Viewpoint: 2024 will be a year of tough strategic choices

In 2024 we will see the convergence of pressures on our industry like never before. As news is downgraded on the big platforms, discoverability will be more difficult, integrated AI search will add complexity, while high traffic and advertising-fuelled sites will feel the pinch acutely. Meanwhile, subscription models - while more stable and generally more robust - will continue to battle the long-term effects of deep discounting and churn.

As I was writing this, a colleague sent through a link about the sad closure of an independent Thai publisher, Coconuts. Despite the publication's editorial and audience achievements, and running a membership model, these efforts had "not converted into commercial success for the publication". In their statement, they said: "Like many other independent news publishers, we have found financial sustainability to be incredibly elusive despite our best efforts."

In the quest for sustainability, 2024 will be the year of tough choices and strategic reckoning on four fronts:

• What to focus on
• What to stop doing
• Where to cut costs and consolidate
• Where to invest

In terms of what to focus on - of course, the big topic du jour is artificial intelligence and how it applies to the news industry. We have worked with many publishers over the past year on AI strategy - please feel free to check all our posts on the topic, including this great explainer.

For the purposes of this article though, I want to focus on revenue diversification. There is an old saying about “if you keep on knocking on the same door, you will get the same answers”, and never was that more true.

We discovered during extensive research for the News Sustainability Project in partnership with GNI that publishers that had some diversity in revenue were on more stable ground. Those with 4 primary revenue sources (of 15% of revenue or above) had significantly higher average sustainability readiness scores, and significantly higher average profit margins (6%) versus other publishers (1%).

The choice of what to focus on has to be carefully planned and tested, and very importantly has to find purchase across organisations: from editorial to product to commercial, for it to be successful.

We also found that the average profit margin begins to dip beyond 4 main revenue streams, suggesting that doing too many things at once is not good for a company in the long term.

One of the biggest challenges for publishing houses is to decide what to stop doing - and this is a vital action that can not only help with strategic alignment and focus but also facilitate cost cutting and consolidation. And of course, this is always easier said than done: especially when ego, nostalgia or emotion cloud otherwise good judgement.

Cost cutting and consolidation will remain ever present and I predict that print costs especially will come under stronger focus as legacy publishers aim for break-even or profitable print businesses and a strategic redirection of investment from print to revenue-bearing digital products and services with better margins.

Funding new growth streams while carrying huge legacy overheads is a very heavy cross to bear, and keeping failing print products alive - no matter how loved they are - makes no sense for stretched businesses.

Our team at FT Strategies is focusing on business analysis, print consolidation and cost optimisation work this year: the Financial Times itself is a superb case study of exemplary print management during digital transformation so please get in touch if you would like to discuss this in more detail.

Finally, the days of everlasting, anonymous traffic seem to be drawing to a close and smart investments in better customer and data management will be well worth making for longer-term benefits. (You could do no better than referring to this brilliant post by Lars K Jensen on LinkedIn with a great collection of links covering this latest setback for publishers).

The stats tell the story and disintermediating your relationship with your reader is simply not good for business. Referring back to the news sustainability research, of the cohort of publishers that were loss-making, 57% listed news aggregators as their top or secondary source of traffic. Of those that were very profitable, only 9% selected the same.

The solutions for publishers will be to pivot from the costly courtship of anonymous browsers and traffic buying to getting to know readers on a one-to-one basis through registration and account creation and providing quality experiences for them.

Direct relationships with readers drive profitability: 68% of “very profitable” publishers (average profit margin of over 10%) recorded logged-in audiences of more than 7.5%. By comparison, 63% of loss-making publishers recorded 0 - 4.9% logged-in audiences. We have the data and case studies to show that owning and capitalising on first-party data drives loyalty, reader revenue and most importantly, an increase in advertising CPM.

The next year is going to be tough on a lot of fronts, but strong leadership and careful decision-making will help publishers through the storm.

Please see ftstrategies.com for more insights into optimising news and media businesses for growth.

An earlier version of this article was published by journalism.co.uk here.