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June 27 2013

15:17

The newsonomics of Advance’s advancing strategy and its Achilles’ heel

Another city. Another melange of limited information, confused storytelling, and an unsuccessful attempt to put on a happy face to mask a huge change in newspapering and civic life.

Last week, Oregon’s dominant paper, The Oregonian, followed in the footsteps of other Advance papers and announced it would be delivering to homes only four days a week come fall. It will be greatly slimming down staff, including dozens in the newsrooms, formally going digital-first, reorganizing into two companies, and producing newsstand editions on the days it won’t home deliver. It’s Advance’s Slim-Fast, Phase 2, tweaked after its torturous New Orleans rollout last year (“The newsonomics of Advance’s New Orleans strategy”).

That’s the new Advance playbook, as the company — a top 10 newspaper company by revenue in the U.S. — proceeds with a revolutionary restructuring of the local news business. It’s a play that serves at this point as a contrarian example. Most publishers believe the Newhouse family, owners of the very private Advance, is downsizing its own business, and about to give away the local market dominance in readership and commerce monopoly regional dailies have long had in the United States.

Within Advance, you hear that its strategy isn’t just on plan — it’s ahead of it. How do we put together what’s really happening and figure out what to make of it?

It’s not easy. Working with sources up and down in Advance cities is one way, gathering lots of partial views. While top editors are willing to talk, Advance’s business leaders are mum. That’s just silly: Newspapers have a special responsibility to the public, one that although further tested by Advance’s new strategy, is universal. Newspapers are citizens of their community — leading ones, we’d hope — and clamming up about changes of this significance is contrary to the values of the trade.

Just as curiously, Advance isn’t sharing much with its peers in the industry. If Advance has really developed the new secret sauce, why not share it with other newspaper publishers nationally and globally? After all, they’re not the competition. Yet Advance’s omerta-light DNA is a sideshow here. What we care about is the Advance strategy and what it means to the readers, to the journalists, and to the business of news going forward.

So let’s look at the updated newsonomics of the Advance strategy, Phase 2, as it rolls out in Portland in October, two months after Cleveland’s Plain Dealer takes the same plunge. Let’s look the strategy — which has a fair amount of smarts built into it — and its challenges, pitfalls and, likely, its Achilles’ heel.

Planning for print decline

As a strategy, think shock therapy and you’d be close. For decades, the Advance papers had been the epitome of corporate paternalism. The no-layoff pledge, generous health benefits, and good salaries all said job-for-life. Advance’s separation of its local digital sites (OregonLive.com in Portland, for instance) from the newsroom — literally 10 blocks away and reporting to corporate, not the publisher or editor — greatly hampered a singular reader focus.

As other companies struggled mightily with the digital transition, the huge staffs of the Advance dailies found themselves too often sitting on the sidelines. Individual editors, with great variability, tried to innovate. Overall, though, Advance dailies were falling behind the peers in trying to meet the digital revolution.

After years of waiting, waiting, and waiting, the company is now in a mad rush to change. When it came time to acknowledge basic truths about newspapering, Advance management reached for the hand grenade rather than the scalpel.

Reading the same tea leaves of print decline as their brethren, they decided that blowing up the enterprise (reassembling it in two pieces) and downsizing their operations, their home delivery, and their community service was the answer.

Their analysis, curiously, parallels that of iconoclast John Paton, the mastermind behind Digital First Media, as Journal Register and now MediaNews properties experience their own more evolutionary revolution. The in-common belief: As print ad revenues show accelerated decline, companies must greatly reduce their legacy costs and concentrate on the digital future. In fact, Paton has somewhat endorsed Advance’s efforts.

While the experiments began in Michigan in 2009, it was the the New Orleans Times-Picayune downsizing that riveted public and industry attention. In fact, 60 Minutes, which had sought the one moment for years to finally talk about the decline of the U.S. press, used the Times-Picayune’s réduction des effectifs as Exhibit A.

Everyone acknowledges that Advance publicly handled the New Orleans changeover as poorly as it could. Marketing. Messaging. Engagement. All subpar.

The T-P seemed to be at odds with the community that went into the streets to demand its very pulp-based existence. The community’s clamor for a seven-day paper went unheeded — until Monday, when the street edition of The Times-Picayune hit pavement, in 60 glorious tab pages. The New Orleans paper had borrowed a page from its northern cousin, the Post-Standard, which cut back home delivery Feb. 1, publishing a print edition even on days that it no longer offered home delivery. The changeover, Phase 2.

Now The Plain Dealer, which just announced a set of layoffs last week, and The Oregonian are following the same five-point model:

  • Massively cut expenses: At The Oregonian, about a sixth of the 650 staffers will lose their jobs. At Syracuse, the number was closer to 30 percent of about 400. Overall, I’ve extrapolated that Advance is aiming for an about 25 percent expense reduction (mainly in staff, printing, and distribution); I’ve been told that is close to the mark.
  • Pixelate the remaining ink-stained wretches: As Oregonian editor Peter Bhatia made (solely, he says) the layoff decisions that eliminated the jobs of about four dozen journalist staffers — about a quarter of the newsroom — he’s been quite clear that digital skills played a part in his decision-making. “How well [people] will work in the new world order” is key, he told me this week. (For the depth of the tumult within The Oregonian, check out Willamette Week’s takeout here.)
  • Separate out the old business from the new: In all its restructured cities, two separate companies have emerged to replace the old print. In Portland, it’s the Oregonian Media Group (yes, the already much-satirized OMG) that will now employ the content and sales people. As I’ve argued over the years, it is content and sales, quite simply, that are the foundation of the new business. The Advance strategy recognizes that and takes it to an operational level. The other new company Advance Central Services Oregon houses “support” of OMG. So it’s mainly made up of the print-oriented parts of the business — production, printing and distribution — along with HR, finance, and technology.
  • Provide seven-day print, but not home delivery: In New Orleans, and at Advance’s two Alabama dailies, the end of seven-day print was cold-turkey. One day: seven days a week of print; after the changeover, only three days. Then, Advance learned something from the Syracuse model. Pushed to continue (at least for a while) the semblance of seven-day print, the Post-Standard found that a by-product of daily print — the durable, seemingly vestigial e-edition — achieved a market purpose. Today in Syracuse, with a daily circulation of about 75,000, about one in ten readers downloads that daily e-edition. E-editions have been around for 15 years; essentially, they’re replicas of the final edition of the printed paper, ones that can be updated during the next day, but often aren’t.

    Why would anyone want to read a static copy of yesterday’s news? Think older readers. They own computers, but are more comfortable with the format of the newspaper they’ve read for decades. This is an interim market, to be sure, but serving it is a subscriber retention must. To publish an e-edition, you need a print edition. If, like the Oregonian, you’re making substantial revenue printing other publishers’ papers, adding a short run of single-copy papers can be done very cheaply. Hence, single copy editions.

    In Portland, there will be four days of home delivery. The Wednesday, Friday, and Sunday editions are clearly full papers. The content emphasis of a Saturday paper — first called a “bonus” in its announcement — is still taking shape, says Bhatia. Consistent with Advance’s marketing and messaging faux pas, it has also named its daily e-edition, “My Digital O,” to the guffaws of many. Talk about service journalism.

    This single-copy story may get more interesting. Whereas Syracuse has stuck to a 16-page edition, with a single ad — to facilitate that e-edition — New Orleans’ TP Street debuted with 60 pages and a good run of ads, adding three to its print team to produce it. Both cities’ papers are delivered to hundreds of newsstands. An ironic question: What would Advance have to charge to restart seven-day home delivery, coming full-circle in its digital-first, cost-cutting exercise?

  • Keep digital access free — at least for now: Most puzzling in Advance’s strategy is its reliance on advertising, which continues to go south for the whole industry — including Advance. As more than 500 dailies in the U.S. move to charging for digital access, including all of Advance’s peer chains, Advance eschews paywalls. Why? Well, given the tight lips, we’re not sure.

    The lack of an All-Access model, I believe, looks like the Achilles heel of the Advance strategy, even if that strategy works in other ways. Why? Advance depends and will depend much more on ad revenue than its peers. Many of those peers believe that reader revenue may reach 50 percent of total revenue within two to five years. They believe that print advertising’s fade looks near-irreversible. Further, they’ve learned that the sharp growth curve upward in digital ad revenue has hit a wall. Some struggle for growth at all; most are in single-digits, well below the 15 percent growth of digital ad revenue overall. Sure, The Oregonian, The Post-Standard, or The Harrisburg Patriot-News could institute a paywall. It would likely, though, yield much less than it could have.

    Getting the order of things right on a paywall is important: Much better to improve the seven-day print product, add usable mobile apps, and then price up, even if you have a mind to cut home delivery. That way, you’ve established a new, higher price — and the monetary value of digital. Instead, Advance maintains what now seems like a nonsensical approach to paid print and free digital, and that bodes ill for holding on to current print subscribers, much less convincing many people to pay much for all-access down the road.

    If other publishers believes half of their 2016 revenue will come from digitally oriented readers, how will Advance newspapers deal with the lack of that revenue? It will have two major choices: find currently unknown large sources of revenue — or keep cutting expenses, including newsroom staff.

Stand back from this audacious strategy — with all its staff-cutting pain, its inducing of reader pain, and the promise of its digital-first, future-is-now thinking — and it’s hard to get past the point of its missing digital reader revenue strategy.

That said, Advance’s more immediate bet is that it can radically reduce its costs and maintain its dominating presence in local news and commerce.

It’s too early to assess the local advertising challenge. It’s a hyper-competitive marketplace, and Advance seems to succeeded in corralling seven-day advertisers into three days. (I’d projected it would hold on to 85 percent of its print advertising revenue in New Orleans; the number appears to be closer to 90 percent.) It still faces, though, a fast-declining (high single digits loss in metro markets) print market. Further, its ability innovate fast enough in the digital ad marketplace is unproven.

As one observer put it to me today, does the new Oregonian plan to make its future on display banner ads? I’m sure execs would answer that no. But its work in newer forms of digital advertising, from content marketing to marketing services to a major video presence, all seem relatively nascent. Is it ready for prime time as a digital-heavy company? Not yet, certainly, and the clock shows two more big Advance dailies going digital-first within 90 days or so. As it fights for digital ad revenue, it faces many competitors from Google and Facebook nationally to lots of local players.

New competition

In news impact, so far, there is mixed evidence.

