How could this be? There are still more than 1,400 metro daily newspapers publishing in print in the US. As one tweeter pointed out, dailies would have to perish at the rate of five per week in order to meet USC Annenberg’s forecast.

We think the five-year timeframe is pessimistic, but we certainly believe USC Annenberg’s prediction will come true within a decade. We made precisely the same prediction five years ago – including identifying the same four titles Annenberg did – only we gave the print industry until 2025 to implode. It now appears that we were optimistic.

Here’s why the Annenberg prediction isn’t so far-fetched. American newspapers had a near-death experience three years ago when two venerable dailies – the Seattle Post-Intelligencer and the Rocky Mountain News – closed their doors, each after more than a century of continuous publication. Two other major titles – the San Francisco Chronicle and the Boston Globe – had their own brush with the reaper at the same time. Both were pulled back from the brink only after their unions made massive concessions and hundreds of highly-paid journalists lost their jobs.

Busting the Union

Early 2009 was when publishers broke the back of the Newspaper Guild. At the Globe, the union bargaining position was so weak that the contract that members finally accepted was actually worse than management’s original offer three months earlier. The showdown at the Globe was a turning point for the US newspaper industry. The management victory in the labor negotiations was so complete that publishers across the country were effectively given carte blanche to fire people by the thousands. Which they did. The amazing Erica Smith counted nearly 15,000 newspaper layoffs in 2009 and another 6,700 in the two years since. And her count doesn’t include the many jobs that were eliminated or scaled back without public announcement.

Newspaper publishers basically bought themselves time, and they used it to bring costs in line with revenues. Most newspapers have drastically scaled back the size of their print editions and many have cut back regional distribution. Publishers have raised subscription prices to milk more dollars out of the dwindling cadre of loyalists who are willing to pay for print. Unfortunately, they don’t have much time. The average ago of a daily newspaper reader in the US today is between 56 and 60, depending on whose estimates you believe. That population will shrink more rapidly than any other demographic group over the next 10 or 15 years. Seniors are also the least attractive audience to the advertisers who support print advertising. It’s a bad combination.

For the time being, printed newspapers can survive simply by cutting costs and raising subscription fees, but that strategy invariably turns into a death spiral. At some point publishers will no longer be able to afford to deliver a product that people want to pay to read in print.

Tipping Point

Circulation declines, which have been running about 8% to 10% annually, will accelerate. A tipping point will be reached and the whole print model will fall apart. We don’t know when that threshold will be reached, but demographic trends that indicate it will certainly happen within the next 10 years and will probably hit a lot of titles simultaneously.

The death of the printed daily doesn’t mean the death of print. Many publishers have cut back out unprofitable Saturday and Monday editions as a way to save costs, and more will certainly follow suit. Sunday editions may be around 20 years from now because of the revenue from flyers and coupons. But many newspapers will no longer be able to support a daily publishing schedule within a few years.

That’s the bad news. The good news is that many publishers are beginning to figure out the economics of digital revenues. A milestone was reached just a couple of months ago when the New York Times Co. released its first earnings report since it instituted a paywall early this year. As we reported at the time, Ryan Chitturn of the Columbia Journalism Review estimated that the Times’ digital revenue in the quarter actually exceeded its editorial costs, meaning that the paper could conceivably publish profitably without a print edition. We don’t expect the Times will shut down its presses anytime soon, but publishers across the country should cheer its success at crossing that threshold.

The Times is making the move to digital faster and more effectively than any other daily newspaper. Assuming other publishers follow its lead, we can expect that many major metro dailies will figure out a sustainable digital formula over the next five years. At that point they can begin to wind down their print operations without fear of giving up the farm. This won’t be pretty. Lots of jobs will go away when the presses shut down. However, the brands may survive and even begin to grow again.

Speaking of The New York Times, the parent Times Company is in “advanced talks” to sell off 16 regional newspapers, including titles in Florida, California, North Carolina, and Alabama. The Times Co. will continue to own the Globe and International Herald Tribune. Analysts are saying the move simply removes a headache for the Times, since the regional media were collectively losing money, and the company can now focus on its core business, which is a good thing these days.

Miscellany

We know the U.S. Postal Service is hemorrhaging money and facing criticism that it’s slow, antiquated and inflexible. So in a bold move to remedy its situation, the USPS is responding by becoming slower and less flexible. Read what the recently announced changes in service mean to publishers. We actually don’t want to be too hard on the Post Office, since many of its problems stem from a congressional requirement that it fund retiree health benefits 75 years into the future. That’s not a typo: 75 years.

And Finally…

The holidays bring family, friends, eggnog, and, best of all, the Crunks. Only they’re not called the Crunks any more since our friend Craig Silverman (left) gained the legitimacy of a Poynter affiliation and began publishing his collection of the year’s best media gaffes as “The year in media errors and corrections” on Poynter Online. Thankfully, the content is still the same.

This year’s roundup of the funniest and most outrageous mistakes and corrections is headlined by several major news organizations that confused the President of the United States with the world’s most notorious terrorist and announced the death of “Obama Bin Laden.” One anchorwoman on Canadian television made the mistake three times in just 17 seconds and apparently didn’t even notice.

