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April 03 2013

18:50

The newsonomics of the Orange County Register’s contrarian paywall

angel-stadium-cc

Get your hot dogs. Get your beer. Get your newspaper. Step right up.

As Opening Day comes to the Big A in Anaheim on Tuesday, you can now expect to hear that barker’s call in Orange County. In what is fast becoming one of the most-watched experiments in newspapering (to use a quaint term), the Orange County Register innovates in a new way, aligning one hallowed American pastime with another.

Hundreds of newspapers have announced paywalls, as the Register is doing and a smaller subset is embracing “membership” as a way of redefining subscription. The Register, though, is making membership more meaningful with a just-completed deal with the many-named Los Angeles Angels of Anaheim. Starting tomorrow, “Register Connect” members — that is, seven-day subscribers — get a perk unlike any other in the newspaper world: free tickets to Angels games. That may be an actual game-changer — giving new meaning to the idea of “all-access.”

The new offer is just part of the Register’s aggressive, contrarian approach to paywalls, which is a central piece of its readers-first, invest-in-content staffing strategy (“The newsonomics of Aaron Kushner’s virtuous circles”). It’s a strategy that reaches beyond the groupthink that has long characterized much of the industry. Let’s look at its approach, including the ticket giveaway — its pros and the cons, its potential brilliance and what could dull the strategy. Let’s look at the newsonomics of the Register’s new paywall, one run by younger, sure-of-themselves non-newspaper people. Let’s also consider how much the Register’s new approach reminds us how first-generation, how 1.0 the current pay systems in fact are. Over 2013, we’ll see twists, turns, and nuances, as even paywall stalwarts like the Columbus Dispatch and Dallas Morning News tell us about previously unannounced changes in their own paywalls.

Aaron Kushner and Eric Spitz, CEO and president respectively of Freedom Communications, which they bought out of bankruptcy last year, have diverse business backgrounds. You’ll find a smattering of greeting cards, beer, unfast food, horse-racing technology, and moving services on their resumes, and they bring that experience to the problems and opportunities of the modern newspaper company. You get the sense that they love to zag when others are zigging — which helps explain their pride in announcing their paywall.

“We’re doing four things that are totally unique,” Spitz told me this week. Those four are interesting, certainly, but they bury the Register paywall lead. The Register is doing two things that others have done, but are doing differently — putting up a hard paywall and making much more of the membership idea than peer pioneers have yet done with it. First, though, a quick run-through of Spitz’s four unique forays:

1. A paywall without discounted digital access

The Register will charge one price — a dollar a day or $365 a year. Get digital or print or both. “We are truly agnostic. It’s our job to get you the content anyway you want. It’s kind of like HBO GO.” Why one price? “You are not paying for the paper — you are paying for the content.”

Most papers charge less for digital-only access, often 50 to 70 percent of the print price. Many have found that non-print readers won’t pay print-like prices for digital-only; some, like The Dallas Morning News, have actually lowered their digital-only prices, as they’ve found low incidence of fully paid print readers “trading down” to digital-only.

In the abstract, the Register’s reasoning makes sense. In practice, expect that few non-print readers will fork over that much money, initially, for tablet and smartphone reading. In the long term, of course, publishers want readers to pay for the content, not the package. In the long term — with production, printing, and distribution costs largely gone and subscription rates close to what they were in print — news publishers would be greatly more profitable. That’s the long term, though, and the path there is foggy. Yes, The Wall Street Journal can charge 83 percent of its print price for digital, and the Financial Times 87 percent (or 113 percent), but those are business-specific anomalies in the print trade.

2. Time-based digital access

If you pay $2.40 for Sunday print only, you get digital access only on Sundays. The Register, true to its agnosticism, is literally matching print and digital access. (You can also buy Thursday-Sunday for $5.60 a week, with matching digital access.) It’s agnostic — and it’s literal. One could argue that The New York Times’ scheme — cheaper for Sunday print + digital access seven days a week — better meets its business needs and consumer psychology. But the Register’s approach is a great test to watch.

3. Day passes

For any 24-hour period, you can pay $2 for access — access that gets you, in effect, two days worth of Register stories. The daypass idea is one that hasn’t much been tested in the U.S., with the Memphis Commercial Appeal trying but apparently dropping it. TinyPass, the company powering Andrew Sullivan’s Dish paywall, says daily access is more popular overseas and for video, selling live events and sports videos. The idea: sampling. Potential upside: day-passers move to full subscriptions. Potential downside: Comparing a $365 commitment to a $2 commitment, many readers opt into day passes.

4. All archives open to the public

The last 90 days of the Register’s content is considered current and covered by the paywall. Any content older than that is open to the full public. Why? “It’s the current content that readers most value,” says Spitz. Undoubtedly true, but it seems to me that archives — a continually undervalued asset by most news companies — have more value that can be exploited.

But it’s the membership program — one that’s not unique in the industry — that will catch the headlines.

Most newspaper membership programs offer free ebooks (The Boston Globe), coupons (The Day in New London, CT) and retail discounts (Los Angeles Times). Some invite members to community events or to visit the editorial staff. The Register wants to go bigger. It approached the Angels, located 10 minutes away, with the idea of better using the empty seats the Angels couldn’t sell. The Angels found themselves sitting on almost 600,000 empty seats last year over 81 games. Put another 7,000 butts in those seats each night, even without getting paid for the ticket, and the club is pulling in another 10 bucks or so on Chronic Tacos, garlic fries, and overpriced Corona.

The perk is available on a first-signed-up, first-served basis to the Register’s 124,000 seven-day subscribers, beginning 72 hours before each game. Forty-eight hours before the game, the Angels, through Ticketmaster, release available seats. Register Connect buyers can nab four tickets, for a service charge of $5. Within a year — subject to going to the end of the electronic queue after landing some tickets — fans can claim as many as 96 tickets a season.

“We’re looking to execute at scale,” Spitz explains, noting that lots of membership perks are good, but few are likely to move the needle of buying and retention. The Angels’ ticket program is that touch of likely brilliance. It is a scale play — and one I’ve been looking for as I’ve heard about the various membership initiatives rolled out over the last two years.

Further, it acts on the power of media. The Register, though shrunken in circulation like the rest of its metro brethren, still throws a lot of weight around town. It retains the power to pull off a big deal with the local baseball franchise — and one that comes at relatively low cost to the newspaper. (The high value/low cost here parallels the Register’s precedent-setting “golden envelope” program, in which it gave those same seven-day subscribers a $100 “check” for “free advertising,” a check they could endorse over to their favorite charity. That program will now be offered “at least twice a year” as well.) A couple of decades after airlines embraced variable pricing — selling off commodities whose value was destroyed by time — the practice is getting to be standard in lots of industries. Newspapers, with their market power, then are well positioned to create a variable pricing marketplace — with their member-subscribers at the center — and the Angels deal leads the way there.