Observers in both New Orleans and Syracuse tell me it is a crazy-quilt. Yes, with time-stamping on the website, more stories and posts are being pumped out of the newsroom.

The new operations break their share of news, and some second-day stories do a great job of summing up major news events. Sometimes, though — more than they used to — both papers drop the ball on breaking news. Other news players, from NewsChannel 9 WSYR in Syracuse to The Lens and the just-launched Baton Rouge Advocate’s greatly energized New Orleans play (“The New Orleans Advocate”), are competing more consistently. The Advance papers are still the biggest dog in town, but the dog park is now more diverse. Come fall, The Plain Dealer and The Oregonian will wake up to find their traditional alpha status more challenged day by day.

Times-Picayune editor Jim Amoss believes he is already seeing the dividends from the wrenching change the newsroom has seen. His staff is thinking news, not the next day’s paper.

“We’ve had eight months of having the news gatherers and editors separate, physically separate, from the print team and not having to think about the print product. The new rhythms have been inculcated in everybody,” says Amoss. “The total number of people in news went from 181 pre-change to 160 now. We’re still in the process of filling some of those positions. That total includes 91 reporters (including metro area news, sports, entertainment, Baton Rouge, and Washington correspondent). The number of reporters pre-change was roughly the same.”

Digital audience has grown, as we would expect given the print stoppage. Overall pageviews are up 15 percent, and “eyes on content” — meaning views of articles, videos, and photos across the site — are up 35 percent. A significant part of that is huge photo growth, up 150 percent year over year; photos represent 16 percent of the site’s traffic.

With the changeover, editors and ad directors have more direction of their own digital presentations and business. Advance Digital, to whom the separate sites used to report, still provides digital product development, sales strategy, news and information content product development, and centralized technology for the digital products.

Oregonian editor Peter Bhatia echoed Amoss’ newsgathering point to me this week: The Oregonian newsroom today has about 90 reporters and will have about the same in the fall. The newsroom cutting has fallen disproportionately in middle editor and copy editing ranks in all the Advance cities, a strategy well-employed by others over, including the Star Tribune, over the past several years in making cuts.

The big questions, of course, are who those reporters are, how much experience they have and what beats they cover. In any newsroom restructuring, newsroom managers can use the opportunity to make changes they long wanted to make, but found inconvenient. In this great shuffle, some areas, like environmental beat experience, have been wiped out at the Oregonian.

Further digital skills may have trumped journalistic skills in such Sophie’s Choice decision-making. Finally, The Oregonian — as keenly aware of its newsroom dollar budget as of its actual headcount — cut many high-salaried people, as well as some younger staffers, weighing, I’m sure, one more factor: exposure to age discrimination suits, as any employer in such a situation would do.

All of that change means The Oregonian, come fall, will find new areas in which to excel — and will leave its flanks more open to competition. In Portland, there’s a lot of it. Pulitzer Prize-winning Willamette Week provides city-smart, well-established news coverage. Oregon Public Broadcasting has been adding coverage area after coverage area. Add in a strong TV news presence and several niche print players, and The Oregonian may find what its sister papers in New Orleans and Syracuse have found: breaking news and analysis becomes more of a multi-horse race.

It’s not just news-gathering and writing that matters on the web, of course. A digital-first news operation should be the go-to news aggregator for the region; The Oregonian isn’t. It should have the best tablet and smartphone apps — news and entertainment — and its offerings so far are nothing special, open to competition. It could leverage community, user-generated content far better, borrowing a page from its Northwest neighbor, The Seattle Times, but hasn’t moved in that direction.

Broadly, let’s say the strategy — at least parts of it — may be right. Then the question becomes: Is the Oregonian ready to execute on it?

There’s little doubt that most of Advance’s employees — whose work will make or break the strategy — have little confidence in the “the plan.” It’s paternalism gone awry, and the sense of abandonment is clear. The lurch in strategy is offering little comfort, as Advance and its publisher largely keep the staff in the dark about how the new business is going to create successful products and long-term employment.

What Advance has done is buy some time. In radically cutting its cost base, it may have given itself a couple of extra years to get its new strategy right. It will need that time, at least, to work the prodigious to-do list it has handed itself.

Photo by Josh Bancroft used under a Creative Commons license.

April 09 2013

12:25

September 05 2012

18:04

Journal Register Co. declares bankruptcy…again: Is this the industry’s first real reboot?

It was just three years ago that the Journal Register Co. filed for bankruptcy, its collection of small local newspapers hit hard by the economic crisis and the secular decline of the newspaper industry.

But it came out of bankruptcy in only six months, and the changes started coming quickly: bringing in John Paton as CEO, committing to growing digital revenue, hiring away top talent, experimenting with open-source software and open-to-the-community newsrooms…it’s been hard to keep up with its one-new-initiative-a-week pace. They’ve been on the move, in a way that frankly hasn’t been the norm in the American newspaper business.

Through it all, Paton emerged as the industry’s most vocal cheerleader for a digital-first culture — and that was even before “digital first” went from a mantra to the name of a new parent company that would also run the much larger MediaNews chain of newspapers. JRC reported digital revenue growth as strong or stronger than their peers and seemed to be making good progress towards a company-wide culture change.

So today, JRC announced…it was declaring bankruptcy again. Here’s Paton:

The Company exited the 2009 restructuring with approximately $225 million in debt and with a legacy cost structure, which includes leases, defined benefit pensions and other liabilities that are now unsustainable and threaten the Company’s efforts for a successful digital transformation.

From 2009 through 2011, digital revenue grew 235% and digital audience more than doubled at Journal Register Company. So far this year, digital revenue is up 32.5%. Expenses by year’s end will be down more than 9.7% compared to 2009.

At the same time, as total expenses were down overall, the Company has invested heavily in digital with digital expenses up 151% since 2009. Journal Register Company has and will continue to invest in the future.

Journal Register expects to emerge from bankruptcy in around 90 days; operations will continue uninterrupted during the process.

Since JRC is as watched as any newspaper company outside The New York Times Co., here are three quick thoughts on today’s move, based on Paton’s post, the company’s press release, and our previous reporting.

I. Room for further consolidation?

JRC is owned by Alden Global Capital, a hedge fund that has investments across much of the publicly traded U.S. newspaper industry. Those investments, combined with its merger-without-merging with MediaNews last year, has led some, like our own Martin Langeveld, to posit that Alden is pushing for a major consolidation of the newspaper industry.

It’s easy to imagine how some of JRC’s recent moves — like its outsourcing of national business news and its chain-wide aggregation project Project Thunderdome — could scale well across a broader swath of the industry.

JRC will apparently enter bankruptcy with a buyer at the ready — something called 21st CMH Acquisition Co., “an affiliate of funds managed by Alden Global Capital LLC,” which has submitted a signed stalking horse bid. So it appears that, in the end, Alden will still be in control, with Paton continuing as CEO.

(I’m not sure how much to read into the creation of something called an acquisition company — is it just to acquire JRC, or is it a staging area for further acquisitions and consolidation, a sort of decades-later echo to what Gannett did buying up family-owned papers? Does 21st CMH stand for “21st Century Media Holdings”? Just a guess.)

Newspaper valuations have for the most part stopped plummeting — if only because there’s only so far for a still-profit-making company to fall. (Year-to-date, some are actually up in stock price: The New York Times Co. is up 21.5 percent, Gannett’s 13.5 percent.) But it’s reasonable to think there are still any number of companies that would be happy to find an exit to scale. By re-buying, in effect, a slimmed-down JRC, Alden seems to be showing it’s still interested in that model.

(Although it’s more than a little crappy that JRC’s employee FAQ says decisions about everyone’s job status will be “made by the ultimate purchaser” — when that ultimate purchaser is apparently just another arm of the current owner. It’s theoretically possible that, at a bankruptcy auction, someone could outbid Alden for JRC, but it seems highly unlikely; Alden’s one of the few folks wanting to put money into newspapers rather than pull it out.)

II. A second shot at shaving debt

It’s worth noting that Paton didn’t become CEO until after the last bankruptcy was concluded. (Paton joined JRC’s board in August 2009 when the company came out of bankruptcy; he became CEO in early 2010.) Paton is arguing now that the terms of the previous bankruptcy were built on higher hopes for print than has since proven justified — that the company didn’t shave enough off its debt and contractual obligations to hack it in today’s business.

We’re on the right track with digital revenue, he’s saying, but we’re still handcuffed by fiscal decisions made from a print-is-healthy mindset:

All of the digital initiatives and expense efforts are consistent with the Company’s Digital First strategy and while the Journal Register Company cannot afford to halt its investments in its digital future it can now no longer afford the legacy obligations incurred in the past.

Many of those obligations, such as leases, were entered into in the past when revenues, at their peak, were nearly twice as big as they are today and are no longer sustainable. Revenues in 2005 were about two times bigger than projected 2012 revenues. Defined Benefit Pension underfunding liabilities have grown 52% since 2009.

Timing is, truly, everything. The newspaper companies that made terrible-in-hindsight decisions to bet on print at peak valuations — McClatchy buying Knight Ridder, for instance — were stuck with crippling debt obligations. But if you just stuck around long enough, that major metro that cost $562 million in 2006 could be had for $55 million in 2012. Alden, as a fund, focuses on distressed assets, those available at market values below their true value. (You can see why they’d be interested in newspapers.)

JRC seems to suffer from an analogous problem: It went through its bankruptcy at a time when some executives still thought the downturn was cyclical and not permanent. That left it with obligations that likely can’t be sustainable in the primarily-digital-revenue model Paton is building toward. One imagines that Paton won’t make that same mistake this go-round. (Sister company MediaNews already had its strategic, debt-trimming bankruptcy.)

That’s little comfort if you’re owed a share of those pension benefits now deemed “no longer sustainable,” of course. But the reality is that most newspaper companies are still not close to a footing that’s sustainable for the long term. Anyone who thought the cuts were over is going to be disappointed for, at a minimum, several more years.

III. It’s put-up-or-shut-up time

Paton’s been the industry’s most effective evangelist for a digital future. (It helps that he took over a newspaper chain not known for quality or tradition beforehand; he has a free hand that Arthur Sulzberger or Don Graham don’t to do deep institutional surgery.) JRC and Digital First have been great at putting forward an innovative face, from its heavy-hitter advisory board to small demonstration projects (Ben Franklin Project) and more substantial rethinkings of workflows (Project Thunderdome).

