The World Association of Newspapers and News Publishers (WAN-IFRA) released an upbeat report on the state of newspapers worldwide, pointing to growing readership levels in emerging economies but cautioning that engagement levels are still low.

The report includes data from 70 countries that account for more than 90% of the industry’s value. It shows:

  • More than half the world’s adult population reads a daily newspaper, with 2.5 billion reading in print and more than 600 million consuming in digital form.
  • The newspaper industry generates more than US$200 billion of revenue worldwide each year. However, that figure is down 2% from last year and 22% since 2008. The numbers are dragged down by plummeting ad sales in the U.S., which has seen print advertising revenues fall 42% since 2008. The good news is that ad revenues are up 9.1% in Latin America, 3.6% in Asia and 2.3% in the Middle East and North Africa.
  • Newspaper circulation remains high, through stagnant, globally. Circulation declined only .9% worldwide in 2012 from a year earlier, primarily due to  rising circulations in Asia. Circulation is down 2.2% globally since 2008, with the steepest declines in Europe.
  • While newspapers are a vital information source, they aren’t engaging online audiences very effectively. Newspapers accounted for only 7% of visits, only 1.3% of time spent online and only .9% of total pages visited.
  • U.S. newspaper publishers now generate 27% of their revenues from non-traditional sources, such as digital advertising, services and ancillary products.

While the report can be seen as a glass-half-full scenario, we think it’s encouraging to see publishers diversifying their revenue sources. The industry’s historic dependence on print advertising in general – and classified advertising in particular – is at the root of its problems. The rapid decline of those revenue sources is prompting some publishers to get creative about finding new revenues. Those that succeed will be stronger for it.

 

Enhanced by Zemanta
Comments Off
By Paul Gillin | April 13, 2013 - 10:31 am - Posted in BusinessModel, Circulation, Demographics, Newspapers, Paywalls, Revenue20, Solutions

In a dying industry, the sensible thing to do is to maximize your revenues before you die. Paywalls might well make money for newspapers. But that doesn’t mean that newspapers aren’t dying. Quite the opposite.

Felix Salmon, Reuters

That quote, which we first saw in this Mathew Ingram piece on paidContent, gave us new insight on why we dislike paywalls so much. Yes, the newspaper industry seems to be adopting them at a rapid pace, and yes, the paywalls at The New York Times and Financial Times are reportedly successful, but there’s something about putting the subscription genie back in the bottle that strikes us as a step backward.

Salmon puts his finger on one of the weaknesses of most current paywalls: They are defensive strategy. They’re designed to keep loyal readers on board, but they repel potential new readers.

Alan Mutter shares worrisome statistics: More than two-thirds of regular newspaper readers are over 45, their average age is 57 and the average age of the online newspaper audience grows one year older every year. This industry is still headed toward a cliff. Unless those demographics turn around, it’s only a matter of time before the audience dwindles to a size that is no longer economically sustainable.

What’s the answer? Unfortunately, no one has come up with one. In another piece this week, Ingram criticizes paywalls for being a no-growth strategy. His article is mostly a restatement of Mutter’s analysis, but the really interesting part is in the comments section that follows. Both critics and supporters of paywalls vigorously debate the alternatives, and both sides make good points. Done right, it seems that paywalls actually could attract new subscribers, but no publisher is reporting the kind of circulation gains that will be needed to replace this rapidly aging audience.

The time seems right for micro payments, but that idea has never gained any traction. Kachingle was one of the early players in newspaper micro payments, but it has now morphed its business model into a co-marketing app content somethingorother that we can’t figure out. People seem to be OK with using Google Checkout for 99-cent purchases, but not for five-cent purchases. We think there’s a psychological barrier to micro payments. Below 99 cents, people don’t want to be bothered to think about paying. In fact, charging a nickel to read a 5,000-word article seems a little absurd, as if the article has no value. At some point, micro payments work against you.

Reuters’ Salmon argues that paywalls as currently implemented are too inflexible. They impose a limited number of subscription options on visitors regardless of what the visitors want or how they behave. Paywalls should use a sliding scale that maps to the needs of the individual reader, he suggests. People with an intense interest in sports will pay more than those who care deeply about entertainment, so they should pay a different price. Few publishers understand their audiences in that kind of depth, though.

