Study: Online-only can cut revenue more than costs

Posted by Emily Dilling on April 16, 2009 at 4:34 AM

Publishers who opt for an online-only format run the risk of cutting revenue more than costs, according to a study by researchers at City University in London, Media Guardian reported.

The study, done by Neil Thurman and Merja Myllylahti, used the example of Finnish financial paper Taloussanomat. The paper decided to switch to an online-only version in 2007 in response to heavy financial burdens. Despite the 52 percent in savings, the online edition saw a 22 percent decrease in readership and a 75 percent drop in revenue.

The case study illustrated that ultimately the Finnish paper hadn't improved its situation by transferring content to the Web.

Neil Thurman, an author of the study concluded that "at least in the case of Taloussanomat, the difference between the loss of income (a minimum of 75 percent ) and the savings made (52 percent) by ditching the print edition makes such a strategy financially worthwhile only if expenditure is at least 45 percent higher than income (i.e. losses are 31 percent). If this finding holds true more widely current profit levels - in the mid-teens for U.S. newspapers - can sustain newsprint for some time to come."

Expressing doubt that the problems facing newspapers were dire enough to adopt an online-only format, Thurman said, "U.S. newspapers are still reaping profits in the mid-teens" and explained that papers often see the change in format as "the only option you've got left."

However, loss-making papers "will not be able to recover profitability soly by going online-only," the study states. "Cuts, including editorial redundancies, will come into play - as they have done at Taloussanomat, where the newsroom shrank from 52 to 31."

Thurman continued to explain the importance of print editions, stating that "just having the print product out there on news stands does promote the Web site." Thurman also attributed the Finnish paper's downfall to the fact that its staff cuts had a direct affect on the quality of the paper's content.

The study, "Taking the paper out of news" is available on City University's Web site
and will be published in Journalism Studies.