In case you missed it, the perpetually poverty-stricken Journal Register Co. is doing some pretty gutsy stuff. The company, which was delisted from the NASDAQ New York Stock Exchange two years ago, has a new CEO who’s interested in reinventing publishing. John Paton (right) has a blog and a Twitter Account. He also has the admiration of Jeff Jarvis, who doesn’t confer praise lightly.

What got Jarvis so excited was a July 4 experiment in which the company’s 18 dailies published using nothing but free, web-based tools. They called this the Ben Franklin Project in recognition of both the country’s birthday and Journal Register’s liberation from ancient proprietary production systems.

More importantly, the company changed the way it reported the news for that day. Readers were actively involved at the front of the process in directing the reporting staff and looking virtually over reporter’s shoulders as stories were prepared. “The Ben Franklin Project is the beginning of a new era of an open and transparent newsgathering process,” wrote Paton on his blog. This is a company worth watching again.

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MediaShift has an excerpt from journalism educator Alfred Hermida about rethinking the role of the journalist in the participatory age. While Hermida doesn’t break a lot of new ground, he crystallizes some concepts we’ve been talking about here for some time, namely that the evolving role of the journalist is as aggregator and authenticator rather than original reporter. Quoting Tom Rosenstiel, Hermida describes the still-important role of the journalist as “a sense-maker to derive meaning, a navigator to help orient audiences and a community leader to engage audiences.”

He also quotes from an article by BBC World Service director Peter Horrocks that calls for an end to “Fortress journalism.” Horrocks writes, “In the fortress world, the consumption of journalism was through clearly defined products and platforms… but in the blended world of Internet journalism all those products are available within a single platform and mental space… the reader may never be aware from which fortress the information has come.”

In the world Horrocks describes, the audience pulls together its own newspaper, woven from bits and pieces assembled from various online sources. The consequence of this is that media organizations can’t afford to reinvent the wheel anymore. Each needs to focus on what it does best and pool efforts rather than duplicate them. So maybe 90 of those 100 journalists who currently attend a Presidential press conference can spend their time out in the field assessing reaction and gathering analysis rather than listening to the same thing. What a concept.

Miscellany

Advertiser optimism continues to grow. Advertiser Perceptions Inc. (API) reports that 32% of ad executives now expect to increase their ad spending over the next 12-months. That’s the largest percentage increase since API began asking ad execs about their intentions in 2007. A year ago, the figure was -5%. The 1,412 ad executives who were surveyed continue to be pessimistic about magazine and national newspaper advertising, with intentions to increase spending down 10% and 32% respectively. But even those sentiments are greatly improved over the -26%/-46% plans of a year ago. The biggest winners are digital and mobile media, with more than 60% of ad executives planning to increase spending there.

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Give Tribune Co. credit for trying to diversify its revenue stream. The bankrupt company is dedicating 10 people to a new consulting business that will sell knowledge of social media and Internet advertising to small and mid-sized businesses. The new venture is called 435 Digital Services, a nod to Tribune Co.’s headquarter address at 435 N. Michigan Ave.

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The Denver Post is going after a local political site, saying that Colorado Pols is stealing its copyrighted material. The political site, which generates marginal revenue, allegedly lifted between three and eight paragraphs of news articles from the Post and other publications. Colorado Pols says it doesn’t need the Post. “There’s thousands of other outlets out there,” says founder Jason Bane. Post owner Media News is one of those media companies that wants to raise the perceived value of its content. The company has confirmed that it will begin testing online pay models this summer at its newspapers in Chico, Calif., and York, Pa.

Speaking of pay walls, Time magazine now has one. Secure in its role as the only newsweekly left standing, the venerable but mostly irrelevant magazine is requiring readers who want to read online versions of its print article to subscribe to either the print or the iPad edition. They can then see the same stuff that’s in the magazine on a screen. Online-only content will continue to be free.

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Circ Labs, the University of Missouri-backed startup that is developing a tool that learns from a user’s online behavior and delivers recommendations for content, has launched a prototype service prior to general release. The prototype installs a Firefox add-in that enables the browser to recommend an article and to read similar articles suggested by the algorithm. Users can share content with each other and be notified of new content as it becomes available.