“For your $400 a year, we’re going to deliver you far more than $400 in value,” says Spitz, underlining the allure of “membership.” To make membership more than a card-in-the-wallet afterthought, Spitz says Register Connect will include a key fob — a literal “key to the city” — to facilitate greater use.

Finally, there’s that hard paywall. It’s the biggest enigma of the Register plan. Come to the Register site, and you can get any non-staff-written story — wires and syndicated content, which makes up 40 percent of the content overall — but you won’t get more than “a headline and a sentence” of local stories.

It’s been the meter — with its flexibility and open site sensibility — that has fueled the paywall movement. Yet the Register, two years into modern paywall history, is going with the hard wall. Why?

Spitz says the Register wants to be clear that paying customers get everything — all access on all devices — and that others don’t. You are a customer — or you’re not. You’re on the Register bus, or you’re off it. There’s a certain purity to the thinking; it certainly slams shut that loophole we’ll come to see as plain weird — readers paying several hundred dollars for print or nothing for online. The metered model has largely closed off that stark choice for real readers of any publication. The Register, though, wants to make it even clearer: Pay your $365 a year — either for print or digital or both — and you get the content. It wants to reinforce its buyers’ smart choice.

The move means that the Register will surely lose more pageviews than if it went with a meter. Figure that it will lose 20-30 percent of them, where new metered paywalls lose about half as much. “We don’t care about monetizing eyeballs,” says Spitz, talking about the small incremental ad value newspaper sites get from marginal readers.

I asked Spitz if he had talked with The Dallas Morning News, one of the few U.S. sites to go hard paywall, and he said he had. “The number one thing we take away from them is the most significant value of the paywall is that if someone signs up — a print subscriber who signs up for the paywall — they become 50 percent less likely to attrite [drop their subscription]. The most important value of a paywall as it turns out is you are telling your customer that they are not stupid for buying something their neighbor is getting for free.”

Ironically, publisher Jim Moroney of the Dallas Morning News tells me that his paper is likely moving to a metered model: “We’re pretty certain that’s part of our strategy. How do it is the question.” Today, the Morning News does what the Register is about to do, offering for free access all the non-staff content, but making local stuff inaccessible to non-payers. Why the likely change? In a word, sampling. Moroney believes that he’s secured his core readers — at a high price of $36.95 a month for seven-day print + digital — but knows he needs to crack a code to bring in new, and younger, readers. The hard paywall is a barrier to sampling.

Phil Pikelny, the Columbus Dispatch’s CMO (“The newsonomics of pressing innovation”) is even blunter about the need for a meter:

Pre-2006, we had a hard wall at Dispatch.com. “It was an unmitigated disaster. While other news sites offered all free content, we [who only offered a free home page, free classifieds and free obits] were only able to attract 6,000 paying subs at the height of our ‘success.’ I’d say that thinking retarded our digital growth by three years. No matter what ‘we wish would happen,’ the simple fact is that people only pay for the value they perceive in a product. A website visitor looking at eight pages a month obviously derives little value from the site visited that infrequently. Obviously no pay scheme will win them over. I personally think a hard wall is so restrictive that the website immediately falls into the no-perceived value pile for too many people in the market.

Pikelny, like Moroney, is among those now looking at second-gen paywall notions: “We’re working on a dynamic paywall. Our thought is to eventually move to five free pages a month [from 10]. However, on those webpages where we have the heaviest revenue from advertising (and some of our most robust traffic) we are considering dropping the paywall altogether during certain dayparts. In other words, our home page and OSU sports pages might be without metering from 8 a.m.-10 a.m. and again from noon-2 p.m. The rest of the website would stay metered at all times. When we lower the meter to five pages a month, we might not lose those who don’t see ‘value’ in paying for our site since they will turn to us for headline or breaking stories without hitting a paywall.”

(At the Newspaper Association of America’s April 15 “Strength of Digital Subscriptions” session, Pikelny, the Star Tribune’s Mike Klingensmith, Gannett’s Laura Hollingsworth, and Press+’s Gordon Crovitz will join me for a session I’m moderating.)

Spitz says he, too, believes, in sampling, and that the Register will do that three ways: (1) the $2 day pass; (2) by providing seven days of free access with any fresh email signup; and (3) by pushing five to ten local stories in front of the wall at any one time.

Maybe, that will work. I’m dubious. Hard paywalls, no matter their intent, create a psychological barrier for readers, as The New York Times’ TimesSelect proved years ago. It doesn’t matter how clever you are; readers don’t like running into walls. That’s going to be especially true as news publishers confront the next challenge of paid digital readership. Properly, they’ve focused on their core print readers, extending them into higher-priced all-access.

That makes sense, but doesn’t provide enough growth, and those readers are averaging almost 60 years old. How are they going to convince younger, not-habituated-to-paying readers to join the paywall revolution?

For the Register, that’s a huge question. It’s down to 124,000 seven-day subscribers, with its official audited reporting pointing to 160,000 daily circulation. On Sunday, that number is 280,000, but it’s unclear how many of those are fully paid. Kushner and Spitz inherited a crazy-quilt of pricing when they took over the Register in June 2012. Their ability to weave a new rational pricing structure will make or break their out-of-the-box strategies.

Their all-in approach is refreshing, and as long as they’re prepared to quickly fix the moving parts that squeak, their model has a chance of success.

Photo of Angel Stadium by socaltimes used under a Creative Commons license.

July 21 2011

15:30

The newsonomics of U.S. media concentration

The rise and potential fall of Rupert Murdoch is a hell of a story. It is, though, closer to the Guardian’s Simon Jenkins’ description Tuesday, “not a Berlin Wall moment, just daft hysteria.” Facing only the meager competition of the slow-as-molasses debt-ceiling story, the Murdoch story managed to hit during the summer doldrums. Plus it’s great theater.

Is it just imported theater, though? We have to wonder how much the cries of “media monopoly” will cross the Atlantic. Is there much resonance here in the States for the outrage about media power in the U.K.? Will the sins (its newspaper unit now being called to account by a Parliamentary committee for deliberately blocking the hacking investigation) of News International impact its cousin, Fox Television, the one part of its U.S. holdings regulated directly by government — or can it build a firewall between the different parts of News Corp.? (See “New News Corp. Strategy: Become Even More of an American Company.”)

Certainly, the tales of News International’s ability to strike fear in the London political class are chilling. Our issues in the U.S., though, are largely different. Both come down to who owns the media, and what we need in the diversity of news voices.

The question of media concentration here is tricky, complex, and a profoundly local question. Yes, there are national issues — but the forces of cheaper, digital publishing and promise of national and global markets easily reached by the Internet have spawned much more competition on a national level.

