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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.

January 17 2012

18:00

NewsRight’s potential: New content packages, niche audiences, and revenue

When NewsRight — the Associated Press spinoff formerly known as News Licensing Group (and originally announced by the AP as an unnamed “rights clearinghouse”) — began to lift the veil a couple of weeks ago, most of the attention and analysis focused on “preserving the value” of news content for content owners and originators. In the first round of reports and commentary on the launch, various bloggers and analysts quickly made comparisons to Righthaven, the infamous and all-but-defunct Las Vegas outfit that pursued bloggers and aggregators for alleged copyright violations.

But most of that criticism misses an important point: Would NewsRight’s investors, all legacy news enterprises, really invest $30 million in a questionable model just to enforce copyrights? Or are they investing in a startup that has the capacity to create revenues from new, innovative ways of generating, packaging and, distributing news content?

While some of the reactions point to the former, I believe the opportunity (and NewsRight’s real intention) lies in the latter: NewsRight has the potential to create revenue for any content creator large or small, and to enable a variety of new business models around content that simply can’t fly today because there hasn’t been a clearinghouse system like it.

(As background, here at Nieman Lab in 2010, I first described the potential benefits of a news clearinghouse months before AP announced the concept. Then after AP made public their plans, I described a variety of new business models it could enable, if done right.)

First, let’s have a look at some of the critics:

  • TechDirt, disputing whether NewsRight would actually “add value,” asked: “AP finally launches NewsRight…and it’s Righthaven Lite?”
  • InfoWars, posting a video talk with Denver radio talk host David Sirota, inquired: “Traditional media to bully bloggers with NewsRight?” In the interview Sirota said, “What I worry about is that it ends up being used as a financial weapon against those voices out there who are citing that information in order to challenge it, scrutinize it, and question it.”
  • GigaOm’s Mathew Ingram pointed out that while NewsRight itself says it will stay out of pursuing copyright infractions via litigation, “one of the driving forces behind the agency is the sense on the part of AP and other members that their content is being stolen by news-filtering services…and news aggregators.” Ingram concludes: “What happens when an organization like The Huffington Post says no thank you? That’s when it will become obvious how much of NewsRight’s business model is based on carrots, and how much of it is about waving a big stick.”
  • Nieman Lab’s own coverage by Andrew Phelps also focused on the tracking and enforcement aspects of NewsRight’s core technology.

NewsRight’s launch PR didn’t do much to dispel these concerns. CEO David Westin said himself in a video: “NewsRight’s designed…to make sure that the traditional reporting organizations that are investing in original journalism are reaping some of the benefits that are being lost right now.” And the company’s press release, quoting Westin, went no further that the following in hinting that there were new business opportunities enabled by NewsRight: “[I]f reliable information is to continue to flourish, the companies investing in creating content need efficient ways to license it as broadly as possible.”

Those traditional news organizations (29 of them, including New York Times Co., Washington Post Co., Associated Press, MediaNews Group, Hearst, and McClatchy) are the investors who scraped together $30 million to launch NewsRight. The Associated Press also contributed technology and personnel to the effort.

Given those roots — along with the initial PR, Westin’s own background as a lawyer, and the fact that NewsRight’s underlying AP-derived technology, News Registry, was explicitly developed to help track content piracy — it’s not hard to see where all the skepticism comes from.

But ultimately, if NewsRight is to be successful, it will have to create a new marketplace. It’s going to have to do more than trying to get paid for the status quo — that is, to collect fees from aggregators and others who are currently repackaging the content of its 29 owners. It can do that, but in addition, like any business, it will have to develop new products that new customers will pay for; it will have to bring thousands of content sources into its network; and it will have to enable and encourage thousands of repackagers to use that content in many new ways. And it will have to focus on those new opportunities rather than on righting wrongs perceived by its investors.

I spoke last week with David Westin about where NewsRight was starting out and where it might ultimately go. While he repeated the company mantra about returning value to the originators of journalistic content — “NewsRight is designed with one mission: to recapture some of the value of original journalism that’s being lost in the internet and mobile world” — it’s clear that his vision for NewsRight goes well beyond that. Here’s some of what we covered:

NewsRight’s initial target is “closed-web” news aggregators. Media monitoring services like EIN News, Meltwater News, and Vocus provide customized news feeds to enterprise clients like corporations and government entities, typically at $100 per month or more. Essentially, they’re the digital equivalent of the old clipping services. Currently, these services must scrape individual news sites, and technically, they should deliver only snippets with links back to the original sources (although whether they limit themselves to that is not easy to monitor). What NewsRight offers the monitoring services is one-stop shopping that includes (a) fulfillment: an accurate content feed (obviating the need to scrape, and eliminating uncertainty by always delivering the latest, most complete version of a story); (b) rights clearance; and (c) usage metrics. The monitoring services will have the option to improve their offerings by supplying full text (or they can stick with first paragraphs); the content owners share the resulting royalties.

While NewsRight currently must individually negotiate content deals, it’s working toward a largely-automated content-exchange system. Clearly, as NewsRight grows, there will have to be an automated system with self-service windows. “I hope that’s right, because that means we will have been successful,” Westin said when I suggested that would have to happen. The deals with private aggregators being worked on now all require one-off negotiations for each deal, both with the aggregators and with the content suppliers. That’s marginally possible when there are 800 or so content contributors to the network, but to be a meaningful player in the information marketplace, the company will need to grow to encompass thousands of content creators, thousands of repackagers, republishers, or aggregators of content, and many millions of pieces of content (including text, images and video) — requiring a sizable infrastructure and high level of automation.

