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April 03 2013

18:50

The newsonomics of the Orange County Register’s contrarian paywall

angel-stadium-cc

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

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

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

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

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

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

1. A paywall without discounted digital access

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

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

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

2. Time-based digital access

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

3. Day passes

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

4. All archives open to the public

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

August 21 2012

20:05

Gannett acquires social media marketing specialist Blinq

VentureBeat :: You know what they say: If ya can’t beat ‘em, buy ‘em! Or at least that’s what the folks at Gannett are saying today. The traditional media titan has just snapped up Blinq, a social media marketing shop.

A report by Jolie O'Dell, venturebeat.com

August 11 2012

16:19

Gannett will buy BLiNQ Media for up to $92m

TechCrunch :: On the heels of Google buying Wildfire and Salesforce nabbing Buddy Media, we have heard from two very reliable sources, plus a third anonymous source, that Gannett Co., the media giant that owns USA Today and other properties, is buying BLiNQ Media. The price for the Facebook advertising software and service is up to $92 million over a period of three to four years, with a quarter of that amount, $23 million, coming up front.

A report by Ingrid Lunden | Josh Constine, techcrunch.com

April 29 2012

20:32

.@Ona receives $50,000 Gannett grant to continue free digital training

Journalists.org :: The Online News Association, the world’s largest membership organization of digital journalists, today announced its fourth year of free digital training, thanks to a renewed grant from the Gannett Foundation. The $50,000 in funding enables ONA to continue one of its most popular and valued programs, ONACamp, which so far has visited nearly 1,000 journalists in communities throughout the United States to update their media skills.

Via Jim Brady, Editor-in-Chief at Digital First Media and President of The Online News Association, ONA:

Thanks to Gannett for its $50K grant to @ONA to support free digital training for journalists: journalists.org/2012/04/27/ona…

— Jim Brady (@jimbradysp) April 29, 2012

Continue to read journalists.org

April 21 2012

12:18

Ryan Thornburg: Pay walls and social media could shift the public agenda

Mediashift | IdeaLab :: If conversations around digital journalism have been dominated by anything in the first quarter of 2012, it's probably been about subscriptions, also known as pay walls. Walls are going up at the L.A. Times and Gannett papers, and getting higher at The New York Times. And the editor of The Guardian asked his readers, "What would you give the Guardian? Money, time or data?"  The conversation all this time has been focused on whether the shift toward digital subscriptions will save the news business. But the more interesting and important question is whether and how it will change the news content and public discourse.

Continue to read Ryan Thornburg, www.pbs.org

April 17 2012

13:32

Pay Walls and Social Media Could Shift the Public Agenda

If conversations around digital journalism have been dominated by anything in the first quarter of 2012, it's probably been about subscriptions, also known as pay walls. Walls are going up at the L.A. Times and Gannett papers, and getting higher at The New York Times. And the editor of The Guardian asked his readers, "What would you give the Guardian? Money, time or data?"

wall.jpg

At the end of last year, Raju Narisetti proposed a pay wall alternative he dubbed the "'Why don't we pay you?' pay wall" ... and then left the unwalled Washington Post for the walled Wall Street Journal.

The conversation all this time has been focused on whether the shift toward digital subscriptions will save the news business. But the more interesting and important question is whether and how it will change the news content and public discourse.

There's never been a question that people will pay for digital content. Give people information they need to profit professionally or enjoy personally, and they will pay for it. But what about all the boring and bad stuff? What about the kind of iron-butt reporting that has journalists cover legislative subcommittee meetings just so powerful people know the public is watching? And the quarter million-dollar investigations that find the hidden winners and losers?

That news doesn't entertain; it doesn't give me a competitive edge; and it doesn't save my family money in the short run. Those kind of stories make big waves every now and again, but no matter how high the pay wall, once the story is out, it spreads via broadcast news, social media and word of mouth. Even those who don't pay for it get to benefit from its impact.

social media's role

The role that social media plays in the subscription pay model isn't fully understood -- by me at least. I'd like to find the time to ask about whether paying subscribers share more or different stories than non-subscribers.

In any case, with a pay wall in place, subscribers will -- as always -- set the agenda more than non-subscribers. Some subscribers will be more influential than others, either because they have more followers or because they provide a better filter. In either case, the future of public discourse lies with subscribers. We need to know more about who they are and how their desired public agenda differs from non-subscribers.

It's easy to suspect that only the elite would pay for news -- only people whose personal social and economic decisions are determined by taxpayer money and public markets -- and that the topics that interest those folks may not be particularly populist.

But then I stumbled across a January 2011 survey by the Pew Research Center that seems to indicate that the willingness to pay for news may not be as elitist as I originally thought: African Americans and Hispanics are significantly more likely than whites to say that they would pay a monthly subscription fee if that was the only way to get full access to their local newspaper online. But there's no significant difference among any age groups under 65, nor is there a difference between men and women. On the other hand, college grads and people who make more than $75,000 a year are more likely to say they would pay for online local news than people who make less and have less education.

So does the public discourse look different if the people who subsidize original reporting -- and then share it -- are rich, educated, racial and ethnic minorities? After paying to see the news, what would they share? And who would they share it with?

the social distribution of news

The democratization of publishing means that alternative points of view would always be waiting in the on-deck circle anytime the paid-stream media misses a story its audience cares about. So it's also important to predict what kind of effect the audience's sharing patterns would have on journalists who want to make sure their pay walled reports remain valuable enough to make ends meet.

The social distribution of news has two benefits for news organizations -- they sell advertising against each unique visitor, and they have an opportunity to convert the social media samplers into paying subscribers. But if the role of advertising at news organizations becomes a significantly lower share of revenue, then eyeballs alone won't matter as much. News organizations might be less interested in running "water cooler" stories that are cute and fun alone. And they might be more inclined to run stories that target an audience that wants more than 140-character summaries.

