The Guardian’s Dan Kennedy has an intelligent piece about why the great newspaper collapse of 2009 didn’t pan out as expected. If you remember, early this year there were dramatic closures in major markets like Denver and Seattle, along with threats of similar harsh medicine in San Francisco and Boston. But as 2009 comes to a close, the San Francisco Chronicle and the Boston Globe are still alive and kicking and there have been no major newspaper shutdowns in nine months. Kennedy points out that publishers took strong action to reverse the tide after that scary first quarter, cutting back sharply on expenses, boosting subscription prices and finding novel new ways to generate revenue. They also had considerable success whittling down the debt that has paralyzed many of their operations

Most daily newspapers, in fact, operate in the black but massive debt accumulated during multiple rounds of consolidation earlier this decade were threatening their existence. The threat is still there, but it looks like there was more fat in newspaper operating budgets than many observers had believed. Washington Post publisher Katharine Weymouth has pointed out that her paper employs twice as many journalists as it did during the Watergate years, even after multiple rounds of cutbacks.

Time to celebrate? Hardly. This industry is not a growth story and probably never will be, but it does appear that publishers are finding ways to gracefully manage their print operations down to sustainable levels. Early experience indicates that online news publishers can the profitable at about 20% of the expense level of their print counterparts. It’s likely that some publishers will figure out ways to get there without shutting down the brand entirely. Of course the price of advertising is also in decline, but that’s a different problem entirely.

It turns out that shares a Gannett Corp. were a heckuva buy in March when they plummeted to $1.85. The stock hit $15.49 on Wednesday as a leading analyst upgraded his outlook for the newspaper industry, saying December could be the industry’s best month in three years. Well Fargo Securities analyst John Janedis said the slide in advertising is slowing and that ad revenues could be down only 8% or 9% next year, compared to more than 30% this year. Janedis raised his rating on Gannett to “outperform” from “underperform” and on New York Times Co. to “market Perform” from “underperform.”

Not in Our Back Yard

We continue to be amazed at how newspapers bury the lead when announcing bad news about themselves. Check out this press release from the Washington Times as reprinted on Talking Points Memo:

The Washington Times today announced that it will begin producing a more focused Monday through Friday edition designed to feature its most distinctive news and opinion content.

Offered as a combination controlled market and paid general interest newspaper at a price of $1.00, the new print edition will be available at retail outlets and newspaper boxes throughout the D.C. metropolitan area. The current newspaper’s last Sunday edition will publish on December 27.

That’s right: the news is that the Times is killing its Sunday edition. This is on top of laying off 40% of its staff a few weeks ago. The paper is also reportedly considering eliminating its sports section entirely. Perhaps the Times reporters wouldn’t bury the lead on this particular story, but the PR department surely did.

Miscellany

Slate’s Jack Shafer throws cold water on publishers’ love affair with e-readers. Citing slick recent demos by magazines like Sports Illustrated, Esquire, GQ and Wired of their content running on handheld tablets, Shafer harkens back to the days of the Washington Post‘s Pathfinder.com experiment and Newsweek on CD-ROM. Publishers thought those delivery vehicles were going to reinvent their business but the efforts crashed and burned for reasons ranging from the public apathy to the relentless commoditization of information. E-readers are simply another delivery device, Shafer asserts and the tiny sales generated by iPhone apps aren’t going to replace revenue lost from print advertising. The devices also negate the tactile and visual appeal of a print publication, reducing the editorial product to just another stream of content.

The New Bedford Standard-Times becomes the latest paper to start charging readers for online access. Its rather convoluted plan announced this week gives readers three stories per month for free, seven more stories if they register and full access for $4.60 per week. That package also includes a print subscription, which usually costs $4.23. So online access for existing readers comes at an additional charge of $.37 per week.

If you’re looking for an inspiring message to give journalism school students, you can’t do much better than the one NewsLab’s Deborah Potter invented for graduates of the University of North Carolina at Chapel Hill. Today’s journalism professionals need to be inquisitive, resourceful and versatile, she says. Yes, news organizations are contracting and pay levels are shrinking but journalists have an unprecedented opportunity to reach a global audience. You’re on your own more than you’ve ever been, but that can be energizing as much as it’s terrifying. The future of journalism is “what you DO, irrespective of where you do it…your credibility depends on HOW you do what you do, not where you do it.” Believe, us it reads better in context. Potter’s also confident that revenue models will emerge that make journalism sustainable.

If you’re wondering what all the fuss is about augmented reality, Jeff Jarvis has a nice collection of video clips showing different ways in which the commendation of images, databases and mobile access can make the world around us more accessible. Here’s one:

In one of the final feature stories in Editor & Publisher, which is closing after 125 years, Jennifer Sabba has an interesting dissection of the circulation experiment at the Dallas Morning News. That paper was one of the first to dig into the economics of circulation pricing in order to better understand elasticity. Newspapers have traditionally derived only about 20% of their revenue from circulation, but the wholesale collapse of categories like classified advertising has forced them to get creative. The Morning News is one of several newspapers have experimented with turning the screws on loyal customers to see how much more they would pay for a print product.

It turns out that pricing elasticity isn’t absolute. Research conducted by the Morning News found that readers were willing to pay more if they thought they were getting more in the bargain. Specifically, the most important topics they identified were national news, local news, business, state, sports and investigative journalism, in that order. “If the paper raised the subscription price but readers felt they were getting more content, the fall-off in volume would be around 10%. At the same price, if readers felt like they were getting less content, volume would fall by 40%.”

The Morning News responded by jacking up its home delivery prices an audacious 66% in one year. However, it also expanded its news hole and launched a free edition that’s distributed to about 200,000 homes four days a week. As a result, in the most recent six-month period, the paper reported one of the largest circulation declines of any major newspaper: 22.1%. But that may not be a bad thing for the bottom line. The paper is sticking with its pricing strategy in the belief that the overall business impact will be positive. That’s the philosophy executives at Hearst Corporation adopted with the San Francisco Chronicle last year. The Chron has hiked its subscription rate 63% in the last 18 months and seen circulation plummet. However, it has reportedly also stabilized a business that was losing $1 million a week in 2008.

