on a relative basis) on circulation development. Their readers just re-up automatically, which saves them on all of those marketing costs, which kill you. I was once shocked to read that they have higher than a 90 percent renewal rate. And their demographics are really attractive. That is a place where you can charge a bit for a subscription (knowing people will still buy it) and count on circulation revenue as a source of profit. But most magazines don't have those kinds of loyal demographics and as fewer and fewer people read magazines, few ever will again.

    This is why the one place (and I am biased about this) in magazines that still has small pockets of success are niche publications. Find a niche with loyal readers, and provide them something they REALLY crave and can't get elsewhere, and you can pull something profitable out of small circulation numbers -- 5,000 copies, 10,000 copies, 40,000 copies. But good luck find those niches. And good look keeping your niche, because magazine have to worry about printing costs and if someone with a website can do what you do as well, goodbye niche. Either way, those niches are few and far between. And in the end there is no way to translate that kind of reader loyalty to most magazines or daily newspapers tied to a locality.
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