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Diversify revenue: Assessing the gaps in your newsroom

What gaps do you have in diversifying and growing revenue? Use these tools to find out.

Gap: How long do you have?

Do the math comparing cash coming in to cash going out.

You might start with the cash needed to pay for the work of your newsroom. To illustrate, imagine a 250-person metro newsroom with an average cost per person of, say, $100,000 (this average cost should include at least salaries and benefits).

That’s $25 million. Now, say that print subscriptions plus advertising generate $30 million.  Great!  And, say this metro currently has digital revenue of $2 million growing at 5% per year.

Today, this metro is okay as far as the newsroom expenses are concerned. It has $32 million of cash coming in; and, $25 million going out. That leaves $7 million to pay for folks in the rest of the enterprise (marketing, technology and so forth), a pool for reinvestment and innovation, and, if there’s money left over, returns to the owners.

Imagine, though, that print revenue is declining at 10% per year.  So, next year it’ll be $27 million instead of $30 million.  And the year after that it’ll be $24.3 million.  In the third year out, it’ll be $21.9 million.

Now, add the growing digital revenue of $2.1 million, $2.2 million, and $2.3 million. By year 3, this metro’s revenue has dropped to $24.2 million – not enough to cover the $25 million for the newsroom’s work. (And, if newsroom costs rise because of inflation, the picture is worse.)

This illustration is limited to the newsroom. Including costs for marketing, sales, technology, finance, HR, and so on – as well as any ownership profit expectations – make the shortfalls come faster. In this example, if there are just 70 additional employees averaging $100,000 per year, the enterprise is at breakeven with regard to personnel: $32 million coming in and $32 million going out. Of course, that means the enterprise is losing money when non-personnel costs are accounted for.

When you and your colleagues do this math, you could factor in cost reductions – e.g. downsizing the newsroom and/or other departments. As you’ll see, depending on the rates of print related revenue declines, digital and other revenue growth, and current size and cost per person, the math is likely to paint a challenging picture. Your metro must either find new revenues or confront the brutal math of downsizing.

Gap: How many “whole P&L” products, services and businesses do you operate?

The newspaper has a ‘whole P&L” – that is, it has newspaper revenues and newspaper costs that, when combined, provide a newspaper P&L. Similarly, Minneapolis has a whole P&L that matches revenues from what it calls tent-pole events to expenses from tent-pole events. And, when Dallas created GuideLive, they used a whole P&L to monitor results.

Use the following table of possibilities, to identify products and services you operate that have their own whole P&Ls:

Whole P&L? Product/Service/Business
Newspaper (whole report)
Print niche report(s) (e.g. guide books)
Print magazines/books
Digital (whole report)
Digital niche report(s) (e.g. entertainment)
Consumer service(s): list out if more than one
Business service(s): list out if more than one
Data service(s): list out if more than one

The fewer you have, the greater the gaps. Why? Because the more ‘whole P&L” products and services you have, the more likely it is that leaders of those efforts can experiment and innovate in diversifying revenue.

Gap: In how many ways does your news enterprise approach revenue generation?

Use the following to assess the ways your news enterprise goes about – indeed, even considers going about – creating value and generating revenues.

Do you make money from these sources? If so, how much?

Revenue Opportunities

Gap: Shortfalls in enterprise orientation, skills, disciplines and coordination

  Yes No
Revenue sources 1.   We define our challenges as print vs. digital.
2.   The best way for us to succeed digitally is by generating huge amounts of traffic.
3.   We don’t have a clear sense of how to identify and pursue opportunities that go beyond our geography.
4.   We don’t focus on actively connecting people and entities in our community in ways that go beyond our content.
5.   We don’t have goals aimed at revitalizing our local community and economy.
6.   We only make money via subscriptions and/or advertising.
Revenue responsi-bility 7.   We ensure strong journalistic values by keeping the business side and newsroom separate from one another.
8.   We believe the newsroom should not play a role in generating revenue.
9.   Our newsroom folks lack an understanding of our current financial performance and what explains it.   Newsroom staff don’t understand business concepts/terms such as EBITDA, CPMs “product,” etc.
10.  The newsroom doesn’t share goals with other departments around audience, product, or revenue.
11.           The newsroom typically introduces new features or products without involvement by other departments (or vice versa).
  12.           We have not had many initiatives led by a combination of editorial and business staff that sought to establish and achieve audience development and revenue targets
Innovation investment & discipline 13.           We don’t have a specific innovation budget (time and/or money).
14.           We remain unclear and uncertain about the criteria to use for choosing how and when to try new things and how to judge whether they worked.
15.           We aren’t clear about the difference between continuous improvement and fundamental innovation and whether we’re doing either of them well.