Sabba’s story provides a new context for understanding the dizzying drop in newspaper circulation over the last few years. While the declines are troubling, they are at least in part voluntary as publishers shed unprofitable circulation and focus on loyal readers. This isn’t a long-term growth strategy, but print isn’t going to be a long-term growth proposition anyway. The thinking behind the strategy actually makes sense in light of the inevitable shift that news organizations must make from print to digital distribution. If there is a cash cow, then milk as much profitability out of it as possible while transitioning the rest of the business to a new economic model.

Debating Paid Models

Rupert Murdoch is apparently getting sick of being portrayed as an old fuddy-duddy who wants people to pay for information that should be free. So he’s taken his case to the Wall Street Journal. In a December 8 opinion, the News Corp. CEO says journalism is the foundation of a free society and blogger “theft” of the hard work of reporters and editors is undermining the value of quality information. Murdoch rejects suggestions that news organizations should become nonprofits as well as the possibility of a government bailout. “The future of journalism belongs to the bold, and the companies that prosper will be those that find new and better ways to meet the needs of their viewers, listeners, and readers,” he writes. But he also states that the economic future of the industry can’t be sustained by online advertising. Instead, readers must be convinced to pay a “modest amount” for good information. “The critics say people won’t pay. I believe they will, but only if we give them something of good and useful value. Our customers are smart enough to know that you don’t get something for nothing,” Murdoch says. Unfortunately, he provides no research or factual evidence for his belief.

Karthika Muthukumaraswamy has a thoughtful post on Online Journalism Blog about how to make paywalls work. She summarizes conventional wisdom that paywalls only succeed when the publication has content that has a high perceived value, usually for a focused audience. The problem with most news organizations is that they’ve been trained to make their information appeal to the broadest possible readership. So how do you change the mindset? Muthukumaraswamy suggests that the best course may be a dual track: continue to deliver broadly appealing information for free while analyzing traffic to determine where the high-value readers are. Then ask them to pay for access to that information. In that vein, “Steven Brill’s Journalism Online plans to charge only the most frequent users who seek very specific content while allowing cursory surfers to avail of most topical news for free.” Don’t demonize Google – she quotes research estimating that search engines can deliver about 50 cents a day of revenue per unique visitor – but don’t make it an either/or proposition, either. The key is to get focused on the numbers and seek your area of highest value.

Speaking of pay walls, The New York Times is mulling the online subscription option but isn’t tipping its hand about its plans yet. Senior Vice President for Digital Operations Martin Nisenholtz told the UBS Global Media and Communications Conference in New York City last week that there’s too much at stake to make this an all-or-nothing proposition. The company values its relationship with Google but is looking at the paid options employed by the Financial Times and the Wall Street Journal, as well as the possibility of just staying free. There is some evidence that the financial free-fall is turning around at the Times, and staff cuts that have trimmed 25% of the workforce could reestablish some stability.

Traffic figures are in for the first month of Newsday‘s bold experiment to charge a $5 monthly fee for access to most of the content on its website. Declines of 21% in page views and a little under 20% in unique visitors were within expectations, according to management. Year-over-year page views were down 35% and unique visitors off 43%, but that compares to unusually busy election year numbers from a year ago. Management isn’t saying how much of the advertising revenue decline was made up by subscription fees. Newsday‘s numbers also can’t be taken as a benchmark for the industry, since a provision of the plan enables the many Long Island subscribers to Cablevision’s Optimum Internet service to get access for free.

Miscellany

The Journalism Shop surveyed 75 former Los Angeles Times journalists and found that more than half believe the paper will not survive in the long term. Only one in six thought the Times would weather the storm that is buffeting the industry. The poll is hardly scientific, but it has some interesting findings about how the former staffers see their future jobs (more than a third expect to exit the profession entirely) as well as whether and how they believe journalism can survive. The generally dour findings show that the journalists believe the media is descending into a mud pit of top 10 lists and celebrity gossip.

Google continues to try to make nice with newspaper publishers while at the same time introducing new products that threaten their business. Editors Weblog points us to Living Stories, a Google Labs feature that aggregates news from around the Web and organizes it by content. The prototype uses content derived from a partnership with The News York Times and the Washington Post. The feature appears to be a modest evolution of Google News at this point, although there is certainly potential for more innovation. One neat feature is a timeline atop some of the news packages that tracks important milestones in the evolution of a story. According to a post on the Google blog, the content is being maintained by staffers at the two newspapers. Google continues to insist that it has no plans to get into the original content business. The blog entry also says the company will provide open source tools that news organizations can use to adapt the service to their own needs.

It appears the Associated Press has begun to turn the tide of customer defections that began last year when the service raised its rates. Some 180 newspapers canceled their AP contracts after the revised rate structure was announced, but now 50 have come back, although not necessarily under the full licensing plan. The Minneapolis Star Tribune is the latest to rescind its cancellation.

As if to dramatize the crisis facing the newspaper industry, the owner of the 125-year-old Editor & Publisher magazine announced it is shutting down the title. The venerable trade magazine was the unwanted child in a deal between Nielsen Business Media and e5 Global Media Holdings, LLC involving the sale of eight brands in Nielsen’s Media and Entertainment Group. The closing was announced in a one-sentence mention in a memo from Nielsen Business Media President Greg Farrar. AFP has the facts and Huffington Post, considered by some to be the standard-bearer for the new breed of publishers that will succeed daily newspapers, adds detail.

That includes E&P’s string of 11 Neal Awards, a prestigious honor awarded to trade publications by American Business Media, as well as the magazine’s once-formidable position as the journal of record for the newspaper industry. E&P writes its own obituary and suggests that there’s still a possibility that the title could be carried on in some form. It also obligingly lists the e-mail address of all staff members for the benefit of recruiters.

We have often cited E&P‘s work in our posts on this website, and had just this morning written a commentary on an excellent dissection of the circulation experiment at the Dallas Morning News that appeared in E&P this week. While the publications articles could be annoyingly terse at times, its features are often very good and its coverage was always timely. We have particularly enjoyed the work of Mark Fitzgerald and Jennifer Sabba and hope that they quickly find a new place to showcase their talents.

