Meet Bobbie Carlton. She’s come up with an idea that every newspaper publisher in New England should have had but didn’t. Her success demonstrates how news publishers can reinvent themselves and survive – maybe even thrive – but only if they have completely rethink what they do.

Carlton isn’t a publisher. She’s a career public relations professional who set out a little more than a year ago to figure out a way to drum up new business in a dismal economy. She knew that there were still plenty of innovative companies in the area that were starved for visibility. Finding investors and customers in a crummy economy was a time-consuming, trial-and-error process. The few conferences that were available for such purposes were either expensive or subjected applicants to long and seemingly arbitrary approvals processes.

Carlton hit on the idea of a cheap, frictionless approach she called Mass Innovation Nights. The events would be free to everyone. Entrepreneurs could show their stuff and hope to catch a big break.

Carlton borrowed meeting space from a local museum.  She partnered with Dan Englander of High Rock Media to build a website and a Twitter account and started promoting Mass Innovation Nights entirely through online word of mouth.  There was no hype and no inflated expectations. If the event bombed, then attendees got what they paid for.

Only the event didn’t bomb. MassInno, as the affair is now known, is a raging success, with exhibitors now competing for limited space. The most recent meetup was tweeted more than 600 times and drew more than 400 attendees. Carlton is toying with the idea of syndicating the idea across the country.

Today, Carlton has so much business coming in from startups that were boosted by Mass Innovation Nights that she’s having to refer work elsewhere. That makes her a popular person in the depressed local PR economy. Partner High Rock is booming, too.

Why was one woman able to exploit a simple idea at almost no cost while media institutions with hundreds of employees stood by and watched? Because newspapers didn’t think it was their job. They believed they were in the advertising delivery business, not the business of growing the local economy. Newspapers that continue to think this way will shrivel and die over the next few years. But there is a path to salvation. It’s in doing what Bobbie Carlton is doing on a grand scale. But how many publishers are willing to make the sacrifices to seize that opportunity?

The Folly of Paywalls

Newspaper publishers are confronting their current business challenges in the wrong way. They’re trying to battle online competition by becoming more like their competitors, building massive online presences to serve global audiences when their advantage is inherently local. They’re also hyper-focused on a source of revenue – advertising – that will only become more competitive and less profitable in the future. They need to change the rules.

The eyes of the industry are currently trained on The New York Times, which is trying to re-bottle the evil genie it released 15 years ago when it elected to give away its content for free. The Times’ paywall experiment will be modestly successful because it is The New York Times. Publishers in Baltimore, Dallas, St. Louis and hundreds of other cities will be unable to exploit the idea, however, because they lack the Times’ brand and international reach. Paywalls are a waste of time.

Instead, publishers should concentrate on diversifying their revenue streams away from advertising and into local business services that promise stability, growth and a future. This is a market in which they have a natural advantage. Small business is the one great untapped revenue opportunity left in America, which is why giants like American Express and Bank of America are practically throwing money at the market. But these global companies lack the local connections and the feet on the street to truly become partners in small business success. Local newspapers have that advantage.

Most major metro dailies have long regarded local business advertising as the cherry on top of the sundae of display contracts from national advertisers and department stores.  Local businesses fueled the classified section, but counted for only a small part of the total revenue picture. Now national advertisers are marketing directly to customers, classified advertising has collapsed and local businesses are publishers’ only hope for a future.

The Local Opportunity

Look at the merchants in your local community. Most don’t know the first thing about marketing. Few are even very good at managing their businesses. Marketing is tough for little guys. They spend their dollars on a mishmash of coupons, flyers, Yellow Pages listings, classified ads and occasional radio and television.  Few of them track ROI or have any means to assess the performance of these investments. Online, they’re practically invisible. They know nothing about search marketing or customer relationship management (CRM). In short, the kinds of sophisticated analytics and tools that big companies use are out of reach to mom-and-pops. Lots of businesses want to market better, but they don’t have anyone to teach them how or give them a cost-effective platform to do so.

News organizations can be that platform. They can start by delivering a basic package of marketing and business services on a subscription basis and expand as local conditions dictate. They can potentially manage many of the overhead and backroom activities that sap small business owners’ time. Here are five ways news organizations can monetize this opportunity. There are plenty more where these come from:

Website Development – Few small businesses know anything about the Web.  Outside of restaurants and entertainment providers, most have websites that are little more than online brochures, if they have websites at all. Their sites aren’t optimized for search, don’t deliver calls to action and have no means to retain visitors as subscribers. Forget about analytics. If small business owners want to adopt new platforms like blogs or Twitter, they either pay outside consultants or figure out the tools through extensive trial and error.

This is a huge opportunity for news organizations. These companies have long-term relationships with business customers, local credibility and expertise in publishing. They can deliver advanced online features like e-commerce, e-mail marketing, search optimization and analytics at low cost by leveraging economies of scale. There is no reason why the local newspaper publisher can’t also be the dominant provider of online services to local businesses.