And they’ve done so in a way that is both open (they’re happy to tell you about the amazing things they’re doing) and closed (not reporting financial results, as publicly traded companies must).

But it’s been harder to be certain how Paton’s optimism has translated into results. Digital revenues are growing, but from an unspectacular base. Many of the company’s initiatives seem, while interesting, unlikely to move the revenue needle much. Print revenues are a problem, just as they are at its peers. Today’s release illustrates that JRC hasn’t yet found the magic formula.

But could Paton’s plan be a model for the local and regional newspaper industry as a whole, as some have dearly hoped?

Paton now will have his chance to prove it. In around 90 days, he’ll have had his chance to shed the costs he wants to shed. No longer will “we were built for print” be a good excuse; if two bankruptcies can’t clear out all those cobwebs, I’m not sure what could. “Digital first” will move from a slogan to a corporate name to a foundation of the company’s business structure.

The newspaper industry’s problem today is not that its leaders don’t know how to make money in media. Lots and lots of money still flows through newspaper offices every day. It’s that they can no longer make that money at the scale they could 10 years ago — but their cost structures are still tied to that old scale. That’s why the past half-decade has been a seemingly endless string of layoffs and cutbacks, shaving dollars and people to keep up with revenue declines, while still being stuck in a fundamentally print-driven structure.

Meanwhile, as newspapers were busy writing press releases about layoffs, their nimble online-native competitors have been able to start from a blank sheet of paper and build for a digital scale of revenue.

This bankruptcy will allow JRC to have get the closest thing the newspaper business has seen to a true reboot.

Now all Paton has to do is deliver.

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.

July 15 2011

20:14

Will “Digital First” bring home the bacon? - John Paton's big bet

Alden Global Capital acquired Journals Register Company recently. But what exactly is Journal Register? The following little piece will help.

Columbia Journalism Review :: "We’re no good at this,” John Paton says, sitting in a midtown Manhattan conference room on a gray, rainy spring day. “We” is the news business, and “this” is designing a viable future for it. “We have to figure it out.” He leans forward in his chair and adjusts his blue Hermès tie. “If this business model’s not fixed, the amount of American daily newspapers that won’t be here in five years will stagger you. They won’t make it.

The reporters and editors at Journal Register Company—a chain of eighteen daily newspapers and 176 non-daily newspapers, magazines, and websites in small markets throughout the Midwest and Northeast—should know. - here's why.

Continue to read Lauren Kirchner, www.cjr.org

April 28 2011

15:00

The newsonomics of story cost accounting

Editor’s Note: Each week, Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of news for the Lab.

What’s a story worth?

Last week, I looked at a single investigative story (California Watch’s “On Shaky Ground“), and we saw the tab of half a million dollars for a 20-month-long tale of sleuthing. What about that ordinary daily story, quotidian journalism as we know it — the grinding out of less eventful articles, the kinds of things that keep us informed but don’t offer epiphanies? How much does it cost, and how much does that matter to the future of the news business?

It’s not an academic question. This week, McClatchy added to the long line of down financial reports, telling us that it was down 11 percent, year over year, in ad revenues and 9 percent in overall revenues, for the first quarter. That announcement follows on from similar reports from The New York Times Co., especially its regional properties, and Gannett. The U.S. news industry is extending its unwanted record: 21 straight quarters of revenue down quarter to quarter. That’s a lost half-decade.

Add up those down revenues and the need to maintain profitability — for public or private owners — and there’s but a single answer: cut costs. Certainly, the industry has cut out major costs in the last three years, but cost-cutting is slowing, if you look at the company reports. The New York Times’ costs were flat in the first quarter, Gannett’s down 0.9 percent and McClatchy’s down 6.5 percent. That’s in large part due to rising newsprint prices, making it harder to get costs more appreciably down. With those continuing revenue declines, though, expect more cost-cutting. It’s a given.

So, let’s ask about that daily story. What’s it cost?

Of course, we’ve never looked at it that way. We’ve hired people, told them to write, at times monitoring their production, but rarely taking a look at the cost of what they’re producing. Given the pressures of the day, given the Demand Media model and given the predilection to start counting whatever can be counted (“The newsonomics of WaPo’s reader dashboard 1.0“), story cost accounting is inevitable.

In fact, it’s already started. Let’s take a brief look at what is bound to become a bigger topic in the months ahead, the newsonomics of a single story.

Clark Gilbert, Salt Lake’s dean of disruption, is getting into the nitty-gritty of retooling editorial content production, top to bottom, and that includes getting a handle on differing costs of content. Gilbert is a key part of the team that is transforming the media properties of the daily Deseret News and leading local TV and radio stations KSL, all owned by the Church of Jesus Christ of Latter-day Saints, better known as the Mormon Church. Last August, Gilbert announced one of the most major restructurings in journalism, making major staff cuts — a prelude to the re-architecting now being done. That restructuring includes the launching of Deseret Connect, an initiative to round up pro-am user-generated content from around Utah, and around the globe.

The new CEO of Deseret Media will soon be able to tell you exactly how much articles cost him. He’ll specify the differing price points of local, proprietary content, of AP content, of a blog post written halfway around the world, and lots more.

For now, he draws upon his experience as a Harvard Business School prof and strategic consultant. From that career work, he estimates the following, general cost metrics for the content offered by news companies in print and online:

  • $250-$300 per staff-written story;
  • $100 per stringer story;
  • $25 per Associated Press story;
  • 5-12 for “remote” stories, largely written by the emerging class of bloggers

“You better know your cost per story,” he says. “That’s the kind of rigor you need.”

As focused as he is on building digital ad revenues, he makes the point directly: “You have to work both sides [revenue building, cost reduction] of this.”

“It doesn’t mean I’m not willing to pay for content,” says Gilbert. “I’m paying a boatload for stories that are a commitment to my audience.” It’s a straightforward strategy: If you are going to pay a boatload for some stuff, you better pay a lot less for other stuff.

Still, those numbers are bound to chill many a journalist. You think posting reader metrics in newsrooms is still a point of contention — wait ’til story cost accounting becomes mainstream. And it will. It’s just simple manufacturing, and like it or not, that’s what the news business has long been. Manufacturing, with lots (New York Times, Wall Street Journal) of quality added or with (insert your favorite rag here) just enough to draw ads. News creation used to be a sunk cost, with headcount a small and usually polite battle between editors and publishers. That was in stable times. In these times, knowing business drivers, down to the dollar, is going to be part of the new world.

The metrics-driven thinking may have been first demonstrated by Demand Media, with its $10, $25, and $50 stories (“The newsonomics of content arbitrage“), but once opened, that Pandora’s Box won’t be closed.

Clark Gilbert is early in the game, but others are taking a parallel cost-conscious approach.

John Paton, CEO of the new, continuous-revolution Journal Register Company, breaks it down differently, but is highly cost-aware.

“We’re not looking to save money on local, professional content,” Paton told me this week. Notice the emphasis on “local” and “professional.” Like many others, Journal Register is beginning to round up hundreds of local bloggers (as Patch joins that club), who will be largely unpaid.

What Paton emphasizes, though, in his cost-of-content analysis, is the 60 percent of JRC’s content — across print and digital — that is national. He’s done a careful counting of what’s in his products, and says that while 40 percent is local (above average for dailies, he says), 60 percent is national. So Project Thunderdome, newly headed by D.C. veteran Jim Brady, has put a bullseye on that content. The notion: Lower the cost, and where possible, raise the quality of national content. That thinking is behind JRC’s recent deal with TheStreet.com, which is now providing its national business news. It’s a revenue share, with JRC gaining national revenues. In addition, says Paton, it has increased its local business content-related revenue, given both the new inventory of ad impressions made possible and the quality of TheStreet.com content. That’s a model Paton intends to extend to other non-local content.

Further, he’s taken dead aim at the cost of getting content through the mechanics of a newsroom. Saying that about half of U.S. editorial staffs are engaged in producing content for publication — not creating it — he’s focused on changing that ratio. Instead of five of ten journalists engaged in production, he’s aiming for two of ten, to be accomplished through centralization and templating of the production functions. “Then, two or three more of the ten can create content,” he says.

Both plans will, in effect, reduce the cost of content overall. And, as with Clark Gilbert’s philosophy, the intent is to invest in unique, local, proprietary content, even though it’s far more expensive.

Let’s consider one more take on story cost accounting. As CEO of Huffington Post, Betsy Morgan pioneered the unique brand of higher-end, often personality-driven aggregation that distinguished the site’s offerings. Out of that experience, and in her new role as CEO of Glenn Beck’s The Blaze site, she’s evolved her own metrics. They divide nicely into thirds.

  • One-third original, professional content, largely reported journalism.
  • One-third voice and opinion.
  • One-third aggregation, or to use the updated term, “curation,” as editors aggregate, honing off-site story selection given their understanding of their unique audiences.

Morgan tells me that “the thirds” form both an audience strategy and a cost strategy. Clearly, as the venture-backed HuffPo began its life, it watched its dollars very carefully. That meant that curation wasn’t just an audience-pleasing idea, of course, but a cost-saving one, as bloggers (at least then!) willingly forked over content in exchange for play and recognition, not money.

Going forward, the “thirds strategy” offers another twist on Clark Gilbert’s and John Paton’s (and Arianna Huffington’s) strategies. Obviously, you don’t pay for the curation part, other than for the technologies or smaller staff to handle it. You can pay for some of the voice and opinion, but there’s a hell of a lot of it you can get for free or cheap. And, once again, you concentrate your costs of content on the high end — original, professional, largely reported journalism.

The new AOL/HuffPo’s been doing that with pro hire after pro hire. Morgan herself is doing it, as recently as this week with the hiring of former Denver Post columnist David Harsanyi.

Add it all up, and it’s a new cost structure for the craft of journalism. As with all metrics, the good or bad they inspire depends on who is using them. What’s clear is that those news outfits — local, national or global — which only concentrate on paying staff, like in the old days, will find themselves out-strategized by those who take the blended approach.

Is it all about thirds? No, but it’s a good place to start.

I think of it as a pyramid. Original content — content that distinguishes news brands — is at the top, and, yes, is the most costly. At the bottom is clearly aggregation, because as Morgan points out, “[readers] can’t easily find and read what’s of interest to them.” Then, there’s the middle third or so. For regional news companies, that includes hyperlocal bloggers and subject-specific (transportation, public health, sports) experts; for national sites, it’s non-staff “contributors” of differing skills and costs. That third is quite open to innovation.

