How the numbers (don’t) add up for newspapers if they axe print

Alan Mutter (aka Newsosaur) picks up on a point from the ‘New Business Models for News’ summit at City University of New York, arguing that scrapping print isn’t a solution, given that 90% of US papers’ revenue comes from ads sold in the print product.

Assuming it would cut costs by 60%, scrapping the print paper would mean the following, he suggests, for a $100m-revenue publishing company with a 15% operating profit:

If the company abandoned print but were able to double its online sales to $20 million, it would lose $14 million in a year, for an operating margin of a negative 70%. To break even, the prototypical publication would have to more than triple its sales from the current levels. To make a profit of 15%, the company would have to quadruple it sales.

A particularly tough target, Mutter adds, because around two-thirds of online revenues typically come from add-on sales to advertisers who are buying space in the print edition.

But this kind of online-only operation is not a pipe-dream, maintains Tim Windsor. Responding in comments on Cory Bergman’s post, he says making it work would need a much smaller newsroom with one or two community managers to make the most of user-generated content, plus linked/licensed content. A core staff of 20 multimedia reporters, he suggests. (Those comments via Mark Hamilton.)

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