“In a dramatic turn to the scandal, former journalists at the Mirror group said they witnessed phone hacking at their newspapers and that the practice was ‘endemic’. So far, the allegations had clouded newspapers of the News International group, the largely affected being the now closed News of the World.

“In fresh developments, James Hipwell, a former journalist of the Daily Mirror told The Independent that he would be willing to testify in front of a public inquiry into the episode headed by Justice Brian Leveson.”

Leesville (La.) Daily Leader Moving To Three Days A Week For Print Edition

“The change [to three days a week from five] is to move the newspaper in a new direction, and will allow the news staff to produce an even stronger product on those three days — allowing more time and focus to cover the news you want to read.
‘This is an opportunity for all of us to strengthen our newspaper,’ Leader Publisher Beaux Victor said. ‘Times are changing all around us and we’re choosing to leap ahead progressively. Our editorial staff, as always, will dedicate their efforts in bringing the news to you. With extra time, the staff will be able to compose more in-depth stories and gather more local content.’”

Chicago Tribune To Print The Sun-Times And Seven Suburban Papers

“The Sun-Times, which has seen its circulation drop in step with the industry, will close its 12-year-old printing plant and lay off more than 400 employees, saving the company more than $10 million annually. The Chicago Tribune Media Group will print the Sun-Times and seven of its suburban dailies.”

BBC Social Media Policy Insists ‘Second Pair Of Eyes’ Review News Updates For Twitter Or Facebook

“The BBC’s new ‘social media guidance’ strictly requires a ‘second pair of eyes’ to review any staff social media updates related to news reporting. The policy is far more relaxed when it comes to staffers using personal social media accounts for personal things. For those cases, it simply lists some ‘considerations,’ which it summarizes as ‘don’t do anything stupid.’”

Newspaper Websites Post Consecutive Quarterly Traffic Increase (NAA Press Release)

“Newspaper publishers continue to grow their share of the Internet audience, attracting an average monthly audience of 110.8 million unique visitors age 18+ to their websites in the second quarter – nearly two-thirds (64.6 percent) of all adult Internet users. That quarterly average represents a 2 percent increase in visitors over the first quarter average. The analysis, performed by comScore for the Newspaper Association of America, indicates that this is the third consecutive quarter of increased traffic for newspaper websites since comScore began tracking web audience data for NAA, in the fourth quarter of 2010.”

Bancroft Family Members Express Regrets at Selling WSJ to Murdoch Because of Scandal

“A number of key members of the family which controlled The Wall Street Journal say they would not have agreed to sell the prestigious daily to Rupert Murdoch if they had been aware of News International’s conduct in the phone-hacking scandal at the time of the deal.

“‘If I had known what I know now, I would have pushed harder against’ the Murdoch bid, said Christopher Bancroft, a member of the family which controlled Dow Jones & Company, publishers of The Wall Street Journal.”

San Diego Union-Tribune Owner Explores Options for Newspaper

“Platinum Equity, which acquired the paper two years ago from the Copley family, hired Evercore Partners to ‘evaluate strategic alternatives,’ said Mark Barnhill, a principal at Platinum.” Such a move is usually seen as a precursor to a sale. Platinum acquired the U-T in May, 2009 and shortly thereafter hacked 30% of the workforce. The owners also sold off property they acquired in the sale, prompting analyst Ken Doctor to suggest that Platinum bought the paper primarily for the asset value.

A group of News Corp. shareholders has filed claims in Delaware Chancery Court accusing the media giant of colossal corporate governance failures surrounding the phone hacking scandal that led to the closure of the 168-year-old tabloid. Shareholders charge that News Corp.’s board of directors “failed to exercise proper oversight and take sufficient action since news of the hackings first surfaced more than five years ago.”

News Corp. shares, which had been steadily climbing since mid-June, are off about 9% since the scandal broke last week. Shares of BSkyB, the satellite TV network that Murdoch is hoping to buy, have lost £2.75 billion in value since the scandal broke. Analysts are speculating that the losses could scuttle Murdoch’s bid, a situation the media mogul had hoped to avoid by shuttering News of the World.

