Dorian Benkoil senior consultant at Teeming Media. An award-winning journalist and editor, he was a foreign correspondent for AP and Newsweek, and international and managing editor for ABCNews.com. At ABC News he moved to the business side, handling sales integration and business development, before joining Fairchild Publications as General Manager for their Internet division, becoming editorial director for mediabistro.com, then a consultant for Teeming Media in New York. He graduates this year with an MBA from Baruch's Zicklin school of business. Learn more about him at Benkoil.com or his blog - MediaFlect.com.
Robert Cauthorn is a journalist, former vice president of digital
media at the San Francisco Chronicle, and was the third recipient of
the Newspaper Association of America's prestigious Digital Pioneer
Award. He launched one of the first five newspapers web sites in the
world and is generally considered to have delivered the first
profitable newspaper web site in 1995. Cauthorn has been in the middle
of the transition from old media to new and is recognized as
frank-talking critic when he believes newspapers stray for their
mission. In mid-2004 he became the president of CityTools, LLC a new
media startup based in San Francisco.
Ben Compaine has divided his career between the academic world and private business. He was a journalist when manual typewriters were considered state of the art, but also led the conversion of his college newspaper to cold type. He has started and managed weekly newspapers. His dissertation at Temple University in 1977 was about the changing technologies that were going to unsettle the landscape of the staid and low profit newspaper industry. Since then he has focused his research and consulting on examining the forces and trends at work in the information industries. Among his most well-known works (and the name of his blog) is "Who Owns the Media?".
Vin Crosbie has been called "the Practical Futurist" by Folio, the trade journal of the American magazine industry. Editor & Publisher magazine, the trade journal of the American newspaper industry, devoted the Overview chapter of executive research report Digital Delivery of News: A How-to Guide for Publishers to his work. His speech to the National Association of Broadcasters annual conference was one of 24 orations selected by a team of speech professors for publication in the reference book Representative American Speeches 2004-2005. He has keynoted the Seybold Publishing Strategies conference in 2000; co-chaired and co-moderated last year's annual Beyond the Printed Word the digital publishing conference in Vienna; and regularly speaks at most major online news media conferences. He is currently in residence as adjunct professor of visual and interactive communications and senior consultant on executive education in new media at Syracuse University's S.I. Newhouse School of Public Communications, and meanwhile is managing partner of the media consulting firm of Digital Deliverance LLC in Greenwich, Connecticut.
About this blog
Two forces have shattered the news media. Technology is the first. Although media technology is undergoing its greatest change since the day in 1440 when Johannes Gutenberg first inked type, for more than ten years now the news industry has mistaken new technologies merely as electronic ways to distribute otherwise printed or analog products. Estrangement is the second. The news media has lost touch with people's needs and interests during the past 30 years, as demonstrated by rapidly declining readerships of newspapers and audiences of broadcast news. How we rebuild news media appropriate to the 21st Century from the growing rubble of this industry is the subject of this group weblog.
What could the Globe fetch? Well, certainly nothing within a rifle shot of the $1.1 billion it paid 16 years ago. David Carr, himself of the Times, asked six experts who specialize in valuing media properties. You could get the short answer in his column.
But even more fascinating is the almost stream-of-conscious responses of the six that he posts verbatim on the Media Decoder blog at the Times site.
The values—all guesses of course-- range from $250 million to a negative $25 million. Yes—The Times Co. might need to offer a buyer (if it could be called that) cash to take off their books the stream of losses projected for the paper into the immediate future, the union contracts and the 400 guaranteed-for-life jobs.
Bottom line? The price of the newspaper company may be less than what it charges ($1.00) to buy a copy of the newspaper.
Few of my friends or acquaintances are fans of the editorial
page of The Wall Street Journal. I live in Cambridge,
Mass, where President Obama received 88% of the vote in November.
So I thought I’d call their—and your—attention to the lead editorial
in today’s paper. Titled “Ink-Stained Politicians,” it is critical of congressional
initiatives to “rescue” the newspaper industry. One of the leaders of this
movement is my own senator, John Kerry. As are many of us, he is concerned
about the future
of the hometown Boston Globe. (The stakes may be particularly high, though,
for the senator. In his re-election bid last year the Globe gushed:"The case for reelecting John Kerry
would be strong under any circumstances . . . [but] the country needs his voice
more than ever.")
So it was Sen. Kerry’s subcommittee that held
a hearing on May 6 titled "The Future of Journalism." It was a
morose affair, with publishers enumerating the fate of failing and fallen
comrades. Then the senators turned to the culprits, Huffington Post and Google.
The hook for the
hearings was what role Congress could conjure to help out what Kerry buys into as “the fourth branch of government.” One
proposal, from Maryland Senator Benjamin Cardin, would allow newspapers to convert
to nonprofit status (hmm-it seems like the point is that they are already nonprofits.
What they should say is not-for-profits). Their operating revenues would be tax
exempt. In return, they would be precluded from endorsing political candidates, though, as the
Journal points out, that wouldn’t prevent them from taking sides more subtlety.
The other idea being floated was some sort of an antitrust
exemption that, as described by Dallas Morning News publisher James Moroney,
would allow the newspaper industry to conspire to find ways for making money from
putting the work of its journalists online. Of course, I thought that was what
the industry has been doing with such projects as Newspaper Next and The Newspaper Project. But I
suppose a major league baseball-like exemption would allow publishers to band
together for steps that would prevent the Huffington Posts and Googles from
making money off their backs.
The Journal’s position is one that I have trumpeted, as have
my colleagues here Dorian
Benkoiland Vin
Crosbie. That is to let the forces of technologies, consumer behavior and
the marketplace play themselves out, at least for awhile longer, before
panicking. I
have argued (as have others) that there will be changes, for sure. But that
there will also evolve multiple business models. There will be winners and
losers. Services lost-- for example some local coverage if some cities or towns
lose their daily printed papers—are highly likely to be regained as new players
jump in to fill a vacuum.
We see hints of that with an array of Web sites that focus
on local and even hyperlocal news. Some, like EveryBlock, for the moment are compendia
of links to local government sites, some blogs and even local news from other
sources. But that doesn't mean that is their end point. It is their opening gambit. Should they gain traction some will start adding original content (or they may find the togain traction they will need original reporting). A few, such as Buffalo Rising and Patch, already do have reporters covering the local
scene. Very few now. But given time, and a market, more
later.
Dallas’s Moroney
speaks for many in the legacy media who are urging Congress to legislate a
"consent for content" requirement to get the Googles and Huffington
Posts of the online world to pay "fair compensation" for content they
pick up and then sell advertising on. The
Journal comments“So, although most
newspapers are giving away their content free online, the feds should guarantee
them a stipend from anyone who gets someone to pay for it. There's a winning
business model.”
In any event, it would seem to be a matter for negotiation rather than legislation.
The Journal continues: “The larger story here is that
newspapers are enduring the familiar process of economic "creative
destruction," in this case brought on by the Internet. Advertisers are
fleeing to search engines, while barriers to entry in publishing have crashed.
Despite the pain this causes to certain companies, this is not much different
than any other industry buffeted by new technology or business strategies.”
Creative destruction is right. In the early 1990s, the 200 year old Encyclopaedia Britannica was a $650 million company. Five years later in was bringing in one third that. It’s business model based on a high priced part time sales force selling “guilt” as much as $2000 sets of books was undermined by Microsoft’s Encarta, given away for free on a CD with a new computer and based on an old Funk & Wagnall supermarket-distributed encyclopedia. The World Book suffered similarly. Both have had to retreat and reformulate to survive in the world of DVDs and online delivery. Where was Congress then?
The Journal’s editorial concludes with an argument almost
stolen (dare I charge?) from a recent post of mine, save the last line:
“Some new business model will
emerge for journalism, if not for all newspapers, and in the meantime the
business of reporting the news isn't vanishing. It is taking new forms and
adapting, with newspapers growing their audiences online even as the sources of
their revenue shift. The industry is currently debating how to charge customers
for content, and no doubt many experiments will be tried. No matter who emerges
victorious, the journalism business will be stronger and more credible if it
avoids the government's embrace.”
To its credit, the Obama Administration is keeping its distance. Press Secretary Robert Gibbs, responding to a question, commented that while it's sad for cities to lose their daily papers, any public assistance "might be a tricky area to get into.…I don't know what, in all honesty, government can do about it."
The sooner the suits in Washington
and the executive suites in Dallas
understand that, the better off it will be for the future of journalism.
Steve Outing today pointed me to Journalism Online, a new attempt to charge for journalistic content. The press release makes it seem they’ll be offering readers a way to pay one price and pick from among paid content they want, and publishers a chance to make their efforts available at a price point they choose. Users will be able to pick stories a la carte, or via subscription. The release frequently mentions newspapers, but also says there are talks with magazines.
The release says ads, alone, can’t and never have paid for quality journalism. Maybe not. And we’ll find out if J.O. is right that Americans will pay for journalism because they understand it needs to be supported. I’m not so sure. They will pay for convenience, ease of use, utility and access they wouldn’t otherwise have.
What will make this work, I think, is from the reader side:
if they can get what they want with ease
if the price point is low enough that convenience outweighs the desire to go hunting for the info elsewhere (think iTunes)
If there are enough publications available
if the content is not commoditized or the kinds of stuff available so many other places that it’s easy to find. (I doubt breaking news or big stories available all over the place will make much money.)
... and for publishers:
the ability to make additional incremental revenue from content they couldn’t get on their own.
strong Incentives to cooperate in the project rather than go it alone, as they’re so used to doing
ease of installation and use
flexible pricing -- Journalism Online is promising to let publishers charge their own prices and adjust them.
data, which J.O. is also promising, to allow quick changes in pricing, story mix, etc. (“Journalism Online will provide reports to member publishers on which strategies and tactics are achieving the best results in building circulation revenue while maintaining the traffic necessary to support advertising revenue.”)
assurance their content won’t be pilfered, will be in an environment they can trust in every sense
enough revenue and revenue share that they’ll feel it’s a fair shake, that J.O. isn’t taking too much of a cut.
The below is from Steve Outing, who posits that allowing only paid subscribers to participate fully in a community’s news site can be a component of a valid business model. He may be right. But what about the competing issue of blocking those who haven’t paid from commenting and participating. Do we create a separate class of reader/citizen? Does the paper have an obligation along these lines? Not taking a position. Just asking the question.
A paid subscription also will allow you to interact with the site and its staff, and participate in discussions, daily chats and comment threads; free readers won’t have their voices heard. (I have to say, this is not a bad idea. Many popular newspaper Web sites have comment threads that are out of control and populated largely, it sometimes seems, by idiots who drown out the sane and smart voices. Charging to be part of the conversation is one way to create more rational, intelligent and useful discussions — albeit smaller — between journalists and readers, and readers and other readers.)
Arianna Huffington, along with NYU professor Jay Rosen and others, are causing a buzz today with their announcement of a new HuffFund to support investigative journalism with $1.75 million in contributions from The Huffington Post (HuffPo) and multi-billion-wielding The Atlantic Philanthropies. “This nonprofit Fund will produce a wide-range of investigative journalism created by both staff reporters and freelance writers,” HuffPo chief Arianna Huffington writes. She writes, further, that this is an attempt to preserve investigative journalism and the crucial role it plays in democracy “during this transitional period for the media.”
It’s good she puts it that way - that the support is during a transitional period. It’s easy to fear that going hand-out to foundations becomes the way those working in the field come to think of as the natural way of things. Others have laid out some of the dangers: Foundations want control; they have specific missions that may be in conflict with the purity of purpose required of investigative journalism; they can be quasi-governmental, slow-moving and bureaucratic. Yet, one could raise equally challenging views of investigative journalism that’s sponsored by commercial interests. It’s hard to find any really good investigative pieces about real estate in any newspaper, reliant as they are on real estate advertising. It’s easy to find reporters and editors who will tell of pieces being tempered for reasons they believe have to do with the need to not offend a sponsor (a.k.a. funder). The ability to continue great journalistic work has relied largely on the strength of character of those doing that work, and their bosses -- anyone from executives of TV networks to the families that run great newspapers. Today, perhaps, that will include the Arianna Huffingtons, Atlantic Philanthropies and Knight Foundations of the world. (An aside: I haven’t seen much discussion of the Medicis and other benefactors who have facilitated creation of some of the great art of our civilizations. Perhaps there’s an analogy there.)
Within the foundation-supported model, the most powerful news organizations will be one(s) that move toward self-sustainability. Mixed revenue models-- without the need to call on the generosity of benefactors -- are surely the best for a number of reasons I won’t get into deeply here, but include everything from creating offsetting revenue streams that bring in different types of cash flows (advertising, subscription, products, events, etc.) to not relying on any one benefactor, so that even if one or the other revenue stream dries up or drops out the core project(s) can continue. Jeff Jarvis writes that what can make this work is the one-percent rule that works in a “gift economy”: If one percent of consumers will support a project, the project can be sustained, as for NPR and Wikipedia. If the one-percent can, ultimately, sustain the journalism without foundation input or control, great. But it doesn’t have to be a gift economy. I’d argue that the one-percent rule is analogous to marketing -- one percent or fewer of people who see a marketing message will take action that justifies the marketing spend. And in this instance the product, itself, is its own marketing message. There is not a need for a separate marketing budget or PR spend (see Fred Wilson's recent Tweet on Twitter and Etsy getting on CBS TV without PR agencies).
And just as the need for short-term profit should not drive a company to destroy its core businesses, the need for ad revenue should not allow a journalistic enterprise to gut its ventures. The effects of that kind of thinking and acting is evident today. We’ve seen weather and sports and tech news blown out while simple coverage of community school boards and local politicians languishes.
The structure of newspapers has not been born of editorial need or service to the communities that consume them but rather commercial convenience. While separate sections for Local, National, International and Opinion may be driven by news decision and interest, one could equally imagine a newspaper where clearly delineated opinion about any given topic appears next to the relevant news story (much as is done with links and feeds digitally) or in which car news and financial news appears on the same page, rather than in separate ‘auto” and “personal finance” sections that serve advertisers of those types of content. Sections have been created and blossomed in those way to support advertisers in each of those verticals. In re-imagining the news business, let’s also free our thinking, as Rosen has done, from the need to have news be created solely by “professionals,” and also from the need to structure news sections and pages according to preconceived notions of what a reader is interested in.
In a “search economy,” people will find and assemble what they want on their Facebook and DailyMe and Netvibes and Instapaper and whatever other pages according to their interests. Those interests create a powerful profile, and “opt-ins” that give clues as to what those folks might be willing to support through contributions, purchases, ad viewing and more. That can then support the journalism they want and need, and, for those willing to tap it while serving them, make the news self-sustaining.
A college classmate, Peter, who lives in Ann Arbor, Michigan, asked me what “my take” was on the changes in the media world, referring to the de facto demise of this home town Ann Arbor News.
If you’ve been on vacation in Bali and didn’t want to pay the $15 a day resort Internet fee, the shut down of the 45,000 circulation News will make this the first city to lose its newspaper. The plan, according to owner Advance Publications, is to completely shut down the operation, lay off all empoylees, then start fresh with two new companies that will need far fewer staff. One, a Web venture called AnnArbor.com, will have some original reporting but rely substantially on reader input and community forums. A second company is described as a printing company that will publish a twice weekly newspaper fo some sort. Advance is also cutting back its daily newspapers in Flint, Saginaw, and Bay City to a thrice weekly schedule.
Types of organizations eligible for non-profit status under IRS 501(c)
My take, I wrote Peter, is that I suspect new players will see it as an opportunity to pick up the slack. They will enter with a different expense base. Maybe no single one will totally replace today's version of the newspaper, but in aggregate they will cover whatever territory for which there is a demand, e.g., an entertainment paper-- probably ad supported. More local stuff online. More stuff you can view on iPhone-like devices or Kindle-like. We’re in a period of fits and starts, but if there is a market there will be big guys or entrepreneurs who will fill the gaps. At the premium end there is the example of the for-profit (they hope) GlobalPost.com. The low end may be the for-profit (they hope) citizen journalist new AnnArbor.com.
But what about the not-for-profit model, a proposal popularized by an op-ed piece in The New York Times last month? An academic study being prepared for publication in the Journal of Media Economics this summer (I’ll post more details in July) looks at the fortunes of nonprofits in the magazine business. It notes that “nonprofit” can take many forms, both legally and as operational models. Many not for profits rely heavily on advertising revenue, just as their for-profit cousins. The study observes that they can be just as susceptible to economic downturns as for profit publications.
Indeed, at a small conference I attended earlier this month, I pointedly asked Rick Edmonds of the Poynter Institute whether the general downward pressures facing the newspaper industry had affected the St. Petersburg Times. That paper is something of the poster child for the non-profit model. The paper is controlled by a foundation set up by the late Nelson Poynter. If the paper has a surplus – the nonprofit term for profit—it declares a dividend. This is turn is the primary source of support for the many good program of the Poynter Institute. Edmunds had to admit that the Times is indeed taking a hit from the same forces felt by all newspapers. It has made staff cuts in its newsroom to help keep up profit. Even so, dividends are down. The Poynter Institute has a comfortable cash reserve for now. But the larger point is that the Times as well as the Institute are not immune to the forces and trends in the industry or the economy.
Philanthropic organizations—even the wealthiest—cannot defy gravity. Harvard, the richest of universities, is having to make major cutback because its endowment—line the financial markets—shrunk 22% ($8 billion) between July and October 2008 alone.
So let’s suppose that a newspaper does indeed have a billion dollar endowment behind it. To generate income it must invest that money somewhere. The more aggressively it’s invested, the more money for the newsroom. If invested in Treasury notes, the endowment is safer—but it may be short changing its mission—essentially leaving money on the table that could be used for journalism. So it takes a moderate course of investment. And suppose that lets the endowment generate a 5% return devoted to newspaper operations. That would be $50 million initially, a nice subsidy to keep up salaries, news bureaus, staffing. But what happens, as it has this past year, if the invested funds lose 20% of their value—well under the markets overall financial loses in the past year, thanks to our hypothetical endowment's conservative portfolio.
Now, with an $800 million portfolio, if it still drew 5%, it could only add $40 million to its income. What’s a publisher to do? Just as advertising and circulation revenue are falling, so is the endowment income that could otherwise prop up its finances. True, it may be better off than its fully for- profit brethren. But it will inevitably need to make cuts: in personnel, in travel, in salaries—the same types of cuts we hear about weekly.
So not-for-profit is not the solution, endowments are not the solution. What is?
As I wrote to Peter, there is not a solution. We have left behind an either/or world for one of many options. There is opportunity for non-profits, such as the well established Pulitzer Center on Crisis Reporting or the new Pro Publica. The entrepreneurial for-profit sector is represented by a new model with GlobalPost. The Detroit newspapers are leading the way (or were pushed) for daily newspapers in hybrid online and print. Advance Publications is trying out another for profit model in Ann Arbor.
The result will be an evolving stew of print, online, mobile, video and audio news sources—international, national, local and hyperlocal. For profit and not for profit. From existing well known media companies, from nonmedia players, from entrepreneurial start-ups. Those that will be successful and those that will prove unsuccessful.
When I teach about marketing, the most important word I emphasize is the word “some.” I tell them not to think in terms of “People want more news” or “People are willing (or unwilling) to pay for…” Market segmentation is about “some." “Some people” want. “Some people” will pay. Some. The digital technologies here and still emerging make it far more efficient to provide news, entertainment, whatever, to each of us in more forms than at any time in history.
It was striking at the Media Summit in New York today how definitive the people on the future of advertising panel seemed compared to the more unsettled tone of the one on the future of news. The news people, from Vanity Fair writer and Newser.com co-founder Michael Wolff (“We just don’t know how to fashion our product” for the new market of news consumers) to Michael Oreskes of AP and ex- of The New York Times (he said there’s a debate about whether there’s even such a thing as journalism) to Dick Meyer of NPR ex of CBS News (who quoted Clay Shirky’s recent essay on disruption of the newspaper business and said we "don’t have a clue" what’s next), were all candid about their grasp for a business model, let alone an editorial process and structure that works to produce news and satisfy an audience today. (Related thoughts on the disruption being much further than for news, here.)
Meanwhile, the advertising and marketing panelists sounded like they knew the solution -- engage consumers in a conversation, be part of a discussion, don’t just bombard them with ad messages -- and were convinced they simply have to lead others in the industry (product managers, marketers, media buyers) to think on their scale and not be locked into old methodologies. Bob Jeffrey of JWT said it doesn’t matter how much is spent on a campaign, what matters is how much it can engage an audience. Carl Fremont of Digitas called for more “active listening," then a “proactive, reactive strategy" of messaging back to consumers by joining in conversations they are having (presumably in places like social networks). He said old models of pushing ads at people weren’t going to work, and that there would be more development of social applications that provide real value and get consumers to opt in. The panelists all agreed on convergence, and also seemed to think TV would make a comeback as it became more addressable through digital technologies.
A later conversation I had with IBM researcher Bill Battino, who moderated the ad panel, said that the clients -- the companies buying the advertising -- were often leading the charge, had combined what were formally separate and segmented advertising and marketing budgets into a more unified whole from which they could then address the challenge of reaching audience through a holistic rather than silo’d media view (display ads, here, direct marketing over there...).
Whatever the state of play between clients and agencies, there was general agreement on the need for entering the “conversation” with consumers, rather than hitting them with messages, to get people to engage, to use technologies to know more about audiences, and to be genuine in messages, seemed to get general nods of agreement. One would think the same might hold for news ; after all, what better way to get at what a news consumers want than to ask them and have them contribute? I’m loathe, hesitant to say the advertising people are farther along in understanding the ways out of the current morass more than those producing news. But I can say I’ve seen it happen before, where the advertisers adapt and adopt a technology (behavioral targeting comes to mind) well before it’s talked about as a way of delivering content.
Nathan Richardson, CEO of ContentNext, writes that newspapers, with old thinking, could learn something from Silicon Valley, and their attitude of sharing both ideas and information. Well written, and a little inside peak at when he was at the Wall Street Journal. But one part of it gave me pause:
Nate,
Finally had a chance to read and consider this piece. Nicely written and reasoned, and even has some smiles. One portion gives me pause:
“Portals should agree to show search results only for the original sources of news content, as opposed to outlets that have repurposed that content.”
That kind of restrictive thinking seems fair at first glance -- after all, shouldn’t the one creating the content be the one who reaps the benefit? -- but it goes against the grain of the way it’s been done not just for the past 10 years of Web journalism, but for the past 40-50 years, with broadcasters and others picking up information, and, if fairly, attributing it to the original source.
Today’s model calls more for incentive than restriction. Perhaps we could allow for some kind of prioritization in the search algorithm for the originator of the content. And some sort of additional revenue to the creator, where there is a shared revenue scheme.
But by highlighting only the creator (which will often mean the large player), Google and the other search engines would be alienating a significant chunk of their constituency, favoring one business over another, and potentially violating tenets of free speech. For example, commentary on a piece of journalism or even pickup of a small portion of it might be fair use, and thus deserve to the be linked to from the search -- and something the searcher would want to see. If the algorithm excludes those results, because they weren’t from the originator of the content, it might be a disservice all around. (Not to mention that the original’s SEO ranking would suffer because of fewer links and accesses to it.)
A final thought: Where would PaidContent be had the system of excluding repurposed content been in place?
There is a delicious irony that the wireless phone companies reap the rewards of enlisting tens of millions of users to pay about $10 monthly for the feature of sending and receiving 160 character text messages, yet publishers can’t make a business of convincing a small fraction of that number to pay half that amount to receive an online “newspaper” or magazine.” We pay to create our own information but won’t pay to receive news and other information created by “professionals.”
This phenomenon is at the heart of a sudden groundswell of concern for the future of the newspaper. Of course, it’s been building, with wave after wave of bad news (which editors thrive on when it refers to anything but their own backyard) of steep declines in circulation and an erosion in advertising that transcends the fall off signaled by the general recession.
And the remedies being proposed? Stripped to their core, there are two. One is to rely on some form of philanthropy. An investment officer at Yale and a financial analyst propose turning newspapers into nonprofit organizations, perhaps endowed by a foundation. They estimate that it would take only $5 billion to fund The New York Times (assuming I suppose a stock market that is more robust that we see at the moment).
The second is to cajole readers to pay something for the online version or to pay more for the print version. In this column I’m focusing on the latter. Another day I’ll add my analysis to the non-profit fantasy.
The re-ignition of the “pay for content”—or as it is now called a “paywall” --- is a response to the tsunami of bad news emanating from all corners of the legacy media business. Although local television and radio are hurting while magazines are downsizing, most of the Sturm und Drang has been about the even worse performance of newspapers. The New York Times has eliminated its dividends to conserve cash and has taken a $250 million loan from a Mexican oligarch. Hearst Corp., once the largest newspaper publisher in the U.S., put the Seattle Post-Intelligencer up for sale Jan. 9, and announced it will convert to digital only or shut it down if a buyer is not found soon. Same for its San Francisco Chronicle. The Detroit Free Press and The Detroit News now deliver papers only on Thursdays, Fridays and Sunday. The Tribune Company is in bankruptcy. And on it goes.
The argument of the growing bandwagon is that newspapers must stop giving away their content free in their online incarnation. They can’t depend on advertising revenue to pay for the same amount of quality journalism that has been supported under the traditional newspaper business model. They need to start charging something. Though not new (I last wrote about it almost three years ago), the subject has been largely dormant until recent months) when a flurry of articles and Blog posts have energized the subject. Tim Burden, at Printed Matters, has nicely annotated the debate since December.
The Achilles heal of this line of reasoning is that advertisers have long covered the full cost of content for newspapers. The share of the total cost of running a newspaper that is derived from circulation revenue has at best covered the cost of the paper, ink and maybe the press, the gas and trucks. Subtract the cost of the presses, printing and delivery and subtract the revenue paid by readers and what is left is the actually the cost of producing the content and the revenue provided by advertisers. At its core, readers have been receiving the information for free for decades.
So if the issue is how can “newspapers” continue to provide whatever mission we think they have fulfilled for the past century as they migrate to an all digital format, then we must follow the money. And that takes us to advertisers-- the same folks who make Google “free” and Yahoo “free” and Huffington Post “free” and “Politico “free.”
If newspapers have essentially been able to thrive on the revenue from advertisers alone (again, with cost of printing more or less covered by circulation revenue), why are they having so much trouble today? The answer is not one single factor, But a major contributor is that newspapers – whether print or digital—are just worth less to advertisers than they were 20 years ago. Back then, local advertisers did not have many options for reaching the mass local audience. What was the alternative for auto dealers? For real estate agents? Supermarkets or department stores? For some, direct mail was one possible option. But that was about it. Using pre-prints instead of ROP became attractive for some large display advertisers, leaving the publishers with a piece of the cash flow. Advertisers were hit with regular rate increases. And they pretty much had to pay, The publishers made good money.
But then a double whammy. Just about the time the Internet became a real alternative for classified listings—think Craigslist, Monster.com, eBay, Autotrader.com—and for retailers—think DoubleClick, Google, et al—the boys at the cable operators had perfected the insertion of highly local spots into their feeds. Between 1989 and 2007 local cable advertising increased from $500 million to $4.3 billion—or from 0.4% of all advertising to 1.6%. Advertising in newspapers fell from 26% to 15% in this period. Although some of the highly local advertisers going to cable may have taken some of their funds from budgets for radio or other local media, it is probable that a significant share came from the hides of newspapers. I estimate perhaps up to 20% of the decline in local newspaper advertising share can be attributed to local cable spots.