We did see one bit of encouraging news this week. The Newspaper Association of America reported that advertising revenues continued their seven-year-long string of declines, dropping 6% in 2012. However, overall revenues were down only 2%. The reason is that publishers are finally diversifying their revenue streams, and not just by charging readers:

These new revenue sources, which include such items as digital consulting for local business and e-commerce transactions, now account for close to one-in-ten dollars coming into newspaper media companies. They are significant enough in scale that NAA has begun to collect detailed data about these revenue categories and track their trajectory year-to-year for the first time.

Consulting? Affinity programs? Marketing Services? Where have we heard those ideas before?

Enhanced by Zemanta

The New York Times released quarterly earnings that indicated that is paywall is working. The report is the first to give some indication of incremental subscriber growth beyond the initial surge of sign-ups that came when the paywall went up in March. It shows that more than a quarter million people are now paying at least the $15 minimum fee. Even better is that traffic to the NYT.com website is actually up 2% from a year ago.

“The Times has created the perfect paywall,” writes Ryan Chitturn on Columbia Journalism Review. “It’s getting tens of millions of dollars from hardcore readers while letting in enough Google traffic and casual readers to continue boosting its online readership and collecting ad revenue off of those eyeballs.”

Chitturn estimates that the Times will take in about $63 million in digital subscriber revenue this year and more than $210 million in total digital revenue. That’s more than it costs to operate the newsroom. Which means that The New York Times could theoretically get out of the print business entirely and still make money.

New York Times Paywall

Does that mean it’s time for everyone to jump into the pool? Bill Mitchell thinks so. Writing on Poynter.org, he tells of moderating a panel at the World Editors Forum in which publishers who had taken the paywall plunge spoke of their initial trepidation and then relief when the steep declines in traffic that they had feared failed to materialize. Traffic to the Berliner Morgenpost has actually doubled since it put up a paywall in late 2009.

Mitchell quotes The New York Times’ Jim Roberts saying the wall has had a morale dividend. “There is more of an investment I feel in the newsroom among our journalists since the introduction of the paywall. They feel a greater stake in the product,” he said.

Perhaps the time is right. The Newspaper Association of America reports that traffic to newspaper websites jumped 20% in September compared to a year ago among the coveted adult demographic. “Average daily visits were up 21%; total pages viewed were up 10%; total minutes spent were up 11 %; and unique visitors were up 9 %,” the NAA reported.

Thus the great paradox continues. Newspapers are more popular than they’ve ever been, but the business model is broken beyond repair. The NAA numbers are encouraging, and perhaps indicates a flight to quality among readers who are fed up with social media noise. For the past five years people have been  publishing all kinds of nonsense online because they could. Now the novelty is wearing off and quality is becoming a differentiation point.

Google’s new Panda search algorithm is supposed to be a game changer in its ability to distinguish quality content from crap. We noted recently that Demand Media, which specializes in crap, has had to remove 300,000 articles from its website because Google won’t pay attention to them anymore. And the world hardly noticed.

The fact that newsrooms turn out a good product has never been debatable, but the idea that people who had been accustomed to getting it for free for 15 years would decide to pay for it is still an open question.

Give credit to the early adopters for fine-tuning the balance of free vs. paid content to achieve some success. The idea is to grant just enough access to entice readers to pay but not enough to give away the farm. The Wall Street Journal lets you read a couple of hundred words gratis but then wants a credit card. Perhaps it and the Times have figured out the formula.

We’ve been skeptical about paywalls for two years, but we’d be the first to cheer their success.  If they enable good journalism to flourish once again, we’re all for it.

Washington Post Co. Holds Out

Katharine WeymouthApparently the Washington Post Co. isn’t convinced. Publisher Katharine Weymouth was quoted in Politico last week saying that paid subscriptions don’t make sense for the Post at the moment. The newspaper’s philosophy is that its website should be “open to everybody and attract as many people as we can to spend as much time as they can with our journalism, and assume that that will bring them back for more.”

