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July 19 2011

14:30

Tackable, BANG collaborate on a location-based digital newspaper

Ever since he was a beat reporter at the Palo Alto Daily News and the Contra Costa Times, Luke Stangel has been thinking about how to improve finding and consuming news by adding more specific location data to news content.

Last year, he co-founded (with Ed Lucero) a company called Tackable to develop his ideas, and in February, we described here Tackable’s first product: a pair of iPhone apps that Tackable envisions as the basis for a social network that “organizes media on a map.”

Now Tackable has rolled out, in partnership with the newspapers of the Bay Area News Group, something much more complex and ambitious: an iPad app called TapIn BayArea, which Stangel describes as “the world’s first location-aware digital newspaper.” TapIn, at launch, is already an impressive, sophisticated product that shows potential to evolve in multiple ways. And its ability to engage users at various levels bodes well for its capacity to generate revenue.

The collaboration with BANG, the San-Francisco area cluster of the California Newspaper Partnership led by MediaNews Group, includes incubation space for the Tackable crew at the San Jose Mercury News. Jeff Herr, CNP’s VP/Digital, describes it as a “strategic partnership, with both partners sharing costs and both having a stake in the potential outcomes, which include expanding the product to other units of MediaNews Group and beyond.

TapIn is the first product that aims for a space envisioned by Ken Doctor here in his recent Lab post, “The Newsonomics of the Swift Street Courtyard,” in which he asked, “Imagine a world in which consumers can move their finger around a magic tablet surface, watching, listening, reading reviews and more?” TapIn may not completely fulfill Doctor’s vision, but it’s aiming to go there. After the launch, Doctor wrote on his blog: ” Potentially — and I cannot emphasize that word too much — it may become a prototypical product for the news industry, pointing a new way out of the hollowing-out landscape into which the news industry has meandered.”

Checking the reviews

During the Lab’s summer hiatus last week, a number of good descriptions of TapIn’s functionality were posted elsewhere, and rather than reinvent the wheel I’ll give you those links and move on to my impressions of where TapIn could be headed:

Not every user is going to be thrilled with the map as the basic navigational interface. The idea that men navigate with cardinal directions, while women navigate by landmarks, has scientific backing and implications for hardware and software design. Is it possible that some people (not necessarily women) will resist the map-based UI? Stangel says, “That was one of the things that came up in our focus groups. The ultimate goal is to produce a product that delights.” To that end, users can choose to access data via one of several views, with or without maps, including OnTap, a mix of the top six things that TapIn thinks you’re going to like. “We’re finding that people are clicking on OnTap a lot,” says Stangel. Right now, OnTap’s content is ranked mainly according to human editorial judgments, but eventually, the rankings will also be influenced by the crowd — frequently-shared material will bubble up — and by user customization in which users list preferences to get more personalized content. (“I want pizza but not Italian restaurants,” or “I like this sports team but not that one.”)

Down the road, Stangel has visions for upgrades ranging from version 1.1 all the way to 2.0. The ultimate goal, he says, is “a product that delights,” and the envisioned upgrades will aim for improvements in localization, personalization and customization, for all of which Stangel offers intriguing possibilities.

For example, TapIn is likely to accumulate many more optional layers of information organized on maps, which users will toggle on and off at will. In fact, Tackable plans to provide an API later this year so that third-party developers can add such layers — essentially apps within the app — catering to niche interests. Some of these layers could begin to appear in the next version, says Stangel, who paints a picture of layers focused on real estate, classifieds, sports scores, crime reports, and user interests like wine or gardening, all location-specific, all capable of generating topical conversations. (Herr also suggests fishing conditions as a map layer; and I can imagine more esoteric-interest layers like spelunking and underground urban exploration.)

To me, this potential multi-dimensional, data-rich, customizable environment is the flip side of concerns about comfort levels with the map interface. There is simply too much mappable news and information out there not to try this.