The other whammy, the gorilla in the room, is Internet advertising. No need to elaborate. But its impact on newspapers is not just that it has siphoned off dollars per se. Much more importantly is that the Internet has given most advertisers greater market power against newspaper publishers. Many big advertisers—like car dealers, real estate offices and big box retailers—don’t need the newspapers as much.
And this also explains why even an all-digital newspaper may have trouble supporting its economic model with online advertising. If newspapers could have simply eliminated all hard copy production costs and kept its advertising rates at the online equivalent of print milline rate, they could be profitable even with less advertising. But online rates are much lower on an equivalent copy sold vs. online visitor basis.
All old media also had a house edge over advertisers stemming from merchant John Wanamaker’s insight, “Half my advertising dollars are wasted. I just don’t know which half.” Now they do. Publishers (and broadcasters) are at a disadvantage in promoting the efficacy of their product when online metrics provide much greater certainty on who is clicking and even buying, vs. the legacy media.
Hence, the renewed look at shaking coins from the readers or viewers. Easier wished than accomplished. We already have a history of those who have tried and succeeded. It’s a short list: The Wall Street Journal. Those who have tried and considered it a failure include The New York Times, Slate, the Atlanta newspapers and USAToday. The Penny Gap lives.
The magnitude of the challenge can be distilled from The New York Times’experience with its Times Select. In its two years of existence, the Times attracted 227,000 paying customers, at $49 annually. This translates into about $11 million annually. And this was just for access to a portion of its material. In abandoning a partial pay model, the Times calculated that it could get greater revenue from advertising on those paid for pages by opening them up, no charge.
I suspect that what we will find in the intermediate future is a mix of models and choices, among them:
• The Detroit model is one reasonable experiment: An attractive daily digital version, with home delivery of the paper reduced to Thursday, Friday and Sunday.
• An advertising supported all digital model, with the publisher closing down the printing plant, selling off its trucks, laying off the circulation and production departments.
• A voluntary pay model. This may take one of several forms. The “shareware” model for software has proven to work to a point. Users are asked to pay what they can or think the product is worth. Many users will be free riders. But, as we see with public television and radio, millions in their audience make annual contributions. (In 2007 at least one-third of those who downloaded Radiohead’s free "In Rainbow" album made a payment, in some cases higher than what the band would have received from a CD sale.)
How these and other variations develop will also depend on changes in the mobile business. The rate of adoption of SmartPhones with iPhone-sized screens; the pricing and availability of e-readers, such as the Amazon Kindle and the price for wireless broadband will enter into the viability of digital news formats replacing physical formats.
On the one hand, he does not see a scenario where most daily newspapers can survive by squeezing a few dollars a month in the form of micropayment from readers. Having tried the user-pays-something route at Slate, he holds this to be a nonstarter.
But he does see the survivors—several of the major news organizations, plus a few “local papers that execute their transfer to the Web so brilliantly that they will earn a national readership” or some “Web site [that] might mutate into a real Web newspaper” – as actually providing more choice for most readers than existed in the past when there were thousands of print newspapers. Furthermore, “Competition is growing as well among Web sites that think there is money to be made performing the local paper’s local functions. One or two of these will turn out to be right.”
The result, observes Kinsley, is that the “American newspaper industry will be more competitive than it was when there were hundreds.” This is a song a few of us have been singing for years. Soon we might have a chorus.
A NY Times Op Ed today suggests newspapers should move to a foundation-supported model and become 501(c)3 not-for-profits. Through that model, with its tax advantages, the newspaper business can survive, the authors write.
Their piece starts by quoting Thomas Jefferson, who said he’d prefer a country with newspapers and no government to the inverse. But I don’t know that Jefferson would have anticipated the rise of everything from public radio to the BBC, from Pajamas Media to The Huffington Post to hyper-local news websites. Many people have come to think of newspapers as the catch-alls of community information, with hard news in one section, opinion in another and service in yet other pages. They have been constructed that way, in large part, because of the business model. Advertisers were assured that news would be presented without slant so as to offend no potential customers, while in other sections relevant ads could appear next to relevant content -- food ads next to recipes, electronics in the tech section, car ads near car articles and so on. Of course, the biggest economic decline for newspapers comes from the classifieds, which for newspapers were like printing money.* Today, the newspapers’ cost structures -- everything from huge printing operations to sales staff and organizational hierarchies -- are in place to support such a business model, built up over decades in which their medium had near-monopoly status. Newspaper chains had achieved such levels of profitability that they competed with oil companies for investors' hearts on stock exchanges. Those investors were interested in whopping financial returns rather than any journalism the papers produced, or even seeing that the papers survived.
Yes, as Dave Morgan, Jeff Jarvis, my colleagues on Rebuilding Media, I and others have written, there are ways to use the newspapers’ cost structures to better effect. Sure, there’s a place for the foundation, or at least the not-for-profit contributory model. NPR is one example. The Knight Foundation is experimenting, to the tune of tens of millions of dollars, with endowing various news ventures to see what can survive and thrive. In a recent interview conducted for the We Media Game Changer awards, Knight president Alberto Ibarguen said the best measure of success for the funded projects would be whether those in the local communities used them for news and information, correcting himself when I challenged an earlier assertion he made that success would be spelled when mainstream news organizations used the nascent products. That kind of flexible thinking is unusual in the news business, and it came from a man who once ran the Miami Herald.
Just because the newspaper business as practiced isn’t feasible, that doesn’t mean news will die or that there is no model to support it. Many smaller blogs are serving their local communities and covering their costs -- without large staffs or printing presses, and minimal costs for infrastructure, distribution and sales. I’ve been told that certain free dailies, such as my hometown’s amNY, are profitable, even if their operations are taken as a standalone entity. Blogs and free newspapers run on a shoestring are not the only possible for-profit business models, either. News cannot always be expected to make a profit, on its own. Network news shows were, according to books I've read, originally seen as public service loss leaders, attracting viewers to entertainment shows that in turn funded the news programming. The news shows also helped the networks keep in the good graces of the FCC. (TV news shows apparently became profit machines only after producers in the Roone Arledge era showed that TV news magazines, morning shows and their ilk could bring the kinds of sponsor-pleasing audiences that would earn many millions of dollars.) Other news operations are also supported by separate operations. The Advocate, a leading voice of news for and about the gay and lesbian community, is funded at least in part by an entertainment company that produces movies and other fare. The news operations of Thomson Reuters are a fraction of the operational cost and income of the financial information parts of the company. Other news organizations are supported by events, custom or other paid media, syndication and other outlets.
I'm not saying foundation support of the news business is a bad idea, inasmuch as news is a public trust. They could be a healthy part of the mix. The foundation-supported news product could even feed the for-profit ventures, much like News 21 and Pro Publica are trying to do.
I don’t know in what fashion(s) the news business will survive, but I do have a very clear picture of how to make individual news operations work cost-effectively -- whether funded by benefactors, investors' capital or simply readers and ads. The ramp-up to profitability takes awhile but much less time than the five or more years it typically takes in the print world. Everything from GigaOm to PaidContent to Gawker Media to The Poliico, from MarketWatch to some very targeted products I’ve worked on under non-disclosure agreements are run as real businesses. Whatever you think of their journalism, they’re no less reliable, journalistically, than a panoply of so-called mainstream newspapers and tabloids I could cite.
There are for-profit models there, and great journalism can survive. Just maybe not in the newspaper business the way it’s been run.
* Classified ads were almost literally printing money. Every square inch of the page represented income, and profit. That was so much profit per square inch, in fact, that newspapers for years were in the very top in profitability -- up there competing with oil companies for the highest profit margins. And the list continues, with auto ads, real estate ads, coupons and other forms of informational advertising to a highly interested buying public that has been rendered, if not useless, at least much less cost-effective by a much more efficient Web, delivered online or on mobile devices.
When I wrote about the expected cut back on home delivery for the Detroit newspapers, the assumption would be that many of the affected customers could access the online sites of the newspapers. I have learned, however, that the alternative to the “paper” paper is a bit more involved. Beyond the traditional Web site, the newspapers will be introducing rather impressive digital editions.
The digital version is more than a Web site. When initially accessed, the user sees a low resolution rendition of the front page on the left of the screen. Clicking on any article brings up the text of the article on the right. In a touch that tries to preserve the traditional flavor of the print paper, the etxt of articles with a jump actually stop where they would on the front page, followed by a link to the jumped page, but then continues with the rest of the article following. It’s an anachronism—but I can see the rationale for this formatting.
Users also have the option to display two pages across in the layout of the actual newspaper. In this format, the cursor changes to a magnifier, so a click on the low rez image enlarges it to a readable size. Yet another option allows downloading individual sections or even the entire newspaper as a pdf file. (Today’s newspaper was a 46 mb ZIP file). As best as I can tell this still needs some work, as each page is a separate pdf file.
The technology is far more amenable to user preferences than the more static approach taken by YuDu or The Sporting News or other previous digital publications’ digital editions.
The notion behind the digital edition is that it is fixed, being a representation of the print version. It is not updated 24/7. It IS the printed paper, digitally rendered. There is no ink to rub off or newsprint to toss out, but otherwise it has the benefits—pages randomly accessible – and drawbacks—fixed in time—as the print edition. Users are advised to go to the paper’s Web site for updates and breaking news.
I also tried it on my iPhone and it worked well, with the usual caveat of the iPhone’s small screen. But I could use all of the digital version’s functionality. Apparently the digital edition does not use Flash or any other non-browser standard technology.
The digital Free Press (and any other newspaper that adopts a similar technology) won’t appeal to everyone. Nothing does. SmartPhone access can provide some flexibility for mobile use, but is not a satisfying substitute. Reading a digital version, even on a nice widescreen monitor, is confining to a fixed place. But it is not hard to see the possibilities. If compatible with e-readers, such as Amazon’s Kindle or the newly introduced iRex with a 10” “paper” screen, the portability issue and the form factor hurdle recede.
Of course, the technologies only address the economics of the newspaper. They do not solve the enduring bigger question: Who will be paying to buy a newspaper, digital or otherwise?
The auto industry is not the only one in Detroit that is hurting badly. The Wall Street Journal reported today that The Detroit Free Press and The Detroit News will cease home delivery four days a week. The two newspapers are independently owned (by Gannett and MediaNews Group, respectively) but operate under a joint operating agreement that handles business operations for both papers, including delivery.
It’s no surprise that newspapers have been hurting, but the Detroit papers seem to be failing faster than those in other cities. Circulation of the papers is down between 15% (Free Press) and 22% (News), a long term slide that has no doubt been exacerbated by the troubles particular to Detroit’s major business.
The official announcement, expected next week, specifically refers to home delivery, suggesting that the papers will continue to print hard copies daily, with distribution limited to newsstands the four non-delivery days. The digital versions will continue as well.
I would have to assume that, if this comes to pass, the green eye shade folks have figured out the savings for this half-a-loaf strategy. I need to be convinced. If they do indeed still turn the presses every day, then the only savings are the variable costs of ink, newsprint, and delivery costs for the home delivered copies. All other fixed first copy costs stay the same. Subtracted from the savings is the lower advertising rates that could be charged for those days, reflecting lower circulation. The cut back is expected to be accompanied by a dramatic redesign of the print editions, which may have some cost implications. I guess we should wait for the details to make a final judgment.
The pending announcement makes very real the current virtual office pool in media circles, the winner being closest to predicting when the first major city newspaper would announce it would become an online-only service. Indeed, we may have a winner. in his column last week on media predictions for 2009, Business Week columnist Jon Fine included this precocious prophecy: “More than one newspaper in a top-100 market ceases publication or reduces its print edition to something unrecognizable as a daily newspaper.” Had he heard the scuttlebutt about Detroit, or is he just that good? (Fine also wrote “At least one recent, heavily leveraged media deal—Tribune, Univision, Clear Channel, the Minneapolis Star Tribune, I could go on—goes bankrupt. A week later the Tribune company did file for Chapter 11, though that debacle was a bit more foreseeable).
Two months ago, the Christian Science Monitor announced that it would become a weekly in print, along with its continually refreshed Web version. The Monitor has long been suffering so it was even less a surprise that the Tribune filing.
Still, this is quite likely the start of a trend. Some publishers may be emboldened by the Detroit plan to move ahead their own online-only strategy. Others can wait and see how it works out for Gannett and MediaNews, then either follow suit or decide to find other ways to cut costs. My own prediction (drum roll please) if that over the next two or three years more dailies will move to a hybrid platform, akin to Detroit, with less than daily delivery or even printing. The early trickle could become a stampede by the end of the decade, regardless of how fast the economy recovers. Newspaper economics are changing.
There is no dearth of bad news about the state of the newspaper business: Declining circulation and advertising linage, translating into repeated downsizing of staff and bureaus.
But much of that is abstract for those not actually losing jobs. So here’s a blast that brings the harsh reality home: Out of Town News, the venerable international news outlet in the epicenter of Harvard Square, in the epicenter of one of the more literate nooks of the world, is closing.
Out of Town News used to be a bustling hub, situated just outside Harvard Yard, across from the Harvard Coop bookstore, at the literal crossroads of Massachusetts Ave, JFK Street and Brattle Street. It was at the entrance (or exit) to the Red Line of the subway system.
John Kenneth Galbraith bought a copy of Le Monde there every day. Julia Child searched for obscure Italian and German cooking magazines, and Robert Frost once stopped by - it actually was a snowy evening - to get directions to a reading.
I used to stop by often. Outside there were stacks of the Globe and Herald, The New York Times, New York Post and the Daily News, Wall Street Journal and Washington Post. Inside were shelves laden with newspapers from Los Angeles, Philadelphia, Denver, Athens, Tel Aviv, London, Paris, Frankfurt, Tokyo: Indeed, 200 cities. Its name was truth in advertising. There were also hundreds of magazine titles, inside and outside. Customers could stand there and browse—or even read—without fear of being asked to move along.
But times change. I haven’t bought anything from Out of Town News in maybe 10 years. And apparently many others haven’t. Galbraith and Child are gone—replaced by a new generation that can read today’s Le Monde online—instead of paying $4 for a two day old issue.
Out of Town News was started by Sheldon Cohen in 1955. Previously he hawked newspapers with his father at the subway station. I met Cohen in the early 1980s. At the time I was working at a policy research program at Harvard, trying to scope out the implications of the inevitable transition to digital for the information industry. For a guy with ink under his nails, he was precociously curious not only about what threats that might have for the print business but what opportunities it might hold for him.
Though later I would see him now and then in the Square, I don’t know for sure where those few discussions lead him. But with great timing—maybe luck, maybe insight—he sold his business to Hudson News in 1994—yes, the year that the Internet went commercial and the Netscape browser was released. Hudson News is the purveyor of print media and over priced gum at newsstands in many airports. According to the Globe, Cohen, now 77, wept when he was told that the kiosk would be closed.
Institutions need to sunset when they have outlived their usefulness. There is probably a majority of two or three generations of Harvard students who have walked through Harvard Square for four years and never stopped into Out of Town News or even thought much about it. I wonder what will be the media institutions that disappear for them to shed a tear over when they look back.
[Added March 30, 2009: Reports of the death of Out-of-Town News were a bit premature. See this brief update.]
I heard Jeff Jarvis on the radio this week say he wanted someone to, in easy link-and-click fashion, explain what’s going on, what the current financial crisis is about. And I suppose he's right (while hoping he’s wrong) that that easy click and see doesn’t exist. (He did on his site say he likes this explanation.)
And, in so complaining, he put his finger on a major problem with journalism as it’s practiced. Amid all the tit-for-tat accusations, running around trying to dig up, follow the latest, get the scoops, journalists too often forget to explain to those who desperately want it what the story at its deepest levels is really about -- which also would serve to tell the reading/listening/viewing public why they should care. That kind of depth, of course, doesn’t get the quick pageviews, nor is it the kind of investigative journalism that tends to win Pulitzers and other prizes. In a business sense, it’s not the kind of journalism that will pay for the resources it takes create it. But it is a big public service that can accrue pageviews (on pages carrying ads) over time. And there are ways to “monetize” it beyond the pageview-ad formulation. (partnerships, re-branding, syndication, books, new sections ... that would be another blog post.)
Not that it’s easy to explain something like this crisis. A lot of people tasked with explaining what’s going on probably themselves don’t understand, and good journalists are trained not to let their grasp exceed their reach. Heck, some of the smartest professors I had in business school seem at a loss to completely explain what’s happening in the economy right now. (One wrote an email about the opposing views of who’s to blame, without answering a question I asked about whether models he taught us projecting increased value as debt is taken on were still valid, or formulations for calculating risk should be changed). And, the ones who can explain it all to us -- smart MBAs who do financial modeling -- are, after all, ones who helped get us into this, with the very financial models they created or followed. They’re likely to earn a lot more than the ink- and pixel-stained wretches working in newsrooms. Then, again, there’s a few of those folk who have a bit of free time at the moment. Maybe they could write a little something for the papers, even help come up with some graphics and videos to explain it all.
Even without the business justifications, though, the explanation would be worthwhile and a public service.
The current financial crisis only rubs salt into the wounds of the newspaper industry. Already hemorrhaging advertising linage and revenue (The Philadelphia Inquirer is reduced to putting car dealer display ads in the main news section where attractive full pages of department store ads used to be), a recession would further erode advertising. But now comes a credit and liquidity crunch that could affect newspapers companies carrying high debt loads, especially if the debt needs to be refinanced in the near term.
The “Heard on the Street” column of The Wall Street Journal last Friday noted that “Of the U.S. media companies whose debt is rated by Standard & Poor's ... 86% are speculative-grade, a higher percentage than any other industry.” Those companies planning to pay down debt through asset sales, such as The Tribune Co., may find that potential acquirers will have less access to financing. With $12 billion in debt, it was expected to pay some of that down through the sale of the Chicago Cubs. But that is not a done deal.
McClatchy Balance Statement
For example, McClatchy, the third largest newspaper publisher, is laden with debt from its 2006 acquisition of Knight Ridder. Its long term debt is still 10 times higher than pre-Knight Ridder even after using proceeds from sales of some newspapers to pay down debt. At the end of June, McClatchy had $1 billion in revolving and term bank notes loans as well as $50 million in public debt that will come due in 2009.
Its Long Term Debt to Equity is 5.8, up from 0.1 in 2005. And its stockholders equity is down 72% from its 2005 level. All this gives the owner of the Miami Herald and Raleigh News & Observer little wiggle room for raising additional capital. This crunch is reflected in its recent dividend announcement, cutting in half its dividend to conserve cash. That step is in addition to a 10% reduction in its workforce.
Holding higher relative amounts of debt is called “leverage” in the financial world. Used judiciously, leverage can help an enterprise grow without diluting the holdings of the owners. But when access to debt is too cheap and easy, it can also lead to making poor strategic decisions. And once laden with debt, it restricts further flexibility when, as now, credit comes with more strings and tighter knots.
With the decline in advertising and circulation, restrictive and more expensive credit may only accelerate the slide for some media companies.
Earlier, I saw the AP having trouble if a group of Ohio papers didn't use it. Now, Jay Rosen points us to to a Wired pickup that links to this story from the MinnPost about Minneapolis Star Tribune sending the AP the requisite two-year notice that it intends to cancel. This after five other papers did so. Now, this doesn't mean that the Strib will necessarily drop AP. Sending notice ahead of a deadline is a common tactic. In fact, some lawyers routinely send out cancellation notices as a matter of course, to they can cancel in the event they do actually wish to cancel. And, Rosen also notes, The Spokesman Review is challenging the two-year cancellation notice requirement.
Nevertheless, it has for decades been a "given" that a U.S. newspaper would take the AP as a core component or important supplement of its news coverage. The MinnPost writer, David Brauer, talks of the damage to the area's news gathering if the AP loses the Star Tribune's participation (and fees). But he also notes that papers could use that money to pay for more of their own reporting:
If AP gets less cash and copy from the Strib and cuts its local presence, Minnesota’s news ecosystem could take a big hit. The wire service’s copy fleshes out local papers big and small; a diminished AP weakens a key line of defense for cash-strapped newsrooms.
Then again, non-metro editors around the nation were among the first to give AP notice; most said they’d rather save the coin for their own staffers (even as their publishers were thinking cash flow)
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A Newsweek editor once quipped in an editorial meeting that "if we have two examples, it's a trend, three, a cover story." Well, now we have at least a half-dozen.
If the major reason for the American daily newspaper industry's demise were its stories contained too many dangling participles, then the industry could more easily comprehend its situation than instead hearing that the reason was it had violated the Principle of Supply & Demand.
The understanding of economics, particularly media economics, has never been its strong suit, except if the topic is how many tons of newsprint to buy, how many points a major stock market dropped, or how cut expenses to match revenues. Most newspaper publishers, editors, or journalists tends to equate economics as solely the science of government financial policy, household spending, Wall Street speculation, and petroleum pricing. They don't understand or have forgotten that a major branch of it is the behavioral science of Microeconomics - the study of how individuals make decisions to allocate their time and activities.
The main paradigm of microeconomics is known as rational choice theory or rational action theory, which states that individuals choose the best action according to their preferences and what constraints of supply, demand, time, and access face them. In it now lays the demise of American daily newspapers as we know them.
How did the American daily newspaper industry violate the Principle of Supply & Demand by failing to adapt the industry's core product to a radical change in consumers' supply of news and information during the past 35 years? To understand how, both start and end at the roots of the newspaper industry.
Start in the European city of Strasbourg during 1605 when the world's first newspaper began publication. It used a technology developed there 164 years earlier by the metalworker Johannes Gutenberg, who had invented a device for producing innumerable copies of the same text. (Please keep that concept in mind, because it's now moldering the newspaper industry). The Supply & Demand equation for accessing daily changing information was then quite the opposite it is today: Consumers had little or no supply of daily news until the daily newspaper. So to produce newspapers, this adaption of Gutenberg's book printing technology spread quickly worldwide.
Some modern critics of newspapers say the industry is leaden and 'doesn't think outside the box.' They probably don't realize the historical irony that underlay their criticisms. The core of Gutenberg's technology was a box containing lead type whose impressions could print innumerable copies of the same thing. In that core is the inherent limitation that it produces the same edition for everyone. Although in the 19th Century steam and later electrical power speeded Gutenberg's technology and the introduction of offset lithography during the middle of the 20th Century eliminated its use of lead, the analog technology used to produce today's daily newspapers is still Gutenberg's. Indeed, today's analog printing technology still has the same limitation that it had in Gutenberg's days - it produces the same edition for everyone.
That technological limitation delineated the newspaper industry's editorial and advertising practices during the past four centuries. Because each edition had a finite number of pages and was printed by analog technology had to produce the same for everyone at once, newspaper editors had to select stories according to two criteria:
Ignorance isn't bliss to the dying. Witness the pathos of American daily newspaper companies. Most have finally begun to realize that the deterioration of their businesses isn't cyclical but grave. Yet few, if any, understand why. Almost all grasp for the reasons.
Some attribute their grave condition to advertisers suddenly switching huge portions of spending from print to online - an excuse that ignores more than 30 years of declines in those newspapers' printed editions' circulations and readerships. Some others attribute their deterioration to not having transplanted their content into online quickly enough -an excuse that ignores not only the dozen years they've spent transplanting it but how their online editions are now read even less frequently and less thoroughly than their printed editions.
Most of the print newspaper experts who diagnose these companies' condition still prescribe stale nostrums such as more consumer focus groups, subscription price incentives, more stylish typography, or shorter stories. Meanwhile, most of the experts who diagnose these companies' Web sites prescribe balms and accessories such as giving blogs to reporters, adding video, or having the readers themselves report the stories. American daily newspaper companies have long been too financially impatient to submit themselves to anything but ostensibly quick cures and they've even longer been too conceptually myopic to perceive the real reasons for their declines.
I'll declare the real reasons. There are but two and neither has anything to do with multimedia, 'convergence', blogs, 'Web 2.0', 'citizen journalism,' or any ancillary topics you may have heard presented at New Media conferences this millennium.
Nor is either of the real reasons advertisers' abandonment of printed newspapers. Their abandonment is a symptom, not the reason for the decline. Contrary to myopia of many newspaper executives, advertisers aren't newspapers' primary customers. Although advertising revenues may be sunshine for newspaper executives, the roots of their business are readers. A newspaper with readers will attract advertisers but a newspaper without readers will not. Readers ultimately support and sustain the newspaper business.
To understand the real reasons why the American daily newspaper industry is dying, first understand why more and more Americans are no longer reading daily papers and how their abandonment of newspapers has been wrought by changes in their own media economics. Also comprehend why the epicenter of the newspaper industry's problems in post-Industrial countries is America and exactly how grave the situation is there.
... That's what Google Trends says. Like I've said, sometimes when you're poking around for other work, you find curious stats. Like, today, if you search "NYTimes.com" in Google Trends, it shows that more visits come from California than New York.
I really, really promise that I will not be stuck forever on what might be seen as a crusade about the change in the editorial mix of The Wall Street Journal since Rupert Murdoch took control. I don’t want to become the Ben-one-note on this as Lou Dobbs has become for his anti-immigration tirades.
Still, there is some news on the subject. I have written several times now about how the Journal has been devoting its front page to hot-off-the-press headlines that are essentially the same as what every other daily publishes: “Obama wins primary,” “Cyclone levels Sri Lanka.” This is a form of run-of-the-mill reporting to which the Journal brings little value added and, with earlier deadlines than most local dailies, perhaps less value.
But now comes some hard data—that’s what I like more than impressions—that does indeed confirm a substantial shift in the Journal’s editorial coverage since the change in ownership. The Project for Excellence in Journalism undertook a content analysis of the front page stories in the Journal for the four months before the December 12, 2007 date that News Corp. acquired control of Dow Jones, the parent of the WSJ and the three months following. Its finding was unambiguous:
In the first three months of Murdoch’s stewardship, the Journal’s front page has clearly shifted focus, de-emphasizing business coverage that was the franchise, while placing much more emphasis on domestic politics and devoting more attention to international issues.
The before and after change is most dramatic in several areas, as seen in PEJ’s chart I’ve cribbed here. Political news is up four fold, reflecting the intense coverage of the primaries that in the past election cycles would have received less space (if only because until recently the Journal rarely devoted more than a single front page column to any story). The full report at the Project’s Web site also compares the “new” Journal’s editorial mix with that of The New York Times, which Murdoch is keen compete with. There are still substantial differences, with the Journal devoting more of its front page to foreign topics, business and economics, less to politics.
Jack Shafer, writing at Slate’s Press Box last month, made note of the PEJ data, but chose to focus on his more generalized impression that the Journal may indeed be better under Murdoch because “it was swinging hard again in its traditional wheelhouse to produce great enterprise journalism.” He proceeds in identifying some examples, all, indeed quality reporting in which the Journal has long excelled.
This may be wishful thinking on Jack's part. I hope not. He has certainly identified some fine-- and traditional -- Journal pieces. But I'm speculating that perhaps they stand out because, as Jack notes, the primary season is over, and there had been no devastating earthquakes or cyclones for a few weeks, and the presidential campaign was in pre-convention simmer. Indeed, in the midst of these fine articles was the front page on June 4, as Obama wrapped up the Democrat's nomination. It struck me immediately as I picked up the Journal and The Boston Globe from the driveway that the Journal article was readily interchangeable with the Globe (and other dailies) articles. In my analysis, every day the Journal wastes newsprint with such headlines, photos and copy is a day lost to do the type of journalism Jack is rightly trumpeting.