Research collaborations between academics and industry could help us make better guesses -- and making good guesses on this topic will be important for any news organization that understands it doesn't sell ads or subscriptions, but trust and influence.

Image courtesy of Flickr user Aunty P.

05:26

Digital-print divide: Gannett profit falls 25pc on newspaper ad decline

Associated Press | New York Times :: The Gannett Company reported a 25% decline in first-quarter profit on Monday, as advertising in its newspapers continued to decline. The company, which owns 82 newspapers in the United States, including USA TODAY; 23 broadcast television stations; and several digital media properties, said it earned $68.2 million, or 28 cents a share, in the quarter, down from $90.5 million, or 37 cents a share, a year earlier.

[Gannett, First Quarter Results:] The company’s continued focus on digital solutions for its advertisers drove an increase of 12.5 percent in Publishing segment digital revenues (included in all of the categories above). Online revenues were up 13.5 percent at domestic publishing operations while at Newsquest they were 6.4 percent higher, in pounds. Digital revenues at U.S. Community Publishing were 11.2 percent higher driven by increases in auto, employment and retail. USA TODAY and its associated businesses reported digital revenue growth of 25.3 percent.

Continue to read Associated Press, www.nytimes.com

Gannett Reports First Quarter Results 04/16/2012, www.gannett.com, (PDF direct link)

February 28 2012

18:12

From Salinas to Burlington: Can an army of paywalls big and small bouy Gannett?

Brick wall with window

Gannett is mounting the biggest campaign yet to make readers pay for journalism online. And the newspaper company’s size means its success or failure could ripple throughout the marketplace.

By the end of the year Gannett plans to launch digital subscriptions for almost all of its newspapers, a kind of unified paywall that would operate on the web, mobile and tablets and cover 80 of the company’s news sites, with the exception of national flagship USA Today.

For newspapers it may signal a turning point, since readers are now looking around the marketplace and finding fewer free papers. That doesn’t mean a change in the amount of free news (aggregation and sharing remain rampant), but it could have an effect on people’s perception, or even willingness, to pay for news. It’s like looking around for cheap gas in your neighborhood: If all the stations list unleaded at $3.85, you’re more likely to believe $3.85 is the going rate for fuel.

Until now there has been no paywall rollout of this scale for U.S. newspapers, with most digital subscription plans emerging piecemeal at places like The New York Times, The Baltimore Sun, and The Boston Globe. The Gannett plan reaches readers across 30 states (and Guam!). In other words, the number of paywalls in the United States will jump dramatically, as well as the number of people exposed to them.

Gannett is pushing a total digital transformation, not just a paid content strategy.

Like all paywalls, the success of Gannett’s plan largely hinges on people’s willingness to pay for news online. (That, and how easy it is to pay. More on that in a bit.) The company is betting readers will pony up, projecting at least $100 million from the new subscription program by next year.

The paywall should be easily scalable, since Gannett likes to take advantage of consolidating resources within the newspaper group. The paywall mechanics and back end will be the same for all 80 papers, but details about pricing and metered access get decided on the local level. Gannett’s papers run the gamut of small to big, and no two communities are alike when accounting for factors like Internet use and penetration of mobile devices. That’s likely why the company began testing digital subscriptions at select papers in St. Cloud, Minn., Poughkeepsie, N.Y., and Lafayette, Ind., among others.

If Gannett has any data about its paywall experiments, it’s keeping it quiet. (The company has, however, been preparing employees to answer questions about the change.) Since the paywall test sites were announced in 2010, no numbers have been released on subscribers or circulation revenues. So what have they learned? Here’s what a Gannett spokesperson told me via email:

On the previous pilots, we learned a lot about consumer engagement and willingness to pay for unique local content from our experiments in Greenville, Tallahassee and St. George. This new model builds on that, responding to consumer demand to have the news and information they value available on whatever platform they choose. Obviously, we feel those early tests were successful or we wouldn’t be building a new subscription model around those learnings. However, we are not going to discuss confidential business data at this time.

Gannett is pushing a total digital transformation, not just a paid content strategy. There will be dozens of tablet and phone apps, which, aside from color schemes and branding, will likely look and work similar across the 80 properties. Again, Gannett’s size is a boon for small and mid-sized papers, as the company can bring them to market faster than the individual papers could have alone. As tablet usage continues to grow, apps or other digital access can incentivize digital subscriptions.

There is some evidence that paywalls for small and mid-sized newspapers can succeed, or at least shore up circulation and not be a drag on revenues. At the same time, in some cities a paywall has boosted circulation of the Sunday paper in particular (the “Frank Rich Discount”). Newspapers in Memphis and Minneapolis have seen bumps in the Sunday circulation, but for others that increase has has yet to fully materialize.

For each community it comes down to how a digital subscription plan is executed, said Ken Doctor, a media analyst and the Lab’s resident expert in Newsonomics. Specifically, he said, it’s a question of how to charge readers, existing versus new, or whether to offer a print discount versus an additional charge for web access.

“What Gannett is saying is, ‘We think we can bump revenues by 10 percent from essentially being flat.’”

For other publishers the decision is simple: Increase subscription prices across the board and promote the value of bundled access to mobile, tablet and desktop. Taking all of that into consideration, and Gannett’s $100 million calculation, doesn’t seem impossible. “What Gannett is saying is, ‘We think we can bump revenues by 10 percent from essentially being flat’,” Doctor said.

Hitting that target is easy when you factor in the conversion of existing print subscribers to digital subscribers. The challenge for most local and regional papers with paywalls is bringing in new readers, who are getting their news elsewhere. And most people signing up for digital subscriptions are older readers, he said. “I haven’t heard of any regional paper that produces substantial digital only customer numbers and revenue numbers,” Doctor said. These are problems that point to whether paywalls can have long term success for locally focused journalism.

