La Presse’s Bet on Tablets and Its Crossover Calculus

Posted on June 6, 2015

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News of the tablet first came from the west. Steve Jobs celebrated the beginning of this decade with a few thousand of his fans: “We want to kick off the year and introduce a truly magical and revolutionary product.” Then it came from the East, with Rupert Murdoch’s The Daily, the first publication to truly take advantage of the device.

Now the important news is coming from up north.

The tablet, born as and symbolized by the iPad, is an instrument like no other for publishers. After the web had played havoc with the business models and reader habits of newspaper and magazine readers, it arrived, promising to be a vertical counterpoint to the horizontal desktop and laptop. It could display pictures wonderfully and text cleanly. It could be held in one hand, just like something printed on paper. Behind brown-paper-covered walls in secret offices, the Journal, the Times, The Guardian, and a few others scurried to be among the first to take advantage of the new platform. The products met with some nice reviews and made a small difference in top-line revenues, as news reading and ad buying increased marginally.

Today, tablets seem to have settled into early middle-age hood, valued, but a third-place player overall to web and smartphone use, bringing in about 12 to 15 percent of news publishers’ traffic. Except in Montreal.

There, La Presse, Quebec’s second largest daily, remains a true believer in the tablet dream. Its La Presse+ product, which drew a fair amount of attention when it launched in April 2013, is now getting a second wind. Its success, its leaders say, is such that daily print will disappear sooner than later.

Is this kind of tablet success, as many publishers have said, some weird French Canadian thing of no application to them? That assumption will soon get a big test. The Toronto Star, Canada’s largest local newspaper (the national Globe and Mail, whose innovations I recently profiled, just beats it in weekday print-plus-digital circulation), has adopted the La Presse tablet platform and plans to launch its own tablet product in early fall. The Star serves the fourth-largest city in North America and, of course, publishes in English.

This week, let’s look at La Presse+, what’s it’s done, and what it may do in Quebec. Next week, we’ll take a close look at The Star’s plans, how they align with La Presse’s, and where, importantly, they differ. Together, they form a fascinating north-of-the-border story. It’s impossible, though, to watch that story and not wonder what might happen south of the Canadian border, as U.S. daily newspaper publishers rely more on consolidation and cost-cutting than cutting-edge innovation.

Importantly, La Presse isn’t betting as much on a device as on a deep belief. The gating principle here isn’t the technology or the platform — it’s whatever works to engage readers of news. In that respect, in the digital age, there are only two things so far that produce engagement, or time spent reading: the tablet — and the newspaper.

“We want to be on any platform that allows us to provide engagement,” says Pierre-Elliott Levasseur, executive vice president of La Presse. So far, that involves at least a six-inch screen: “Less than that, it doesn’t work. We’re working on a phablet product now.”

La Presse+ is gorgeous, taking advantage of all the capability that Steve Jobs built into tablets, including photos, videos, and immersive advertising.

“This is what we told our staff, and it almost sounds like a pitch,” says Levasseur, and indeed it does. “You take video, with its emotion, magazines with their reproduction quality, great graphic design, and then the best of the newspaper depth and breadth, combined with the best of the web, which is instantaneity and interactivity [La Presse+ counts 26 kinds of interactivity within the product], and then you realize that even 25- and 30-year-olds will use this product, because it’s the best way to tell the story,” says the 44-year-old. “With this product, we have improved our demographic profile.” La Presse is washing out some of that baby boomer gray: “Fundamentally, the problem with newspapers is the aging demographic.”

While it may be a pitch, it’s one that delivers. Even for those unable to read French, the La Presse+ experience translates.

The math behind it, though, stymies some observers. From the beginning, La Presse+ has been free. No meter. No subscription. No circulation revenue. Its revenue comes all from advertising.

As Levasseur explains, “It enables publishers to move your low-digital-value, low-ARPU [average revenue per user] readers to a high-value, high-ARPU platform. Our CPMs are very high.”

The audience and ad metrics seem stunning:

  • Engagement: La Presse+ claims engagement numbers, as measured by time on site, that rival or exceed what we saw in the halcyon days of print: 44 minutes on weekdays, 50 minutes on Sundays, and 73 minutes on Saturdays, the traditional big weekend day of newspaper reading in Canada. Overall, the company now says it has a weekly tablet readership of 453,957.
  • Ad rates: Levasseur compares half-page print rates of $42 CPM (cost per thousand readers) to $68 for a half screen on La Presse+. He contrasts those numbers with far lower yields on desktop (about $13-14 CPMs) smartphones (at $2-3 CPMs). ARPU math that serves as the foundation for the strategy. Five months ago, La Presse+ launched a content marketing initiative, which now takes advantage of the product’s superior storytelling chops.

Those are the big head-turning numbers, but the lessons extend further.