Affinity Programs – Every hotel, airline, national retailer and supermarket chain has a loyalty program these days.  The reason is simple: they work. Customers who carry affinity cards typically buy between 10% and 30% more product from the merchants who offer the programs than from those who don’t. Unfortunately, few small-business owners have the option of participating.  The administrative overhead is high and customers won’t carry cards for every merchant in their community. News organizations could set up these plans as cooperatives, allowing groups of noncompetitive businesses to participate at a modest cost.  Commercial grade analytics could be bought and scaled to provide reporting that demonstrates the return to business owners.  Revenue would come from the fees paid by the participants and potentially even subscribers to premium buyers clubs.

Events – Lots of small businesses would like to use event marketing to share their expertise and meet new prospects, but if you’ve ever tried to stage a promotional event, you know what an ordeal it is. The details and hidden costs can be overwhelming and few small businesses have the means to manage the leads that result.  Again, publishers can come to the rescue.  By building expertise at event management and applying it to different businesses within the community, publishers can provide targeted thematic events (for example, outdoor recreation or pet care) at a scale and cost that makes them affordable to local businesses. They can gather and manage leads that result and create marketing programs that optimize them for their customers. The news organization becomes a business partner and consultant, not just an outlet for advertising. There’s even the possibility of generating fees from event attendees in some cases.

Value-Added Advertising – Craigslist has won the war for the low end of the recruitment advertising market.  Publishers need to stop mourning the loss of this commodity business and move the bar higher. Christopher Ryan and Steve Outing published a manifesto for competing with Craigslist more than a year ago. Unfortunately, few publishers seemed to have noticed.  We won’t try to reinvent their wheel; ReinventingClassifieds.com has some great ideas publishers can apply to take advantage of their local reach and marginalize Craigslist.

For example, they can offer real estate agents or car dealers video walk-throughs of the products they sell. Or they can provide peer recommendations like Angie’s List (more than one million members at $35/year). They can tweet ads and push them to mobile phones. They can even provide transaction and fulfillment services that Craigslist can’t. In short, they can do all the things that Craigslist doesn’t do and build these features into a monthly subscription service that makes them all but invisible to the customer.

Transaction Fees – If you’ve ever used Ticketmaster, you’ve experienced the sticker shock of discovering that those $40 Nine Inch Nails tickets carry an eight dollar “convenience fee.” But you pay it because it’s easier than standing in line for two hours. Publishers can tap into that revenue stream.

The local garden show probably isn’t interested in ticket brokering. It may outsource the task to TicketMaster for the sake of convenience but it would really be interested in using a local organization that could combine fees with demographic marketing, behavioral targeting and amenities like e-commerce. Who better to deliver that experience than a service provider that knows the local community? Do you think restaurant or hair salon owners would like to have automated scheduling? The newspaper could provide that, too, with fees from the buyer, the seller or both.

Bottom Line

The five scenarios outlined above are just a sample of the opportunities available to local publishers once they stop thinking of themselves as advertising vessels and become partners in the success of local businesses. At their core, newspapers are marketing tools. Instead of simply providing advertising space, publishers can become marketing consultants, value-added resellers and service bureaus. They can offer the kind of expertise and analytics at a price that mom-and-pops can finally afford.

There are many more possibilities: Publishers could offer accounting, tax preparation, creative services, executive recruitment, business telephony, technical support, facilities management, order fulfillment and so on. Where they lack in-house expertise, they could partner with local providers under an approved-vendor program. Does this mean publishers might compete with their prospective advertisers? Sure, but how many of those companies are advertising now, anyway? Members of the approved-vendor program could potentially buy bigger schedules from the publishers who feed them business.

Back to the Future

Few publishers will choose to pursue the business model outlined here. It’s too hard. Departments such as circulation will need to be downsized or eliminated. Sales people must be retrained or released. Experts must be hired in new areas and partnership networks will have to be formed. New services will have to be created and priced, software licenses acquired and technology infrastructure put in place. These changes are painful, but reinvention isn’t pretty. It’s easier to sit and hope that paywalls will succeed in letting you do what you’ve always done.  Good luck with that.

If this transformation sounds radical or risky, consider that it’s already been done. More than 20 years ago, many computer companies faced the same kind of near-death experience that confronts newspaper publishers today. Their core hardware products, which generated 80% margins, were suddenly assaulted by cheap, standardized components. Many of these companies died or were acquired, but a few, like IBM and Hewlett-Packard, took the strong medicine that was necessary to transform themselves. Today, IBM derives more than half its revenue from services, a revenue stream that barely even existed 20 years ago. Its 2008 revenue was a record $103 billion. HP made the shift even earlier. Twenty years ago, it was less than one-fifth IBM’s size. In 2009, it was bigger than IBM.

Thanks for sticking with us through this long essay. Now tell us what you think. Are we off the wall or could business services be the prescription that nurses this dying industry back to health?

Has the newspaper advertising market contracted enough and publishers adjusted their business models enough to make subscription revenue a meaningful contributor to the business? Recent financial results indicate that the industry may be at an inflection point that could form the basis for meaningful change.

Ken Doctor has been analyzing the changing shape of the newspaper industry on his Content Bridges blog, which should be on every newspaper executive’s reading list. We shared a panel with Doctor a few months ago when he said that the industry would probably bottom out in the second quarter and enjoy a 12- to 18-month reprieve before  business began to slide again. So far, he’s right on the money.