To test, go to gocirculate.com and create an account. The confirmation page contains a link to the toolbar software. You can then browse and add pages to the knowledge base. We were able to install the menu bar, but couldn’t log onto the site for some reason, and Circ Labs provides no means to recover a password. We guess that’s why they’re calling this a test.

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Buried in a lightweight study of the Internet habits of young women is this nugget: “Nearly half — 48% — of all respondents now claim to get more news through Facebook than from traditional news outlets.”  This number comes from Lightspeed Research and Oxygen Media, which surveyed the habits of 1,504 U.S. adults who use social media. The researchers also claim that 39% of women between the ages of 18 and 34 now describe themselves as Facebook addicts, and that a third of young women check Facebook before going to the bathroom in the morning. We supposed one needs one’s priorities.

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Variety’s website has adopted DailyMe’s behavioral tracking and recommendation technology called Newstogram.  Newstogram generates data on user’s interests to deliver visitors content, advertisements and e-commerce opportunities tailored specifically to them, based on their specific interests and behavior. DailyMe started life as a customized news service for consumers but has morphed into a customization engine that publishers can serve up to their visitors. Readers get filtered news and publishers get better insight into what motivates readers.

And Finally…

Roy Rivenburg is still at it. The jokester who dreamed up Not the LA Times two years ago continues to tweak the nose of the West Coast’s most self-important newspaper. A recent story has Times editors arguing over whether it’s better to start articles with the time or the weather. The inspiration is this page of formulaic opening sentences extracted from the real newspaper. “If I don’t find out the time of day in the first sentence, I stop reading,” says one subscriber.

We spent a couple of days in New York earlier this week enjoying the suffocating heat while hearing what other people are saying about the changing media landscape. On Monday, the Bulldog Reporter Media Relations Summit presented a panel of  mainstream media veterans from the Wall Street Journal, CBS and Hearst Magazines and one new-media upstart from Huffington Post, a news organization whose sudden success baffles a lot of traditional journalists.

The best quotes were from Alan Murray (right), Executive Editor of Wall Street Journal Online, who at one point characterized Huffington Post and similar aggregation sites as “parasites.” Facing HuffPo Managing Editor Jai Singh (below left) at the other end of the stage, Murray one point asked, “Isn’t that the Huffington Post model? Go do something else and then we’ll let you be a journalist?”

Singh, a print journalist who was an early pioneer in digital news at CNet in the mid-90s, declined to engage in battle, preferring instead to carry the banner for a new kind of journalism. Defending HuffPo’s participative model, he remarked simply, “Community is fundamental to journalism online.” Huffington pays few of its contributors, rewarding them instead with visibility and Web traffic. Singh noted that  a blogger recently asked HuffPo to pull down a link to his sites because the traffic was crashing his servers. Murray conceded that the traffic from Huffington was gratifying.

Murray was a bit smug in pointing out that the Journal never gave away its editorial content and today generates about $200 million annually in digital revenue, or about double its $100 million editorial budget. “But how many other pubs are going to be able to get to same place?” he asked

Ellen Levine, editorial director of Hearst Magazines, didn’t seem particularly worried about that question, although she acknowledged that journalists will no longer have the luxury of being insulated from the business side of the house. “The most important thing I’ve learned in last 54 years is if you don’t understand the P&L, you are out of business,” she said.

Levine sees the market dividing into two camps, with disposable print on one end and high-end luxury magazines on the other. The disposable market will migrate quickly to readers like the Apple iPad, but Levine said luxury publications are going to be around for a while. “The day I can wrap myself in my iPad in the bathtub, that’s when magazines will be gone,” she said, drawing the biggest laugh of the session.

