By Paul Gillin | October 1, 2013 - 7:44 am - Posted in Business News, Newspapers, OnlineMedia

Lloyds List 1741We usually focus news of comings and goings on this site solely on major metropolitan dailies, but we’ll make an exception for Lloyd’s List, which claims to be the world’s oldest daily newspaper and which is going out of print at the end of this year. The paper, which originated as a list of ship arrivals, departures and casualties that was posted on the wall of Edward Lloyd’s coffee shop in London in 1734, canvassed readers in June and discovered that fewer than 2% of them read the print edition any  more. Management sounds upbeat about the transition to all-digital, which has been in the works for several months. “The digital approach offers new avenues and opportunities to innovate an up-to-the-minute service that offers in-depth news and information on every aspect of shipping,” said editor Richard Meade in a quote in the Guardian. See the links below for additional coverage. Jolly good.

For you history buffs, Google has digitized about 85 years of Lloyd’s List, beginning in 1741.

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By Paul Gillin | September 28, 2013 - 10:45 am - Posted in Business News, Newspapers

To no one’s great surprise, management and leaders of four unions at the  Newark Star-Ledger reached an 11th-hour agreement on a new four-year contract that will save the 171-year-old daily from shutdown. After two weeks of intense negotiations, which culminated in a 48-hour around-the-clock bargaining session, negotiators said they reached a deal that involved sacrifices on each side. No details were released, but Ed Shown, president of the Council of Star-Ledger Unions, said management got most of the $9 million in cuts it was seeking. Union members will vote to ratify the contract next week.

Star-Ledger executives had little to say, but in reading between the lines of what union negotiators said, we can assume that the unions got the worst of this deal. Management’s original proposal had demanded a 55% cut in wages and benefits, which union leaders said was outrageous. Management sought $9 million in annual savings on labor expenses, saying that was equivalent to the amount it could save by outsourcing production entirely. The Star-Ledger lost $19 million last year and is on track to lose that much money again this year. It’s hard to understand why cutting those losses in half is considered an accomplishment, particularly since owner Advance Publications has been hacking away at expenses across its portfolio of titles.

We expect the drama isn’t over yet in Newark. With an unemployment rate of 10.2% and household income that’s one-third lower than the national average, the economy in New Jersey’s largest city doesn’t offer the paper’s management a lot of options.

 

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By Paul Gillin | August 19, 2013 - 9:50 am - Posted in Business News, BusinessModel, Local news, Newspapers, Paywalls, Solutions

The San Francisco Chronicle is removing its paywall after just four months and the Dallas Morning News plans to follow suit. Observers are speculating that this could be the end of the nearly two-year-old binge that has seen more than one-third of U.S. newspapers erect barriers to their online content.

Neither company is abandoning the idea of gated content entirely, but both are reportedly pursuing new models based on premium services. That’s basically a reversal of the paywall formula. The premium-service model is aimed at monetizing a small part of the audience while a paywall denies service to everyone except those willing to pay. We think this amounts to a concession from both papers that paywalls are ineffective in their geographies.

San Francisco is a particularly tough place to make a paywall work, with its abundance of media and its tech-savvy audience. Also, the Chron isn’t exactly The New York Times of the west coast. In our view, it was a mediocre newspaper before cutting more than half its staff over the last few years.

All the Chronicle content will now be available on SFGate.com. What content will remain paid? A vaguely worded message from the new publisher and president said the paid SFChronicle.com site “will continue to provide readers with an online version that replicates a newspaper experience and reflects the changes in the news throughout the day.”

Replicating the newspaper experience online is a non-starter. We assume they’re working on better ideas.

The premium content model that the Chron and Dallas Morning News reportedly hope to implement is difficult to pull off. It has worked for ESPN, Cooks Illustrated, Consumer Reports and a number of financial publishers, but we’re not aware of any successes in the general news market. The premium model works best with investor audiences or those who are passionate, affluent and have an insatiable thirst for knowledge about a topic. None of those characteristics applies to local news.