Politico points out that the Post has hardly been a beacon of publishing success lately. It has shed more than 45% of its newsroom staff and it just last month announced plans to close nine of its 11 suburban regional bureaus. The Post Co. does have a couple of things going for it, however, including its profitable Kaplan education division and its phenomenal 30% market penetration. You’d think a market share like that would be an incentive to charge more for the product, but Weymouth seems in no hurry. She isn’t ruling out a paywall but says she’s content to wait and see what works.

“They Won’t Invest in You”

Invantory is developing software tools to help people sell things. It wants to be kind of an alternative to Craigslist, with a mobile twist. The founders thought newspaper publishers would be potential customers, because they already know the classified advertising business and they have a desirable channel. But Invantory gave up on doing business with newspaper publishers. The principal reason: their computer are a mess.

“Newspapers’ online technology platforms [are] not standard,” wrote co-founder Ian Lamont on the Invantory blog. “This means that non-trivial integration work is required for practically any new feature or service, whether created in-house or purchased from a vendor. There are dozens of online content management systems (CMS) in use, most heavily customized.”

In other words, any chance newspaper publishers might have to federate their once-highly profitable classified advertising businesses into a network that could compete with Craigslist is undercut by technology decisions made years ago and incompatibilities perpetuated by customization.

The Invantory co-founders met with Newsosaur Alan Mutter at the New England Newspaper Publishers Association. Mutter, who himself tried to start a business to service newspaper publishers a couple of years ago, told them to forget about pursuing a model based up on serving the dying newspaper industry. “VCs with any experience won’t invest in you,” he said.

Miscellany

The i newspaper celebrated its first anniversary this week, challenging the conventional wisdom that print dailies are dead. The commuter-friendly daily, which delivers news in bite sized nuggets, has succeeded in building a paid circulation of 184,000 during its first year. And it’s reportedly profitable, too.


“Data journalism,” in which reporters mine public information to discover nuggets of news, is an increasingly popular discipline. Editors Weblog has a list of free tools anybody can use to become a data journalist.

Newsonomics by Ken Doctor

Publishers send us a lot of books to review, and we wish we could get to them all more quickly. It took us 18 months to finally read Ken Doctor’s Newsonomics, but we’re glad we did. Doctor’s perspectives on the future of news are as fresh today as they were in early 2010. We were surprised and encouraged by his optimism.

Many journalists view the economics of their profession as bitter medicine. Doctor makes it clear that survival in the new world will mean understanding the business, but those journalists who know how to package and market their work will thrive. And they won’t have to sell their souls or lower their standards to do it. Here’s our review on Amazon:

Journalists hate to talk about the economics of their profession, which is why this is such a valuable book. Doctor proceeds from the assumption that the newspaper industry as we have known it is an irreversible decline and that only a handful of national dailies will exist in a few years. There’s no reason to belabor that point, and he doesn’t.

Instead, he devotes the rest of the book to the much more important discussion of how journalism can be reinvented and deliver value in an economically sustainable model. His perspective is both optimistic and uplifting. Doctor sees the end of the vertically integrated news organization as creating opportunities for focused and nimble ventures to emerge that can indeed deliver quality journalism and pay their reporters a living wage. Competition will raise quality standards and ultimately deliver a better product. We have to go through an ugly deconstruction process in order to get there, but Doctor sees bright light at the end of the tunnel.

A lot of journalists are uncomfortable with Doctor’s views because they fear the loss of the comfortable salaries and modest output demands they have long enjoyed. Well, welcome to the new world. Jobs are going away and journalism is becoming a business of self-employed contractors. Journalists with initiative, innovation and skill will be able to make a better living working for multiple masters than they could have made working for media companies. News organizations will be under pressure to be more responsive to their readers’ demands, but Doctor does not believe this will result in the “dumbing down” of news. Tiered models will emerge that deliver high-quality journalism to those who are willing to pay a modest amount for it.

Newsonomics was published 18 months ago, but its lessons and predictions are just as valid today as they were then. This is a clear, concise and ultimately hopeful look at the economics of $45 billion industry in the middle of wholesale reinvention.