I’ve mentioned before that I have great respect for Murdoch as a savvy businessman and as a risk taker who has made real contributions to the competitive landscape of the media.. My current critique is that the hot news approach is not a strategic direction that plays on the Journal’s long time strengths. To the contrary, it takes the paper on a path that daily newspapers should be trying to leave behind.
Ok. ‘Nuff said. I’ll leave this behind. If only Lou would move on from his obsession.
There’s a lot of grumbling and retorting about the AP’s attempt to then sort-of retreat from making bloggers either paraphrase or take down their pickups of material from the venerated wire service. But there’s a more immediate problem that runs deeper than complaints from bloggers like Michael Arrington, Jeff Jarvis or Jeff Nolan.
A few weeks back the editor of the Cleveland Plain Dealer on "On the Media" talked about how newspapers in Ohio were reaping great benefits trading material, and linking and cross linking. More importantly, she said she was no longer reliant on The Associated Press for her stories from the region but instead was getting the original versions direct from the other sources around the state rather than paying “a big chunk” of her budget, about $1 million for rewritten AP stories. Picking up directly, on the Web, and putting other papers’ stories directly in the newspaper was also better quality, she said, and readers were noticing:
“I mean, we've always had access to news from all over the state. It was just, you know, it went through the AP mill. I frankly think we're getting better, more distinctively written stories because they're not going through the AP mill.”
If local papers skip the AP, that means the core constituency is in revolt. That will potentially be more corrosive than the fight with the blogosphere over fair use. "As long as there are are two papers to trade articles, the AP will exist," one rake at the wire service -- where I worked for seven years on the international desk and as a foreign correspondent -- quipped to me once. But what if the members form their own cooperatives and cut out the AP as middleman?
I’m not saying this will happen immediately. AP, whose core business is the not-for-profit cooperative dues of member newspapers, has offered to cut its rates starting next year. Newspapers, despite ad and circulation declines for decades, have been notoriously slow moving, and many will be reluctant to pick up content from papers they might think of as competitors; the AP has given them the cover they sought to do so less blatantly. But the economic pressures are only increasing as revenues and readership decline more precipitously, and any success in Ohio could be the thin edge of a wedge. “We've set up this little cooperative,” said the Plain Dealer editor, Susan Goldberg. “I don't know how it'll work in the future, but right now it's working really well.”
Add to that AP’s deal to have its direct results placed higher in Google than member papers, further pissing them off, and newspapers will look harder at the Ohio example. We're talking months or perhaps years, certainly not decades. The example could spread nationally or internationally.
CEO Tom Curley has been leading the AP into a future in which an increasing share of its revenues comes from sources other than member dues, such as direct photo revenues, Web content services and broadcast fees. But the transformation may not be fast enough. AP doesn't have the luxury of Bloomberg or Thomson Reuters in which news gathering can be supported by financial terminals that really bring in the bucks.
AP should own the Web. It has its roots in the trading and sharing of information. It gets a significant chunk of revenue from providing the backbone through which others pass content. It coded and tagged and parsed content with everything from category codes to prioritization markings, and ways to match text and photos decades before those practices became fashionable for everyone. But culture and old habits are very hard to change, and I fear for the company's viability hope it can work out a more creative win-win solution for all.
There's a discussion on a listserv (remember those?) some of us here are on as well as some Internet discussion about Microsoft leader Steve Ballmer's remarks that paper media will go away in 10 years. Only he doesn't say that, exactly. He says it's immaterial whether it's 8 or 10 or 14 years. The exact timing isn't his point.
He also doesn't literally mean, I would guess, that all ink on paper production will cease in toto, full stop. Horse and buggy still exists, as do books made by hand, despite the invention of the press and moveable type. But his point in a larger strategic sense is, I think, well-founded. That the lion's share of media -- media that matters in a larger, societal and business sense -- will be delivered over an IP network, at least in the industrialized world. Who can refute that, honestly? Newsprint and fuel costs rise, we're choking on garbage and need to recycle, our forests are becoming denuded. Meanwhile, the technology of the next next next generation Kindle and Sony reader and iPhone and e-paper and tablet computer will all be better better better, and eventually get good enough that people will be comfortable opening their flexible, reaable (and listenable and watchable and networked) thin, bendable screen (or goggles or mini-projector or who-all knows what?) as they do a newspaper or book today.
People love books and magazines and newspapers not because they're ink on paper, but because they're right now the best technology around: quick, easy, never need rebooting, easy to fold, put in a bag, read in nearly all conditions, don't need power, etc, etc. If the IP device technology approaches those attributes, it will be immaterial on what surface people read, and the cost- and other pressures I mention above will move folks to digital (or IP, if you prefer).
Sure, some glossy magazines will still give a "luxury" experience that won't be well-approximated by the screens. And some may get news on paper -- those at the bottom rung who can't afford digital or at the very top who CAN afford good paper -- but the mass will probably be digital. So, yes you'd win the bet if you said there will be print around in 10 years. But if it's 14 or more, you might lose if you say it will have primacy above digital.
The Wall Street Journal's editors again flub an opportunity to differentiate themselves from the fading pack of daily local newspapers. At least the Times used the slightly more accurate "Claims" rather than "Clinches" and uses a marginally less trite photo.The Journal used the same photo as chosen by the Philadelphia Inquirer editors.
It will take the a few circulation reporting periods (March 31 and September 30) to get a feel for whether the Journal's new "look like a conventional daily" strategy is a positive or negative.
Most of what my colleagues and I write about in this space back in some way to the tsunami-scale scale changes overtaking the legacy media and the absence of a roadmap for what they should do. We can only track what seems to work for others, try to prognosticate the future (iffy beyond, say, six months), observe forces and trends at work, cajole and suggest.
There is, in short, much uncertainty surrounding where the business models for media are and should be headed.
One area that legacy media can control and should know something about is content. Newspapers, broadcasters, publishers of all stripes, have absolute control over their content. Newspaper publishers constantly need to ask themselves “What do consumers want when they subscribe or take $.50 (or $1.00) out of their purses/pockets to buy the publication. Broadcasters certainly ask, ‘Why should viewers tune us in?”
But I’m constantly amazed at their lack of insight and therefore the choices they make. And here I’m referring in particular to the broadly defined “news” segment of the media. Research shows that there has been a range of motivations that are involved in getting individuals to buy a newspaper or tune in a news program—or click to a Web site bookmark. One of the top motivating factors is the interest in learning what we do not know. What happened in the world while I slept? Who won the game last night? What is the weather forecast for tomorrow? What did my stocks close at? What does some “expert” think about a new movie or show? Surprise me!
What we don’t need the news media for is to be told what we already know. The Internet has, of course, made it possible for more people to know more of the answers to the above types of questions before they are available in print or even on a regularly scheduled broadcast. Still, there are many things we know even without the Internet. For example, most of use know if it is hot outside. Or wet or windy or cold. We look out the window or open the door. Anyone who drives a car knows the price of gasoline. Anyone who flies knows the airports are crowded and lines at Thanksgiving are long.
So where am I going with this rant? I’m astounded—and hopefully some of you are as well—at how the editors of news media shoot themselves in the foot everyday with the non-compelling nature of their many of their content decisions. For example, most days I turn on “American Morning” on CNN, even before the computer is fired up. And what do I hear, at length, each day lately? A business reporter, Ali Velchi, telling us the price of gasoline. “Pain at the pump” is the not so original refrain. And the usual “B” roll of someone filling up, with the obligatory quote from the woman in the street who is driving less and someone who will give up their “gas guzzler.” And the anchors commiserating over the latest record. And a reiteration of where Lundburg or AAA thinks the price is going in the “peak driving season.” Compelling stuff, no? Maybe the “Today Show” isn’t so lame.
Not long ago I was asked by a small chain of newspapers to spend a few days with their editors in a session to help them understand and strategize for the challenges facing them. They sent me a large stack of their newspapers so I could get a flavor for them. In the sample were issues from several of the papers with a variation of the headline “It’s Hot Out There.” Immediately I created in my head what this would say. By the third paragraph it would quote some gardener about the heat and how he is coping with it. And sure enough, in the first article I read I was both pleased and disappointed with the copy. There, in the third graph, was a quote from Pedro something, with the Generic Landscape Co. “Yeah, it’s hot. So we start really early and quit by two o’clock,” he explained. I mentally patted myself on the back. But there was more disappointment that the article was so very predictable.
However, the larger point is that, with both CNN and these newspapers (and many others that could be included) that these prominent “stories” were not about news. They were what anyone knew.
In this space I have recently been critical of The Wall Street Journal for a new editorial approach that has often reduced prominence of analysis and surprise in favor of featuring in many cases material that most readers would already know: A who-what-where-when accounting of an earthquake. A routine summary of the previous night’s primary results (and, with its early deadline, less timely that what was in the local newspaper). It is telling readers what many, if not most, could be expected to learn from other media they are likely to have seen.
The legacy “news” media cannot materially change the trend toward whatever is coming via technology. But they can slow their demise by concentrating on the content of their products. And they can enhance the position of their digital products as well by providing audiences with the serendipity factor and with a value added quality that is needed to have users buying, tuning or clicking to their products. That has been the not-so-secret sauce behind the strength of The New York Times, USA Today, Fox News and, until recently, The Wall Street Journal. Give people what they don’t know, not the current weather or yesterday’s price of a gallon of petrol.
Sometimes less can be more. This is the implication of my colleague Dorian Benkoil’s thoughts here last week about how newspapers (and other legacy media) might position their Web-based content to optimize revenue over eyeballs. Special interest magazine publishers have long worked this way, charging far higher cost per thousand ad rates for Time Inc's Fortune for example, than for its People, as the former has more attractive demographics for many advertisers than the latter. So a far smaller circulation can bring in as much revenue and perhaps greater profit margins than more circulation and costs. This has been the economics behind many subject-focused cable TV channels as well.
Here’s another way to look at more by subtraction. David Pogue, a New York Times tech columnist who I find entertaining and quite informative, had a column last month about why a product can be a success even with acknowledged flaws. Referring to Apple’s Mac Air he wrote:
…When your laptop has the thickness and feel of a legal pad and starts up with the speed of a PalmPilot, it ceases to be a traditional laptop. It becomes something you whip open and shut for quick lookups, something you check while you're standing in line or at the airline counter, something you can use in places where hauling open a regular laptop (and waiting for it) would just be too much hassle.
It's the same lesson I learned when I reviewed the Flip "camcorder" a couple weeks ago: if you change the shape and concept of something enough, it ceases to be that thing. It becomes a new thing, or a descendant of that earlier thing. But it's no longer the original thing, and you can't judge it on the same yardstick.
Lesson learned: Form—the products attributes—can create the function. Thus an entrepreneur can break out of a well-defined category (camcorder, laptop, cell phone) by changing some key characteristics—weight, time to boot up, capabilities—even a dramatic new price point.
Does this insight provide any guidance for the media industry? Should the local newspaper continue trying to be a general interest publication even when online? Is it already something else, in which case it needs to be evaluated by a different metric (i.e., time spent, return visits) than what has been used in the past (i.e., hits or clicks or gross eyeballs or total page views)? Or, perhaps, should legacy media be creating new “things” based on the old? What is the media equivalent of the Mac Air or Flip camcorder: a product that is recognizable but, by changing—often removing—product attributes is used by consumers (and advertisers in this case) in new ways?
Experiments with short form videos—first popularized from the bottom up thanks to the YouTube platform—have now become mainstream with the traditional video programmers. Viacom purchased short film pioneer Atom Films in 2006. But most attention continues to be on finding outlets for conventional programming, such as NBC Universal/News Corp.’s Hulu.
If I had the answer I’d offer it (though probably not here—a guy’s got to feed his family, or in my case, start paying college tuition). But I think it is an area ripe for brainstorming and another round of informed trial and error.
There’s been a debate on a Poynter Institute journalism discussion group about how to increase pageviews, bring in new traffic to news websites, to increase ad views, when newspapers are struggling to bring in digital revenues, and that inventory is topping out. My friend and mentor Vin Crosbie points out how numbers from the Newspaper Association of America show that even for the best of the best newspapers, users are coming only an average of once per week, and spending only five minutes per session. Newspapers, he says, are general interest publications.
Meanwhile, another participant, Amy Gahran, has asked why newspaper execs are limiting their vision to commoditized pageviews on websites. Shouldn’t they be thinking more about how to add ad revenues to feeds, mobile distribution, RSS, widgets and the like?
And I’ll add a third thought: Newspapers aren’t really a single general-interest publication, but rather -- in a digital age -- an amalgam of targeted niches. Sure, in print, it’s one branded publication that you hold in your hands and flip through as you’re interested. But on the Web, it’s a local sports “vertical,” a local business “vertical” and so on. While the general interest local news areas of the site will probably remain commoditized, the more targeted areas with a high interest and usership should be sold separately and at a higher CPM. If the frequency is as low as Vin says, that can be made a strength, by asking advertisers to understand they’re buying engaged targeted readership, not frequency or reach.
Similarly, AP announced its test of a mobile initiative to give more content and ad outlets for digital distribution. . That should make some folks in that discussion happy.
Former Wall Street Journal publisher Gordon Crovitz’ inaugural commentary for the paper today repeats a fair amount of what he told the Chicago School of Business last month : that James Rothschild was annoyed over how the telegraph leveled the information playing field (and that we tend to overestimate technology’s effect in the short-run, and underestimate it long-run. (Witness the initial hype over the Web at first, and how it’s now part of daily life with little fanfare.)
But a lot of what he said at the CSB speech -- a thoughtful analysis of today’s media landscape -- wasn’t in the column and bears repeating. One crucial point he made was that B2B information applications now often lag behind consumer ones. Consumer-focused products tend to have better interfaces and applications than the high-priced business and financial services ones. He calls this a “real challenge for the B2B industry, which has so far been less affected by the digital age than B2C.”
“Much of the innovation is based on the broad consumer market,” B2C rather than the B2B market, he says. This is a see change. It’s been a given that people pay handsomely for business-oriented information, and get real value from it. But Crovitz notes that financial professionals with high-priced terminals at their desks today will often turned to Yahoo Finance. This movement has big implications for B2B information providers.
Other points he makes:
* Subscription plus ad revenue “works very well” as a revenue model. (In other words, the WSJ is smart to have subscriptions and ads; new owners News Corp., of course, considered doing away with them.
* Software and information are more powerful together than separate. “Information and software are more closely linked and mutually dependent than ever before. Changes in each affect the other. “The great changes in computing power” have shifted the information industry, changes in information have affected software..
* Neither content nor distribution is king: the consumer is.
When News Corp. first announced its intention to bid for Dow Jones, some critics moaned that Rupert Murdoch would impose his political ideology (presumably conservative) at the flagship Wall Street Journal. Jack Shafer at Slate, no knee-jerk Murdoch critic (“I genuinely admire the rotten old bastard”), nonetheless had his early list to be skeptical.
Rather than muck up a successful franchise that has outperformed the dismal newspaper industry metrics in advertising and circulation in recent years, my take at the time was why would he do more than invigorate management?
Well, I was wrong. Although there is no noticeable new slant ideologically, there has been a very visible change in editorial priorities. My own opinion is that they are taking the Journal 180 degree from where it should be.
For me (yes, I know, a sample of one), the attraction of the Journal was the unique front page: Distinctive both in physical layout and in content. It was clearly not my hometown Boston Globe—or your hometown whatever. I need not elaborate for anyone who has been a Journal reader.
While the Journal had moved away from the old six column layout, with most articles running one column down the front page, to a more conventional design with multi-column heads and less copy on page 1, the gist of the content was the same.
Now, many days I pick up the Globe and the Journal outside my door and I need to stare for a second to figure out which is which. Do I really need the Wednesday Journal to tell me about the vote tally from Tuesday’s primaries (and with an earlier deadline, less complete than the Globe). For that matter, what proportion of Journal readers even need the morning paper to inform them of the outcome? They got it from TV last night, from TV this morning, or online anytime.
There was certainly room for improvement in the management of Dow Jones that News Corp. could provide. Fresh thinking can be introduced. As one who has been following the ups and, more lately, downs of the newspaper industry professionally for 35 years, the fresh air being blown across the newsroom of the Journal seems to be a cold wind rather than a crisp breeze.
Prove me wrong Rupert. It’s your money and legacy. But if I’m right, can I get the old Journal back?
The Wall Street Journal Online Wants to/Does not want to be free, Part 7
Did I say in November that Rupert Murdoch said that the Wall Street Journal Online would do better with a totally ad supported business model? As Emily Latella would have said, “Never mind.”
We had some discussion here last summer on the scenarios that might justify a free strategy, wherein lower ad rates and foregoing $60 million or whatever in subscription revenue could be made up by 10x greater readership.
Apparently the new owner of Dow Jones is backing off. A report on a Wall Street Journal bureau chiefs’ meeting last week says that “Murdoch has scaled back his ambition to make WSJ.com entirely free.” According to one who was there “He said he originally thought making it free would bring in the biggest audience, but that after studying it it’s not as simple as he thought.”
That newspapers continue to lose advertising market share to the Internet is not a revelation. That newspapers are losing share of local advertising is a reason for concern. According to the latest tally, newspapers accounted for 43.7% of the local online advertising pie of $8.5 billion for the first 10 months of this year. This was down from a 44.1% share of a smaller total in 2004. The online revenue of local TV stations, on the other hand, did not decline so precipitously.
Local advertising traditionally has accounted for about 85% of total revenue for newspapers in larger market, even higher for small market newspapers. Local TV stations receive a far higher proportion of their revenue from spot national advertising, while radio stations have tended to be in between, though in most case closer to newspapers than TV. The primary local competitor for newspapers has historically been directories (e.g., Yellow Pages) and direct mail. Increasingly, cable has been able to siphon off local dollars with the capability to insert advertisements down to the neighborhood level.
What must be most unnerving to newspaper publishers and, to a lesser extent other local media players, is that pure play Web sites now have the largest share of local on-line advertising revenue—43.7% by the reckoning of Borrell Associates.
How can this be? Didn’t the publishers take solace in the fact that their local papers had a built in advantage over the upstarts thanks to their identification with the local market? And that all-critical brand equity?
It is becoming evident that the value of ad placement based on search terms, Zip code or Internet address proves more effective for the local advertiser even if the page viewed does not directly contain information that is congruent with the location of the user. That is, the value of the local newspaper or radio station has been that the advertiser had a high degree of confidence that anyone listening to that station or reading that paper was in their local trading area. But online the advertiser may not only be assured that the ad is placed in view of an individual within their target trading area, but may also have specific demographic or other characteristics desirable for that advertiser. Not to mention the added delight of knowing when an ad may have been seen and responded to in the form of a click or more.
Of course, this is true for the online site of any local medium. Too often, however, it seems that while the publisher’s sales force was working on convincing the paper’s current advertisers to try the online version, the new players had no such blinders. They were marketing to anyone, which often meant new service providers and merchants who had not been print advertisers: smaller in size but far greater in number. A version of the long tail effect. And that is where much of the growth is coming from. It’s not just old advertisers in new bottles.
Just now, minutes after the WSJ sent out an alert about the George Mitchell baseball drug report, someone put up a list of the players names on Wikipedia. I saw it on public Twitter while randomly visiting the public page there.
Wow. How can a newspaper hope to compete with that? And why wouldn't a newspaper, to save effort, simply -- assuming the list is accurate -- link to it? Journalistically, I can see the rationale of wanting to control the accuracy and therefore keep it on the newspaper's site. There will be tons of lists in tons of publications (hats off to any that add value). ... But, the speed of the list by what seemed to be a private individual, and on Wikipedia to allow other fervent folks to correct it - that's something that proves the power of community and individuals. (And one more caveat: I'll bet you that some Web editors -- you know who you are! -- will copy and paste that list without saying they did so.)
Is a large circulation newspaper likely to generate more revenue by charging for its online edition or making it free to maximize advertising revenue? Is the online version of a newspaper a complement to the print version—or a substitute? The stakes are high and the answers have been elusive. With few exceptions, since the dawn of the Internet Age, newspapers have been wrestling with whether this new conduit would be its friend or its death.
Of course, we will know in the long run, when some media historian looks back on this time from 20 years hence. But that doesn’t help today’s decision makers. That is why the research of University of Chicago economist Matthew Gentzkow published earlier this year in The American Economic Review is so helpful.
In this highly data driven paper with the typically academic title, “Valuing New Goods in a Model with Complementarity: Online Newspapers,”, Gentzkow blends consumer data from the Washington, DC market with newspaper operating results to address three questions: What is the relationship between print and online versions on 1) the demand for either diversion, 2) on the welfare of consumers, and, crucially, 3) on the impact of charging consumers for the online product?
With 30 pages of assumptions, explanation and calculations, Gentzkow makes a well substantiated finding that, The Washington Post would have been better off charging a modest sum for its online version (on the order of $6.00/month) until about 2004. After that, however, the growth in online advertising expenditures crossed over to affirm that it is significantly more profitable to set a zero price for the online edition when one factors in even a small transaction cost for online payments. He suggests that his findings are robust enough that they would likely apply to other big city newspapers.
Along the way, Gentzkow upends the early assumption that the print and online versions of a newspaper were complements. Applying a more sophisticated demographic model than had been used in the past, which simply looked at newspaper readers and online readers, Gentzkow concludes that the substitution effect is “nonnegligible." He does add that ”it is “small, however, relative to some earlier predictions.” In other words, real but not likely “to threaten the survival of print media,” at least right now.
Gentzkow further quantifies the “consumer welfare benefit” created by having a zero consumer price for online newspapers, which he put at $45 million annually for The Washington Post’s market. For the 2000-2003 period that came at the expense of Washington Post Co. stockholders, as he calculated it lost money by giving away the online edition when it could have made a profit by charging for it. (Among the factors here is that, as substitute products, by charging for online, some print subscribers would have continued with their subscriptions instead of switching to the online offering). Starting in 2004, however, the Post was more profitable with the free online version that it would have been with an online use charge
Having seen considerable discussion about whether The Wall Street Journal would be better off making its online version free, as the The New York Times has done Gentzkow’s approach is another data point (a rather large one at that) to reinforce the advertising supported model, for mass market newspapers, at least. There are numerous instances, however, where a consumer-paid model will still be needed. In the magazine business, for example, advertising revenue for many of the mass audience magazines, such as People or TV Guide, can be 50% or more of total revenue. But there are many niche publications, such as The Nation or Weekly Standard, that are highly dependent on subscriptions for the bulk their revenue. It is likely to be the same for niche online sites.
Reuters reported that News Corp Chairman Rupert Murdoch said on Tuesday he was planning to boost the numbers of subscribers to the Wall Street Journal's Web site more than tenfold by making access free.
"We are studying it and we expect to make that free, and instead of having 1 million (subscribers) having at least 10-15 million in every corner of the earth."
In a sign the universes of marketing and journalism are converging, Hilary Schneider, EVP of Yahoo's Local Markets and Commerce Division and the Yahoo publisher network gave a list of attributes (she wasn't completely clear but I think she meant) that journalistic content has to follow. She was speaking at the Online News Association Conference. And, surprising, the New York Times' International Herald Tribune's Michael Oreskes, giving the second-day keynote, stole her slides and showed them again. With some paraphrasing:
1. Obligation to the truth
2. Loyalty to citizens
3. Disclosure and verification
4. Maintaining independence (her slide actually said "an independence" but I'll trust that was a typo
5. Independent monitor of power
6. Forum for public criticism and compromise
7. Make the significant interesting and relevant
8. Keep news competitive and proportional
9. Exercise personal conscience
It as a bit surrealistic. Schneider spent some time talking about brands and marketing, and Oreskes was all about democracy and free speech.
Jeff Jarvis is asking for newspapers' "iPod moment" without fully describing what it is. Here's my response:
The iPod moment for newspapers will be when truly functional ePaper hits... color, touchscreen, wireless Internet built in, agnostic to standard, plays video, can work and read when not connected. A cross of the functionality of the iPhone, today's browsers and the TimesReader. It will be even more of a moment if that ePaper can also allow data entry for tagging and blogging, VOIP and so on. I dunno how many years.
Remember, people from MIT Media Lab and elsewhere imagined such a paper for the movie Minority Report. It was shown as USA Today in one scene on the train.
I agree with others, though, that it's coming incrementally. I can, today, do many of these things on my smartphone, and certainly on a laptop I carry most places.
Many commentators are hailing the demise of The New York Times' TimesSelect service as the demise of paid content online. I hate to rain on their parade, but paid content isn't dead. Consumer Reports, Zagat, Playboy and other premier brands prove everyday that paying for the premier content in a topical category is very much alive.
So why did the premier brand of The New York Times fail at paid content with Times Select? Because The New York Times and other traditional newspapers don't provide premier content in a topical category. Traditional newspapers provide a package of news that attempts to satisfy everyone's interests in all categories— an endeavor that is doomed to fail online and that is increasingly failing in print, too.
The demise of TimesSelect is notable only because it's the last major gasp of newspaper publishers' attempts to charge for providing everybody online with the exactly the same package of content. Not only won't online consumers pay to receive exactly the same package as everyone else gets from a newspaper brand, but they won't pay for even the best slice of that package.
That doesn't mean that online consumers aren't willing to pay; they just aren't willing to pay to receive exactly the same package as everyone else gets. Unfortunately, most media executives don't seem capable of conceiving that their companies can produce anything else at once but the same package of content for every consumers. Those executives are stuck thinking in what academics call 'one-to-many' or mass media terms.
People would be willing to pay a subscription fee for a service that delivers news to them online; but not for a service that doesn't exactly meet their needs and interests, that sends exactly the same package of news to everyone. Paid content isn't dead; just payment for the traditional 'one-to-many' package of content is.
There is a three-step process towards understanding why TimesSelect and other similar newspaper projects are doomed from the start. The steps are to understand why more than one billion people worldwide have gravitated onto the Internet; why traditional newspapers fail to match the reason why those people gravitated there; and why the traditional packaging of newspapers needs to radically change if that industry is to survive.
The fact is that, while everyone shares a few common interests (the weather, for example) and some people share some common interests (such as fans of the Red Sox), each person has many specific interests (a fan of Patrick McGoohan, knitting, Malaysian cuisine, etc.) and each individual is a quite unique mix of those common and specific interests.
To satisfy her mix of interests, an individual will use whatever media is available to her. Thirty years ago, her only choices in media were the three or four general-interest TV networks (ABC, CBS, NBC, and maybe PBS) she could receive via antenna, one or two dozen magazines (mostly general interests ones such as Time, Newsweek, USN&WR, Life, Look, etc.) available on her local newsstands, and one or perhaps two (unless she lived in a metropolis) daily newspapers that were delivered in her town. While those would likely certainly her common interests each day, she'd have to glean them for the very occasional that might satisfy her mix of specific interests.
Then came cable (and later satellite) TV, which gave her dozens of specifically topical channels 24/7/365. Then came developments in offset lithography that made publication and distribution of topical ('niche') magazines economical, and hundreds appeared on newsstands. And then she got access to the Internet, which gave her access to millions of topical webpages. Usage of all of these satisfies her - and a billion other people's -- unique mix of commons and individual interests better than any general-interest newspaper or news program can. People's use of the Internet to satisfy their individual mixes of interests caused the growth of the search engines. They didn't gravitate to online to read general-interest newspapers and news magazines (things that later followed them online).