Analyzing the latest round of financial figures emanating from publishers, Doctor sees clear signs of a bottom. Not a soft landing, mind you, but evidence that the gut-wrenching death spiral has begun to flatten out. He notes that the latest results showing continuing year-over-year revenue declines of 25% to 30% would have been cause for panic a year ago, but we’re so used to the bad news now that we can actually see a silver lining in the slowing rate of descent.

The encouraging news, Doctor notes, is that publishers are beginning to speak of light at the end of the tunnel while actually beginning to pay down the debt that has been threatening to crush them. McClatchy trimmed $100 million worth of debt this quarter and the New York Times Co. (NYT) has reduced its debt by nearly 25% this year. If these companies are to have any chance of growing again, they must get out from under this burden, so this progress, while not remarkable, is a start.

Assuming we’re reaching some kind of stability, what happens next? Most likely, we’ll see some experimentation with alternatives to the ad-heavy revenue model. In last week’s earnings call, NYT CEO Janet Robinson all but confirmed that the Gray Lady will set up a pay wall in the near future. Even though Times Select was a short-lived disaster, enough new models for monetizing subscriptions have emerged that the Times may be ready for another go.

Another factor is that circulation revenue is actually showing more stability than advertising revenue during this downturn. Check out the analyses by Ryan Chittum on CJR documenting that last week’s McClatchy results showed 5% growth in circulation revenue. He also makes the remarkable observation that, following a 1.5% increase in circ revenue in the second quarter, NYT Media group now derives almost as much money from circulation as from advertising:

“In the second quarter, the Times brought in $185 million in advertising revenue, while it reaped $166 million from its subscribers. Three years ago, those numbers were $316 million and $156 million respectively. The ad-to-circ revenue ratio at The New York Times has gone from two-to-one to one-to-one. Stunning.”

True that. Part of the reason the ratio has changed, of course, is that advertising revenues have fallen so far. But if, as Ken Doctor points out, publishers are learning to run much tighter operations, then the possibility of a balanced circ/ad revenue model becomes more real.

That doesn’t mean an answer has been found. Writing in The Wall Street Journal, itself a testament to the viability of reader revenues, Brett Arends points out that NYT bonds are currently yielding 11%, which is in junk bond territory. In other words, investors still think there’s a high likelihood that the Times Co. will default on its debt. Like many other observers, Arends sees no hope in online advertising revenue as salvation:

“The Times’ websites had about 52 million online readers in the first quarter. Internet revenues? Just $78 million. That’s 50 cents per reader per month. That’s not even a box of tic tacs. Company operating costs during the same period: $654 million. Payroll alone was $145 million.”

Ugly? Yes. But it’s at least an acknowledgement that online sales won’t solve the problem. Online ad inventory is continually expanding and CPMs have declined steadily for the last five years. There’s no reason to believe that trend will reverse itself, so publishers have to take a more serious look at reader revenues. A number of new models have emerged recently, including Alan Mutter’s ViewPass and Martin Langeveld’s CircLabs. Meanwhile, some half-serious schemes to regulate the proliferation of free content through licensing or legal means have also begun to spring up. Jeffrey Neuburger outlines a few of these on MediaShift; we don’t think any of these proposals holds water on its own, but they are collectively an indication that all is not yet lost in the battle to derive value from intellectual property.

To paraphrase Ken Doctor, publishers may finally be due for a breather. They have a chance to take stock of their new organizations and see if there’s a chance to grow the businesses again, or they can go back to trying to wring historic profits out of their operations. If they choose the latter, they will find themselves once again caught in the death spiral so eloquently described in this recent brief essay by Seth Godin. Let’s hope the past two years has at least taught them the dangers of staying with the status quo.

It appears that some leading news titles are finally throwing in the towel on the circulation wars.  The New York Times just announced that it will hike its single copy price to $2 on June 1, a 33% increase. Outside of the New York area, the Sunday Times will now cost a whopping seven dollars for home delivery. Several other papers have also increased prices recently, including the Washington Post, Tampa Tribune and Dallas Morning News.  These papers have effectively doubled their newsstand prices in the last two years.  Newsweek just rolled out a new design and cut its circulation by half while increasing cover prices.

What’s going on?  We suspect the publishers are finally beginning a sunsetting strategy for their print editions.  By driving up circulation prices, they are effectively winnowing out their low-value customers.  Price increases will probably come fast and furious in the future. Each will cause circulation to fall until a new floor is reached. Expect circulation declines to quicken as more newspapers adopt the strategy.  Declines have been running in the 6% to 8% range per year for the last two years, but will probably increase if more papers follow the lead of the Times and Journal.

In effect, these newspapers are giving up on print. They are harvesting their most loyal readers and shifting their investments to new platforms.  With the average age of a daily newspaper reader now standing at over 55 years, publishers can expect to derive print circulation revenue for about another decade. Of course, it may not be economically viable to stick with a daily schedule that long, but that readership can be milked for some time to come.