As to what kind of local reporting we get, we see powerful forces at work, shaping who owns what and how much. Likely, we’ll see some News Corp. fallout in FCC debates now re-igniting in and around Washington, D.C. — as the fire of regulating media burns more brightly here, even as Ofcom, the British regulator, grapples with similar issues.

That said, the question of media concentration, or what I will call the newsonomics of U.S. media concentration, will be fought out on two battlegrounds in the U.S. One is at the regulatory level, as the FCC looks at cross-ownership and the cap on local broadcast news holdings by a single national company, like News Corp., and may take into account its U.K. misdeeds. (Especially if the 9/11 victim wiretapping claims are borne out.) Second, and probably more important, sheer economic change is rapidly re-shaping who owns the news media on which we depend. The fast-eroding economics of the traditional print newspaper business are changing the face both of competition and of journalistic practice faster than any government policy can affect.

So this is how our time may play out. Smart, digital-first roll-ups align with massive consolidation.

First, let’s look at the print trade, at mid-year. The numbers are awful, and getting no better. We’ve seen the 22nd consecutive quarter of no-ad-growth for U.S. dailies, the last positive sign registered back in 2006. Further staff reductions, albeit with less public announcement, continue at most major news companies. This week, Gannett — still the largest U.S. news company — reported a 7-percent ad revenue decline for the second quarter, typical among its peers. Its digital ad revenues were up 13 percent, a slowing of digital ad growth also being seen around the industry.

We see a strategy of continuing cost-cutting across the board, with a new phenomenon — roll-up (“The newsonomics of roll-up“) — trying to play out.

Hedge funds — which bought into the industry through and after 14 newspaper company bankruptcies — are having their presence felt. Most recently, Alden Global Capital, the quietest major player in the American news industry, bought out its partners and now owns 100 percent of Journal Register Company. Alden, with interests in as many as 10 U.S. newspaper chains, apparently liked the moves of CEO John Paton. Paton’s digital-first strategies have more rapidly cut legacy costs than other publishers’ moves, and moved the needle more quickly in upping digital revenues.

No terms were announced, but Paton says “all its lenders were paid in full.” That would be a qualified success, given the bath everyone involved in the newspaper industry has taken in the last half-decade.

In JRC’s case, we’d have to say the push of hedge funds for faster change has been more positive than negative. Pre-bankruptcy, it was derided for its poor journalism and soul-crushing budgeting. Under Paton, who has brought in innovators like Arturo Duran, Jim Brady, and Steve Buttry, the company is trying to reinvent new, digital-first local, preserving local journalism jobs as much as possible. A work very much in early progress.

You can bet that Alden’s move is just one of its first. Sure, as a hedge fund, it may just be getting JRC ready to sell; hedge funds don’t want to be long-term operators. Before that happens, though, expect the next shoe to drop: consolidation.

JRC owns numerous properties around Philly, and a roll-up with Greg Osberg-led (and Alden part-owned) Philadelphia Media Network, has been talked about. Meld the same kind of synergies, and faster-moving print-to-digital strategies of Paton with Osberg’s new multi-point, Project Liberty plan, and you have a combined strategy. Further combine the operations into a single company — removing more overhead, more administration, more cost — and you have a better business to hold, or sell, or still further combine with still more regional entities.

It’s not just a Philly scenario.

In southern California, the question is how the three once-bankrupt operations — Freedom Communications, MediaNews’ Los Angeles News Group and Tribune’s L.A. Times (still not quite post-bankrupt, but acting like it is) — will mate. Over price, talks broke down about merging Freedom and MediaNews (both substantially owned by Alden; see Rick Edmonds’ Poynter piece for detail). Yet, everyone in the market believes consolidation will come. Now with Platinum Equity, another private equity owner, putting its San Diego Union-Tribune back on the market just two years after buying it for a song, we could see massive consolidation of newspaper companies in southern California.

Media concentration, perhaps in the works: Southern California, between L.A. and San Diego, contains at least 21 million people — or a third of the total population of the U.K. Philly and Southern California may among the first to consolidate, but the trends are the same everywhere.

So this is how our time may play out. Smart, digital-first roll-ups align with massive consolidation. It’s time to get our heads around that. That won’t necessarily mean that Alden, or other hyper-private owners, keep the new franchises. Their goal probably is to sell. But to whom, with what sense of public interest?

Which brings us back to broadcast, to which newspaper people give much too little shrift.

Both those in the old declining newspaper trade and those in the mature and largely flat broadcast trade (as an indication, Gannett’s broadcast division revenues grew to $184.4 million from $184 million in the second quarter) are beginning to figure the future this way: there may only be enough ad revenue in mid-metro markets (and smaller) to maintain one substantial journalistic operation. Not one newspaper and one local broadcaster. But, one, presumably combined text and video, paper and air, increasingly digital operation.

So, finally, let’s turn back to the FCC. The Third Circuit Court of Appeals just returned cross-ownership regulations back to the FCC, largely on procedural (“hey, you forgot the public input part”) grounds. In addition, it will likely soon take up the national cap on local broadcast ownership. (Good sum-up of FCC-related action by Josh Smith at the National Journal.)

Which brings us back to the News Corp story. The national cap — how much of the U.S. any one national company can serve with local broadcast — is 39 percent. Fox News does that with 27 stations, and, of course, has lobbied for more reach. So, the media concentration issue may play out as the cap is further debated, and as cross-ownership — a News Corp. issue in and around New York/New Jersey — returns as well. Will Hackgate’s winds blow westward, as local broadcast news concentration comes up again?

Though it may be shocking to many newspaper people, though, local TV news is a major source of how people get the news. Some 25 to 28 million viewers watch local early-evening or late-evening TV news, according to the Project for Excellence in Journalism. That compares to about a 42-million weekday newspaper circulation, so those numbers aren’t quite apples to apples. In my research for Outsell, I noted that local survey data indicated that reliance on TV news equaled that of newspapers.

As Steve Waldman’s strong report for the FCC pointed out, local TV news is “more important than ever” — but thin on accountability reporting.

So while much of the media concentration questions centers on print, local broadcast ownership, and direction of news coverage, matters a lot.

Combine that local concentration — 39 percent or more — with the sense that the market may only support single journalistic entitities and we’re back to the theme of media concentration, perhaps on a scale hitherto unseen.

A declining local press, with signs of impending roll-up. Stronger local TV news, weaker in accountability reporting, and pushing for more roll-up. Winds of outrage wafting over the Atlantic. Regulatory breezes gaining strength.

These are powerful forces colliding, and in the balance, the news of the day won’t be quite the same.

July 18 2011

16:00

Alden Global Capital drops a shoe: Is the Journal Register acquisition prelude to more consolidation?

On Thursday, Journal Register Company announced that it had been acquired by Alden Global Capital, a secretive hedge fund that specializes in “distressed opportunities,” such as companies emerging from bankruptcy — including newspaper groups. The acquisition may foreshadow additional moves by Alden, which is interested in two strategies to add value to its investments: (a) it wants its newspaper holdings to aggressively develop digital capabilities and revenues, and (b) it wants to see consolidation (mergers) among newspaper groups.