It could be that San Francisco and Dallas are just early indicators that paywalls are not a good strategy for most newspapers. If so, we’ll know soon. Many publishers are coming up on their first year of experience, and they’ll have both the data and the experience to make a decision.

Bezos-Watching

Jeff Bezos

If you need any further evidence that Jeff Bezos is the Lady Gaga of media-watching, look no further than this roundup on Nieman Journalism Lab. Everyone is speculating about what the Amazon.com founder plans to do, but Bezos himself is offering few clues. We didn’t read everything Nieman’s Mark Coddington found, but we did peruse a few analyses.

A profile in The New York Times highlights the paradox of Bezos’ interest in being a media magnate, given that Amazon is an extremely secretive company. “There are fewer leaks out of Amazon than the National Security Agency,” write David Streitfeld and Christine Haughney.

What little we know of Amazon comes from its famously vague quarterly analyst calls. Outsiders are rarely permitted to tour its buildings and even its own executives don’t know where all its data centers are located. Bezos himself makes few public appearances and keeps a low profile in his hometown of Seattle.

So why does he now want to carry the First Amendment flag in our nation’s capitol? Ken Doctor sees three reasons why he and other super-rich people are buying into newspapers: Low valuations, a call of duty and the hubris to believe they can turn around an industry everyone thinks is dying. Also, no one else is willing to do it. “The few remaining people with the stomach to run daily newspapers have bank accounts with at least nine zeros after a non-zero numeral of some kind,” he writes at Nieman.

Kudos to Doctor for reminding us of EPIC 2014, a vaguely creepy spoof video made in 2004 that forecast the emergence of a media Death Star created by the merger of Amazon and Google in 2014. Some of the parallels are striking (watch below).

Writer and futurist Tim Carmody says he’s studied Bezos for years and believes the Amazon founder is driven by a fascination with the future and the urge to leave something behind other than the company he runs. Carmody also has interesting details about the sale of the Post, which appears to have been more a coincidence than a plan. “By all accounts, Bezos did not go looking to buy a newspaper,” he writes. “When he was approached by his friend Donald Graham about buying the Post, he initially begged off considering it.” It was Graham who pushed the deal more than Bezos sought it.

A few consistent threads run through the accounts we read. One is that Bezos is intensely focused on customer experience. The Times relates the story of how Amazon stationed ambulances outside its Allentown, Pa. warehouse during a heat wave rather than turn up the air conditioning or reduce the workload for its employees. Meeting shipping deadlines was more important than the health of its notoriously overworked fulfillment staff.

A second is that Bezos is a long-term thinker who aims high. Whereas many entrepreneurs would have been satisfied to build the world’s largest online bookseller, Bezos has set his sights on becoming an infrastructure powerhouse that can deliver goods and services physically or virtually anywhere in the world. The newspaper industry could benefit from this kind of vision right now.

The third is that Bezos is an unpredictable experimenter who disdains the status quo. It’s a given that he will ruffle feathers among his conservative colleagues in the publishing ranks. Again, not a bad thing.

There are also conflicts of interest that will merit scrutiny. The biggest is Amazon Web Services, a contract data center operation that hosts thousands of large research and commercial entities, including more than 500 government institutions. It’s Amazon’s fastest-growing business, and the government market is a huge opportunity.

Will Bezos be able to balance his dual role as free press agitator and major government contractor? Most people seem to think so. As the Times’ headline summed up:  “Expect the Unexpected.”

 

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By Paul Gillin | August 9, 2013 - 7:59 am - Posted in Business News, Local news, Newspapers

Several news outlets are reporting that AOL will shut down one-third of its Patch network of hyperlocal news sites and lay off about 300 people today. Newsday says AOL will close about 300 of its 900 sites and TechCrunch says layoff totals could reach 550. It’s unclear how large the Patch workforce is, but the last figure we saw was about 900.