Because people now have better means of satisfying their unique mixes of common and individual interests, general-interest newspapers' circulation and readership are declining, as are general-interest news program's listenership and viewership. For the past 30 years, you can track those declines to match the rise of CATV, 'niche' magazines, and Internet access (the recent plummet in newspaper circulation began almost exactly when the majority of Americans got broadband access, 'always-on' access to this better way satisfying their individual mixes of interests).
Traditional newspapers are obsolete. The reason why the traditional newspaper deliver exactly the same package of stories to all readers isn't because all readers want exactly the same package. It's due to a limitation of the Industrial Era technologies still used to produce those newspapers: an analog press (like an analog broadcast transmitter) can only produce the same edition at one time. That's the latent reason why a newspaper editor picks for publication mainly the stories that are of most common interest. For example, I'm a New York Times subscriber who's a soccer and Formula One racing fan but I rarely see stories about those sports in that newspaper. Yet I know NYT receives entire wires devoted to daily events those sports (even the Swiss Intercantonal league, Turkish Third Div., etc.) because I was the Reuters executive in charge of delivering those to the Times. The NYT newsroom has the soccer stories I want, but doesn't print them and instead prints baseball and American football stories, because its analog presses simply can't produce editions that match each individual subscriber's interests.
Though that limitation of analog presses doesn't exist online, almost every newspaper is inadvertently transplanting it there. For most of the past ten years, I couldn't get those soccer stories from NYTimes.com either, because it would publish online only the stories that appeared in print. (For the past four years I've been able to find the soccer wire on NYTimes.com but had to click half a dozen levels down into the site to find them.) Shoveling into online the same package of content for everyone doesn't add value in a medium that people are using to satisfy their individual interests and needs.
Moreover, people 'unpackage' the traditional newspaper's package of content online. A person who might have read the printed Willimantic Chronicle for national news because it's the only printed daily available in Willimantic aren't likely to read that paper's website for national news, because they've got now access to NYTimes.com, CNN.com, etc. Ditto with national sports, business, international news, etc. They'll use a newspaper's website only for whatever that newspaper can uniquely do (which is local news in the most cases). This means that only a fraction of the traditional newspaper's package of content has value online. That means people might be willing to pay, at most, only a fraction of the traditional price for it online (which fits within surveys that indicate people are willing to pay online for newspaper content, but no more than about $1 per mo.)
So if providing the same package of content for everyone doesn't add value in a medium that people are using to satisfy their individual mixes of interests and that package is worth only a fraction online of what (fewer and fewer) people are willing pay for it in print, why do so many newspaper publishers still hope people will pay the same for it online as in print? Or pay something for just a slice of that traditional package?
The NYT at least realized that its columnists were a unique part of its traditional package, but wildly miscalculated the people would pay $50 per year for that. Some 227,000 people did, producing $10 milion per year in revenue for NYT, but they were only 1.6% of NYTimes.com's 13M registered users and that revenue wasn't much compared to its $300M in revenues. Pluse, lack of access meanwhile displeased the other 12.7M registered users.
The reason I mentioned soccer is that the stories exist that can satisfy each person's unique mix of common and specific, but traditionally produced newspapers -- in print and online -- don't deliver the right match to each person's mix. It's a distribution problem: the stories exist but aren't getting to the right people. So, people are using new media to hunt for the mix that satisfies them, visiting many sites and using many different mechanisms. Eliminating their need to hunt is the business opportunity here for media companies. Google and Yahoo! know that, which is why they're beginning to offer customizable services that can deliver from all sources stories that can match each user's unique mix of common and specific interests.
Although services like that can be subsidized entirely by advertising, if people are willing to pay for anything online, it's likely that they'd be willing to pay for a daily news service that uniquely matches each of their mix of common and specific interest. Would you be willing to pay $5 to $3 per month for a service that each day delivers exactly what you want from all news sources, trade journals, blogs, etc.? The technologies (structured data, etc.) to do this online already exist, but the problem is the news industry's infrastructure is still based on the Industrial Era practices of producing the same thing for every users and producing it from only one brand.
Therein also lies the problem with most micropayment systems. You'd need a universal one to satisfy most people's needs and interests. People aren't going to use a different one for each site (even if it might serve a number sites). It'll need to either be build into the infrastructure, not layered atop the status quo, or exist upstream of the consumer and built into whatever service ultimately delivers the customized service to her. In other words, the aggregation of micropayments would be done wholesale by whatever service charges the consumer the monthly macro-price.
A paid service for custom content would likely also feature advertising, except it would be advertising to match the person's unique mix of interests. Such a service would be more valuable to both consumer and advertiser. [How to remedy the way that online marketers have blown consumers' trust during the past 15 years is another matter.]
A unique printed edition for each user can also now be produced. Agfa and Oce are now manufacturing digital presses (i.e., giant inkjet printers) for newspapers that, when coupled to a database and templates, can produce an edition uniquely customized for each subscriber. (For example, the Agfa Dotrix press costs a fraction what an analog press does, requires only one operator, and can produce 20,000 newspaper copies per hour. That speed is fine for about 1,000 of the nation's 1,450 dailies; larger ones need only buy multiple digital presses.) I know that MAN Roland and other manufacturers of traditional presses are likewise developing digital presses that would service larger newspapers. [Whether printed editions will soon be supplanted by e-paper is another matter.]
So, the era of one-to-many, of each person getting the same thing daily, is over. People aren't going to pay for that online. Fewer and fewer people are continuing to pay for it in print. And if soon nobody's going to pay for that package, then nobody's going to pay much or anything for just a portion of that package.
Paid content online isn't dead; just payment for 'one-to-many' content. Unfortunately, most people in the news industry, including most of its pundits, still think in only 'one-to-many' terms, which is not how consumers use online.
The most e-mailed story at The New York Times’ site today is the one announcing that the Times is terminating its subscription “TimesSelect” service, effective tomorrow.
Calculated from the Times’ press release , TimesSelect had about 227,000 subscribers beyond its print base. This was generating an estimated $10 million annually. By online subscription standards, both are substantial numbers (though dwarfed by The Wall Street Journal’s base of one million online subscribers).
The Times’ release clearly points to the strategic basis for its decision: It could do better than $10 million in advertising by opening up its columnists and archives to a larger audience. No subtlety here: Denise Warren, chief advertising officer expected that “with the removal of the pay wall… Advertisers on the site can expect to see an unprecedented number of Times readers interacting with their brands." American Express is the first “sponsor” of the newly opened site.
TimesSelect was a bit controversial from the start, and not just with consumers. Many of its columnists, who, after all, get both ego satisfaction and presumably greater impact with a bigger audience, were unhappy being sequestered behind the pay wall.
Although the venerable Times yielding to the advertising-over-consumer payment model seems to add further credence to the “information wants to be free” trend, I have gotten wind of a new venture that aims to succeed as a user payment model for content providers where micropayments has failed. I will supply more details when available.
It's not news to anyone who regularly reads this space that that "if you take out classified ad profits from newspapers, you take out the profit." Those were the words today of Michael Price, Senior Managing Director at private equity firm Evercore Partners, at the Convergence 2.0 conference in New York put on by deal-watching publication The Deal. But he didn't leave it there, and instead talked about what to do – at least for one anomalous newspaper with an audience most publishers would kill for.
Price went on to talk about what his firm would do if they'd bought the Wall Street Journal: "go deep on the Internet" for their passionate, C-level (meaning top executive) audience, giving everything they could want about any of various subjects they're interested in, be it credit markets, insurance, or whatever. He called it an "octopus" strategy. Unfortunately, Price said, newspapers haven't figured out how to "monetize" their good content. Leo Hindery of InterMedia Partners in a keynote Q&A said the New York Times should follow a similar strategy, out-Googling Google by, for example, giving someone searching for news on Alan Greenspan everything they could possibly imagine. Instead, he said, they're putting their newspaper content online, but in a much more fragile ad banner market.
Jeffrey Sine of UBS Securities said that while the Journal is held up as a huge success for subscriptions on the Internet, it "really is not that successful in the larger sense," which I take to mean $70 million (1 million people paying $70 per year) isn't tons of money in this realm. He added on Price's remarks saying the Journal needed to "upsell" folks on their "tiered" interest levels by selling them more on the value chain. Sine said his firm had sold Marketwatch to Dow Jones a few years back (for nearly $500 million, if you remember), which I guess gave him Street cred.
Later, Price said that that Dow Jones and Reuters have been "crushed" by Bloomberg. Another panelist – Dennis Miller of Spark Capital -- pointed out how CNN ended its 27-year relationship with Reuters, probably because Reuters was directly competing by running its material directly, with its own ads. Hindery said the folks at Bloomberg "are not unapprehensive" about their lack of a print partner.
A poll conducted in May by Harris Interactive for INNOVATION International Media Consulting indicates that online news and information will supplant television network news as the leading news source over the next five years. But news from television in general (including from cable networks) should continue to be dominant. It also confirmed continued erosion of the role of newspapers, although by my interpretation of the findings newspapers may be in a position to benefit from the ascendency of online news if they can navigate some tricky shoals.
By the numbers
The poll, covering the U.S., Australia, UK, Spain, Germany, France and Italy, asked about media habits today, expectations about media sources in five years (always an “iffy” kind of question) and about attitudes towards newspapers, such as credibility, importance and image. You can see all the results here. I have focused today on just several pieces of data that I think most useful for publishers.
In the U.S., 39% of adults claimed to get most of their news from television, compared to 24% from newspapers and 18% online. By 2012, 37% respondents projected they still would be relying on television, newspapers down to 19% and online news sources up to 26%.
But the poll does not differentiate between online news that is provided by today’s newspaper publishers and that coming from a non-newspaper Web site. Much to its credit, the INNOVATION poll does follow up with this question:
“When most people think about ‘reading a newspaper’ today, do you think that they include the newspaper’s online news and information websites as part of the definition of reading the newspaper?”
Nearly half—49%-- said that they did not consider a newspaper’s online site as within the definition of “the newspaper.” Another 21%-- a large proportion—were unsure.
This finding raises some strategic uncertainty for newspaper publishers and editors. At this point, many consumers still consider the “newspaper” the physical product. So, for example, at the top of its main Web page it may say “The Philadelphia Inquirer” in the familiar Old English script, but it’s not the "newspaper” for these readers. It’s just online news. So should newspapers be focusing on transferring the newspaper’s brand to the online arena?
I don’t know, based on responses to another question that asks simply,
“Do you personally consider online news from a newspaper site to be as credible as the news printed in the newspaper?”
Two thirds of the adults in the U.S. agreed that credibility was equal to the printed paper, only 14% did not (the rest were undecided). However, this finding is undercut by what the same poll found in measuring the credibility adults place on the newspaper in the first place: On a scale of 0 (no credibility) to 100, the median was 57, a rather so-so vote of confidence. (It bested the publishers in the U.K., where newspapers only had a 50 score, but lagged Germany, where they garnered a median of 67).
Responses to another question also should raise a red flag. Given a list of reasons why the respondents might not read newspapers, 55% agreed that they are “Biased or too narrow of a viewpoint” in their reporting. And, consistent with the previous credibility score, 38% said they are “Not viewed as a credible or trustworthy source of news and information”
Implications for strategy
If the credibility of newspapers in the U.S. is so tepid and objectivity so questioned, then might not publishers be better off distancing their online product from their print products? If online news is viewed as a new or different product, should publishers try to present themselves to the pubic with a new brand? Something like what General Motors did with Saturn: Create its own identify, a fresh platform, a different business model. To some degree that has worked for GM and Saturn.
Another approach, also borrowing from the auto industry, is to create a new, perhaps high end product, as Toyota did successfully with Lexus. Instead of creating a Toyota model with more bells and whistles, it created a separately dealer network for a separate brand (sharing some components under the hood only). Might publishers want to keep their current print and online brands for the mass audience but establish new brands with distinctly new content and a different business model for the high (or low) end?
I’m not necessarily advocating for either one. But looking at this empirical data suggests that there there is a need for fresh thinking, for opportunities to be tested—and perhaps some swamps to be avoided.
[Full disclosure: I have occassionally been a consultant for INNOVATION.]
There have been a number of developments and announcements in recent weeks, which, individually, amount to little more than the now-normal background noise of the media business. But seen collectively, they add further arrows to the growing quiver of ammunition that the media landscape is continuing to sift beneath our feet.
For today, I want to highlight the data and analysis published last week by the media-centric private equity firm, Veronis, Suhlis & Stevenson (VSS) in its latest Communications Industry Forecast, covering through 2011. This has nuggets which, if accurate (this is a forecast) would bring to higher resolution the winners and losers in the media arena. For example, total spending on all communications grew substantially faster than GDP between 2001 and 2006. Furthermore, VSS predicts that communications industry spending will continue to grow faster than the overall economy through 2011, making it the third growing sector of the economy.
That’s some good news. On the other hand, the report finds that, for the first time since 1997, consumers spent less time with media in total last year than in the previous year. VSS believes this decrease, though small in percentage terms, is due to changing consumer behaviors and digital media efficiencies. “The drop in consumer media usage was driven by the continued migration of consumers to digital alternatives for news, information and entertainment, which require less time investment than their traditional media counterparts.” It continues: “Consumers typically watch broadcast or cable television at least 30 minutes per session while they spend as little as five to seven minutes viewing consumer-generated video clips online.”
VSS does not see this decrease as part of a long term trend, expecting consumer media usage to stabilize in 2007 and increase slightly through 2011. However, this would be driven by time spent with out-of-home media and videogames as the only major segments to achieve accelerating growth in this timeframe. Overall consumer time spent with media is forecast to increase at a compound rate of 0.5% from 2006 to 2011, down substantially to the 0.8% in the previous five-year period.
The real headline, however, is this prognostication: “In what would be a watershed moment in communications history, VSS predicts that Internet advertising – including pure-play websites and digital extensions of traditional media – will replace newspapers as the largest ad medium in 2011.”
I assume they mean that advertising in printed newspapers will be supplanted by advertising online—which includes the advertising that newspaper publishers generate from their online sites. Still it would be another stake in the heart of what once the biggest rooster in the barnyard.
But here’s another bombshell: “In addition to shifting their attention to alternative media, consumers are also migrating away from advertising-supported media, such as broadcast TV and newspapers, to consumer-supported platforms, such as cable TV and videogames.” Time spent with consumer-supported media grew at a compound rate of 19.8% from 2001 to 2006, while time spent with ad-supported media declined 6.3% in the period. This is not a measure of revenue but of consumer time spent. But with all the buzz about everyone moving to totally ad supported models (see Rebuilding Media’s latest foray into this space), this finding more than suggests that consumers are willing to part with their discretionary income for the right content or platform.
Another data point is found in a piece by Bobby White in The Wall Street Journal (sub. required). "Across the cable TV industry," writes White, "… independent channels are also turning away from TV to the Internet." Black Family History, The Lime Channel, The Employment and Career Channel, Horror Channel and HorseTV are among those that pulled the plug on their cable affiliation in favor a going Internet only.
“The shift illustrates how the Internet is offering a second chance to certain segments of old media. Web-based TV is now becoming a more viable business route, and Internet video is exploding. Running an online-only video channel, which doesn't require expensive cameras and broadcasting gear, is cheaper than operating a cable TV channel. While starting a new cable channel today takes an initial investment of $100 million to $200 million, a broadband channel needs just $5 million to $10 million to get going, says Boston-based research firm Broadband Directions.”
It’s a constant challenge when in the midst of change to separate trends from simple data points. One needs a series of data points over time that show direction. The Journal article may well be a data point that fits into the trends the VSS study provides. It seems though that enough data points are aggregating to confirm some direction with far reaching strategic implications for and broad array of players in the media industry.
New York Times tech writer/videographer/blogger and general wise guy man David Pogue has created an avid following for his tech videos on NYTimes.com. It's not uncommon to hear someone at a conference or gathering ask if you've seen the latest one – whether a goofy review of the iPhone, some rant done around his town at his Connecticut home, or other ways of amusingly imparting his judgments about what's good and not so about the latest devices, doo-dads, and services. And, as he notes in the interview below, he's landed a show on the Discovery Channel.
His videos, by Internet standards, are pretty high quality – crisply shot, nicely edited, easy and clear to view and understand. And that has little to do with technology. He uses a Mac and an "old" Sony camera and just recently got an intern to help. He also puts in many hours, creatively conceives and crafts his pieces, and lets his personality show.
And therein lies a lesson. A lot of people (me included sometimes) spend time fretting about what technology to use and how to assemble the bits and pieces and get creative to garner an audience. Of course, being on NYTimes.com doesn't hurt. But what makes the videos work is the effort Pogue puts in. While the technology enables that, makes it so one guy can do it all, it isn't what made the videos successful. Pogue just does it. Here's the interview, done via e-mail, with minor editing.
How did you go from being a print guy to a video guy? Did you always want such an outlet?
Nope. I always thought I'd be a Broadway composer. From the time I was a teenager, I was playing piano and writing songs. I went to Yale, was a music major, wrote a musical per year. Then I went to New York and worked on Broadway for about ten years as an arranger/conductor!
The transition to tech was slow and sneaky. I bought a Mac in 1985 to run sheet-music software on. For years, I wrote about software and gave personal computer lessons while doing Broadway at night.... Finally, the balance sort of tipped, and I found my teaching skills in more demand than my musical ones!
Of course, the Pogue-trackers have noticed that my musical career has lately been sneaking back into my tech career (see my iPhone "musical" on YouTube,for example)...
How did you arrive at the persona? What made you feel you had the freedom to> let it out like that? (NYTimes is generally thought of as a "serious" place?)
The persona!? That's no persona-- that's the way I am!
I don't know -- I've always just been sort of a goofy guy who likes to be the class clown. I don't think the Times ever had a problem with it. They've never, EVER suggested that I tone it down. The humor is part of why the Times hired me to begin with --and that's also why I love the Times!
The Times reporters aren't a very funny bunch when it comes to news reporting. But you can find some really funny writers in opinion columns and reviews!
How do you get such high production values? Do you have a videographer, producer, editor? Who does all the work we don't see (lighting, shooting,> editing, etc.?)
HAH!! You call those high production values!? You're kiddin' me, right?
There are NO production values!
I just shoot with an old Sony camcorder, and dump it into iMovie for editing. (I'm trying to learn Final Cut Pro.) When I need to film myself, I stick the camcorder on a tripod. I also have a video light for use when I'm shooting at night.
This summer, I have a 17-year-old intern who operates the camcorder, which makes the whole thing go a lot faster. Ordinarily, though, I just do the whole thing myself.
How long does it take to produce each video? What's the process you go through?
It usually takes 5 to 10 hours. Maybe 45 minutes to film (if I've done the preparation, like plotting out the shots) and the rest to edit and compile.
The Times has a wonderful stock-music library they've made available to me, and that's where I get the background music.
I really wish the videos didn't take so long. I'm actually trying to make them a little simpler these days...
How has appearing on video changed your professional life?
Well, I've been very surprised. To me, they're not really a big deal—nobody even noticed them the first couple of years--but now they've won awards, they occasionally rise to the top 10 on YouTube, and they have a HUGE following of fans (plus the vindictive hatred of a few humorless bloggers!).
They also led to my Discovery TV series, "It's All Geek to Me," which just finished airing, as well as to some other TV opportunities that are coming up.
And, finally: Do you spend most of your time at home? Your videos look suspiciously suburban so much of the time.
Correctamundo! The videos are almost entirely shot at home, or around town here in Connecticut. :)
There's been some good discussion of whether the Wall Street Journal should go free since the original post here. I have to admit I was thinking tactically, rather than long-term strategically, and may have been in the mindset of the old Journal, not the new Murdoch. WSJ publisher Gordon Crovitz said there'll be a mixed model -- so for now it's a moot question. I can see how longer term it can make sense for the Journal to go free -- IF they are willing to bear the cost for a few years; bearing costs for years is something Murdoch has shown himself willing to do in New York, Boston, London, Australia and elsewhere.
First, here are some clarifications of the original post:
1. Subscription revenue is damn hard to come by on the Internet and getting a million paid subs at $79 each for nothing but content is an incredible feat. That's tough to give up for any company. I've been asked to analyze that in the past, and it's the classic difficult position for a business. Will you forego, say, three-five years of revenue -- bust up your own successful business -- to make more revenue farther out. Are you willing to eat your own lunch? Sometimes it's wise, but it's tough to try -- even if you are thinking big. ... but thinking big is something Murdoch does, and can afford to do.
2. Subscription revenue can be better income than ad revenue. It's more reliable through economic downturns, the cash comes earlier and revenue is realized as cash at a higher percentage than for ads (which can be canceled at almost a moment's notice and can be difficult to collect on). Subscriptions can be lower cost maintenance than advertising (which comes with client handling, managing multiple creatives, serving costs, and so on). Yes, there's churn. But once you get a subscriber, they have a "lifetime value," of whatever revenue you'll make from them. Replacing subscription dollars with ad dollars is not a 1-to-1 replacement.
3. I purposely did not include Marketwatch, video and other items that are already free on the WSJ site because those things are already free and have advertising, and I'm not sure making WSJ.com free will raise those other boats significantly. OK, with a big and strong strategic push that really integrates them all, and uses the force of Dow Jones I could see it. But it'll take time
4. The assumptions I made were just that. Assumptions. As Henry Blodget points out, you can make different assumptions and come up with different numbers. My numbers were educated guesses based on what I know of the market, and I took Murdoch's words at face value. To really assess the situation would require an actual look at the WSJ books and experience, and maybe some experimenting. I assume that Lehman Bros. have better numbers than I do. They estimated $115 million overall revenue for WSJ.com. I said $137 million. I also had subscriptions at 58% of the revenue, while they put ads on top at 54%. Either way, we're making assumptions.
Jeff Jarvis suggests not only going free but also having the Journal prepare to leave the print realm, other than some sort of specialized, analytical product. Certainly, the Journal audience is the kind of high-income adopters that will be a good test case for giving the content on every device imaginable. And if you're going to go free, distributed content to every device imaginable (all ad-supported, of course, with various upsells) is certainly the way. As one competing example, Forbes launched widgets this summer -- they've even managed to line up Visa as a sponsor, and the ad is served, which means it's also tracked and can be swapped in and out. (The company that made the widget for Forbes even claims the ads can be different sizes).
In other words: Sure, by all means, go free. Think big. Watch it grow over time. Grab mainstream news readers from the NYTimes and elsewhere. It's a difficult, but do-able formula. News is commoditized. But financial may give the Journal that extra "oomph" even as a free product to charge a higher than usual ad rate. If the Journal goes free, it should be done in a considered, coordinated way, using the distributed media Jarvis suggests, stronger linkage with Marketwatch, increased use of video, multimedia and social aspects, and improved personal finance capabilities (here's an idea: open it up to widgetizing, just like Facebook, and give prices for the best financial widgets or other gizmos, apps, etc.). Would the journal consider taking the even bolder step Jarvis suggests and I concur with of opening up its API to developers, for all kinds of mashups, further data, and what not? Not likely near term, but that would be big.
In the column, Fine ponders which major American newspaper will be the first to stop publishing a print edition and publish online only. He speculates that it will be the San Francisco Chronicle, which has reportedly lost $330 million this decade, approximately $1 million per week. Fine wonders if how the Chronicle should consider stopping its presses and start delivering news only online.
On the surface, that sounds like a good idea. The Chronicle's print edition is losing money. It has a large potential online-only audience in San Francisco. And if the Chronicle stops using its presses, it will no longer have to bear the costs of purchasing, printing, and distributing paper edition, costs that probably total 50 to 60 percent of the Chronicle's expenses.
But before roaring off with this idea, check under its hood to make sure it has an engine. I don't know what percentage of the Chronicle's revenues its website produces, but my guess is 5 to 10 percent. The printed product generates the rest. So, if the Chronicle were to stop printing paper, it would reduce its expenses to only 40 to 50 percent of their prior level, but the will have also removed 90 to 95 percent of its em>Chronicle's revenues. So, it's rather obvious that the Chronicle would be in a much, much worse predicament than it is now if it were to stop its presses permanently and publish online only. A not-so-fine idea.
But what really troubles me about Fine's speculation—and for that matter most newspapers' attempts to shovel their printed content onto their websites— are two two unconscious and linked presumptions that I think underlie such ideas: (1) That there is nothing inherently wrong with the Chronicle's product (i.e., its package of journalism and advertisements) except (2) that it should be delivered online rather than on paper because more and more people are getting their information online.
A lot of publishers suffer from these presumptions. They see less and less people reading printed publications, more and more of those people reading things online, and believe that all they need to do is shovel their printed editions over to online (and add video and audio) to reverse their newspapers' declines in readership.
These presumptions ignore the fact that newspaper readerships have been declining for more than 30 years and that approximately half of those declines occured before the Internet was opened to the public or the public had any online access. Shouldn't that give publishers a hint that the major cause of their readerships' declines isn't the Internet or their content not being online?
And is adding video and audio to that content (so-called 'multimedia') going to reverse those declines? Consider that television station's news viewerships have been declining for more than 20 years and that radio station's news listenerships have been declining for even longer. Do you think that if radio or television stations add newspaper-like texts to their own websites that this will reverse the declines in their viewerships or listenerships? So, why do publishers think that newspapers adding video and audio to their own texts online will reverse newspapers' declines in readerships? Adding together two or more declining media do not an ascending new-media make.
The real problem, Mr. Newspaperman, isn't that your content isn't online or isn't online with multimedia. It's your content. Specifically, it's what you report, which stories you publish, and how you publish them to people, who, by the way, have very different individual interests. The problem is the content you're giving them, stupid; not the platform its on. But I digress.
Back to Fine's column. If the San Francisco Chronicle, despite losing money, cannot afford to stop its presses and go online only, what it is likely to do?. I think that daily newspaper presses will be outsourced before being stopped.
I think the Chronicle will try to do what another troubled newspaper is considering. Boston Herald owner and Publisher Patrick Purcell has been talking about outsourcing his newspaper's printing. Dow Jones & Company has a printing plant with spare capacity 80 miles outside of Boston, a plant that prints the regional edition of The Wall Street Journal. This plant in.Chicopee, Massachusetts, is far more efficient than the Herald's antiquated presses. Purcell is calculating whether eliminating his own presses, pressmen, ink, and paper costs would save him money against whatever markup on those costs that Dow Jones would charge him.
Two footnotes:
First, we frequently see much larger dollar amounts printed in the business sections of newspapers ('Murdoch Buys Dow Jones for $5 billion', etc.), making us somewhat inurred to smaller financial figures such as $330 million or $1 million per week. However, the San Francisco Chronicle's latest weekday circulation figure is 386,564, so if that newspaper has lost $330 million during the past six years, it's lost approximately $853.67 per reader during that time or $142.28 per reader per year! Now does its amount of loss impress you? It does me. The Chronicle would lose less money if it just bought each reader a fine meal each year at San Francisco's best restaurant instead of delivering a newspaper each day.
Second, earlier this week I posted on my own company's blog some reasons why I've not been blogging here or there lately. I apologize for my absence.
[Update: when I wrote this post a few days ago, I didn't (and I suspect Fine didn't either) that the Chronicle has already signed an agreement to outsource its production to a third-party printer. A tip of my hat to Alan Mutter's blog. The outsourcing deal will cost the jobs of 230 unionized press operators when the new plant opens in 2009. When this outsourcing contract was signed, I wonder how large a newspaper the Chronicle's executives thought they'd be producing in 2009?]