In its capacity as a distressed-opportunity specialist, as I detailed here in January, Alden acquired stakes not only in JRC, but also in MediaNews Group, Philadelphia Media Network, Tribune, Freedom Communications, and the Canadian newspaper group Postmedia Network . Among publishers that avoided bankruptcy filings, it has stakes in A.H. Belo, Gannett, McClatchy, Media General and Journal Communications. (I detailed those investments in this post in March.) In addition to its newspaper holdings, Alden has other media investments, including in Emmis Communications and Sinclair Broadcast Group. Only the investments in public companies are detailed in SEC filings — they add up to about $210 million in media holdings. Together with the non-public investments in JRC, MediaNews, Freedom, Postmedia, and Philadelphia, Alden may have as much as $750 million of its total assets of $3 billion invested in newspaper and broadcast media properties.

At the time of that January post, Alden had just asserted itself at MediaNews Group by shaking up the executive suite and naming three new directors to the seven-member board. (Disclosure: I spent 13 years as a publisher at a MediaNews Group newspaper.) That move was important because it enabled Alden to use MediaNews as a platform from which to drive consolidation in the still-fractured U.S. newspaper industry. (The largest player, Gannett, owns only about 13 percent of the industry in terms of daily circulation.) Under SEC rules, by taking a position on the board, Alden was no longer allowed to speculate in MediaNews stock; hence, their assumption of board seats signalled an intent to use their MediaNews holdings strategically rather than speculatively. Until the JRC acquisition, Alden had not done the same at any of the other firms in which it had invested.

The first strategic move MediaNews made after the January shakeup was to make a bid for Freedom Communications, publisher of the Orange County Register and other papers and owner of broadcast properties, which put itself up for sale in March. Alden is believed to own about 40 percent of Freedom, a stake similar to its MediaNews holdings, but by not taking board seats, it had remained on the speculative side of the fence at Freedom, and therefore could not influence Freedom’s choice of an acquisition partner. But clearly, the ideal marriage from Alden’s point of view would be between Freedom and MediaNews.

Last month, the Wall Street Journal reported that talks between MediaNews and Freedom had broken down, with a Freedom valuation of about $700 million at issue. Other suitors, including Tribune (in which Alden has a stake), may be in the picture, but with its relatively debt-free post-bankruptcy structure, and its heavy presence in the California newspaper market, MediaNews was in the strongest position in the bidding for Freedom. As Denver-based Westword (which keeps a close watch on MediaNews) said about the talks breakdown, “expect MediaNews Group and Freedom to sit down again in the coming months despite the current state of negotiation interruptus.”

Meanwhile, the Alden takeover of JRC gives it a second operating platform for its consolidation goals. Its JRC investment is now strategic rather than speculative as well; it can call the shots. Clearly, it likes JRC CEO John Paton, one of the prime exponents of a “digital first” strategy. Paton has also had a relationship with Alden’s Canadian interest, Postmedia, including a spot on its board and a role in recruiting its CEO, Paul Godfrey.

Since Paton took over JRC as it emerged from bankruptcy in 2009, he has built a reputation as a visionary by replacing old proprietary systems with open source software and cloud-based services. In 2010, the company said it earned $41 million in cash flow and increased digital revenues about 70 percent.

JRC, with Alden backing, could now become an east-coast consolidator by scooping up other newspapers and newspaper groups — perhaps even acquiring the East Coast holdings of MediaNews, papers in Pennsylvania and New England which, although dear to the heart of chairman Dean Singleton, are mostly a distraction to its Denver-based, California-centric holdings.

Obviously, the Philadelphia newspapers could be part of the reshuffle/consolidation, and other owners, including Gannett, could join the fray. (Gannett already is partnered with MediaNews in California.) It’s not hard to imagine an east-west strategy, with newspaper properties flowing into a western-U.S. consolidation led by MediaNews and an eastern grouping led by JRC. Even without mergers, there are places where Alden could encourage strategic partnerships between companies it owns or has invested in — for example, between JRC and the Philadelphia newspapers.

Shira Ovide of the Wall Street Journal noted, in response to the Alden acquisition of JRC, that there hadn’t been much action in the newspaper acquisitions market for some time. But the market could be loosening up. During the recession and beyond, owners held on, remembering the inflated values of the 1990s and early 2000s. It’s now clear both that those days will not come back and that Alden has its fingers on key factors that could build value: digital first, and consolidation. And Alden seems to have a nice cash pipeline.

Nostalgia for “local newspaper ownership” notwithstanding, the market will push owners into sales and mergers until there are just a few major owners of newspapers across the country. Even if this happens, daily print publication may still not be sustainable in many markets for more than a few years — but that’s another topic. The gamble for Alden and others is to accumulate a stake in a consolidated newspaper industry in the hopes that its local brands can retain (or regain) value as mainly digital enterprises.

Still, neither JRC’s digital-first focus nor industry consolidation strategies are magic bullets. Alden’s money chases risk in order to earn high rewards, and there’s a lot of risk in this picture.

On the digital-first side, we’re still waiting to see if newspapers can catch up and increase their share of the online ad market. JRC may have grown its online revenue by 70 percent, but in 2010 digital revenue for the daily newspaper industry as a whole grew just 10.9 percent, and still showed less online revenue than it had in 2007 ($3.042 billion in 2010 versus $3.166 billion in 2007). And much of what newspapers count as digital revenue is sold in print-dominated packages, not as pure online advertising.

As for consolidation, as I noted in a comment to Ken Doctor’s March post, “The Newsonomics of roll-up,” we could be looking at a classic industry mop-up operation — where the consolidator knows it’s all downhill from here, but is able to buy assets so cheaply that just milking them until they run dry produces a nice return. I wrote at the time in that comment:

While newspaper values have bounced back from rock bottom, you can still buy newspaper assets for a fraction of what they were worth at the peak six years ago (20 to 25 cents on the dollar, at most, depending on the company), with cash-flow paybacks in the range of 5-6 years, plus the consolidation benefits, plus, in many cases, valuable real estate that can be flipped. And with some luck, a digital spinoff or residual asset a few years down the road. So without much risk, maybe you can double your money over five years. (And if you’re really lucky, the economy keeps improving and you can find a bigger sucker and double your investment in just in a couple of years.) I believe that’s the Alden Global strategy. They have put their people on the board at MediaNews (and nowhere else) in order to use it as a launching platform for consolidation.

Let me temper that with the benefit of the doubt. John Paton says that Alden believes in digital-first. But if that strategy doesn’t begin to deliver the returns Alden expects — at JRC, MediaNews, or any other media outfit where Alden chooses to exercise the influence that comes with its ownership stake — the mop will come out of the closet and we’ll see a consolidation that’s driven purely by financial strategists at Wall Street firms, with no particular concern for journalism, digital or otherwise.