A lot of reasons are being cited for Patch’s failure to get traction, ranging from competition from local newspapers to a crummy content management system. “Patch has gone from being free-wheeling to overly controlling with its local editors and then back and forth between the two,” writes TechCrunch’s Alex Wilhelm.

Our local Patch is run very well. Susan Petroni, a former daily newspaper reporter, covers the town so efficiently on a shoestring budget that her Patch site regularly scoops the local daily newspaper. However, the site is an unholy mess to look at, with ads and editorial content intermingled with each other seemingly at random. And Petroni’s discipline may not be typical. See  the comment titled “A PATCH INTERN’S STORY” on Romenesko for a more cynical view.

Patch has been dragging down AOL earnings since it launched, and CEO Tim Armstrong has pledged to make the network profitable by the end of this year or shut it down. It looks like this is a last-gasp effort to break even.


Update: Bloomberg BusinessWeek reports that AOL will replace the head of the Patch divison and close or find partners for 400 of its community websites. The exact number of layoffs is still undetermined, but it appears it will be at the high end of the 300-550 positions that were rumored earlier today.

 

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By Paul Gillin | August 6, 2013 - 11:51 am - Posted in Business News, BusinessModel, Journalism, Newspapers, Solutions
Image representing Jeff Bezos as depicted in C...

New media tycoon Jeff Bezos (Image via CrunchBase)

History may well mark the typically somnambulant first days of August as the week that forever changed the U.S. newspaper industry.

In a stunning sequence of events, two young billionaires with no media experience bought iconic East Coast newspapers and affirmed their commitment to helping to rejuvenate an industry that has been in freefall for the past seven years.

The Washington Post Co. announced yesterday that Amazon.com founder Jeff Bezos would buy the company’s namesake newspaper for $250 million, ending eight decades of stewardship by the Graham family. The news came just three days after billionaire commodities investor John Henry was announced as the new owner of the Boston Globe.
The news continues a trend toward deep-pocketed investors making substantial investments in news organizations, shoring up depleted reporting staffs and experimenting with new business models. Value-investing icon Warren Buffett has snapped up more than 60 dailies and says he plans to buy more. In Southern California, greeting card magnate Aaron Kushner and his partners at Freedom Communications are turning heads with an aggressive investment strategy at the Orange County Register that is showing early signs of bearing fruit.

This is the best news the newspaper industry has had in years, and we think the management styles of these investors symbolizes the kind of long-term view that the business badly needs.

Long-Term Vision

Why Billionaires Are Trying to Rescue the Newspaper Industry

Let’s look at the two newest arrivals on the media scene. We’ve watched both Henry and Bezos with interest for years, but for different reasons. Henry is the white knight who rescued our hometown Boston Red Sox from a tumultuous management struggle and brought the town its first World Series victory in 86 years. Bezos is an Internet pioneer who steered his company to greatness in a turbulent industry and forever changed retailing. The two men made their fortunes in very different industries but share a commitment to long-term vision and a belief in fundamental values.

Fenway Park, home of the Boston Red Sox, Bosto...

When Henry took over the Red Sox in 2002, the team was actively negotiating to abandon Fenway Park and build a new stadium in the suburbs. The new owner promptly scuttled the negotiations and redoubled his investments in the team’s home field, shoring up the infrastructure, adding seats and experimenting with new revenue sources that would keep the team competitive with other big-market players. The strategy has paid off. The 101-year-old stadium is a huge tourist draw, and high ticket prices combined with innovative promotions have enabled the team to support a payroll and farm system that consistently keeps it at the top of the American League East. Fans complain about ticket prices, but they can’t complain about the team’s performance on the field.