In the last paragraph of one of the many stories in today's Wall Street Journal about the purchase of parent Dow Jones, Rupert Murdoch is quoted as saying if the paper went completely free it would be a "wash" financially. It would certainly be a huge step to go free (and one I'd be perfectly happy with, paying as I now do.) Let's explore whether Murdoch's assertion is really likely to be true.
First a few assumptions:
- The soon-to-be 1 million paid subscribers referred to in another piece in WSJ are paying full price, $79.
- There are seven million unique visitors and 90 million monthly pageviews, as WSJ claims. (That's almost 13 pageviews per unique.)
- The two display ads per page (large rectangle, narrow skyscraper) run at an average CPMs of $35 and $20 (reasonably possible rates for a targeted, subscription audience in a financial/business publication). The performance based ads at the bottom are together worth an effective CPM of $12. (I know that may be high, but there are a lot of them, and it's the Journal.)
- 80% sellout on average in all ad spots (some spots will be without paid ads in some instances, there has to be some room for ad serving and so on).
- Each pageview is equally valuable.
So, we've got, yearly:
- 1 million subscribers * $79 = $79 million from subscription
- 90,000,000/1000*.8 * (35 + 20 + 12) = $4.8 million monthly in advertising * 12 = $58 million in ads
Grand total: $137 million revenue from subscription and ads.
Murdoch predicts in the piece that a free site would have 10 times as many visitors and five times as much advertising. But the number of pageviews per unique would drop significantly, because a lot of the traffic – especially new traffic – would be inbound single hits or quick dips from blogs, search engines and so on. The ad rates would also drop because advertisers could not be convinced they were buying as exclusive a subscription audience. Let's take Murdoch's assertions as true and assume:
- Pageviews per unique will drop to a more normal news industry standard of 4 per unique. (We'll also assume that by "visitors" Murdoch means "uniques".)
- Ad rates will drop to 60% of their previous levels
- A lower level of sellout on pages (as Murdoch acknowledges in saying ads won't go up as much as visitors will).
So we have:
- 70 million unique visitors at 4 pageviews per = 280 million pageviews per month.
- Five times as many ads and 60 percent sellout.
Which in my estimation comes out to a total of about $67.5 million.
At 80 percent sellout it's $90 million. Even at the same number of advertisers, that's still only $108 million.
Now, maybe to Murdoch the difference between $137 million and $108 million is so small as to be pocket change and therefore "a wash." Or maybe my assumptions or math are way off (if you want a spreadsheet with my calculations, just ask and I'll send it.) But that's still a lot of newsroom jobs for that extra $29 million, or more under the poorer ad scenario
Plus, subscriptions are pre-revenue, cash collected up front that can then be spent over time. They're great for cashflow and provide a "float." Ads on the other hand are typically paid months after they're billed, and can be a real problem for cashflow. Subscriptions also tend to be more stable in down times than advertising, which can be canceled with little notice. Subscriptions are a more stable business and take less overhead to maintain.
I don't see that making a successful subscription product like the Journal free makes economic sense. Tell me what's wrong with my thinking.
I know the forces of impudent American prudishness are hijacking the whole Hillary/cleavage "issue", but the point of the original Washington Post fashion writer's article, if you read it, was not that Hil's gone mad, flopping her orbs around wantonly or that her slight V-neck somehow caused a mistaken exposure – both of which were implied in the stark-raving coverage, blown up and bounced, and rebounced around again.
Rather, the credentialed fashionista was writing that this most managed of stage-managed candidates (running since she was in high school, perhaps) chose to tweak her carefully chosen and usually bland uniform in favor of a slight hint of sexuality. Her choice is, perhaps, akin to Al Gore's attempts at being environmentally friendly (or just friendly, period) in his earth-toned clothes, or, worse, Dukakis' attempts to look manly in a helmet atop a tank. But her choice certainly bears observing, just as Jon Stewart (or was it just my imagination) noted the crotch-hugging manliness of the commander-in-chief when he stepped aboard that aircraft carrier to declare victory in Iraq. (I know, it wasn't literally victory, but let's not niggle. That's what he clearly meant us to think.)
Sure, we might not have made such a big deal if it were Obama wearing a slightly sexier than usual T-shirt – then again, we might have. And if Hillary was trying to soften her image a bit, or dress in a way that amounted to a fashion trial balloon, then we're allowed to examine her motives (Al Gore's calls for civil discourse notwithstanding). But enough, please, about the cleavage or Clinton's body. That really wasn't the point. The woman's body is what it is. Her image, though, is carefully managed, and any change bears watching. Read the WashPost piece, and I think you'll see what I mean.
Back in the early days of consumer online services one of the hot topics for prognosticators was the expectation of “disintermediation.” In brief, this referred to cutting out middlemen in the supply chain, such as stockbrokers between buyers and sellers of securities. Online services, then the Internet, they predicted, would make transactions more efficient by cutting out unneeded intermediaries.
Although talk about disintermediation has subsided and the predictions of some self proclaimed visionaries have not been fulfilled, the reality is that this phenomenon has in fact been operating and is picking up steam.
It is most clear in many financial transactions. Pre Internet I recall paying about $150 on average to buy or sell a stock. I’d have to call a broker, who would call me back later with the results of the order. And he or she got a hefty commission. Today, services such as eTrade, Fidelity and many others facilitate electronic orders that pass through them to the exchanges. Commissions have fallen to as low as $5 a trade.
eBay is a disintermediation vehicle for many types of transaction. About eight years ago, cleaning out the basement of the house where I was raised, I came across a stash of Playboy magazines dating from the early 1960s and Life magazines from the same era. My first reaction was to check on their value with some used magazine and book stores around. They, of course, would have bought them below the market rate so they could retail them for a profit. But I stumbled across this new eBay thing, listed them and sold them myself at “retail,” bypassing the intermediary. Moreover, I was able to reach a national (at the time) audience, while the local retailer had to base its price on a smaller, local market.
With its original direct to consumer business model, Dell disintermediated computer retailers. Paradoxically, HP has helped rejuvenate that channel and Dell has just this week acknowledged that it will sell through retailers. As I keep reminding my marketing students, the word “some” is a big word. Some people may like going direct, but some people still like to call a broker, go to Blockbuster, buy from Wal-Mart. For now, disintermediation is not an absolute—it’s an alternative.
The process continues. Netflix started the disintermediation of video rental stores—and will itself be bypassed by downloaded videos unless it is successful in becoming “one of them.” Much software is downloaded, not packaged, hence stores like Egghead and CompUSA have died or had to retrench.
Which bring us to the media world. The first high profile threat was Napster, which was the ultimate in disintermediation by allowing individuals to trade music with each other. After some fumbling, the recorded music industry has reached a degree of accommodation with the technology through iTunes and its competitors. Bye-bye Virgin Music Superstores, Tower Records and a host of others.
Newspapers have seen a portion of their high margin classified ads disintermediated by Craigslist and Monster.com. Why pay those high per word rates when you can reach more people, in a searchable format, than in the shrinking newspaper. Advertisers have learned about disintermediation as well. While banner ads have a third party middleman, Google’s AdSense or AdWords is far more efficient: pay only when used.
The legacy television networks are scrambling to prevent disintermediation. Postings of network shows on YouTube and the like were a threat to the networks and their local affiliates and had to be stopped. To one degree or another ABC, Fox NBC and CBS have elected to disintermediate their own local affiliates by allowing viewers to access many network shows online directly from their own Web site. Meanwhile, NBC has engaged in deals to distrubute its programming via numerous Web sites, as has CBS.
Disintermediation is not necessarily a losing proposition for the media industry. It’s just a matter of learning how to use it to its advantage. For example, last week the season finale of the popular TV series Grey’s Anatomy featured a soundtrack
by singer Ingrid Michaelson. Never heard of her? Not surprising, as she does not have a recording contract. She was found on MySpace by a firm that specializes in locating undiscovered talent (of which there is much) and using their works on TV shows and commercials for far less than it cost to license the music of established artists from a record label.
Because she does not have a record company contract, when one of her songs gets downloaded from iTunes, she pockets $.63 of the $.99 charge, compared to the 10 to 15 cents a major label artist gets sent. That amounts to $37,800 from the 60,000 times her songs have been downloaded. Ms. Michaelson has a gig she would likely have never had before MySpace, income in excess of what she would likely have earned from her music before iTunes. And ABC bolsters its profitability by a few dollars.
That’s the kind of creativity the newspaper industry needs as well. Disintermediation will ebb and flow. But the net will be more flow than ebb.
"In the online video syndication space, the largest video owners will not be the broadcasters. It's going to be the newspapers." That prediction from Critical Mention CEO Sean Morgan at this morning's NYMIEG breakfast (full disclosure: I'll be moderating a breakfast June 20 on career change in media for NYMIEG). Morgan mentioned how a local TV station in San Jose produces, maybe, five or six videos a day, but the San Jose Mercury newspaper produces 60.
"When we see these newspapers turn the corner by adopting new technologies that allow them to put a braodcast voice on their text news, the market is going to erupt."
Takes the "get ready for a video ad explosion led by the the NY Times" idea a big step further. And quite a prediction from a guy whose bread and butter today is from the broadcast affiliates -- putting their conent up behind a paid wall that others pay to access, search (via closed captioning), tag, organize, import, etc. (It's basically a video clip and syndication service much like the older one that employs people watching hours of video and transcribing it, then shipping it around the country).
Morgan also took the wraps off a free version of Critical Mention called Clip Syndicate that he said will offer clips for free that the stations (and others?) want to distribute without the wall in front if it. It won't, he said, eat Critical Mention's lunch. He made an analogy to Google vs. LexisNexis. Nexis, he noted after the event, has more sophisticated search and manipulation and organization tools.
Yesterday on the Online News Association's discussion list, the editor of a 37,000-circulation daily newspaper asked to hear:
"…from folks who have tried something in between free and paid regarding your online content, such as holding back some print content from online; charging for 'premium' online content; giving access to some online content only to print subscribers. If you've done anything like this has it produced revenue or slowed print circulation erosion?"
Though I've not run a newspaper website in more than a decade, I today replied because I've spent more than a dozen years studying online paid content strategy and cases and had for several years been a columnists about the subject.
Fresh data that has surfaced over the past few weeks has reinforced previously observed trends in media advertising and usage. But they have also raised some red flags or sounded warning bells or whatever imagery you’d prefer. Yet amidst the downers there are some positive signs. The transition from legacy media formats to digital formats continues to show a mix of threats and opportunities.
First is the continued downward spiral of advertising in daily newspapers. Nothing new here. But the rate of decline may be accelerating. For the fourth quarter of 2006, total ad revenue at newspapers-- including online revenue-- was down 3.7% from the same period a year earlier.
This past February, individual newspapers and groups reported some dramatic year over year declines: USA Today down 14% while parent Gannett was down 3.8% overall. The Tribune Co. and McClatchy both reported 5% losses. The New York Times Co. was down 6% and The Wall Street Journal off by 10%. Even publishers of smaller city papers, where the losses have been more modest in the past, were afflicted. Media General, which publishes papers in Tampa, Richmond, VA and Winston-Salem, NC, was down almost 6%.
And this is in a period where advertising expenditures in general were reasonably robust. One can't attribute this to a recession. The New York Times reports that publishers “blamed the declines largely on the continuing shift of classified advertisers from print to online, especially to mostly free sites like Craig’s List. In some cases, particularly in Florida and California, they traced the weaknesses to volatile real estate markets.”
Meanwhile, one bright spot for newspapers, online advertising, is showing some signs of slowing as well. Online ad revenue, though up 31.5% for newspapers last year to $2.7 billion, still accounted for only 5.4% of newspaper ad expenditures. Most threatening is that newspapers are facing growing competition from other Web sites aimed at their local market strongholds. Google and Yahoo have already been offering key word search-related advertising that can be geared to local advertisers. But now other local media—TV and radio stations, city magazines—are beefing up their Web sites to help shore up their own advertising woes. Radio stations, faced with declining time spent listening are putting video on their Web sites, along with streaming audio of their programming, to attract larger audiences and selling local advertising.
Perhaps most ominously for all the local media is that the largest share of advertising as well as the fastest growing, are “pure play” sites. That is, they are not related to existing legacy media but exist solely on the Web. This might include Craig’s List as well as local news sites such as Buffalo Rising and Dallas’ Pegasus News. As seen in this table from Borrell Associates, about 38% of local online adverting goes to these nontraditional sites—and their share is rising.
There is a small note of good news. A Nielsen/NetRatings study (commissioned by the newspaper industry trade association), found that online visitors to newspapers Web site rose by 5.3% in the first quarter of this year. According to this source, that is the steepest quarterly rise since the numbers were first tracked in 2004. This translates to 59 million visitors to newspaper Web sites.
And another report that might lift the spirits of newspaper publishers came from the Poynter Institute last month. A study tracked the eye movement of 600 test subjects as they read whatever they wanted from their regular newspaper and their newspaper’s Web sites. The most relevant finding for here is that a much larger percentage of story text was read online than in print.
On average, online readers read 77% of what they chose to read, while broadsheet readers read an average of 62% and tabloid readers read an average of 57%.
Newspaper publisher McClatchy Co. has entered into an agreement to provide Yahoo with news and commentary from its staff. Initially it will be limited to material from just four foreign bureaus, but could expand.
With more than 36 million unique monthly visitors to Yahoo’s news site alone, the alliance gives McClatchy far more exposure than it gets through its newspaper (aggregate circulation about 3 million, readership maybe two times. Web site visits likely include some overlap with print readership).
This is just one of a string of recently announced deals between newspaper publishing companies and Yahoo and rival Google. It is the start of a realization that the core of the news business in the future for these folks is more news gathering and less news distribution.
It is part of an action plan (I would hope) among some legacy media companies more than others that it can no longer be business as usual in the digitally connected universe. Ken Goldstein, a analyst who concentrates on Canadian media, has a few illustrations that nicely captures how massive this change is, looking in this case at television.
Figure 1
Figure 1, which I have only slightly modified from his, shows the quite simple value chain c. 1975: Content providers—primarily Hollywood studios – created movies and television programming. They were distributed via commercial broadcasters to consumers, with nascent cable providers also starting to retransmit those signals. Advertisers contracted with the broadcasters to deliver their messages to the consumer. Straightforward and limited to handful of players.
Fast forward to 2007. Figure 2 shows a far richer, more complex, more fragmented landscape. The number of players has proliferated exponentially. Indeed, considering peer-to-peer and aggregators such as YouTube that provide easy access to materials from content creators that range from the highly professionals to the rank duffer, the close circle of content providers is blown apart. And this is possible because the gate keeping function of the broadcasters and then cable providers has been undermined by satellite and the Internet, not to mention offline conduits such as DVDs.
Figure 2
Similar charting of the newspaper or radio value chains would yield parallel changes, blowing up of the tight community of players and limited choices for advertisers and consumers. In its place is greater choice for these constituencies. But with this choice comes greater effort, for advertisers to find the best outlets for their target markets and for consumers to know what they want and where to find it.
This change also provides a surfeit of opportunity for those enterprises willing to make the effort and accept some failures in experimenting with evolving and unproven business models. I don’t know how the McClatchy/Yahoo deal will pay off for the newspaper publisher. But it is certainly moving its mindset in the right direction.
[When terminology gets stretched too far, discussion distorts and tempers snap. A friend in the Poynter Institute's Online News discussion group industry recently stretch the definition of 'citizen journalism' to include Letters-to-the-Editor. That 's when my patience snapped and I released criticisms of the 'citizen journalism' movement, which I've intentionally withheld for years.
Online News is an email-based discussion group, so some other friends have since asked me to post my criticisms here, so that they can hyperlink their own blogs or publications. Here goes:
Letter-to-the-Editor are as much journalism as a man's video of his kid's wedding is cinema. Or as much as a woman putting a Band-Aid (or 'plaster' the British would say) onto her kid's bruised knee is practicing medicine. Or as much as a guy appearing in traffic court to dispute a parking ticket is practicing law. It's too much of a rhetoric stretch.
Does its publication in a newspaper somehow make a person's opinion be journalism? If so, you might as well shutdown college schools of journalism. No need for those.
Yes, too many newsroom have become remote from, and condescending to, readers. Letting readers comment or converse in newspaper (web)pages is a much needed remedy. Yes, it's great when citizens who posses a particular expertise help report stories about that topic. Likewise, when citizens who witness a news event contribute their first-hand experiences. And, yes, it's heartening to believe that citizens themselves might be capable of reporting a significant portion of the news. Don't get me wrong: The concept behind 'citizen journalism' is noble, much like Karl Marx's vision of pure communism or Jean-Jacque Rousseau's vision of natural goodness or Ayn Rand's vision of objective individualism.
However, I live in the world of real people. It's hard enough to find a professional journalist who can sit through 52 weeks of zoning board hearings and write intelligently about that, nonetheless finding an amateur who doesn't have a vested interest or axe to grind and who can sit through and objectively write about those hearings.
Too much of what's being cloaked or prattled about in our industry as 'citizen journalism' isn't journalism at all and a lot of it is simply b*llsh#t. I'm sorry, but I'm tired of all this groupthink. We need objective reporting about this topic, too.
I sincerely compliment my friend Dan Gillmor who, in a neologism that Thomas Paine would have admired, coined the term 'citizen journalism.' That coinage helped make the concept palatable to many professional journalists, a group hugely pre-disposed to believing that everyone has a latent desire to do what they do. Others in our industry, such as my friend 'Robespierre' Jarvis, have even painted 'citizen journalism' as a struggle between the people and 'big media' (I remember Andrea Panciera of 'big media' Belo's Projo.com retorting at an ONA meeting, 'Hey, I'm too a citizen of my community!') And many of the news industry's think tanks -- whose own thinking about how to reverse the declines in news readership, listernership, and viewership has become bankrupt -- have climbed aboard the citizen journalism bandwagon for lack of anything else to play. Propelled by all this groupthink, the concept has gained huge inertial momentum in our industry.
Again, don't get me wrong. I think that technologies via which readers can comment, help report, eyewitness, tip off, and otherwise supplement, amplify, or redirect newspaper coverage are absolutely needed. These are tools that every news organization should begin using (oops, I should have used the politically correct phrase: 'begin sharing') with people. I applaud BlufftonToday.com and other well conceived applications of this. And I support my friends who are helping to teach citizen journalism to the few citizens who do want to report.
But citizen journalism is a supplement, not a panacea. Citizen journalism itself isn't going to reverse the declines in news readership, listernership, and viewership. Not by a longshot. The real solution requires more than just the tools that folks in our industry are calling 'citizen journalism' and that are providing so much distraction.
Every country seems to think that someone else is ahead of it in practical application of online media. I'm often asked which country is the best. The answer since the late nineties has clearly been the four Scandinavian counties, though South Korea and Estonia have joined them in the top rank during the past four years. The Finns, Swedes, Danes, Norwegians, South Koreans, and Estonians have pulled well ahead of the Americans, Canadians, British, Irish, Dutch, Germans, and Singaporeans in online media usage and application.
Before putting Norwegian online usage into perspective, allow me to first tell you about Norwegian printed media usage. Until Japan surpassed it last year, Norway for years had the world's strongest readership of daily newspapers – 0.626 copies sold daily per adult, compared to 0.33 in the US). At the beginning of 2006, the national tabloids Dagbladet and Verdens GangVerdens Gang and Dagbladet were selling 343,703 and 252,716 copies per day respectively in a nation of only 4,610,000 people. Imagine the equivalent daily circulations in America, which adjusted for population would be 22,366,789 and 16,445,726, far above the actual circulations of 2,269,509 for USA Today or 1,086,798 for The New York Times. DB and VG are very successful printed newspapers.
Despite that strong readership, print circulation is rapidly declining in Norway. The state agency Medianorway reports that VG's circulation dropped 6.2 percent and DB's 13 percent during 2005. Several DB staffers told me that the as yet unreported 2006 circulation changes were be similar. [Update: Audit Bureaux of Circulation figures released Febuary 12th showed that VG's daily circulaiton during 2006 had dropped by 28,000 copies to 315,500. I don't yet have the ABC figure for Dagbladet.]
As in most other countries, many print edition executives are blaming their companies' free online editions for cannibalizing printed edition circulation sales. These print edition executives want either (a) access to the online editions to be sold for a subscription fee equivalent to print or else (b) that the online editions not provide full news and instead encourage online readers to get that by purchasing a printed copy.
That first option is philistine and regressive in a world where the only growing sector of daily newspaper circulation is free papers – up more than 137 percent during the past five years, from 12 million to 28 million copies worldwide. The second option is like insisting that each automobile one hundred years ago have a horse in front of it, a workable but really dumb idea.
Almost all Norwegian adults and teenagers are online, far higher percentages than in America, Canada, or the UK. The average bandwidth into Norwegian homes and offices is 1.5 megabytes per second. And the strong newspaper readership and advanced online infrastructure shouldn't lead to any mystery that Norway produces what may be the world's best online editions (so too do several of the dailies in Sweden, Denmark, and Finland).
VG.no receives 950 000 unique users per day and Dagbladet.no 750,000. The weekly unique user numbers are 2,240,000 and 1,820,000 respectively, almost entirely domestic traffic. The equivalent number in the US would be 61,822,124 and 48,806,940 unique users daily, or 145,770,060 and 118,438,174 per week. Compare those numbers to to NYTimes.com's 13,372,00 unique users per month. Online editions are pervasive in Norway.
Dagbladet's new-media EBITA earnings climbed from 8.5 million to 22 million Kroner (1.3 million to 3.3 million US dollars) between 2004 and 2005. The 2006 increase was at least 40 percent more and forecast to be the same during 2007. The Economist magazine last year reported that VG's publisher Shibsted earned nearly 40 percent of its revenues from new-media. Dagbladet AS reportedly earned about a third of its that way. New-media will probably contribute more than 40 percent of each companies earnings this year.
I asked Dagbladet staffers whether they or VG had the best online edition. With typical Scandinavian humility, most answered that VG did. Their answer was like the student who scores 98/100 saying the student who scored 99/100 is better. A tiny difference.
I've been in Oslo because Dagbladet asked me to be the featured speaker at their seminar Thursday for approximately 90 of Dagbladet's online advertisers. My role was to explain what the future of digital media will be. No one, including me, truly knows the answer to that. I chose not to tell them the trends — indicators that have too often been wrong during the past 15 years of public access to the Internet. I instead explained the underlying dynamics that are driving change and, in particularly, what this will mean to not only dagbladet.no but the company's social networking site, blink.no. More than 350,000 Norwegians – including 42 percent of norwegians between ages 16 and 18 and 75 percent of those younger than 26 years– belong to it.
[I apologize if I'm being cryptic here about what underlying dynamics are driving change. It's intentional and I apologize. I've been writing a long piece about the answer, which I plan to post soon. During the past few months, I've had a radical change in philosophy about what ails the news industry. Let me leave for now to state that the answers are two-fold: failure to utilize fully the new technologies plus the errant course that journalism itself has taken during the past 30 years. The latter should put me in real good standing with journalists and J-schools!]
Dagbladet also invited me to their parent corporation's winter holiday party – where I was easily identifiable as the sole person among the 300 there who didn't speak Norwegian.
I was surprised to discover that the Norwegian state broadcaster NRK, which has long been involved in online media, produces a good website, but its online, mobile, and interactive/digital TV developments and strategies seem behind the British Broadcasting Corporation and other Western broadcasters, and well behind the South Korean broadcasters. Is it lack competition that could make NRK change more quickly? I don't know.
While in Oslo, I talk to several people about the idea of holding an online news publishing conference in Scandinavia. But the World Association of Newspapers beat me to the idea, announcing yesterday that one will be held there on March 8-9 – relatively short notice.
By the way, did you know that the Norwegian word for beer, øl, is pronounced url? No wonder Norwegian's are technosavvy.
Data points, data points, data points. After awhile they aggregate enough to become trends. Here are several recently observed data points:
• Time Warner’s Time Inc unit announced that it was cutting 150 positions, half from editorial at Time, People, Fortune, etc. This on the heals of a reduction of 600, mostly business side, last year.
• The digital version of Sports Illustrated accounted for 13 percent of profits in 2006 and is projected to rise to 18 percent this year.
• The number of people reading Internet blogs on the top 10 U.S. newspaper sites more than tripled in December 2006 from the previous December—from 1.2 million viewers to 3.8 million.
• On the other hand, viewership of the ABC, CBS and NBC evening newscasts was down by 1.1 million in November from 2005.
• Based on the first six months of 2006, Internet advertising revenue should total about $16 billion for the year, or about 30% greater than 2005. This is roughly 10 times the rate of growth of advertising overall and would make Internet advertising greater than magazine advertising (although some of the Internet expenditures go to the Web sites of magazines).
• A private equity group has agreed to buy the Minneapolis Star & Tribune from McClatchy for less than half of what it paid for the newspaper nine years ago. And presumably McClatchy was happy to be walking away with what it got.
These data points confirm what we intuitively know is happening. But the data adds an undeniable veritas to the generalizations. Time Inc is not waiting until its profit disappears and its publications are in trouble before it takes action. Meanwhile, the editors on the digital side can gather greater respect within their organizations and among their peers—and more importantly, greater clout—as they can show that they have an audience and growing revenue and even profit.
While “we” may be the center of attention as content providers, the top news Web sites list this year, based on the volume of links at Google News, is topped by ABC News, The New York Times and Reuters. Compiled annually by NewsKnife.Com, the list is little changed from last year.
1 ABC News
2 New York Times
3 Reuters
4 Washington Post
5 Times Online, UK
6 Forbes
7 Guardian Unlimited, UK
8 Voice of America
9 Christian Science Monitor
10 International Herald Tribune
11 Bloomberg
12 CNN
What can be read into this analysis? By the numbers:
• Six of the top 12 are associated with newspapers.
• Two have roots as wholesalers—news services. Only since the development of the Internet have they reached out to an end-user audience.
• Two are related to commercial television news operations, one from a magazine, one is a government agency.
• Three are non-U.S. based, with all three being in the U.K. (IHT is nominally located in Paris, but most of its content is from its New York Times parent)
• One, The Christian Science Monitor, by its inclusion on this list, might seem to have far more prominence in the online world than in the print world, where its circulation is about 70,000.
• They are all—no surprise—English language.
Does this ranking tell us anything about online and traditional media institutions? It is important to understand what this is not: a ranking of the most used news sites, though as might be expected there is some overlap. According to Nielsen data, ABC News.com is the fourth largest pure news site, behind the New York Times (discounting higher ranked sites that are essentially news portals, like Yahoo or aggregated listings such as all Gannett sites taken together, except USA Today). And of the others only CNN makes the Nielsen list.
NewsKnife’s analysis essentially awards the greatest weight to the news sites based on the frequency and prevalence of its links. You can see more of the methodology here.
That said, the NewsKnife rankings do reflect the prominence that these sites have in Google’s aggregation of the news and no doubt drives far more traffic to these sites than they would have without Google News. It suggests that relatively small circulation publications can get high visibility, while being a major player in general in other venues (e.g., CBS News, Associated Press) is not an automatic ticket to top ranked accessibility.
Juan Antonio Giner has posted a series of photos of newsrooms from around the world at the Innovation Media Consulting Group’s blog. (I am an occasional consultant for Innovation). He reports that traffic to the site has far surpassed any other post. The photos show the attractive as well as the archaic. At one extreme are some cluttered cubicles at the Toronto Star, at the other is the state of the art Daily Telegraph’s new facility.