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.

May 27 2010

14:00

The Newsonomics of wilting flowers

[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

Ah, the Dream of the Wilting Flowers. Like many web dreams, premature, premature, premature…and then, maybe soon, pop. A sensation, with lots of dollars involved. Our best current example: Steve Jobs’ “invention” of the iPad, which of course was dreamed up in quite similar forms, decades before, in the fancies of Alan Kay and Roger Fidler, among others.

It’s all timing, right?

So it’s a good time to get a sense of what’s happening in local mobile commerce among news companies.

A friend visiting the exhibition hall at the NAA Orlando convention in April told me he’d been besieged by mobile commerce vendors. Then there’s the group (mobile commerce) grope, symbolized by the Groupon craze. Get a whopping good deal — but only if you can get enough of the crowd to go along with it as well. Of course, iAds are on the horizon, with Apple offering a sweet-smelling twist on walled-garden marketing pitches. Google’s AdMob — the leading mobile ad network — just got the thumbs-up from the FTC and has launched AdWhirl, its open-source (take that, Apple) “mediation layer” to facilitate mobile commerce. You can’t stay on top of all the mobile-marketing plays these days, no matter how much you try.

Let’s look at newspaper companies and what they’re doing with mobile commerce. Talk about timing: When Dan Finnigan ran Knight Ridder Digital a decade ago, one of his favorite mantras was the Dream of the Wilting Flowers. As in: It’s 4:30. You’re driving down the street. Your phone knows where you are, of course, and coming up, on the right is a florist…with a perishable commodity, flowers that will be worthless within 24 hours. Your “smart” phone, knowing where you are, who you are, your flower-buying habits, and maybe your spending proclivities, sends you the florist’s coupon for half-off, if you stop by within the half-hour. Satisfied merchant, satisfied customer, a perfecting of supply and demand.

It’s still a great vision, with a new generation chasing it, and getting closer. Talk to newspaper companies, though, and you’ll hear the answer is “we’re not yet there.” Closer, but not quite there.

Bill Ganon sees that wilting-flower dream, but he’s drilling down into something more basic: mobile sales training and the establishment of mobile pricing standards and analytics. Then, maybe by the end of the year, he says, the location-aware capabilities of smartphones may start to smell the daisies.

Ganon is the general manager for local market development for Verve Wireless, and Verve is the newspaper industry’s biggest mobile play. Spurred first by AP investment and partnership in summer 2008, many newspaper companies have turned to Verve for mobile content and, now, ad solutions. Verve now powers more than 400 mobile news sites for newspaper and broadcast companies including MediaNews, Hearst, Belo, McClatchy, Freedom, and Lee.

Verve is making a new ad push, after seeing its first forays fall flat locally. That push is predicated on scale. Its network — the Blackberry has just been added to the iPhone, with Android and iPad applications on the way, says Ganon — has grown dramatically. Year over year, for April, it has grown to 8.9 million uniques (from 2.9) and 130 million page views (from 51 million).

When Ganon — a veteran of old media sales at Newsweek and Sunset, as well as eight years with Qualcomm — took over local sales eight months ago, he found a ragtag group of local mobile efforts. Now, as Ganon describes his work, we can see the emerging newsonomics of local mobile pricing. As the mobile commerce world explodes, Ganon is focusing on the basics. He says Verve can now count 75 local sites beginning to make consistent sales, up from around 20 when he came on board. The basics of the push:

  • Training: Verve’s local market sales team of four is spending lots of time training newspaper and broadcast sales staffs on how to sell mobile. That’s reminiscent of the ongoing training done by Lem Lloyd’s merry band through the Yahoo-powered Newspaper Consortium. (In fact, with all the Yahoo, Verve, and marketing-services training ongoing, I’d wager that newspaper sales people have gotten more training in the last two years than in the previous two decades.) Verve’s training focuses on taking the mystique out of mobile: “Advertisers don’t like stealth solutions. They like to know what’s behind the curtain,” says Ganon.
  • Pricing: Ganon urges a $15 CPM (cost per thousand) floor for selling mobile. With that guideline, he says Verve-powered sites are averaging $19 CPMs, which would be about twice the average of what news sites on getting on the desktop web. Says Ganon: “This is your time to define metrics.” In other words, try to establish a price, not allowing prices to fall to low single digits as inventory is sold by middlemen, as has happened in the main digital business. Right now, most newspaper companies can count no more than five percent of their digital revenue, coming from mobile. Most of that total — maybe $100 million — is going to bigger, national brands like The Wall Street Journal and The New York Times. That’s out of maybe $500 million involved in mobile advertising overall in the U.S.
  • The Pizza Sale: Salespeople are being trained to sell the crust (a banner ad), the sauce (a landing page, tailored to action off the ad), and the toppings (call-to-actions, whether “click to call” or map directions). Pricing is still impression-based, though, Verve sees cost-per-click and cost-per-acquisition offers down the road.

What’s apparent is how early we are in local mobile selling — and how far away it is today from adding appreciably to news site revenues. The deals are small, and even the best-performing sites can count no more than 20 advertisers, with most having far fewer on their sites at any one time.

And the Dream of the Wilting Flowers? Ganon says Verve should be able to add in location-aware selling, maybe by the end of the year, but he believes that it “will be a major breakthrough.” So, 2011, maybe. When that breakthrough comes, the big question is who will benefit most: the local newspaper and broadcast companies, or Apple, or Google, or Yahoo, or maybe Verizon or AT&T?

Ask Walter Sanchez, publisher of BQE Media in Brooklyn and Queens and a Verve client, and he’ll tell you it’s an uphill climb. I met Walter at a recent New York Press Association conference, and his marketing efforts were way ahead of the curve, among publishers. He’s busy selling social sites, SEO, SEM, and mobile sites, he’s proud of getting such small businesses as Beach Bum Tanning sold on mobile ($500 a year for a landing page and 3,000 short-text messages). But he’ll tell you that most local merchants are indeed still mystified by the web, and they’re slow adopters: “When those 21-, 22- and 23-year-olds start buying their own businesses, in a few years, then, we’ll see real adoption.”

April 09 2010

14:00

This Week in Review: The iPad has landed, WikiLeaks moves toward journalism, and net neutrality is hit

[Every Friday, Mark Coddington sums up the week’s top stories about the future of news and the debates that grew up around them. —Josh]

The iPad unleashed: If you’ve been anywhere near a computer or TV this week, it’s not hard to determine what this week’s top journalism/new media story is: Apple’s iPad hit stores Saturday, with 450,000 sold as of Thursday. I’ll spare you the scores of reviews, and we’ll jump straight to the bigger-picture and journalism-related stuff. There’s a ton to get to here, so if you’re interested in the bite-sized version, read Cory Doctorow and Howard Weaver on closed media consumption, Kevin Anderson on app pricing, and Alan Mutter and Joshua Benton on news app design.