Any legitimate news content creator can join NewsRight for free for the duration of 2012. “Anyone who generates original reporting, original content, can benefit from this. We’re open to anyone who’s doing original work.” Westin says. That includes not only newspapers and other traditional news organizations — it can include hyperlocal sites and news blogs. Basically, that free membership will bring you back information on how and where your content is being used. NewsRight’s system is currently tracking several billion impressions for its investor-members and is capable of tracking billions more for those want to use the service. (All this is rather opaque on the website right now, but if you’re interested, just click on the “Contact us to learn more” link on their homepage, and they’ll get back to you.)

Down the road, NewsRight is looking for ways to create new content packaging opportunities. Westin: “There is a large number of possible businesses [that we can enable]. We don’t have any of them up and running yet; it’ll be a better story when we’ve got the first one up. But I do envision a number of people who might say, ‘I wanted to create this product, dipping into a large number of news resources on a specific subject, but it’s simply been too cumbersome and difficult to do’…We should be able to facilitate that.” What he envisions is something that reduces the friction and the transaction costs in setting up a news feed, app, or site on a niche topic and allows a multiplicity of such sites to flourish — “new products based around the content that don’t exist now.” That includes personalized news streams — products for one, but of which many can be sold: “As we continue to expand News Registry and the codes attached to content, it makes it possible to slice and dice the news content with essentially zero marginal cost.”

While the initial offerings to private aggregators carry a price tag set by NewsRight, in the ultimate networked and largely automated point-to-point distribution arrangement — individual asset syndication — NewsRight will likely stay out of pricing. The “paytags,” or the payment information embedded in the Registry tags, will be able to carry information on a variety of usage and payment terms — not only what the price is, but nuanced provisions like time constraints (e.g. this can’t be used until 24 hours after first published), geographic constraints (to limit usage by regional competitors), variable pricing (hot news costs more than old news), and pricing based on the size of the repackager’s audience. Content owners would likely have control over these options, but there’s also the potential for a dynamic pricing model — something similar to Google’s auction mechanism for AdWords — in order to optimize both revenue and usage.

The NewsRight network could make it possible to monetize topical niche content that’s too difficult to syndicate today. There a lot of bloggers, hyperlocals, and other niche sites today that earn zero or minimal revenue and are operated as labors of love. The potential for NewsRight is to find new markets for the content of these sites. And general publishers like newspapers might find it profitable to jump into specialized niches for which there’s no local audience, but which might generate revenue via redistribution through NewsRight to various content aggregators.

Could that grand vision come to fruition? As I’ve pointed out before, a very similar system has worked very nicely for ASCAP and BMI, the music licensing organizations, which not only collect royalties for musicians but enable a variety of music distribution channels. (This is on the performance and broadcast side of the music biz, not the rather broken recorded music side.) Both AP CEO Tom Curley in launching NewsRight and Westin in discussing it refer to ASCAP and other clearinghouses as models — not just for compensating content creators but for enabling new outlets and new forms of content. NewsRight’s is purely a business-to-business model — it doesn’t involve end users. So the traction it needs will come when it can point not just to compensation streams from private aggregation services, but to new products and new businesses made possible by its system.

December 08 2011

16:00

Tom Stites: Layoffs and cutbacks lead to a new world of news deserts

Editor’s note: Tom Stites had a long career in newspapers, editing Pulitzer-winning projects and working at top newspapers like The New York Times, the Chicago Tribune, and the Philadelphia Inquirer. In recent years, he’s shifted his emphasis to trying to figure out a new business model to support journalism through the Banyan Project. This week, Tom outlines his beliefs on where web journalism stands today and one model he thinks might work; here’s part one.

Here’s a challenge: Name a straightforward two-word phrase related to journalism that you can enter in Google and get only one result.

Stumped? Try “news desert” — one, and only one, direct hit.1

Now check Wikipedia. “News desert” comes up entirely empty — but “food desert” gets 3,400 words. Any why not? Hunger is a crucial issue, and “food desert” provides a vivid frame that elicits a mental movie of hungry people crawling over arid dunes in search of an oasis for sustenance.

Frames matter. They determine how an issue is understood, driving this understanding into the language and thus into people’s thinking about what actions to take. One proof of the power of “food desert” as a frame is that a Google search yields thousands of direct hits — including links to serious actions people have taken, including the Agriculture Department’s food desert locator and to Food Desert Awareness Month.

But isn’t it also a crucial issue that a huge part of the American people, the less-than-affluent majority, is civically malnourished due to the sad state of U.S. journalism — and that the nation’s broad electorate is thus all but certainly ill informed? It has long troubled me, and many others, that an issue so central to democracy has such a peripheral role in the discourse about journalism’s future, which tends to focus more on crowdsourcing, Twitter and Facebook, aggregation vs. original reporting, how AOL is faring with Patch, and search engine optimization. These are important topics, but perhaps an energizing frame like “news desert” can widen the aperture of thinking about journalism’s future and sharpen the focus on people’s and democracy’s needs — on journalism as public good.

Elites and the affluent are awash in information designed to serve them, but everyday people, who often grapple with significantly different concerns, are hungry for credible information they need to make their best life and citizenship decisions. Sadly, in many communities there’s just no oasis, no sustenance to be found — communities where the “new news ecosystem” is not a cliché but a desert.

The Chicago journalist Laura S. Washington introduced me to the desert frame, and she credits a South Side community organizer for originating it. Washington used it in her remarks in April when she and I were members of a panel called Journalism and Democracy: Rebuilding Media for our Communities at the 2011 National Conference for Media Reform. Suddenly a movie was running in the little screen in my mind: The protagonists were losing sleep on a hot night, worrying over life issues they might be able to resolve if only they had the right information — but there was no news oasis in the landscape of their lives, so they just kept tossing and turning. I couldn’t see if movies were playing in the heads of the hundreds of people in the hall listening to our panel, but they clearly got exactly what Washington meant.