Giner’s take is that “We must be shamefaced about the design of our newsrooms…The future of newspapers starts in the radical design and redesign of the newsrooms.”
The new Al Jazeera Newsroom
My colleague at Innovation, Juan Senor, writes at the blog: "Open, airy spaces create energy and facilitate communication." He is referring in particular to the UK's Sky News Channel's newsroom. There might be something intuitively attractive about this and other expectations for more thoughtfully desgned newsrooms for a multimedia world. And if one is designing a new space it is a no-brainer to give fresh thought to the placement of editors, other newsroom staff, to lighting and work flow.
The key, though, is "payback." It's obvious why editors and reporters would be interested in how others are living, in many cases envious of the likes of the Daily Telegraph's newsroom. But most publishers and owners of ongoing newspapers, before signing off on an expensive newsroom rewrite, will ask "what's the return on investment?" Is there hard data that a revamped, reorganized newsroom has a return in a better newspaper-- and through that improved circulation, online traffic and/or advertising?
Newspapers all across America are using newsprint to wave the white flag, surrendering to the major search engines.
Earlier this month, 50 American newspapers agreed to have Google sell some of their online advertising inventories. Those newspapers include The New York Times, The Washington Post, and the Chicago Tribune.
Today, 176 other American newspapers announced their agreement to have Yahoo! sell some of their online advertising inventories. These include newspapers owned by MediaNews Group, Hearst, Belo, E. W. Scripps, Journal Register, Lee Enterprises, and Cox Enterprises.
Welcome to the wholesale surrender of major American newspaper companies to the search engines!
The chairmen of many of these newspaper companies are claiming the deals represent victories or advantages for their newspapers, but their claims are hardly true. The deals instead represent their failures during the past ten years. You can see this when looking back on the long perspective (which is why I've pictured the white flag atop the mountain, above).
Reporting Yahoo!'s arrangements with those newspapers, The New York Times today mentioned the effort ten years ago by the New Century Network consortium of the largest American newspaper companies -- Advance Publications, Cox Newspapers, Gannett Company, Hearst, Knight-Ridder, The New York Times Company, Times-Mirror, Tribune Company, and The Washington Post Company -- to form a common online advertising platform and also a common news search engine that included all their newspapers content and advertising space. But the executives of those companies bickered and failed to work together, and the New Century Network effort collapsed.
Little was done in the nearly ten year interim. Three of those companies (Gannett, Knight Ridder, and Tribune Company) joined forces to create a common online job ads services (Careerbuilder.com); and, along with Belo, McClatchy, and The Washington Post Company, a common online automobile ads service (Cars.com), but those online ventures intentionally excluded many other newspapers companies.
Moreover, almost all American newspaper companies during the past ten years have decried the growing market power of the online search engines. Google and Yahoo! have captured more national online advertising, and almost more local online advertising, than all American newspaper sites combined. American newspapers also worry if the search engines' news search sites sucks online traffic from their own sites. (In Europe, the World Association of Newspapers is leading an effort to sue or block the search engines from accessing newspapers' contents without remuneration.)
However, now most of those American companies or their successors have agreed to let Google and Yahoo! sell their newspaper's online ads. So, much for newspapers competiting with those search engines for ten years!
Publishers are organizing to stake a larger claim to the revenue now being garnered by the search engines, particularly Google. Two weeks ago a consortium of primarily EU-based publishing associations lead by the World Association of Newspapers announced a venture called Automated Content Access Protocol (ACAP), through which the providers of content published on the world wide web would be capable of communicating permissions information (relating to access and use of their content) in a form that can be readily recognized and interpreted by a search engine “crawler”, so that the search engine operator is enabled systematically to comply with such a policy or license. The full ACAP briefing paper is here.
A recent article by the Society for Computer and Law reviews the legal status of Google’s tools that provide web users with links to online content. For the most part courts have ruled that Google (and therefore other search engines) are not violating copyright by providing links to the pages of publishers. Last month, however, a Belgian court did rule that Google News (as opposed to Google’s basic search) was acting as an information portal (that is, like a publisher) rather than a mere search engine. The SCL article summarized the publisher arguments that court considered:
It causes the newspaper publishers to lose control of their Web sites and their content. While Google News links to an article on the newspaper publishers’ servers, once the publishers removes the article it still remains accessible on Google News via the link to the Google cache.
The appearance of automatically generated headlines on Google News means that users may avoid or by-pass the newspaper sites, resulting in a reduction of traffic and therefore loss of advertising revenue to the publishers.
Google News ‘short-circuits’ other protections for the publisher such as copyright notices and terms of use.
Access to the newspaper articles and other material via Google’s cache results in other missed opportunities for the newspaper, including reader registration and re-distribution rights.
Someone please help me understand, Where’s the beef? How does the publisher lose control of its Web site? For example, at 11:04 am EDT on Oct. 18 Google News’ top link was: The axis of anxiety
Belfast Telegraph - 1 hour ago
North Korea is the newest and least predictable member of the most dangerous club in the world. By David Usborne and Raymond Whitaker.
Has the Belfast Telegraph been robbed of possible traffic because thousands of users saw that? And how many of those who clicked through to the article would otherwise have the Belfast Telegraph as their usual source of online news? On the other hand, how many of those who clicked were exposed to the ad promoting “Online Monopoly”, an ad I for one have never seen elsewhere and was intrigued enough to click on.
Less than an hour latter, the lead had become:
Rice seeks to temper fears of Asian arms race Swissinfo - 2 hours ago By Sue Pleming and Chisa Fujioka. TOKYO (Reuters) - US Secretary of State Condoleezza Rice reassured Japan on Wednesday that Washington would stand by a commitment to protect its Asian ally, trying to temper ...
Was the Belfast News, or any other pubisher in that listing, being taken advantage of by being in the Google spotlight for 30 or 40 minutes?
And then its on and on about Google’s “cache” (sounds like “cash”, which, of course, is what this is all about). An article at Google News this morning headlined “Reuters offloads Factiva stake for $160m.” It was freely available if I chose the Times Online (London), but when I clicked on The Wall Street Journal’s link, I found only the first 50 words or so of the story and was told I needed to be a subscriber to see the whole thing.
Where’s the beef?
When I searched Google’s archive for articles mentioning HP CEO Mark Hurd and the recent controversy about investigating the HP Board, I received dozens of hits. But when I tried to view “Dunn Departs HP Board,” from Pensions & Investments Online Sept. 22, I was confronted with a screen that said I needed to register and sign-in before getting access.
So where’s the beef?
ACAP: Will it Work?
In the ACAP project, the publishers have gone out of their way not to paint their effort as a way to get back at the search engines. They are, indeed, trying to make this out to be a “win-win” proposition, describing their plan as “a new and exciting scheme that aims to improve the relationship between publishers and search engines….” They continue, “Via ACAP, we look forward to fostering mutually beneficial relationships between publishers of original content and the search engine operators, in which the interests of both parties can be properly balanced.” The search engines folks should embrace ACAP because “More content will be searchable: ACAP will give content owners the confidence to allow search engines to index their content under clear terms of use.”
In practical terms, ACAP is a solution in search of a problem. I’m certain the overwhelming number of publishers today get far more benefit from being crawled and displayed by the search engines than any minor harm. They get hits from audiences far greater than they would get sans search engines. (I wish I knew of some solid research that would confirm this, but it’s so evident on its face that I’m willing to make this assertion.). More hits can only lead to great value for advertisers, more registered users, and, in a few cases, and even subscription revenue. Content providers already have the option of-opt out from Google, they can already control access to the bulk of their content through registration and subscription requirements.
The outlook for the successful widespread implementation of an ACAP-like system primarily depends on whether Google really sees anything of value in it. If Google, MSN and others choose not to modify their crawlers and spiders, whatever, to interpret the code that ACAP will provide publishers, the latter will be left with the choice of either opting out altogether or using current tools. There are only a handful of publishers worldwide that might even entertain the fiction that they would be better off without the search engines even as now functioning.
There are precious few example—I can think of none—where top-down implementation has succeeded on the Internet. The Internet itself-- though initially developed with US government funding-- grew very much organically, as did the World Wide Web. eBay was not a creation of Christy’s or Sotheby’s auction houses. Despite years of talk about micro payment systems, it was not the major financial institutions that created PayPal, the most successful new system for online payments. Downloaded music was not a creation of music publishers or record companies, but grew from the success of Napster and the initiatives of Apple. Online video has received most of its attention thanks to the success of YouTube rather than a big-bucks push from the legacy video industry. And Google itself was a garage-shop end-around the top-down effort of Digital Equipment Corp (later Compaq’s) Alta Vista search engine.
Not only is ACAP a long shot to succeed as a model, but I don’t even see how the content industry will be better off if it does.
On this day when eMarketer estimates that Google is well on the way to capturing 25 percent of all U.S. online advertisement spending and almost twice the amount of Yahoo!'s revenues, with which Google's revenues only 18 months ago were on par, here are some other issues that my business partner and I are examining:
° What will be the future role of news agents and newsstands? Although they don't play a sizeable role in distribution of American, Canadian, German, and Japanese newspaper (only about seven percent of circulation in those countries), local newsstands and news agent play a most significant role in most other major countries' newspaper ecology. Plus they play significant roles in magazine distribution in every country.
In most of the world's countries, newspapers and their hired wholesalers distributed daily copies to the news agents and newsstands, who then distribute them to you. when you subscribe to home delivery of a daily newspaper, you make your subscription with your neighborhood newsstand or news agent (not directly with the newspaper as is the situation here in the U.S.) The news agents or newsstand has the relationships with the subscribers; the newspapers themselves don't know who subscribes, just that the wholesalers reports how many copies were sold to the retail newsstand and news agents.
Some digerati simply expect newsstands and news agents to go out of business if newspapers and magazines someday switch entirely to online publication. But that would create a major disruption in countries such as the United Kingdom, where 47 percent of the daily newspapers' gross revenues came from newsstands and news agents. Must the newspapers forge direct subscription relationships with consumers? Will physical newsstands and kiosks cease to exist? (Do remember that browsing a physical newsstands if much easily than one online.) Or will they be replaced by physical versions of some sort of electronic kiosk?
° More immediately on that topic, we've today been helping a U.S. investment client ascertain what the U.K. Office of Fair Trade's provisional decision-making about news agent competition means for major newspaper and magazine distribution wholesalers such as W.H.Smith, Menzies, or Dawson News.
In the U.K. wholesalers grant news agents and newsstands exclusive rights to distribute certain titles in specific geographical areas (a rural town, a one block radius in London, etc.). Since 2004, the OFT has been investigating whether such exclusivity is anti-competitive and disserves consumers. It last year issued a provisional finding that these exclusivities weren't anti-competitive with newspapers but were with magazines. Several months ago, it however changed its findings to say the exclusivities are anti-competitive for newspapers, too. It's still investigating, and will issue new findings in the spring.
° Would the regional press be better served using virtual newsrooms? We know several reporters at various regional newspapers who've gotten into trouble by not being at their newsroom desks five days and 40-hours per week. They've defended themselves by pointing out that news doesn't occur in newsrooms. That's all too true. The successful newsroom was an empty one 25 years ago because all its reporters who expending shoe leather, but too many corporations now consider an emply desk or cubicle in a newsroom to mean that the reporter isn't doing her job.
Today's technologies allow reporters to work from anywhere. So, why should they be physically anchored to their newsroom for most of the work day? Newsrooms are a great place for reporters and editors to have story conferences, but with instant messaging, SMS, person-to-person webcasting and voicecasting, mobile devices, etc., the reporter should be able to work from his car, home, local coffee shop, or the news scene. Why chain them to an Atex or SII mainframe six or eight hours each day?
Many journalism schools teach how to report using multimedia and new technologies, but none teach editors how to use those technologies to replace the newsroom itself. It's time that was done.
° Open archives. How much are newspapers really making by charging for online access to stories that might be more than a week old? Do they earn more that way than the online advertising revenues from opening up their entire archives to consumers and search engines? Are publishers being foolishly doctrinaire by charging for archives?
° American business publications in print took a revenue bath last month. The Society of American Business Editors and Writers' Talking Biz News reports Magazine Publishers Association data showing large drops in advertising pages and revenues.
Though Barron's, The Economist and Inc magazines showed increases in ad revenue, Forbes 4.2 percent, Smart Money 5.4 percent, Money 6.6 percent, em>Business 2.0 fell 7.4, BusinessWeek 8.9 percent, Kiplinger 19 percent, and Fortune 28.1 percent (after that magazine had already declined 12 percent in August). It's odd that business magazines would have less advertising once the summer vacation season ended.
° The Financial Times and the weekly New York Sun published 'think' articles about the future of the American newspaper industry, and both make the same point about profit margin versus product development.
The FTstory contrasts the Los Angeles Times and the St. Petersburg Times. The former is owned by the publicly-traded Tribune Company and the latter owned by a not-for-profit trust. The FT's reporter suggests that Wall Street demanding too much profit ("trying to push profit margins beyond 20 per cent") comes at the expense of keeping newspapers viable.
The Sun's story looks at The Los Angeles Times and the now defunct Knight Ridder Inc., and is a bit more blunt:
It seems its [Knight Ridder] 32 daily newspapers had been able to record "only" a 20% return on investment in recent years.
Cut back on the quality of a newspaper in order to show an impressive short-term return for the market's sake, and the slide toward disaster has begun. Readers will notice and begin drifting away, and advertisers will soon follow. It won't be long before the vultures are circling.
° Last but not least, the online news pioneer Milverton Wallace, who'd organized the European NetMedia conference during the new-media industry's first decade, looks at the long-term changes underway, in an essay he's written for the Club of Amsterdam.
Pardon me for writing again about newspapers, but they're often the starting point in the feeding chains of broadcasters and bloggers. And this story is just in about newspapers themselves:
According to the latest figures from the Newspaper Association of America Newspaper Audience Database project, more Americans visit newspaper websites than purchase printed editions. That is, more do sometime during a month. The NAA announced that more than 55.5 million Americans now visit newspaper websites at least once per month and this total grew by more than 31 percent during the past year.
When many of us started publishing news online during the late 1980s (via Prodigy, CompuServe, AOL, and other proprietary online services) or in the mid-1990s on the World Wide Web, the time when newspapers would have more online users than print readers seemed a distant dream.
It's a milestone, an accomplishment that deserve praise.
Yet this dream isn't a wet dream. Nor is it real. The big caveat in the NAA announcement is those numbers are monthly, not daily.
Slightly more than 54 million Americans purchase a printed editiondaily while 55.5 million visited a newspaper website at least once per month. Conflating daily print and monthly online figures makes it appear that the American newspaper industry isn't so much losing daily print readers as gaining equally frequent new readers online. That's good PR for the newspaper industry, and more power to the NAA for touting it. But the claim isn't really true.
Daily reach isn't monthly reach and vice versa. There may be 55.5 million users of newspaper websites, but they use those site far less frequently and less thoroughly than daily.
Look closely at NAA's NAD data (which is downloadable as an Excel spreadsheet). How often does the average user visit a newspaper site during a month? There's are no data about that in the NAD data, but we can calculate an indication from the data. Though the NAD spreadsheet is password-protected against any changes or added calculations, you can simply add a new worksheet into it by using Excel's 'Insert > Worksheet' command and link it to the NAD data to make indicative calculations.
Take as an example the first newspaper listed in the data: The New York Times. Divide its number of monthly users into its number of monthly page views to calculate how many pages the average user saw that month. The answer is 24.8, or less than a webpage per day during any month. That indicates that the most frequent possibility would be the average user of that site visits almost daily (i.e., 24.8 times in a 30-day month) but sees only one webpage per visit and that the least frequent would be one visit per month during which he sees more than 24 webpages. (My guess within that range would be about six visits per month and some four webpages seen per visit.)
Make the same calculation about the Boston Globe (line 244 in the NAD spreadsheet) and the answer is 21.3 or only about two webpages every three days. Try the Miami Herald (line 1389) and get 5.6 webpages per month or less than one webpage every five days. Etcetera.
The NAA is conflating the numbers of people who read at least one printed page daily with people who might read perhaps only two webpages per week. Those numbers aren't really equivalent.
Moreover, I'm puzzled by another NAA datasheet (PDF) available online, this one from Nielsen/Netratings data. It shows almost the same number of site users per month as the NAD data, but an average of nearly 47 webpages seen monthly per user. That's a discrepency of more than 100 percent from the NAD data! I wonder what the explanation is such a huge discrepency in data covering the same period and through NAA.
But the growth of the online news audience has slowed considerably since 2000, particularly among the very young, who are now somewhat less likely to go online for news than are people in their 40s. For the most part, online news has evolved as a supplemental source that is used along with traditional news media outlets. It is valued most for headlines and convenience, not detailed, in-depth reporting.
Broadcast news outlets continue to struggle over the last two years alone, the audiences for nightly network, local TV news and radio news have all slipped. Even so, the recent trends in news consumption are relatively stable when compared to the 1990s when TV news in particular was suffering losses of far greater magnitude.
Similarly, the latest Pew news consumption survey finds that newspapers, which also have seen their audience decline significantly, are now stemming further losses with the help of their online editions. However, the discrete online-only newspaper audience is quite modest in size.
Four-in-ten Americans say they read a newspaper yesterday, with 6% reading a newspaper online 4% read both a print and online newspaper, while 2% read it only online. In addition, 3% say they read something on a local or national newspaper website yesterday. As a result, even the highest estimate of daily newspaper readership 43% for both print and online readers is still well below the number reading a print newspaper on a typical day 10 years ago (50%).
The biennial news consumption survey by the Pew Research Center for the People & the Press, conducted among 3,204 adults from April 27 to May 22, finds that the audience for online news is fairly broad, but not particularly deep. People who say they logged on for news yesterday spent 32 minutes, on average, getting the news online. That is significantly less than the average number of minutes that newspaper readers, radio news listeners, and TV news viewers spend with those sources. And while nearly half of all Americans (48%) spend at least 30 minutes getting news on television, just 9% spend that long getting news online.
The web serves mostly as a supplement to other sources rather than a primary source of news. Those who use the web for news still spend more time getting news from other sources than they do getting news online. In addition, web news consumers emphasize speed and convenience over detail. Of the 23% who got news on the internet yesterday, only a minority visited newspaper websites. Instead, websites that include quick updates of major headlines, such as MSNBC, Yahoo, and CNN, dominate the web-news landscape.
The rise of the internet has also not increased the overall news consumption of the American public. The percentage of Americans who skip the news entirely on a typical day has not declined since the 1990s. Nor are Americans spending any more time with the news than they did a decade ago when their news choices were much more limited. In 1996, people on average spent slightly more than an hour (66 minutes) getting the news from TV, radio or newspapers. Currently, they spend virtually the same amount of time (67 minutes) getting the news from all major news sources, the internet included.
As internet news has gone more mainstream, its audience has aged. Since 2000, nearly all of the growth among regular internet news users has occurred among those ages 25-64. By contrast, virtually the same percentage of 18-24 year-olds say they get news online at least three days a week as did so six years ago (30% now, 29% then). Currently, about as many people ages 50 to 64 regularly get news on the internet as do those in their late teens and early 20s.
If newspaper new-media is to succeed printed editions, then it still has a long way to go. And it will need to go that far within not much more than perhaps ten years before declines in print circulation will drop below he level where newspapers become uneconomic to publish and therefore insolvent, as others have calculated.
Have you ever wanted to take what you now know and go back ten years in time? I saw it done on Wednesday.
The American Press Institute, a training and think-tank institute for the American newspaper industry, warped time when presenting the second phase of its Newspaper Next project to transform that industry.
The project is being run by Innosight, the consulting company founded by Clayton Christensen (pointing at one of his slides above), the Harvard Business School professor who wrote the book, The Innovator's Dilemma about the troubles established companies have facing disruptive change in the markets. Because newspapers are facing such a change, the API hired Innosight to help it.
Innosight’s presentation on Wednesday basically consisted of two parts: An explanation of what tends to happen when established companies face disruptive change and basically two recommendations what the newspaper industry should do.
The Tribune Co and its Los Angeles Times newspaper are in the news again today. This time it’s about the paper’s publisher, Jeffrey M. Johnson, who has become something of a newsroom hero in standing up to the parent company by refusing to initiate ordered budget cuts. This new profile comes after a flurry of articles (and here and here) in recent weeks about pressures on the Tribune Co to sell the Times. Moreover, the situation at the Times is a subset of turmoil at the Tribune Co., similar to that which resulted in the dismemberment of Knight-Ridder.
The unrest at the Times, however, is being repeated at large and medium size dailies all across the country. The underlying facts are undisputable. The remedies are less obvious.
The facts, which have been repeated frequently here and elsewhere, are that:
1) Daily newspaper circulation has been on a long term and steady decline. From a high point in the 1980s of about 63 million daily copies, the most recent count reports a total of 45.4 million copies, a decline of about 28%, even as population and households increased over that period. Some papers and some areas have fared better than others, but the trend overall is down.
In the case at hand of the L.A. Times, circulation, which was more than 1 million daily 10 years ago, was down “only” 17%, to 852,000 this year. Again, this despite a 12% growth in population since 1990 in Los Angees County alone.
2) Advertising is flat. Adjusted for inflation, newspaper advertising revenues increased only 7.3% between 1994 and 2004. That’s a compound annual growth rate of 0.7%. Total advertising in all media, on the other hand, grew by 49% in that period. Newspapers accounted for 27% of total advertising in 1985, 23% in 1995 and about 17% today.
With lower circulation and an expanding list of alternative vehicles for reaching their audiences, advertisers have been switching their budgets elsewhere, from direct mail to local cable to the Internet.
So, what’s a publisher to do? Jack Klunder, senior vice president for circulation at The Los Angeles Times, commented that Johnson was not against retrenchment: “Jeff has never said that we don’t need to make intelligent cost cuts. The challenge is, How do you grow your business when you have years of a stagnant or even declining revenue picture? You can’t grow your business just by cutting costs.”
Indeed. But Klunder’s statement leaves out a big detail: What is their business? Does he refer to the business of printing and distributing a newspaper? Or does he mean the business of gathering news and other information and making it available on a variety of platforms to multiple audiences?
True, businesses cannot grow by cutting—but they can survive. And right now newspaper publishers need a strategy to grow their business while transitioning from a reliance on high profit paper-based models. They will never again be able to have long term growth in the newspaper. But they can thrive if the cuts in expenditures on printing presses and circulation departments are accompanied by maintaining the capability for providing content about the local area in which they are well known. And offering this by whatever mechanisms some customers want to use: Web sites, Podcasts, Vodcasts, mobile devices, or telepathy for that matter. That will keep some—hopefully enough-- advertisers as customers as well.
I don’t know if the Tribune Co. has been intelligent about the cuts they want to make in LA or elsewhere. What we do know is that cuts are inevitable given the shrinking traditional newspaper. The hard part is how to make that part of a plan for regeneration.
Let’s peek under the blanket because there's a lot of people in the dark there. A widespread misconception is that taking printed or broadcast content and putting it online or wireless is new-media. This misconception blankets even many new-media executives.
No, taking printed or broadcast content and putting it online or wireless is as much new-media as microwaving hamburgers is new cuisine. It’s just the same old beef reheated a new way.
The reason this misconception is so widespread is that most people, including most media executives, are myopic. They might see the superficial changes underway but rarely the seismic changes that underlie and motivate the surface. They can’t perceive the forest because all the trees get in the way.
But the verb evolve probably better describes what’s going on than motivate.
Media ever evolves towards greater, more articulate distribution. Technology drives the evolution.
Note that the evolution has two dimensions: Greater. And more articulate.However, most media executives still see only one dimension: the greater distribution (i.e., greater reach). They fail to notice the newer dimension: More articulate distribution. They're conditioned not to see it.
And why not? The first period of evolution led to the greatest distribution.
Gutenberg’s invention of moveable type allowed economical distribution of books, newspapers, and broadsides. The later invention of rotary presses, powered by steam and then electrical engines, allowed their mass production. Morse’s telegraph extended the reach of text. Marconi’s radio extended the reach of words. Farnsworth’s television extended the reach of moving pictures. By 1990, any content could reach anywhere in the world within 24 hours in the physical form of print or instantaneously when telegraphed or broadcast.
But the second period of media evolution is now underway, and it will lead to the most articulate distribution. That means the ability to distribute to each person those pieces of content that are most pertinent to that person’s unique mix of generic and individual interests. It doesn’t mean distributing the same package of content to everyone -- be that package an album of music, a printed newspaper or news magazine, programs in a broadcast schedule, or even an intact broadcast program.
As with geologic periods, there has been occurring a brief overlap between these two periods of media evolution. We are in that overlap.
I was leading an editors conference for a small newspaper publishing group last week. The objective was to think about strategies for the newspapers as well as their online components. To get things going I presented an ersatz IQ quiz to the 60 or so participants. Below are the questions. The answers and discussion follow. Few of the editors last week had the correct response to more than two of the five questions.
1. In the last quarter, MediaNews Group derived 13% of its profit from online. What % of its revenue was from online?
a) 5%
b) 8%
c) 10%
d) 13%
e) 15%
2. What is the annual quarter over quarter rate of increase for online revenue of newspaper publishers?
a) 10%
b) 20%
c) 30%
d) 40%
e) 50%
3. In 1950 about 2% of GDP went toward advertising. What was the % in 2005?
a) 1.5%
b) 2.0%
c) 2.5%
d) 3.0%
e) What’s GDP?
4. Craig Newmark got the idea for Craigslist when he was classified ad manager of what Northern California newspaper? Extra credit: In what year?
a) San Francisco Chronicle
b) Oakland Tribune
c) Sacramento Bee
d) San Jose Mercury-News
e) None of the above
5. Which newspaper group created the first consumer-oriented online news product in the U.S.? Extra credit: In what year? (+/- one good enough)
a) NY Times Co.
b) Dow Jones
c) Gannett
d) Knight-Ridder
e) McClatchy
f) Tribune Co.
Answers
1. a) I read recently that NewsMedia (a privately held company) claimed that 5% of its revenue was from online. (Unfortunately I didn’t make note of the source and I have been able to find it again. If anyone can provide a link, please leave a comment or email me). This would help confirm that the profit margin for online is greater than in print. I keep telling the newspaper folks that they should not be concerned about replacing lost print revenue dollar of dollar with online revenue. The key metrics are profit margin and net profit. 30% on $100 million beats 20% on $125 million.
2. c) For the industry overall it has been running about a 30% to 35% clip recently—both in the US and EU. It is still under 6% of total newspaper ad revenue in the U.S., but much needed, as print revenue has been flat.
3. b) Advertising expenditures have hovered about 2% of GDP for decades, up a bit in good years, down some in recession years. In 1930 newspapers took in about 45% of the total. By 1950 it was down to about 30%, with most of the difference going to radio. Surprisingly perhaps, television had relatively little effect on newspaper advertising share, with most of that medium’s share coming out of radio in the 1950s. Of course, the total amount spent on advertising kept increasing over the years, as 2% of a consistently larger GDP kept all boats rising, even as some lost share. But today, with so many boats in the water, newspapers are not only losing share but, in constant dollars, finding it hard to even increase ad rates enough to make up for declining lineage. Even broadcast television is losing share, to cable networks.