We like the newspaper headline that reminded readers to “turn your cocks back one hour at 2 a.m. Sunday,” but our favorite is a lengthy correction from The Guardian about this year’s Royal wedding. It includes the passage:

“The piece referred to “damaging stories of royal profligacy past: Charles with his staff of 150, and an aide to squeeze his toothpaste for him”. [The couple’s press secretary] writes, “The Prince of Wales does not employ and has never employed an aide to squeeze his toothpaste for him. This is a myth without any basis in factual accuracy.”

This stuff is too good to be made up. Thank you, Craig.

We will not be charging to view the following content online: the front page, classifieds, all advertisements and advertising promotions, special sections, auctions, community calendar or customer service pages.

Webpages that will be charging for viewership – after 15 free views per month – are local, state, national and world news pages; local and regional sports; news accessed by Facebook and Twitter; opinion pages; obituaries; entertainment (except AP wire); health, outdoors, weddings, anniversaries; births, lottery; weather; archives; comments; photo galleries and videos.

A monthly online subscription is $4.99; if you have a print subscription, your online subscription is only $1.99 per month. An annual online subscription is $49.99 per year; or if you have a print subscription, it is only $19.99.

Got all that? Better keep a pen and paper handy, because once you get to those 15 views, get out the credit card. That is, unless you’re reading the front page or a “special section,” whatever that is. And forget about the kind of free pass from Twitter that The New York Times gives you. Social media referrals count toward the 15-ppm limit.

In Hawaii, the Honolulu Star-Advertiser has joined the paywall parade. Here’s how PaidContent.org described its plan:

Existing print subscribers get free digital access. Non-print subscribers can either sign up for an “all-access” package for $19.95 per month, which includes digital access and a print subscription for one person, or purchase a digital-only subscription—the price of which varies based on location.  Oahu residents pay $9.99 per month or $50 per year; other Hawaii residents pay $4.95 per month or $25 per year, and those outside the state of Hawaii pay $1.95 per month or $10 per year. The site is also offering a $0.99 day pass, primarily aimed at tourists and former tourists who are interested in specific events.

Clear enough? If you really want to know what’s going on in Hawaii, you’re best off moving out of state. God forbid you’re unlucky enough to live in the newspaper’s home city.

One more example, from the Augusta (Ga.) Chronicle:

Digital-only subscribers get unfettered access to our site for $6.95 per month. This subscription fee will include the iPad app as well. Current print subscribers pay a reduced rate of only $2.95 to add these services…Passers-by and casual readers still will have access to breaking news, video, photos and blogs. We also will allow all users access to 25 premium pages monthly as a sample.

With 46% of small newspapers already charging for some online content, and another 39% planning to do so, the online news world will soon be pockmarked with digital toll booths, each charging different fees. Even the major metros can’t agree on a plan. PaidContent.org assembled a comparison chart of what the big papers are doing earlier this year. If you can find any patterns there, let us  know.

We’re not saying variety is a bad thing – lots of businesses compete on price – but when the product is already perceived as a commodity, then confusion tends to drive customers away. Small publishers evidently don’t see it that way, given the large number that are settling in the paywall camp these days. But are they growing their businesses or just trying to protect what’s left of them?

Mathew Ingram said it well in a recent piece in BusinessWeek:

The biggest flaw in a paywall isn’t that the math is questionable, or even that a wall is inherently a backward-facing strategy, aimed at stacking sandbags around a paper’s content…The biggest flaw…is that walling up your content is an invitation to free competitors…to come and take away your readers.

One of the major reasons the newspaper industry is in such dire straits right now is because barrriers to entry have collapsed. Paywalls are an invitation to competitors to take away all but the most loyal (i.e., oldest) readers. AOL’s Patch has recently opened an outpost in our home town, and we admire the work its tiny staff is doing to bring us news from around the corner that our regional daily doesn’t cover. Despite allegations of sweatshop-like working conditions at Patch, we believe AOL will have no trouble finding journalists to staff its local offices. Between Patch, labor-of-love sites like this one and an assortment of listservs and Facebook pages, we’re more aware of what’s going on in our community than we ever were when we subscribed to a daily.

We believe that paywalls can work if they are simple, transparent and perceived by the customer to be reasonably priced. There is room in the market for services that could federate many small publishers under a single subscription plan, and we expect some cohesion to emerge from the current mess.

Ultimately, though, paywalls will only work if the publishers who deploy them can deliver value their readers can’t get anywhere else. Can the newspaper owners holding the sandbags today honestly say they are doing that?

Miscellany

We’ve noted before the irony that editors who are so committed to hacking through everyone else’s hype roll over when the spin doctor is their own employer. The Orange (TX) Leader upholds that proud tradition in an un-bylined story announcing a reduction in its publishing schedule and the end of home delivery by news carriers.

Combining the Saturday and Sunday editions isn’t a cutback in frequency, but a reader service, said publisher Eric Bauer. “It will be available in the Saturday mail, so people will have more time to enjoy it,” he said. And editor Gabriel Pruitt is almost giddy about cutting frequency to thrice-weekly: “I could not be more proud and excited about how we will better serve this community…Readers can expect more in-depth stories, insightful information, photos and videos.”

The words “reduction,” “cutback” or “cost-cutting” don’t appear anywhere in the story. In fact, there’s no indication that the changes are anything but a reader service. We suspect that if the announcement was coming from the local public works department, it would be handled quite differently.