Since each site has the ability to determine the pricing for its subscription plan, there will undoubtedly be tension between what individual markets will bare and what the mothership needs to improve its bottom line. For Gannett, one paper’s success with digital subscriptions can be another paper’s failure. The fate of Gannett’s plan rests in whether the Sioux Falls Argus Leaders of the world offset the likes of The Indianapolis Star or Cincinnati Enquirer.

Image by Darwin Bell used under a Creative Commons license

January 17 2012

07:38

Metromix, New York: Gannett reduces headcount

The original headline of the article was "Gannett shuts down New York entertainment and nightlife website, Metromix," but a spokesperson at Gannett told Capital that they reduce headcount and that they are not planning to shut the website, at least not for now.

Capital New York :: Gannett Co. has "cut back" (was: shuttered) the New York branch of the local entertainment and nightlife network, Metromix, Capital has learned. The New York Metromix editor, Kirk Miller, broke the news to his writers this afternoon in an email. It was unclear whether any of the Metromix sites in other cities had met a similar fate.

Continue to read Joe Pompeo, www.capitalnewyork.com

Tags: Gannett

December 07 2011

19:20

Your 2011 holiday gift guide, brought to you by the news

Santa running down the street in Algers, France

If you want to save journalism, you might turn to journalism this year for all your Christmas shopping.

This weekend at NewsFoo, an O’Reilly “un-conference” for about 170 journalists and tech disrupters, the tech writer Mónica Guzmán posed a question: “Can’t we [news organizations] sell anything besides articles?” Yes, it turns out, and there are numerous examples of them trying it.

A couple of months ago Guzmán was talking to an entrepreneur in Seattle who had just sold his latest startup to Google. “We got to talking about journalism, and I’m always fascinated to listen to people who come from an innovative mindset, but not a news mindset, look at news. What he said, basically, is I don’t see how news is really going to innovate and move forward unless they can get past this idea that what they sell is just content.”

News organizations have one big advantage in business: They know their audience.

“We have a huge leg up when it comes to organizing information communities,” she said. “[News outlets] build those communities that can be really specific and really well defined.” (NewsFoo is generally off the record, but Guzmán talked with me after her session.)

Here are a few examples of all the ways news companies are selling non-news products to consumers. Some might look better wrapped up under the tree than others, but if you feel like supporting the news, maybe there’s room on your credit card for one or two of them.

Merchandise!

For the oenophile in your life, buy a gift subscription to the New York Times Wine Club. Six rare wines (four red, two white) for $90 per shipment, or $180 for the most exquisite Reserve Club varietals. Each bottle is paired with tasting notes and an NYT recipe. Europeans can sample Telegraph Wines, “one of the UK’s most respected wine merchants.” A case of six bottles of Prosecco goes for £54 and includes two complimentary Champagne flutes.

Spaceballs: The Flamethrower

The Telegraph doesn’t stop at wine. There’s a Telegraph Garden Shop, Motoring Shop, a travel shop for holiday cottages. You can buy earrings, duvet covers, snow boots, and clothes hangers. “They are the leading retailer of clothes hangers in the U.K.,” said Jeff Jarvis in an April 2010 Editor & Publisher story. The newspaper raked in a quarter of its profit in 2009 from selling things, he said.

The Onion cheaply repurposes tons of its own content into coffee-table books and framed prints. NPR, almost true to stereotype, sells “green gifts,” “gifts for gardeners,” and “gift for tea lovers.” None of those items have NPR branding, just the kind of things a typical NPR listener might like to buy. (And shoppers know their purchase helps support the news.)

The überaggregator Boing Boing sells stuff as weird as that which it aggregates, e.g., rubber finger tentacles, a remote-controlled flying shark, a bacon-scented air freshener. That site outsources the e-commerce software and payment processing.

Specialty iPhone apps

Santa's Hideout screen shot

There are plenty of smartphone and iPad apps that try to generate revenue for news organizations, but it’s less common for there to be an app that doesn’t have anything to do with the outlet’s journalism. Just today we wrote about Condé Nast’s new Santa app, which helps parents assemble and share lists of what their kids want for Christmas.

This summer Hearst Corp. launched its App Lab, a sort of digital R&D unit for the ad agencies who work with Hearst. It was Hearst that developed Manilla, a financial management product for consumers, earlier this year.

Events

In September, the web-only Texas Tribune launched the Texas Tribune Festival, a first annual symposium that brought together politicians, wonks, lobbyists, and others from the universe of Texas politics. (I interviewed editor Evan Smith about it this summer.) Tickets cost $125, but the real money comes from corporate sponsorships. In 2010, before the festival existed, the Tribune raised about $600,000 in event sponsorship, Smith told me. The Tribune festival was modeled on the New Yorker Festival, which also sells tickets and big-name sponsorships. Forbes follows a similar model for its CEO conferences around the world, but those tickets are a lot pricier.

Digital marketing services

Rubber finger tentacles

435 Digital is a Chicago consulting firm that does web design, SEO, and social media — actually, it’s a division of Tribune Co., but you would never know that from looking at its home page. The group is made up of the people who gave us Colonel Tribune and the ChicagoNow blog network.

GannettLocal, too, offers marketing services for local businesses that advertise in Gannett-owned papers. Condé Nast sells its in-house creative talent to advertisers, competing with the very agencies whose work fills the pages of its magazines.

Using reporters’ smarts

The Chronicle of Philanthropy, as I wrote this summer, packages its reporters’ in-house expertise about particular topics as paid webinars that cost as much as $96 apiece.

The premium content, the merch, the events, the consulting, the apps — they are all specialty products for niche audiences. Whether all of the offerings are making money is for another story.

“Last-minute shopping?” by Louise LeGresley used under a Creative Commons license.

July 21 2011

15:30

The newsonomics of U.S. media concentration

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

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

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

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

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

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

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

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

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

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

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

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

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

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

It’s not just a Philly scenario.