The harvesting strategy makes sense economically, strategically and environmentally. It’s pointless to throw good money after bad chasing new readers with deeply discounted subscriptions that are canceled after three months.  Loyal readers are more attractive to advertisers than bulk circulation and can command higher CPMs. And this means fewer papers going in landfills.  Treating print as a cash cow enables publishers to plow whatever profits are left into new platforms.  Their companies will grow smaller over time, but at least they’re more likely to have a future.

Miscellany

Dan Froomkin begins a four-part series at Nieman Journalism Lab on a prescription for the news industry.  He argues that the bland, expressionless voice that journalism organizations have adopted for the past 40 years has undermined their appeal. “We stifle some of our best stories with a wet blanket of pseudo-neutrality. We edit out tone. We banish anything smacking of activism. We don’t telegraph our own enthusiasm for what it is we’re doing.” In part two, he argues for putting passion back in news reporting.

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The Wall Street Journal is running an interactive map that shows “adverse events at the top 100 newspapers” since 2006.  You can mouse over the regions and see information on layoffs, circulation trends and business conditions.  It ‘s accompanied by a dense, ugly chart with detailed information and lots of unexplained columns.  It also doesn’t include recent information like the closure of the Tucson Citizen.

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San Diego Valley Reader has an extensive profile of Tewfiq (Tom) Gores, the billionaire who runs Platinum Equity, the partnership that bought the San Diego Union-Tribune. The piece details the controversial background of Gores’ uncle, Tom Joubran, an Arab immigrant who prospered as a grocer in Flint, Michigan but whose background may involve some criminal activity.  It suggests that the Union-Tribune may adopt a strong pro-Palestinian editorial position, which would be quite a contrast from its traditional Republican leanings.

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USA Today has a cover story in its money section today that was reported entirely on Twitter. Reporter Del Jones asked CEOs to comment on whether the country is drifting toward a European style of capitalism.  Their responses are reproduced in the staccato shorthand that Twitter’s 140 character limitation imposes.  Absent from the discussion are the founders of Twitter – Evan Williams, Jack Dorsey and Biz Stone – who failed to respond to numerous tweeted requests.  Of course, with more than 2 million followers between them, they’re probably busy.

The New York Times this week carried a well-argued op-ed making a case for turning newspapers into endowed institutions. The authors, which include a financial analyst and the chief investment officer at Yale University, suggest that newspapers endowed under Section 501(c)(3) of the I.R.S. code would enjoy the best of both worlds. They could continue to generate revenue from advertising but would enjoy the benefits of tax-free status as well as insulation from the vagaries of the market. The only thing they’d give up is the ability to support political causes.

The authors make a persuasive argument, but the devil is in the details. They suggest that the Times could cover its newsroom costs with an endowment of $5 billion, but getting enough people to sign checks to reach that total would take years. The National Association of College and University Business Officers lists just 18 academic institutions with endowments of more than $5 billion, and that tally has no doubt shrunk since the markets collapsed last fall. These institutions have large rosters of wealthy alumni whose affinity for their alma maters is stronger than is most people’s fondness for a newspaper. They’ve also been amassing their endowments for 100 years or more. While the Times might have a shot at generating that kind of loyalty, it’s a stretch to believe many smaller papers could successfully generate enough endowment to cover their expenses, and few have the time or resources to mount the necessary fund-raising campaigns.

Poynter’s Bill Mitchell points to a fascinating history at Online Journalism Review of earlier efforts to establish non-profit or reader-funded newspapers. This idea isn’t new; it’s been tested for nearly a century without notable success. In fact, Poynter Institute, the Church of Christ, Scientist and the Church of Jesus Christ of Latter-day Saints are the only three nonprofit institutions in the US that own daily newspapers, and all are struggling to keep their properties viable. Dorian Benkoil also takes up the question at Corante, but he argues that profitable journalism models are already emerging online and that we should focus on those. Judging by the lack of precedents, it seems likely that the endowment model will remain an interesting but unattainable goal.

When the Web became a consumer phenomenon a decade ago, newspaper executives first shivered and then rushed in to what they believed would be a gusher of growth. Online channels appeared to deliver incremental new readership, and advertisers were eager to reach more eyeballs.

Most publishers took the path of least resistance to exploiting the online opportunity. They simply layered the job on the existing ad sales force. Reps were given packages and incentives to upsell print advertisers with incremental business. And it all worked great. Until recently.

Ad Age sums up the alarming news that online ad sales by newspaper businesses is beginning to decline. Among the publishers reporting drops in the most recent quarter are Tribune, Scripps and Lee. For now, sales are dropping in the single-digit percentage range, but the falloffs are a sharp contrast to the 20%+ annual growth of the online ad market in general.

Why is this happening? Simply stated: greed. When most newspapers went online, they slapped the same stuff they were producing in print into an HTML template and uploaded it to a server. Today, few of them offer any reader interaction outside of a basic commenting capability and some shortcuts for bookmarking stories to Digg. The stuff they post online is still cut and pasted from print. There’s been no investment, no innovation and no effort to keep up with Web 2.0 evolution.

More problematic is that newspapers have failed to establish and train dedicated online sales forces. Their reps did okay when online ads were a simple add-on to free value-add to an ROP advertiser, but now that the online business is becoming the engine of growth, those simple upsells don’s work very well.