If you’re looking for the former, The New York Times and the current issue of Wired have thoughts on the iPad and tablets’ technological and cultural impact from a total of 19 people, mostly tech types. We also saw the renewal of several of the discussions that were percolating the weeks before the iPad’s arrival: New media expert Jeff Jarvis and open-web activist Cory Doctorow took up similar arguments that the iPad is a retrograde device because it’s based around media consumption rather than creation, strangling development and making a single company our personal technology gatekeepers. In responses to Jarvis and Doctorow respectively, hyperlocal journalist Howard Owens and former McClatchy exec Howard Weaver defended those “consumers,” countering that not everybody consumes media like tech critics do — most people are primarily consumers, and that’s OK.

Meanwhile, two other writers made, judging from their pieces’ headlines, an almost identical point: The iPad is not going to save the news or publishing industries. Leaning heavily on Jeff Jarvis, The Huffington Post’s Jose Antonio Vargas made the consumption argument, saying that consumers want to tweak, question and pass around their content, not just passively consume it. And Harvard Business Review editor Paul Michelman contended that publishers are trying to retrofit their media onto this new one.

News business expert Alan Mutter and Poynter blogger Damon Kiesow offered some tips for publishers who do want to succeed on the iPad: Mutter wrote a thorough and helpful breakdown of designing for print, the web and mobile media, concluding, “Publishers who want to take full advantage of the iPad will have to do better by creating content that is media-rich, interactive, viral, transactional and mobile.” Kiesow told news orgs to consider what the iPad will be down the road as they design.

There was also quite a bit written about news organizations’ iPad apps, most of it not exactly glowing. Damon Kiesow provided a helpful list of journalism-related apps, finding that not surprisingly, most of the top selling ones are free. The high prices of many news orgs’ apps drew an inspired rant from British journalist Kevin Anderson in which he called the pricing “a last act of insanity by delusional content companies.” Poynter’s Bill Mitchell took a look at early critical comments by users about high prices and concluded that by not explaining themselves, publishers are leaving it to the crowd to make up their own less-than-charitable explanations for their moves.

As for specific apps, Poynter’s Mallary Jean Tenore was wowed by USA Today’s top-selling app, the Columbia Journalism Review’s Ryan Chittum compared The New York Times’ and Wall Street Journal’s apps, and news industry analyst Ken Doctor looked at the Journal’s iPad strategy. Finally, the Nieman Journalism Lab’s Joshua Benton found three intriguing news-navigation design ideas while browsing news orgs’ iPad apps: Story-to-story navigation, pushing readers straight past headlines, and the “cyberclaustrophobia” of The New York Times’ Editors’ Choice app.

Is WikiLeaks a new form of journalism?: On Monday, the whistleblower website WikiLeaks posted video of civilians being killed by a U.S. airstrike near Baghdad in 2007. In a solid explanation of the situation, The New York Times’ Noam Cohen and Brian Stelter noted that with the video, WikiLeaks is making a major existential shift by “edging closer toward a form of investigative journalism and to advocacy.”

Others noticed the journalistic implications as well, with Jonathan Stray of Foreign Policy wondering whether WikiLeaks is pioneering a new, revolutionary avenue for sourcing outside the confines of traditional media outlets. On Twitter, Dan Gillmor posited that a key part of WikiLeaks’ ascendancy is the fact that unlike traditional news orgs, it doesn’t see itself as a gatekeeper, and C.W. Anderson declared the video and an analysis of it by a former helicopter pilot “networked journalism.” If you want to know more about WikiLeaks itself, Mother Jones has plenty of background in a detailed feature.

Net neutrality takes a hit: In the tech world, the week’s big non-iPad story came on Tuesday, when a federal judge allowed Internet service providers some ability to slow down or regulate traffic on their network. It was a huge blow to proponents of net neutrality, or the belief that all web use should be free of restrictions or institutional control. The FCC has tried for years to impose net neutrality standards on ISPs, so it’s obviously a big setback for them, too.

The New York Times, Wall Street Journal and CNET all have solid summaries of the case and its broader meaning, and The Washington Post takes a look at the FCC’s options in the wake of the ruling. I haven’t seen anyone directly tie this case to journalism, though it obviously has major implications for who controls the future of the web, which in turn will influence what news organizations do there. And as Dan Gillmor notes, this isn’t just a free-speech issue; it’s also about the future of widespread broadband, something that has been mentioned in the past (including by Gillmor himself) as a potentially key piece of the future-of-news puzzle.

Murdoch rattles more sabers: As his media holdings continue to prepare to put up paywalls around their online content (The Times of London was the recent announcement), Rupert Murdoch made another public appearance this week in which he bashed search engines, free online news sites and The New York Times. There is one thing he likes about technology, though: The iPad, which he said “may well be the saving of the newspaper industry.” Staci Kramer of paidContent astutely notes that Murdoch’s own statements about charging for content imply that it will only work if virtually every news org does it. Meanwhile, Australian writer Eric Beecher argues that Murdoch’s money-losing newspapers subsidize the power and influence that the rest of his media empire thrives on.

In other paid-content news, the Chicago Reader has an informative profile of the interesting startup Kachingle, which allow users to pay a flat fee to read a number of sites, then designate how much of their money goes where and trumpet to their friends where they’re reading. Also The New Republic put a partial paywall up, and newspaper chain Freedom Communications took its test paywall down.

Reading roundup: I’ve got a pretty large collection of items for you this week, starting with a couple of bits of news and finishing with several interesting pieces to read.

Columbia University announced a new dual-degree master’s program in journalism and computer science. Eliot Van Buskirk of Wired has a deeper look at the program’s plans to produce hacker-journalists who can be pioneers in data visualization and analysis and device-driven design, along with a couple of brutally honest quotes from Columbia faculty about the relative paucity of computing skills among even “tech-savvy journalists.” Just about everybody loved the idea of the program, though journalist/developer Chris Amico cautioned that more than just dual-degree journalists need to be hanging out with the computer scientists.  ”The problem isn’t just a lack of reporters who can code, but a shortage of people in the newsroom who know what’s possible,” he wrote.

Down the road, this may be seen as a turning point: Demand Media, which has been derided lately as a “content farm” will create and run a new travel section for USA Today. As Advertising Age points out, USA Today isn’t the first newspaper to get content from Demand Media — the Atlanta Journal-Constitution gets a travel article a week — but this is collaboration of an entirely new scale.

Now the think pieces: Here at the Lab, former newspaper exec Martin Langeveld updated his year-old post asserting that more than 95 percent of readership of newspaper content is in print rather than online, and while the numbers changed a bit, his general finding did not.