Investigative Journalism Under Siege

One thing all  panelists agreed-is that investigative journalism is under severe pressure because of lack of funds and reader preference for quick-hit sound bites. Investigative reporting “has been most challenged by the collapse of business models,” Murray said. “A team can work six months on a story and it will never be paid back.” Few viable alternatives to newspaper-sponsored investigative journalism have arisen. At the moment, ProPublica’s nonprofit approach appears to be working, but Murray questioned its scalability.  “ProPublica sets up investigative journalism as the equivalent of the opera or the symphony,” he said, choosing examples of organizations that are known to appeal to small, elite audiences.

Singh agreed. “Much of the news is commoditized. Investigative journalism is where the value is,” he said. But publications no longer get the mileage out of in-depth stories that they once did. Singh cited Rolling Stone’s blockbuster account last week of Gen. Stanley McChrystal’s insubordinate remarks about the Afghanistan war as evidence that exclusivity has almost ceased to be meaningful. “The Rolling Stone story was picked up by Time and Politico before it was published in Rolling Stone,” he said. Huffington Post has created a modest investigative journalism fund to help fill the gap.

Panelists agreed that it’s no longer viable for 100 newspapers to maintain Washington bureaus just to report the same news. “When I ran the Washington bureau [of the Journal] during the Clinton administration, there were 150 reporters chasing the same ‘blue dress’ story,” Murray says. “What’s killing the metro dailies is that they had monopolies. You can’t just differentiate by geography anymore.”

Investigative reports used to help sell magazines by enticing readers who were interested in one story to subscribe, Levine said. “That doesn’t work anymore. People just print out the article that interests them.”

Singh saw possibilities in that fact. “There is an opportunity to create products for people who just want to read one article,” he said. The others nodded, unclear about what that product should be.

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At one point during Monday’s discussion, The Journal ’s Murray told of getting calls from former network television producers looking to work on an experimental webcast at the paper. When told that the Journal couldn’t afford their talents, most asked simply to be made an offer.

Television journalism, which was never much to write home about in the first place, has become a pale specter of its former self as talent has fled the budget-strapped industry. On Tuesday, we chatted with Marijane Miller, who is one of those refugees. Miller is now a producer at WhatGives!?, a media company that creates programming to promote charitable causes. She spent more than 20 years in broadcast television, much of it producing documentaries and educational programming, and she worked on some pretty visible stuff.

Now Miller travels the country with a Sony videocam creating her own mini-documentaries of people doing work to make the world a better place. Miller said she became demoralized and frustrated during her last few years in commercial television as quality documentaries gave way to low-budget reality TV and voyeurism. Reality TV is anything but real, she told us. People who do stupid and outrageous things in real life are often only too happy to reenact their absurdities in front of the TV cameras. The sad thing is that many television producers these days are only happy to oblige.

The last straw for Miller was working on a reality program in which a person did something truly revolting. We won’t go into details, but Miller characterized the act as “sick. I thought they were going to throw the person off the program,” she said. “Instead, they asked him to reenact the scene.”

The happy ending is that Miller described WhatGives!? as a bit of a throwback to the golden age of television. “They just tell me to go out and find good stories and tell the truth, and” she said. “I haven’t had this much fun in years.”

If the Knight Foundation didn’t exist, someone would have to invent it.

This week the organization that is doing so much to advance the cause of innovation in journalism unveiled its list of a dozen winners of the Knight News Challenge, a contest that “funds ideas that use digital technology to inform specific geographic communities.” Not all the winners are focused on geographic applications (one proposes to combine reports from journalists embedded in Afghanistan with Facebook updates from soldiers in the field), but there are some innovative ideas in the group that will get enough funding to at least get off the ground. The best part is that the winners of the $2.74 million in grant money must make their inventions freely available.

You can read all the details at the page linked to above or watch the short video below, which quickly covers each project. What we like about all these ideas is that they’re doable with today’s technology (several are live  today) and they bring focus to the overused concept of “citizen journalism.” Most are also oriented toward leveraging geographic communities, which is where newspaper publishers absolutely must focus. We particularly like these brainstorms:

Will blogs replace newspapers? If they do, it’ll be with a technie agenda, according to the New Media Index from the Pew Research Center’s Project for Excellence in Journalism.