If you talk to most veteran print sales reps, you’ll quickly learn that they have no idea how to sell online advertising. The language and metrics are foreign to them. That’s not surprising, given that their incentives have historically been heavily loaded toward print sales. Print generated a disproportionate amount of their revenue and commissions, so they sold what brought in the money. Their motivations aren’t difficult to figure out. Sales people are coin-operated. They prefer the path of least resistance and sell what’s easiest to sell.

The problem is that upselling print advertisers is a losing business when those advertisers are fleeing print. This forces sales reps to prospect for new business, and all that new business is coming in online. What’s more, the revenues and commissions from that business are much lower than what the reps have been accustomed to. And they have to learn a whole new language and process to bring the business in the door.

So now you’ve got ad sales reps who have been taught how to close $10,000 deals that carry a 1% commission suddenly selling having to sell $500 deals that take just as much time to close. Even if you hike the commissions to 5%, it’s still a pretty unappetizing prospect for most of them. The fact that the products are uninspiring and expensive makes things worse. That means reps are basically selling brand and reputation, and newspaper brands are now becoming a liability.

Some nimble publishers have experimented with setting up online-only sales staffs and training new recruits in the intricacies of selling a highly targeted and measurable medium. They’re on the right track. Those that have deputized their print sales people to peddle banner ads as a companion to their ROP contracts are headed off a cliff. Sadly, that’s probably most of them.

Gannett Loses Control

What do you do when a blogger becomes the chief source of information about what’s going on inside your company for employees of that company? That’s the conundrum that’s facing Gannett these days, as Jim Hopkins’ independent Gannett Blog has apparently gone viral. Hopkins reveals some recent traffic statistics: 91,000 visits and 189,000 page views in the last 30 days. That’s serious blog traffic, folks. What’s more, the site is being swarmed by Gannett employees. It’s become the virtual watercooler for a company of 46,000 people

The conundrum for Gannett is what to do about Hopkins. So far, it’s chosen a strategy of benign neglect, which is a huge mistake. Hopkins remarks that Tara Connell, Gannett’s chief spokesman (and interestingly, a former managing editor at USA Today) has gone almost silent recently as rumors have swirled about layoffs and cutbacks. Meanwhile, check out the volume of comments on each post on the blog. Gannett’s strategy (and we suspect this isn’t Connell’s decision) is about as wrong-headed as it could be. It is allowing a brush fire to grow out of control. What’s worse is that it’s failing to address an important channel to its own employees, who are the most valuable spokespeople it has.

One of the great ironies of watching the newspaper industry collapse has been to see the same media icons that have long scolded institutions for their insularity become reclusive and inwardly focused when the spotlight is turned on them. Gannet Blog is exhibit A in how not to handle a new influencer.

Stiff Upper Lip at the Sunday Times

The UK’s The Guardian sits down with John Witherow, who’s edited the Sunday Times for 14 years, for his first interview in nine years. Jane Martinson finds the 56-year-old Witherow to be charming, disarmingly unpretentious and energetic. He’s full of passion for newspapers and optimistic about the future. Speaking of uber-boss Rupert Murdoch, with whom Witherow speaks every week, he says, “He intuitively believes in newspapers and thinks they can be successful. He believes that all titles should aim to expand their circulation.”

The Sunday Times has had limited recent success in that area. Witherow admits that a price hike to £2 two years ago was a tactical mistake that cost the paper 100,000 readers. Still, at 1.15 million weekly copies, it’s a profit engine that earns £50 million a year.Witherow is excited about a new design that has added full color. He doesn’t see his 14-year tenure in one of the country’s most visible journalism jobs as a liability. He loves the experience of reading newspapers and views it as his challenge to pass along that enthusiasm to others.

DirectTV Pioneer Takes Over at the LA Times

Broadcast veteran Eddy Hartenstein takes over as publisher at the beleaguered Los Angeles Times. The paper runs a terrific profile of the guy. Hartenstein is “regarded by many as the father of the satellite TV industry,” having germinated and nurtured the idea of delivering by satellite what had previously been available only over wires. He’s an analytical thinker who also has the people skills to lead an organization. He prefers to stay out of the spotlight and let his accomplishments speak for him. People respect and like him. He had lunch with Times editor Russ Stanton for 3½ hours before agreeing to take the job. Sam Zell assured him that Tribune Co. won’t micro-manage the operation. And mark this quote from Zell about the Times: “This [the Times] is a keeper.” Let’s see if that promise holds up when the next debt payments come due.