It’s a great whiteboard exercise, at least, for anyone in the news business. Pass the marker, please, and work the pyramid.

March 31 2011

14:00

The newsonomics of oblivion

So, how long do newspapers have?

Two years ago, that question was on the lips of many as newspapers cut back deeply — in staff, in number of pages, in the very size of the page, and in selling their very headquarters and flagship buildings — in the depth of Deep Recession. We hear it less now. In part, that’s because many publishers and editors decided writing their own obituaries — talking about the sorry state of their enterprises and detailing the cutbacks for the public — wasn’t smart. In part, like any tired story, we’ve moved on and now occupy ourselves with digital reader payment strategems and with the discussions of how tablets and smartphones are, and aren’t, forever changing journalism.

Yet the question looms in the dark corners, in private conversations, and occasionally bursts into public view: “How long do newspapers have?”

Saturday, in Dallas, I moderated an on-stage conversation between two immoderate forces in daily journalism: The Deseret NewsClark Gilbert, aka “the baby-faced dean of disruption,” as his alternative rival, the Salt Lake City Weekly, has called him; and John Paton, the Digital First, bomb-throwing CEO of the post-bankrupt (and up from cardboard desks and leaky newsroom pipes) Journal Register Company, not long ago the bottom feeder of the industry.

Paton had tossed aside his usual JRC change presentation. Instead, he went with 10 tweets, each, in turn, well-retweeted.

The first and second: “The newspaper model is broken & can’t be fixed” and “Newspapers will disappear in less than 10 years unless their biz model is changed now.”

His point: Piecemeal change is a dead-end, given the converging downward spirals of the business. Only massive, digital-first strategies and re-organizations that scrap old structures, budgets, job descriptions — and, massively, costs — have any hope of porting today’s newspaper companies to that other side of a mainly digital news age.

He’s right, of course. No, not necessarily about the 10-year prediction. It could be five or fifteen, but that makes little difference to the notion. Today’s daily newspaper companies have little chance of surviving in anything resembling tomorrow’s form very far in the future.

In fact, as I talk, privately, to those running the companies, they, too, are largely in agreement. While they talk little publicly these days, the fact remains: You can’t find anyone who says he yet has a proven, sustainable business model for moving forward.

That’s the reason we’re seeing such significant embrace of digital reader walls and fences. The New York Times, the Dallas Morning News, and the Augusta Chronicle all share a goal: get off the road to oblivion and somehow find a new route, a life-saving detour, in uncharted territory. Fear of oblivion is becoming, finally and for more publishers, a motivator for more systematic change. If it works, a new digital reader revenue line could be one important building block of a stable new business model, though it won’t be enough by itself.

Oblivion like the once-famous “revolution” in Gil Scott-Heron’s song won’t be advertised. No one’s going to send out a press release or hold a news conference to say, “It’s over.” Newspapers have numerous fellow travelers among legacy media on the road. As we heard this week, CBS News’ ratings have been in decline since 1992. Somehow we will finally pull the plug on that format, but in the meantime, it’s a long winding-down, marked by lesser and lesser capacity to both do the work of journalism and to see its impacts.

Let’s look at several data points as we explore this notion of the newsonomics of oblivion.

How can we measure the threat of disappearance, of slipping away into history?

Let’s start with this number: 20 quarters. It has been 20 quarters since the U.S. newspaper industry experienced a quarter’s performance that was better than that same quarter a year earlier. It was way back in the second quarter of 2006 that the industry last experienced growth.

Things just keep getting worse, in deep recession, in lesser recession, in timid recovery, and now in a wider economic recovery that has lifted into positive (year-over-year, actual dollar growth) territory all other media that depend on advertising for much of their income. Broadcast and cable TV, radio and magazines have all regained a positive revenue path, as online media’s growth has shot out in the growth lead, the recession itself accelerating the movement of dollars to it.

Gannett’s recent public report, saying publishing division revenues will be down between 6 and 7 percent for the quarter now concluding, is indicative of the continuing deep malaise.

While first quarter industry numbers won’t be publicly reported ’til mid-April, look for them to be down 6 to 10 percent in ad revenue. Print advertising just isn’t recovering. Even good growth rates of 15 to 30 percent in digital — helped by more “online-only,” and fewer bundled-with-print, ad products — can’t come close to making up for print decline. “We’re now growing digital at almost 30 percent,” one CEO recently told me. “But we’d have to grow it at 80 percent or more to make up the [print] losses.”

The numbers suggest that only more cost-cutting retains profitability, which is running 5 to 10 percent currently, the black maintained only by the ongoing staff and other reductions of the past several years. (Witness the recent cuts at Gannett and McClatchy.)

The story is the same throughout the industry, with similar trends in Japan, continental Europe, and the UK; only one of London’s half-dozen quality dailies is even turning a profit these days.

We can look at the models built by Axel Springer. Not well known to Americans, the German publisher is the largest newspaper publisher in Europe, with huge reach overall in 36 countries, including 170 newspapers and magazines, over 60 online offerings for different target groups, and TV and radio properties. In print, it’s the leader in Germany, in both ad revenue and market reach, touching 53 percent of the German population annually. It says it is second only to innovator Schibsted in digital (as percentage of total) revenues.

And yet: Its own forecast future is highly problematic.

By 2020, those extended lines paint a blurry picture, says Gregor Waller, who has just left Axel Springer as vice president for strategy and innovation to start a new digital venture. Waller’s presentation at a recent World Association of Newspapers/IFRA conference is among the best I’ve seen among news publishers. It looks honestly at what’s happening now — and what’s likely to happen — and draws logical, if heart-stopping, conclusions.

Citing the familiar trends of increased advertiser choice, mobile reader migration, the social web revolution, and print decline, Waller’s “conservative” projection forecasts that, by 2020:

  • Print circulation revenue will drop by 50 percent;
  • Classifieds revenue will drop by 90 percent;
  • Display revenue will drop by 30 percent;
  • With online ad revenue, growing at a compounded maximum 11 percent rate, there will be “no way to close the revenue gap with online advertising.”

All of which results in a “huge revenue gap.”

Waller’s conclusion: “Digital advertising will play an important role, but without paid content, publishing houses with a big editorial infrastructure for daily quality news will not survive.”

Which is another way to describe oblivion for the industry as we now know it.

Axel Springer is aggressively testing paid metered models at its Berliner Morgenpost and Hamburger Abendblatt, paralleling The New York Times’ major move this week, and that of more than two dozen U.S. dailies — which have, or soon will, paid schemes.

Waller would be the first to tell you that digital reader revenue isn’t the panacea, but one important piece to creating a sustainable new business model.

John Paton will tell you that digital reader revenue is a distraction, and that the radical restructuring of newspaper companies is their own possibility of finding that future.

They’re both right.

In 2011, it’s a Rubik’s Cube that can’t be solved, with one of Hollywood’s looming, time-ticking-down deadlines. A big twist here, a little one there, and then lots more, we can only hope, will provide a solution. We can be agnostic as to whether that model comes out of the legacy companies, out of cable and broadcast, out of public media, out of for-profit start-ups, or, likely, some combination of those. But we need solutions that provide stable funding for, as Waller puts it, “big editorial infrastructure for daily quality news.”

The threat of oblivion should be a powerful motivator, and we now see — finally — after a decade of decline, its specter moving us away from incremental, “experimental” tests to a fundamental restructuring of the business of news.

Image by Thomas Hawk used under a Creative Commons license.

March 29 2011

20:00

What’s Project Thunderdome, you ask? Inside Jim Brady’s new job at Journal Register Company

So Jim Brady, formerly of AOL, washingtonpost.com, and TBD, is now of the Journal Register Company. That’s big news — and not only because it had been an open question where Brady would land after he left TBD in November. As John Paton, JRC’s CEO, put it in a release announcing the news: “The debate of bloggers vs. journalists or citizen journalists vs. professionals is now over. The new business models of news demand we understand and incorporate both.”

Brady “will immediately be responsible for Project Thunderdome,” the release notes, which is an initiative that is — besides being, obviously, one of the most delightfully named projects in the news innovation world — “Journal Register Company’s plan for engaging audience and creating content across all platforms and geographies.”

But what is Thunderdome, exactly? I talked to Brady and Jon Cooper, JRC’s vice president for content, to learn more.

Essentially, they told me, Thunderdome is an attempt to take Journal Register’s current collective of media properties — community newspapers joined at the top by a corporate brand — into an interwoven network. While the project’s ultimately about content (both improving its quality and expanding it), it’s also about production practices: It’s trying, in particular, to create uniform standards across the organization when it comes to content management. Ultimately, Thunderdome will mean a redesign for JRC’s digital platform as well as its print platform, giving JRC’s papers — in print and especially (per JRC’s “digital first, print last” ethos) online — a standard look and feel.

Essentially, Journal Register is “building a news system,” Brady puts it, “as opposed to trying to retrofit one that came out of a different time.”

On the one hand, Thunderdome is about systematization and centralization — and the production-side efficiencies that come from them. “Right now, we operate anywhere from 6 to 8 [CMSes], depending on who you talk to,” Cooper notes — and the reason that number varies is that “we have places that don’t actually have a CMS.”

Those CMS-less properties — gird yourselves, techies — use a Windows folder structure to manage their content. Imagine erasing a coworker’s content, Cooper notes, “because you happen to name your story ‘Fire,’ and I had named my story ‘Fire,’ and I copy over yours.”

So that’s one side of it. But Thunderdome is also about the categorization of content. Much of the efficiency JRC hopes will be gained from the new system will come from the bifurcation of local content and what it calls “common” content — in other words, from distinguishing between information that requires feet-on-the-street reporting and information can be provided by wire services or other more centralized sources. It’s the classic distinction between wire content and original, taken to the next level. So take, for example, content like stocks, weather, comics — things that a journalist might not define as journalism in the strictest sense, but which readers want as part of their news experience. Journal Register, across its 18 daily papers, does over 50,000 of those pages a year, Cooper told me, creating different products for different locations. Sometimes that’s necessary, of course (the weather in Connecticut being different from the weather in Michigan); often, though, it’s simply redundant — a waste of time and resources.