Print stalwarts will be relieved to hear that at least one major professional group is still committed to the supremacy of ink on dead trees: America’s school administrators. A recent survey conducted by The Haselton Group found that administrators prefer print editions of top trade magazines rather than online editions or e-newsletters from the same publications. Administrators get 45% of their industry-related information from printed trade magazines, “far outweighing the combined total of next three greatest sources: blogs, national newspapers and local newspapers.”

Administrators are joined in their loyalty by the many college journalism programs that are still teaching inverted pyramid style and how their students can find their first job on a daily.

California Watch’s “On Shaky Ground,” an account of the dangerous vulnerability of many California schools to collapse in the event of an earthquake, is “old-fashioned, shoe-leather, box-opening, follow-the-string journalism, and it is well done,” Doctor says. It also cost over a half million dollars to report, an amount that would have caused most newspaper publishers to gulp even before the industry entered its string of 21 consecutive quarterly revenue declines.

But a half million is a relative bargain when you consider the number of media organizations that benefited from it. Pieces of the series ran in six major dailies and were picked up statewide by ABC-affiliate broadcasters. Top public radio stations in the Bay Area and Los Angeles ran with it, and a number of ethnic and online outlets (including more than 125 Patch sites) also picked up the coverage. Many localized the content by snipping local maps or extracting information about their area from the voluminous database of school-by-school information that the project produced.

Doctor notes that California Watch is building a new kind of syndication business around investigative journalism, which is the branch of news that has been hardest hit by budget cuts over the last three years. This is not a reincarnation of the Associated Press model, which mainly delivered breaking news. Bloggers, citizen media and Twitter have diminished the value of that function considerably. What citizen journalism can’t do it spend 20 months developing a story, which is what California Watch did.

California Watch is still “feeling its way along,” in Doctor’s words. Syndication revenue won’t support its current $2.7 million annual budget, so donations are grants are still essential to its livelihood. But look at what donors get for their money: About 70% of that $2.7 million goes to support the project’s 14 journalists. By comparison, a typical daily newspaper’s editorial costs are about 20% of overall expenses. These nonprofit models are vastly more efficient than the newspaper investigative teams they’re replacing.

And when you spread those costs among a lot of subscribers who pay a few thousand bucks a year to get access to the reports, it’s really not that expensive. “An owner…can hardly reject the offer of paying one-hundredth of the cost for space-filling, audience-interesting content,” Doctor writes. Particularly when compared to the value of a single child’s life who might have been saved (hearings are already under way).

Doctor’s analysis raises an important point about the evolving economics of information. In a world in which raw data has become a nearly valueless commodity, value is derived from filtering and contextualizing information for specific audiences. The small California weekly that could never dream of spending a half million dollars on an investigative project can spend a few hundred dollars to buy the work of a dedicated investigative team and then extract the information that’s relevant to its readers.

This is a much more efficient way to deliver news, but taking advantage of it requires discarding treasured assumptions like the not-invented-here syndrome and the belief that scope and scale define importance. It’s good news for local publishers. In the traditional model, only a handful of California papers could have tackled a project the size of On Shaky Ground. Now nearly everyone can share the wealth.

The Long, Slow Bleed

Lest anyone think the lack of major metro daily closures over the last couple of years is a sign of strength in the newspaper industry, consider recent earnings reports. Ad revenues at Gannett, McClatchy, Media General and Journal Communications were all off between 6% and 11% in the first quarter, and there’s no sign of a turnaround. Alan Mutter’s analysis makes an important point about why newspaper advertising isn’t sharing in the sputtering recovery.

The more advertisers of all types experiment with Web, mobile and social advertising, the more they will come to appreciate the power of the digital media to tightly target qualified prospects while granularly measuring the costs and effectiveness of their campaigns.

In sales jargon, the buying process is a funnel, with a large number of uninformed prospects at the mouth and a few qualified buyers at the tip. As consumers increasingly research their purchase decisions online, the need for merchants to advertise their availability declines. They get more leverage from intercepting buyers during the decision-making process. The deeper into that process buyers get, the better the prospect of converting them to customers. And incidentally, vendors only have to pay for actions like clicks and leads, not vague measures  like circulation.

The reason newspaper closures have largely stopped is that the industry’s near-death experience in 2008 – 2009 focused publishers on slashing costs, raising subscription prices and squeezing as much blood as possible out of the stone of an aging and shrinking circulation base. That is not a prescription for growth. We continue to stand by our 2006 prediction that major metro daily print newspapers will all but disappear by 2025. In fact, we think it’ll happen sooner than that. It’s just that death will come from cancer, not heart attack.

Miscellany

The Las Vegas Review-Journal is expanding its business model beyond pure advertising. according to a press release,  a partnership with parent company Stephens Media LLC’s digital arm will enable the Review-Journal to launch a service to  provide local businesses:

…full website, branding and logo design; hosting and customer support for websites and related digital services; email marketing; mobile marketing; training to provide local businesses easy tools to maintain and update their own sites and analyze web traffic; search engine optimization and search engine marketing; customer reputation management with daily reporting; social media presence and tracking tools for digital and traditional marketing efforts to ensure monitoring of ROI.

Hmmm, why didn’t we think of that?

Desperation often drives innovation, and the miserable state of the Las Vegas economy no doubt played a role in this quest for new revenue sources. We think it’s a smart move; most small businesses have no idea how to market themselves online and a local newspaper is a trusted partner that’s in a great position to give them a hand.