Miscellany

• The Chicago Tribune has cut 70 of newsroom positions – or about 13% of its total editorial headcount of 550 – in recent weeks. That’s more than most people expected, according to rival Chicago Sun-Times. The mood in the newsroom is described as “tense,” which is probably an understatement.
• More signs that the Modesto (Calif.) Bee is being absorbed into the Sacramento borg. The paper is offering a buyout to all of its 200+ employees, its second such offer this year. Last month, the paper said it will stop printing in Modesto and move those operations to Sacramento. That cost 33 full-time and 127 part-time employees their jobs. In April, the Bee extended a buyout plan to about 100 employees, 11 of whom took it. The McClatchy Co, which owns the franchise, is trying to cut overall expenses by 10%.
• The Indianapolis Star will lose 23 employees as part of the bigger cuts at Gannett. The story didn’t specify the size of the paper’s total workforce.
• Tucson Newspapers, which publishes The Tucson Citizen, will eliminate some 30 jobs, also as part of the Gannett cutbacks.
• The anonymous “Retch” at TellZell is exhorting readers to fill out an online petition. “It calls for Sam Zell to add two seats to the Tribune board of directors: one to represent the workers and another to represent readers.” Seeing as the workers own the means of production at Tribune Co., it doesn’t seem a half-bad idea. However, they’ve got to get more than the 128 signatures so far.

We Miss Copy Editors Already

From CIOInsight.com

And Finally…

If you’ve ever taken a “money shot,” you’ll appreciate this gallery of pictures that were taken just at the right time. A good 90% of them were no doubt accidental, but let’s pat the photographers on the back anyway. Everyone needs a good pat on the back once in a while.

Mark Potts sums up and points to analyses by Alan Mutter, Ken Doctor and Mike Simonton suggesting even worse news ahead for the newspaper industry. Revenues continue to fall faster than cost cuts can make up the difference, suggesting that ongoing cuts are likely for the forseeable future. Potts suggests the unthinkable, which we joined him in predicting two years ago: “We’re going to lose a big newspaper (several, actually). And it’s going to happen sooner than anybody thinks.”

One of Potts’ sources is Alan Mutter,  whose number crunching constantly turns up interesting insights about the state of the business. Mutter says newspaper companies are still turning in blue-chip profit margins. That’s good, right? Not if your business is collapsing. It means that newspaper companies are hacking away at the product in order to sustain profits. One wonders why. It’s not as if anyone is buying newspaper stocks. When businesses are forced to reinvent themselves, it usually means swallowing the bitter pill of accepting losses while the old business is discarded and a new one developed.

By propping up their profits, newspaper companies are only setting themselves up for a harder fall. Troubled companies can choose to either invest in product development and try to build new businesses or manage their cash cows down into the ground. Mutter’s analysis suggests that publishing executives have already made that choice. That’s with the possible exception of Sam Zell, whose  deep costs cuts at least appear to have a strategy behind them.

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Is The New York Times worth just $750 million? That’s its actual value, according to an analysis by a BusinessWeek intern.  Jay Yarow walks us through the math and then quotes an  analyst saying, “”Valuations have fallen to unprecedented levels that have no relationship to reality.” True, but no one is stepping up to the plate yet, suggesting that Wall Street  still believes we’re nowhere near the bottom. In the meantime, the Times‘ investment in its new Manhattan headquarters building is reportedly worth $750, which means that for that price you could buy the paper and get the building for free. Or vice versa.

And Finally

It used to take a team of writers and designers to create a newspaper spoof. Now it just takes Roy Rivenburg. The writer has dreamed up Not the Los Angeles Times,  a very funny takeoff in the finest tradition of the Onion and a raft of newspaper parodies that came out in the 70s and 80s (our favorite was Off The Wall Street Journal). Selected headlines:

• State sells San Diego to erase budget deficit
• Wal-Mart unveils $29 defibrillato
• Galleria escalator stalls, dozens of riders trapped

The site is only one page deep, but clicking on the links provides further amusement.

The New Yorker devotes 6,600 meticulously edited words to the impending death of newspapers, examining objectively the promise and perils of a new-media world which writer Eric Alterman sees embodied in the Huffington Post. Drawing on sources ranging from Walter Lippman to The Simpsons, Alterman concludes:

• That the death of newspapers is inevitable;
• That the model that will emerge to replace them looks strikingly like that of the newspapers of 200 years ago; and
• That our democracy is probably better off for this trend, although the plight of people in “the dark” is worse.

Here are some excerpts. Everything is elliptical:

Bill Keller, the executive editor of the Times, said recently in a speech in London, “At places where editors and publishers gather, the mood these days is funereal. Editors ask one another, ‘How are you?,’ in that sober tone one employs with friends who have just emerged from rehab or a messy divorce.”

The McClatchy Company, which was the only company to bid on the Knight Ridder chain when, in 2005, it was put on the auction block, has surrendered more than eighty per cent of its stock value since making the $6.5-billion purchase. Lee Enterprises’ stock is down by three-quarters since it bought out the Pulitzer chain, the same year. America’s most prized journalistic possessions are suddenly looking like corporate millstones. Since 1990, a quarter of all American newspaper jobs have disappeared.

Only nineteen per cent of Americans between the ages of eighteen and thirty-four claim even to look at a daily newspaper. The average age of the American newspaper reader is fifty-five and rising.

It is a point of ironic injustice, perhaps, that when a reader surfs the Web in search of political news he frequently ends up at a site that is merely aggregating journalistic work that originated in a newspaper, but that fact is not likely to save any newspaper jobs or increase papers’ stock valuation.