Thunderdome aims to establish a 40/60 — or even 50/50 — ratio of local content to common content. “JRC is a fairly large organization,” Cooper notes, “so we have a decent amount of power that we put behind a project like this.” As Brady puts it, the system will allow the papers “to spend their actual staff time covering local news and embedding themselves in the local community — which they have to do to make themselves successful.”

A big part of Brady’s job at JRC will be to figure out the specifics of that kind of production-side streamlining, determining, for example, content partners — JRC, yesterday, announced a financial-news-content deal with The Street — and staffing the Thunderdome effort with vertical content specialists. Another part of it will be figuring out the audience engagement side of the equation — to put to use the knowledge Brady gained at TBD. “That’s key to us,” Cooper says — “key to Thunderdome, key to our brand expansion, key to our current brands.” Brady’s work won’t just be about “providing leadership to our journalists,” he notes; it’ll also be about “working with our communities — our physical, geographic communities, but also our digital communities.”

Which all sounds eminently reasonable and, well, not Thunderous. So, then: What’s with that name? JRC’s CEO, John Paton, named the project, Cooper told me. When he’d visited The Washington Post, someone had talked about the paper’s digital center as “the Thunderdome” — and the name, both epic and tongue-in-cheek at once, came into play as a working title as Journal Register laid out its (also epically named) Ben Franklin Project. The project came out of the basic realization, Cooper says, that “we can’t wait for a unified CMS; we can’t wait for a unified technology to be in place. We have to make it happen sooner.”

It’s that kind of thinking that attracted Brady to Journal Register in the first place. When you’re looking for a new job, he notes, you’re looking at both “the size of the opportunity and the size of the challenge.” For Thunderdome, the size of both is “large.” “Folks have done production hubs; folks have done content bureaus or content sharing,” Cooper says. “But what we’re really looking to do is to empower local journalism. And part of that is to remove the roadblocks to small operations.”

Image by rachelbinx used under a Creative Commons license.

March 25 2011

19:30

Journal Register’s open advisory meeting: Bell, Jarvis, and Rosen put those new media maxims to the test

We watchers of media — analysts, theorists, pundits, what you will — make assumptions about journalism that have become, along the way, tenets: Openness and transparency will engender trust…. The process of journalism matters as much as the product…. Engagement is everything…. Etc. We often treat those ideas as general truths, but more accurately they’re simply theories — notions that speak as much to the media environment we’re hoping to create as to the one we currently have.

In that respect, one of the most interesting media outfits to watch — in addition to, yes, the Googles and Twitters of the world — is a chain of community of newspapers dotted along the East Coast. The Journal Register Company, which declared bankruptcy in 2009, has been attempting over the past year to reverse its fortunes with a “digital first” approach to newsgathering that involves a healthy does of New Media Maxim: It’s using free, web-only publishing tools whenever possible. It’s established an “ideaLab,” a group of innovation-focused staffers to experiment with new tools and methods of reporting and engaging with readers. It’s been sharing profits with staff. And it’s convened a group of new media all-stars to serve as advisors as its papers plunge head-first into “digital first.”

Yesterday, those all-stars — Emily Bell, Jeff Jarvis, and Jay Rosen — gathered in the newsroom of JRC’s flagship paper, Torrington, CT’s Register Citizen (home of the famous newsroom cafe, the community media lab, and, as of this week, a used bookstore), to talk innovation strategy with Journal Register staffers. The confab was literally an inside-out version of a typical, closed-door Advisory Board session: Rather than taking place in a closed-off meeting space, the conversation happened around a desk smack in the middle of the Register Citizen’s open, airy newsroom, with the clacking of keyboards and the clicking of microfilm reels and the general hum of journalism being done serving as soundtrack to the discussion.

Most importantly, the meeting was open to the public. Community members (twenty or so of them, including librarians, an assistant schools superintendent, a UConn professor, a state senator, and a representative from the Chamber of Commerce) sat in chairs loosely situated around the advisory board’s oblong desk. (The atmosphere was casual: “We have a bit of an agenda today,” Journal Register CEO John Paton said during his introduction, “but the advisory broad usually works best when it’s just talking about issues.”) And to accommodate the members of the paper’s virtual community, the meeting was also live-streamed, both on the Register Citizen site and on UStream (370 total views). Situated directly above the meeting area was a wall-mounted screen that streamed tweeted questions and comments about the proceedings — from JRC employees and the broader community — via the #JRC hashtag.

As Bell tweeted after the confab concluded: “Never quite been to a meeting like that before.”

I highly recommend watching the archived video of the discussion (above or here): Rarely do journalism’s wide array of interested parties — journalists themselves, business-side executives, academics, analysts, and, of course, community members — come together in such direct dialogue. The conversation that resulted is both telling and, I think, fascinating. But if “Read Later” you must, here are some broad — but, be warned, not even close to summative! — takeaways from the proceedings.

The tension between journalism-as-process and journalism-as-product

During the board’s discussion of engagement and transparency, Emily Olson, the Register Citizen’s managing editor, described a recent experiment in which the editorial staff asked the paper’s readers what they would like the paper to fact-check. The responses, she noted, weren’t gratitude at being asked to participate in the process, but rather sarcasm and indignation: “Why do we have to do your jobs for you? What are you getting paid for?”

While the table generally agreed that a more targeted question — “What do you want us to fact-check about X?” — might have been more effective in terms of eliciting earnest responses, Olson’s experience also hints at one of the broad problems facing news outlets that have so many new engagement mechanisms available to them: How do you serve a wide array of audience interest, not only in terms of content, but also in terms of presentation? How do you accommodate different “levels” of audience, not only when it comes to background information about stories, but also when it comes to the desire for participation? To what extent do people want to participate in the process of journalism, and to what extent do they prefer information that is simply presented to them?

“People,” of course, is anything but monolithic — and that’s the point. Some folks are thrilled, cognitive surplus-style, to have new opportunities to participate in the creative process of journalism. Others, though, want a more sit-back experience of news consumption. They don’t want here’s-how-we-got-the-story or here’s-how-you-can-help; they simply want The News, the product. If you’re a media outlet, how do you enable participation from the former group…without annoying the latter?

The power of data

In a post-meeting discussion, the table agreed on the power of data — not only as a valuable journalistic offering, but also as a means of increasing JRC papers’ pageviews, and thus the company’s bottom line. Rosen noted the telling experience of the Texas Tribune, where a whopping two thirds of total site views come to its data pages.

Data presentations, Rosen noted, can be successful because they bridge the gap between what’s available and what’s accessible in terms of information. Sure, data sets are already out there, so in focusing on them, you might not be adding new information, strictly speaking, into the communal cache of knowledge; but “packaging, framing, explanation, user-friendliness: that’s the value added.”

The Register Citizen recently posted the county schools budget on its site, its publisher, Matt DeRienzo, noted — which was, the board agreed, a good first step in the data direction. The paper could try similar experiments, they suggested with any number of similar data sets, from the already-accessible to the need-to-be-FOIAed. Ultimately, “become the Big Data place,” Jarvis advised.

The benefit of hedged experimentation:

One of JRC’s chief infrastructural advantages — one shared, in various ways, by other media companies — is that it holds several different properties under its auspices. In other words, it has an entire chain of newspapers that it can experiment with, testing everything from those news-innovation-y tenets to more notional what-ifs. If Journal Register, as a whole, wants to figure out the best way to run comments, the Register Citizen could implement Facebook Comments, say, while the New Haven Register could experiment with a HuffPo-style community moderation approach, while the Troy Record could see what happens if comments are turned on for one type of story and disabled for another. For the company overall, risk can be essentially mitigated through experimental diversification — and, on the other hand, the lessons learned from the experiments can be applied company-wide. And, in that way, amplified.

The commenting conundrum

The board’s discussion — as happens a lot — spent a lot of time focused on the ideal way to run comments systems. How do you reward helpful participation while punishing — or, at least, discouraging — trolls and other conversation-killers? “Every community is going to have bozos,” Jarvis noted. “The Internet’s just a community; so it’s going to have bozos.”

A more productive approach than one focused on troll-fighting, the board suggested, might be to focus instead on rewarding good behavior — the Gawker/HuffPo approach that empowers community members to elevate the good comments and demote the bad. Utlimately, though, no one’s “figured out” how to do comments; and that’s partially because each community is different when it comes to the kinds of conversations it wants to conduct and convene online.

What the board — and, from the sounds of things, community members — did agree on, though, was that it’s a good idea to expand the notion of comments beyond the-things-that-follow-a-story. Reframing commentary from the reactive to the more productive — instead of “What did you think of this story?” something like, “How should we write this story?” — could be a useful exercise not only in terms of conversation, but also of engagement and transparency. And, of course, it could keep improving the overall quality of the journalism. “I’m going to be honest — it used to be a joke,” Melanie Macmillan, a reader who’d come to the meeting, noted of the Register Citizen. But now, with the strides it’s making toward openness and involvement, “it’s something I’m proud of.”

March 10 2011

15:00

The newsonomics of AOL/Patch buying Outside.in

Editor’s Note: Each week, Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of news for the Lab.

There are two ways to be local, we’ve learned.

You can create local news, as newspapers, TV, and some radio stations — and more recently, tens of thousands of bloggers — have done. Or you can aggregate local, sorting through what those newspapers, TV and radio stations, and bloggers have created, picking up what you want, lifting a headline and quick summary and providing a link.

Over the years, the aggregators have often laughed — not publicly, of course — at those silly people who sink millions into creating local news, or content of any kind, while creators have joked — sometimes publicly — that some day those aggregators will have to turn out the lights, when all the content creators have gone bankrupt and out of business. Creation is hugely expensive, when all you have to do is build a better algorithm, scoop up what’s already there, organize it better than someone else, and sell advertising against it. That’s why the first decade of this century has been largely the decade of the aggregators, with the Googles, Yahoos, MSNs and AOLs, among the leaders in aggregation — and revenue.

So as much as AOL CEO Tim Armstrong talks about sparking a content revolution and creating lots of original content, in the background, he also needs to up his aggregation game, using more and more of other people’s content. That’s how I read the recent announcement that AOL’s Patch is buying Outside.in, a company that uses technology to roundup local content, dividing it into the categories of local news and local blogs — and which has partnered with newspaper companies in its four-year history. (Sadly, the memorable url construction, owing to an Indian .in domain, will probably fade into history.) It’s a small play, but one that may have bigger impact on the emergence of hyperlocal news — and local advertising/marketing dollars — in the years ahead. Let’s look at the newsonomics of the Outside.in deal, and what it tells us about the future of Patch itself and AOL’s play to get bigger audiences faster.