AOL’s Patch network of hyperlocal news sites intends to recruit 8,000 bloggers over the next few days. It’s asking each of its 800 sites to sign up 10 community members to blog. No word on whether the contributors will be paid, but given that Arianna Huffington is now running the show, we think we know the answer to that one.

And Finally…

Reports emerged in the Twittersphere early this week that the world’s last manufacturer of mechanical typewriters was closing down its India production plant. A lot of people, including us, were taken in by this. But there’s good news for the old-timers who still appreciate the clatter of metal on paper. Atlantic Wire reports that several factories in China, Japan and Indonesia are still manufacturing typewriters. Even if production shuts down, there’s a pretty good used market. For old time’s sake, we bought an IBM Selectric, which used retail for $450 in the 1970s, for a buck at a yard sale a couple of years back. We’re still not sure what to do with it.

Steve Outing Pretty Much Trashes the NYT Paywall

For starters, it’s too expensive. The $15/mo minimum makes the Times all but inaccessible to cash-strapped young readers, which happen to be the people the paper most needs to engage. He also hates the defensive posturing publishers are using to justify subscription fees: “We need to do this to survive.”

Now THERE’s an incentive to customers to support you: Tell them if they don’t, you’re going to go out of business. How’s that working out for you, General Motors?

Outing points to the Times‘ own David Carr as the source of the right price: $4.99/mo. Respondents to Carr’s defense of the paywall plan posted on nytimes.com repeatedly refer to that fee as one they can swallow. Is anyone upstairs listening?

How To Hack the New York Times Paywall … With Your Delete Key

Mashable reports a new way to easily breach the paywall: “Readers need only remove “?gwh=numbers” from the URL. They can also clear their browser caches, or switch browsers as soon as they see the subscription prompt. All three of these simple fixes will let them continue reading.”

The NYT’s Melting Iceberg Syndrome

Frédéric Filloux suggests that The New York Times could improve its profitability by going to Sunday-only publication and forgetting about the other six days of the week, at least in print. “Sunday circulation is 54% higher than on weekdays…Sunday copy sales bring five times more money than any weekday…Some analysts say the Sunday NYT accounts for about 50% of the paper’s entire advertising revenue.”

If the Times could cut more than half its expenses by eliminating six days’ worth of print, it could theoretically make more money by publishing less frequently.

We also liked Filloux’ use of an iceberg as the analogy for a business that’s collapsing from within: “As an iceberg melts, the resulting change of shape can cause it to list gradually or to become unstable and topple over suddenly.” See any similarities to what’s happening to print?

A Big Op to Upgrade Op-Ed at New York Times

Alan Mutter believe the departure of Times columnists Frank Rich and Bob Herbert presents an historic opportunity for the Old Gray Lady to become the amazing technicolor dreamcoat of diversity of opinion. If Times‘ columnists are so smart, how come they missed the historic events going on the Middle East? Mutter asks. That’s what happens when your world is limited to Manhattan and the Beltway.

“Instead of dedicating the bulk of its limited and precious op-ed space to another generation of slightly more diverse Pooh-Bahs, the Times should publish the best of the online conversations in its print editions,” the Newsosaur recommends. That would be both good journalism and good promotion for the Time’s pricey paywall.

New York Times Digital Subscriptions: The Unofficial FAQ Updated

PaidContent.org has a useful rundown of the ins and outs of the Times‘ paywall, including pricing tiers, thresholds and platforms. Can you get a family account to nytimes.com? You’ll just have to read this FAQ to find out.

From the Onion: NYTimes.com’s Plan To Charge People Money For Consuming Goods, Services Called Bold Business Move

“In a move that media executives, economic forecasters, and business analysts alike are calling ‘extremely bold,’ NYTimes.com put into place a groundbreaking new business model today in which the news website will charge people money to consume the goods and services it provides.”

It will be interesting to see if area readers agree with this publisher’s optimism (comments are disabled on the essay), for the AJC has suffered some of the worst cutbacks of any major metro daily. In early 2009, the paper laid off 30% of its editorial staff, reducing its total size to less than half of what it was in 2006. Distribution to seven outlying counties was discontinued, coming on top of an earlier decision to cut all its regional editions. The AJC daily circulation fell 52% between 2002 and 2010, although some of that loss was self-inflicted due to distribution cutbacks.

The question is whether a newspaper with a staff of 230 journalists can produce the same quality of material as one with 500. We don’t want to dismiss out of hand the possibility that it can, but it won’t look anything like the paper it was a few years ago. In a desperate bid to survive amid its circulation free-fall, the AJC has completely upended its editorial model over the last five years, turning most of its attention to the suburbs and vacating its downtown offices in August in favor of cheaper space near the northern suburb of Dunwoody It has taken steps to address a perceived left-wing bias and chosen not to endorse candidates in recent elections. The AJC has partnered with local Cox TV and radio stations on tag-team reporting projects, attempted to partner with local weeklies to share content and even run occasional pieces from Demand Media, the crowdsourced editorial engine that assigns stories by keyword relevancy.

Can you cost cut your way back to success? The AJC will be on the leading edge of answering that question. There’s nothing like a near-death experience to focus the mind, and in slashing its costs, the paper has had to make some grueling decisions. Its experience is probably familiar to many in the industry, where the shift of the audience to the suburbs has challenged publishers to remain relevant at the local level its audience cares most about. It helps that the AJC has a near monopoly in its market, and that its website is the default destination for news about all things Atlanta. There’s nothing particularly special about its Web presence, but it was one of the first major dailies to release an iPad app.