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

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

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

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

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

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

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

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

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

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

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

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

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

July 18 2011

16:00

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

May 05 2011

14:30

The newsonomics of the new ABCs of journalism

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.

This week brought us the long-worked-on new counting metrics for American daily newspaper journalism.

ABC, the Audit Bureau of Circulations, has long provided The Number.

The Number — really The Numbers, a daily number and a Sunday number — have been the reader numbers dailies measured themselves by, twice a year, spring and fall. Who’s up, who’s down, who’s number one — it’s really a horse-race number, simple to report by the publishers and simple to report by those covering the industry. Of course, The Number has been in horrific decline. Take a look at the State of the News Media circulation chart (a third of the way down a long page) and you can see 15 straight reporting periods in single-digit decline, tracked since 2003. Clearly, circulation is still dropping, though it will take the next six-month comparisons, using these new metrics, to establish new benchmarking.

That’s one of the reasons The Number is gone — optics do count — but more importantly the nature of ad buying has changed dramatically in that same period. Newspaper ad revenues have been halved while online ad revenues will approximate newspaper ad revenues this year or next. While halved to $25 billion annually or so, newspapers, with the new ABCs, have made a directional shift to satisfying those advertisers; recall that even the New York Times, the digital leader with 25 percent of its ad revenues being digital, still depends on the print for three-quarters of its dollars.

So The Number is all but gone. Sure, there’s still “Total Circulation,” and that’s led some to do apples-to-apples comparison to the last set of numbers from last fall. It’s not a fruitful exercise, given the magnitude of the changes.

“ABC and the industry never intended that ‘total circulation’ to be a metric of success,” John Murray, the Newspaper Association of America’s vice president of audience development told me this week.

That’s because there is a now a whole raft of numbers, a new set collected by publishers, verified by ABC and used, over time, quite differently by advertisers. Trying to understand the difference between the old report and the new report is best done either dead sober or after a six-pack; anywhere in between may leave you wanting. I appreciate Poynter’s Rick Edmonds thorough picking through the changes, the new lexicon and taxonomy, and I won’t repeat his observations.

What’s significant to me about the changes are two big things, one theoretical and one practical, and therein, I think, lie the newsonomics of the new ABC report.

The big picture recognition here, as publishers and major advertisers have wrestled the new system to the ground, is that the age of simple mass is gone. Counting is increasingly about niche. How many of the readers are paid readers of print? How many read e-editions, and, of those, how many read replicas and how many read dynamic products? How many readers get free, but requested, packets of news and ads, and how many readers get the packets because they’ve been targeted (affluent households) just because of where they live? And there’s more nuance than that.

Just as the digital marketing world has increasingly provided agencies and advertisers with a trove of audience data, the print world is slowly responding. While advertisers can only track these differing print niches with differing coupon codes, or a spectrum of differing 1-800 call-in numbers, print at least can be niched in some ways, even though it doesn’t offer the intensive harvesting of data that digital does. Of course, the various e-alternatives, from “online” to tablet to smartphone, are offering advertisers the ability to say “I’ll take this, but not that” and to mix and match print and digital buying as never before. While advertisers could do some picking and choosing before, they were often flying blind and these new categories of circulation counting — verified circulation and branded editions to “requested” or “targeted” delivery — give them better data on which to make those choices. Consider the data advertisers get with this first report just the beginning of new sets of metrics to come.

On a practical level, we can see a couple of fundamental ways the new ABCs will impact the marketplace:

  • Sunday and preprints: Sunday Select is the flavor of the age, as companies from Gannett to McClatchy to Belo eagerly make up for declining paid Sunday circulation with packets of news and ads delivered to non-payers. “Paid is no longer the determinant of value,” says Murray — and that’s a huge change for an industry that long differentiated its ad appeal on the basis of paying customers. If readers opt in (“requested”), that’s a big plus for advertisers. Why? That shows “engagement,” that magic word all online publishers seek. Opt-out (or “targeted”) denotes a little lesser value, but since those being targeted are higher-demographic households, advertisers still like to reach them. In the new stats, though, they’ll be able to see how many paid, how many requested and how many targeted editions got distributed on Sunday. Some will try to differentiate results among the three. I asked John Murray where advertisers are at in tracking the differing results among paid, requested, and targeted, on a scale from one to ten. “I’d put them at 2s and 9s,” he told me, explaining with a couple of numbers how much in transition we are. Some — think Best Buy, for instance — are 9s, trying to track and compare everything, including differing print deliveries. Others are 2s, still essentially buying mass, but planning on doing more tracking over time.

Sunday is huge for newspapers, as a third or more of their revenue is driven by that one day. And preprints, or the Sunday circulars — all those glossy colorful ad inserts from the big box stores — are now make or break for that Sunday take. “Media [reading] habits are changing faster than ad habits,” says Randy Novak, a Gatehouse veteran and now vice president of industry research and relations for Geomentum, a local focused ad agency. “People like to touch those preprints.”

Let’s complete the value circle here. Who loves those preprints? Twenty-five to 44-year-old women, says Murray, and they are coveted consumers. Consider Sunday and its preprints to be the biggest raison d’etre of the new ABCs.

Further, add in a Wednesday or a Thursday midweek market day, says Novak, and you’ve got a newer, winning formula. We begin to see further definition of a strategy that is emerging at daily newspaper companies. That strategy: Sunday print/daily digital, especially tablet, as a coming subscription/ad satisfying program coming to a city near you by 2013-14 (“The newsonomics of Sunday paper/daily tablet subscriptions“). Or Sunday/Wednesday print, and the rest digital. We’re headed there, I believe, as the economics of advertising and the emerging reading habits of news readers merge to forge new revenue and cost-saving plans. (One thing to watch closely in the next sets of ABC reports: How well Sunday print paid is doing.)