The deal — for a purchase price of less than $10 million — is small when compared to the investment ($14.4 million) put into Outside.in by some high-profile investors (Union Square Ventures, Marc Andreessen, John Borthwick, Esther Dyson, and CNN) and when compared to AOL’s $315 Huffington Post buy. It’s tiny, also, when compared to AOL’s spending of $606 million for 14 acquisitions since the beginning of 2010 — a number, of course, that itself pales against Google’s 48 purchases for $1.8 billion over roughly the same period.

Yet it parallels the HuffPo buy in a major way: It’s an attempt by AOL to get bigger faster. Look at AOL’s financials and it’s clear Armstrong is in a race against time. As one savvy newspaper veteran pointed out to me last week, AOL looks, ironically, a lot like a newspaper company. It has a legacy circulation product, in slow, but unmistakeable decline — its AOL-brand Internet access service — and a digital ad business (in turnaround mode) that isn’t growing fast enough to turn the company sustainably profitable in the future. So The Huffington Post not only pasted the face of Arianna atop the site, in hopes her followers will follow, but acts as the wished-for rocket fuel for overall company traffic growth over the next couple of years, especially as the election season, with its political interest, dawns once again.

Patch is part of that strategy for audience growth, drawing into AOL customers through the local pipeline.

The Outside.in deal aims to do a simple thing to support that growth: create more page views around local content, at a lower cost to AOL. Or putting it even more simply: bulking up Patch, on the cheap.

And isn’t that what critics of fast-growing Patch — more than 800 served up across the country, the fastest-growing news startup and hirer of journalists in the last several years — have said since Armstrong and Patch President Warren Webster announced its hypergrowth plan last summer. For all of you who have said, “I don’t get the business model, they’re paying too much for content,” Armstrong and Webster apparently agree with you.

Patch still needs to make its one editor/reporter per Patch pencil out, but it can do something about the costs of lassoing other content. Peruse the Patches around the country — mainly on the coasts, but with a growing representation in the Upper Midwest — and you see lots of vitality and lots of variable quality. At the top sites, you’ll find the site updated with posts and tweets every few hours, and that owes itself both to the hard-working Patch editors (10-plus hour days are still not uncommon) and their ability to pull in good stringers. The budget for those stringers actually varies by the month, as Patch balances budgets and getting its allocations right. Take a bigger Patch site — serving a city of 80,000, for instance — and it may get more than $2,500 a month in freelance budget, while smaller ones serving communities of 20,000 may only get $1,200.

What Outside.in offers Patch is a new tool to manage how much local content it offers through aggregation — rounding up news from other local sources, including local dailies and weeklies and blogs, and how much it decides to pay for directly. Add Outside.in to Patch pages and you may get the sense of a fuller news report, Patch+. Sure the plus requires readers to link off the site, but that’s the nature of the aggregation game. You get more readers to come to because you’ve created one of the largest centers of local content. If you do it right, you can be ahead of the game — and trim costs.

Let’s look at it on a pure cost basis. If Patch gets 1,000 sites up and going, which should happen this year, and it can trim what it spends on stringers by an average of $500 per site per month, that’s $6000 a year in savings per site. For the Patch network in general, that’s $6 million a year. With Outside.in costing no more than one and a half times that number, you’ve paid for the acquisition in less than two years. (Of course, there are also ongoing operating costs as Outside.in CEO and able web serial entrepreneur Mark Josephson and some other team members join Patch.)

The tweaking, of course, is both about the algorithm — tour Santa Cruz Outside.in today, and the top five news stories are from the local Patch!; where’s the local daily, the Sentinel? — and in the content model. What’s the mix of paid, fresh voices and local aggregation that pulls in, and retains, audience?

That question is, of course, what leading local newspaper sites have been trying to figure out as well. A number of newspaper partners of Outside.in itself have tried, without significant commercial success, to figure out the formula. Other sites like SeattlePI.com have used aggregation (SeattleTweets) and innovators from the Miami Herald to the Journal Register papers have signed up local bloggers, in distribution and ad-revenue-sharing programs. All of these are works-in-progress at getting the local original content creation/aggregation model right.

Patch could get it right, or righter, and become a more formidable challenger to local newspaper sites — especially as they go to paywalls of various kinds. (Although that also reopens the question of how findable and linkable their own local content is for the aggregating algorithms of Outside.in and others.) If it does get it righter, it could also become a more likely potential partner for media companies looking to cut their own local costs and reach audience. It’s all in getting that cost of content unit/ad yield per unit of content right, and no one’s yet minted the winning formula.

We can see the dilemma in one current market. Journal Register CEO John Paton (who talks about competing with Patch, here) has been working with Outside.in, to supply aggregated content for the planned fyi.Philadelphia site. He put that relationship on hold this week, and delayed the product launch, as he conjures the question: Is the new Patch/Outside.in a friend, a foe, or some in-between still to be figured out?

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.

December 15 2010

17:00

In-car app stores, success for Xinhua, and more social media: Predictions for journalism in 2011

Editor’s Note: We’re wrapping up 2010 by asking some of the smartest people in journalism what the new year will bring.

Below are predictions from Paul Bass, John Paton, Philip Balboni, Martin Moore, Mark Luckie, Adrian Monck, Ken Doctor, Keith Hopper, and Vivian Schiller.

We also want to hear your predictions: take our Lab reader poll and tell us what you think we’ll be talking about in 2011. We’ll share those results later this week.

Every city of 100,000 or more in America will have its own online-only daily local news site.

Local governments will create their own “news” sources online to try to control the message and compete with new media and compensate for the decline of old media channels.

Newspapers, TV and radio stations, and online news outlets will collaborate on a bigger scale on local coverage and events

Vivian Schiller, president and CEO, NPR

“Local” takes center stage in online news, as newspaper sites, Patch, Yahoo, NPR member stations and new start ups (not for profit and for profit) form alliances, grow, and compete for audience and revenue online.

Twitter and Facebook become established as journalism platforms for newsgathering, distribution and engagement.

In-car Internet radio becomes a hot media topic, though penetration of enabled cars will lag by a few years.

Keith Hopper, director of product strategy and development, NPR

One of bigger things to move in 2011 will be triggered by emerging, seamless connectivity in the car. The historical limitations of satellite radio have obscured the real potential here. We will see a revolution in how news is presented on the go if auto manufacturers get past their inevitable awkward attempts and are able to streamline the user experience. I fully expect in-dash app stores and additional inspiration for distracted driver legislation that goes well beyond basic audio news. On the positive side, engaged news consumers will never fall asleep at the wheel again.

Philip Balboni, president and CEO, GlobalPost

2011 will be a seminal year for the reinvention of the business of American journalism — especially notable for the continued maturation of the new generation of online only news sites: the Huffington Post, Politico, GlobalPost, Daily Beast, and others. With The New York Times paving the way for monetizing one of America’s most visited and highly regarded general news sites, 2011 should be the year we can point to as a game-changer for online revenue generation by charging consumers for high quality news content and the beginning of the movement away from sole reliance on selling page views and ad impressions.

In 2011 we will see the return of legacy news media. Chastened by the mistakes of the past, the legacy companies will be more nimble and eager to pursue Digital First solutions. And armed with their billions in revenue and new outsourcing solutions to drive down legacy media costs they will be much better resourced financially to compete with online news start-ups. The New Year will prove difficult for online start-ups like Huffington Post, et al to drive towards sustainability and profitability. Look for consolidation between the old and new worlds.

We have been stupid and slow to change but we are changing. We still count our revenue in the billions and that gives us so much more in the way of resources compared to the startups. Smart plus money is an advantage. We are getting smarter.

The power of news organisations to dictate the news agenda will decline further as peer-to-peer and algorithm driven editorial recommendations grow in influence.

Those news organisations that develop sophisticated skills to clean, structure and filter data quickly will gain significant competitive advantage over those who don’t.

Mark Luckie, founder, 10,000 Words , national innovations editor, The Washington Post

With the recent upswing in the availability of media jobs, I predict those journalists who developed a substantial online presence, created unique digital journalism projects, or who were at the forefront of the digital journalism conversation during the course of their unemployment, will return to newsrooms with zeal and newfound perspective, if they so choose. They will re-invigorate those news operations who are actively seeking employees who will help move journalism forward (and hopefully they will get a relatively larger paycheck in the process).

Adrian Monck, managing director and head of communications and media, World Economic Forum

Julian Assange will be mired in a court case.

The infrastructure of the Internet which made free speech briefly freer will increasingly marginalize and muzzle it.

A handful of diplomats will get HuffPo columns on the back of their cable writing prowess.

Drone strikes will continue to dully but effectively kill more men, women and children by accident, recklessness or negligence than document dumps. The public will remain indifferent.

Xinhua will have its “CNN moment” and emerge as a global reporting force on a key international story.

Western media will increase reporting partnerships with Chinese media.

Business news networks will look to hire mainland Chinese talent.

Piers Morgan will be a critical success on CNN, but not a popular one.

Jeff Jarvis will put BuzzMachine behind a paywall.

2011 is the year of The New Trifecta. The convergence of mobile, social and video on the tablet defines the new platform as a unique consumer experience yielding, consequently, new business models. No longer are mobile, social and video “categories” of content or revenue lines, but powerful forces that when brought together redefine the news reading and viewing experience. That’s one big reason we’re seeing significantly higher-than-online time-on-session tablet data.

Social media optimization will grow in 2011. Almost organically, social referrals (mainly Facebook and Twitter) have become the fastest growing source of news traffic. News publishers can now count 5-15 percent of their traffic sent from social, making search/Google referrals less important. In addition, social referrals convert better (“qualified” social leads) in obtaining new, continuing customers. The next big question: If this is happening without much publisher work, what kind of work would further harness the social juice?

Growth in the company year will be mainly digital. There are few signs the old print business is coming back, and this year’s single-digit decreases in print advertising looks like it will continue into next. That means digital revenue — online advertising generally, new tablet ad revenue and digital reader revenue — is the only hope for building a future for legacy companies.