In an interview with Poynter, Newser’s Michael Wolff had some provocative words for news orgs, telling them readers want stories online with less context, not more (as several folks asserted a few weeks ago at SXSW) and saying he would’ve told newspapers way back when not to go on the web at all: “[Online readers'] experiences have changed and their needs have changed, and I just don’t think traditional news companies are in a position to really understand that kind of change or to speak to it or to deliver it.”

At The Atlantic, Lane Wallace wrote that journalists’ (especially veterans’) strongest bias is not political, but is instead an predetermined assumption of a story line that prevents them from seeing the entire picture.

And lastly, two great academically oriented musings on media and society: Memphis j-prof Carrie Brown-Smith wonders if social media furthers our cultural knowledge gap, and University of Southern Denmark professor Thomas Pettitt talks to the Lab’s Megan Garber about the Gutenberg Parenthesis and society’s return to orally based communication with digital media. Both are great food for thought.

January 07 2010

19:11

Keeping Martin honest: Checking on Langeveld’s predictions for 2009

[A little over one year ago, our friend Martin Langeveld made a series of predictions about what 2009 would bring for the news business — in particular the newspaper business. I even wrote about them at the time and offered up a few counter-predictions. Here's Martin's rundown of how he fared. Up next, we'll post his predictions for 2010. —Josh]

PREDICTION: No other newspaper companies will file for bankruptcy.

WRONG. By the end of 2008, only Tribune had declared. Since then, the Star-Tribune, the Chicago Sun-Times, Journal Register Company, and the Philadelphia newspapers made trips to the courthouse, most of them right after the first of the year.

PREDICTION: Several cities, besides Denver, that today still have multiple daily newspapers will become single-newspaper towns.

RIGHT: Hearst closed the Seattle Post-Intelligencer (in print, at least), Gannett closed the Tucson Citizen, making those cities one-paper towns. In February, Clarity Media Group closed the Baltimore Examiner, a free daily, leaving the field to the Sun. And Freedom is closing the East Valley Tribune in Mesa, which cuts out a nearby competitor in the Phoenix metro area.

PREDICTION: Whatever gets announced by the Detroit Newspaper Partnership in terms of frequency reduction will be emulated in several more cities (including both single and multiple newspaper markets) within the first half of the year.

WRONG: Nothing similar to the Detroit arrangement has been tried elsewhere.

PREDICTION: Even if both papers in Detroit somehow maintain a seven-day schedule, we’ll see several other major cities and a dozen or more smaller markets cut back from six or seven days to one to four days per week.

WRONG, mostly: We did see a few other outright closings including the Ann Arbor News (with a replacement paper published twice a week), and some eliminations of one or two publishing days. But only the Register-Pajaronian of Watsonville, Calif. announced it will go from six days to three, back in January.

PREDICTION: As part of that shift, some major dailies will switch their Sunday package fully to Saturday and drop Sunday publication entirely. They will see this step as saving production cost, increasing sales via longer shelf life in stores, improving results for advertisers, and driving more weekend website traffic. The “weekend edition” will be more feature-y, less news-y.

WRONG: This really falls in the department of wishful thinking; it’s a strategy I’ve been advocating for the last year or so to follow the audience to the web, jettison the overhead of printing and delivery, but retain the most profitable portion of the print product.

PREDICTION: There will be at least one, and probably several, mergers between some of the top newspaper chains in the country. Top candidate: Media News merges with Hearst. Dow Jones will finally shed Ottaway in a deal engineered by Boston Herald owner (and recently-appointed Ottaway chief) Pat Purcell.

WRONG AGAIN, but this one is going back into the 2010 hopper. Lack of capital by most of the players, and the perception or hope that values may improve, put a big damper on mergers and acquisitions, but there should be renewed interest ahead.

PREDICTION: Google will not buy the New York Times Co., or any other media property. Google is smart enough to stick with its business, which is organizing information, not generating content. On the other hand, Amazon may decide that they are in the content business…And then there’s the long shot possibility that Michael Bloomberg loses his re-election bid next fall, which might generate a 2010 prediction, if NYT is still independent at that point.

RIGHT about Google, and NOT APPLICABLE about Bloomberg (but Bloomberg did acquire BusinessWeek). The Google-NYT pipe dream still gets mentioned on occasion, but it won’t happen.

PREDICTION: There will be a mini-dotcom bust, featuring closings or fire sales of numerous web enterprises launched on the model of “generate traffic now, monetize later.”

WRONG, at least on the mini-bust scenario. Certainly there were closings of various digital enterprises, but it didn’t look like a tidal wave.

PREDICTION: The fifty newspaper execs who gathered at API’s November Summit for an Industry in Crisis will not bother to reconvene six months later (which would be April) as they agreed to do.

RIGHT. There was a very low-key round two with fewer participants in January, without any announced outcomes, and that was it. [Although there was also the May summit in Chicago, which featured many of the same players. —Ed.]

PREDICTION: Newspaper advertising revenue will decline year-over-year 10 percent in the first quarter and 5 percent in the second. It will stabilize, or nearly so, in the second half, but will have a loss for the year. For the year, newspapers will slip below 12 percent of total advertising revenue (from 15 percent in 2007 and around 13.5 percent in 2008). But online advertising at newspaper sites will resume strong upward growth.

WRONG, and way too optimistic. Full-year results won’t be known for months, but the first three quarters have seen losses in the 30 percent ballpark. Gannett and New York Times have suggested Q4 will come in “better” at “only” about 25 percent down. My 12 percent reference was to newspaper share of the total ad market, a metric that has become harder to track this year due to changes in methodology at McCann, but the actual for 2009 ultimately will sugar out at about 10 percent.

PREDICTION: Newspaper circulation, aggregated, will be steady (up or down no more than 1 percent) in each of the 6-month ABC reporting periods ending March 31 and September 30. Losses in print circulation will be offset by gains in ABC-countable paid digital subscriptions, including facsimile editions and e-reader editions.

WRONG, and also way too optimistic. The March period drop was 7.1 percent, the September drop was 10.6 percent, and digital subscription didn’t have much impact.

PREDICTION: At least 25 daily newspapers will close outright. This includes the Rocky Mountain News, and it will include other papers in multi-newspaper markets. But most closings will be in smaller markets.

WRONG, and too pessimistic. About half a dozen daily papers closed for good during the year.

PREDICTION: One hundred or more independent local startup sites focused on local news will be launched. A number of them will launch weekly newspapers, as well, repurposing the content they’ve already published online. Some of these enterprises are for-profit, some are nonprofit. There will be some steps toward formation of a national association of local online news publishers, perhaps initiated by one of the journalism schools.

Hard to tell, but probably RIGHT. Nobody is really keeping track of how many hyperlocals are active, or their comings and goings. An authoritative central database would be a Good Thing.

PREDICTION: The Dow Industrials will be up 15 percent for the year. The stocks of newspaper firms will beat the market.