A recent study published by Sacred Heart University found that fewer than twenty per cent of Americans said they could believe “all or most” media reporting, a figure that has fallen from more than twenty-seven per cent just five years ago, Nearly nine in ten Americans, according to the Sacred Heart study, say that the media consciously seek to influence public policies, though they disagree about whether the bias is liberal or conservative.

Arianna Huffington and her partners believe that their model points to where the news business is heading. “People love to talk about the death of newspapers, as if it’s a foregone conclusion. I think that’s ridiculous,” she says. “Traditional media just need to realize that the online world isn’t the enemy. In fact, it’s the thing that will save them, if they fully embrace it.”

[Huffington Post] is poised to break even on advertising revenue of somewhere between six and ten million dollars annually, according to estimates from Nielsen NetRatings and comScore, the Huffington Post is more popular than all but eight newspaper sites.

The blogosphere relies on its readership, €”its community, €”for quality control.

Most posts inside the [Huffington] site, however, go up before an editor sees them.

Journalism works well, [Walter] Lippmann wrote, when “it can report the score of a game or a transatlantic flight, or the death of a monarch.” But where the situation is more complicated, journalism “causes no end of derangement, misunderstanding, and even misrepresentation.”

When Lippmann was writing, many newspapers remained committed to the partisan model of the eighteenth- and nineteenth-century American press, in which editors and publishers viewed themselves as appendages of one or another political power or patronage machine and slanted their news offerings accordingly.

The twentieth-century model, in which newspapers strive for political independence and attempt to act as referees between competing parties on behalf of what they perceive to be the public interest, was, in Lippmann’s time, in its infancy.

[The piece goes into an analysis of a 1920s debate between Lippman and rival John Dewey over the nature and methods of democratic discourse.]

As the profession grew more sophisticated and respected, top reporters, anchors, and editors naturally rose in status to the point where some came to be considered the social equals of the senators, [P]olitics increasingly became a business for professionals and a spectator sport for the great unwashed

The Huffington Post was hardly the first Web site to stumble on the technique of leveraging the knowledge of its readers to challenge the mainstream media narrative. For example, conservative bloggers at sites like Little Green Footballs took pleasure in helping to bring down Dan Rather after he broadcast dubious documents allegedly showing that George W. Bush had received special treatment during his service in the Texas Air National Guard.

Talking Points Memo “was almost single-handedly responsible for bringing the story of the fired U.S. Attorneys to a boil,” a scandal that ultimately ended with the resignation of Attorney General Alberto Gonzales and a George Polk Award for Marshall, the first ever for a blogger.

During the Katrina crisis, for example, [Talking Points Memo] discovered that some of [its] readers worked in the federal government’s climate-and-weather-tracking infrastructure. They provided the site with reliable reporting available nowhere else.

Traditional newspaper men and women tend to be unimpressed by the style of journalism practiced at the political Web sites, Real reporting, especially the investigative kind, is expensive, they remind us. Aggregation and opinion are cheap.

In October, 2005, at an advertisers’ conference in Phoenix, Bill Keller complained that bloggers merely “recycle and chew on the news,” contrasting that with the Times‘ emphasis on what he called “a ‘journalism of verification,’ ” rather than mere “assertion.”

“Bloggers are not chewing on the news. They are spitting it out,” Arianna Huffington protested, “In the run-up to the Iraq war, many in the mainstream media, including the New York Times, lost their veneer of unassailable trustworthiness for many readers and viewers.”

Newspaper editors now say that they “get it.” Yet traditional journalists are blinkered by their emotional investment in their Lippmann-like status as insiders. They tend to dismiss not only most blogosphere-based criticisms but also the messy democratic ferment from which these criticisms emanate. The Chicago Tribune recently felt compelled to shut down comment boards [because they] “were beginning to read like a community of foul-mouthed bigots.”

[Huffington] predicts “more vigorous reporting in the future that will include distributed journalism, €”wisdom-of-the-crowd reporting, A lot of reporting now is just piling on the conventional wisdom, €”with important stories dying on the front page of the New York Times.”

And so we are about to enter a fractured, chaotic world of news, characterized by superior community conversation but a decidedly diminished level of first-rate journalism.

Before Adolph Ochs took over the Times, in 1896, and issued his famous “without fear or favor” declaration, the American scene was dominated by brazenly partisan newspapers. And the news cultures of many European nations long ago embraced the notion of competing narratives for different political communities, It may not be entirely coincidental that these nations enjoy a level of political engagement that dwarfs that of the United States.

In “Imagined Communities” (1983), an influential book on the origins of nationalism, the political scientist Benedict Anderson recalls Hegel’s comparison of the ritual of the morning paper to that of morning prayer: “Each communicant is well aware that the ceremony he performs is being replicated simultaneously by thousands (or millions) of others of whose existence he is confident, yet of whose identity he has not the slightest notion.” It is at least partially through the “imagined community” of the daily newspaper, Anderson writes, that nations are forged.