  • Proving — and disproving — e-edition value: E-replica editions have been used by some papers to artificially pump up those sagging circulation numbers (“How much can we trust e-edition numbers?“). Publishers have told me privately that while they packaged — and counted — those replica products, only a small percentage of readers actively used them. Starting with the ABC fall report, there will be some effort to count usage — a nod to advertisers who figured out the scheme. In addition, we’re already seeing “replica” and “non-replica” parsed out, which should help separate out the e-chaff. More interestingly, as we see increasingly nuanced reporting of specific tablet and smartphone usage, we’ll be getting an emerging picture both of how news is really being read and how marketers can effectively read readers via these new platforms.

Just as we’re moving away from the One Number for print, we’re emerging from a time of counting those rudimentary uniques and pageviews online, with time spent digitally the big issue of the day for all publishers, but especially for those trying to sell those digital subscriptions. Where we may be headed: Time on Brand, as the biggest — and/or best — news brands try to satisfy readers, and bring along marketers to serve them — on a changing-through-day array of devices.

April 28 2011

15:00

The newsonomics of story cost accounting

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

What’s a story worth?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

March 31 2011

14:00

The newsonomics of oblivion

So, how long do newspapers have?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

And yet: Its own forecast future is highly problematic.

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

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

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

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

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

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

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

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

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

They’re both right.

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

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

Image by Thomas Hawk used under a Creative Commons license.

March 11 2011

15:00

This Week in Review: NPR at a crossroads, hyperlocal’s personal issue, and keeping comments real

Every Friday, Mark Coddington sums up the week’s top stories about the future of news.

A bad week for NPR execs named Schiller: For the second time in five months, NPR has found itself in the middle of a controversy that’s forced it to wrestle with issues of objectivity, bias, and its own federal funding. This one started when the conservative prankster James O’Keefe orchestrated a hidden-camera video of a NPR fundraising exec bashing Tea Partiers and generally straying from the NPR party line while meeting with people pretending to represent a Muslim charity. (The “donors” also met with PBS, but their people didn’t take the bait.)

Reaction was mixed: The right, of course, was outraged, though others like Slate’s Jack Shafer and Gawker’s John Cook downplayed the significance of the video. NPR was outraged, too — “appalled,” actually, with 21 journalists condemning the remarks. CEO Vivian Schiller said she was upset and that the two execs had put on administrative leave, but within about 12 hours, however, Schiller herself had been forced out by NPR’s board. The New York Times has good background on the shocking turn of events, and Poynter summarized the six months of controversy that led up to this, stretching back to Juan Williams’ firing (the American Journalism Review’s Rem Rieder called Schiller’s ouster “Williams’ revenge”).

Reaction to NPR’s handling of the situation was decidedly less mixed — and a lot more scathing. In a chat and column, NPR ombudsman Alicia Shepard ripped just about all parties involved, and the online response from media-watchers was just as harsh. NYU j-prof Jay Rosen called it “profoundly unjust,” and several others blasted NPR’s leadership.

The Awl’s Choire Sicha called NPR’s management “wusses,” CUNY j-prof Jeff Jarvis called the NPR board “ballless” and said the episode exposes the difference between NPR and the stations who run it, ex-Saloner Scott Rosenberg lamented NPR’s allowing the O’Keefes of the world to take over public discourse, and Rosen and Northeastern j-prof Dan Kennedy told NPR to start fighting back. The Columbia Journalism Review’s Joel Meares put it best, saying the fiasco “exposes them as an organization that is fundamentally weak — too concerned about its image to realize that ‘surrender’ is not always the best option.”

The episode also stoked the fires of the perpetual debate over whether public radio should keep its federal funding. The Atlantic’s Chris Good looked at the political aspects of the issue, and The Christian Science Monitor examined whether public radio stations would survive without federal money. A few calls to defund public radio came from outside the traditional (i.e. conservative) places, with Gawker’s Hamilton Nolan and media analyst Alan Mutter arguing that NPR will be in an untenable situation as a political football as long as they’re getting federal funds. Meanwhile, here at the Lab, USC’s Nikki Usher did give some encouraging information from the whole situation, looking at Schiller’s legacy of digital and local innovation during her NPR tenure.

Making hyperlocal news personal: AOL continued its move into local news late last week, as it bought the hyperlocal news aggregator Outside.in. In an excellent analysis at the Lab, Ken Doctor argued that the purchase is a way for AOL to get bigger quickly, particularly by bulking up Patch’s pageviews through cheap local aggregation tools. ReadWriteWeb’s Marshall Kirkpatrick took the opportunity to ask why hyperlocal news technology services like Outside.in, Everyblock, and Fwix haven’t been as useful as we had hoped.

Mathew Ingram of GigaOM posited an answer: Hyperlocal journalism only works if it’s deeply connected with the community it serves, and those technologies aren’t. Without that level of community, “AOL is pouring money into a bottomless pit,” he wrote. The Knight Digital Media Center’s Amy Gahran said that might be where local news organizations can step in, focusing less on creating news articles and more on using their community trust to make local information useful, relevant and findable.

Elsewhere on the cheap-content front: All Things Digital reported that AOL is laying off hundreds of employees (including the widely expected gutting of several of its news sites), and Business Insider snagged the memo. Wired talked to two Google engineers about its anti-content farm changes, and Wikipedia founder Jimmy Wales said good content is created either by passionate fans or by proper journalists being paid a fair amount. But, he said, “paying people a very low amount of money to write about stuff they don’t care about — that doesn’t work.” And Dan Conover at Xark warned against turning content — especially hyperlocal — into a franchise formula.

Accountability and authenticity in online comments: TechCrunch was one of the first companies to try out Facebook’s new commenting system, and after about a week, MG Siegler noted that the number of the site’s comments had decreased, and they’d also gone from nasty to warm and fuzzy. Entrepreneur Steve Cheney proposed a reason why the comments were so “sterile and neutered”: Facebook kills online authenticity, because everyone is self-censoring their statements to make sure their grandmas, ex-girlfriends, and entire social network won’t be offended.