It’s perhaps fitting that we learned of E&P’s demise the way an increasing number of readers consume their news these days: it was posted on Twitter.

Newspaper publishers are reporting some good news at last, although how good it is depends on your perspective. Speaking to the UBS Global Media and Communications Conference in Chicago this week, executives from Gannett, Media General, McClatchy, the New York Times Company said revenue is showing signs of bouncing back.

Gannett’s Bob Dickey said the industry is emerging from a “cyclical downturn” and that Gannett is positioned to take advantage of new revenue opportunities and an improving climate. Executives said they were comfortable with the high end of Wall Street’s earnings estimates for the quarter. However, that doesn’t mean growth is back. Gannett is still planning to trim expenses by single-digit percentages during the next year and it started with the announcement last week of further cuts at USA Today.

Media General said it sees signs of ad spending “firming,” and that aggressive cost cuts of the past two years have stabilized the company. Media General has whittled $200 million off its debt load over the last three years, although the total debt still stands at a daunting $700 million.

The New York Times Company has also been cutting its debt — from $1.1 billion-$800 million — and sees the slope of decline in advertising revenues beginning to flatten. It expects print advertising revenue to be down 25% in the fourth quarter, but that’s compared to inflated election-year spending in 2008. CEO Janet Robinson said it looks like online advertising will actually increase 10% in 2010.

McClatchy says it’s lifting a pay freeze that’s been in effect for over a year but don’t break out the champagne just yet. Revenues were still down 23% in the third quarter although CEO Gary Pruitt said McClatchy is “successfully navigating through these difficult economic times.”

Newsosaur Alan Mutter isn’t buying any of it. He says newspaper executives are whistling past the graveyard when you look at the magnitude of the industry contraction over the last four years. According to his projections, “classified advertising in 2009 is likely to total no more than $6 billion, or fully 65% less than the $17.3 billion in sales booked in 2005.” He also points out that the recession took a particularly heavy toll on retail and automotive companies, which are the backbone of newspaper revenues. Most of that business will never come back, he says.

Meanwhile, new figures from TNS Media Intelligence show the media industry is far from out of the woods. Advertising expenditures slipped 14.7% in the first nine months of 2009, with traditional media leading the downward spiral. Newspapers and radio posted identical declines of 22.8% in the period. Business-to-business magazines fared the worst, with revenues down more than 27%.

That brightening at picture at the New York Times Co. won’t stop it from continuing to cut costs at its flagship. The newspaper will be forced to resort to layoffs after it failed to meet its target of cutting 100 positions through a voluntary buyout offer. The Times isn’t saying how many people stepped up to take the severance package, but speculation is that about 50 union and nonunion jobs will be cut to layoffs.

The news is better at the Worcester Telegram and Gazette, which the Times Co. has pulled off the auction block. The T&G was offered for sale early this year almost as an afterthought when the Times Co. put the Boston Globe up for sale. The company later canceled the sale, reportedly because bids weren’t high enough. While the Globe has been in a downward cost-cutting cycle this year, its sister 30 miles to the west has apparently been focusing on remaking itself. The reason cited for the cancellation of the Worcester paper was a transformation of its “journalistic and business operations.”

Perhaps all those fresh-faced young journalism wannabes who are flooding J-schools across the country right now know something we graybeards don’t. While there’s still plenty of legitimate hand-wringing going on over the collapse of publishing institutions, some media seers are beginning to see promise where others see peril.

David Carr’s essay in The New York Times last weekend is drawing considerable attention and well-deserved praise for its glass-is-half-full perspective. Carr, who put in his time at the traditional media watering trough, observes that the technology-enabled young journalists he meets these days increasingly see the collapse of hidebound media institutions as an opportunity to make a name for themselves based upon merit rather than survival. “The next wave is not just knocking on doors, but seeking to knock them down,” he writes. “Young men and women are still coming [to New York] to remake the world, they just won’t be stopping by the human resources department of Condé Nast to begin their ascent.”

We found ourselves nodding vigorously as we read this piece. Carr expresses no nostalgia for an industry that was built on the inefficiencies of traditional advertising that are now being Googled out of existence. Career paths that relied upon young journalists doing “marginal jobs for indifferent bosses doing mundane tasks” are being vaporized and replaced by a meritocracy in which the best may not only survive but thrive. We’re still a long way from the Promised Land, and it’s a scary world if your job security is based upon having outlasted everyone else, but it’s invigorating if you’re young, energetic and enabled with all the trappings of today’s technology.

New York City venture capitalist Fred Wilson agrees. “I believe the move from a velvet rope model to a meritocracy is a good thing and that the new media business we are building in the wake of the old one will be a better media business; leaner, faster, and controlled more by users than media moguls,” he writes. Amen. As sympathetic as we are to the many people whose careers and lives have been thrown into chaos by the collapse of traditional media, we continue to see a much brighter future once the wreckage is cleared away.

AOL to Automate the News

America Online, which recently announced plans to lay off a third of its employees, is breaking some new ground in the newsgathering field. The company plans to use automation to crawl the Web looking for stories that its visitors have indicated they prefer through their clicks and page views. The robot will then advise a team of increasingly dehumanized editors when and where to publish what it finds. AOL will also use its new venture, Seed.com, to outsource assignments to an army of (presumably low-paid) reporters and photographers.

It sounds impersonal and even a little creepy. The idea of building a new site based entirely upon the preferences of viewers strikes us as a little like the model at Digg.com, which generates boatloads of traffic, but tends toward stories about video games and loopy kids. Digg isn’t threatening to upend CNN.

Writing on FastCompany.com, Kit Eaton makes an interesting case for AOL’s actions creating a revenge effect. If social media is actually adding more of a human element to interactions between groups, does a service that removes much of the human decision-making make any sense? Eaton proposes that readers today actually expect more of the human element in their news coverage rather than less. Of course, we haven’t seen the AOL technology in action and human editors could tweak the parameters over time to make its selections look more like The New York Times. But we doubt it.