4. e) Trick question. Newmark—as presumably most of the readers of this blog will know, was a software engineer and did not come from the newspaper industry. That, of course, is the point. We might have expected that someone at a newspaper would have seen the connection between online and classifieds in a creative way before an outsider did. In fact, incumbents tend not to be product innovators because they are afraid of cannibalizing their current profitable products. So outsiders are freer to innovate. It is easier to create a Wal-Mart from the ground up than for a Sears to re-invent itself. By the way, Craigslist first appeared for the San Francisco area in 1995.
5. d) Knight-Ridder teamed up with AT&T to create Viewtron, a videotex service, in 1983. I was there. It used a TV set for the display (what else?) and the ubiquitous “set top box” from AT&T for the smarts, incorporating a 1200 baud modem. All for about $600 (double that in today’s dollars). Oh, plus $12 per month, plus $1 per hour for the dial-up time. The graphics were crude. But the services are recognizable: news, weather, sports, primitive online banking, shopping—and email with the handful of others who subscribed. Never heard of it? Surprise! They shut it down in 1986, after spending $50 million. Right idea, wrong decade.
The point of the quiz is three fold: First, the online information business did not arrive suddenly with the commercialization of the Internet. It started with Prestel in the late 1970s in the UK and had the attention of the newspaper industry (or at least Knight-Ridder and Times Mirror, which lagged K-R only by months with its own videotex trials) in the early 1980s. Unfortunately, the failure of these early developments emboldened the naysayers who were skeptical that online would ever be a threat to newspapers.
Second, it is exceedingly hard for incumbent players in any industry to reinvent themselves faster than outsiders can see and take advantage of opportunities. For the incumbents the knee jerk reaction is to preserve market share. For the new guys, getting even one or two percent of a large market such as advertising, can look very attractive.
Finally, online advertising dollars are quickly becoming sizeable and the profit margins make even the 20% sought under the old one-newspaper city model look minimal. Growing the online component of their businesses—whether with a MySpace type acquisition or more modest local initiatives—is not only important, but urgent and imperative.
We’re often quick to put down the newspaper company executives who “don’t get it,” who are still fighting rear guard actions against the forces and trends eroding the traditional newspaper’s business, or just moving too slowly, looking for “the” strategy or business model, when in fact the digital dynamic calls for experimentation and innovation.
Coloring with such broad brush strokes always leaves out the finer grain. There are many in the industry who do get it and who have been trying to find models of content, delivery and revenue to make up for the revenue being lost by the ink or paper product.
This line of thought came to mind having recently discovered a thoughtful piece in Nieman Reports by Mike Riley, the editor of the 97,000 circulation Roanoke (VA) Times. His starting premise is that we need to stop thinking of the institution of the newspaper. The first step is to think of these operations as news gathering organizations. In that context they are in a position of strength looking at the media landscape:
In most markets, they are the last remaining mass-medium; they are prime creators of original journalism and, in many cases, they are deeply committed to a community’s civic life and welfare. Finally, they are blessed with a profitable business model that can, if allowed, underwrite a range of digital experiments and online forays to move us successfully into the future.
Riley offers 12 observations for his news gathering colleagues. Several that I find most critical and not always obvious are:
Don’t force change. So then how do you change if editors and publishers can’t dictate it. He says to start with natural allies in the newsroom and let it spread. He found that the photographers were among the first group most amenable to experimentation, creating multimedia presentations and videos for the Web site. Others caught the enthusiasm – the viral approach. Ultimately, says Riley in another one of his points, “Get everyone to drink the Kool-Aid.”
Integrate, don't separate. Riley thinks there is now a clear winner in the debate about whether a disruptive technology has a place in the traditional newsroom of the newspaper. Should the online newsroom be separate or integrated with the traditional newsroom? “My belief is that you shouldn't relegate online players to backrooms or basements, particularly if you want others to learn and grow. The online content operation should be integrated into the newsroom, particularly as the seismic shift of resources from print to online gains momentum.” He found that moving the online time into the newsroom at his paper made a huge difference for the good. "The online editor hears a metro editor talking with a reporter about a breaking story, and within minutes that nugget of news is posted on our Web site.”
Don't be afraid to invent jobs. At a time when the news is usually about downsizing, he says that new positions must be created. One that has been of great success for the Times was a multimedia editor. This approach has paid off with some stellar prize-winning multimedia projects. He launched the TimesCast, an interactive, online video newscast in the somewhat iconoclastic spirit of Rocketboom.com .
Work across traditional barriers. This one gets dicey: the modern newspaper was viewed as having a high wall between the newsroom and the business side of the enterprise. Editors were known to resign if publishers tried to infiltrate. But, says Riley, “In this new world, different departments need to communicate and coordinate well…” This includes the information technology folks as well as those in advertising.
In a traditional newspaper world, such conversations might seem jarring, but in this new environment, it is essential that they take place as we construct a new paradigm. This is not always easy for newsroom folks to understand. The irony, of course, is that newspapers, the world's chroniclers of change, are themselves frightened to death of change, and that fear can often impede vital experimentation.
There are others who understand what needs to be done and are in a position to make it happen. Steve Yelvington, who is the new media guru for the 27 Morris Publishing dailies, has been toiling in this patch for decades. Significantly, Morris and Riley's parent corporation, Landmark Communications, are privately held companies. Though they might not have access to the capital available to their publicly owned cousins, they may be better positioned to experiment and absorb lower margins while making the transition from the ink on paper world.
At any rate, Riley’s article is a helpful take on working toward a blueprint for change in the newspaper business.
Federated Expected to Drastically Reduce Newspaper Advertising
More down news for big city newspapers: Federated Department Stores, owner of Macy’s and Bloomingdale’s, is expected to trim (perhaps "hack" is the better term) its current $825 million expenditures for newspaper advertising by 25% to 50%. Federated’s department store brands reportedly are the single largest advertiser for newspapers. Spot TV is also expected to suffer. According to Advertising Age the new mix will favor national TV and magazines.
I'm in Amherst, Massachusetts, at the Media Giraffe conference and am frustrated.
Most of the speakers from mainstream media seem to have an intrinsic belief that the package of journalism they're been providing for the past 50 years shouldn't change, plus that their journalism ("quality, objective journalism") simply needs to be placed onto new platforms (the Web, mobile phones, etc.) to get more people to use it and ensure the future of journalism and the news media in general.
The facts belie their faith in that belief. Newspapers' and news magazines' circulations and readerships are steadily declining, as is listenership and viewership of news broadcast. Some publishers and broadcasters claim that their websites' increasing numbers of users show that there are no declines but increases. But I know that the data from those sites show that those users actually use the news media online far less frequently and much less throughly than users of those media's traditional print and broadcast products. People are 'voting with their feet' and rejecting mainstream media's package of journalism, whether in print, broadcast, or online.
Meanwhile, I'm also frustrated by the alternative being offered here: the utopian fantasy that if the news media would only incorporate 'citizen journalism,' all will be well. Bullsh*t!
Yes, I think that most of mainstream media long lost ago lost touch with a plurality — if not majority — of their audience. I agree that much of traditional media might have been complacently 'talking down' to their audience for years. I indeed think that "citizen journalism' is an excellent tool for helping to repairing those problems; but it is just one of many new tools needed. Most of "the people formerly known as the audience" still want to be the audience, don't want the onus of reporting the news themselves, and the ongoing data — including those from 'citizen journalism' projects that have existed for a few years — about citizens' involvement in journalism isn't and won't reverse the declining usage of news. Facts, not faith.
During the opening session of this conference, I raised my worry about 'citizen journalism' being peddled as a panacea. But Jeff Jarvis, my co-moderator of that session, cut me off. "I don't think that's the question!"
Well, thank you, Jeff, for telling the conference that what you're co-moderator is asking is not the question. I think it is. I'm not alone 'Citizen journalism' shouldn't be a sacred cow. Certainly not at a conference whose stated purpose is to examine the future of journalism and participatory democracy.
Jeff has claimed that if only one percent of a site's users engage in 'citizen journalism,' it will create a "democraticized community." I think he's an advocate who's making the proof fit the results. His claim reminded me of certain 20th Century nations' claims that their 99 percent voter turnouts proved that they're democracies. No, give me usage rates of 40 percent (like U.S. voter turnout) or even 20 or 10 percent, and I might believe. Sorry, but one percent participation doesn't make something a success or a democracy.
There is a pile of solipcism in the news industry. We like to report the news, so we think that most people would, too. But I fear that some advocates' single-minded focus on 'citizen journalism' is distracting the news media from many, many other changes it must make. The advocates are succumbing to Maslow's Syndrome — when the tool in your hand is a hammer, everything begins to look like a nail. 'Citizen journalism' is a wonderful tool, but more tools than just that are needed to repair and rebuild the media.
Moreover, researchers and analysts such as Prof. Robert PuttnamBowling Alone) have ably documented that we live increasingly in a nation of couch potatoes when it comes to the news usage, civic involvement, and comity. Traditional media editors have long believed that they somehow can control that by changing the story package, but there's widespread evidence that their belief is just an article of faith and not fact. Likewise, advocates of 'citizen journalism' believe that they can that they have that influence, too.
No, just giving the tool of 'citizen journalism' to the public won't reverse the declines. More changes to journalism than just 'citizen journalism' are necessary. What's needed is not just including 'the people who used to be known as the audience' but also changing the core journalism by the people who used to be known as Knight Ridder.
The average age of a user of American newspapers' websites has increased by five years during the past five years, according to annual survey data I've seen from Belden Associates. The data strongly indicate that the American newspaper industry's strategy of going online to appeal to younger readers is failing.
The average age of a user of American newspapers' websites was 42 during 2005 and 37 during 2000, according to Belden. The average increased during four of the past five years.
True, the average age of the website user is younger than that of the average reader of a printed edition — 42 versus 55. But the American newspaper industry's online strategy has been largely aimed at reaching users in the 25 to 34 age plus those in the 35 to 44 age group in general.
The Belden data shows that the ranks of newspaper website users who are age 25 to 44 have steadily declined during the past five years while those in the oldest age group (55 plus) have increased.
If the American newspaper industry is to reverse its declines, it must steadily decrease — not increase, the average age of its users — whether users of print or online.
Each year since 1999, Belden has interviewed more than 134,000 users (including 38,300 during 2005) of 39 U.S. newspaper websites of various sizes. Here are some Belden highlights about the users:
I’m in Moscow, where I will be attending some of the sessions of the World Press Association Newspaper (WAN) Congress and the associated World Editors Forum. One early observation from what the organizers have put on the program is ongoing concern about the online world for the editors, but business as usual for their publishers.
On the Editor’s Forum is a keynote address by Columbia Business School’s Eli Noam, whose theme starts with the warning “Today's newspaper will become a news-integrator, but the problem for traditional news organisations is that this type of virtual integrator function can also be done by others.” Other speakers here (remember, this is are newspaper publisher and editor conferences) are Wikipedia founder Jimmy Wales, Corante Media Hub colleague Steve Yelvington, Yahoo! News’, Neil Budde and Google News’ Nathan Stoll. Mochila.com and Microsoft have their presence here as well.
Unfortunately, the sessions for the publishers are far more mundane, despite promising titles. A session with the promising description of the “latest research and strategy reports in the Shaping the Future of the Newspaper project” is about classified advertising. A session headlined “The Product Innovators” will feature “The Future of newspapers - newspapers of the future” with that digital innovator Axel Springer of Germany and a “Review of the Russian media scene.” from TNS Gallup Media. Of interest, perhaps, but hardly the stuff of shoring up a sinking ship.
In all fairness, WAN has always been heavily European with a strong South American and Asian presence (China has a impressive delegation of 41 registered participants, compared to the 70 or so from the U.S.) In many regions newspaper circulation is still growing, thanks to improvements in literacy that expands the universe of readers and the lower penetration of cable, DBS and the Internet than in the West. That said, the publishers might be serving their future better by attending the Editor’s Forum.
While the New York Times Co. and the Washington Post have some reasonably high level people attending, is there any message in who is missing: no one from McClatchy, Gannett or Tribune Co. (other than a mid level European manager from the Tribune News Service).
If any worthwhile insights stumble out of these conferences, I’ll be sure to share them.
I'm still in shock after the two conferences I attended earlier this month. How times have changed!
During 1998, I flew from a new-media conference in Zürich to one in Las Vegas. I was in a different kind of shock then. Zürich and Las Vegas are remarkably different cities, but culture shock wasn't a problem. Jet lag was. My circadian clock was nine hours askew. Fortunately, Las Vegas is the city where being wide-awake at wee hours is perfectly acceptable.
This year, I flew from a new-media conference in New York City to one in Las Vegas. Jet lag wasn't a problem; there are only three time zones between those cities. However, a week later, I'm still in shock. Culture shock. But not because of the difference in cities.
I'm suffering culture shock because I'd too quickly gone from a conference of digerati to one of analogati. I'd almost say, to one of Ludderati.
Worse, the two conferences were all digerati back in 1998, but the times since have left one of those conferences behind.
The digerati were at the Syndicate conference last Monday and Tuesday in Manhattan. This conference was about how the Internet is changing the way that news and information is distributed. Among its 125 attendees and speakers were AOL Weblogs Inc. Founder Jason Calacanis, Rocketboom host and co-owner Amanda Congdon, Newsvine CEO Mike Davidson, Richard Edelman of Edelman PR (who has his own blog), Brightcove VP of Content and Online Services Eric Elia, ZDNet International Contributing Editor Steve Gillmor, Blogger Jeff Jarvis of Buzzmachine.com, Eric Norlin, Doc Searls, Technorati Founder and CEO David Sifry, Reuters Consumer Media Senior VP & General Manager Steven Schwartz, Halley Suitt, and David Weinberger. Most of them have invented somne new-media technologies, innovatively adapted those technologies, or successfully started companies based upon those technologies and innovations.
Due to a scheduling conflict, I could attend only the first few hours of the Syndicate conference (I blogged just the opening sessiont of this conference). Most of the speakers and attendees whose names are hyperlinked above can better report about this conference than I can. Nevertheless, I was there long nenough to experience how new ideas were flying throughout, aided by speakers who broke the Fourth Wall of the stage and let the audience participate and by wireless Internet access throughout the conference hall, which let attendees and speakers check facts, check on each other, and all participate even more. It was exhilerating, and I came away with many new ideas.
A few days later, I flew to Editor & Publisher and MEDIAWEEK magazines' Interactive Media conference in Las Vegas. It would be quite unfair of me to call its attendees ludderati or Luddites. The Luddites were a social movement in the early 1800s that objected to technological change and tried to smash new technologies. By contrast, the 300 or so attendees of the Interactive Media conference were executives who owe their positions to technological change and are trying to embrace it. They've spent most of the past eight to twelve years putting their printed publications online. For examples, you can now read The Washington Post, Minneapolis Star Tribune, or Newsweek online, hours before those periodicals appear in print. The online versions sometimes even contain hyperlinks to source materials, though most don't.
In 1998, the attendees at these two conferences had been on roughly the same level of sophistication about technology and new-media theory. However, the Interactive Media attendees are still at that 1998 level, while the Syndicate attendees are now eight years' more sophisticaled. The difference was so striking it shocked me.
One of the few Interactive Media attendees who is as sophisticated as any of the Syndicate attendees is Forbes magazine Executive Editor and Forbes.com Editor Paul Maidment. Read his story about how out-of-date the conference's attendees were, if you don't believe me. He leads it with something he heard:
"I don't know what to do, but I am ready to do it." That was the quote that raised the biggest chuckle at the recently concluded Interactive Media Conference, Editor & Publisher's annual gathering at which the U.S. regional newspaper industry's panjandrums stare transfixed into the onrushing headlights of online publishing. Trouble is, it was a self-knowingly nervous giggle.
I remember that quote. It was one of three incidents I particularly remember from the Interactive Media conference. Here are the other two:
The first was when two college students were interviewed on stage in front of the attendees. They were asked what websites they had browsed that day from their personal computers and also what books they'd recently read. The students said they had browsed no websites from personal computers, but instead did their browsing that day from their mobile phones. They also said they hadn't lately read any printed books except college textbooks, except they had recently bought and downloaded several ebooks onto their PDAs.
That they used their phones rather than PCs to browse surprised the attendees, almost all of whom design their websites for PCs. Similarly, the attendees were flummoxed that someone who read ebooks ("The convenience and portability of having all those books at hand," one student replied. "I can read them whenever and wherever I am").
When the conference later held a panel about publishing to mobile devices, it mentioned that most mobile phones in the U.S. can be used to browse the Internet, and asked the attendees for questions. The opening question came from an executive who announced, "Maybe I'm a dinosaur, but I had heard that it's possible to browse the Web from a mobile phone and I had someone show me how. I could figure out how to type the 'www' but couldn't figure out how to type the '.' in Web addresses. So, isn't all this concern about mobile phones way too early?"
Only in the minds of her and most of the 300 other attendees, despite the evidence before them, I thought.
The second incident was orchestrated by speaker and Innosight consulting company Managing Director Scott Anthony. He presented a 30-second video and asked the attendees to count in it the number of times a basketball is passed among a trio of people wearing white who were weaving among a trio of people wearing black. Most of the 300 attendees counted anywhere between 12 and 16 passes. But Scott then asked how many had seen a person wearing a gorilla suit walk across the screen and wave at the attendees. Only about a dozen of the 300 attendees raised their hands.
So, here was a conference about a changing environment, but most of its attendees weren't able to perceive an obvious incongruity — a real change — in a 30-second video. That was Scott's point.
Outside research indicates that only about 10 percent of average people see the gorilla in that video (an ape easily seen in this still image). That means that at least 30, not only a dozen, of the 300 attendees should have seen the gorilla. Moreover, this conference's attendees are people paid by their companies to perceive, understand, and deal with change. Shouldn't more than a dozen or 30 of the 300 Interactive Media attendees have seen the gorilla in their midst? I think that most of the attendees of the Syndicate conference would have.
You won't find much blogged about the Interactive Media conference because its organizers decided not to provide its attendees with wireless Internet access (reportedly because using the Internet might distract attendees from hearing the speakers — a remarkablly Industrial Era policy in an Information Era where people routinely multitask. Moreover, why should a concert about interactive be interactive? Go figure.).
With the exception of not providing wireless, the fault in Las Vegas wasn't Editor & Publisher or MEDIAWEEK magazines'. It was the attendees. They're so driven to do what made sense to them in 1998 that they don't question whether that makes sense now or how things are changing.
There are many executives in the newspaper and magazine industry who are as sophisticated about technology and new-media theory as the Syndicate attendees, but most of them no longer attend the annual Interactive Media conferences. I can understand why (perhaps they correctly don't think they will learn anything), but the people who do attend and the industry as a whole lose by those people's absences.
All this tends to confirm the quote Paul Maidement reported. The attendees might know that their businesses need to change, but they don't know how and probably won't be able to perceive the answer if they saw it. This drives deep to the heart of why newspapers and magazines have failed to adapt to the Internet beyond about 1998.
I'm still in shock. My thanks to the conference's organizers for letting me speak on the panel entitled What's Wrong with Media. I'll probably attend next year's Interactive Media conference, but I've more than enough reasons to question why.
Is the agreement by a new local group of Philadelphia investors to buy The Philadelphia Inquirer and the Daily News from McClatchy any sort of vote of confidence in the future of daily newspapers? I’m afraid not. But we still may be able to scratch out some good news in this outcome.
The price being paid, $562 million in cash and debt assumption, is about nine times the reported EBITDA of the newspapers (EBITDA is “earnings before interest, taxes, depreciation and amortization,” which approximates operating income). This is based on 2005 earnings of about $62 million. However, income at the two Philadelphia papers has been declining for years. Indeed, 2004 income was about $75 million. And one can’t argue that 2005 was just a down year for the economy.
Nine times EBITDA would not be a bad deal for a growing property. But if income declines by a similar percentage in 2006, the price would be 11 times EBDITA—a rather rich price. Still, if the winning bid had been placed by an experienced newspaper group such as Gannett there might have been some reasonable room for speculating that there was serious hope for turning around the direction of these two declining newspapers. But, alas, it was a local group of investors, with no known experience in publishing. Thus, one must assume that part of the valuation they placed on the properties was "“home town” sentimentality, maybe boosterism, perhaps charity, or even naiveté that they had a “plan for turning things around.
It was probably some combination of all the above.
Though I would tend to be skeptical that the new management has any magic for substantially changing the growth vector of the newspapers, there is some reason for very cautious optimism. The other side of the naiveté coin is fresh thinking, such as offering “fixed slots to repeat advertisers." Not being saddled with the tradition of the ways of newspaper publishing, this new group may be able to implement strategies or specific programs that come out of their very different backgrounds: residential home building (Toll Brothers), consumer packaged goods (NutriSystem), an insurance brokerage, even a labor union pension fund.
Also, coming from outside newspaper publishing, these investors may not be basing their calculations on obtaining the profit margins that traditional publishers have become used to. Knight Ridder’s profit margin in 2004 was over 19%, which is about what newspaper publishers expect. The Philadelphia newspapers reportedly had a margin of half that, clearly dragging down the overall corporate rate. But for manufacturing industries in general, 9% is pretty good. For example, in the home building industry, 5% net income is typical. So perhaps these investors decided that an investment that could return close to 10% ain’t too bad. That might actually be a positive sign for a newspaper if it was in the context of a strategy to position it for a changeover to a greater emphasis on online income.
As the TV reporters like to end with, where this goes remain to be seen. But see it we will. Stay tuned.
Note: At my Who Owns the Media Blog I have taken a different angle on this deal, focusing on the media ownership implications.
Here are two short videos (QuckTime ) of Rebuilding Media contributor Robert Cauthorn's speech Tuesday at the Publish Asia 2006 conference in Kuala Lumpur, Malaysia. Cauthorn challenged traditionalist beliefs in order to encourage a new period of innovation and growth within the newspaper industry. He told Asian newspapers that they might not be declining in circulation but that does not mean they are being spared from the world's newspaper crisis, because circulation in Asian countries is not growing in pace with the growth in the middle economic class. He also asked newspaper executives to think about their business in a different way:
"If the car industry realizes that they are not selling enough cars, they create new models, change their products... Newspapers publishers are not selling as many newspapers as before, but continue doing the same kind of newspapers. Therefore, you are taking wrong decisions and in a continuous way."
Cauthorn's was the first regular speech at the conference. He followed the Honorable Y.A.B. Dato' Sri Mohd Najib Bin Tun Haji Abdul Razak, Deputy Prime Minister and Minister od Defense of Malaysia, who opened the conference and also encourage publishers to fulfill new audiences requirements:
"There are many publications trying to inform in real time with sms alers, 24/7 websites... because if you don't move with the times and give audiences whay they want, you won't only be left behing but also force to leave the game. Change is not anymore a possibility but a real necessity."
Here is a question for the daily newspaper industry:
When does the bovine brain realize it's entered the abattoir?
Does it finally realize that something is amiss as it trots up the slaughterhouse ramp? Does it realize only as it receives the fatal blow? Does it ever realize at all? When should the steer have stopped following the herd instinct?
I ask because I don't think that the American daily newspaper industry realizes that its slaughter has already begun. Slaughter may sound overly dramatic, but I think the evidence makes it an accurate description of the situation at hand. A hand with a cleaver.
I think the industry has started to realize that it's being bloodied, but it doesn't yet realizes that its gutting is the reason. Perhaps in a bovine way, the newspaper industry thinks it is the master of its own destiny. The reality, however, is the newspaper industry stopped growing beefy long ago and has been milked beyond the 'mature business' phase, so its owners have begun to lead it by the nose to the butcher.
Consider the American daily newspaper industry's view up the slaughterhouse ramp:
• The industry lost 2,500 local newsroom jobs last year, numbers that have been increasing annually despite the industry mooing that its news coverage must get better and that local news is its core purpose.
• Its circulation and readership has been steadily declining for generations, despite the U.S. population and the number of college-educated Americans steadily growing; yet the industry continues to chew its traditional cud about how it is an absolute necessity for all Americans.
• The industry still claims to be a potent force in America, yet its major stockholders see that as just bull and have devalued the industry's equity by more than 40 percent during the past five years.
• Knight Ridder, America's second largest chain of newspapers and a pioneer in the industry's new-media efforts, provided a rich milk of more than 20 percent profit margins to its stockholders, but they led it to be sold this year.
• Even the largest public shareholders of The New York Times Company have been clamoring for changes in control at that company, despite acknowledging that it publishes the best newspaper in the English-speaking world. Large public shareholders at Tribune Company are similarly upset about that company's decline value.
But why believe me that this is the situation? For years, I've been warning that the end is near for the American daily newspaper industry unless it makes radical changes, but I'm an independent consultant who works for a tiny firm that isn't associated with any media industry think tank; any university; or any big brand name, multi-industry consulting company. So, I'm easy to ignore by an industry that's largely in a state of bovine denial. It's also easys to ignore my warnings that the industry's new-media efforts won't save it unless those make the radical changes, too.
In Austin on April 7 during his keynote speech at the 7th International Symposium on Online Journalism at the University of Texas, Picard (pictured above) gave a dire presentation forecasting the end of the newspaper industry and asserting that:
"the current strategies of publishing companies to gain economies of scale and scope, to move into cross-platform content provision, and to maximize return across a portfolio of content products will be effective only for the short-and mid-term."
Let me rephrase that in words that perhaps a cow could understand:
I call for each newspaper website worldwide to create and display a banner ad on May 3rd forb World Press Freedom Day.
During the past seven years, the World Association of Newspapers (WAN) has freely provided printed newspapers with photos, graphics, and texts about jailed or killed journalists, including essays by world notables denouncing the jailings or killings of journalists, that newspapers can publish on May 3rd.
Why shouldn't newspapers' online editions also campaign for world press freedom?
Online editions get their news from the same journalists. Plus, if online editions are to succeed print and become the dominant source of news during this century, they must begin raising banners for world press freedom. Let's start now!
WAN has no World Press Freedom Day campaign materials specifically for online editions, which this year is a forgivable oversight. Moreover, my guess is that organization's might not have staff time or budget to create such materials between now and May 3rd.
Yet, online newspaper staffs are creative. I propose that online newspapers editions adapt the World Press Freedom Day infographics, photos, and texts that WAN offers online for printed editions. Shrink the printed banners to banner ad size, etc.
If you run a newspaper website, should you really give this campaign one banner ad space on your home page?
It's only for one day. If you don't want to give it that advertising space, then just add another banner on your home page for this campaign. (Or perhaps create a separate webpage about World Press Freedom Day.) Can't your online edition do that as a public service in support of the thousands of journalists who risk their lives each day, some of whose work you might be publishing? Or for the more than 500 journalists who have been arrested and imprisoned this year? Or for the more than 50 who have been murdered this year?
What should news sites not operated by newspapers do in support of World Press Freedom Day?
WAN offers its campaign materials specifically to newspapers for use on May 3rd. So, I believe that prohibits use of those materials by other types of media organizations. Nevertheless, this shouldn't mean that other types of media organizations can't craft their own campaign materials from other sources, notably from news stories about imprisoned or killed journalists. Do so!
Many newspaper publishers this year have declared that online is no longer subsidiary but core to their news efforts. Let's make World Press Freedom Day core online, too!
Another week, another front paper story on the media business from The Wall Street Journal. Today it was the lead story: “As Market Shifts, Newspapers Try to Lure New, Young Readers.” (subscription required)
The article provides some fresh data on advertising in newspapers: The categories of customers that provide by far the largest proportion of advertising have reduced the percentage of their ad budgets devoted to newspapers since 2000. In the case of employment—the highly profitable classified ads for jobs-- the decline was nearly 6%. In a high fixed cost business such as newspapers, this is a serious trend, though not a surprising revelation. Consolidation in the department store industry, highlighted most recently by the merger of May Co. and Federated, has only exacerbated the decrease.