How much do you really know about your reader? Chances are it isn’t very much. News organizations traditionally haven’t had to know their customers very well because the booming advertising market ensured they didn’t have to. Now that advertising’s value is in free-fall, however, this kind of knowledge may become the most valuable asset you’ve got.

New Revenue for News Organizations Presentation on SlideShare

New Revenue for News Organizations Presentation on SlideShare

We had the chance to speak to a group of newspaper executives about new revenue models a couple of weeks ago and were a bit surprised at how foreign the concepts of lead generation and qualification were to them. In the business-to-business (B2B) publishing industry, lead management has been the lifeline that has kept publishers afloat. It has corollaries that would be useful to news executives in consumer publishing, too.

Lead generation (called “lead gen” in the trade) is the process of matching sellers with qualified prospective buyers who are ready to make a purchasing decision. Advertising is a basic shotgun approach to lead gen in which the publisher plays a passive role by merely providing a platform for delivery. The onus is on the advertiser to convert those leads to customers. That’s an expensive process. B2B companies focus most of their attention on so-called “warm” leads, or those who are ready to sign a check. The problem with advertising is that it also delivers “cold” leads, or tire-kickers, and it’s expensive for the vendor to weed those people out.

Know Thy Reader

Publishers can be a whole lot more active about matching buyers and sellers, though. As they gather information about the characteristics of their audience, they can structure programs that generate better-quality leads and charge more for them.

B2B publishers went through the valley of death a decade ago in a market contraction that was a lot quicker and more dramatic than the one that’s hit newspapers over the last five years. Publications like PC Magazine, which raked in more than $100 million a year in ad revenue at one point, were completely out of the print business by 2009. A lot of publishers perished, but those that survived have converted to a lead gen model.

These publishers now focus on developing customized online destinations and real and virtual events that deliver warm leads. The more they know about the customer, the more they can charge for the lead. Web analytics make it possible to know a lot more about our online visitors in particular than we used to know. When combined with customer relationship management (CRM) systems, publishers can now build extremely detailed profiles of individual audience members.

Newspaper publishers know about the value of segmentation. That’s why they created automotive, real estate, arts & entertainment and home sections decades ago. Advertisers wanted to reach more qualified buyers. Online, you can take that to a new level.

Once an online visitor registers with you and accepts a cookie, you can track that person’s every online interaction with you and build profiles that enable your advertisers to make customized offers. A visitor who reads a lot of article about boating and clicks on your offer of a discounted ticket to the boat show is a lot more interesting to local suppliers of nautical equipment than the average reader.  Similarly, a member who registers for your discounted passes to the bridal expo is going to suddenly interest a lot of specialty retailers.

All About Targeting

Is what we’re telling you a revelation? We hope not. Google and Facebook have built their businesses on delivering warm leads as indicated by search activity and member profiles. They’ve sucked a lot of money out of the print advertising market in the process. On LinkedIn, you can now buy ads aimed at engineers with VP titles who belong to construction groups and live in the greater Cleveland area. Can the Plain Dealer deliver that level of granularity? Probably not. But if it had that same quality of information in its database, it could create some pretty compelling packages for local businesses that wanted to reach those people.

We don’t mean to imply that B2B and consumer newspaper publishing are the same thing, but there are lessons news organizations can learn from their B2B counterparts, who have a half-decade’s more experience with adversity. Qualified prospective customers who are ready to make a buying decision have a lot more value to advertisers than drive-by readers. What can you do to capture more information about the people who visit your online properties? How can you use that information to develop high-value – and high-priced – marketing programs for your customers? Finally, how can you use your unique advantage of local presence to distinguish your products from Google’s and Facebook’s?

Tell us what your news organization is doing to tap into this opportunity.

Note: Our book on B2B social media marketing has a lot more detail about this topic.

TBD

...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.”

Oscar MartinezAdds 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.