News Corp. CEO Rebekah Brooks is facing police questioning and at least nine journalists and three police officers could face jail as the scandal unfolds, reports the Daily Mail. New e-mail evidence indicates that “four-figure payments” may have been made to police officers to ignore the activities of private investigators hired by the tabloid. The Telegraph says the payments may have totaled more than £100,000

Former News of the World editor Andy Coulson (right) was arrested by detectives investigating the phone hacking and illegal payments to police during his tenure as editor of the News of the World. The action is causing some embarrassment for British Prime Minister David Cameron, who hired Coulson as his press spokesman despite knowing about his involvement in the alleged scandal. (Telegraph photo)

And it gets worse. Rupert Murdoch’s son, James, could face criminal prosecution in both the UK and the US over the phone-hacking charges, several outlets report. James Murdoch is chairman of News International, the News Corp. subsidiary that owns News of the World. He has admitted to making out-of-court settlements to victims of the phone hacks and to misleading Parliament, although he maintains he didn’t do so deliberately. Murdoch is liable for prosecution in the US because News Corp. is listed on the NASDAQ stock exchange. “Under American law, the Foreign Corrupt Practices Act (FCPA) makes it a crime for American companies to offer corrupt payments to foreign government officials,” says the Telegraph, which, like most British papers, is covering this scandal with gleeful abandon.

If you want more coverage of this unfolding story, follow it on Google News.

We are pleased to inform our readers that News of the World is not the same tabloid as Weekly World News, the US tabloid that has long been a crusader in its coverage of the threat of space aliens to our way of life. WWN is alive and well, and will continue in its mission to cover the stories that others fear to expose.

The 168-year-old News of the World, which boasts a Sunday circulation of 2.5 million, will publish its last edition on July 10. The move comes as outrage in Britain reached a fever pitch over allegations that the tabloid had illegally accessed and even deleted voice mail messages on the phone of a 13-year-old girl who was kidnapped and later found murdered.

Allegations of phone hacking are nothing new for the tabloid. Reports of reportorial excess have swirled around News of the World for two years. However, public anger and advertiser boycotts grew this week amid allegations that as many as 4,000 people have been victimized by such tactics, including relatives of terrorist attack victims and soldiers killed in combat.

The tipping point came with reports this week that hired investigators had not only hacked into the phone of 13-year-old Milly Dowler (left) but also deleted some of the voicemails, giving her parents false hope that the girl was still alive. James Murdoch, the heir apparent to the Rupert Murdoch empire, issued a statement saying such a practice – if it occurred –  ”was inhuman and has no place in our company.”

Analysts speculated that the decision to shutter the News of the World and lay off 200 employees was made by the younger Murdoch and supported by his dad, although such drama has not been typical of the elder statesman. Skeptics saw more nefarious motives.

Specifically, they questioned why News Corp. didn’t demand the resignation of Rebekah Brooks, chief executive of News International and editor of News of the World at the time the allegations first surfaced. Brooks is a Murdoch confidante, and critics suggested that the jobs of 200 people had been sacrificed to preserve hers.

The scandal also broke as News Corp. neared the final stages of its bid for BSkyB,  the largest pay-TV broadcaster in the United Kingdom, with over 10 million subscribers, according to Wikipedia. Critics suggested that the cloud created by the News of the World allegations could have jeopardized Murdoch’s bid.

Writing in the Telegraph¸ Harry Wallop quotes politicians and media commentators speculating that an even more cynical business objective was involved. News Corp. had already announced plans to move to a seven-day-a-week publishing schedule across its four UK titles: the Sun, News of the World, the Times and the Sunday Times. The expansion could  potentially create internal competition across the News Corp. properties. Eliminating one title may have little impact on revenues as advertisers simply migrate their business to other holdings within the portfolio.

Whatever the motives, the decision strikes us as a massive overreaction. Scandals like this are usually addressed by a few high-level resignations and some corporate self-flagellation. It could be that the timing was simply bad for News Corp., but depriving 200 people of their livelihoods – and a couple of million Brits of their weekly celebrity scandals – strikes us as a bit over the top.

...but apparently not TBD's future.

Wow, that was fast.

Just six months after it was launched as the most ambitious hyperlocal news operation in the US, Washington’s TBD has cut expenses deeply and narrowed  its mission to arts and entertainment. One third of the staff – or 12 employees – were let go this week. The apparent chaos at TBD is evidenced by the fact that general manager Bill Lord, who came on board just two weeks ago, said layoffs were only one of several options being contemplated at that time. Owner Allbritton Communications cited low traffic figures as the cause of the cutbacks. Considering that TBD racked up 6 million page views in January, it must have needed a lot of traffic to cover expenses.