Miscellany

Last week we told you about a new daily newspaper that is being launched into the Detroit market, hoping to fill a void left by the reduced publication schedules of the two major dailies there. Well, the experiment didn’t last long. The Detroit Daily Press published just five issues before hitting “a bump in the road” and suspending further operations until the new year. The suspension was blamed on “lack of advertising, lateness of our press runs and lack of distribution and sales,” according to an announcement on the publication’s Facebook page. This sounds to us like more than just a pothole, but we hope the owners, who have courted this market before, can overcome their troubles and come back in 2010. Photographer Rodney Curtis offers an insider’s perspective. Having lost his job at the Detroit Free Press earlier this year, he’s now a double-dip victim of the industry’s troubles.

Some local television stations are now crowdsourcing the news assignment process. Broadcasting & Cable reports on stations in Milwaukee, Lancaster, Pa. and Little Rock that are opening their daily news budget meetings to outsiders through video, live blogs and Twitter. News directors say the experiment has been a mixed bag, since audiences that sometimes number over 100 can get stuck on gossip and minutia instead of general interest stories. However, they say the open-air meetings have also resulted in solid news tips, such as the WITI (Milwaukee) story on a father surprising his son at school upon returning from Iraq. The boy’s teacher had clued the station about the visit.

Add MediaNews and A.H. Belo to the short list of newspaper publishers who are considering joining Rupert Murdoch in his crusade against Google’s evil empire. Executives at both companies were quoted recently saying that they may withhold some paid content from Google’s search spiders. However, they indicated that they would not block access to free content. These statements are a minor blow to Google, which says it can work perfectly well with paid content and that publishers using paywalls need Google even more to make their content discoverable.

The Hopi Tribal Council has decided to close down the Hopi Tutuveni, which is the primary newspaper covering Hopi lands. The 6,000-circulation paper, which has been publishing since the 1970s, was called “ineffective” by one tribal Council maker and didn’t merit continued funding by the budget-pressed group.

It’s the end of an era, of sorts, at the Washington Post. The paper plans to close down its last three domestic bureaus – in New York, Los Angeles and Chicago – at the end of this month in a significant retrenchment that focuses on the Washington area. The move continues a recent trend toward embattled big-city dailies shutting down the remote offices as they attempt to go hyperlocal. David Carr quotes Post Executive Editor Marcus Brauchli as saying “We are not a national news organization of record serving a general audience.” The Wall Street Journal announced plans to close its Boston bureau last month.

It’s Thanksgiving Day in the US, so we present some thoughtful reading for consumption on a day of rest.

Study Examines Citizen Journalists’ Motivations

There isn’t a lot of good news for traditional media organizations in a new study prepared by two college communication professors and funded by the McCormick Foundation. In preparing New Entrepreneurs: New Perspectives on News, Researchers interviewed approximately 50 female consumers and citizen journalists to learn how they see their role in the evolving news ecosystem and what motivations prompt them to participate. While most of the participants expressed respect for traditional media outlets, they also identified some serious shortcomings, including lack of connection with the local community, failure to innovate and hostility toward the grassroots work the citizens are doing. The 18-page report is quick reading.

One of the more striking conclusions is on the subject of objectivity. The citizen journalists expressed frustration at media reporting that equates objectivity with lack of involvement.

New media creators believe that they can be objective, but still be connected to their community and to the stories they report. They saw a very strong distinction between news and opinion and took great strides to ensure that they, their contributors and their readers understood the difference, but they did not see their “participatory perspective,” a more informed, connected perspective, as encroaching on objectivity.

Citizen journalists also believe that their connections and involvement in the local community gives them an advantage over the frequently shifting ranks of beat reporters.

Being a part of the community rather than detached from it also led to more thorough reporting in the opinion of some of the new media creators. They believed they had better access to sources and were better versed in the issues.

“Our local government was hilarious. A lot of times the paper can’t point that out because the paper is an authority figure, and an authority figure who points a finger and laughs is a bully. Whereas, I was just some person on the back porch.”

There are also indications that both consumers and content creators believe that traditional media overplay conflict in the quest to make stories more compelling. This polarizes participants and frustrates efforts to find common ground. Since citizen journalists have a vested stake in their communities, they believe that sensationalism works against the progress they are trying to achieve.

Several of the citizen journalists also said that local media organizations had reacted to their work with attitudes ranging from neglect to outright hostility.

The new media creators in particular felt that traditional media’s reaction to the changes was to attack the new media rather than embrace it. The passion and respect for journalism that was seen among all creators (and even consumers) may make some feel threatened by any change to the industry. But the new media creators are more likely to see the change as an evolution that can be accepted without threatening the basic standards of the profession.

This last point is the most troubling finding of the research. Read Clayton Christensen’s book, The Innovator’s Dilemma, to learn how market disruption almost always comes from below. The new entrants, which are frequently of inferior quality, are treated with disdain by the market leaders. However, as Christiansen points out, new kids on the block open access to much larger audiences and invariably improve with time. Meanwhile, market leaders tend to stake out the high-end and gradually become niched out of existence. The only way to avoid this fate is to embrace new competition, even if it causes considerable discomfort. Reinvention doesn’t come without pain.

Journalism is Changing, Not Disappearing

Doc Searles present a well-reasoned argument why journalism isn’t disappearing from the earth but simply following the path already blazed by business. Searles, who co-authored the seminal Web 2.O essay, “The Cluetrain Manifesto,” looks at the industry from a technologist’s perspective. Much as personal computers and open source software moved computing innovation from the center to the ends of the network, journalism is undergoing a similar metamorphosis. Journalism isn’t going away so much as being democratized.

This transition is nothing new, Searles points out. Peter Drucker foresaw the end of the modern corporation in the late 1950s because “companies existed at the suffrance of the individuals who comprised them, even as it organized their work and put it to use.”

The current transition will move the nerve centers of journalism from monolithic organizations to networks of individuals. Specialists will be able to profit from their work, but they will compete on a truly open playing field. To use an analogy, in the preindustrial age anyone could set up shop and become a cooper, but only a small number of people were good enough or fast enough to make their living building barrels.