Leaving user input fuzzy

TapIn’s social layer is based on Gigs, a feature borrowed from the original Tackable phone app. Deliberately non-specific, Gigs simply allows users to place a red pin on the map and attach a post of some kind. This could be a restaurant recommendation or comment, but most intriguingly, it could be a question — “I’m here and have an hour to kill, anything cool to do nearby?” or “Does anybody know why traffic on this road is tied up?” or “What’s the story behind this interesting-looking building,” or “Can someone recommend a plumber who will come out here on a weekend?” “Post what you need and see who can deliver,” Herr says. “[We're] definitely just nibbling at the edges of a new marketplace like that.”

Indeed. I’m often struck by how quickly location-specific questions like, How do I kill 6 hours at the Denver airport are answered on Q&A sites like Ask Metafilter (and, not quite so quickly yet, on Quora). With local critical mass (how large?) the quality of such answers could be even better and faster on TapIn.

Stangel says Gigs was left “intentionally nebulous. We don’t put a lot of rules on what you ask for. You type in what you’re interested it. it could be a request for a photo. It could be simply, I saw something here and want to leave this digital beacon here to tell people about it.” The Gig pin and its associated content disappear after 24 hours — this is a pure real-time feature. People are starting to use it, and Tackable is watching to see how. “Our goal has been to create a robust community of people who live in a particular region and to give them the tools to really easily talk to one another, to ask one another questions, with the idea that they think and share local knowledge,” Stangel says.

In the course of the week since the app went public (on July 12), Stangel says downloads have been picking up exponentially, pushed along by Twitter talk, as well as by stories and promotions in the BANG papers. People are actively using the app and sharing links through it, Stangel says.

Where the money comes from

Herr spoke and emailed with me about the business side of TapIn. The principal revenue stream, of course, is expected to be advertising. “Geo-awareness just drives everything here,” he says. The tablet enables more elegant and engaging ads than prior websites, and Herr aims to use those capabilities. “We hand-selected some of the brightest advertisers in our markets because we need them to help us model out the ideal formulation.”

Clearly, additional revenue streams are possible down the road as well — for example, commissions on ticket sales generated through the app. An expansion of TapIn to the CNP’s southern California group, Los Angeles Newspaper Group (LANG), and to MediaNews’ Denver Post seems likely if the current rollout takes off with users and advertisers.

“From the start we looked for ways to engage people through game mechanics.”

One revenue stream will come from $4.99 per month user subscriptions (which kick in after a free introductory period during the summer), but a unique feature of Tapin is that active users can easily earn back the cost — and more — by earning credits for clicking on ads, sharing content or other forms of engagement. It’s an idea that might well be considered by other publications that have put up paywalls — just as electric meters can run backwards when homeowners install solar panels, engaged users could earn back their subscription fees by doing what you want them to do. (In the print world, many readers will tell you that the main reason they buy a Sunday paper is that they save more than the cost of the paper just by using some of the manufacturers’ coupons.)

Stangel says that what the team is calling the “earnout” feature came out of the CNP side of the collaboration. Every user action on a web site or app has a value — the user doesn’t know what it is; there’s no visible counter. But the site operator, the newspaper in this case, does. The team realized that “there could be a way for us to quantify the actions that people take on the app to essentially hold on to some of that value and trade it in for other things they find of value on the app,” Stangel says. Currently, they can do that at a store on the TapIn website that offers TapIn gear and merchant gift cards; eventually, this will happen within the app itself with a richer mix of offerings.

Here, too, I believe TapIn is potentially hitting a nerve and turning it to its advantage. As illustrated most recently by the Netflix pricing kerfuffle, whether it’s the slow economy or simply consumer fatique, people are reaching the limits of their willingness to spend more on digital services and content. So, especially when an app is clearly earning money from advertisers targeting me, why not give me a chance to reverse the meter by earning back my costs (and more) when I respond to the ads or engage my friends in the app?

All of this highlights the game-like aspects of TapIn. Herr points out, “From the start we looked for ways to engage people through game mechanics. We found in Tackable a perfect partner given their heritage in the gaming industry. They all worked in leading game-development shops on impressive game projects. I mean, they figured out how to coax couch potatoes up on their feet to jam on air guitars all night long!”