The breathtaking speed with which Allbritton reined in the TBD venture shouldn’t be lost on other hyperlocal publishers. Alan Mutter sums up the difficulties that all such organizations face:

• Small audiences are difficult to monetize in the first place;
• Finding and converting advertisers to reach small audiences is expensive;
• Advertisers are reluctant to spend a lot of money on online ads in general, particularly when the audiences are small.

Mutter calls AOL’s Patch.com, which now encompasses more than 800 hyperlocal sites, the next litmus test for the concept. AOL is reportedly spending $50 million on the venture, but the tone of Mutter’s analysis is that that money is probably wasted.

Keep reading, though,  if you want a different perspective. Nearly every one of the 20 or so people who weigh in on Mutter’s post disagree with him, some vehemently. They argue that hyperlocal news does work if publishers don’t get too greedy. Comment writers include several people who are successfully running the kind of small operations for which Mutter see so little hope.

“Hyperlocal is just a way of expressing the need for news that is more local, closer to the neighborhood or town level, than the metro daily ever could be,” notes  Jay Rosen. “And of course it corresponds to a class of advertiser that was priced out of and ill served by the metro daily and TV stations.”

Adds Oscar Martinez (left) of NeighborsGo, a successful hyperlocal venture by the Dallas Morning News, “If nothing else, [the Patch.com] effort should be applauded because the competition will remind newspapers that there IS money on the table and, more important, there’s still time to go after it.”  We interviewed Martinez more than 2 1/2 years ago, and his hyperlocal operation is still alive and kicking.

Our take: Mutter’s analysis is accurate, but publishers continue to debate the wrong thing. The issue isn’t whether there’s enough advertising out to fund a lot of successful hyperlocal ventures; there probably isn’t. The solution is in finding other ways to monetize small businesses in the area. We laid out our proposal two years ago, but with the exception of Sacramento Press, a hyperlocal venture that is truly flourishing, we haven’t seen a whole lot of interest.

Promoting Newsroom Innovation

Lauren Rabaino picks up on a Twitter chat with Jay Rosen in which the professor said newsrooms need to radically revamp their culture. Rabaino points to a few examples of how tech startups break the mold in interacting with the customers and investors. While her use of the word “awesome” is a bit excessive, her examples aren’t.  Why are biographies on news sites so boring? Probably because newspaper cultures have traditionally buried the identities of all but their most prominent columnists. In contrast, tech startups use bio pages to point out that there are real people behind the products. Why not humanize the staff that brings you the news? Chances are they’re members of the community, anyway.

There’s also an interesting idea about bringing webcams into the workplace, something that text-messaging startup Tatango has reportedly done for its investors (although we can find no evidence of it on Tatango’s website). We’re not sure if webcams in the newsroom would be very interesting to look at, but the idea of opening up news meetings to the public has always intrigued us. Yes, competitors would be free to watch the action, too, but might the involvement of the community in the news gathering process also give the open newsroom a competitive edge? We’ve always thought that when it comes to reporting the news, more participation is better than less. Some traditionalists still resist that idea.

In a similar vein, Editor & Publisher has an essay by Neil Greer, CEO and co-founder of ImpactEngine.com, about how to motivate people to innovate. We think the recommendations are mostly management common sense, but they’re valid anyway.. T

Miscellany

The Selma (AL) Times-Journal will put up a paywall next Tuesday, becoming the latest in a trickle of small papers to charge for access. It’ll cost you $48/year or $4.95/month to get the news, and PayPal is accepted. Print subscribers will get in for free, but only after paying the online fee and then asking for a rebate. The story about the paywall is bylined by Times-Journal news editor Rick Couch, who temporarily abandons journalistic impartiality in failing to explore the controversy around paywalls or the possibility that this could actually be a bad idea.

A.H. Belo Corp., which publishes the Dallas Morning News and Providence Journal, among others, lost $119.5 million, or $5.65 per share, during the final quarter of 2010. That’s way down from earnings of $5.6 million, or 27 cents per share, in the same period the previous year. However, a large charge to cover pension expenses responsible for much of the drop. Revenue was down about 4%.

Gannett reported a fourth-quarter profit increase of 30%, largely due to cost-cutting and strength in its broadcast division. However, advertising revenue on the publishing side dropped nearly 6% and circulation revenue was down 4%.

And Finally…

Thanks to Legends and Rumors for calling out this correction from The New York Times, which we publish in its entirety:

An article on Jan. 16 about drilling for oil off the coast of Angola erroneously reported a story about cows falling from planes, as an example of risks in any engineering endeavor. No cows, smuggled or otherwise, ever fell from a plane into a Japanese fishing rig. The story is an urban legend, and versions of it have been reported in Scotland, Germany, Russia and other locations.