This is small consolation to the out-of-work journalists who have lost the enveloping arms of the corporate parent. Journalism’s traditionally high barrier to entry has kept out the vast majority of wannabes, but those barriers have now fallen away. Journalism in the future will be more competitive, but it will also be more innovative and rewarding because the rewards will accrue to the individual journalists rather than to their companies.

Common Sense on Creative Commons

If the concept of the Creative Commons license mystifies you, check out this essay by Joi Ito, CEO of the nonprofit Creative Commons organization. He draws an analogy to the open source license, which has revolutionized the quality and availability of software. If someone has tried to create a Google in the pre-Internet standards page, the effort would have cost billions of dollars and not worked very well. Google happened because standards were already in place and the founders didn’t have to navigate layers of approval and legal challenge. They built the basic technology for small money and evolved from there. The result is a service that has benefited the world rather than the handful of rich businesses. Had Google been created in the pre-open standards era, the fees the creators would have had to charge to make back their investment would have precluded its widespread adoption

The economics of Creative Commons and open source stands traditional business models on their head. In the past, copyright holders jealously guarded their franchise in the hopes of realizing a (usually small) license fee from its use. Under Creative Commons, the assumption is that good work will be passed around freely, usually with attribution to the author, thereby benefiting the Creator in other ways, such as through paid writing assignments, speaking engagements and publicity.

Ito’s case builds upon Doc Searles’ point that in a democratized economy, intelligence radiates outward the endpoints. The more people who adopt the work for their own use, the greater the benefit to everyone. In most cases, the creator also makes out.

There are exceptions, of course. A small number of large organizations stand to benefit when intellectual property is tightly controlled. However, openness creates opportunity for many others. Witness what has happened in the recording industry as the star-making machinery has ground to a halt and hundreds of thousands of bands have taken their case to MySpace. There may be fewer stars, but there are also more bands making a living by having control over their own destiny.

This idea even works for large entities. The success of Google Maps is largely due to the work of independent developers who have created remarkable mashups, while Unilever’s award-winning Dove Evolution TV ad has benefited from dozens of adaptations and parodies, each of which reinforces the value of the original work.

P.S. We just added a creative Commons license insignia to our right sidebar.

The dismal circulation figures reported by the US newspaper industry a couple of weeks ago may actually have been optimistic. There’s new evidence that many publishers took advantage of recent changes to Audit Bureau of Circulations (ABC) rules to actually overstate their real readership numbers. The blogosphere is having a field day with this one.

The catalyst was this AP piece that points out that changes adopted by the ABC seven months ago now enable publishers to count “bundled” subscriptions of paid and online editions as two subscribers, even if only one person is doing the reading. This continues recent trends by the bureau to loosen rules and give its publisher customers more flexibility to pump up their numbers. In the spring of 2008, for example, the ABC made it possible for publishers to declare as paid circulation copies that sell for as little as a penny.

The AP story doesn’t pinpoint how many news organizations benefited from the rules change in the most recent reporting period, but notes that 59 newspapers counted at least 5,000 electronic editions in their weekday circulations. If those numbers were backed out, the record 10.6% drop in the most recent six-month period would probably have been even worse. The story cites several examples of papers that showed declines in print subscribers but were still able to post circulation increases by counting delivery of electronic editions.

However, numbers games don’t fool anybody in the world in which smart people with spreadsheets can quickly analyze them. As Mark Potts points out, “Fudging the numbers may make internal constituencies happy, but they’ll bite you in the long run. Advertisers can count, too.” In other words, you can slice the numbers any way you want, but it doesn’t count for a hill of beans if customers don’t come in the door.

Electronic editions are basically digital versions of the print product that readers can download for the sake of convenience, ecology or availability. Jim Brady tweets wryly, “Nothing shows that you ‘get’ digital more than trying to deliver it to people in exactly the same form it appears in print.”

The circulation gains are part of a broader campaign by publishers to distract people from the reality of plunging circulation and ad revenue. Scarborough Research released a much-cited report recently that documented that 74% of American adults read a paper in print or online during the past week. These statistics look impressive, but qualifiers like “adult” and “in print or online” color the numbers. The newspaper industry has largely lost the youth market and online distribution is a mixed blessing at best.

Publishers are playing numbers games of their own. Mark Hamilton notes that the industry has largely abandoned circulation figures in favor of research-driven readership numbers that report the number of people who have read or looked into a newspaper in the past seven days. These figures serve to buttress the argument that newspapers are still a core element of American life while obfuscating the fact that subscribership is down.

And even large circulation numbers don’t equal business success. Alan Mutter contrasts the circulation strategies of two Bay Area publishers: Hearst’s San Francisco Chronicle and MediaNews Group. The Chron has all but abandoned discount circulation in a quest to cut its operating losses and drive circ revenue to 45% of total sales next year. MediaNews is taking the opposite course. It has used aggressive discounting to become the most widely circulated publisher in the area. The combined circulation of MediaNews papers in the region is now nearly triple the Chron’s. MediaNews president Jody Lodovic calls his strategy a long-term view, but is junk circulation good for anybody? The Chronicle‘s strategy is to stabilize its business, which may be a more rational plan in an unpredictable economy.

Whatever the numbers, advertisers are speaking more loudly with their dollars. US newspaper advertising revenue fell by nearly 28 percent in the third quarter from $8.9 billion to $6.4 billion. If you extrapolate that out to a full year, the US newspaper industry has shrunk by nearly half since 2006, when it reported $49.2 billion in revenue. The AP quotes Newspaper Association of America (NAA) president John Sturm positioning the figures in the context of a dismal economy, but it’s hard to find any bright spots when even online advertising was off 17%.