So I’ve been using “news desert” in conversations and presentations over the last six months. It never fails to communicate powerfully.

“Gee,” a community leader in Haverhill, Massachusetts, said when I used it. “That sure describes us.”

Haverhill is a middle-income city of 60,879 whose daily newspaper and community radio station folded years ago and whose sole weekly is withering — and it will be the pilot city for the Banyan Project, a web journalism startup I lead that’s designed to sustain itself while serving communities and publics that other media tend to ignore. News deserts are places whose economies cannot sustain any established business model for journalism, for-profit or nonprofit, and Haverhill exemplifies one kind: municipalities whose news institutions have failed or faded as advertising has dried up and can no longer come close to meeting the information needs of the community and its people. Many rural communities fit this category as well.

Demographics rather than political boundaries define other news deserts categories. In a speech at the Media Giraffe Project’s 2006 Conference, I laid out how metropolitan newspapers across the land tailor their coverage to serve readers in the top two quintiles of the income distribution, ignoring the quite different information needs of everybody else — and that was before the five-year newspaper ad revenue nosedive caused widespread layoffs, further shriveling the supply of original reporting that is the bedrock of journalism’s public good. I didn’t have the news-desert frame back then, but when it comes to life-relevant original reporting it’s clear that it describes where the less-than-affluent American public tends to live.

Minority communities in big cities tend to be the most arid news deserts of all, a point Washington made in her NCMR panel presentation and in an In These Times essay. (A Chicago blogger’s item calling attention to her essay is the source of that one and only Google hit.) Washington’s desert phrase was a bit different.

“We live in a communications desert,” her essay begins. “How can this be, you say? Our 24/7 news cycle delivers…millions of words, bytes, video clips, posts, emails and tweets…Yet paradoxically, in this ‘revolutionary’ media age, our cities are parched for information and news coverage with context and quality.”

She cited foundation-funded research aimed at assessing the news needs of low-income and minority communities on Chicago’s West and South Sides. Low-income respondents in an 800-person phone survey were less connected than others on every measure tested. People told focus groups that they read Chicago’s dailies but found little that resonates with their lives.

And it’s not just the newspapers. In a speech in June, FCC commissioner Michael Copps cited a study that shows that black or Hispanic populations have fewer Internet-only news sites. “If the majority of hyperlocal sites are taking hold in affluent areas that can support advertising,” he said, “have we really dealt with diversity and competition, or have we just moved media injustice onto a new field?”

Desertification is on the march, claiming more and more communities as newspapers continue to wither and few Web efforts manage to replace more than a fraction of the original reporting that newspapers have abandoned (see Part I of this series). There are fresh examples from week to week and from coast to coast, but none is more vivid, or sadder, than the dramatic increase in aridity that newspaper readers in San Francisco Bay communities are surely experiencing right now.

The Bay Area News Group, which had been 13 dailies published by the Denver-based MediaNews chain, last month cut 34 newsroom positions across the group and combined five of its titles into two; in total, more than 100 employees lost their jobs. In one stroke, three papers died and the 10 survivors were all wounded. Readers will find the papers less reflective of their communities — they’ll have local news sections and most will have familiar nameplates, but their general news, sports, and comics pages will be more uniform. And, with the shrunken staff, original community reporting, which has been drying up for years as newspapers laid off reporters, will become even more parched.

Eric Newton, now senior advisor to the president of the Knight Foundation, was managing editor of The Oakland Tribune 20 years ago. In a posting to the Knight Blog, he recalled that he’d supervised a staff of 130 full-time journalists; after years of attrition the newsroom was home to only a dozen reporters — and this was before the newest cutbacks.

Newton recalled that Bob Maynard, The Tribune’s revered late publisher, had referred to the daily newspaper as “an instrument of community understanding.” Newton added, “We need some new instruments.”

Tomorrow: Might the elusive Web journalism model be neither for-profit nor non-profit?

Tom Stites, president and founder of the Banyan Project, which is building a model for web journalism as a reader-owned cooperative, was a 2010-2011 fellow at the Berkman Center for Internet and Society at Harvard.

Photo of Morocco’s Erg Chigaga by Joshua Benton.

Notes
  1. In addition to the single direct hit for “news desert”, Google also turns up 55,698 false positives, with “news” ending one phrase and “desert” starting the next. And, ironically, 48 hours before this piece was posted, my friend Doug Muder added a second, quoting me.

December 06 2011

21:14

To avoid consolidation: MediaNews Group introduces ‘Digital-First’ Mondays

paidContent :: In the hopes of saving money while avoiding consolidation, MediaNews Group is introducing “digital-first Mondays” at six of its California newspapers. Of those papers, the three that have paywalls will make all web content free on Mondays, and print subscribers will no longer have to pay an additional cost for online access.

Continue to read Laura Hazard, paidcontent.org

July 19 2011

14:30

Tackable, BANG collaborate on a location-based digital newspaper

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

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

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

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

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

Checking the reviews

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

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

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

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

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

Leaving user input fuzzy

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

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

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

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

Where the money comes from

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

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

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

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

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

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

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

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

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

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.

February 24 2011

15:30

The Newsonomics of the digital mercado

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.

It’s as old as organized humanity itself: the mercado, the bazaar, the marketplace. We love to visit Old World marketplaces as we travel abroad. At home, our own shopping is now a mish-mash of malls, big box stores, neighborhood shops, and online commerce. Amazon, itself, is now a $34 billion business, and its Prime delivery program can deliver just about anything (my favorite buy: an electric mower) right to your door, seeming so local.