September 22 2010

19:00

Journal Register Company joins with Outside.in for a hyperlocal news/ad portal in Philadelphia

At the Suburban Newspapers of America conference in Philadelphia this morning, Journal Register Company CEO John Paton made an announcement: The newspaper chain will soon be launching an online, hyperlocal news portal in Philly. A new step forward in the company’s “digital first” business model, the yet-to-be-named site’s content will come from a mix of journalists professional and amateur, curated by JRC editors. And it will leverage the partnerships the JRC already has in place with Yahoo (audience targeting) and Growthspur (contributor training).

Or, as Paton puts it: “crowd and cloud.”

The site will be a direct competitor to Philly’s existing establishment news sources: the Inquirer and the Daily News. It’s no accident that Paton announced the project the day before the financially plagued papers are to be put to auction. “They’ve had that town to themselves for a long time,” he told me. “And I think there’s room in this new ecosystem for a whole bunch of people to play. I’m sure they’ll think we’re no threat at all — and I hope they keep on thinking that.”

The idea of the new site is to bolster both content and audience — on the cheap. (JRC, you’ll recall, declared bankruptcy last February; since Paton took the helm of the company shortly after that — with an advisory board that includes new media thinkers the likes of Jay Rosen and Jeff Jarvis — it’s been engaged in the Herculean task of restoring a network of small, Rust Belt papers to profitability. Remarkably, it’s getting close.) The new effort will tap into Philly’s existing content infrastructure — the hyperlocal blogs that have already sprung up to cover the area — and then give that content, via the hyperlocal news provider Outside.in, a singular publishing platform. (The site will also mark a continuation of JRC’s partnership with Growthspur, which trains would-be journos in both blogging and the dark arts of content monetization.) The details are still being worked out, but the idea is a mutualization of resources and revenues that will benefit all involved, from the local bloggers to the Journal Register Company to its partners — to, of course, the site’s consumers. Think TBD, Philly edition.

Think also: TBD, “inexpensive tools” edition. Though JRC will dedicate some of its resources to the new site — in particular, staffers will provide additional content, curation, and general editorial oversight — “we’re hoping that this will be largely crowd-supported,” Paton notes. JRC, after all, doesn’t have papers in metro Philly. “We’ve surrounded Philly with our properties, and so we’re able to provide some context” — but, then, generally not “right-downtown context.” For that, the site will rely on the bloggers who know the terrain; and in turn, Paton says, “we can bring depth to this, and we can bring curation to this.”

And that’s true of audience, as well. The site will apply JRC’s “digital first” approach…to users. Last week, JRC expanded its partnership with Yahoo — the latter company provides behavioral and geographical ad targeting to the newspaper chain — to include the Philadelphia market. That was “the sales piece,” Paton notes; the new site will be “the content piece.” The hoped-for end result? “We’re collectively creating audience, collectively creating content, at a very low price point.”

It’s a “hoped-for” result, though, because the site is still in its development stages. (Hence, again, the lack of name — “I figured TBD was taken,” Paton laughs.) But the CEO values transparency, even if it means unleashing a gestational product onto the market. “It’s a work in progress,” he says of the site. But he and the JRC staff figured, he says, “Let’s just announce it — we’ll get some help in finalizing it just from the announcement. And our solution will come out of that.”

June 02 2010

13:00

The art of the (public) cover letter: Journal Register staff apply for ideaLab spots via blog comments

After last week’s successful completion of the Journal Register Company’s Ben Franklin Project, CEO John Paton was looking for a new project that would keep the momentum of innovation going for the beleaguered newspaper network.

Enter the ideaLab, JRC’s new strategy to “equip 15 Journal Register Company staff members with the latest tools and give them the time and money to experiment with them.” Journal Register will carve out 10 hours a week from ideaLab members’ current jobs, Google-20-percent-time-style, “to allow them time to experiment with these tools and report back on how we can change our business for the better.” And, out of advance recognition that ideaLab commitments might seep into staffers’ free time, the company will ad an extra $500 per month to those staffers’ pay.

Paton is currently in the process of selecting the company’s ideaLab members — and, to do it, he’s asked Journal Register staff to apply for the positions. Publicly, if they choose:

In about 200 words or less, email me at jpaton@journalregister.com or post on my blog what you would do with the tools and time to improve our business. Any Journal Register Company employee in any division or any department – part-time or full-time – is eligible. I will involve our Advisory Board ( http://bit.ly/dyhkVK ) in the selection of the 15 staffers and we will make sure the ideas of those chosen will be posted on my blog and the Ben Franklin Project site.

Now, the ball is in your court. Over to you.

What happened next was pretty remarkable: Journal Register staffers took that ball — and ran with it. Paton’s post has received over 150 comments — nearly all of them from Journal Register employees, best I can tell — and nearly all of them lengthy, thoughtful, and earnest. Cover letters, in comment form.

Here’s one from Joe Cahill of the Montgomery News:

Despite just officially joining JRC as a part-time employee, I have spent the last five months interning with Montgomery Media in Pennsylvania. As a college student majoring in Communications, working in multimedia journalism has been the fulfillment of a life-long dream. I have always dreamed of working in the journalism industry, and having the ability to utilize my passion for new technologies and multimedia production while doing so has proven invaluable to me.

Since its inception, I have followed the Ben Franklin Project diligently. I’ve worked alongside one of the editors, Andy Stettler, for the past five months. Andy, a friend and former classmate of mine, has taught me volumes during my tenure at Montgomery Media, and I continue to work alongside him to produce the best possible content for the company.

I would like to humbly submit myself as a candidate for JRC’s ideaLab. If chosen, sir, I promise to spend every waking second as an innovator, and using the tools and time given to me to both better the company and better myself as a student of Communications. Thinking differently is what I do best, and working for the ideaLab would be my chosen calling.

And one from Marissa Raymo of The Oakland Press:

With the ideaLab technology, I would like to explore ways to develop mobile websites for our newspapers (in addition to the mobile apps that are already in development). For example, the New York Times has both a downloadable application for iPhone/Android/Blackberry platforms and a mobile website (mobile.nytimes.com) that can be accessed without any downloading.

I would also research additional revenue opportunities through online advertising, etc. I recently tested a new online revenue opportunity through backlinks on our newspaper website. Since newspaper sites are generally highly ranked pages, our advertisers may be able to increase both their websites’ page rank and traffic through direct links on our newspaper websites (which cannot be made through our banner ad serving software). With time and technology, I believe that this could be developed into a very profitable revenue opportunity.

Most importantly, I would use the ideaLab to find ways to make our entire internet presence more user-friendly to the generations that were not raised on this technology. I look forward to the innovations and renovations to come. Thank you for the opportunity to grow with this company!

And one from Victor Ciarrone of The Morning Journal:

John,

As an account executive for The Morning Journal, I am excited about the direction the company is heading as a multi media news company. The Ben Franklin Project is very intriguing.

One of the main roadblocks we run into, as reps, is ad production. The time from receiving the ad material to the final proof can take days, sometimes weeks. With a faster turnover on ad production, our time on the street may increase.

10 hours a week will be spent on incorporating the iPhone, iPad, and Netbook into the success of our sales staff. These three products can be utilized for the production of ads right in front of our clients. Using the iPhone to collect data, composing the ad with the iPAD, and delivering the final result with the net book. (Plus the Netbook weighs much less than the laptop I am carrying around – might save me from a hip replacement later on in life.) It will be a fun opportunity to find innovative ways to help our company succeed with the goals we have in place. Timed saved on production is more time on the street building relationships and contributing the success of where we as a company want to be in the near future.

Have a wonderful week and I hope to hear from you.

Victor Ciarrone
The Morning Journal
Retail Advertising

There’s much more in that vein. Anyone in the company can become part of the ideaLab, Paton told me — and while, “so far, one of the best applications is from an intern,” he’s also received applications from publishers of Journal Register papers. “It’s all departments, part-time, full-time. If you’re one of the 3,106 people on our payroll, you’re eligible.”

It’s pretty remarkable to see journalists essentially applying for jobs in the open (though the comments, Paton notes, don’t include the many emails he’s received containing similar cover-letter-like expositions). But the public-auditions phenomenon Paton’s post encouraged is of a piece with the transition toward transparency he’s been trying to inculcate at the company. “This was a crappy culture here before, at JRC, and hardly known for innovation,” Paton says. Staffers have “been screwed on pay, they’re been screwed on benefits” — trust in executives, understandably, has been low. But the ideaLab, both in its formulation and its application structure, is meant as a kind of crucible of cultural change. Like the Ben Franklin Project, “this is a way of making them think differently about the process.”

“The courage and tools to experiment”

It’s also a way of liberating Journal Register journalists. “When I started in this business in the ’70s — probably because we had more money than God — we weren’t afraid to experiment,” Paton notes. “Newsrooms used to be places where people hated to follow process, weren’t very good at rules, didn’t like authority, saw themselves as independent, and were generally anarchists — and proudly so.” Now, though, “dollars are challenged, and people are much more afraid to try new things.”

But giving journalists the freedom to experiment — reviving that spirit of independence and even rule-breaking — can be good business as well as good journalism. The Journal Register sites, Paton says, have gone from serving around 100,000 video streams this January 1, to, as of April — after the staff, later this winter, were given Flip cams and the mandate to use them — around 1 million. “So people can do this — if you give them the courage and tools to experiment.”

And how will the ideaLab leverage those goods? Basically, its members will be “free agents,” Paton says — they’ll be given tools and simply asked to experiment with them and find new ways to use them. There will be no real rules, “other than that we’re going to make sure you get 10 hours — so 25 percent of your work week — free.”

The idea for the ideaLab itself, Paton notes, actually came from Jay Rosen, a Journal Register Company advisory board member. (“As a CEO, my greatest gift is theft,” Paton says. “I used to be a rewrite man — I can take anybody’s good work and make it mine.”) Rosen sent Paton a note suggesting that the company put together a group of innovation-minded employees who could spearhead the company’s efforts at innovation. “And I thought it was a pretty good idea,” Paton says. But though it was the CEO who implemented the experiment, Paton notes — and here he loses some of his idea-thief cred — “all credit for the ideaLab goes to Jay Rosen.”

Of course, it’s not a given that the innovation-via-staffers approach the JRC’s ideaLab concept endorses is the best way to create value in a news organization. In the most recent episode of their Rebooting the News podcast, Rosen and Dave Winer discussed the idea — and Winer objected to the org-centric, supply-side-focused sensibility the ideaLab implicitly endorses. “I think you’re barking up the wrong tree,” Winer said. “I think these guys ought to go learn what their customers want. They ought to get on the other side of the fence — I think that’s where you’re going to find the answer.”