Soon after the introduction of the iPad, I posted here a set of iPad strategies for publishers. There is also a somewhat expanded version on my own blog. In the latter, I urged publishers to recognize that mobile will be ubiquitous; that content needed to be created and formatted specifically with the tablet’s capabilities in mind; to make everything personalized, customized and social; to forget about trying to emulate print with “issues” and “editions” on the tablet and recognize the atomization of content and the native capabilities of the new device; and to find new ways for merchants and brands to interact with consumers.

To me, TapIn hits the bulls-eye of those strategies. I’ll go a little further out on the limb than Ken Doctor’s “potentially” and say that TapIn is, in fact, the prototype (although certainly not the last word) for an innovative new class of apps and sites that can bring news publishers engagement with a brand new generation of consumers.

January 20 2011

21:00

The shakeup at MediaNews: Why it could be the leadup to a massive newspaper consolidation

[Our regular contributor Martin Langeveld spent 13 years as a publisher in MediaNews Group. That gives him an inside perspective on the company's bankruptcy filing, which he shares with us here. —Ed.]

Back in the early 1990s, Dean Singleton predicted that ultimately there would be just three newspaper companies left standing, and he intended his MediaNews Group to be one of them.

It was an audacious prediction, because at the time, after a decade of wheeling, dealing and sometimes ruthless management, MediaNews Group still consisted of just a dozen newspapers, and the company’s board meetings, as he was fond of saying, “could be held in the front seat of a pickup truck.” But Singleton often repeated his prediction of industry consolidation, and it was the driver behind MediaNews’s growth into the sixth largest newspaper company (in terms of circulation) over the past 15 years. Today MediaNews has 54 daily newspapers with a total of 2.4 million weekday circulation. (On its own site, MediaNews claims to be the “second largest media company,” but that’s a double stretch: Its properties are nearly all newspaper entities, and, by my count, Gannett, Tribune, News Corp., McClatchy and Advance have more daily paid print circulation — and are certainly all bigger media companies than MediaNews.)

MediaNews’s growth was accomplished not only through acquisitions but through innovative regional partnerships such as the California Newspaper Partnership, and was paid for through a complex and ever-changing leverage structure put together by the financial wizardry of Singleton’s associate Joseph “Jody” Lodovic IV.

But over the past few years, opportunities for Singleton to pursue his vision came to a halt. MediaNews could not outrun the ticking clock of debt accumulation; revenues plummeted; newspaper values tumbled; and lenders threatened foreclosure. Lodovic engineered a strategic and very quick bankruptcy that wiped out $765 million in debt by placing nearly all of the company’s stock in the hands of the former bondholders. Remarkably, the bankruptcy reorganization left him and Singleton in charge and with a small equity stake, plus the opportunity to earn back an equity position up to 20 percent. They also had theoretical control in the form of the power to appoint a majority of the board.

The shakeup

It was an unusual outcome — in other major newspaper bankruptcies, the lenders have imposed new management. For example, there have already been several changes at the top in Tribune’s ongoing bankruptcy process; at Freedom Communications, longtime chief Burl Osborne was replaced by Mitchell Stern, whose background includes CEO stints at Fox Television Stations, Inc. and Direct TV; at the Phildelphia Media Network, the publisher of the Inquirer and Daily News, Greg Osberg, a veteran of Newsweek and U.S. News & World Report, was handed the reigns; and at the Minneapolis Star-Tribune, Michael Klingensmith, a longtime Time Inc. executive, became CEO following the paper’s emergence from bankruptcy.

And then there is Journal Register Company, which emerged from bankruptcy in August 2009 and was once known as one of the most rapacious of publishing firms. “Tell me a Jelenic story,” Singleton would ask new refugees from Journal Register hired by one of his papers, referring to the sometimes ludicrous anecdotes of skinflint budget management attributed to Journal Register CEO Robert Jelenic and his lieutenant, CFO Jean Clifton. But under its post-bankruptcy CEO, John Paton, Journal Register Company has become a forward-thinking, innovative organization with a digital-enterprise management style, and has even instituted a profit-sharing plan which was on track, as of October, to make a substantial year-end payout.