He could do worse than to fill it with the staff at Huffington, however. The $315 million deal, which was announced late last night, puts HuffPo founder Arianna Huffington (right) in charge of all of AOL’s editorial properties, which include TechCrunch and the rapidly growing Patch.com network of local news sites. She also gets Mapquest and MovieFone thrown into the deal. This should be a dream come true for Huffington, who launched HuffPo as a blog six years ago and who has taken only $1 million in investment capital since then.  The New York Times has all the facts.

Huffington has a chance to shape a new kind of media company as AOL struggles to recover from its disastrous merger with Time-Warner and its reputation for editorial superficiality. AOL has made some innovative strides in investing in Patch, and its earlier acquisitions of TechCrunch and Engadget demonstrate a willingness to invest in distinctive editorial models that challenge mainstream media. However, as The New Yorker noted in a recent critical profile of AOL and Armstrong (summarized on PaidContent.org), the company’s failure to hire an editor-in-chief has made it appear strategically aimless. The installation of Huffington in that job is a chance to fix that.

HuffPo is growing like a weed. The organization now has more than 200 employees and is on track to generate $60 million in advertising revenue this year. Paywall fans might want to note that HuffPo has no paid subscription model. In fact, as The New York Times points out, readers’ ability “to leave comments on Huffington Post news articles and blog posts and to share them on Twitter and Facebook has been a major reason the site attracts so many readers.”

AOL has been such a backwater of editorial mediocrity for so long that it’s hard to shake the assumption that the company will find a way to screw this up. However, Armstrong does appear willing to place bets on some properties that are breaking the mold of how journalism has traditionally been done. With Huffington at the helm, AOL has a strong leader in this “space.” Please just don’t call it that.

Shaky Daily

Have you downloaded your copy of Rupert Murdoch’s The Daily for the iPad yet? Don’t rush. A lot of early adopters are apparently still waiting for it to load. PaidContent.org says the app routinely takes a minute or more to start and that crashes and freezes are common. In ratings on the iTunes store, “even the positive reviews mention load problems and crashes,” writes Staci Kramer. Adds John Gruber, “My opinion of it has declined each day.”

Alan Mutter is a little more definitive, pronouncing The Daily “a dud” based upon its first issue. With “the barest possible news report back-filled by a bunch of vapid features,” the journal is “more like the Etch-A-Sketch edition of Us magazine than the ground-breaking news platform it purports to be,” he writes. Ouch.

To be fair, The Daily is in start-up mode, and anyone who has ever launched a new publication will tell you that the first issue is usually not portfolio material. Few people will remember these early negatives if the venture turns out to be a hit (remember Amazon’s frequent outages in the late 90s? Neither do we). One impressive achievement for the new publication is the stable of blue-chip advertisers it’s lined up. AdAge says they include Macy’s, Verizon Wireless, Land Rover, Pepsi Max and Virgin Atlantic. It also ran a 30-second ad on the Super Bowl, but that achievement is made less notable by the fact that its parent company owns Fox Broadcasting.

The Times They Are Delaying

It’s been nearly a year since The New York Times announced plans to charge for access to its online content starting in January. Now January has passed and we’re still waiting for what publishers hope will be a model for other subscription wannabes across the Internet.

Perhaps the Times is dallying because it doesn’t want the paywall to be another Daily. Times staffers are laboring to fix more than 200 bugs in the technology for charging readers, Bloomberg says. The difficulties apparently stem from the complexity of the app, which has several payment tiers and which must balance limited access with the offsetting needs to be visible to search engines and to enable readers to easily post links  on Twitter and Facebook.

While the world waits for the time strategy to unfold, the paper has quietly launched an unrelated and useful recommendation engine. Neiman’s Megan Garber caught up with Marc Frons, the Times’ CTO for digital operations, and discovers that the engine does a lot more than simply spit back articles that share similar tags. Frons says the program also looks at “people’s patterns, and how they move around the site, and what sorts of different things they might look at.” It tries to figure out what you might like even if you haven’t read stories in that domain recently. On the back end, it gives the Times greater insight into what readers want, which probably has some value in determining what they will pay for.

And Finally…

We were so stunned by the ad for coupon broker Groupon that ran on the Super Bowl last night that we fished it out of YouTube to be sure we hadn’t heard it wrong. We hadn’t. Actor Timothy Hutton delivers a solemn soliloquy on the suffering of the people of Tibet under Chinese rule. “Their very culture is in jeopardy,” he says. But there’s a bright spot: “They still whip up an amazing fish curry,” and you can get it for half off with your GroupOn membership.

