Strategies and Insights: Publishers on the way to digital transformation

The media world is undergoing rapid change. Publishers are faced with the challenge of revolutionizing the print business and adapting business models in order to remain economically viable digitally. It is therefore important to shed light on the various challenges and opportunities that change brings and to be aware of possible strategies. Dr. Christoph Mayer, Partner at Highberg and expert for future-oriented media strategies, spoke about this at the Purple Day 2024 important insights, which are summarized for you in this article.    

Development of print circulation, sales revenue and advertising market

Over the last 20+ years, the newspaper business has undergone a predictable development that affects print circulation, the advertising market and distribution revenues and poses challenges for media professionals.  

Print circulation is declining slightly, between -1 percent and -5 percent depending on the publisher and region. E-paper and web are cushioning this development slightly with their revenues, but cannot counteract it. The advertising market is declining overall and recording heavy losses. On the other hand, sales revenues are growing slightly due to subscription price increases. However, these price increases are finite, which is why the slight growth has been declining for two to three years.  

This development is driven by the age structure of print subscribers, as this market is primarily made up of the older population. However, it is estimated that this readership will decline sharply over the next five to ten years. This will affect 40 percent of print subscriptions, which is why both print circulation and revenues will fall drastically. As a result, delivery density will fall, which is why the unit costs of delivery will explode.  

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As a result of these developments, entire districts will become uneconomical for print circulation in future, which is why print subscriptions will be actively switched off and circulation will fall even further. This will lead to a significant downward spiral and, in the next five to ten years, it will no longer be possible for publishers to deliver print editions economically.  

Print or e-paper - which is more economical for publishers?

The fact is that not all readers can be digitized at the same time. As the print business is becoming increasingly uneconomical, publishers still have to act. How should publishers proceed in order to remain profitable? To answer this question, it is first worth comparing print and digital.

E-paper and Plus subscriptions are cheaper than print due to lower production and delivery costs. In a purely digital world, where there are no more print editions, about half of the costs for publishers are eliminated. In this case, the question arises as to how many e-papers, subscriptions and Plus are needed to be profitable. Although the cost base is halved in this case, digital products have a significantly lower average revenue. The price of a Plus subscription is a quarter of the price of print, while the price of an e-paper is half. This means that the number of pure Plus subscriptions, for example, would have to be more than twice as high as today's print subscriptions, a challenge that is almost impossible to implement.  

According to estimates, publishers will be optimally positioned in future if half of their subscriptions consist of e-paper and Plus. The target number of digital subscriptions should therefore be just as high as the number of current print subscriptions.  

Significant differences between print and digital products

Print and digital differ in several fundamental aspects, first and foremost the physical and virtual form of the content presented. The tangibility of a print product is reflected in the tangibility of the user base, as print is only available as a pure plus or purchase product. Digital offerings, on the other hand, are available as both free and paid products, which makes users more difficult to grasp overall.  

The differences are also clear when it comes to delivery: readers find it difficult or even impossible to ignore print products, as they are delivered to their homes as a push product. In addition, the perceived value is higher and, in the case of daily newspapers, delivery takes place every day. As a pull product, digital can be ignored or forgotten, and the value is only present if it is actively used. These characteristics are also reflected in the general product value. Print products, on the other hand, are leafed through and the articles they contain are immediately visible and "opened". In contrast, many articles in digital format are never seen and must also be actively opened.

Two markets with different target groups

There are clear product differences between print and digital, but publishers are subject to the shift towards digital products if they want to be profitable in the future. The question arises as to whether the same market exploitation is realistic with a combination of print and digital as was previously the case with print.  

To do this, it is first important to look at the markets in which the products are located. Two markets can be identified based on the age distribution of the readership: The age structure of print subscriptions and e-paper subscriptions is relatively similar, while that of Plus subscriptions is clearly distinct. These are two separate markets.  

As print becomes uneconomical, the target group of print subscribers will have to be converted into e-paper readers in future. The readership of Plus subscriptions, on the other hand, are new target groups that have not yet been addressed. It is therefore important for publishers to achieve conversions from print to digital among their readership. In known cases, these conversion rates have varied greatly to date. In the worst cases, they are 20 to 30 percent, in most cases 50 to 60 percent and sometimes even a good 70 to 80 percent.  

