Despite the promise of online paywalls and gains in digital readers, U.S. newspapers' total revenue will continue to decline through at least 2017, a new report said.
Total U.S. newspaper revenue is projected to slip at a combined annual growth rate of 2.9% between 2013 and 2017, as circulation trends improve but advertising falls at a compound annual rate 4.2%, according to the latest annual Global Entertainment and Media Outlook from PricewaterhouseCoopers.
"There are some very positive signs about the resilience of the industry, but a lot of that lost revenue won't necessarily come back," said Greg Boyer, managing director at PricewaterhouseCoopers' entertainment, media & communications practice.
Some of that promise comes in the form of more readers online. Newspaper websites drew more than 100 million unique visitors in 2012, according to the Newspaper Association of America. They also saw a 7% boost in unique visitors between the ages of 21 to 34. As more people go to newspaper websites, digital advertising is expected to increase through 2017, growing at a compound annual rate of 9.7% between 2013 and 2017, the report said. But the gains won't be enough to offset the 7.8% compound annual decline in print ads.
Newspaper revenue from digital ads in 2017 is projected to hit $5.5 billion, compared with $12.8 billion in print.
Circulation revenue is projected to slip at an annual compound rate of just 0.2% between 2013 and 2017, helped by a 29.8% increase in digital circulation revenue thanks to the introduction of online paywalls. The slide in print circulation revenue will continue, but at a slower rate, dropping by 1.8% over the next four years. The bulk of circulation revenue -- $9 billion -- comes from print, with the other $1 billion a result of digital subscriptions.
The shifting landscape of the newspaper industry is giving circulation revenues a greater piece of the overall pie. "As advertising revenue has declined, this shift toward greater share of income from circulation has been imperative," the report said. "Securing the future loyalty of readers, while avoiding large discounts on subscriptions, is more of a priority than ever."
This has begun playing out at The New York Times Company, where combined circulation revenue for The New York Times and sister publication the International Herald Tribune began outpacing advertising revenue this year. "Given that one of the underlying structural problems of the U.S. newspaper industry has been its reliance on advertising rather than circulation revenue, this was a seismic change," the report said.