Its free classifieds service is an acknowledgment that there is no more money in that business anymore. The question is where the revenues are going to come from? A lot of eyes in Atlanta will no doubt be on The New York Times as it attempts to launch a paid online subscription model in the first quarter. For a paper with the regional clout of the AJC, that may be just what the doctor ordered.

According to an account in Editor & Publisher:

Whereas Boston.com will continue to offer breaking news, sports, and weather from various sources, along with classified advertising, social networking, and information about travel, restaurants and entertainment, BostonGlobe.com will be designed to mirror the experience of reading the paper’s print edition. It will contain all the reports from the day’s paper as well as exclusive reports, in-depth news, analysis, commentary, photos and graphics, plus video and interactive features.

What does this mean? Will Boston.com become a My Yahoo-like text portal with wire feeds and little else? Will all of the material produced by the paper’s staff of reporters and photographers migrate to the paid edition but not be available to non-paying subscribers? How will those staffers feel about reaching a smaller audience? Will paid subscribers get anything more than an online version of the print edition? If so, why wouldn’t they just choose to receive the print edition in the first place and skip the whole online hoohah?

The answers to these questions will no doubt emerge in the nine months or so that the Globe has to consider its transition. Staffers will be watching the experience of their corporate parent as it imposes a pay wall at nytimes.com in January. BTW, we haven’t heard a whole lot about the plans for that experiment in recent months. We assume it’s still on.

We are on record as believing that paywalls will not work to salvage or grow the newspaper industry, but we also believe that the New York Times Co.’s strategy in this case is sound. Basically, management has recognized that trying to rejuvenate the print operation is futile, so it’s better to manage it into the ground as profitably as possible. This means raising subscription rates, erecting pay walls, holding the line on advertising prices for existing customers and generally trying to squeeze every last dollar out of the print operation that it can. It’s called milking the cash cow, and it’s a tried-and-true business strategy.

It is also a strategy of capitulation. The Boston Globe will never again see growth in its print edition,  so the best it can do is to wring profits out of the dwindling number of subscribers it has. Publishers are learning that over in London right now, where online readership of the Times fell 7.6% between July and August. Page views dipped 22% and time spent on site fell 16%. Some of this was no doubt due to the summer holiday, but the evidence is becoming abundant that pay walls significantly reduce traffic. The question is whether the incremental revenue offsets the corresponding declines in readership. No one has an answer yet, but it appears that newspaper publishers are increasingly willing to admit that print has no future and trying to get what they can out of a dying franchise. Believe it or not, than is healthy.

In the case of the Globe, The Times Co. will hopefully plow profits from paid subscriptions back into new properties that have the potential for growth, but it may choose to do something else instead. In the meantime, the message from the Globe’s move is that print is dead, resuscitation efforts are futile and those who still value print are going to pay for the privilege of receiving it. Not a bad strategy at all. At least it’s realistic.

Miscellany

Staffers at the Globe and elsewhere might want to look at the experience in Pittsburgh, where the Post-Gazette‘s PG+ is reportedly profitable and figuring out a sustainable business. The secret sauce in the publishing realm is sports, which motivates fans in the Steel City to fork over dollars in exchange for the latest information about local stars. However, a more important development may be the Web property’s shift into new areas of revenue such as sponsored events. “Those events have included a Post-Gazette “summer camp” featuring classes on fly fishing and cooking, as well as higher-brow discussions of the midterm elections,” writes Poynter’s Bill Mitchell. Hmmm… diversifying revenue. Where have we heard that before?

And Finally…

Publishers could do worse than to rely upon the genius of their reporters. In Chicago, Sun-Times reporter Kara Spak won a “Jeopardy” quiz show to the tune of $24,001. In response to a question about an 1863 poem that mentions “the eighteenth of April in Seventy-Five,” Spak correctly identified the source as “The Midnight Ride of Paul Revere.” We don’t believe her employer requires her to contribute her winnings to the company pension fund. Had she worked for Tribune Co., we’re not so sure that would have applied.

The results varied significantly by age. Nearly half of Americans between the ages of 18 and 29 said they had confidence in newspapers. However, disillusionment evidently sets in early, as the confidence level dropped to 16% among 30- to 49-year-olds, making them the most cynical group. Even liberals, who have traditionally been a stronghold of support for mainstream media, expressed support to the tune of  only 35%. It’s important to keep the results in perspective, though. Gallup has been conducting this survey annually for the last 20 years, and confidence in newspapers has never exceeded 39% during that time. However, confidence dipped from the low 30s to the low 20s about four years ago and has been stuck there ever since.