The University of Colorado should eliminate its standalone journalism major in favor of an integrated information science or digital communications program, according to the chancellor of the Boulder campus. If approved, the shutdown of the current journalism school could happen as early as  next year. Chancellor Phil DiStefano isn’t calling for journalism education to fade from this earth. Rather, he thinks it should be incorporated more holistically into a liberal arts education and perhaps become a minor concentration. Boulder’s Daily Camera presents both sides of the debate, including anxious statements from the current journalism faculty who will be moved, like displaced persons, to other corners of the campus.


The Detroit Media Partnership is borrowing an idea from the fast-food industry and offering a $5,000 prize to the person or group who can come up with the best idea “for helping The Detroit News and the Detroit Free Press increase their audiences or better serve the community.” Management is taking suggestions now and will hold a public vote in early April. Finalists will pitch their ideas to a panel of judges that includes Domino’s Pizza Inc. CEO Patrick Doyle, whose policy of responding to customer complaints about his company’s crappy product is credited with turning Domino’s around.


Detroit eighth-grader Annie Reed levitates over Eminem interview Detroit’s second most famous business – rapper Eminem – shook up the local journalism world a bit by snubbing hundreds of media supplicants and granting a rare interview to East Hills Middle School eighth-grader Annie Reed. Reed, who had pursued the interview at the urging of her newspaper instructor,  talked to the 38-year-old rapper for about 10 minutes. The word “cool” was apparently used several times. The Detroit Free Press story is more about how Reed got the audience with Eminem than about what was said on the phone. It’s an uplifting tale and the photo is great. Lose Yourself.


“Launch glitches” will keep Rupert Murdoch’s tablet-only Daily free for at least several more weeks, according to Publisher Greg Clayman. Users have been reporting frequent crashes and freezes, which Clayman said is not surprising for a digital news publication that sometimes exceeds 100 pages per day. While people we know who have tried the Daily mainly dismiss it as gossipy fluff, Clayman says subscriptions are running ahead of plan, although he wouldn’t be more specific


The quarterly earnings season is upon us, and newspaper publishers are reporting better results, but not on the print side. The Washington Post Co. earned $11.59 a share in the quarter, which is nearly $3 dollars better than analyst consensus estimates.  However, print advertising revenue dropped 12%, continuing the ugly trend of the last five years. The good news: online revenues were up substantially.

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.

We won’t try to paraphrase the presentation that Journal Register Co. CEO John Paton gave to the INMA Transformation of News Summit last week because Paton stated everything so beautifully. So we’ll just give you a few quotes from the transcript that we highlighted. Paton gets it like no other news executive we’ve encountered.

“You don’t transform from broken. You don’t tinker or tweak. You start again – anew

“Doing more of the same with less results in the same done worse. It is prolonging the death of a broken business model rather than adapting to the realities of the present.

“Just about everything we are doing at JRC – and just about what every newspaper or legacy media company is doing – is focused on getting ON the Web. Very little is being done to position legacy media companies to be OF the Web.

“There is now an even bigger audience for our core product – news – than ever before.  And in the crowded marketplace that is the Web, it is the deep trust the audience has for print that is leading us and them online.

“To be in the news business now means you must run your business as digital first.  And that means print last. That is how this new world works.

“[The reason the industry isn’t changing faster is] fear, lack of knowledge and an aging managerial cadre that is cynically calculating how much they DON’T have to change before they get across the early retirement goal line. Stop listening to the newspaper people and start listening to the rest of the world.

“We are getting out of anything that does not fall into our core competencies of content creation and the selling of our audience to advertisers. Reduce it or stop it. Outsource it or sell it.

“We bought every reporter – and now some ad salespeople as well –a Flip video cam. They paid for themselves in about a month as we have gone from 100,000 video streams a month to about two million.

“One [JRC] group in Pennsylvania is trying to meet a challenge set by Jay Rosen [called] the ‘100% solution:’ Cover everything that happens on a particular subject in a particular area. Using the crowd, Twitter, smartphones plus Google Docs to manage it all, they are attempting to create real-time game coverage of high school sports. That’s every game in real time.

“Citizen Skip Harrison of Trenton New Jersey has an all-abiding interest in the New Jersey educational system. He is part of the Community Media Lab at our paper The Trentonian. We are training interested citizens to be journalists.

