Business success of paperless papers may signal next step in mainstream news: Don Pittis

Reports of a new decline in advertising spending due to the coronavirus outbreak are just the latest insult to the downtrodden newspaper business struggling to catch its breath in what has seemed like an endless epidemic of change.

In Europe, where COVID-19 is now spreading, media groups are already reporting a sharp drop in ad spending from the leisure and tourism industry.

"Falls in ad spending are a sign companies are finding things tougher," British stock analyst Emilie Stevens told the Wall Street Journal. "It's one of the first types of spending to go when companies need to cut back."

As newspapers look for new ways of saving money, evidence from Britain and Canada may point to the next stage in the evolution of broadsheet papers to complete their transformation — the elimination of paper altogether, but with no paywall.

Beating The Telegraph

Last week, The Independent, once a traditional British broadsheet newspaper, announced that it had become a $1-billion US property, as analysts noted that it had made more profit than The Telegraph, the conservative-leaning title formerly controlled by Canada's Conrad Black.

The company had become "a unicorn," the term used for startups that have have crossed $1 billion US in value. Independent Digital News and Media chair John Paton credited the outlet's success to its scheme to do away with printing in March of 2016.

The results are stunning for a newspaper corporation that only a decade ago sold itself off for £1 plus a share of the next 10 months income, seen as the only alternative to going broke.

"Few, if any, serious newspapers in the world have made the transformation to digital only," said Paton.

Maybe so, but one of them is in Canada. The venerable Montreal daily La Presse stopped its presses almost three years ago after 133 years of appearing on newsprint.

At first the switch from print to a proprietary tablet-based publishing tool was not an unmitigated success, said Amélie Daoust-Boisvert, an assistant professor of journalism at Concordia University in Montreal and a former reporter for Le Devoir. Part of the evidence that it was no longer a big money earner was that in 2018 the owners of the title, Canada's Desmarais family, spun it off into a social trust, effectively a non-profit foundation.

Good news story

But now, after a difficult patch that involved serious cost-cutting, La Presse appears to be back on the road to success, said Daoust-Boisvert.

"I suppose it's not easy for everyone there, but it's encouraging news that they are still publishing every day," she said. 

As a non-profit, the financial success of the Montreal paper is harder to read, but according to their own report last month, despite a large payout to lay off unionized printing staff, the decision by La Presse to stop the presses has been a success story. The board of directors reports this year's operational deficit is falling and the paper is heading for a balanced budget next year.

That is a positive sign in a business where traditional daily papers continue to hemorrhage money, including just last month the McClatchy group of 30 papers including the Miami Herald and the Kansas City Star. So far the papers continue to operate in bankruptcy, but the company said plunging ad revenue and falling subscriptions finally pushed them over the edge.

For more than a decade, since the collapse of one of their most important sources of revenue, classified ads, quality broadsheet newspapers have been struggling to find a business model that works.

Early suggestions that online news had to be free were replaced by paywalls, which seemed to work for specialty papers like the Wall Street Journal or the New York Times with the stature to attract online subscriptions. The Guardian in the United Kingdom decided to offer their product free, depending on online ads aimed at their large readership, while begging loyal readers for donations. But none of those three have given up their print editions.

Karen Unland, one of the first editors for the online version of the Edmonton Journal back in 2007, says while so many newspapers remain committed to paper editions, the cost of printing, distribution and house-to-house delivery remains enormous.

"It's very expensive to do," says Unland, who now runs her own successful online news business for the Alberta capital, called Taproot Publishing.

No longer crazy talk

"I felt really strongly that we needed to kill the print product so we could fully concentrate our resources," said Unland, remembering her time at the Journal. "But at the time that was crazy talk."

Since then, online-only publications such as The Athletic or Business Insider have crowded into the market, offering specialty service for a price, while avoiding printing costs.

For both La Presse and The Independent, the model they have chosen is similar to the Guardian's but without the cost of running printing presses and distributing a physical newspaper.

It is a model that Jeff Elgie, CEO of Village Media, based in Sault Ste Marie, Ont., has shown can work in small markets as well as large.

The profitable company, that now has editions in 12 Ontario communities as well as affiliates outside the province, earns 70 per cent of its revenue from local advertising from dedicated regional sales reps, 15 to 20 per cent from Google-style ads, and the rest from local contributions and the licensing of their publishing technology to other papers.

Elgie says, rather than paywalls, the company uses its reach to attract advertisers. But, unlike existing papers, the 15-year-old company has one big advantage.

"We're not hindered by legacy issues. You know, we don't have large buildings and printing presses and distribution facilities," he said.

Elgie says his readership, while appealing to all ages, skews younger, and being fully online offers an intangible aura of representing the future instead of the past.

"There's a stigma attached to being a newspaper," he said. "You're for parents or grandparents."

For established papers struggling to survive, parents and grandparents still addicted to a physical newspaper may simply be too important to the bottom line to ignore. But one day soon that will change.

Follow Don on Twitter @don_pittis