We hope this ad is a subtle joke. If so, it sets new standards for subtlety. In a posting on the Groupon blog, founder Andrew Mason explains that the ad is partly satirical. “What if we did a parody of a celebrity-narrated, PSA-style commercial that you think is about some noble cause (such as ‘Save the Whales’), but then it’s revealed to actually be a passionate call to action to help yourself (as in ‘Save the Money’)?”

Actually, we think it’s a terrible idea. Using the suffering of people and the peril of entire species to sell advertising is sort of baldly offensive on its face, don’t you think? If the ad is intended to raise money for Tibet, it would have been nice to offer diners the option of sending their savings directly to Tibetan relief. But the ad neglects that detail.

If you agree that this campaign is over the top, please tweet your thoughts to Andrew Mason. Better yet, give to The Tibet Fund, where Groupon is saving face by matching donations up to $100,000.

Singleton transformed MediaNews from an unknown regional holding company into the country’s sixth largest newspaper publisher, with weekday circulation of 2.4 million. His able sidekick was the company’s president, Joseph Lodovic, whose financial wizardry enabled much of MediaNews’s growth. When the company entered bankruptcy last year, Singleton and Lodovic engineered a debt-reduction plan that still left them with a significant stake in the company, a rare outcome in a Chapter 11 filing.

Both are now out. Singleton has been promoted into a powerless strategic role and Lodovic has retired. Martin Langeveld, who worked at MediaNews for 13 years, offers a shrewd analysis of the ownership picture of the U.S. newspaper industry. It is now dominated by bankers, hedge funds, investment bankers and others who could care less about public service or journalism. But that’s not necessarily bad.

Langeveld looks at the industry’s ownership map. The majority of newspaper holding companies in the U.S. have experienced one or more bankruptcies over the last five years, leaving control in the hands of creditors and shareholders. Langeveld presents a chart showing who is now in charge at companies like MediaNews, the Philadelphia Media Network, Journal Register Co., Freedom Communications, Tribune Co. and others. It turns out to be a small circle of friends, led by Alden Global Capital, which has stakes in no less than six media companies that are emerging or have emerged from bankruptcy.

Langeveld sees the possibility for a massive consolidation to take place now that so many interlocking directorates are mapping the future of these distressed companies. Which is a good news-bad news scenario. “Strategic geographic consolidations, if operationally led by someone of [Journal Register CDO John] Paton’s caliber, could be a potent force for the rejuvenation of the industry, including a renewed focus on…local journalism,” he writes. But there’s also the pessimistic view, which is that these firms simply get chopped up and sold off piecemeal.

The timing could be good for the dismemberment scenario. After crossing the Valley of Death in 2008 and 2009, most U.S. newspaper companies are once again on stable, if shaky footing and many are profitable again. The Los Angeles Times might even fetch a price of $1 billion, says Sharon Waxman of The Wrap, quoting industry analysts. That would be a shot in the arm to Tribune Co., which could barely even give away its newspaper properties when it was frantically bailing water in the days before it entered Chapter 11. It could also be good news for The New York Times Co., which couldn’t even get $25 million for its distressed New England properties two years ago, but which might be primed to take another run at selling off the Boston Globe.

So investors might choose to get while the getting is good, but they might also opt to stay in for the long haul. Ken Doctor sees the possibility of progress as investors consolidate control. “We’re seeing increasing impatience among the new owners with the old leadership,” he writes on PaidContent.org. “A growing conventional wisdom among them: Too many newspaper CEOs just aren’t moving fast enough to grasp the mostly digital, multi-platform future.” If investors do believe that media companies have a future – and the 2010 recovery in stock values provides at least a glimmer of hope – then they may bring in new management that has a clue about the new media world.

“At Freedom, the new owners brought in as CEO Michael Mitchell Stern, who came from DirecTV,” Doctor recounts. “In Philly, they brought in Greg Osberg as CEO and publisher; Osberg comes both from magazines and digital start-ups. The new Star Tribune owners brought in Mike Klingensmith, a Time Inc. alum. The new formula: out with the newspaper-only people and in with media people.”

Or, as John Paton recently said, “Stop listening to the newspaper people and start listening to the rest of the world.”