Pew gathered a year’s worth of data on the top stories discussed and linked to on blogs and seven months’ worth of comparable data from Twitter. The findings: The news that people discuss in social networks is a lot different from what the mainstream media discusses. Also, the type of media makes a different. Topics that are talked up on Twitter aren’t the same as those that get chatted about on YouTube.

Twitter is the techiest of the platforms. During the period measured, an astonishing 43% of news topics on Twitter related to technology, compared to just 1% in traditional media. On the flip side, mainstream media spilled 10% of its ink on the economy, compared to 1% in the Twittersphere.

Bloggers most closely matched mainstream media in the topics they discussed, but even they have a techie orientation. During the week of May 24-28, when most of America was riveted on the oil spill that threatened the entire Gulf Coast, bloggers talked mainly about Facebook privacy. Meanwhile, on Twitter the talk was all about Apple surpassing Microsoft in size.

The research draws some interesting contrasts in the styles that dominate these social media. In the year studied, “bloggers gravitated toward stories that elicited emotion, concerned individual or group rights or triggered ideological passion,” researchers said. On Twitter, in contrast, “The mission is primarily about passing along important — often breaking — information in a way that unifies or assumes shared values within the Twitter community.” There’s a narcissistic fascination with Twitter itself in much of this news. Still, Twitter was the only medium of the four studied that devoted significant attention to the Iranian election protests.

Pew also remarks on the attention-deficit style of consumption that dominates the Internet. Stories quickly pass from prominence into obscurity. “On blogs, 53% of the lead stories in a given week stay on the list no more than three days. On Twitter that is true of 72% of lead stories, and more than half (52%) are on the list for just 24 hours.”

Blogs shared the same lead story with traditional media in just 13 of the 49 weeks studied. On Twitter, it was just four of 29 weeks studied; just 5% of the top five stories on Twitter remained among the top stories the following week;More than 99% of the stories linked to in blogs came from legacy outlets such as newspapers and broadcast networks. On Twitter, the ratio was considerably different, with only half of the links going to legacy outlets;YouTube is the most international of the four platforms studied. One quarter of the most-watched news videos on YouTube were of non-U.S. events.

A few other striking findings:

What can we learn from this? For one thing, it appears that, when left to their own devices, long form social media practitioners gravitate toward a mainstream media model. The profile of blog content is remarkably similar to that of traditional media. This is probably a matter of the blogosphere reflecting its sources of information rather than the other way around, because, the survey also found that mainstream media reflect very little of what starts in the blogosphere. It does indicate that the topics covered by mainstream media match pretty closely the interests of people who care enough to compose thoughtful commentary about the news of the day.

It’s also clear that bloggers need mainstream media, although maybe not as much as media professionals would like to believe. The research found that 80% percent of the mainstream media citations from bloggers went to just four outlets: the BBC, CNN, The New York Times and the Washington Post.

Twitter and YouTube are not cast in the same mold as blogs. Those outlets reflect a specific set of interests, most notably the digirati who use Twitter. It’s also interesting that the research found such a small percentage of content devoted to technology on YouTube, but that may be due to the nature of the medium. Most computer stuff isn’t very visual.

There’s nothing in these results to indicate that blogs are going to replace mainstream news anytime soon. “Bloggers gravitated towards stories that elicited emotion, concerned individual or group rights or triggered ideological passion,” the survey authors wrote. In other words, blogs are commentary, not news.

Miscellany

Yahoo is continuing its slow crawl into the world occupied by news outlets. In the past year, the company has hired several editors to staff a fledgling news bureau and acquired Associated Content. Now TechCrunch says Yahoo wants Huffington Post. The two are in a content syndication deal and Yahoo may even try to acquire HuffPo, although the price is probably prohibitive.

Huffington Post is now the biggest blog on the planet, TechCrunch says, with more traffic than NYTimes.com. It’s on track to generate $100 million in revenue next year, making it a pricey acquisition for the struggling Yahoo. Meanwhile, Google continues to insist that it’s not interested in getting into the original content game, indicating that Yahoo may be the bigger threat to traditional publishers.