Bezos was one of hundreds of online booksellers that jumped on the early Internet. He successfully steered Amazon through the ravages of the dot-com crash and intense competition from brick-and-mortar retailers to make it a $61 billion powerhouse that has changed the way Americans shop. Bezos has kept his focus on core principles like personalizing the shopping experience and delighting customers. He has resisted the urge to chase short-term opportunities and focused instead on big picture problems like chipping away at the cost and frustration of shipping. See Michael Moritz’s profile for a financier’s account of Bezos’ brilliance.

Amazon made some early missteps, such as investments in busted Web 1.0 startups like Pets.com and Kozmo.com, but it has executed almost flawlessly since the end of the dot-com bubble. It has sacrificed profitability for growth, but that hasn’t stopped the stock from rising ninefold over the last five years. With Amazon still under-performing in international markets and just beginning to crack the business-to-business opportunity, there is reason to believe its best days are ahead of it.

Rule-Changers

Long-term thinking as exemplified by Henry and Bezos is exactly the tonic the newspaper industry needs. Its woes are rooted in a merger binge that started in the late 90s, fueled by an appetite for short-term profits. As online competition has eaten away the circulation and revenue base of the U.S. industry, most publishers have responded by cutting costs, raising prices and hoping for the best. But you don’t transform an industry by cutting costs. You do it by changing the rules. Bezos and Henry are rule-changers.

Editor & Publisher reported last week on newspapers that are successfully experimenting with new revenue sources. We have long maintained that growth opportunities exist  for publishers in local markets if they can break their advertising addiction and partner with businesses in new ways. Wouldn’t it be nice to see the Post and the Globe blazing these trails?

It’s tempting to dismiss these relatively small investments (the $250 million purchase price of the Post represents just one percent of Bezos’ net worth) as low-risk bets by people with money to burn, but we think there’s more to it than that. Wealthy entrepreneurs know that healthy, independent media are essential to democracy and to capitalism. Media watchdogs keep government and regulatory excesses in check and ensure that markets operate predictably. They also provide business intelligence that isn’t easily available elsewhere. Both Henry and Bezos are avid newspaper readers.

We have no reason to believe that either of these new media owners has any plans to try to wring cash out of a dying business. On the contrary, Henry was quick to issue a statement affirming his belief in the importance of a healthy Globe to the region. Bezos is leaving the current Post leadership in place and said no layoffs are planned. “The values of the Post do not need changing,” he said. “The duty of the paper is to the readers, not the owners.”

Some people have speculated in recent years that the salvation of the newspaper industry would be donations from foundations and wealthy investors. Perhaps there’s some truth in that, but donations are a backhanded way of saying that a cause can never support itself. Warren Buffett, John Henry and Jeff Bezos all have their own philanthropic interests, but we don’t believe they see these newspaper investments as charity. They see value, growth and ultimately something  that has eluded publishers for the last several years: profit.

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By Paul Gillin | August 3, 2013 - 10:08 am - Posted in Business News, Local news, Newspapers

John W. Henry

Four years of turmoil appear to be nearing an end in Boston with news that billionaire financier and Red Sox owner John Henry will buy the Globe for $70 million.

The deal came quickly after Henry’s bid to purchase the Globe through a partnership was rejected early this week. On Thursday, Henry said he would go it alone. Hours later, the deal was done.

The news is good for the paper and for the city, both of which struggled through an agonizing showdown between The New York Times Co., which owns the Globe, and the newspaper’s unions in 2009. The Times Co. threatened to shut down the Globe at the time unless significant concessions were made, including the end of a lifetime employment deal that had been extended to more than 100 Globe employees in the 1990s.

After a two-month standoff, the unions caved in and agreed to terms that were actually less favorable than the Times Co.’s original offer. Since then the Globe has reportedly stabilized itself financially. The owners announced that the paper was for sale early this year. The $70 million sale price actually indicates some appreciation in the Globe‘s value over the past four years. When the paper was originally put up for sale in 2009, the Times Co. was reported to be considering offers of as little as $25 million. It paid $1.1 billion for the Globe in 1993, but has extracted more than the original purchase price in cash over 20 years.