A Test for Tablets

The Daily for the iPad is set to launch any day now, and media watchers are abuzz over whether a tablet-only news product that is reportedly backed by $30 million of Rupert Murdoch’s money has a chance.

In case you missed it, The Daily is Murdoch’s bet that tablet owners will pay a buck a week to get a quality news service. He’s reportedly hired 100 journalists, including some well-recognized names, and set in for the long haul. It’s a bit retro, even while being progressive. For example, the text won’t have any hyperlinks and there will be no Web equivalent that readers can share. Apple is helping out by making The Daily a signature product on its new iTunes subscription service.

Ken Doctor hauls out the old spreadsheet and calculates the economics of the venture. He figures that if about .25% of tablet owners opt in for a yearly subscription, The Daily can clear $10 million in annual reader revenue. Can advertising make up the difference? That’s the question, and without any similar products to use for comparison, it’s anybody’s guess. Doctor’s view is that The Daily has a chance, but Murdoch is a risk-taker who has some history of spectacular failures. For Rupert, though, $30 million is pocket change. (Martin Langeveld also shares his thoughts on The Daily over on Quora).

Speaking of subscription fees, speculation over what The New York Times will charge for access to its web content is at a fever pitch. BusinessWeek says the fee will be less than the $19.99 a month the Times charges for its Kindle edition. This is a minor scoop at best, since a Times Co. executive said as much last month. We just wish the Times Co. would announce a pricing plan so we can get some sleep.

Big Pay for Big Names

Conventional wisdom in the journalism business is that new media ventures pay a lot less than the traditional outlets they replace. But that isn’t necessarily true, according to The Wire. The insider-y media site, citing unnamed sources, says that big-name journalists such as the Washington Post‘s Howard Kurtz are commanding six-figure salaries at some well-funded websites. Specifically, The Wire says Kurtz is getting a $600,000 salary at Daily Beast, while Tim O’Brien commands $400,000 a year at Huffington Post. “We may be entering a new golden age of journalism, in which the most-talented digital journalists can make way more than their print counterparts ever dreamed of,” writes Henry Blodget.

“Balderdash,” says the Beast. In a rejoinder to Blodget, Beast Executive Editor Edward Felsenthal says he was “flabbergasted to read the salary figures you tossed out for Howie Kurtz.” However, Felsenthal doesn’t provide any guidance on what the Beast is actually paying Kurtz, and HuffPo isn’t talking.

Meanwhile, Blodget takes the opportunity to add The Daily and Bloomberg LLC to the list of generous employers. Bloomberg, he notes, “has quietly become the second-richest and most powerful media organization in the world.”

Does this mean happy days are here again for journalist pay? Not likely. The majority of grunt-level former reporters still say they’re getting half of what they were making in mainstream media, or less. Demand Media, for example, reportedly pays about 10 cents a word for its articles, which are assigned based upon their performance in search results.

Nielsen: 362K Paying for London Times

How are the early Murdoch paywall experiments in the UK faring? That involves unraveling some complex formulae about the value of free versus paid circulation and the opportunity cost of a paid subscriber. However, for now we are calling the early figures from Nielsen encouraging. The media monitoring service recently estimated that some 362,000 people have been accessing subscription content on the Times of London’s website each month since a paywall went up in June. The trade-off: unique monthly visitor traffic is down about 44% from 3.1 million to 1.78 million.  A separate analysis by Hitwise concluded that there had been a “large reduction” in visits to the Times’ website since the paywall was erected, resulting in a drop in online market share of nearly 60%.

So does this mean the Times’ paywall is a good or a bad idea? Here’s one way to look at it: The Times charges £1 per day or £2 per week for online access, with print subscribers getting a free ride. The back of our envelope says that if the Times can get half of those 362,000 monthly visitors to pay for one week’s worth of access each month, then it will have traded 1.3 million visitors for £362,000, or about 25 pence per visitor. The question then is whether those lost visitors can be monetized to the tune of 25p.

That actually should be a fairly easy calculation. If the Times looks at its online advertising revenue for the prior year, for example, and compares it to average unique monthly visitor volume, it can calculate the value of a free visitor pretty quickly. If that value is less than £.25, then the paywall is working, at least for now.

It isn’t that simple, of course. Those 362,000 monthly visitors aren’t necessarily paying the full price for Times content. Some are using free or heavily discounted promotions account or are print subscribers when get the online product bundled. However, they may also be more valuable that afree visitors. If advertisers are willing to pay more to reach paying customers on the theory that they’re better prospects, then those 362,000 visitors could be worth more than two bits apiece.