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Laid-off journalists are increasingly finding new careers in the public relations industry, according to an article in the UK’s Independent. But the new trend is to hire journalists for their journalism skills rather than their contacts in the industry. Edelman, the global PR firm, recently hired Richard Sambrook, the former head of BBC News, and gave him the title of Chief Content Officer. It also just hired business journalist  Stefan Stern from the Financial Times as the new head of strategy.

The article quotes Sambrook as saying that Edelman realizes its clients can now take their message directly to the consumer. “”The walls of the traditional box of PR are falling away and Edelman is taking the opportunity to move into new territory,” he said. “We are at a moment when a lot of the traditional lines between PR and consulting and advertising and broadcasting are blurring.”

This trend may make a lot of traditionalists cringe, but it’s clearly gathering momentum. In recent weeks we’ve talked to several business bloggers who are refugees from flailing media operations. The question is whether businesses have the guts to let these journalists do what they do best or if they will try to box them into the traditional role of corporate shill. It’s unlikely that people like Sambrook will tolerate the latter approach, which is why his hiring has considerable symbolic importance.

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You know times are tough when you’re rejoicing over the slowing of a decline. Newspaper advertising revenue declined to $5.98 billion in the first quarter, a drop of 9.7%. The good news: that’s the smallest drop since the third quarter of 2007. Print revenue was down over 11% and classifieds were off 14%. Online revenue, though, was up nearly 5%. “Declines are moderating across the board and, in some instances, have turned positive,” NAA President-CEO John Sturm said in a statement.

Last January we told you about Adam Chadwick and Bill Loerch, two filmmakers who are chronicling the decline of the US newspaper industry and the resulting crisis in journalism for a documentary film called Fit to Print. We just got a link to the trailer for their film. Watch it below. The filmmakers have been working on a shoestring budget and could use funding. If you can help them, contact Chadwick directly.

While Google is busy figuring out how to save journalism, some entrepreneurs are going ahead and doing it on their own using unconventional techniques that may make some traditionalists shudder. Writing in The New York Times magazine, Andrew Rice surveys the landscape of recent media startups that are confronting the reality of plummeting margins by crowdsourced news operations.

They range from Demand Media, which generates assignment lists based entirely on search terms, to Global Post, which hopes to charge readers for direct access to its foreign correspondents. A few themes are apparent through many of the business models. One is their reliance upon search as both a guide and a source of revenue. New-age publishers see Google as the pulse of reader interest and have tuned their models to respond, in some cases, in near real-time. Another is that they pay very little for journalism.

Rice visits True/Slant, an operation that uses a digital speedometer to match content on its site to trending topics on Google and Twitter. Thousands of writers contribute to the service, which posts about 125 articles a day. Journalists are paid a fraction of what that would make at traditional media organizations, but at least there’s a little money in the work. True/Slant has only five full-time staff and about 300 contributors. “It’s not so much a unified publication as a loosely connected commune of bloggers, who generate a continual stream of content with minimal editorial intervention,” Rice writes.

The 125-story-per-day figure may sound like a lot, but it’s a pittance compared to the daily output of Huffington Post (500) or Examiner.com (3,000). These publishers produce news in the kind of volumes meant to serve picky advertisers, who only buy proximity to certain keywords. Since advertisers don’t have to waste money on audiences they don’t want any more, the publishing model being built by these new companies is to churn out huge quantities of content and serve lots of niche advertisers.

Everything is search-optimized and, in some cases, search drives the boat. Demand Media actually assigns stories based upon search popularity. Freelancers pick from a list of topics culled from popular search queries and turn out articles and video that post to sites like eHow, which has a revenue-sharing agreement with Demand. No story is assigned unless there’s a high probability it will pay for itself.  Demand “says these mathematically generated ideas are 4.9 times as valuable as those devised by mere human brainstorming,” Rice writes. Journalists get $15 to $20 per item and Demand Media booked $200 million in revenue last year.

