Newspapers aren't dying and Jeff Bezos isn't crazyAugust 22, 2013: 12:09 PM ET
Companies change with the times, and newspapers are no different. But they are now emerging in a strong position.
By Caroline Little
FORTUNE -- Jeff Bezos, John Henry, and Warren Buffett are not investing in dying businesses. They don't do that. They are investing in assets poised for a rebound. Despite the recent spate of media last week about the spiraling of newspapers, there are a few facts for industry pundits to consider.
Newspaper media comprised a $38.6 billion industry in 2012. While those revenues saw a 2% decline compared to 2011 revenues ($39.5 billion), we're also starting to see promising shifts in the newspaper business model: growing revenue streams across several categories -- some of which have only emerged in recent years.
Just this past year, circulation revenue rose by 5% -- from $10 billion to $10.5 billion -- as digital subscriptions grew dramatically, marking the first gain in this category for the newspaper industry since 2003.
Our research has found that what's driving circulation growth is increasing digital and print-digital bundled subscription rates. And if you take an even closer look, you'll see these new circulation spikes may bode well for the future of newspapers on the whole. Already newspaper media companies that have innovated in this way have experienced success, with digital-only circulation revenue growing by 275% and revenue from bundled subscriptions seeing a six-fold (499%) increase.
Advertising is also seeing gains, as newspapers become less reliant on print advertising and much more so on a diversified revenue model. Compared to 82% in 2006, less than half (46%) of industry revenue came from print advertising in 2012. What's more, new sources of revenue completely unrelated to conventional advertising -- such as digital consulting for local businesses and e-commerce transactions -- grew by 8%, accounting for nearly one in 10 dollars of total streams for newspaper media companies.
Although it is difficult for digital ads alone to fill the role that print advertising once played, we nevertheless see growth in this area, too. Overall, total digital advertising, which includes digital ads bundled with print ads, increased by 5% in 2012, to $3.3 billion. The digital-only advertising component of that total increased by 20% to $1.1 billion.
When you combine revenue streams from all essential facets of the newspaper media advertising business model, including print, digital, niche, and preprints, it's hard to ignore the evidence that newspapers are still ticking strong.
We see that evidence in readership numbers, too. Even though print-only circulation has shown a decline in recent years, the paper version continues to draw a large audience. Of the seven in 10 Americans (158 million U.S. adults) who consume content from newspaper media each week, 144 million of those adults read a physical copy, according to a syndicated study by Scarborough Research.
The spread of mobile technology, meanwhile, is rapidly and significantly expanding the audience for digital newspaper content. On an industry-wide basis, those who now use only smartphones or tablets to access digital newspaper content increased the overall newspaper online audience total by 27%. For some newspapers, mobile-only users have boosted the online audience by more than 50%.
It's also important to consider the effects that the younger audience will have on readership, for a number of reasons, but first, because mobile audiences are, on average, younger readers. Nearly half (46%) of the mobile-exclusive audience falls in the 18-to-34 age group compared with 30% of desktop-bound users.
Perhaps of utmost importance, the same Scarborough Research study shows that youth and those under 30 still have a pulse on news media, and consider the newspaper a vital source of information. Some 57% of those aged 18-34 read newspapers, in print or online, throughout the course of an average week. Yet, when you look at how younger, socially driven generations use and consume media, this percentage doesn't begin to account for the value of newspaper-generated content, which is quoted, cited, condensed, Tweeted, edited, emailed, and shared countless times throughout the day.
The fact is all media are transforming. Companies change with the times, and newspapers are no different. But they are now emerging in a strong position, and we are seeing promising revenue streams for future success. I have no doubt the recent purchases mark the "beginning of a phase in which this Gilded Age's major beneficiaries re-invest in the infrastructure of our public intelligence," as Jim Fallows writes. I suspect that Warren Buffett, John Henry, and Jeff Bezos think so, too.
Caroline Little is the president and CEO of the Newspaper Association of America