If print dollars are becoming digital dimes, we'd better start chasing the dimes - John Paton“We have successfully printed pages on a press using only free Web tools. The next time some rep comes to your shop brandishing a $20 million system, tell him the price just went down. Way down. Our capital expenditures have been reduced by half.

“In Torrington, CT at the Register Citizen, our young publisher Matt DeRienzo deputized his entire community to fact check all of his products online and in print…He issued an invitation to every reader, source and community member to hold them accountable and engage in correcting, improving or expanding the story. Matt’s innovative approach…has created an online audience 6.5 time greater than his print audience and he has taken what was a money-losing operation into a profitable one.

“As of Q3, year to date, the Journal Register Company['s financial performance] is handily outpacing the industry as compared to figures provided by the Newspaper Association of America. JRC’s ad performance has been three  times better than the industry. More importantly the company’s digital revenue has grown from negligible to 11% of ad revenue in November – in less than a year. With each passing day, that revenue is also less tied to the print buys. More than 60% of digital revenue this month is NOT tied to print sales. Our company which was bankrupt in 2009, is projected to have a profit margin of 15% this year.”

A couple of weeks ago, we profiled Sacramento Press, a bootstrapped startup that appears to be doing a lot of things right, including adopting a diversified revenue model and partnering with other small publishers to share in advertising contracts. Well, they’re moving fact. Ben Ilfeld, the 29-year-old founder of Sacramento Press, sent us this announcement yesterday. He’s hoping to expand and duplicate the Sacramento business model in other towns throughout California. Tomorrow, the world! Here’s to the renamed Macer Media’s success.

The following is an edited press release:

Looking to help communities elsewhere build successful new local online media models as traditional media struggle to survive, the founders of The Sacramento Press have chosen a new corporate identity – Macer Media LLC – to underscore their philosophy to keep their operations lean, even as their business continues to develop new sources of revenue and grow at a healthy pace.

Macer Media will serve as a corporate umbrella over several operating entities, including The Sacramento Press, Sacramento Local Online Advertising Network (SLOAN), The Bay Area Publisher Partnership (BAPP) and DealTicket, an online local daily deal site.

Macer Media aims to assist 21st Century publishers in other markets in understanding and obtaining the innovative blends of news gathering, advertising, social media and technology needed to succeed at seeding their own “hyper local” new media outlets.

“We want to run a lean company in the spirit of these local and hyper-local champions and be a company that not only has a stake in the hyper-local fight in the form of The Sacramento Press, but also helps out others in our space by providing the tools to build healthy local media ecosystems,” said co-founder Geoff Samek.

The Macer Media team is focusing initially on creating trusting relationships with local publishers throughout California to test the sharing of news, as may be appropriate for their readers, and as a means for local advertisers to expand their reach.

The Macer Media team encourages publishers to develop their own distinctive blends of news gathering, advertising, social media and technology infrastructure rather than adopting a “cookie cutter” approach to serving local audiences.

“We learned fairly quickly that people respected what we’re doing with The Sacramento Press in terms of our mix of technology, advertising and news gathering,” Ilfeld said.  “We’ve demonstrated an ability to innovate with technology and then leverage our strengths in technology and marketing to start SLOAN, our local ad network.  Those are hallmarks of what we do.”

We can’t remember the last time we went two weeks without updating the Death Watch, but a crush of work (though not so much money) has overwhelmed us recently. Plus we saw the new Harris Poll that found that over half of online adults now believe traditional media as we know it will no longer exist in 10 years, causing us to wonder if there’s really any point to “chronicling the decline” any more when the majority now agree  on the end point. But we forge ahead for SEO purposes, if nothing else. Here are some stories we’ve bookmarked lately.

Nielsen: 362K Paying for London Times

Revenue 2.0 ideas for newspapersHow 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

Associated Press' Tom CurleyFor 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

Starbucks store with newspaper boxesCould 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.


