[credit provider=”Mike Hammerton via Flickr” url=”http://www.flickr.com/photos/mikehamm/4608534792/”]
Anna Tarkov calculates that the Chicago Tribune’s Groupon deal — two years of the Sunday ‘bune for $20 — works out to 19 cents an issue.What’s at work here is the myth of legacy media, that every reader sees every ad thus every advertiser pays for every reader … thus every reader is equally valuable and it’s worth losing money holding onto any reader.
Those aren’t the economics of online, where advertisers pay only for the readers who see (or click on) their ads, and where abundance robs publishers of pricing power over their once-scarce inventory.
My favourite illustration of this is the Star Ledger killing its stock tables in 2001, shaving $1 million of costs and losing only 12 subscribers. That means that prior to this, the paper was spending $83,000 per reader to hold onto them. Papers had been scared of losing one reader because, in their economics, every reader was equally valuable. But no longer. I keep urging papers to calculate the net future value of readers and decide who’s worth keeping and serving and who’s not, economically speaking.
The Tribune is losing much money on every one of those Groupon readers — not only the lost retail value of every discounted sale but also the fact that the paper no doubt was already published at a lost — that is, it costs more to produce a copy than its sold for because each reader is valuable to advertisers. But is she?
What the Tribune is also trying to do here is hold onto its critical mass. When its Sunday circulation falls below a certain level, certain lucrative advertisers — coupon and circular advertisers — will stop using papers as their means of distribution. That will be a kick in the kidneys almost equal to the creation of craigslist and it’s coming any day. In fact, it’s already starting … that, surely, is why the Tribune is so desperately trying to hold onto every reader.
But those economics will quickly disintegrate. Watch it happen….
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