We can research almost any purchase. We can compare prices. We can get advice and reviews from hordes we’ll never meet.

Yet it’s far from nirvana. Navigating the byways of web commerce, other than great walled gardens like Amazon, can be frustrating. Numerous culs-de-sac interrupt us. Price-comparison sites like Price Grabber, Google Product Search, Shopzilla, and UK’s Kelkoo only seem to give us a partial view of what’s available. It’s tough to know when reviews may be gamed. Sites like preprint-digitizer Shop Local (“Your Local Weekly Ads, All in One Place”), owned by Gannett, seems curiously backwards, like replica E-Edition newspaper products for reading. Trying to compare model numbers, on sites like CNET or Best Buy, can give us digital nervous breakdowns.

Within the infinity of shopping choice, a lot of us would like some order.

That’s what the new Find n Save product aims to provide, and for the benefit of newspaper companies. Find n Save is the latest effort from newspaper companies to reclaim what they consider to be their birthright, maybe a third generation of such marketplaces following the ShopLocals and the earlier Storerunners.

Find ‘n Save focuses us on a decade-old-plus newspaper company problem.

While the daily newspaper — with its display and classified ads, its Sunday circulars, and its Wednesday food coupon – used to be the leading local marketplace, it now is just part of the pack. One number — print ad revenue halved in 10 years to $24.8 billion in 2009 (no final tally is yet in for 2010, which was still lower in single-digit decline) in the U.S. — gives real meaning to this splintering of commerce.

Digital media, with its search-led research/price comparison abilities and, now, with the new couponing craze, has wrought havoc with the newspaper business model.  All of that digital commerce has been disruptive and disintermediating. Yet there’s been more disintermediation (of traditional publisher/merchant relationships) than remediation.

We turn to lots of digital media to research and shop, but we have few go-to places of habit, again with Amazon making the greatest inroads into our shopping lives so far.

From a customer-centric perspective, it’s never been more confusing to find good deals. Yes, they seem to come from every quarter — print circulars, the web overall, direct mail, eBay alerts, Amazon “notifications” — but they’re disordered.

A recent study by the BIA/Kelsey group puts a number on the proliferation of marketplace choice. The annual study points to consumers using an average of 7.9 different media to make buying decisions in 2010, compared to only 5.6 in 2007. Buying’s gotten more complex.

The flipside, of course, is that merchants’ own choices about how to market have gotten more complex (“The Newsonomics of  Eight Per Cent Reach“), with small- and medium-sized businesses using 4.6 media to reach customers in 2010, as compared to 3 in 2007.

So taking a look at Find n Save, let’s look at the Newsonomics of the would-be new mercado, and what it will take to make these new marketplaces bigger business for local media.

McClatchy’s newspapers are the first big clients for Find n Save, a product of Travidia, a long-time player in the print-to-digital ad conversion business. Find n Save replaces Marketplace 360, the company’s former regional marketplace product.

Two big McClatchy papers — its hometown Sacramento Bee and the Kansas City Star — launched Find n Save in November. The company’s other big sites, from the Miami Herald to its North Carolina properties (Charlotte and Raleigh) and the Fort Worth Star Telegram, should feature it by July 1, with the rest of the company’s 30 markets putting Find n Save in place by year’s end. MediaNews’ flagship Denver Post will also launch it soon.

It’s not the only new effort at a regional marketplace.

Find n Save will soon by joined by another regional commerce portal. FYI Philly will launch this spring, in the greater Philadelphia region, two of its principals tell me. It’s conceived as a commerce portal, details to come. Significantly, it’s the result of unprecedented cooperation among four newspaper competitors in that region: Philadelphia Media Network (the new parent of the Inquirer and Daily News), the Journal Register company, Gannett, and Calkins Newspapers.

For Chris Hendricks, McClatchy’s VP/interactive, the Find n Save push is about a grand goal: reclaiming retail advertising. While the destruction of print classifieds has been well chronicled, the steady decline of local retail has been less so. You can figure that retail advertising has declined about $7 billion annually since its 2001 height. Yes, online display advertising has yielded some retail revenue, but doesn’t come close to recreating the lost revenue — or the lost sense of marketplace. 

So Hendricks talks about “blowing up retail” — and reordering it with Find n Save. “People are searching more and more for local services and products,” he says. “And they’re getting more and more confused.”

Find n Save aims to bring some simplicity to that confusion. Take a look at it, and you can see it’s a work in progress. What we notice about it — very prominently — is the deal of the day. Yes, Find n Save aims to take advantage of the Groupon revolution. Some Find n Save sites are partnered with Groupon, while others offer their own deals of the day. The idea is that the deal of the day isn’t just a new ad play, a new revenue source, for news sites; it’s also a new gateway to local commerce. The rest of Find n Save shows its ambitions:

  • It gives prominence to other local couponing, deals without the social must-buy incentives of the daily deal. Subway sandwiches, vacuum cleaners, lots of restaurants, and car care — but all in one place.
  • It incorporates product search, as have previous versions of the product. Consumers can search by product, brand, and store, among other attributes, narrowing or expanding search as they wish, and see where that product is available locally. The big allure, here, is the ability to check whether a product is in stock, at multiple, close-by locations. Search for lamps or shoes or spas, and you’ll find a motley assortment of offers.

So far, the November-launched sites have seen their marketplace traffic “quintuple,” says James Green, chief marketing officer of Travidia and an alum of Raleigh’s pioneering Nando Media. He says that’s due mainly due to “product-centric search engine optimization,” providing a new level of prominence in Google search results. If that base can keep growing, Chris Hendricks sees the sites becoming commercial magnets. Possible new, related streams can include display ads, offering prominence and placement, charging local retailers for ingestion of their inventories and conversion of their print material generally and topical directories, he says.