Henry is somewhat of a local hero in Boston. A hedge fund manager with a brilliant analytical mind, he purchased the Red Sox in 2002 with two partners (one of which was The New York Times Co.) and put in place a new front office that led the team to its first World Series victory in 86 years in 2004. Henry also has stakes in  the New England Sports Network, the Liverpool Soccer Club and the Roush Fenway NASCAR racing team. He lives in nearby Brookline.

His decision to keep the Red Sox in Fenway Park instead of moving to a larger and more lucrative new stadium has been controversial, but the team’s on-field performance has quieted the critics. Henry has shown more of a tendency to invest than to cut costs. In a prepared statement, he said the region “needs a strong, sustainable Boston Globe playing an integral role in the community’s long-term future.”

Henry also gets Boston.com and BostonGlobe.com in the deal. Boston.com was one of the first newspaper-owned websites to feature a strong regional focus. However, it lost its uniqueness as the Globe‘s partners in the joint venture fell away over the years. The Globe relaunched Boston.com last year with a stronger Boston voice while breaking out BostonGlobe.com as the newspaper’s online flagship and its first paywalled property.

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By Paul Gillin | August 2, 2013 - 8:10 am - Posted in Best/Worst, Education, Future of Journalism, Journalism

Journalism Degree.org  just posted a list of 100 Exemplary College Newspapers for Journalism Students. The ranking isn’t in any particular order and there’s no explanation of what methodology (if any) was used to assemble the list, but we clicked around to some of the candidates are were impressed to see that good journalism is being nurtured on college campuses around the country. If you or someone you know is considering journalism school, consider this list because campus newspapers are where you’ll be practicing a lot of your craft.

 

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Freedom Communications' Aaron Kushner (photo by Jebb Harris, Orange County Register).

Freedom Communications’ Aaron Kushner (photo by Jebb Harris, Orange County Register).

California newspaper defies industry wisdom to stay alive – and prospers” declares The Guardian in an analysis of the Orange County Register‘s death-defying experiment under the leadership of a former greeting card executive with no background in newspapers.

Aaron Kushner (right) and his partner, Eric Spitz, formed Freedom Communications and bought the Register a year ago. They then stunned the shell-shocked newspaper industry by declaring their intention to go completely against the prevailing practice of layoffs and cost cuts. They would invest in print, double their reporting staff,  increase subscription prices and  put up one of the industry’s most rigid barriers to online access.

They’ve kept their promise. Newsroom staff is up to 360 from a low of 180 when Freedom took over. The Register routinely publishes daily issues that are nearly twice the size of its nearby rival, the Los Angeles Times. Page counts have been increased by half, color expanded and even the quality of paper improved.

Daily circulation is holding steady and total circulation is up sharply if you include the 28 weekly papers the company has invested in over the last 12 months. The Register has hired investigative reporters and lured newspaper wunderkind Rob Curley out of exile to rejuvenate the editorial product with a focus on local news and practical advice.

Freedom is showing particular sensitivity to  local businesses. One promotion late last year gave each reader the opportunity to contribute $100 worth of advertising to his or her favorite charity. Some 1,300 nonprofits benefited from the program.

Kushner thinks the time is right to place a big bet on print. “Never before and never again will so many people be in the sweet spot of newspaper readership as the next 20 years,” he told the Guardian. “It’s called the baby boom.”

There’s no doubt the Register is growing, but is it prospering as the Guardian‘s headline proclaims? The jury is still out on that.

Ken Doctor ran the numbers back in January and concluded that the Register may be able to cover its estimated $9 million+ in additional annual costs through higher subscription fees, but that the advertising market is in long-term decline and there’s little that any newspaper can do about that. Doctor contrasted Kushner’s growth strategy with the slash-and-burn tactics being applied by Advance Communications and said we’ll know in about two years whether growth or contraction is the recipe for success. Clearly, we’re pulling for Kushner.