There are also intangibles, like the lower cost of operating a computing infrastructure to serve a smaller visitor base. However, we would suggest that the quick and dirty calculations aren’t all that complex, and if other Murdoch titles forge ahead with similar strategies, then the paywall is probably working.

A Case for Editorial Accountability

“In reality, publishers and CEOs have little understanding about what their editors are doing,” writes Neil Heyside (left) of New York-based CRG Partners in a provocative piece on MediaShift about the cost of content. Heyside shares some anonymized cost figures from client newspapers in the US and UK showing that the ways in which publishers allocate budget for different kinds of content varies wildly.

He makes the argument that publishers can reduce the amount of staff-generated content by increasing contributions from free (aka citizen) sources and making more use of “reworked” or rewritten material like press releases. He also suggests that publishers can make use of pooled or wire service material for topics that have little local relevance but that are important to carry anyway, such as international news and movie reviews.

“One paper printed 8% of its material from free content,” Heyside writes. “If that number moved up to 20% …a reduction of the use of 16% of staff-produced material led to a savings of 28% in staffing costs.” Sounds easy, but as anyone who’s worked with a substantial amount of contributed free content will tell you, the time required to massage it into something worth publishing can nearly equal the cost of paying for good material in the first place. Commenter Scott Bryant makes this case with some passion. Both Heyside and Bryant are right. Publishers should scrutinize the process and costs of creating content more carefully and editors should be more accountable for what they spend. However, quality is an intangible that defies rigid classification. As Sam Zell and his team found out at Tribune Co. a couple of years ago, boiling editorial content down to column inches, source counts or other rigid metrics is a recipe for trouble.

AP: Newspapers Are Now Loss Leaders

For the foreseeable future, publishers don’t seem to be funneling their investment dollars into wire services. Associated Press CEO and President Tom Curley (right) tells Poynter’s Rick Edmonds that newspapers now make up only 20% of the AP’s revenue and that figure is expected to continue to decline by 4% to 5% a year for the foreseeable future. In fact, “The AP loses money on services to newspapers and effectively subsidizes those offerings with more profitable lines of business,” such as photo wires and corporate business news, Edmonds writes.

The silver lining for the AP is that the drop appears to be a consequence of the industry’s overall decline rather than the contentious battles that erupted between the AP and its member newspapers two years ago. Curley says that unpleasantness has largely been put to rest as a result of adjustments to AP’s licensing fees and a lot of face-to-face meetings.

There is one battle still ongoing, however: with CNN. The AP claims that the broadcast giant is effectively using wire service material without paying for it by picking up (and attributing) stories moments after they hit the websites of AP subscribers. Here’s another area in which copyright law has failed to keep up with the velocity of digital information. As long as CNN summarizes and attributes information, it isn’t technically doing anything illegal, but the AP also has a defensible case for arguing that those actions are unfair to it and other members.

Miscellany

Could Starbucks soon compete with the newspaper publishers whose products it places next to the cash registers at its ubiquitous coffee shops? Yes, but for now it’s taking pains not to call its new in-store information service a “news” network, even though it sure looks like one. Instead, the Starbucks Digital Network is being positioned as a means for the retailer to gather more intelligence about what interests its customers in order to deliver to them better…um…latte? Sounds like a bit of a stretch to us. More likely, Starbucks is testing ways it can use localized and even personalized news as a way to improve customer affinity and maybe even sell advertising.

We proposed more than two years ago that Starbucks could become a major force in the US media market (see slide 28 in embedded presentation below) if it chose to pursue the opportunity. Our scheme was to provide printed, personalized mini-newspapers optimized for reading by commuters. Since we floated that idea, though, the iPad happened, and it now makes more sense to deliver news digitally to a tablet-toting public. However the plan works out, we think publishers should look at Starbucks as a potential partner rather than a rival, because anyone who feeds the caffeine jones of millions of affluent professionals enjoys a chemical bond that no editor can hope to match.

And Finally…

Rupert Murdoch has been the most strident of all publishers in demanding that readers pay for content, which is why the circulation promotion now being used by his Sun in the UK is so deliciously ironic. The paper stuffed thousands of banknotes into Saturday’s issue. Presumably it used small denominations so as not to encourage assaults on its street vendors. The daily has recently suffered a 4% drop in circulation. Perhaps Murdoch is hoping that readers will put their winnings to work to pay the access fees for the Times or News of the World.