The topic sentence for the Journal article: “Looking for ways to shore up their readership and broaden appeal to advertisers, many U.S. newspapers are adopting a new tactic: targeting narrower and younger audiences.”
Does this tactic (or is it a strategy) make sense? It depends on what the editors and publishers have as their long term goal. One question that newspapers editors and managers must get clear in their heads is the line between their newspapers and the entity that publishes the newspapers. That is, when we talk about “saving the newspaper” or “developing new strategies for the newspaper,” should this refer to the ink on paper product that is manufactured on Goss Metroliners? Or does this refer to the role of a newsroom, advertising department, and marketing organization that create of bundle of information for distribution to an audience by whatever channels?
I raise this question because the answer would suggest the direction for strategy. Emphasizing the current newspaper product might result in actions such as redesign of the paper’s graphics, changing the editorial mix to target a specific group of readers (i.e., “younger, current nonreaders” as the WSJ headline suggests), raising local ad rates for the dwindling core of “must have” advertisers, and so on.
On the other hand, if the strategy is to ensure the health of the company that publishes newspapers, then a different strategy may emerge. That is more likely to focus on new products, such as online classified ad services, hyper localized neighborhood Web sites, specialized free print publications such as the Tribune Co’s RedEye.
The two strategies are not completely mutually exclusive, but how they are viewed by editors and publishers does make a difference. First is a matter of priority. If management believes that it is newspaper that is paramount, then it may over invest in that (new presses anyone?), making the new ventures skimp for internal venture capital. And new ventures may be viewed more as an end to subsidizing newspaper margins than to truly developing new businesses that will replace the declining size of the paper product.
On the other hand, a strategy that looks at threats and opportunities, at the publisher’s own strengths and weaknesses, would look at the pieces of the enterprise—the editorial resources, sales and marketing, even circulation – and be willing to strike out in a fresh direction. There are some innovations finally emerging that the tide may be turning to this latter mode.
A day after the official announcement of McClatchy’s intended acquisition of the much larger Knight-Ridder, some of the dust is starting to settle. It reveals a not very pretty picture.
First, the assurances that McClatchy CEO Gary Pruitt made on Monday that “We have no plans for layoffs or across-the-board cuts" in the newsrooms is rather disingenuous given that he also confirmed that McClatchy would sell 12 of the 32 Knight-Ridder dailies, ideally on the same day the acquisitions is closed. Indeed, Pruitt added "McClatchy would not operate those papers for even one day." Thus, his statement that they would not close any newspapers, even the troubled Philadelphia Daily News, is likewise meaningless, as any of the possible buyers of the Philadelphia papers are not bound by any such promise.
And McClatchy is generally rated one of the most editorially conscientious publishers.
Second, McClatchy is trying to thread a needle: On the one hand it must assure its stockholders that its purchase will lead to a growing, prosperous newspaper company. Thus Pruitt talks about the growth markets many of the Knight Ridder papers are in.
Pruitt pointed out that the average rate of household growth over the next five years in the markets for the 20 papers the company would keep is 11.1%, compared to the average growth rate for newspapers in the United States is 7.5%.
On the other hand, in the markets of the dozen papers that McClatchy plans to divest the household growth is 4.8% for the next five years. Yet if it is to attract buyer interest, it must put a positive spin on these papers that do not fit its “long-standing acquisition and operating strategies." In other words, they’re dogs (financially, not necessarily editorially).
Of the 32 Knight-Ridder daily newspapers, McClatchy will sell 38% of the total. However, they account for 44% of Knight-Ridder’s daily circulation
The 12 McClatchy “rejects” can no doubt be sold. At some price virtually anything can be. While some of the pundits have proclaimed the 30% premium that Knight-Ridder fetched over its value before it put itself up for sale as a sign that there is a bit of life left in the industry, there is little likelihood that buyers of the 12 orphaned K-R papers will leave them untouched once they buy. Curiously, The Wall Street Journal (sub. required) reported that The Newspaper Guild-Communication Workers of America, which represents workers at Knight Ridder papers, said it is interested in buying some or all of the 12 papers. “Union President Linda Foley says it ‘intends to be aggressive about making an offer’ and is contacting McClatchy about its interest. ‘We're reaching out to them as we speak,’ she said yesterday evening.’” Now that would be fascinating to see.
Then again, Pruitt can also see how much he can get for the 12 on eBay—with no reserve.
Finally: The New York Times to Cease Printing Daily Stock Tables
The New York Timesannounced today that it would cease printing the daily stock listings, except on Sunday. It joins, among others, the Tribune Co.’s papers in Chicago, Los Angeles, New York and Orlando in cutting back on the pages of agate type. This has been a long overdue measure. The Internet has provided financial data faster and easier for years. Most investors who need to know the price of their securities would have found online access worth the price of an ISP service long ago. It's a no-brainer for saving tons of newsprint at a time when big city newspapers are under cost ands revenue pressures. The Times Co., however, declined to provide an estimate on its savings.
My speech last week for Borrell Associates to the World Association of Newspapers Advertising Conference in Paris received good play in The Guardian of London, MarketWatch in the U.S., PaidContent.org, and from WAN itself. Yet, most of the news stories focused on a comparison I made between the relative values of print edition readers and online edition readers.
That was a good 'take-out' quote for those stories to use. However, I made that comparison towards the end of my speech just to show the newspaper advertising executives that they must greatly increase their online revenues, particularly if their readerships continue shifting from print to online.
Other points I made were that American newspapers are earning significant revenues online, particularly now that local advertisers are going online. However, newspapers are in danger of losing local online advertising revenues, not to TV or radio stations but to 'pure-play' Internet competitors such as Google and Yahoo. And that newspapers must their expand their online advertising focus well beyond just the traditional classified advertising categories of jobs, properties, and automotive, because those three categories account for just a fraction of the monies advertisers are spending online.
So, for the record, here's the text of that speech:
It comes every day. Relentlessly. News with no indication that the trends set in motion by silicon is slowing. Indeed, they are picking up speed.
“It,” is the creation of new media outlets, forms and channels. It is good news for anyone who is concerned that the old media limited access to content. It is bad news for those whose livelihood depends on the older media structure.
Here are just two data points, both brought to our attention by The Wall Street Journal (read it online for $50 annually or in print for $200 annually, your choice).
On Feb 8 the Journal featured on its front paper “Unlike Big Dailies, A Paper Prospers In Bismarck, N.D.” Focusing on the Bismarck, ND Tribune, the Journal’s storyline is that “The paper is among a tier of papers with circulations of 50,000 or less that is proving relatively resilient in the face of a prolonged slump among larger papers.
On Feb 21, the Journal lead with another media story: “Online Video Goes Mainstream, Sparking an Industry Land Grab.” The gist of this story is that there are companies that now make it “easy for any producer -- from home-movie buffs to television networks -- to distribute their videos to multitudes of Web sites.” And that is not just technologically possible, but with a revenue model.
Now, what is the link between these two media stories? The Journal celebrates newspapers whose circulation “is holding steady” while big city circulation is plummeting. It mentions that Bismark’s population grew 11% between 1990 and 2000. Despite that, circulation was lower in 2005 than in 1996. For The Bismarck Tribune’s parent company, Lee Enterprises, advertising revenue was up 4.7%-- but that does not mean linage was up. Even Knight-Ridder, top heavy with the more rapidly declining big city papers, could claim 2.8% ad revenue growth in 2005.
More telling in the Journal’s “glass half full” story was the signal in the last paragraph. Scheel’s, a local sporting goods chain, and major local advertiser with 3000 employees, reported that a survey it conducted of its employees found that almost none of the under 40 years old subscribed to a daily newspaper. It concluded with: “At the same time, the response rate to the company's newspaper ads is half of what it was 10 years ago, he says. So increasingly, Mr. Scheel is skipping newspaper ads and reaching out to customers directly through email.”
Meanwhile, according to Parks Associates, someone in more than 10 million U.S. households watches an online video at least monthly. Even more download videos. The market for using the Internet to access video thus stands in direct counterpoint to the newspaper trends. Brightcove is one of the start-ups positioning itself to facilitate a wealth on online video. (Time Warner’s AOL and IAC/InterActiveCorp are among the investors). The model is simple. Anyone with video content—The New York Times and Reuters are two, but so also is tiny Bollywood & Beyond, Inc. in discussions or any amateur film maker-- can sign on. Any Web site that wants to link to the available content fills out on online form and, voila, can offer syndictaed video appropriate for its site. Brightcove sells advertising that runs prior to the video. The revenue is sliced among the video provider, the Web site and Brightcove.
Of course, there is nothing new and insightful here about the long term declining fortunes of the traditional newspaper industry and the prospects of all things digital. Big yawn. No, the message today is two-fold. First is the rate at which the changeover is happening. There are Brightcove-type initiatives being uncovered virtually every day. Just another that I came across recently was the movie “Waterborne,” which was reportedly the first full length feature with an original release on Google Video. It reportedly had 25,000 downloads in its first two weeks, at $.99 to $3.99 a pop, followed by an advance purchase of 15,000 DVDs. The independent producers had previously rejected at six figure advance from a distributor to maintain full ownership rights.
Unlike the dot-com era, these ventures come grounded in realistic business models based on reliable trends such as the growth in broadband. (Though, as an aside, successful attempts to legislate the benign sounding network neutrality policy could set back some of the high bandwidth –need plans).
Second, no matter what spin even The Wall Street Journal tries, the forces and trends at play cannot be buried. The only way the Lees, McClathchys, Gannetts and Knight-Ridders of the publishing world will stay profitable is by raising rates, at the risk of accelerating loss of advertisers and buyer, and by cutting costs. They have been doing both. In the short term it can produce favorable returns for investors.
As I noted here before and will say again, newspaper publishers, as well as other traditional publishers and radio and television broadcasters, are going to have to reinvent themselves while they still have strong cash flow and resources.
Today is the final day of a symposium in Washington to brainstorm the future of the newspaper. The symposium is part of the “Newspaper Next: The Transformation Project” of the American Press Institute. API, a creation of the newspaper publishers, has as its mission providing “training and professional development for the news industry and journalism educators.” “Newspaper Next” is a $2 million year-long project that seeks to “conceive and test new business models to help newspapers thrive in the next decade” It has hired some high priced Harvard Business School professors as consultants to collaborate with the “25 industry innovators and thought-leaders” who will produce the report later this year.
The members of the task force include mostly individuals who are associated with traditional newspapers as well as a handful of leading edge digital pioneers, such as Steve Yelvington. Creating a task force to try address the future of the newspaper industry would be ho-hum. The unique innovation of this effort is that the model will be tested at an operating daily newspaper, probably starting early next year.
This is all well and good, if not unconventional or even a bit weird. With 1457 daily newspapers in the U.S. alone—not to mentioned the thousands of others globally—one would expect that there is plenty of opportunity for experimentation in real time. And in fact that is happening. Some newspapers, like the Lawrence (KS) Journal-World, have been trying out new approaches to both their print product and their online sites. Editorial techniques such as encouraging citizen journalists, running photographs uploaded by readers, focusing on neighborhood-level articles and more are being tried somewhere at any given time. Business models that include reducing (New York Post) or even eliminating the price of the papers (Metro) are in play.
Among the pushing-the-envelop goals of “Newspaper Next" are
Assess the threat to newspapers in the next decade, including emerging competition
Determine opportunities for newspapers, including implementation of available new technology
Suggest executable new business initiatives – products, services and strategies – with detailed rationales
This is what $2 million antied up in 2006 gets? Seems to this observer that any newspaper-owning company that has not had its own task force and consultants analyze the external environment by now is incompetent and should sell out and get into the slide rule business. Any publisher who has not taken advantage of dozens of studies, scores of blogs from some very savvy current and former newspaper people among others, and the accumulated insights from 10 years (mid-1980s-mid-1990s) of being warned that big change was coming and 10 years of living with these changes should be stripped of his or her titles and forced to use a typewriter forever. And any publishing enterprise that does not have a thick book of possible initiatives now in progress or worth considering should be prohibited from ever buying another ton of newsprint. Where have these folks been for 20 years?
I’d be curious to see how many “models” the API group promotes. Or do they expect the same model that may be appropriate for a 26,000 circulation daily in a homogeneous North Dakota town can be applied to an 800,000 circulation paper in a metropolis? One size isn’t going to fit all.
The players in the newspaper industry carry the burden of being the incumbents. As such they have been afraid to innovate if it might cannibalize their traditional product or stray into a competitive area they wished to avoid. It should have been one of the major dailies that initiated a feature such as Yahoo’s Kevin Sites in the Hot Zone. Any of the major chains could have teamed up with a Lycos or Overture five years ago to create a service that Goggle pre-empted with Google News. The New York Times Co. bought About.com in 2005 for $410 million. Why wasn’t About part of a portfolio of $5 and $10 million start-up venture investments?
To be sure, there were some pockets of foresight. The Tribune Co. did have a venture portfolio dating back to the 1990s that included early investments in AOL and Excite. The Raleigh News & Observer started its NandoTimes online site in 1994 (though it was shuttered in 2003 in favor of local newspaper-branded sites by McClatchy.) Knight-Ridder pioneered an early videotext service with AT&T in the early 1980s. However, it often seemed that many of the investments were of the CYA nature, rather than as part of a strategic plan to reinvent themselves for a changing environment.
It is easy to look back and groan over what should have been. Reality is, there were plenty of signs a decade or two ago of where the information industry was headed and a gaggle of analysts interpreting them for the industry. Many listened, fewer heard and only a handful acted in a committed way. The inflection point was then. There’s nothing wrong with API’s $2 million experiment. Better late than never.
In 1994, I was doing some consulting to The New York Times Information Services Group (NYTISG), which had put that newspaper’s content onto America Online’s proprietary online service. It had recently launched a website containing New York Times Syndicate stories, which were taken from the front sections of the newspaper, and NYTISG was deliberating whether to launch a website for the newspaper itself.
But first it wanted to promote the NYT Syndicate stories’ website. Its staff had noticed from usage logs that one person in particular was accessing the syndicate site many times each day. So, they asked me track down that person and ask him if he’d be willing to be part of a promotional ad for the website.
Running that person's IP address through a WHOIS engine, I it resolved to filo.stanford.edu. I phoned Stanford University’s IT Department and I learned that filo.stanford.edu wasn’t one person, but a computer server operating a Web indexing spider under the direction of two doctoral candidates, Jerry Yang and David Filo.
I reported this the vice president in charge of NYTISG. I explained what a Web indexing spider was; how the basics of that technology were in the public domain; and suggested that The New York Times Company should operate one. That way, I said, the Times’ site would offer online users not only ‘All the News that’s Fit to Print’ but also a searchable index of everything that is online.
The vice president (who now publishes a newspaper in the state of Washington) looked at me as if I was daft and he replied, “No, we’re a newspaper, not some sort of online encyclopedia or phone book.“
Of all the consulting advice that I’ve given clients during the past dozen years, it was the one bit that I wish had been followed.
The New York Times Company and most every other newspaper in the world nowadays wishes it had the online traffic, gross revenues, and market capitalization of Yahoo! -- the Web indexing company that Jerry Yang and David Filo built from that spider.
I mention this because last week the World Association of Newspapers (WAN), the trade organization representing 18,000 of the world’s newspapers, announced that it had joined other traditional publishers organizations in efforts to determine if can they legally charge the search engines that index their news.
The other publishers organizations involved are the International Publishers Association (IPA), International Federation of the Periodical Press (FIPP), European Federation of Magazine Publishers (ENPA), European Publishers Council (EPC), European Magazine Publishers Association (FAEP), French association for magazine publishers (SPMI), association of French national newspapers (SPP), and the French regional daily newspaper association (SPQR), plus the French news agency Agence France-Presse (AFP). Some online groups that are dominated by subsidiaries of print publishers, such as the Online Publishers Association of the UK, have given the endeavor a “cautious welcome.”
Don’t be fooled by this initiative. Rather than catch up by doing what they should have done long ago, these publishers are searching for legal ways to tax the railroad because the gravy train has left them behind.
The publishers organizations acknowledge that search engines “provide a valuable service to publishers in terms of traffic generation” but claim that the search engines “have built their business models in large part on taking content for free.”
Let’s consider that phrase “taking content for free,” but first look at this:
WAN - Newspaper, Magazine and Book Publishers Organizations to ...
A task force of global and European publishers organizations, led by the World
Association of Newspapers, has agreed to work together to examine the options ...
www.wan-press.org/article9055.html - 15k - Feb 3, 2006 -.
Did I now just take WAN’s content? Was that citation comprehensible? From it, would you know what WAN and those publishers are doing?
I ask because I’ve just cited WAN’s online content exactly the same way, word for word, that Google News’ automatically did. Neither that eight-word abstract headline nor its 25-word abstract text even explains what WAN and the other publishers’ organizations are doing.
Look at Google News or Yahoo! News and see for yourself how the search engines briefly abstract news organizations’ headlines and texts. Whether or not a gist of a news story, nonetheless its content, as cited by the search engines is comprehensible depends entirely upon if that news organization’s headline writer and text author were pithy and cogent enough. Does the publishers’ content really consist of a (often incomplete) headline of less than ten words and an incomplete text of less than two dozen words?
No. I think the publishers’ claim that the search engines are taking their content is absurd. The search engines are merely pointing people to the content on the news organizations’ own sites. Indeed, the search engines’ citations towards the publishers’ news is even less than academic abstracts or business abstracts. Ask a librarian or professor.
However, WAN President (and Group COO of newspaper publishing company Independent News & Media PLC) Gavin O’Reillytold the Financial Times "That’s often enough” for readers browsing the top stories and “the fact here is that we’re dealing with basic theft."
If you accept Mr. O’Reilly’s logic, then don’t be surprised if the restaurant industry sues the newspaper industry for providing capsule listings and reviews that point potential diners to restaurants. The newspaper industry could defend itself by claiming that it doesn’t actually provide the food content to restaurant's potential patrons (at best, the reviews might provide a bit of the restaurants’ flavors) and that the reviews are simply pointing potential patrons to those restaurants and thereby increasing those restaurants' traffic. However, the restaurant owners might claim ‘That’s often enough’ to prevent people from coming onsite and browsing.
Is "theft" what the search engines are doing? Is theft pointing to something that is being given away for free? The news organizations aren't charging anyone for accessing their news online.
If the newspaper industry wants to claim that citing its headlines online is "theft", then it might first pursue the other daily newspapers that are doing it (such as this or this regular example) Publishers should pursue their direct competitors who are doing it, before claiming that the search engines are competitors.
Mr. '’Reilly also said, “The irony is that these search engines exist, largely, because of the traditional news and content aggregators and profit at their expense."
That statement is both patently and historically false. Search engines such as Google and Yahoo! existed for many years before indexing the news organizations’ websites. During that time the search engines, without pointing to those organizations’ news, grew to dwarf those organization in terms of online traffic, asset value, and market capitalization. News has never accounted for a significant fraction of these search engines traffic or revenues.
The only basis for theft that Mr. O'Reilly might legitimately claim is that the search engines have 'stolen' advertisers and consumers from using those publishers' websites more often or more fully. Google and Yahoo! now have more online advertisers than those publishers because these search engines attract more consumers than any of those publishers' sites do. And the search engines attract more consumers than the publishers' sites do because the search engines provide a service that those publishers long ago failed to provide but could have.
Indeed, the organizations announced their legal initiative eight days after Google announced that it was removing the ‘Beta’ from Google News. I don’t think that timing was random.
In the WAN announcement, Mr. O’Reilly referred to the’ Napsterisation’ of content, hoping to lend credence to his industry’s claim that search engines are stealing its content.
However, what the search engines are actually doing has nothing to do with ‘napsterizing content or stealing content. What the search engines provide to consumers is a package of pointers to where information — including now news — from all sources is located online. As I’d mentioned from my New York Times experience, the newspaper industry could have done that a dozen years ago. Or five years ago. Or now.
The newspaper industry didn't and doesn’t. Five years ago, did attempt to create what it called Internet ‘portals’, but those website contained only the content from that newspaper company and its affiliates. A portal just to them.
I don’t wish this WAN endeavor well. I think it’s a waste of time and money that the newspaper industry could better be spending on providing the types of services that it should have done long ago or those that it needs to now. Perhaps it is too late for The New York Times or other newspaper companies to become Googles or Yahoos (or Ebays or MySpaces), yet there are still plenty of new services to be developed online.
Don't try to tax a gravy train that you've missed. Start another one.
[The listserv of the Online News Association, an association of professionals who run news media sites, has been discussing the viability of unmoderated, anonymous discussion forums. The discussion arose after The Washington Post temporarily turned off the comments facility on its Post.Blog due to "hundreds" of comments "including personal attacks, the use of profanity and hate speech."
While lurking that discussion, I realized that many online news professionals mistake pseudonymity for anonymity. Moreover, I've for some time been meaning to write about a widespread fallacy that I think is impeding progress towards rebuilding the media. So, I today entered that discussion, particularly since someone there had earlier cited some of my earlier writtings elsewhere against news organizations operating unmoderated, anonymous discussion forums.
Because this is a controversial topic and I'd also think it should be discussed beyond the ranks of news media professionals, I below reproduce my ONA response. Because the ONA might prefer to keep private the identities its members involved in that discussions (including about the topic of transparency?), I've disguised the names of the ONA members who I quote::]
[UPDATE: I'm in error. A friend at Online Journalism Review has informed me that New England Courant Publisher James Franklin DID NOT know that his sixteen year-old brother and apprentice Benjamin was the pseudonymous 'Silence Dogood' until AFTER publishing 14 anonymous articles slipped under his newspaper's door at nights between April and October of 1722. The elder Franklin was upset when he discovered the author's true identity and it contributed to a lifelong schism between the brothers.
Walter Isaacson's recent biography of Ben Franklin (which cites http://www.ushistory.org/franklin/courant/story.htm as its source about 'Silence Dogood') however mentions this as the only time when Benjamin Franklin used a pseudonym without the prior knowledge and approval of a publisher.
I was in error, but think the correct facts still point to recklessness by that publisher, who soon served jail time for his own writings in the Courant and the Boston authorities later banned from publishing newspapers. I've corrected what I wrote below, striking out the earlier paragraphs
While I understand how tying comments to names may have help people recognize their personal responsibilities, I also know there is a rich history of anonymity in American journalism, going back to the early blogger Silence Dogood.
Anonymous to the readers or to the publisher?
'Silence Dogood' has been pointed to as the mother of a rich history of anonymity in American journalism. What is true is that between April and October of 1722 New England Courant Publisher James Franklin printed 14 anonymous articles that had been slipped under his door.
The author 'Silence Dogood' claimed to be the widow of a country minister, but Franklin suspected the name was a pseudonym for someone else. It was common for eighteenth century journalists, including Franklin's, to use pseudonyms when writing articles that the authorities might have been considered to be libelous or illegal.
Historical records infer that James Franklin knew the identities of his other pseudonymous contributors, but not that of 'Silence Dogood'. That failing was perhaps one of many reckless publishing decisions by Franklin, who soon served jail time for his own writings in the Courant and who the Boston authorities later banned from publishing newspapers. He was meanwhile not amused to learn that 'Silence Dogood' was actually his 16 year-old brother and apprentice Benjamin Franklin.
The publisher of 'Silence Dogood' knew exactly who 'she' really was before 'her' writings were published in the newspaper. In fact, New England Courant Publisher James Franklin knew his sixteen year-old brother and apprentice Benjamin very well in 1722 before letting Ben use that pseudonym.
Unlike James Franklin, American Weekly Mercury Publisher Andrew Bradford of Philadelphia a few years later knew before publication that “Caelia Shortface” and “Martha Careful” were pseudonyms for journeyman printer Ben Franklin, who’d fled Boston and joined his employ and started writing articles under the pseudonyms “Caelia Shortface” and “Martha Careful” in that Philadelphia newspaper.
As did American Weekly Mercury Publisher Andrew Bradford a few years later when journeyman printer Ben Franklin joined his employ and started writing articles under the pseudonyms 'Caelia Shortface' and 'Martha Careful' in that Boston newspaper.
When later Ben Franklin himself became a newspaper publisher in Philadelphia, he occasionally published his own articles under the pseudonyms 'Anthony Afterwit' and 'Alice Addertongue.' Yet the 'Richard Saunders' of the eponymous book Poor Richard's Almanac was probably Publisher Ben Franklin's best-known, self-permitted pseudonym.
There is a rich and successful history of pseudonymity in American opinion journalism. Alexander Hamilton, James Madison, and John Jay wrote The Federalist Papers using the pseudonym 'Publius,' but not without their publisher's prior permission and knowledge of their true identities. A more recent example occurred in 1947 when the publisher of Foreign Affairs granted the Moscow-based American diplomat George Kennan the pseudonym 'X' to write the renowned political essay proposing the geographic containment of Communism.
Though I can't think of a current American periodical that regularly grants pseudonyms to its writers, the British publishers of the Financial Times and The Economist regularly grant them for some of their columnists. However, those publishers know their columnists' true identities and vet the columns beforehand.
In all the examples I've mentioned, the publishers not only knew the pseudonymous writers' true identities beforehand but also vetted the writers' submissions before publication. That's a far cry from publishing anonymous blog postings.
Though there is a rich history of pseudonymity in American journalism, there is none of anonymity. It has long been understood that if the publisher of a reputable periodical grants a writer use of a pseudonym, then that publisher knows the writer's true identity and takes responsibility -- legal and otherwise -- for that writer's words.
Printed periodicals grant pseudonymity but never anonymity. Imagine the cacophony that would result if printed periodicals published unvetted, unreviewed, and anonymous Letters-to-the-Editor or Op-Ed essays.
Yet we're now discussing how some of those periodicals' are doing the equivalent of that online. Should there really be any surprise that many of those comments are scatological, obscene, or libelous?
Publishing anonymous, unvetted, and unreviewed commentary is a huge difference from those publications' print editions' policies. It's a different kettle of fish, one that can stink for the publishers. Indeed, those publishers and their new-media managers are being reckless. And if you think I've used too strong a word, poll newspaper libel lawyers and libel insurers.
Forgive me, but I would respectfully suggest that the topic IS worth discussing more than once, particularly in a medium evolves as fast as ours.
Yes, it's certainly worth discussing again and again. But we do realize that, for human reasons, the topic has not evolved during the past 10 years despite the evolution of technology. This topic is substantially the same as it was when the first open bulletin boards were posted on the Web in 1996 or when the first proprietary online service user forums went online years earlier. Online news managers who don't know its history are doomed to relive it.
Although the technologies of this medium evolve with the speed of 'Moore's Law,' the actual laws and liabilities governing the technologies evolve about as fast as the eponymous Gordon Moore can walk (he celebrated his 77th birthday this month). That is because the mechanical topic of technology and the human topic of ethics aren't related to each other. Although we may strive to offer bulletin boards and commentary fields where people might provide thoughtful and ethical comments without scatology, obscenity, or libel, we cannot and will not achieve that through technology alone.
What I'm about to state might seem farfetched, but a decade of studying online news media leads me to fear that it is true:
Vin Crosbie
Dorian Benkoil
Bob Cauthorn
Ben Compaine
sports, primitive online banking, shopping—and email with the handful of others who subscribed. Never heard of it? Surprise! They shut it down in 1986, after spending $50 million. Right idea, wrong decade.