The new economics of search-driven publishing have thrown open the question of how much journalism is worth. Contributors to many of the sites Rice describes are paid anywhere from $10 to $25 per contribution. Search advertising is such a low cost-commodity that one publisher estimates a journalist needs to attract 1.8 million monthly page views in order to earn a $60,000 annual salary.

If all of this makes you slightly nauseous, you’re not alone. Many of these emerging business models play to popularity as measured by search volume. Nor surprisingly, sex and sin sell. “Writers and editors know that click-driven Internet economics tend to reward lowbrow gimmickry. They have to decide whether to work around that or to embrace it as a fact of life,” Rice writes. Some new models play directly to the will of the crowd, such as Henry Blodget’s (yes, that Henry Blodget) gossipy Business Insider and Demand Media.  Other new operations, like GlobalPost, The Politico and Awl, are attempting to produce thoughtful journalism and make money at it, mostly through creative use of alternative funding sources.

The elephant in the corner is the rising interest of businesses in inserting themselves into the media stream. Nearly everyone Rice interviews agrees that the companies that pay the bills want – and deserve – a role in determining  content. True/Slant, which is run by 57-year-old former newspaperman Lewis Dvorkin, gives its advertisers the same tools to contribute to the news stream as its reporters. “It’s the way the world is moving,” Dvorkin says.

News executives who insist upon seeing Google as the Great Satan would do well to read James Fallows’ 9,000-word analysis in this month’s Atlantic. Fallows is well-equipped to write the story of Google’s tortured romance with the news industry. He is a veteran traditional journalist with a technology bent who is as comfortable writing for PC Magazine as for Atlantic.

There’s a lot to digest in this article but a few insights struck us as particularly important. One is that Google sees itself as having what one executive calls a “deeply symbiotic relationship” with news organizations. Second is that Google is devoting a lot of bright people and significant amounts of money to help news organizations reinvent themselves. The third is that Google believes advertising will become a lucrative and sustainable source of income for news organizations in the future, but only if they change their tactics.

Thief or Robin Hood?

Google is often pilloried by publishers for “stealing” content. This is despite the fact that Google lifts no more than a few characters from each story, doesn’t sell ads on its Google News service and is the number one source of traffic for most newspaper websites. The real reason Google is so despised is because it has accelerated the “unbundling” of news. This is at the root of the industry’s disruption. Newspapers traditionally have delivered their entire product in one package with advertising in lucrative sections like automotive and food subsidizing the stuff no one wants to pay for, like correspondents in Afghanistan. Search engines have blown apart this model by making it possible for online readers to navigate directly to the content they want. When each form of content is forced to justify its own existence, the world/national news, statehouse coverage and other staples lose out.

Fallows points out that Google and newspapers have a lot in common. Google’s well-being is tied to the availability of high-quality information online. One of the reasons its executives feel such urgency about helping the newspaper industry is that they fear that the loss of this content will diminish Google’s core value. Fallows also astutely points out that Google’s business model is itself a bundle: the company makes the vast majority of its profits from search, which enables it to fund loss leaders like News and Books.

Genuine Concern

Fallows spent a year interviewing Google executives and he portrays their concern about the news industry’s crisis as heartfelt and earnest. Certainly, no Internet company has been more visible in trying to engage with publishing executives. CEO Eric Schmidt addressed the American Society of News Editors last month and has been quoted many times despairing about the industry’s troubles. Of the other online companies that have taken their share of news industry flesh, only Craigslist’s Craig Newmark has shown any concern about the consequences.

Fallows’ piece is basically upbeat. Google executives express unequivocal confidence in the future of display advertising, a vehicle that has been widely written off as a dying intrusion on users’ reading experience. Advertising on the Internet is still in its infancy, executives assert, and advances in targeting will enable display ads to do for readers what Google’s AdWords technology has done: deliver relevant contextual offerings to readers based not only on the article in front of them but also on their self-described interests and recommendations of their friends. As advertising increasingly reflects a two-way dialogue between reader and publisher, “news operations will wonder why they worried so much about print display ads, since online display will be so much more attractive,” Fallows writes.