RIGHT. The Dow finished the year up 18.8 percent. (This prediction is the one that got the most “you must be dreaming” reactions last year.

And RIGHT about newspapers beating the market (as measured by the Dow Industrials), which got even bigger laughs from the skeptics. There is no index of newspaper stocks, but on the whole, they’ve done well. It helps to have started in the sub-basement at year-end 2008, of course, which was the basis of my prediction. Among those beating the Dow, based on numbers gathered by Poynter’s Rick Edmonds, were New York Times (+69%), AH Belo (+164%), Lee Enterprises (+746%), McClatchy (+343%), Journal Communications (+59%), EW Scripps (+215%), Media General (+348%), and Gannett (+86%). Only Washington Post Co. (+13%) lagged the market. Not listed, of course, are those still in bankruptcy.

PREDICTION: At least one publicly-owned newspaper chain will go private.

NOPE.

PREDICTION: A survey will show that the median age of people reading a printed newspaper at least 5 days per week is is now over 60.

UNKNOWN: I’m not aware of a 2009 survey of this metric, but I’ll wager that the median age figure is correct.

PREDICTION: Reading news on a Kindle or other e-reader will grow by leaps and bounds. E-readers will be the hot gadget of the year. The New York Times, which currently has over 10,000 subscribers on Kindle, will push that number to 75,000. The Times will report that 75 percent of these subscribers were not previously readers of the print edition, and half of them are under 40. The Wall Street Journal and Washington Post will not be far behind in e-reader subscriptions.

UNKNOWN, as far as the subscription counts go: newspapers and Kindle have not announced e-reader subscription levels during the year. The Times now has at least 30,000, as does the Wall Street Journal (according to a post by Staci Kramer in November; see my comment there as well). There have been a number of new e-reader introductions, but none of them look much better than their predecessors as news readers. My guess would be that by year end, the Times will have closer to 40,000 Kindle readers and the Journal 35,000. During 2010, 75,000 should be attainable for the Times, especially counting all e-editions (which include the Times Reader and 53,353 weekdays and 34,435 Sundays for the six months ending Sept. 30.

PREDICTION: The advent of a color Kindle (or other brand color e-reader) will be rumored in November 2009, but won’t be introduced before the end of the year.

RIGHT: plenty of rumors, but no color e-reader, except Fujitsu’s Flepia, which is expensive, experimental, and only for sale in Japan.

PREDICTION: Some newspaper companies will buy or launch news aggregation sites. Others will find ways to collaborate with aggregators.

RIGHT: Hearst launched its topic pages site LMK.com. And various companies are working with EVRI, Daylife and others to bring aggregated feeds to their sites.

PREDICTION: As newsrooms, with or without corporate direction, begin to truly embrace an online-first culture, outbound links embedded in news copy, blog-style, as well as standalone outbound linking, will proliferate on newspaper sites. A reporter without an active blog will start to be seen as a dinosaur.

MORE WISHFUL THINKING, although there’s progress. Many reporters still don’t blog, still don’t tweet, and many papers are still on content management systems that inhibit embedded links.

PREDICTION: The Reuters-Politico deal will inspire other networking arrangements whereby one content generator shares content with others, in return for right to place ads on the participating web sites on a revenue-sharing basis.

YES, we’re seeing more sharing of content, with various financial arrangements.

PREDICTION: The Obama administration will launch a White House wiki to help citizens follow the Changes, and in time will add staff blogs, public commenting, and other public interaction.

NOT SO FAR, although a new Open Government Initiative was recently announced by the White House. This grew out of some wiki-like public input earlier in the year.

PREDICTION: The Washington Post will launch a news wiki with pages on current news topics that will be updated with new developments.

YES — kicked off in January, it’s called WhoRunsGov.com.

PREDICTION: The New York Times will launch a sophisticated new Facebook application built around news content. The basic idea will be that the content of the news (and advertising) package you get by being a Times fan on Facebook will be influenced by the interests and social connections you have established on Facebook. There will be discussion of, if not experimentation with, applying a personal CPM based on social connections, which could result in a rewards system for participating individuals.

NO. Although the Times has continued to come out with innovative online experiments, this was not one of them.

PREDICTION: Craigslist will partner with a newspaper consortium in a project to generate and deliver classified advertising. There will be no new revenue in the model, but the goal will be to get more people to go to newspaper web sites to find classified ads. There will be talk of expanding this collaboration to include eBay.

NO. This still seems like a good idea, but probably it should have happened in 2006 and the opportunity has passed.

PREDICTION: Look for some big deals among the social networks. In particular, Twitter will begin to falter as it proves to be unable to identify a clearly attainable revenue stream. By year-end, it will either be acquired or will be seeking to merge or be acquired. The most likely buyer remains Facebook, but interest will come from others as well and Twitter will work hard to generate an auction that produces a high valuation for the company.

NO DEAL, so far. But RIGHT about Twitter beginning to falter and still having no “clearly attainable” revenue stream in sight. Twitter’s unique visitors and site visits, as measured by Compete.com, peaked last summer and have been declining, slowly, ever since. Quantcast agrees. [But note that neither of those traffic stats count people interacting with Twitter via the API, through Twitter apps, or by texting. —Ed.]

PREDICTION: Some innovative new approaches to journalism will emanate from Cedar Rapids, Iowa.

YES, as described in this post and this post. See also the blogs of Steve Buttry and Chuck Peters. The Cedar Rapids Gazette and its affiliated TV station and web site are in the process of reinventing and reconstructing their entire workflow for news gathering and distribution.

PREDICTION: A major motion picture or HBO series featuring a journalism theme (perhaps a blogger involved in saving the world from nefarious schemes) will generate renewed interest in journalism as a career.

RIGHT. Well, I’m not sure if it has generated renewed interest in journalism as a career, but the movie State of Play featured both print reporters and bloggers. And Julie of Julie & Julia was a blogger, as well. [Bit of a reach there, Martin. —Ed.]

[ADDENDUM: I posted about Martin's predictions when he made them and wrote this:

I’d agree with most, although (a) I think there will be at least one other newspaper company bankruptcy, (b) I think Q3/Q4 revenue numbers will be down from 2008, not flat, (c) circ will be down, not stable, (d) newspaper stocks won’t beat the market, (e) the Kindle boom won’t be as big as he thinks for newspapers, and (f) Twitter won’t be in major trouble in [2009] — Facebook is more likely to feel the pinch with its high server-farm costs.

I was right on (a), (b), and (c) and wrong on (d). Gimme half credit for (f), since Twitter is now profitable and Facebook didn’t seem too affected by server expenses. Uncertain on (e), but I’ll eat my hat if “75 percent of [NYT Kindle] subscribers were not previously readers of the print edition, and half of them are under 40.” —Josh]

Photo of fortune-teller postcard by Cheryl Hicks used under a Creative Commons license.

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