Covering Costs

I'll bet a lot of people raised an eyebrow when they saw this headline on Romenesko this morning:

LAT website revenue now exceeds paper's editorial payroll costs

I'm not sure why anybody's surprised. In fact, I'll bet NewYorkTimes.com and WashingtonPost.com (and probably others) can boast of something similar, or close. But it seems to be gospel in a lot of pessimistic circles that online revenue simply isn't enough to support a traditional newsgathering operation, and that that's an insoluble problem.

Hogwash. Online revenue has been rising steadily–even in the current downturn, at some places–and is able to cover more and more of the costs of news organizations, as the LA Times case demonstrates. We're still nowhere near the tipping point at which online revenue can entirely replace print (and the print edition, with its high costs), but we're getting there. It's just not happening fast enough. Newspaper online operations need to move more aggressively to get past the banner ad and sell new advertising products to new advertisers. The money's out there–they just need to go get it. It's not as easy as selling print used to be. 

A year ago, in my Crossing the Chasm white paper, I predicted it would be five to eight years before newspaper online operations could cover the total costs of running fullblown news, marketing and sales organizations. With the economic downturn, that prediction is probably on the low side, unfortunately. And the transition time in between is going to be hellish, as we've already seen. But as the Los Angeles Times disclosure indicates, the trend is in the right direction (editorial cost-cutting helps, no doubt). Newspaper Web sites just need to work harder to get there more quickly.

Update: Jeff Jarvis has more detail from LA Times Editor Russ Stanton, including some very smart things the paper is doing to make its Web site more successful–and to bring more Web culture, thinking and education into that now-paid-for print newsroom. Bravo.

Comments

[Working Reporter]

"Stanton said the Times' Web site revenue now exceeds its editorial payroll costs."

Does that mean the Web site is covering the PAPER's editorial payroll costs? Or is it just covering the editorial costs for the Web site? Many papers still maintain two distinct staffs; I don't know if that's the case at the LA Times.

If the former, that's good, unexpected and exciting news. If the latter, it's almost irrelevant, since the great bulk of the content is presumably created by the paper's staff, not the (usually tiny) Web site's staff.

Any ideas which it is?

[Mark Potts]

The implication was that it's the print editorial costs that are being covered. The online editorial costs were probably covered years ago; that's a much smaller staff.

[Working Reporter]

Well, if that's true, great. The way it's worded ("its payroll costs") would refer to the Web site, but perhaps Annenberg just needs a copy editor.

[tgdavidson]

Working Reporter:

Most newspaper web sites hit profitability years ago - not just covering their payroll costs, but technology, marketing, you name it. Many produce margins that could make a hooker blush. Of course, some costs are buried inside the parent organization, but net net, digital operations are a potent, and increasingly important, economic force at most shops.

[GAReporter]

Stanton, Jarvis and everyone else should stop with the victory laps. If online revenue, which by the way isn't looking good in this economy, indeed matches payroll it's because so many bodies have been hacked. I'm sure Sam Zell's bankers will be high fiving themselves as they wait in line in bankruptcy court hoping there's something left over for them. This is a financial disaster of Zell's making that totals more than $10 billion. Online revenue that is, at the very best, $100 million isn't the salvation.