“Deals are the content,” says Hendricks. He notes, for instance, that news sites’ attempts to connect up editorial content with restaurant directories — using newspapers’ unique and core strengths — hasn’t produced the dividends many of us thought they would. Forget the packaging of feature content with ads; just focus on the ads.

So what can we make of this step forward?

Well, it’s a step, but probably many more are needed. Fronting a site with coupons makes some sense, and will pull in additional audience. Yet the overall research and shopping experience will have to be fuller if these are to become go-to sites with masses of local buyers.

It’s hard to know how many years we are away from the perfection of commerce — you know, getting each of us the kinds of timely and meaningful shopping offers that bring order out of the digital shopping chaos. Certainly, though, here is some of what will be needed:

  • Broader, deeper databases of products: That’s simple to say, and hard to achieve. I asked James Green whether Find n Save is a breakthrough product. Not yet, he said, saying that there’s not yet “enough conversion.” That translates as product search being too spotty; provision of retailers’ real-time inventories is still a work-in-progress. If we as consumers run into more dead-ends than usable deals, we’ll stop coming back.
  • Reviews and recommendations: Find n Save contains none. In a world of imperfect knowledge, we love seeing what dozens of others think of products and services, just like in the early mercados. What’s new, good, and fresh? Throw out the reviews that are outliers, and we’ve got a better-than-even shot of making a better buying decision. Sites without them lack the critical component found in sites from Amazon to Best Buy to Yelp.
  • Preferences and customer knowledge: While some of us are highly concerned about privacy, many others say, ‘Just use your tracking to give me what I want — including deals — and stop spamming me with useless ads.’ So the ability to state preferences and to have my digital behavior intelligently watched — for my benefit — will be a big differentiator.
  • A great tablet product. James Green says Find n Save’s mobile app will be ready soon. Apps are, of course, becoming a price of admission for mobile customers. More importantly, the winning local marketplace will figure out how to combine deep, broad shopping info, social reviews, deals — and to fully embrace the interactive and visual capabilities of the tablet. Just as the iPad — and its newer cousins — are the big do-over opportunity for news companies’ reader business models, they’re also literally a blank slate for the new mercado.

Who will build it? It could be a Travidia, or an Amazon or a Google or a Facebook or a Flipboard-for-commerce so far unborn. There are billions of dollars baiting the hook.

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.

September 02 2010

15:00

The Newsonomics of less-is-more, more or less

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

It is a head-turner, which seems to be, at first, an only-in-Utah story. The Deseret Morning News, KSL TV, and KSL Radio, all owned by one company, the Deseret Management Co., a for-profit arm of the Church of Latter-Day Saints, are combining operations.

One headline: “Salt Lake City paper axes 43% of its staff”.

Another: “Deseret News a model of growth and innovation for the entire industry”.

One’s a fact; the other is aspirational.

Remove the religious subtext, for a moment, and I believe we see a model that will appear ordinary in many American cities, within a few years. Think about it. If we as readers, viewers and listeners want words, photographs, videos, and audio, and expect it to be served up in an easy-to-use, relevant-to-me way, then why would the companies that produce news in those various forms be separate?

They’re separate, of course, because those words/picture/audio used to be called newspapers/magazines, network and cable TV and radio broadcasters. Those words, though, describe the old world, those packages the content came wrapped in. In our digital world, we’re seeing delivery blur through the Internet. And, that inevitably, and now more quickly, means that single companies will produce words, pictures and sound — and they’ll find ways to do it more cheaply and efficiently.

If you own the Salt Lake properties, or if you’re Tribune and own the Chicago Tribune, WGN-TV and WGN radio, you practically have a fiduciary responsibility to rearrange assets that will make the company more efficient. If you own a broadcast station or a newspaper, you can more easily see the rationale in buying or combining with the other, to meet customer (reader/viewer and advertiser) demands of the coming age.

So the Salt Lake Experiment joins TBD’s (“The Newsonomics of TBD“) in putting together the text and video pieces. They are the next generation in this attempt to make convergence work. Call it News Convergence 2.0, with Tampa’s Tribune/WFLA experiment the best poster child for 1.0. How well the Deseret operation (or TBD) executes is, of course, the key. Journalism isn’t about white-board theories, in any era; it’s about getting the news gathered, analyzed, and distributed to readers, and doing it better than the competition.

Let’s look at the newsonomics of the Deseret decision, though. The numbers in play are curious ones, as Deseret News President and CEO Clark Gilbert lays out a “less is more” theme in the major restructuring of his company. In fact, let’s use the more and less theme to gauge the moving pieces of the new business model.

  • Less is More: Take that “43%” headline. The legacy news staff of the Deseret News has indeed been cut 43 percent — 85 jobs, including those of the editor and publisher of the paper. That number includes both full-time and part-time positions. So we’d expect a lot less coverage, right? With a bit of frustration in his voice, Deseret News President and CEO Clark Gilbert tells me bluntly “That’s an Old Media world view. We have access to more journalists, hyperlocal contributors, national sports figures than ever before.” His point, and his plan: The combined operations of the remaining Deseret News staff and the sister news staffs at KSL TV and radio will operate smarter and more efficiently.

    “Say there’s a story on Capitol Hill [in Salt Lake City]. Right now, the paper sends a reporter and a photographer and KSL sends a reporter and videographer. That’s four people, and that story may end up on B3,” says Gilbert. “Now we’ll send one.”

    So, step one: “Reduce duplication.”

    So the news math changes dramatically. The new staff of something more than 200 (Gilbert is being cagey about the number) will be expected to multitask, with remaining staffers increasingly cross-trained and “new employees expected to have those skills.” Do the math. If it took four people to do a story and now it takes only one, you can afford to jettison one of those positions and get more productivity out of the other two.