Good News for Hyperlocals

Hot new DC news startup TBD “resembles a sleek, coolly designed, high-tech house with several unfurnished rooms — and a market value yet to be determined,” writes Howard Kurtz in a generally favorable review of the most ambitious hyperlocal launch of the year. The site, which has 15 reporters buttressed by an army of 127 local bloggers, “has a voice, a sense of fun and a knack for packaging short items that creates the appearance of flow and momentum,” Kurtz writes. It also has some good political reporting, although the staff seems to be more focused on local news than national or global politics. TBD has been closely watched as a potential model for hyperlocal startups because of its inclusive approach to community journalism and its backing by a major media company, Allbritton Communications, which also owns The Politico, as well as a collection of regional television stations

Also on the hyperlocal front, BringMeTheNews, an aggregation and podcasting venture founded by former Twin Cities news anchor Rick Kupchella (right), just raised $1 million from two local investors. The site has an interesting business model and has reportedly been profitable since day one. It aggregates headlines and summaries from “hundreds of online news and non-traditional sources” around Minnesota and publishes them on its website. It also produces audio news summaries that are picked up by Minnesota radio stations and broadcast to about 1.5 million listeners each day. At the moment, the site produces no original content.

The advertising model is also novel: The site carries no more than four paid sponsors, who buy contracts of at least six months’ duration. Sponsors are also expected to “provide informational advertising of interest to our audience.” According to MinnPost, “Sponsored copy is integrated into the links BringMeTheNews curates, and carries the sponsor’s logo. Theoretically, the copy is useful information for readers (Explore Minnesota tourist guides, OptumHealth wellness tips) while still advancing the sponsor’s interest.”

Despite having only one-eighth the traffic of MinnPost, BringMeTheNews has apparently hit upon a revenue model that works, even at low volume levels. Kupchella said the business would still be viable without the radio component.

Miscellany

The Worcester (Mass.) Telegram & Gazette will begin charging up to $15/mo. for access to local news articles. Non-print subscribers will be able to read 10 stories for free before the paywall goes up. The T&G is owned by The New York Times Co., which plans to build a paywall at its flagship newspaper in January. The Worcester experiment may be a pricing trial balloon. If a lot of people will pay $15/mo. to read the T&G, it’s good news for the Times. We doubt it, though.

And Finally…

As if to underline the shrinking attention span of the American news consumer, American Public Media’s Marketplace Radio devoted all of six sentences to summarizing the world financial situation last week. The idea came about during a daily news meeting, when staffers were boiling down the factors underlying the global financial crisis and thought it would be funny to express them as simply as possible. Megan Garber has the background on Nieman Journalism Lab. We snipped out the 90-second segment below for your listening pleasure.

Gannett officially exited the Hawaiian market where it has played for nearly 40 years. The company signed over ownership of the Honolulu Advertiser to the owner of rival Honolulu Star-Bulletin, bringing an end to a brutally competitive battle. Analysts say Gannett was winning the war but chose to cash out rather than to fight a smaller competitor that simply wouldn’t go away.

The Star-Bulletin plans to merge the two papers into the Honolulu Star-Advertiser sometime in the next 60 days, cutting about 300 of jobs in the process. The combined papers will have a circulation of between 135,000 and 140,000.

This is a little confusing. You see, Gannett used to own the Star-Bulletin. Then it bought the Advertiser and tried to close down the Star-Bulletin. Antitrust regulators didn’t like that idea, so Gannett had to sell the Star-Bulletin to David Black, who is now the publishing brains behind Platinum Equity, the private firm that bought the San Diego Union Tribune last year. Black bought the Star-Bulletin in 2000 and settled in for a long battle, despite having less than half the circulation of the Advertiser.

It turned out to be a war of attrition. A series of bruising battles with labor unions in which union members at one point actually tried to discourage local businesses from doing business with the Advertiser left Gannett bruised and weakened. While the Advertiser maintained its circulation edge, it continued to lose money. Black told the Advertiser that the Star-Bulletin has lost more than $100 million since 2001. Since Black appeared to be in the race for the long haul, Gannett accepted an offer that the Star-Bulletin publisher characterized as “compelling.”

The bottom line is that Honolulu now becomes a one-paper town and the Advertiser becomes the newest addition to our R.I.P. list.

The Respite Arrives

It was about a year ago that Outsell analyst Ken Doctor (right) told us that the newspaper industry was in for an 18-month respite from its troubles beginning in late 2009. It turns out he was right on the money. Alan Mutter totes up recent financial results from six big publishers and reports that the four-year-long freefall in revenues appears to be slowing. Ad sales for the big six fell 10.2% in the first quarter of 2010 compared to drops of 28.3% last year and 12.8% in 2008. As the smoke clears, the extent of the wreckage becomes apparent, however. Overall newspaper revenues in the US are down more than 46% since 2006 and stand at the lowest level since 1986, Mutter says. But in inflation-adjusted figures, the industry is down an incredible 72% over the last 25 years.

Mutter quotes Gannett President Gracia C. Martore stating confidently that “We are very pleased with the momentum that we had coming out of last year.” It’s hard to believe any industry executive could use the word “pleased” in the context of this crisis. Doctor told us last year that news executives should use this short-term breather to make much-needed changes to their business model, diversify their revenue stream and investing in online properties. Little has happened since then outside of publishers rallying around the brain-dead notion of charging for existing content.

But perhaps they simply have no choice. In weighing in with his own characteristically astute analysis on Nieman Journalism Lab, Doctor notes that while some publishers that were hemorrhaging cash a year ago are now marginally profitable, market conditions provide precious few options for spending that pocket money. Doctor calls 2010 “a year crying out for investment in innovative mobile media product creation and marketing services/advertising infrastructure build-out,” but notes that once-mighty publishing companies must satisfy themselves with sitting on the sidelines and nursing their fragile profits while Google completes an acquisition every month.