Writing on CJR.com in May, Ryan Chittum said the odds are against Kushner, but noted that if he fails, “he will have gone down investing in journalism.” Chittum also has some revealing stats about the profitability of newspapers, which remains quite strong. When newspapers shut down, it’s because they can’t afford the cost of their debt, he says. Most are still in the black on an operations basis, which makes Advance’s frequency cutback strategy all the more puzzling.  It also suggests that value investor Warren Buffett  isn’t a billionaire for nothing.

Kushner says he’s in it for the long haul and he now has his eyes on a bigger prize: the L.A. Times. Tribune Co. is going to be looking to unload some assets now that it has exited bankruptcy, and many observers believe the Times will be on the auction block. If Kushner buys it, he can all but own the southern California market. Regardless of the  current fortunes of daily newspapers, having a  near-monopoly on even a shrinking media business in the country’s largest media market has to be attractive.

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By Paul Gillin | June 27, 2013 - 5:00 pm - Posted in Business News, Layoffs, Newspapers

The ax is falling again at Advance Publications.

The company that cut back frequencies in rapid succession at its once-daily newspapers in New Orleans, Syracuse, Cleveland and, most recently, Portland,  is now threatening to shut down the Newark Star-Ledger unless it wins substantial concessions from the paper’s unions.

Publisher Rich Vezza  said the Star-Ledger, which is New Jersey’s largest daily, lost $19.8 million last year and will lose about the same amount this year this year. It’s threatening to outsource printing and production unless unions representing pressman, mailers, engravers and machinists  make significant concessions by a September 27 deadline.

A union executive said  union members are willing to negotiate but that the Star-Ledger has shown little interest in meaningful proposals. Ed Shown, president of the Council of Star-Ledger Unions, said the latest management proposal demanded a 55% cut in  wages and benefits.  The unions issued a joint statement  challenging management’s $19.8 million loss  estimate.

Vezza said the frequency cutbacks implemented at other Advance titles aren’t an option here. If an agreement isn’t reached, the paper will close at the end of the year, presumably idling its 771 employees. “This is not a threat. This is reality,” he told Philly.com.

This is the second time management has threatened to shut down the Star-Ledger. It used a similar tactic to bring significant concessions from unions in 2008, when it also laid off 40% of its newsroom staff.  Five years ago the paper employed 330 editors, but that number has since fallen by nearly half.

Other publishers have used closure threats of closure to pressure their unions. In 2009 The New York Times Co. forced major concessions at the Boston Globe and Hearst Corp. came within a few weeks of  shuttering the San Francisco Chronicle before unions gave in.

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How are the experiments in reduced frequency that began in Detroit more than four years ago and have since spread to Cleveland, Syracuse, New Orleans and now Portland working out? Not so well, says author and J-school professor John K. Hartman.

Writing on Editor & Publisher‘s website, Hartman says the most from seven-day to three-day home delivery has caused massive subscriber flight and forced publishers to quietly backtrack. Newhouse, which is cutting frequencies across its line of dailies, has already had to introduce a new tabloid to produce on the days the Times-Picayune doesn’t publish.

Hartman blames greed. He accuses Newhouse of sabotaging journalism at the papers it own in the name of maximizing profits for the Newhouse family.

Newhouse is saving big money by eliminating news staff, eliminating office staff, eliminating delivery staff, and eliminating delivery expenses. In other words, Newhouse is getting out of the daily newspaper business and into the tri-weekly advertising shopper business.

We didn’t know this, but Hartman says the Detroit Free Press and News have re-introduced daily delivery to about 15,000 homes. The experiment, which was positioned as a “bold transformation” in December, 2008,

lost so many readers they had to beef up their non-delivery-day newspapers and restore limited seven-day home delivery. The Free Press now offers home delivery to 15,000 households through independent contractors the other four days a week. Nonetheless, hundreds of thousands of readers of the print products were lost in Detroit, and the projected switch of readers and advertisers to digital sites has not taken place.