Tech guru Robert Scoble disagreed, arguing that TechCrunch’s comments have improved, and people know real change and credibility only comes from using their real identities. Slate’s Farhad Manjoo made a somewhat similar argument, eloquently making the case for the elimination of anonymous commenting. GigaOM’s Mathew Ingram weighed in by saying that Facebook can’t make or break comments — it all depends on being involved in an actual conversation with users. He pointed to a brilliant post by NPR’s Matt Thompson, who gave numerous tips on cultivating community in comments; much it went back to the idea that “The very best filter is an empowered, engaged adult.”

Meanwhile, Joy Mayer of the Reynolds Journalism Institute got some advice on cultivating online reader engagement from the Wall Street Journal’s (and formerly the Lab’s) Zach Seward, and the Lab’s Megan Garber reported on the results of some research into which stories are the most liked and shared on Facebook.

More paywall test cases: Newspapers continue to pound the paywall drumbeat, with the CEO of newspaper chain Gannett saying the company is experimenting with various pay models in anticipation of a potential one-time company-wide rollout and the Dallas Morning News rolling out its own paywall this week. Ken Doctor crunched the numbers to try to gauge the initiative’s chances, and media consultant Mike Orren disagreed with the News’ idea of how much a metro newspaper’s operation should cost.

Elsewhere, Reuters’ Felix Salmon made the case that Britain’s Financial Times’ paywall strategy has contributed to its decline, writing, “the FT strategy is exactly the strategy I would choose if I was faced with an industry in terminal decline, and wanted to extract as much money as possible from it before it died.” Meanwhile, The New York Times’ public editor, Arthur Brisbane, chided the Times for not aggressively covering news of its own paywall, and Mathew Ingram of GigaOM called paywalls a futile attempt to hold back the tide of free online content.

Reading roundup: Some things to read in between SXSW Interactive panels:

— New York Times executive editor Bill Keller wrote a rather odd little column taking shots at news and opinion aggregators, especially Arianna Huffington. Everyone then took shots at his column, including Huffington, TechDirt’s Mike Masnick, GigaOM’s Mathew Ingram, and Gawker’s Hamilton Nolan.

— Newsweek published its first redesigned issue under The Daily Beast’s Tina Brown this week. The Society of Publication Designers had a look at the issue, which Slate’s Jack Shafer panned. The New York Times noted the issue’s familiar bylines.

— A few Apple-related notes: At MediaShift, Susan Currie Sivek looked at the impact of Apple’s 30-percent app subscription cut on small magazines, and Poynter’s Damon Kiesow urged Apple-fighting publishers to move to the open web, not Android-powered tablets. GigaOM’s Om Malik joined the chorus of people calling for iPad apps to be reimagined.

— Two great posts at the Lab on search engine optimization: Richard J. Tofel on why the web will be better off with the decline of SEO, and Martin Langeveld on the SEO consequences of including paid links on sites.

— Former Guardian digital chief Emily Bell gave a fantastic interview to CBC Radio about various future-of-news issues, and Mathew Ingram summarized a talk she gave on newspapers and the web.

— Finally, two must-reads: The Atlantic’s James Fallows wrote a thoughtful essay arguing that we should take the contemporary journalism environment on its own terms, rather than unfairly comparing it to earlier eras. And at the Lab, former St. Pete Times journalist and current Nebraska j-prof Matt Waite called news developers to let the old systems go and “hack at the very core of the whole product.”

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.

February 10 2011

15:00

The Newsonomics of overnight customers

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 a new epidemic of digital-pricing strategery, to borrow a fading term, now breaking out within the newspaper executive suites of the western world. Rupert will soon be charging 99 cents a week for The Daily, and dozens of dailies are laying out digital payment plans to be put into effect this year. Some are hiring top-drawer consultants to parse the many possibilities and run the odds of success before they throw the dice.

The questions are many. Do I charge print subscribers anything extra for digital delivery? If so, how much? If I add a fee for print subscribers, is it opt-out or opt-in? Do I offer a day pass or week pass, or just stick with monthly and annual subscriptions? If I put up a wall, where do I place it? Do I restrict content access by type — allowing free access to classifieds, commerce, and commoditized national and global news, but keep the somewhat proprietary local stuff locked up? Do I let readers read some — maybe 10 or 20 pages a month — of their choosing before making them pay to go further? How many bundles should I offer, and what’s in them?

We’re in uncharted territory. We know very little about consumer behavior when it comes to paying for journalism because the old, steady, entrenched models worked so well for so long that they barely changed over decades. Then the Internet came along and publishers felt compelled to give away their work for free — a subject to be featured in many psychology dissertations to come — as they abandoned, for a 15-year period it appears, a two-legged (advertising + circulation) business model.

A year from now we’ll have lots of data, parsed by all of us every which way from London to New York to Memphis and Augusta to Dallas to San Jose and Modesto, and then we’ll see what works, what doesn’t, and indeed, what “works” means in dollars (and pounds) and cents.

For now, though, the paid plans consist of commonsense, conjecture, conventional wisdom, consultant graphs, and, I believe, some fascinating assumptions about human psychology. On the eve of the launches of more paid offers, let’s examine four of those assumptions underlying this new era.

Let’s call it the newsonomics of overnight customers, which is our first psychological model, and one that I think may turn out to be the most promising.

Our four psychologies:

The psychology of the overnight customer

In north Texas, if you’re a Dallas Morning News subscriber, you’ll wake up sometime after March 1 (the loose date for the debut of the company’s digital paywall), and find that you no longer have a split identity. Though for 15 years you’ve been a “subscriber” for print and a “user” for online, you’re now just a customer. You pay your $30 or $33.95 (the new price as of Jan. 1) a month, and you get seven days of the Morning News and access to the Morning News’ new digital bundle, consisting of desktop/laptop, smartphone, and tablet availability.