Forbes’ Jeff Bercovici rang up a media appraiser who correctly estimated the value of Newsday two years ago in order to find out what the Boston Globe is worth. Kevin Kamen’s guess: a maximum of $120 million and a realistic value of $75 million. That sounds terrible in light of the $1.1 billion that Globe parent New York Times Co. paid for the New England Media Group in 2003, but remember that money was relatively easy to come by in those day and that the Times Co. couldn’t find someone to take its Boston Harbor boat anchor off its hands last year for a paltry $25 million. Since then, cost-cutting has made the Globe a little more valuable, Kamen estimates. Perhaps that’s why a group of investors, led by entrepreneur Aaron Kushner, wants to buy it, Bercovici reports.

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.”LA Times Brief Subhed glitch

Comments Off
By Paul Gillin | February 9, 2010 - 8:46 am - Posted in BusinessModel, Future of Journalism, Journalism, Newspapers, Revenue20

Yesterday I visited with a journalism class at a major university. This institution’s journalism program is considered one of the finest in the country and its faculty boasts notable veterans of the newspaper and broadcast field. I spoke to a small class for about 90 minutes, devoting the first hour of that time to a discourse on the state of the US media: Why it’s in a predicament, how the story is likely to play out and what it all means for aspiring journalists. The rest of the time was discussion.

My material wasn’t the type of stuff these students are used to hearing, judging by their reactions. About 2/3 of my talk was about economics and business. Among the topics I addressed were:

  • How advertising efficiency is devastating the media economic models that are based on the inherent inefficiency of mass-market advertising;
  • The irony that newspaper readership is at an all-time high even as the industry craters;
  • How the efficiency of online publishing permits new media organizations to operate much more cheaply than their predecessors;
  • Why the 57-year-old average daily newspaper reader is an undesirable target for advertisers;
  • Why advertising costs will continue to go down and why this is a problem for traditional media;
  • Why Craigslist has devastated newspapers’ most profitable revenue source;
  • How the need to sustain high circulation levels has made newspaper editorial content bland, inoffensive and, ultimately, vulnerable to competition.

The students were aware that they’re stepping into an uncertain world but they didn’t seem to grasp the finer points of the media business. Looking at the journalism department’s website later, I could see why. The curriculum lists 29 courses in the journalism program, and not a single one is about the economics of publishing or how to sustain a career as a journalist.

This university is failing its students. I suspect that so are a lot of others.

Learning a Trade

Journalism schools are essentially trade schools. When I was going through a J-school program in the late 1970s, everything was focused on getting the students out into the working world with the skills and savvy needed to get to the top. Judging by my recent experiences with journalism schools, the same career path that was advised 30 years ago is still being recommended today. This begins with a low-paying job at a small daily and proceeds through a series of staff positions at increasingly larger publications. The Holy Grail is to land a job on the staff of The New York Times, which itself has laid off 200 journalists in the last year.

This career path isn’t going to work in the future. Newsroom staffing levels today are 55% of what they were eight years ago. While elimination of high-paying jobs has created some entry-level opportunities, the path for career journalists will increasingly be up and out into the freelance world where they will have to compete on speed, agility and business skills.

The business side of the equation is where the greatest disconnect occurs. Journalism schools mostly disdain the moneymaking side of the house. Students are taught that revenue is somebody else’s job; they are in the position of delivering information. In fact, the ad sales department is often portrayed as a den of evil, full of conniving capitalists who only want to bastardize the product journalists so lovingly nurture.

The failure of the economic model is the reason most news organizations are in such trouble today. Journalists are mostly unprepared to help. The church-state separation that is intrinsic to the culture of newsrooms prevents them from understanding why the business is in trouble. Most journalists I have met still show alarming ignorance of the business that pays their salaries.

I’ve written before about the need for young journalists to develop entrepreneurial skills. This doesn’t necessarily mean going door-to-door selling ads, but it does mean understanding how advertising works, how audiences can be monetized and how diversified revenue streams can build a sustainable income. These topics are distasteful to veteran journalists, who have never had to worry about such things. Unfortunately, they’re very relevant to the students they teach.

Journalism schools need to become small business foundries if they are to continue in their mission of preparing students for the real world. Unfortunately, most of them change slowly, and the rapid decline of media institutions has caught them flat-footed. They need to move quickly to adjust their curricula in order to avoid sending their students unprepared into the tumultuous job market that awaits them.