Miscellany

All may not be lost for the East Valley Tribune, which earlier this month announced plans to shut down at the end of the year. The paper reported on Friday that an unnamed buyer has emerged who plans to keep the paper operating both in print and online. The buyer also plans to keep a “substantial” number of Tribune employees on the payroll. There were no other details. Freedom Communications, which owns the Tribune, has been seeking a buyer since early this year, but no serious offers emerge prior to a Sept. 1 bankruptcy filing. In fact, Freedom’s chief financial officer said one bidder offered to take over the business only if Freedom paid him to do so

Count Twitter cofounder Biz Stone among the army of skeptics about Rupert Murdoch’s plans to remove News Corp. properties from Google’s search index. Saying Murdoch’s scheme is likely to “fail fast,” Stone told a London audience that the Australian media magnate should instead focus on “how to make a ton of money out of being radically open rather than some money by being ridiculously closed”. He suggested that Twitter’s crowdsourced model offer some opportunities and that the company would be willing to work with newspaper publishers. Twitter executives also said last week that the service will soon announce a plan to start making money off of the estimated 60 million members it has acquired.

And Finally…

Ed Padgett pointed us to this clever music video by Christopher Ave, the political editor at the St. Louis Post-Dispatch who isn’t a copy editor but who is sympathetic to the plight of wordsmiths around the country who are falling victim to layoffs. The slick production, which looks like it was recorded in a newsroom, includes the following refrain:

I was there to fix your grammar
When you thought it wouldn’t matter
Cut all your extraneous blather down

AP Stylebook is my bible
Helped me stop a suit for libel
But nothing ensures my survival now

And I don’t know what I’ll do
After I am through
Killing my last adjective

Mallary Jean Tenore tells the story behind the video on Poynter Online. It has less than 800 views, so go visit it and add to its five-star rating.

After nearly losing its two daily newspapers a year ago, Detroit is actually adding one to the stable. The Detroit Daily Press will launch next week with daily newsstand distribution at first and home delivery scheduled to begin in about a month. This is actually the title’s second appearance; it originally appeared in 1964 and lasted for about four months before folding. The owners, who said they came out of retirement to take another shot at the Detroit market, plan to distribute 200,000 daily copies and charge a fraction of what their competitors charge for newsstand sales and advertising space.

Brothers Mark and Gary Stern say they have enough capital to make a go of it for two months and need 150,000 paying subscribers to break event after that. In light of that short timeframe, the quote in Editor & Publisher seems a little odd: ” “This is a permanent situation for us.” However, the brothers say they have raised private capital and have a much more efficient operating model that does away with unions and captive printing presses, so perhaps they have cash on hand to last much longer. The operation will employ about 60 people. It has recruited several veterans of the Detroit newspaper industry.

The Detroit market was roiled early this year when the Free Press and the News scaled back their home delivery operations to three and two days per week, respectively, in the name of saving costs. Few details have emerged on the financial success of the experiment. Both saw circulation declines in the first half of this year, but well within the average range for the industry

Local writer Isak Dinesen notes that the Stern brothers are Detroit natives and so may have an affinity for their local area. She also points to a Facebook page and online mockup (above) of the new title. The promotional language advertises “paper delivered seven days,” which is a direct reference to its competitors’ reduced schedule.

Miscellany

The question of whether readers are willing to pay for news appears to come down to how you ask the question. Alan Mutters tallies up recent research and finds that the percentage of Americans who say they’d crack open their wallets ranges from a low of 20% (Forrester Research) to a high of 53% (American Press Institute). The amounts vary widely, too. We’d suggest the wording of the question and the makeup of the sample group has a lot to do with the variations. That and the fact that Internet research is inherently unreliable. Forrester at least has been doing this for a long time.

Jeff Jarvis hits the nail on the head again with an essay about the new business model for news organizations. He observes that the cost model for a successful online title is about 10% that of a print property. In other words, there’s money to be made online, but requires the cost structure to be radically changed. The problem is that most newspaper publishers  can’t stomach the idea of eliminating 90% of their staff. Of the major metro dailies that have closed this year, only one — the Seattle Post-Intelligencer — has successfully shifted it is cost model to match the online revenue opportunities. Recent reports have indicated that the P-I actually is profitable online, although few details are available.

It isn’t human nature to shoot nine out of every 10 employees. So for many publishers, it’s easier simply to go under completely. That’s why Jarvis argues that bankruptcy is a bit of a magic potion. It’s an opportunity to get out from under debt, blow up the unions and completely restructure the way an organization works. Unfortunately, he correctly points out that those publishers that have gone through the bankruptcy procedure — which is most of them — have mostly failed to do more than trim a few expenses here and there. That isn’t going to save them; it will just postpone the inevitable.

The New York Times will end its Times Extra aggregation experiment in two weeks, about a year after launching the feature. The company insists that the decision isn’t a backtrack from the goal of aggregating outside content but rather than the content would now be presented within stories rather than on a dedicated site.

The New York Sun, a weekdaily that shut down a year ago, has been rejuvenated online. It will be resurrected for a 20-week run featuring crosswords from famous puzzle editor Peter Gordon for $1 per week. No word on whether management will decide whether to continue publishing the paper, but we expect that revenue will be an important factor.

BusinessWeek is reportedly set to lay off 100 people in the wake of its acquisition by Bloomberg LP. It appears that layoffs will be across the board, with employees who are in the line of fire being asked to submit resumes, news clips, and 250-word statements about their qualifications for continuing to work at the esteemed business publisher. BusinessWeek becomes property of Bloomberg on Dec. 1.

The Associated Press laid off 57 union workers, including 33 editors. The newswire is seeking to cut its personnel expenses by 10% by the end of the year.

Citizen journalism startup AllVoices will start paying professional journalists to cover beats, although the compensation is a meager $250 for now. The site has more than 200,000 registered members, most of whom contribute their work for free. AllVoices’ CEO Amra Tareen said the program is intended to recognize that these are “tough times for many journalists as news organizations downsize” and noted that reporters could earn more than the basic fee if their stories generate a lot of traffic. We profiled AllVoices last year.

And Finally…

Go to the basic Google home page and start typing a question. See what the Genius Google, in its near-infinite wisdom, thinks you’re asking when it provides all those “helpful” suggestions in a drop-down box. It turns out that certain kinds of queries generate amusing suggestions. For example, type “Is there any” (sans quotation marks) and see what Google suggests you really mean. (Okay, so we stole that from TheNextWeb.com.) Let’s get creative… Type in “why will” or “how come” or even “why is it that” and see what you come up with. The results are so strange that this feels like a big practical joke on Google’s part, but it does lend itself to endless experimentation.