    Step two: “Deepen coverage,” meaning the re-allocating of resources to cover issues most important to the readers. Gilbert says that about half of the remaining news staffers will serve in the “integrated newsroom,” with the remainder staying in more traditional journalistic roles. In that integrated newsroom of roughly a hundred, a third will serve as first responders/rewrite and two-thirds as field reporters. “You’re sandwiching the reporters between first responders [getting to news and getting it out quickly] and rewrite [those taking the reporters work and purposing it for various platforms],” explains Gilbert. Those who first-respond also do rewrite — so that’s going to be a busy staff.

    The journalistic question: How do the new stories compare to the old ones?

  • More Costs Less: Borrowing basic notions of getting cheap and free content from the Huffington Post and Demand Media, Gilbert is putting into action what he has long preached in academic and consulting circles. I’ve called this emerging time the Age of Cheap Content. That principle means that the new Deseret operation will leverage bigger-name writers (especially those consistent with its Mormon roots and values, like former BYU football star and current Philadelphia sports anchor Vai Sikahema) for little financial compensation. That’s the HuffPo model. And they’ll leverage Salt Lake and Utah reporters to address both topical and hyperlocal coverage, through the new Deseret Connect. That’s the Demand side of the idea, bringing together a large database of qualified writers — “not random bloggers,” says Gilbert — and keeping their payments low or non-existent. “Some of the best don’t write for money.”

    Deseret Connect already has received more than 100 applications, and Gilbert says he can see it scaling to a thousand or more contributors within the year, using management system techniques developed outside the news industry for BYU/Idaho faculty.

    Gilbert says the non-pros will work on a path from generalists to columnists to doing editorial features, with pay increasing along that continuum — though he’s clear to point out that people doing the writing won’t be looking to the company “as their main source of income.”

    So, looking at cost per content unit — a Demand-like analytic — the new company will be able to house lots more content under its brand, at a far lower cost point.

  • More Beats Less: The Deseret play aims to bring together text stories and blogs, video, and audio. That supposes that readers want all kinds of coverage brought together for them. It’s a bet that products that converge video and stories for readers will beat the competition, competition like MediaNews’ Salt Lake Tribune, the biggest non-church-owned news presence in the state. One big question here: How will the customer experience be converged? In Washington, two ongoing TV stations folded their websites into the new TBD at launch. How separate and how unified will the DeseretNews.com and KSL.com sites be?
  • More is More: The new Deseret operation doesn’t just focus on geography — Utah’s more than 700,000 households. It’s taking a twin approach to being a general interest news site — and a new worldwide voice for the Mormon faithful of 13 million or so worldwide. In the company’s strategy, that’s described as a values-oriented approach, and you can already read that six-point values mantra widely. The six: “the family, financial responsibility, excellence in education, care for the needy, values in the media, faith in the community.” They make for a strong philosophy, but in marketing, that’s quite a straddle — one that may be difficult to pull off, especially as Salt Lake City itself has become majority non-Mormon.

The economics of it are clear, though. Pay (or don’t) to get a story written or a video shot once, and then distribute it many times over. It’s basic Internet economics, with a nichy, religious angle, one of many variations we’ll soon be seeing on these increasingly popular themes.

August 19 2010

13:30

The Newsonomics of the FT as an Internet retailer

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

Back in 2002, the Financial Times took a radically different path than most of its news publishing peers: It decided to charge its online readers to access its content. Flash forward eight years, and the FT model — a metered model — is the one many publishers are eying and beginning to test. The New York Times plans on debuting its metered model early next year; the Times Company-owned Worcester Telegram went metered this past week. Journalism Online is now powering MediaNews’ metering tests in York, Pennsylvania and Chico, California.

We can see the FT lineage in the Journalism Online Press+ pay solution. “The FT pioneered use of the meter as an elegant approach to freemium for news publishers — letting casual visitors continue to sample a selected number of articles per month while asking the most engaged readers to pay for unlimited access,” Journalism Online co-founder Gordon Crovitz explains. “In this way, the FT has been a pioneer.”

In the eight years since 2002, the FT has persevered through thicker and thinner markets. Now, it is one of the few companies showing advertising and circulation revenue growth and building a seemingly stable and successful model for the next decade. Its recent financial performance, most of which was released as part of its parent Pearson’s half-yearly report:

  • The FT group, responsible for about 8 percent of Pearson’s ongoing revenue and home of the Financial Times newspaper and digital products, showed an operating profit of £14 million, double last year’s profit. Revenue at the FT Group moved into positive territory, up 7 percent year over year, with advertising showing growth as well as readership revenue.
  • Overall ad revenue now makes up 45 percent or less of the FT’s revenue, down from 74 percent in 2000.
  • Digital readership increased by 27 percent, while the number of registered users — spurred by a no-unregistered views policy (with exception of home page and section pages) — saw a 77 percent increase to 2.5 million during that period.
  • Digital subscriptions grew by 27 percent to 149,000.
  • The FT raised its subscription rates by about 10 percent recently, with standard subscriptions now costing $225 or £190 and premium subscriptions going for $330 or £299.

That’s an impressive report. It contrasts with the experience of most news publishers, who are struggling to stave off continuing year-over-year losses in both ad and circulation revenue — and are finding themselves too dependent on ad revenue as the ad marketplace morphs away from traditional media.

We can parse a number of reasons for the FT’s upward trajectory. In the end, though, I think that FT.com managing director Rob Grimshaw sums it up best, and in a way that should make all news publishers pause and re-think.

“Where we’ve found inspiration is Internet retail, not publishing,” he told me last week. “We’re becoming a direct Internet retailer and we have to have expertise to do that. When you do that with publishing, it looks like a different business.”