Still, there’s nothing to say that experiments oriented toward the demand side of news production couldn’t be part of the group’s mandate. In fact, when it comes to the ideaLab, pretty much anything is fair game, Paton says. The team will hold no regular meetings or conferences or check-ins; the idea is simply to give smart, knowledgeable, enthusiastic people the freedom to experiment, and see what happens. Paton, who ran news operations in Europe and Canada (as well as the U.S.) before taking the helm at Journal Register, has a farm in France; he’s learned, from cultivating it, the benefits of letting things bloom, organically. “I don’t want to manicure anything anymore,” he says. “I don’t want to be one of those guys on his John Deere, up on the lawn, making it cute. And I think that’s what this is going to be like: Think of it as wildflowers instead of a nice, clipped garden.”

January 18 2010

17:51

Singleton’s next chapter: Can he steer MediaNews to a digital future?

[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.]

In August 2006, as part of a deal that netted MediaNews Group the Contra Costa Times, San Jose Mercury News, and the St. Paul Pioneer Press, the Hearst Corporation agreed to make a $300 million equity investment in MediaNews. At that point, the peak of MediaNews’ company’s expansion and with revenue and cash flow at an all-time high, the holdings of the principal stockholders — the Singleton and Scudder families — net of debt, were arguably worth more than $500 million each.

But last Friday, whatever was left of that equity, as well as Hearst’s stake (not finalized until a year later), evaporated as part of an announced plan to file a “prepackaged” Chapter 11 bankruptcy. For Hearst, it’s a hefty writeoff of a bad investment. For the Scudders, it’s a bitter payoff after nearly 25 years of active participation in MediaNews management. For MediaNews CEO William Dean Singleton and his financial wizard, company president Joseph (Jody) L. Lodovic IV, it’s a fresh start (which includes a 20 percent equity stake for the duo, and retained control of the company).

Could readers of the company’s papers now see new investment in its newsgathering capabilities, long hammered by budget reductions? For MediaNews employees, could this be an opportunity to participate in the transformation of the company into a truly digital enterprise? Both answers depend on what kind of vision is shared by Singleton, Lodovic, and the former bondholders who are now their equity partners.

MediaNews’ story

In 1983, Singleton, then a brash 32-year-old newspaperman who already had bought and sold several newspapers, enlisted the help of his friend Richard B. Scudder to buy  the Gloucester County Times in New Jersey. Scudder, former publisher of the Newark Evening News (which his family owned for three generation before selling it in 1972), was founder and president of the Garden State Paper Co., the first commercial-scale producer of recycled newsprint.

Singleton and Scudder went on to create MediaNews Group in March 1985, and steered the company through a long series of deals that eventually built it into the sixth-largest newspaper group (by circulation) in the country — today it owns 54 daily newspapers with a total weekday circulation of about 2.3 million, plus a slew of weeklies and niche products. It also has a television station in Anchorage and a group of radio stations in Texas.

From the outset, Singleton and Scudder agreed to manage MediaNews for growth, and never to pay dividends. Neither of the partners ever personally owned any stock — they put it in trusts for Scudder’s children and grandchildren and for Singleton’s future children. Singleton was only 33, unmarried and childless at the time, but Scudder was 72, so the trust strategy would avoid inheritance taxes in the event of his death.

The company never went public, but because a small portion of its debt was publicly held, it was required for years to file disclosures with the SEC, providing a detailed window into the complex financial structure that enabled its growth. (That window closed in 2008 when the company reached an agreement with bondholders to avoid the filings.)

The financial wizard behind the company’s financial maneuvers was Jody Lodovic, who became chief financial officer in the early 1990s and rose to become president. Together, Singleton and Lodovic created partnerships with Gannett in Texas and New Mexico and with Gannett and Stephens Media in California to which each company contributed its newspapers, with MediaNews assuming the management. They pioneered the concept of “clusters” of papers that could realize economies of scale. They deftly exploited joint operating agreements in Detroit, Charleston, W.V., York, Penn., Salt Lake City and ultimately in Denver at the conclusion of a long battle between MediaNews’ flagship paper, the Denver Post, and the Rocky Mountain News. At times, when cash was tight or they got offers they couldn’t refuse, they sold papers, including the original New Jersey cluster dear to Dick Scudder’s heart.

For Singleton, the elimination of most his company’s debt is a long-delayed goal. As early as 1996, at a retreat for the group’s management and publishers, he outlined strategies including a few more years of acquisitions followed by a push to reduce debt. But somehow, acquisition opportunities kept coming along, and debt reduction was put off. Singleton began to feel that at some point, there would be only two or three newspaper companies left standing, and he wanted MediaNews to be one. To be in the running, the company had to keep growing. Ultimately, revenue tanked not long after the final big deals with McClatchy and Hearst, and MediaNews found itself in workout last April. Given the complexity of its financial structure, it’s not surprising that it took eight months to package the bankruptcy.

For Singleton, it’s not the first disappointing turn, but certainly the biggest. In 1975, pre-MediaNews and at the age of 24, Singleton was involved in an attempt to revive the Fort Worth Press, which had been closed by E. W. Scripps after losing money for two decades. The venture ended in failure after three months. MediaNews bought, but couldn’t make a go of the Dallas Times-Herald, which was closed a few years after Singleton sold it. Later, MediaNews bought the Houston Post but couldn’t make it profitable and sold the assets to Hearst, which owned the dominant Houston Chronicle. Hearst paid $120 million and immediately closed the Post. (The laid-off staffers, calling themselves the Toasted Posties, set up an early social networking site of sorts to stay in touch and swap gossip about Singleton; it was succeeded by a now-dormant blog, and later by a Facebook page.)

Known as a cost-cutter

Though he continues to have a reputation for ruthlessly cutting costs when necessary, Singleton takes a genuine pride and interest in his newsroom staffs. When visiting newspapers, before heading out for dinner with the publisher, he makes of point of visiting the newsroom to see what’s going on. He keeps an eye on editors, reporters and photographers with promise and has promoted some to the Denver Post. He has a mail subscription to every one of his dailies, and when he’s traveling, his sister and personal secretary Pat Robinson sends some of them to his destination in Fedex boxes so he can keep up. Editors are not surprised to get a call from Singleton asking about a local story, or exhorting them to run more local news on the front page. He lets each local paper formulate its own editorial views and endorsements. Before the going got rough, Singleton and Scudder convened annual gatherings of MediaNews publishers to talk strategy; they enjoyed these confabs far better than meetings of publishers.

And as Singleton told the Wall Street Journal in an interview relating to the current bankruptcy process, he continues to press his vision for consolidation of the newspaper industry, telling the Journal he wanted to be the “aggressor” in that effort.  The group’s employees fear that by consolidation, Singleton means more outsourcing or more centralization of operations regionally and nationally. There’s been a lot of that already, and there could be more, but Singleton and Lodovic will now be free to expand their partnerships, to seek mergers with other groups, or to rationalize the market through exchanges of newspaper properties. “Look at the map,” Singleton told the Journal in response to the question of where such consolidations might occur.

Singleton has lived with multiple sclerosis for 24 years; the disease has now robbed him of the use of his legs. In a long and particularly revealing interview last year with the Colorado Statesman, he discussed its effects:

I cheated it for many, many years. The last three years, I haven’t cheated it so well, and it has become more aggressive. I’ve lost the use of my legs and partial use of my arms and fingers. I feel fine most of the time. I’ve never missed work because of it. But clearly the current prognosis isn’t particularly good. The good news about Multiple Sclerosis is, it doesn’t kill you. But it does disable you. Not being able to walk or button your shirts or tie your tie — it’s troubling. But I’d rather be disabled and alive than fully able and headed to the other side. So I count my blessings for all the things it hasn’t taken. But it certainly has taken a lot. I look worse than I feel. I feel pretty good.

I’m still very energetic and do what I want to do. I travel if I want to travel, and get around to the newspapers and go anywhere I want to go. I enjoy life a lot, but I just enjoy it differently without some of the physical things I once had. It’s comical when I go on the road. I can’t button a button because my fingers don’t work. I can’t type anymore. I can’t use a computer because my fingers don’t work. If I go to hotels where I stay regularly, I’ve always got a concierge who’ll come up and button my shirts and help me tie my tie. If I stay in a strange hotel, I ask one of the housekeepers if she’ll button my shirts. She almost wants to call the police or something. You get all kinds of weird looks when you ask a housekeeper, “Would you come here and button my buttons for me?”

And I love it. In some places you get somebody who can’t speak English, so you have to explain how to button a shirt. And some places you get somebody who does, and they first think you’re joking. And then they understand your nod and they start laughing and everything. One of the fun things I have in life when I travel is the look on somebody’s face when I ask them to button my shirt. So you make the best of it.

Clearly, the MS puts some urgency in Singleton’s quest for a legacy. The elimination of most of his debt gives him an opportunity to rebuild newspaper operations that have been hammered for years by revenue declines and the company’s inability to invest adequately in its future (many of the papers are still operating on content management systems installed as Y2K solutions).  Whether he, or Lodovic, will have the vision to turn the company into a truly digital enterprise is an open question. Singleton has an understanding of the web (he helped lead the formation of the Yahoo Newspaper Consortium), but he’s not an active computer user. He has often expressed faith in the future of print, and has strongly espoused charging for content in order to protect the print side of the business: “I think print’s going to be important for a long time…Print is still the meat. Online’s the salt and pepper.”

With that attitude it seems unlikely that Singleton and Lodovic come to share the digital vision of another CEO leading his company out of bankruptcy, Journal Register’s John Paton, who told Jeff Jarvis recently (speaking of his previous company, Spanish-language publisher impreMedia):

The first thing we did was to decide that in our company, a print company, when it came to products we would be digital and brands first and print last. It was our radical way of focusing everyone on the future. By recognizing our competitors and our future were digital everything we built and did had to follow that decision.

Paton is free to pursue that vision at Journal Register, which is also newly unencumbered by debt. The readers and employees of MediaNews could benefit from a similarly unequivocal determination at the top to radically reinvent the business in a truly digital direction.

Disclosure: I worked for MediaNews Group as a publisher for 13 years from 1995 to 2008 at its cluster of four dailies in western New England. In a previous post, I outlined in more detail my suggestions for a more digitally-oriented MediaNews Group.

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