The one glimmer of good news is that newspaper publishers are finally making a dent in the massive debt that has hobbled them for the last five years. But that still leaves them little room to do anything new. A year ago, Doctor also predicted that after the 18-month respite ends, the industry will enter another period of severe contraction. We think he’s gonna be right about that prediction, too.

Miscellany

There’s good news in Orange County, Calif., however, were Freedom Communications, which owns the Orange County Register along with 31 other dailies and eight TV stations, has emerged from Chapter 11 with $450 million less debt and new ownership by a private equity firm. Freedom entered a controlled bankruptcy last September while its new owners completed a restructuring plan. The founding Hoiles family had originally been granted a tiny 2% stake in the revitalized company, but they lost that in January, leaving Freedom entirely in the hands of the private equity owners. The company is looking for a full-time CEO, if you’re interested.

It appears that the Post Co. is not a good fit for the magazine business. Its magazine revenue plunged 27% in 2009 and its operating loss increased to nearly $30 million. The Post redesigned Newsweek and trimmed its circulation by over a million last year in a last-ditch attempt to focus on a narrower and more profitable niche. However, the magazine market is in dismal shape in general, and weeklies have almost no value proposition in an online-driven news world.

Analysts couldn’t even speculate on who might buy Newsweek, other than U.S. News & World Report owner Mortimer Zuckerman, who shows signs of being off his rocker. That may be just the kind of buyer Newsweek needs.

One thing’s for sure: The Times is reveling in its three 2009 Pulitzers, as evidenced by this snub from a spokesman: “The readers and employees of the Wall Street Journal deserve much better than this type of juvenile behavior from its editor in chief.” The reference is to recently taunting of the Times by Journal editor Robert Thomson, who has criticized his cross-town rival for being insular and slow.

Print newspapers and magazines will never get [to new online business models], he argues, until they burn the boats and shut down their print operations. Yes, there are still a lot of people and money in those boats—billions of dollars in revenue in some cases. “At risk is 80% of revenues and headcount,” Andreessen acknowledges, “but shift happens.”

Andreessen has a point that it makes senses to abandon failing models in the long term, but setting fire to profitable print operations is the wrong strategy at the moment. After years of fretting over declining circulation and trying desperately to rejuvenate a dying business, newspaper publishers are finally adopting an intelligent strategy. They’re milking all they can from their profitable business while trying to manage it down to a level that new models can take over. It won’t be easy.

The strategy that most publishers have recently adopted has three parts:

• Raise subscription rates in order to milk as much revenue as possible out of an aging but loyal reader base;
• Manage costs downward in a manner that preserves profitability without alienating traditional readers;
• Invest in growth markets that can preserve the brand and generate new profits.

The New York Times reported last year that its second-quarter subscription revenues nearly matched its advertising revenue. Aggressive price increases, combined with a substantial reduction in discounted circulation, are turning paying subscribers into a profit engine. Other publishers are adopting this approach, which is why the seemingly catastrophic declines in circulation of the last couple of years aren’t as devastating as they seem. Many businesses have legacy customers that generate a small but profitable business. Successful long-term franchises, however, also have the skills to move on.

A Successful Online Model

New media news entities have demonstrated that they can earn a profit with about 20% of the revenues of print organizations. That’s because their operating expenses are about 90% lower. These organizations are profitable, but a lot smaller than print publishers.

In their most recent round of earnings reports, most publishers stated that they are now deriving between 12% and 16% of their revenue from online advertising. Most of them have also not done nearly as much as they can to monetize other sources such as events, transaction fees and value-added and classified advertising. Once publishers reach the threshold of 20% online revenue, they can conceivably shutter their print operations while sustaining the business and the brand. They’re trying to get to that threshold gracefully, though. Lots of money can still be made in print if publishers can manage that asset down steadily while reducing costs in lockstep.

That’s a tricky process. If publishers cut costs too deeply, they risk losing loyal print subscribers and circulation revenue could enter a free-fall. They also don’t have the luxury of much time to complete the transition.

Even harder is the third bullet point. The people who run newspapers are skilled at operations and asset management, not visionary investments in emerging markets. In the TechCrunch interview, Andreessen correctly points out that technology companies are adept at dealing with constant disruption to their markets, a situation that faces Microsoft right now. Successful technology companies manage this challenge through a kind of creative destruction process. Successful executives are experts at learning to identify new opportunities and quickly discarding old product lines without looking back.

However, technology companies don’t have the luxury of a loyal legacy base that newspaper publishers have. The audience of committed daily readers may still buy the newspaper industry another 10 years of life in print, although that business will eventually become unsustainable. It isn’t crazy for publishers to want to milk the cash cow for a few more years. The hard part is finding new opportunities and having the stomach to invest in them in the face of inevitable shareholder demands for greater profits.

Burning the boats isn’t a wise strategy at the moment. But it’s a good idea to start collecting firewood.

It’s good to see the industry tackling its challenges head on, but we have to wonder if this is the right crowd to do it. Nearly every person in the room will have a career and a business built on a crumbling advertising model. It seems unlikely that much innovation will flourish in that atmosphere. And if you believe what people like Mark Potts and Steve Outing are saying, then the future of these companies is about diversifying revenue and cultivating local advertisers, not finding new ways to squeeze more blood from the display advertising stone.. Meanwhile, the agenda is packed with speakers from the newspaper industry. We trust Huffington Post wasn’t invited.