  • Staffing: La Presse staffed up in technology to 140-plus from a meager crew of 15 in 2009. That’s been its major investment, which it says came in at about $40 million Canadian. La Presse is privately owned by Quebec’s Gesca, a subsidiary of Power Corporation of Canada, a major diversified financial services company with a long history of influence in Canadian politics. Its news focus is now squarely on La Presse+; the company sold off six regional papers in March.Levasseur says other staffing remained fairly stable, with roughly the same number of journalists employed now as pre-La Presse+. Knowing that La Presse+ had to have a stronger features/lifestyle presence and a seven-day publishing schedule — it’s a morning edition product — the company staffed up by one or two dozen to enable those additions. (La Presse published a Sunday paper until 2009 and now prints six days a week.)
  • iOS dominance: Heavy users of digital newspaper news skew heavily to Apple products, and, here, La Presse+ is no different. More than 80 percent of the product’s “opens” and of the time spent using it, come from the iPad. (Opening is the digital equivalent of circulation; meaning the day’s edition is both downloaded and opened.)
  • Readership: Those tablet buyers form the sweet spot for La Presse+. The targeted age demographic: 25-54. Currently, 65 percent of La Presse+ readers range between 25-54. That compares to 46 percent of print readers in the same age range, with that readership of course skewing older. Levasseur says 14 percent of those using the product had never read La Presse in any form previously; 27 percent may have been on smartphone apps or website, but hadn’t read the paper. Again, this is the low engagement/low ARPU-to-high strategy in process.
  • It’s a way to motivate your staff: “You really turn your staff into a real digital organization.”
  • Content: Levasseur says it’s mainly the form factor of the tablet — which enables that storytelling — that brings in that younger audience, rather than a significant change in the content itself.

So where might this lead? Move over Advance Publications, whose own day-cutting could seem like mild historical prologue. As Levasseur describes it, it’s clear the company is planning its exit from print. The onlyquestion is when.

Some La Presse execs will tell you that the days of daily print newspapering may be measured in months, not years in Quebec. Certainly, the strong Saturday paper will remain as a reading and shopping mainstay for a longer time. Daily print, though, is another story. The company has reviewed lots of metrics, and thinks it will soon arrive at a point of important crossover (“The newsonomics of crossover”).

Consider: 60 percent of LaPresse ad revenue now derives from the tablet, a product that’s only been in the market for two years. Since web does still contribute some digital ad revenue, print now throws off only 30 percent of overall ad revenue. Yet the production people come in to work every day, and the presses and trucks still roll, all at great cost.

So the crossover calculus: Trade all those print and production costs — which now make up 65 percent of La Presse’s overall costs — for drops in both daily print advertising and daily print circulation, while maintaining Saturday for both revenue streams.

How many of La Presse’s daily 100,000-plus print readers will convert to the tablet edition when print starts to go away? One number that complicates such a transition: Today, there’s only 6 percent weekly overlap among those who read print and the tablet. Still, if print is removed from the market, some La Presse execs believe that as many as 30 percent of print readers will make the journey fairly immediately, even though there’s so little overlap now. How about the other 70 percent? It sounds like hubris at first hearing, but the company is willing to let them go to make the digital transition. At that point, it would become a digital news company that also publishes one strong weekly print product.

Yes, it’s the nightmare of the 70-year-old you know who pleads: “They won’t take the newspaper away from me before I die, will they?”

(Let’s note that The Star’s plan, in that respect, differs markedly; it plans to keep its print paper strong for now, believing it can profitably serve both audiences and markets.)

You’d think the great slowdown in tablet sales would give La Presse pause. After great year-on-year sales growth, tablet sales hit a wall in 2014, growing just 4.4 percent. That’s four percent, after 2013 growth of 55 percent and 2012 growth of 78 percent. One huge seller, Best Buy saw a 30 percent decline in tablet sales in the fourth quarter. And iPad sales have declined year-over-year for 8 consecutive quarters. Why? Those larger-than-phone phablets with 5.5-inch-plus screens eat into tablet sales. The big wild card: Tablets, expensive and unsubsidized, aren’t replaced near as often as smartphones. So they stay in use for a longer time.

We might think of the market as fairly saturated, but another way of looking at is to count the installed base that saturation has built: 147.1 million people in the U.S. will use a tablet of any kind at least monthly this year, says eMarketer.

In Canada, more than 50 percent of households own tablets — and those will tend to be the news-reading households.

As it proceeds into Year 3 of its grand experiment, La Presse is looking for ways to defray that large investment in tech development and staffing. That’s why it’s become a vendor, an often difficult path for a publisher. The Star serves as its first customer, but it plans to add more, though not immediately. Getting The Star off to a great start is essential to its vendor strategy.

There’s still skepticism, says Levasseur: “I think many of the publishers are just wrapping their brains around the short-term problems they have right now. Others are just printers, and they want to ensure the survival or print as long as they can. It isn’t a question of how many we can put the pipes. It is how many publishers are willing to adopt.”

One further advantage of the Star relationship: the two companies will jointly sell tablet advertising, covering the two largest ad markets in the nation, Toronto and Montreal.

Already, its digital transition has been remarkable. In 2013, the company’s digital ad revenue totaled 10 to 12 percent. In 2014, the first full year of La Presse+ operation, it came in at 70 percent, says Levasseur, the overwhelming share of that from La Presse+.

Has La Presse crossed over into the proud new age? No, not yet, and not surprisingly, given that La Presse+ is still a toddler. Gesca is a private company, releasing selective numbers, as private companies do. We don’t know what its P&L statement looks like, further complicating its message to the wider newspaper world.

Levasseur makes the longer-term crossover point. “The faster we move people and revenue over to the new platform, the more we are going to be profitable.” In the short term, the company has stopped marketing its print subscriptions, even encouraging cancelling subscribers to transition to the free tablet product. That means it’s taking a short-term hit on circulation revenue, while still bearing the costs of print production. That’s why the logic of day-cutting looks so attractive.

The company can hit that crossover button whenever it wants. It would just like to have as big a tablet business as possible in place first.

First published at Harvard’s Nieman Journalism Lab

Posted in: News-Trend