The debate over whether search engines are friend or foe to the newspaper industry continues to grow and become more complex.

Rupert Murdoch says he will really go ahead with his stated plans to remove his portfolio of publications from Google’s search index. Jonathan Miller, News Corp’s chief digital officer, told the Monaco Media Forum on Friday that the company would begin blocking Google’s search spiders within a few months. Miller said Google brings in an army of one-click visitors who are “the least valuable traffic to us…You can survive without it.” He also said Murdoch intends to lead the industry in the just-say-no campaign. A Google spokesman responded that the search engine sends about 100,000 clicks to news organizations every minute. TechCrunch estimates that Google drives about one quarter of the total traffic to The Wall Street Journal.

While there’s no doubt that Murdoch is serious about drawing a line in the sand on this issue, the decision to talk about it this far in advance indicates that this is a negotiating tactic. Much as Hearst and the New York Times Co. wrung concessions from unions by threatening to close the papers they own, Murdoch may be looking to extract some kind of licensing deal from Google in return for backing down.

The Journal and the Financial Times are the only two daily newspapers that are having any success with a paid subscription model because both provide information that subscribers see as essential to their business. Few other newspapers can make that claim, which is why paywalls have been so difficult to implement.

Miller’s comment about drive-by visitors is worth noting. Publishers and auditors tend to look at traffic as the ultimate metric of success, but there are different kinds of traffic. Sex and celebrities drive page views just as they sell newsstand copies, but that kind of traffic is undesirable to most advertisers and extremely hard to monetize. If Murdoch has decided that his core base of paying and print subscribers are sufficient to run the company, he may be choosing to press his advantage while he still has leverage. The Wall Street Journal was the only large US newspaper to show any growth in the recent Audit Bureau Of Circulation report and Murdoch may have decided that he doesn’t need the casual visitor in order to be successful.

The Bing Factor

Media entrepreneur Jason Calacanis thinks Murdoch wants to do a deal. He suggests that the publishing tycoon could strike an exclusivity agreement with Microsoft Bing. This would have the win-win effect of driving revenue from Microsoft’s deep pockets while also upping the ante in the search wars. It’s an intriguing idea, and few other companies have the throw weight to pull it off.

Bing appeals to news executives as a foil for Google. TechCrunch reported last week that Microsoft held a secret meeting with representatives of some of Europe’s largest newspapers to discuss throwing its weight behind ACAP, a protocol that provides a variety of access controls over content. TechCrunch says Microsoft told the European publishers that it’s ready to commit £100,000 to fund development of ACAP, which permits search engines, for example, to index the full content of an article while displaying only part of it to a casual visitor. The report speculates that Microsoft may be hoping to use publishers as allies in a flank attack on Google by striking deals that give Bing exclusive or semi-exclusive access to their content.

Bloom Fading from User-Generated Content Rose?

Is user generated content beginning to lose some of its shine? Current TV, the cable channel founded by former Vice President Al Gore is in the process of retooling its content model to emphasize acquired and compiled programming while cutting back on standalone viewer submissions. The company will lay off 80 people in the process. Current TV says that while it’s as gung ho as ever on user-generated content, it will shift to a style of programming that sounds more reminiscent of America’s Funniest Home Videos than full length amateur documentaries. Chief Operating Officer Joanna Drake Earl also said “viewer-created ad messages” have been a huge success, with viewers preferring them by a 9-1 margin and advertisers reporting higher recall rates.

The Current TV downsizing bookends a year that began with the shutdown of another prominent user generated media company, 8020 Media. That publisher had a brief moment in the spotlight when it produced two print magazines consisting entirely of submissions from readers. The experiment proved that user-generated content is no panacea, however. The task of sorting through thousands of articles and photographs and turning them into professional-looking copy was little more efficient than working with professional journalists. The advertising downturn didn’t help.

The troubles of these prominent experiments shouldn’t be seen as a referendum on citizen media. Scores of other ventures are ongoing and an increasing number of events are being reported first through channels like Twitter. The most viable models appear to be those that combine citizen reports with moderation by professional editors. Perhaps America’s Funniest Home Videos had this all figured out years ago.

Miscellany

If you’re following this Twitter thing that everyone is so excited about, you should check out a couple of new resources. Twitter Times is “a real-time personalized newspaper generated from your Twitter account” and it’s a pretty good metaphor for the way trust is awarded in the new world of democratized information. The service chooses news and blog posts mentioned in the Twitter streams of people you follow. The result is a digest that looks like a newspaper, only the stories are selected by your friends.

The algorithm behind Twitter Times is obscure and the site appears to be the work of a single Russian programmer named Maxim Grinev (right). While it doesn’t try to capture every recommendation from trusted sources, its constantly changing selection of content pretty much reflects the topics we are interested in. Users can share personalized home pages with each other and, of course, follow tweeters mentioned therein.

Also check out MuckRack.com. It’s a collection of jounalist Twitter feeds set up by a small group of people who call themselves Sawhorse Media. Journalists have to apply for inclusion and list a publication they are affiliated with before being added to the list. The qualification criteria seems a bit outdated to us in this age of citizen media, but the resulting list is a pretty good lineup of media pros. MuckRack is one of 16 identical sites that run the topical gamut from beauty to beer. It seems that lists are all the new rage on Twitter.

The wrangling over Philadelphia’s two bankrupt newspapers continues to grow more bizarre. A Federal district court judge last week ruled that the creditors trying to take control of The Philadelphia Inquirer and Philadelphia Daily News must make a cash offer for the papers rather than simply taking control of them from the bankrupt Philadelphia Newspapers, LLC. The two parties have engaged in months of legal wrangling, even trading accusations of document theft. The new ruling opens the bidding to third parties as well as current ownership, with the courts apparently trying to steer the matter toward a resolution that keeps both newspapers operating.