Internet retailing — think Amazon — seems like a very different business than publishing. In the endlessly measurable digital age, though, the parallels are striking. It’s not in what you are selling — books, electronics, or news stories — it’s what you know about your customers, their habits and wants.

In February, I produced a report for Outsell, a global publishing industry research and advisory company, about the FT. I called it “Five Things to Learn from FT.com,” and my greatest learning was that analytics, the smart gaining of knowledge from data, was at the heart of the company’s successes and plans. If we look at the emerging newsonomics under the FT business, we see how analytics are driving both of the FT’s two basic business lines, reader revenue and advertising revenue.

Reader revenue now accounts for more than half of the publisher’s income. While there are many moving parts under it, the FT’s pricing of its subscriptions, its targeting of markets, its tweaking of offers, and its valuing of paying customers are all increasingly done on the basis of analytics — not on the gut calls that have long fueled news company decision-making.

Much of it is “propensity modeling,” fancy words to say: What’s the likely reaction of what percentage of people if we offer them this, that way? The modeling grows out of the analytics, now put together by a team of nine people at the FT — up two from a year ago. The group is relatively new, and it’s one that Grimshaw says has produced a night-and-day difference for an outlet that, like most of its fellow news companies, used to “hold and manage” data, rather than using it to drive the business.

The FT has been able to gauge consumer behavior well enough that its subscriber volume and pricing have risen. Even though the site allows fewer unregistered clicks than it did a year ago, Grimshaw says page views overall have gone up — the result of the paying customers using the product more.

In addition, the FT has taken a new tack in the enterprise licensing of its content. Two years ago, it began to reclaim its syndication business. It still works with third parties to deliver the contract, but directly contracts and licenses more than 1,000 companies for its usage. The direct licensing does help a bit in pricing and margin, says the FT’s Caspar de Bono, who directs the B2B business, but the direct pipeline of customer-usage data it provides is the bigger win. Analyzing that data helps the FT improve its products and its delivery — and increasingly gives the content licensees themselves a view into the content’s usage and value for their workforces.

Advertising, too, is benefiting from the research work. The more knowledge the FT can share about its audiences, their habits and preferences, the better advertisers can target their messages. In addition, analytics support the FT’s eight-member Strategic Sales team as it customizes marketing approaches for firms and their agencies. Grimshaw says that by early 2011, advertisers themselves will get some access to FT audience data.

It’s all a work in progress, but one that is coming closer to offering a virtuous circle of business results. It’s a model — an Amazon model for the news world — that bears attention from months-old online news start-ups and venerable, nineteenth century brands alike.

July 15 2010

15:00

The Newsonomics of the dead cat bounce

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

The season’s upon us, as newspaper and media companies announce their second-quarter earnings. At least some of the companies will announce: fewer than used to a couple of years ago, as Tribune has gone private (and banko), metros like Philly and Minneapolis have moved to private hands, MediaNews releases less information than it used to, and Dow Jones’ results are less decipherable, aggregated within News Corp. news division results.

Still, Gannett — the largest U.S. newspaper company — leads off Friday. The New York Times Co. follows on July 22. McClatchy comes in on July 29. We’ll also hear from A.H. Belo, Scripps, Lee, and Media General, dates TBA.

Let’s get ahead of it a bit and see what we can look for in the announcements and what that will mean for the news industry. Let’s look at a newsonomics primer of this struggling industry as the rest of the economy haphazardly improves around it.

I could call this post “The Newsonomics of newspaper quarterly earnings reports,” but much better is the story of the moment: How much will newspaper companies tout — and how will the reduced-but-remaining corps of those who cover the industry report — how positive their dead cat bounce is. “Dead cat bounce” is a phrase you hear — confidentially — from some newspaper executives. It’s an old Wall Street term, observing that even long-declining stocks will bounce a bit sometimes.

Let’s recall that last year’s ad revenue results had all the spring of a dead cat — down some $10 billion and 27 percent. So take a dead cat and pump a little life in it, with things less worse than they were in the disastrous 2009 and you get a bit of a bounce — but not one to crow about. Unless, that is, you don’t have much else to crow about, and that’s that’s the predicament, circa mid-2010, of most newspaper companies. They don’t have a big, positive story to talk about.

So, consider this a parsing guide to what we’ll hear in the next month:

  • How much was the second quarter down from 2Q 2009? First-quarter numbers were down largely in single digits, and that seemed a relief after comparable double-digit declines. We heard such CEO parsing as “improvement in comparables” and hopefully spun statements such as “Domestic classified advertising was just seven percent lower than March a year ago.” The problem: The rest of the economy, and even the TV and online ad economies, are all showing real growth — and taking market share from newspapers. Newspapers’ continuing inability to find real arithmetic growth doubles down on the theory that these revenue changes are more structural than cyclical — and that the Great Recession may have accelerated newspapers’ downward fortunes. Are there any positive growth numbers to report? Which categories may be turning positive — maybe national or retail display ads — as the sagging economy continues to plague the traditional classified strengths of auto, recruitment, and real estate?
  • How much will the prepared remarks focus on cost or debt reduction and how much on revenue growth? Play Earnings Bingo and count the comments involving “debt reduction” or “cost restructuring” as compared to “growth.”
  • How much of revenue is now coming from digital, and what’s the digital growth rate? Most newspaper companies increased their percentage of overall revenue attributed to digital to the 12-15 percent range in 2009 — but that was largely because print revenues dropped so precipitously. The news industry is becoming more digitally oriented, but still has a long way to go. Still, it’s a useful percentage to know; few companies report it routinely, but often mention it in Q&A. Most importantly, is the digital business growing, and at what rate, after being just north or south of flat in Q1? Such growth is key to these companies’ future.
  • How much of that digital revenue is coming from digital-only sales? McClatchy CEO Gary Pruitt was the first to make a point of digital-only sales, as it approached half of total digital revenue. Pruitt’s right; it’s an important barometer of where the business is going, not where it’s been. Since the mid-’90s, the industry has been overly reliant on “bundled” ad packages of print/online. Now as the digital marketing revolution matures, a number of companies — often spurred by the Yahoo Newspaper Consortium — are really pushing online-only packages.
  • How much revenue is coming from emerging marketing services business initiatives? Tribune and Gannett are among the leaders at selling website building, search engine optimization services, and more to small and medium-sized businesses. Will we hear about this big new push — and how many dollars it is starting to drive?
  • Is there any circulation revenue growth? Circulation numbers have continued to plummet, while newspaper companies have priced up substantially. The overall notion: Get long-standing, habituated print subscribers to pay more of the freight. For The New York Times, the strategy has worked and circulation revenue has continued to grow (up 11 percent in Q1). For other companies, Gannett (circ revenue down 5 percent) and Lee (down 4 percent), the math isn’t working as well. Pricing up and losing both revenue and circulation numbers that are the lifeblood of selling advertising is not the outcome desired. So watch circulation revenue numbers in the reports. If they’re still negative, that’d be an indication that newspapers’ circulation pricing power is waning.
  • Do we hear any strategies discussed for the second half of 2010 or into 2011? Any iPad/tablet plans or development? The discussions surrounding the earnings calls can focus just on numbers, sometimes arcanely so, or get into actual strategies that may lead from the tepid now to a better tomorrow. How much strategy do these companies have and/or are willing to share with investors?

Image by Eric Skiff used under a Creative Commons license.

May 03 2010

14:00

The Newsonomics of reborn newspaper profit

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

The first quarter newspaper numbers are in. They paint a consistent picture.

Across the board, the reporting of public news companies reflects a new, if unsteady reality. In short, that reality is one of profit. Not the big profit of 20-percent-plus profit margins — the envy of many other industries — that were a truism as recently as five years ago. Now, the profit’s more tepid, mostly in single digits: The New York Times, 8 percent; Gannett, 8 percent, McClatchy, 1.5 percent. Expectations run that news companies will show a five to 10 percent profit for the year, absent unforeseen calamity.

But that mild profit is good news. Recall that a year ago, much of the industry was in freefall. A number of companies — stunned by the quick near-Depression downturn of ad revenues — went operationally into the red. They responded with draconian cuts in staff and newsprint, and as the recovery has emerged, they’ve positioned themselves as smaller but profitable companies, though their first-quarter revenues still largely lagged the first quarter of the horrific Q1 2009. Wall Street has rewarded them with improved credit ratings and advanced share prices. There seems to be, say investors, some future here. This week’s tenacious auction in Philadelphia with lenders led by the Angelo Gordon private equity company — now a big player in the U.S. daily business — winning the papers with a $135 million bid only reinforces the notion that newspaper valuation may have been trashed too much.

It’s a fragile stability. One big question for all publishers: where do we go from here?

Here the newsonomics are constrained. While Google is off buying a company a month and Apple charts its own strong growth path, most newspaper companies have little room to maneuver. Sure, the private Hearsts — a diversified media company with newspaper interests — can invest in new companies and technologies, but for publicly owned newspaper companies, it’s a different story.

First off, their meager profits are uncertain. They then face three ways to use those profits. The three:

  • Debt reduction: Debt has been the anchor around many newspaper companies’ necks, as those that borrowed to complete acquisitions reeled as the business changed and then the economy tanked. Thirteen newspaper companies have declared bankruptcy, with that clean-up continuing. Yes, they’ve discharged a lot of debt (Alan Mutter tracks the $1.9 billion discharged in just four of the bankruptcies), but almost everyone — those now out of bankruptcy and those that avoided it — still has debt service to bear. In most cases, it is reduced, given either bankruptcy or workouts with lenders, which extended payments. Debt reduction remains not only a necessity, but a strategic goal. In most quarterly reports, news company CEOs trumpet their abilities to reduce debt, a sign of their revitalization — and an indication they hope to have more maneuvering room in the future. New York Times Co. on its 1Q debt picture: “The Company continues to improve its liquidity, reducing its debt, net of cash and cash equivalents by approximately one third to $671 million from its balance at the beginning of 2009. The majority of the Company’s debt matures in 2015 or later.” Over at Gannett, CEO Craig Dubow made a prominent point of his company’s recent $260 million quarterly debt reduction. Much of McClatchy’s first quarter statement focused on debt reduction and its refinancing.
  • Product investment: Publishers don’t have to look much beyond their own recent FAS-FAX circulation numbers — another 8.7-percent daily decline — or their talks with community members. They realize their major cuts in staff and product has diminished their business prospects; they’ve cut into bone, in parlance you often hear. A few companies, including Belo and MediaNews, have cautiously added back a little staff here, a little newshole there. They’d like to invest more in product, but agreements with lenders and their own sense of how fragile the newspaper recovery is holds them back.
  • Profit improvement: These are, after all, public, for-profit companies. Investors of all kinds expect them to grow their profits, after re-establishing the stability of them.

To put it simply, at this point, there’s not enough profit to satisfy all three goals. So, in 2010 — a year crying out for investment in innovative mobile media product creation and marketing services/advertising infrastructure build-out — news companies have far fewer resources than they’d like and they need. While once they were the big guys, looking at buying startups, for now, they’re largely on the sidelines, marveling at the mojo, the profits, and the acquisitions of the Googles and the Apples.

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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