That’s right. You’re no longer a “user”, a hateful term if ever one were invented, or a “visitor,” or a brother from another digital planet. Overnight, you’re a customer again.

In this psychology, a news company has put a value on what it produces. You, the customer, now are being shown that value. Maybe a year, or two, or three, from now, you perceive that value — forgetting all about those days of “free” — and value your relationship to the Morning News’ news, whether you access it by paper, phone, tablet, or TV screen.

The big hope: When you are ready to forsake pulp itself, you’re accustomed to paying for digital — you’re a customer of all, clearly — and do so without thinking twice. (And if the Morning News can save big bucks on not having to print and deliver a paper to you, and tens of thousands of your neighbors, it can significantly cut costs, increase profits, and maybe grow its news-gathering capability.)

We expect that after The New York Times’ finishes its own (higher-priced) pricing strategy, it, too, will offer print subscribers digital access as part of the coming “All-Access” bundles. Journalism Online says that about half of its newspaper clients will offer print subscribers no-extra-charge access to digital, while the rest will tack a small upcharge onto print bills.

This psychology, I believe, offers elements of a winning one. Why? It begins to change the artificial split between print and digital consumption. Most likely, it slows down — only temporarily, but every year makes a huge financial difference to news companies — print loss. Bundle it all together — print + digital — and there’s less incentive to drop print, even your use is declining. Less loss in the short-term helps retain print ad revenue, which is still 80 percent or more of all newspaper company ad revenue.

Secondly, it sets up publishers for the hastening print-to-tablet transition. If the kind-of-print-like tablet convinces readers to move away from print more quickly, the more they’ve been accustomed to paying for tablet digital, the less likely they are to balk at paying just for tablet digital.

Journalism Online cofounder Steve Brill will tell you that the company still urges publishers to charge something extra for digital access, even a $1.95 or $3.95 a month, often a 60 percent or more discount compared to what digital-only bundle buyers will pay. Whether you ask print subscribers to pay a small amount for digital access or give them access “free” as part of their print subscription (they still have to register for the restricted access even if no new payment is involved), they’re as likely to sign up for digital access, he says. If that holds, a small, incremental price itself may not be that much of an issue with print subscribers. Those that want it are as likely to pay for it as take it for “free,” as a new digital customer. It’s a way too early to know if that will be the case, but it’s one metric that should be at the top of publishers’ watch lists.

One way or the other, though, print customers are becoming digital customers, quickly. One key lesson here: It is newspapers’ print subscribers and regular readers who should be the likeliest to maintain their loyalty (and show the most willingness to pay of all potential audiences). In a sense, this is a back-to-the-future scenario, redrawing that big “circulation” circle as it was, but now including digital access.

The Forrest Gump psychology

Is a news site just a bunch of chocolates? If so, how important is it to allow would-be news customers to sample the wares before making them open their wallets? If you let them sample, can they sample all the treats, or just half the box — and which half?

Morris Communications’ Augusta Chronicle, partnered with Journalism Online’s Press+, now gives readers 25 pageviews a month before the paywall comes down, giving them access to the whole site. Dallas Morning News digital readers will find that most local stories — other than widely covered local news — have a small “D” symbol, indicating restricted access content that only print or digital subscribers can get access to. In Memphis, the current plan of Scripps’ Commercial Appeal is to start charging in the second quarter, but only for mobile access, while the website itself remains free.

Sampling is a big question. Print subscribers, who tend to be older, know what they are getting, while less habituated readers, who tend to be younger, may need to develop a habit. If sampling of the key, unique, proprietary stuff is made difficult, then how likely are news sites’ to develop a next generation of paying readers?

The psychology of the maze

So what happens when digital visitors bump into paywalls? Remember TimesSelect, and how disorienting that seemed to be to many. It makes people anxious to bump into a wall. Publishers hope that those who bump into walls (after 10-20 pageviews a month), and don’t pay, will come back the next month, and be more likely to pay then. Michael Romaner, head of Morris Digital, which has rolled out an Augusta-like model in Lubbock and plans six more similar rollouts by July 1 (and the rest of the company’s titles by the end of the year), says early data shows that 25 percent of those who ran into the wall paid up. Again, that’s very early data. Let’s see if that 25 percent number holds in Augusta and elsewhere, and what the tracking of the 75 percent — how many go away and never come back? — shows. How many just keep sampling, and are ad-monetized, but never fork over circulation dollars?

The psychology of the psych-out

Maybe news companies are overthinking all of this. Maybe they’ve psyched themselves into believing the world of free news content has really and profoundly changed — with little supporting evidence, other than a number of one-time news apps sales. It’s true that the metered systems, pioneered by the Financial Times and at the core of The New York Times’ and Journalism Online’s models, aren’t bet-the-company strategies. They are designed to keep the engine of growing digital ad revenue humming, allowing 80 percent or more of digital customers go on their merry non-paid ways, while turning those heavier digital readers into digital customers. If they succeed, they’ve picked up a new digital revenue stream, maybe laid down the first pavement to tablet utopia, and maintained a commitment to a digital ad future. All that combined may be just a middling success in revenue, though, as print (see both recent McClatchy and Gannett reports) ad revenues remain stubbornly negative.

If they fail — and that means losing more traffic due to paywalls than they anticipate — then news publishers have once again too strongly believed their own conventional wisdom and will pay the additional consequences.

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.

November 30 2010

15:00

Making social gaming scale: Lessons from the Democrat and Chronicle’s adoption of alternate reality

Just over a year ago, Rochester’s Democrat and Chronicle launched an ambitious Alternate Reality Game (ARG) called Picture the Impossible. The seven-week game was a collaboration with the Lab for Social Computing at the Rochester Institute of Technology, and it built web, print, and real-life challenges over a fictional storyline designed to connect players with with Rochester’s history. Participants were divided into three teams that competed against each other to earn money for three local charities. The players completed a scavenger hunt in a local cemetery, created recipes for a cooking contest focused on local ingredients, and earned points each week for both web-based games like jigsaw puzzles and print newspaper challenges like assembling a mystery photo. The game concluded with a Halloween costume party for the top players.