So given that the normal pattern is for the post-bankruptcy owners to dump the old leadership team, it should not be surprising that the MediaNews creditors-turned-owners considered Singleton and Lodovic to be on probation. And it turns out that their trial period is over. On Tuesday, MediaNews announced a shakeup in which Lodovic (who has no street-level newspaper or digital operating experience, and whose financial skills were no longer relevant in the post-bankruptcy structure) was ousted and Singleton was reassigned to “executive chairman of the board” — ostensibly with strategic and deal-making responsibilities described specifically as “opportunities to optimize the company’s portfolio of properties and consolidation opportunities in the newspaper industry.”

On the surface, this looks like a way for Singleton to pursue his vision of consolidation, something he alluded to at the time MediaNews emerged from bankruptcy. But in reality, the shakeup robs him of nearly all his clout. The Singleton-Lodovic appointees to the MediaNews board are gone, replaced by new directors representing the stockholders group led by Alden Global Capital, a hedge fund firm which has acquired a large, though not controlling, stake. Several interim executive positions were also filled by people related to Alden or its parent, Smith Management LLC. While Singleton may have ideas for strategic consolidations, without Lodovic he lacks the necessary financial engineering savvy, and without control of the board, he can’t make anything happen. The new title for Singleton looks and feels like a face-saving ambassadorial position.

Consolidation?

So the question becomes, what will happen next? For clues, it is worth digging into Alden Global Capital and a web of investment cross-connections that tie it and several other hedge funds and investment banks to most of the major newspaper firms that have experienced bankruptcies in the last few years.

Consider the following list of investment banks, hedge funds and investment managers that have been reported to be involved in various bankrupt or post-bankrupt publishing companies (note, though, that because most of these are private investments by relatively secretive players, it’s not possible to know whether all of them are still involved as listed, or what their ownership percentages are):

MediaNews Group: A large stake is held by Alden Global Capital; the reorganization was led by BankAmerica and involved 116 lender-creditors.

Philadelphia Media Network (publisher of the Inquirer and Daily News): Alden Global Capital, Angelo, Gordon & Co, Credit Suisse, Citizens Bank, CIT Group.

Journal Register Company: Alden Global Capital, JPMorgan Chase.

Freedom Communications: Alden Global Capital.

Tribune Company: Alden Global Capital, Angelo, Gordon & Company, Greywolf Capital, Oak Tree Capital Management, JPMorgan Chase. (Note, in this case, the players are not on the same page yet, with Alden and others filing suit against JPMorgan and others.)

Minneapolis Star-Tribune: Angelo, Gordon & Company, Credit Suisse, Wayzata Investment Partners.

Postmedia Network Inc.: The Canadian group acquired the newspaper holdings of bankrupt Canwest Global Communications Corporation with backing from Golden Tree Asset Management as well as Alden Global Media and a number of smaller investment funds. John Paton, CEO of the above-listed Journal Register Company, serves as an advisor and recruited its CEO, Paul Godfrey, a media executive who also did a stint as CEO of the Toronto Blue Jays.

Morris Communications: The lone publisher with no apparent overlapping investors shared with the others; its principal creditor in bankruptcy was Wilmington Trust FSB. But Wilmington is a bank, and in most of these cases the banks have been flipping their holdings to the hedge funds.

Clearly, Alden is the outfit with the most skin in the game, having investments in MediaNews, Freedom, Philadelphia Media, Journal Register, Freedom, Tribune and Postmedia. (Incidentally, as a further extension of this network, JP Morgan Chase, which has been involved in the Tribune, Freedom and Journal Register reorganizations, is the largest stockholder at Gannett, with a 10.2 percent “passive” investment.)