And Finally…

The folks who brought you the wonderful Fail Blog have aggregated some of their best media miscues into Probably Bad News, a site whose tagline is “News Fails, because journalism isn’t dying fast enough.”You can upload your own favorite typos, double entendres and acts of sheer stupidity for others to vote upon. Many of the examples are computers gone haywire, which lack the sheer hilarity of printed mistakes, in our view. But there’s some good stuff there, anyway.

There’s more to the story, of course. The total audience of potential online subscribers to Newsday is pretty small, given that the service is free to subscribers to Optimum Cable, which is owned by Cablevision. Cablevision bought Newsday for $650 million in May, 2008 after a bidding war. Newsday said Optimum Cable cover 75% of Long Island, meaning that just about everyone who would want to read Newsday online can already read it. The company also said  its goal was never to amass a huge audience but rather to increase engagement and improve advertiser value by focusing on local residents.

Still, you have to wonder about the wisdom of the paywall strategy, given the sacrifices  made to implement it. Editors Weblog says traffic to the site is down by a third since October. However, PaidContent.org says the drop off is only on the order of 10%. Either way, Newsday has traded off a lot of eyeballs for a small number of credit card numbers and unless its advertising rates have increased proportionately, the paywall is probably a net loser at this point.

Newsday is sticking by its guns and saying that the slow ramp up is neither surprising nor a problem. “Given the number of households in our market that have access to Newsday‘s web site as a result of other subscriptions, it is no surprise that a relatively modest number have chosen the pay option,” the company said in a statement that called into question why such a strategy was desirable in the first place.

Give Newsday credit for being a pioneer, though. The industry has been buzzing about paywalls for the last year and the company at least had the cojones to do something.  You do have to wonder about the timing, though. Publisher Terry Jimenez reportedly told the staff last week that Newsday lost $7 million in the first three quarters of last year. It’s now embroiled in a labor dispute with unions that are refusing to accept a 10% pay cut. under the circumstances, this seems like an odd time to make a bet-the-business decision.

iPad is Here. You Can Breathe Again

Our reaction to Apple’s iPad announcement yesterday was summed up in our tweet: “It’s a big iPod Touch? Really? That’s it??”

For a product that was generating over 200 tweets per minute in the hours leading up to the launch event, the reality of the iPad underwhelmed us. Perhaps we’ve just learned to expect bigger things from Apple (although the iPad certainly is bigger than the iPhone – by several inches).

The commentators we read see more potential, however. Nicholas Carr, who’s been documenting the shift of data and applications from the desktop to the cloud, sees the iPad as a potential paradigm shift. In Carr’s view, this product completes the transformation of the end-user device from personal computer to window on the Internet. Unlike a laptop, the iPad relies upon software delivered over the Internet for most of its functionality. The large screen and persistent connection could change user behavior, he observes. People will get into the habit of expecting words, images and sound to be delivered whenever they need it in a slim device that fits in a briefcase, although not a purse.

Ken Doctor evaluates the pluses and minuses of yesterday’s announcement. The good news for publishers is that readers will finally carry around a device that delivers an experience similar to what they have traditionally received from a magazine or tabloid newspaper. That can’t be bad for publishers who are accustomed to working in that format. Doctor also sees the iPad as a “magnet for marketing dollars” from companies that can finally deliver a television-like experience to a handheld device. The tablet may also rejuvenate long-form reading, which has suffered as continually distracted readers have learned to consume information in sips rather than draughts.

Doctor worries, however, that media companies were not a bigger part of the launch. Apple seemed to play it safe, touting the iPad as a work machine but imbuing it with a clumsy virtual keyboard and incorporating features that will obviously be appealing to gamers. The company claims to have more than 140,000 applications in its iTunes store. Publishers who are accustomed to having the biggest brand in their markets are going to get lost in there unless Apple pulls them out of the muck and gives them some visibility. At least at this point, that isn’t happening.

David Coursey looks at the iPad from more of a technologist’s perspective with Six Reasons You Want an iPad, Six Reasons You Don’t. He notes, “Apple wants you to pay $829 for the 64GB device, plus monthly wireless fees for AT&T’s 3G. The first year total: $1,189.” Of course, the iPhone was also vastly overpriced when first announced.

Meanwhile, Amazon last week revised its royalty policy for self-published authors and small presses. Amazon could be ready to make a play for the loyalty of publishers who were shut out of the Apple party. Its licensing terms need to be friendlier, but it’s already showing a willingness to make those changes.

Miscellany

Publishers that seemed to be ready for the toe tag at this time last year are staging some remarkable comebacks. Following hot on the heels of MediaNews Group Inc.’s announcement last week that it will enter a controlled bankruptcy and quickly reemerge in better condition, McClatchy said it has reached a debt restructuring deal with its creditors that will give it more time to get its debts under control. The owner of the Miami Herald, Sacramento Bee,  Kansas City Star and 27 other dailies has shifted its obligations to extend its repayment deadlines for a couple of years and says that 90% of its creditors have agreed to the plan. Year-over-year revenue is still falling at an alarming rate of 20%, but McClatchy said the rate of decline has slowed and it is getting its expenses under control. Its stock closed at $5.60 yesterday, up 1,600% from its 2009 low of 35 cents. Don’t you wish you could turn back the clock?