The company is applying technology to increase the yield of advertising in the same way that airlines adjust their pricing, planes and schedules to maximize revenues per mile. One innovation is an arbitrage system that enables publishers to adjust the allocation of premium priced advertising on a second-by-second basis. Another is Fast Flip, a Google experiment that seeks to mimic the print reading experience on a computer screen. Google has even adjusted its treasured search algorithm to accommodate complaints from individual publishers. There is little or no revenue in these efforts for Google; the company’s motivation appears to be giving publishers more options.

Rethinking News

However, Fallows also emphasizes that Google executives believe news organizations must take responsibility for their own health by rethinking their approach to the business. Krishna Bharat, a distinguished research scientist at Google and the driving force behind Google News, probably reads more newspaper content than most humans. He notes that duplication of effort saps the productive potential of the industry as a whole.

“You see essentially the same approach taken by a thousand publications at the same time,” Bharat says, referring to pack journalism. “Once something has been observed, nearly everyone says approximately the same thing.” This repetition is a relic of the days when readers had limited sources of information and hundreds of reporters might cover the same event. Now this approach has become antiquated. Publishers would get more bang for the buck by pooling their efforts to provide the five Ws and devote more resources to “something else, equally important, that is currently being neglected.”

Executives also emphasize that while they believe the ad picture is bright, a continued overreliance on display advertising will be the news industry’s undoing. Instead, they advise a “lots of small steps” approach based upon continuous experimentation and diversification of revenue streams. “The three most important things any newspaper can do now are experiment, experiment, and experiment,” says Hal Varian, Google’s chief economist.

Which, when you think of it, is how Google works.

Presentation by Google Chief Economist Hal Varian

We were hit with a nasty new WordPress virus last week and have been in recovery mode for several days. The virus informs the visitor that the site presents a security threat and offers to download antivirus protection which you should never, ever do.

If you see this warning, don’t click anything except the “close window” button and get out of there. We would also appreciate it if you would drop us an e-mail if you see this threat. The site appears to be stable now but we want to be sure. Thanks.

Hawaiians are preparing to be one newspaper poorer.

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

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

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

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

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

The Respite Arrives

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

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

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

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

Miscellany

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

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There isn’t much room in the market for newsweeklies any more, and the conventional wisdom has been that Time magazine will be the last man standing. Looks like conventional wisdom is right. The Washington Post Co. is reportedly looking to unload Newsweek after three straight years of losses and the likelihood of a fourth. “In the current climate, it might be a better fit elsewhere,” said Post CEO Donald Graham in a statement.

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

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

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The Wall Street Journal’s campaign to slug it out with The New York Times for national daily supremacy appears to be taking its toll on at least some Journal staffers, who are grumbling about the paper’s failure to secure even a single nomination for a Pulitzer Prize this year. There are all kinds of theories about the snub, ranging from perceived institutional hatred for Rupert Murdoch at Columbia University to the Journal’s focus on breaking news at the expense of long-form journalism to the inherently biased and political process of awarding prizes for non-measurable things like journalism in the first place (our favorite).

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

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The publisher of Dan’s Papers, which is the largest-circulation local newspaper on eastern Long Island, filed for bankruptcy, citing the weak real estate advertising market. This is despite the fact that Dan’s Papers claims an average reader household income of $381,000. The real estate market must be really bad, or high-income people must not be reading newspapers or both. Owner Brown Publishing Co., owns 15 dailies, 32 weeklies, 11 business publications, 41 free publications and 51 newspapers or niche websites.

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If you’re an iPhone, iPod Touch or iPad user who really likes the idea of getting a newspaper look-and-feel in a digital package, you might want to check out PressReader from NewspaperDirect. “If you’ve ever wanted to experience unadulterated newspaper goodness on the iPad, this is it,” the company said in an e-mail. “Cover-to-cover newspaper browsing with one finger. Or two, if you like to zoom in.” Which we do. The company says it delivers more than 1,500 daily newspapers from 90 countries digitally in formats that can be viewed or printed. The iPhone reader is free, so what do you have to lose?

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