 

Drumbeat of terrible earnings news continues

As if the newspaper industry needs any more bad news, a new survey finds that high-margin print classified ads perform dismally compared to online competition. The only exception: recruiting blue-collar workers. Quoting:

‘A survey of human resource executives revealed that print ranked the lowest when it comes time to finding good candidates. ‘Statistically and anecdotally,’ editors with Classified Intelligence wrote, ‘print advertising is an ineffective medium for recruiting candidates.’ Seventy percent of respondents said print was either ‘very ineffective’ or ‘ineffective’ up 60% from 2006. Only 14% of the 70 recruiters polled said that print was a good way to find employees. One interesting piece of information from the study: Recruiters did give print high marks for finding blue-collar candidates.”

It’s getting a little bizarre out there

Perhaps some unscrupulous publishers are taking advantage of the situation

• In the first case of its kind that we can remember, a publisher has been fined for running a journalism sweatshop. E&P reports that the Chinese Daily News has to pay $5.2 million for allegedly forcing reporters to file five stories a day and to rush between news conferences and interviews. Ad quotas were unreasonably high and production workers were forced to labor nonstop. Reporters testified that they had to work six days a week, 12 hours a day, but weren’t able to complain because of pressure and the culture of intimidation. We’ve heard that morale is bad in newsrooms pretty much everywhere, but this is extreme!

• And this would be funny if it weren’t true. The following item is reprinted in its entirety from Media Post: “Under a new Wall Street Journal policy, if a reporter writes a book based on a newspaper story, Rupert Murdoch wants a piece of the action, reports Crain’s New York. Any reporter’s book that uses research for Journal stories would qualify. In exchange a share of the book’s proceeds, the newspaper provides marketing and advertising support for the title. Most publishers do not require such a fee.”

Bright spots: some small-town papers are thriving

Not all newspapers are suffering. While the big metro dailies struggle to become more local, a host of existing local newspapers are seeing revenues and circulation grow to record levels. The secret seems to be focusing on mom-and-pop advertisers, making editors a part of the communities they serve and coming up with new ways to get the paper into the hands of everyone in the community.

E&P reports on several, including “the publisher of two paid Texas weeklies that between them don’t quite sell 5,000 copies: the Aransas Pass Progress and the Ingleside Index. The papers ended 2007 up 14% in ad revenue from 2006. ‘We are planning for a similar 2008,'” the publisher says.

Most of these papers are free, by the way, and that’s how they’re getting results for advertisers. Quoting one publisher: “I can remember for years Bill Dillard, the head of [department store] Dillard’s, would tell all of us daily newspaper publishers year after year — you have to get into more households. I don’t think he said you have to go out and get more paid subscribers.”

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Alan Mutter has expertly documented the crumbling business models of American newspapers, often finding insights in the financial reports that everyone else has missed. In this post, he focuses on the good news: there’s evidence that some small publishers are figuring out innovative new publishing models that are both profitable and popular with their readers. The one thread through all of them is that they target small audiences.

November Journal Communications Revenues Plummet 13% On Political Ad Fall-Off – Editor & Publisher, Dec. 19, 2007
Retail advertising was up 1.9% — but classified advertising revenue slumped 15.5%, with bi declines in help-wanted and real estate. Help-wanted classified revenue fell 24.7%, while real estate was down 30.1%….Total interactive advertising revenue at the daily newspaper, which is included in various ad revenue categories, increased 38.8% to $1.19 million for the period.

Gannett November Revenues Fall 4.6% On Big Classifieds Drop – Editor & Publisher, Dec. 18, 2007
The fall was “propelled by huge declines in U.S. classified newspaper revenues, including a 28.4% plunge in real estate and a 23.5% collapse in help-wanted.”

Publisher Hands Sun-Sentinel News Site Over To Marketer – The Daily Pulp, Dec. 14, 2007
[The Sun-Sentinel puts a marketer in charge of the newspaper’s website, including editorial content. A lively debate takes place in the comments section, including opinions about the senior editorial manager who was laid off as a result of the changes. – Ed.]

Times Media readership increases – St. Cloud Times, Dec. 14, 2007
[The St. Cloud Times appears to be doing a few things right. Overall readership is up 9% over the last four years (presumably most of those gains are online). Aggressive investment in local coverage appears to be paying off: “Over a 30-day period, Times Media reaches 93 percent of the adults in the region, the highest of all Gannett papers’ surveys that have been measured so far.” – Ed.]

‘Cincy Post’ Shutting in 3 Weeks — How Staffers Spend Final Days – Editor & Publisher, Dec. 12, 2007
Many employees plan to get out of the journalism business.

Big Investor Tells Sun-Times Group To Cut More, Pay Execs In Stock – Editor & Publisher, Dec. 11, 2007
$1.8 billion plunge in shareholder equity has big hedge fund up in arms.

Alan Mutter throws cold water on the Yahoo newspaper partnership announced last year. The deal had been the subject of a recent glowing report by Deutsche Bank, which forecast that the deal could lead to actual increases in newspaper revenues as soon as 2009.

Hogwash, Mutter says, quoting sources inside the coalition. A restaurant that serves lunch and dinner can get a big initial boost in business by adding breakfast, but that surge won’t be duplicated the next year. “We aren’t anywhere near matching the initial gains,” says one insider quoted in the story.

It doesn’t help that the focus of the deal is recruitment advertising, which is being hit by a slowdown right now.