Over 2,500 people signed up for the game in all, and it attracted a highly engaged core of about 600 people, including members of the young professional demographic that the Democrat and Chronicle had been most hoping to attract. But running an ARG was also very resource-intensive. I talked with Traci Bauer, the Democrat and Chronicle’s managing editor for content and digital platforms, about what the paper learned from Picture the Impossible, and how they are building social gaming into the paper’s day-to-day operations.

Picture the Impossible emerged through a collaboration between Bauer and RIT professor Elizabeth Lane Lawley. It was funded through sweat equity from both organizations and a donation from a local charity and Microsoft Bing. (Kodak, which is based in Rochester, provided cameras and printers as weekly prizes.)

The game attracted players of all ages, including families, students brought in through RIT, and plenty of Baby Boomers. (“They’re easy,” Bauer said. “Boomers do everything.”) Two-thirds of the players were women. The most important strengths of the game were the collaborative team structure and the focus on earning money for charity. Team spirit was high on the message boards for the three different “factions,” and players strategized ways to maximize their weekly point totals. The scavenger hunts and real-life games (some powered by the text-messaging/smartphone app SCVNGR) were popular, as was the cooking competition, which brought in 104 entrants. When I spoke with Bauer and Lawley last year, they had also been very excited about the way the game used the print paper as a physical element of play.

Bauer said the newspaper had learned enough from the collaboration that the experiment would have been worthwhile even if the game flopped. It didn’t.

“The beauty of it wasn’t in the volume of players, but in the amount of time that they spent in the game,” Bauer said. “In the end we had 62 minutes on-site per unique, and that’s compared to 30-35 minutes on our core sites.”

Bauer came out of the project believing that the news industry needs to harness gaming strategies. “There’s something in there, for sure,” she said.

Her goal is for the Democrat and Chronicle to always have some kind of social gaming presence. When Picture the Impossible closed last Halloween, “I wanted to quickly get another initiative out there,” Bauer said. “I hate when you build something and it’s a success and you put it up on a shelf and don’t pay attention to it for years.”

The problem was that Picture the Impossible had taken a huge amount of time and resources. The newspaper’s collaboration with RIT had ended, and the pressures of making social gaming a normal part of newspaper operations meant figuring out a more pared-down, sustainable model.

For the Democrat and Chronicle, that has meant abandoning the Alternate Reality Game model, with its fictional storyline that united the different elements of the game and propelled it forward. As a news organization, Bauer said, creating fictional scenarios didn’t really fit with their mission. It also meant fewer real-life challenges, even though they were very popular with players. RIT had been “instrumental” in making those in-person activities work. “It’s not what we’re really good at, organizing baking contests and things like that,” Bauer said. “It wasn’t what we’re about.”

This time around, the Democrat and Chronicle’s new social gaming project, score!, is focused around one of the newspaper’s core activities: political coverage. Launched in June, score! focuses on the November elections, and consists mainly of politically-themed web games and quizzes. One new game, Headline Hopper, has players propel little politicians through a landscape of quotes, Mario Brothers-style.

As in Picture the Impossible, players accumulate points and earn money for charity, and the profiles of score! players note whether they participated in Picture the Impossible, to build continuity between the two games.

This time, Bauer said, they thought the team loyalty that had powered Picture the Impossible would be formed around political parties, the Democrats competing with the Republicans. But that team structure flopped when only four Republicans signed up. As a result, Bauer said, they’ve mostly abandoned the team focus. The in-person component of score! has also been scaled back; players can get “stalker” points for snapping photographs of politicians at local events, but Bauer said the challenge hasn’t really taken off. Part of the problem is that candidates are unpredictable, so it’s hard to get information about possible stalker events until the very last minute.

The election focus has been one of the strengths of score!, in part because it gives the game a natural theme that’s easy to build content around, and in part because the games build on the status that comes along with being well-informed about politics — and with having other people know that you are.

“In the forums they talk about how much they’ve learned about the election, and how they feel like smarter voters because of it,” Bauer said.

Players now need to log in to the game through Facebook, which has generated about a dozen complaints from people who can’t play — not enough to be a real concern. And the benefit of the Facebook platform is that it allows players to compare their scores with friends.

Like Picture the Impossible, Bauer said that the 2,300 score! players fall into three tiers: a smaller group of 250 hardcore players, a middle tier of casual players, and then the remainder — who scored a few points and then didn’t come back.

“That’s really our target, is the causal player,” Bauer said.

One of the biggest challenges of running games when you’re not a full-time gaming company is negotiating the relationship with the hardcore players versus the larger group of more casual ones. The most devoted players are also the ones who post the most complaints on forums and Facebook. “We have to keep reminding each other as a team [that] this is an initiative that is going to be constant on our site, and we can’t wear ourselves out catering to five people,” Bauer said.

At the same time, those small number of hardcore players are responsible for a lot of the games’ energy. “That’s where the conundrum is,” Bauer said. “We owe all of our success to those kinds of people.”

When score! ends, Bauer will evaluate the game’s analytics to see which parts of it generated enough engagement to make the time invested in it worthwhile, and continue to think about how to automate parts of the game to make it more sustainable. The next game will debut sometime early in the winter, Bauer said, and it may involve competition between players in Rochester and other cities.

So far, the Democrat and Chronicle is the only Gannett paper to implement a major gaming initiative, Bauer said. She said this was disappointing, but not surprising, since the success of Picture the Impossible didn’t translate into a bump in revenue. (Unlike Picture the Impossible, score! has advertising on its site.) As much as she believes in making social gaming part of a newspaper’s toolbox, Bauer said, “it certainly doesn’t produce a lot of revenue, and until it does, it’s not going to get a lot of attention.”

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