With all these interrelationships among investors and “distressed” newspaper firms, it’s not hard to see why Dean Singleton might say that achieving some kind of “consolidation” will be a full-time job. Still, it seems unlikely that Singleton will get to pull the strings, when the money behind the interlocking investment structures is controlled by billionaire Randall Smith, Alden’s founder, who built his fortune through investments in junk bonds and distressed properties. Alden acquired most of its newspaper stakes through its Alden Global Distressed Opportunities Fund, which it launched in 2008 and which is now worth nearly $3 billion. Alden has offices in New York, Dallas, Dubai and Mumbai, along with a tax-haven presence on the Channel Island Jersey.

The tip of the iceberg of consolidation shows in rumors of a possible merger between Freedom and MediaNews. This would be of strategic value particularly in California, where MediaNews already controls about 26 percent of the newspaper market by circulation through its California Newspaper Partnership created by Singleton and Lodovic. MediaNews, Gannett and Stephens Media Group all contributed newspapers to the partnership, in which each firm holds a proportionate equity stake and profit share, but which is controlled and managed by MediaNews. Combining MediaNews and Freedom would add another 7 percent, bringing the total to 33 percent. Antitrust is unlikely to be a big hurdle, since the MediaNews and Freedom holdings compete only at territorial margins and the continuing decline in newspaper revenue and circulation is a sufficient argument for the need to consolidate.

Alden could be seeing the California opportunity not only as a chance to find additional cost savings through production efficiency, but more importantly as a way to gain revenue through market share, both in print and online. Conceivably, because of Alden’s role in Tribune, the Los Angeles Times could end up as part of the partnership as well, boosting the consortium to about half the state’s paid circulation.

This California consolidation opportunity could be used as a model for similar possibilities elsewhere. For example, in New England, a combination of MediaNews, Journal Register and Tribune would have properties in Connecticut, Rhode Island and Massachusetts — totaling about 25 percent of circulation in those states, on a par with the current California partnership. On a countrywide basis, the companies in which Alden appears to have a stake and some degree of influence, as detailed above, have about 15 percent of all circulation and if fully merged, would be about 10 percent bigger than the current champion, Gannett. Gannett currently holds only about 13 percent of total circulation, and when compared with most other media such as television, cable, radio and magazines, the patchworked map of newspaper ownership and its lack of concentration of ownership both now seem outdated and inefficient. Singleton’s early vision of three principal players owning most of the newspaper landscape is increasingly likely.

But it must be done right. Strategic geographic consolidations, if operationally led (one hopes) by someone of Paton’s caliber, could be a potent force for the rejuvenation of the industry, including a renewed focus on what, after all, is the principal product and potential strength of all three companies: local journalism, along with Paton’s strong emphasis on digital-first, print-last thinking.

MediaNews’s own statement on the reorganization seems to echo this: “These measures will strengthen the company’s performance in its core markets, and continue the transformation of the business from a print-oriented newspaper company to a locally focused provider of news and information across multiple platforms.”

It’s really the last hope for the newspaper business, but a pessimistic view is possible, of course. Randall Smith, Alden’s CEO, is a shrewder and more sophisticated financial engineer than Lodovic was as Singleton’s second-in-command, and Alden’s ultimate interest is in earning a strong return on its investments, not in the future of journalism, so its strategy is at heart a financial one. And, yes, consolidation will come at the cost of jobs.

But Smith also knows that the only way to win his big bet on the future of newspapers is to turn them into nimble, modern digital news enterprises, and even Singleton (who rarely touches a computer) seems to agree.

Let’s hope they both listen to Paton, who said in a December speech:

Stop listening to newspaper people. We have had nearly 15 years to figure out the Web and as an industry we newspaper people are no good at it. No good at it at all. Want to get good at it? Then stop listening to the newspaper people and start listening to the rest of the world. And, I would point out, as we have done at JRC – put the digital people in charge – of everything.

Disclosure: I worked for MediaNews Group for 13 years as a publisher in its newspapers in Pittsfield and North Adams, Mass. and Brattleboro, Vt. In a previous post, I asked whether Singleton could steer MediaNews to a digital future.

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