Well, we had been looking for definitive text. Our thanks to the estimable blog of Mr Russell Davies for locating this rigorous Ladybird Books examination of modern newspaper economics. To quote:

Meeting the costs of a newspaper

Like any other commercial enterprise, a modern newspaper must operate at a profit if it is to continue in business. A paper has two main sources of revenue. One is the money received by selling the paper: the greater the circulation, the greater the revenue from sales. The other is the money received from advertisers who pay for space in which to publish their advertisements.

Advertisements are very important to newspapers of all kinds. More than 60% of the revenue of a newspaper comes from advertising. If a paper selling at sixpence a copy loses one thousand pounds worth of advertising, it has to increase its circulation by over forty thousand pounds to make up the loss. Since the publishers get only part of each sixpence (because the distributors need something to cover their costs), the increase in circulation may have to be much greater than forty thousand.

To some extent advertising revenue depends on the circulation of the paper, and the different types of people who read it. An advertiser wants as many of the right kind of people as possible to see his advertisement. He will wish to advertise in papers which are bought by the largest possible number of people he seeks to attract.

Failures and new ventures

As we have seen, different newspapers appeal to different types of reader. A popular paper appeals to the majority of people, while a quality paper appeals to a more specialised type of reader. Whatever the kind of paper, it is in competition with all the others to increase its circulation and advertising revenue. This has been the situation throughout the life of most of our national papers, and this competition has been the cause of the failure of many papers in the past. Competition forced the amalgamation in 1930 of the Daily News and the Daily Chronicle, to produce The News Chronicle.

Papers now have to compete for advertisements with commercial television and they have lost a considerable amount of advertising revenue as a result. Since the cost of producing newspapers is continually rising, the task of operating them profitably becomes harder. In some cases, it has proved impossible. The News Chronicle failed in 1960, and another great paper of the pre-war era, The Daily Herald, ceased publication in 1964.

Although it is difficult to operate newspapers profitably, new ventures are still undertaken. Among them are The Sun, and The Sun Telegraph, the first new Sunday paper for 40 years.

A new edition is probably imminent. We’ll look out for it.