In most cases, these conversions are forced. Print editions were abolished by publishers at a certain point in time and digital offerings were offered as an alternative. In contrast, the rates for "voluntary" conversions are significantly higher if print offerings are retained but incentives are created to favor digital offerings. What can publishers learn from this?  

Strategies for implementing the digital business model

Publishers can use various strategies on the way to a digital business model - in combination or individually. It should be noted that it is not necessarily the inefficiency of print subscriptions in a region that triggers the switch to digital. Publishers can take a strategic approach beforehand and use various methods to encourage their readership to use digital offerings. This includes, for example, reducing the number of delivery days for print offers in order to introduce readers to the digital product.  

The following three strategies lead to the digital business model:

• Strategy 1: Extend print lifetime

• Strategy 2: Support print subscribers with digital transformation

• Strategy 3: Print subscribers must use digital offerings

Pull and push strategies for digital transformation

There are various pull and push strategies to increase the use of digital offerings.  

It is worthwhile for publishers to communicate the advantages of an e-paper. This includes, for example, the earlier accessibility of content, which can take place the evening before. Another point is the simplified use and accessibility: publishers can send links to the e-paper directly via daily e-mail or WhatsApp messages - without having to take out subscriptions or download apps.  

Creating incentives to read e-papers is also promising. This includes bundling, with which e-papers in expensive areas can be made available to print subscribers free of charge. E-papers can also receive more content or content that can only be read in the e-paper.  

Training enables publishers to actively support the use of digital offerings. Training older readers in particular can take place via a reader telephone, online explanatory videos or even on-site events that explain e-papers. Another important point is setting up Internet connections and cooperating with associations that provide digital training for older people.  

Voluntary vs. forced conversion

Most of the cases in which digital conversion has taken place were "forced" by the publishers, so there were no alternatives for the readership. This is necessary in areas where print has already become uneconomical. However, there is a clear disadvantage to forced conversions: a low conversion rate at a high cost in order to generate print subscribers into digital customers. This approach is unfavorable for publishers due to the high costs, and the durability of this readership is also uncertain.  

Publishers should therefore instead initiate voluntary change in areas where print is currently still economically viable. Readers should be supported with incentives to subscribe to digital offerings.  

Five components for digital success

To create high-quality and successful digital products, publishers can follow five components.  

• User needs: Paying attention to user needs is changing the work of the editorial team. In addition to traditional news pieces, new formats are emerging, such as background and explanatory pieces, deadline announcements and advice, analyses and commentaries, encouraging and solution-oriented stories and entertaining formats. According to Highberg's data, the newly created stories work better digitally and achieve a higher average media time on articles.  

• Broadcast plan: Depending on user needs and other parameters, publishers can create a kind of "broadcasting schedule". When which formats are published digitally depends on the needs of the readership. On Mondays, entertaining formats can dominate, interspersed with classic news formats and encouraging stories. Which content is offered when depends on user needs.

• Newsletter: This component can also contribute significantly to the success of digital products. Newsletters not only enable direct communication with the readership, but also increase the personalization of the content. Targeted advertising also creates sales opportunities, which supports the monetization of the published content.  

• Personalization: This component can significantly increase the relevance of individual products. Various aspects play a role here. Topic personalization is based on sub-local interests and topics, while geo-personalization relates to locations and regions. In the future, personalized content can be displayed on the homepage for subscriptions.  

• AI support: With the help of AI, content can be processed in large quantities and new, personalized content can be created.  

Conclusion on the digital transformation

It is important for publishers to "push" their print readership towards digital subscriptions. The use of digital offerings increases acceptance of them, so that there is already a basic level of acceptance when print is discontinued. This is important, as the end of print products will come sooner than previously assumed.  

Publishers should definitely take a strategic approach and collect data on the different districts in which the readership lives. This not only helps to assess profitability, but also to adapt strategic measures to the state of the districts.  

A basic understanding of the needs of the readership enables publishers to set priorities. On the one hand, districts with the greatest economic urgency can be introduced to digital products first. On the other hand, personalized content can be created and incentives created to generate greater engagement. In this way, publishers can increase the use of digital products and drive forward their digital transformation. So far, the digital product sector has not grown fast enough to counter the increasing inefficiency of print.  

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