About 55,000 readers of the Los Angeles Times in the San Gabriel Valley and Riverside were surprised to open their morning papers late last month to discover that the Times had acquired a sudden fixation with topic of “briefs subhed (see below).” Actually, it was a production error.  “About 55,000 papers were printed before the error was discovered,” the Times wrote in a correction. “Readers feared that all the copy editors had been laid off, or even ‘massacred,’ as one put it.”

“New paywall costs the Times 66% of its internet readership” says the July 18 headline, which then helpfully points out in the subhead that that means that 33% of the audience is still there. Two days later, though, the very same Guardian trumpets, “Times loses almost 90% of online readership,” a decline it characterizes as “massive.” We marvel at what a difference two days can make.

The Guardian then presents a convoluted analysis of comparative data that suggests that the Times’ website traffic has fallen anywhere from 84% or 93% since it began charging £2 a week for online access. The paper also presents various scenarios for calculating the Times’ share of overall traffic to UK newspaper sites and debates what the impact on the paper’s bottom line will be.

The nut graph, however, makes it clear that this is a non-story: “The figures are…unlikely to surprise some executives at the Times: the Sunday Times‘s editor, John Witherow, predicted in May that ‘perhaps more than 90%’ of pre-registration readers were likely to be lost once the registration-only service was implemented.”

So what is the story here? The Times got exactly what it was expecting. Its financial people have presumably run the numbers and decided that they’re ready to take the traffic hit. In fact, the Guardian even quotes Rupert Murdoch saying that paywalls could generate “significant revenues” for his newspapers.

Let’s give the Times credit for setting up a real paywall. Even Google can’t penetrate this sucker. Clicking through to any section or story from the home page is pointless without a credit card in hand. Murdoch is putting his money where his mouth is. He has pledged to take all his newspapers to a paid-access model, and the Times’ experiment is bold, regardless of the outcome. Unlike subscribers to the Wall Street Journal or the Financial Times, the readers of the London Times have no compelling financial interest in the content. In the crowded UK news market, they also have plenty of alternatives from which to choose. If the Times can make its paywall work, it will give a lift to the rest of this beleaguered industry. Although probably not to the Guardian.

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.

Alan Mutter isn’t buying it, and apparently neither is the man who produced the survey. Mutter e-mailed Ed Strapagiel, the Kubas executive who led the research. His opinion is that publishers’ forecasts of a .2% decline in ad sales next year aren’t realistic and he offers a list of reasons for their optimism. Our favorite: “Optimism is better than slitting your wrists.”

In the category of blind optimism, you can also include the Bureau of Labor Statistics. It forecasts that the newspaper industry will lose 25% of its jobs over the next eight years, making it the seventh fastest shrinking job market in the US during that time. The bureau doesn’t explain its methodology, but we suspect that a dart board is involved. The newspaper industry has shed 45% of its jobs since the 2001 peak and nearly 31,000 and just the last two years, according to the amazing Erica Smith. There is nothing on the horizon from a demographic, economic or competitive standpoint that suggests a turnaround in the business so the BLS forecast of a roughly 3% annual decline over the next eight years strikes us as a bit optimistic. Perhaps the prospect of an end to the suffering of the last 18 months is sparking some irrational exuberance.

Incidentally, these last two stories were reported by the industry trade journal Editor & Publisher, whose closure was announced last week in a sale of magazines by its former owner, Nielsen Co. A short story on the E&P website says that staff members plan to go ahead with a January issue and that E&P‘s 125-year run may not yet be at an end. “A number of outside companies and individuals have expressed interest in possibly keeping E&P going, so stay tuned for updates,” the story notes, cryptically.

Miscellany

The BBC’s worldwide chief executive, John Smith, has come out in support of Rupert Murdoch’s plans to charge for news. The endorsement is notable because the BBC has been something of a foil for news organization’s paywall ambitions, since it provides high quality information – including international coverage – under a government subsidy. While Smith praised Murdoch’s lone-wolf advocacy for the “importance of having quality content,” he notes that paywalls will be extremely difficult to maintain. Separately, the BBC’s director general last month said the broadcaster had no plans to erect paywalls around its public service broadcasting websites.

“I plan to say that publicness has benefitted me and that I wish the doctors would, in turn, be more public,” he writes. “The response I got from my posts here was helpful not only in the support I received but especially in the information I got from fellow patients who proceeded me and told me in frank and brave detail what I would experience.” We wish him a speedy recovery, whether in public or private, as we would all be worse off for the loss of his often blunt but always intelligent criticisms.