Publishers can take heart in recent numbers from Scarborough Research that indicate that newspapers continue to be at the center of American reading habits. Writing on Media Post, Scarborough’s Bob Cohen cites the following 2009 stats:

• 74% of adults read a paper in print or online during the past week. Newspaper readership in some markets reach upwards of 90%;
• 19% visited a newspaper website during the past week;
• 70% of American adults read a printed newspaper during an average week.

Scarborough’s numbers jive with other data that indicates that newspaper readership — online and in print — continues at all-time highs. The problem is monetizing the low-value web traffic. Cohen suggests that publishers need to do a better job of selling the centrality of their products to the audience’s daily habits. “Aggressive self-promotion, while not a natural inclination of this culture, could go a long way in these unusual times,” he writes.

Nearly a year to the day after announcing a radical strategy to cut back from daily to four-times-per-week frequency, the East Valley Tribune of suburban Phoenix is finally pulling the plug. Unless a buyer emerges with a reasonable bid, the paper will shut down at the end of the year, publishing its last print edition on December 30. About 140 employees will lose their jobs.

We’ve covered the Tribune’s twists and turns in previous entries, and there’s nothing particularly new to say about the situation. The Tribune has been operating under a cloud since it cut 40% of its staff and moved to free distribution a year ago. It has not been profitable in two years. The paper can still be saved if a buyer emerges within the next seven weeks, but owner Freedom Communications said no inquiries have been received that “we would remotely consider.” The Tribune traces its heritage back to 1891, when it was founded as the Evening Weekly Free Press. Its website has extensive reaction, a timeline and comments from the community.

Miscellany

The San Francisco Chronicle is going glossy. The beleaguered daily, which has been on thin ice since Hearst Corp. threatened to close it early this year, is making the unusual move in an effort to move its image upscale and appeal to advertisers as well as its core of older, affluent readers. Beginning Monday, the front page and many of the section fronts will be printed on higher-quality paper, although there’s disagreement about whether the paper will actually be glossy or simply a somewhat smoother version of newsprint. Huffington Post notes that the Chronicle has staged a comeback this year by hiking circulation prices and focusing on its core readership. It has even turned a profit some weeks, which is an accomplishment given that the Chron was reportedly losing $1 million per week at the beginning of the year.

The Chronicle’s strategy mirrors that of an increasing number of metro dailies, which are compensating for circulation declines by squeezing more circulation revenue out of its loyal customers. Circulation at the Chronicle is off more than 50% over the last eight years. The retrenchment isn’t a growth strategy, but it least it offers the prospect of financial stability.

That’s a short-term benefit, but the long-term problems may be worsening. The Wall Street Journal reports that newspaper publishers are scraping the bottom of the barrel in their cost-cutting efforts. With newsroom staffing down more than 40% in the US over the last eight years, there’s very little fat left to cut, Nat Worden notes. That means that revenue needs to start growing again. But it isn’t, and that means that publishers may be on the brink of an abyss. “It’s possible that newspapers are cutting costs to a level that accelerates the departure of their audiences towards other outlets,” says Fitch Ratings analyst Mike Simonton. In other words, a death spiral.

Alan Mutter throws water on the paywall concept, saying that publishers may be talking a good game but won’t have the nerve to pull the trigger and accept the loss of website traffic and its associated advertising revenue. He cites recent comments by executives from the Washington Post and the San Francisco Chronicle that indicate that neither believes paywalls are a viable strategy. Many publishers are intrigued by the prospect of charging for premium services, but they may have dug their own graves by hacking their workforces to the extent that there is little of value to offer. He also cites a poll of newspaper executives that indicated only half think paywalls have a chance.

While that may be a glass-half-empty perspective, Mutter points out that lack of unanimity on the issue is self-defeating. In other words, the strategy can’t work unless everyone is on board because the outliers will sabotage the whole equation.

That isn’t stopping MediaNews from pressing ahead, however. The publisher will test pay walls at two of its smaller newspapers beginning in the first quarter of 2010. The Chico (Calif. ) Enterprise-Record and the York (Pa.) Daily Record had been selected for the experiment, presumably because the downside risk is small. MediaNews CEO Dean Singleton said he has no intention of blocking free content from all his properties, but, “We have to condition readers that everything is not free.”

The Toronto Star plans to outsource about 100 editing jobs overseas, including copyediting and pagination. The move comes even as parent company Torstar reported a modest profit for the third quarter, despite a 12.6% plunge in advertising revenue. “We must find the best way to operate our business at the lowest possible cost, including contracting out non-core functions where there is a sound business case to do so,” wrote publisher John Cruickshank in a memo to employees. Offshore outsourcing has been a growing trend for the last couple of years, but job losses have mainly been confined to back-office functions. There’s no word on whether the Star may actually farm out reporting jobs, which are far more difficult to perform from half a world away.

It just gets worse and worse in the magazine business. The Associated Press is reporting that Time Inc. will lay off 540 people next week, while The New York Times says the publisher has informed the state of New York that 280 layoffs are coming in New York alone between now and the end of January. Time Inc. cut 600 jobs, or about 6% of its workforce, a year ago.

At least there are a few new jobs for those idle to journalists to apply for. Editors Weblog reports that the UK’s Bureau of Investigative Journalism is hiring up to 20 journalists as it seeks to spend a £2 million pound grant it recently received from the Potter Foundation. And The Wall Street Journal plans to hire a dozen journalists to staff up a new regional edition. Of course, the Journal also just closed its Boston bureau and laid off nine reporters

And finally…

“‘Jon and Kate’ for first mention, ‘Jesus, ENOUGH’ afterwards.”

“Stories about people who claim to have psychic abilities must always be written as though they aren’t liars, for some reason.”

“To describe more than one octopus, use sixteentopus, twentyfourtopus, thirtytwotopus, and so on.”

“The plural of ‘Pokemon’ is ‘vermin.'”

Those are just a few of the gems from one of the funniest new voices in the Twittersphere. Follow @FakeAPStylebook for more. Journalists will recognize the style of the tweets as being in the mold of the AP style book. Only the crew of 16 publishing professionals who collaborate on the tweet stream bring a deliciously twisted perspective to their craft. Mark Glaser rips the lid off the anonymous micro blogger, noting that the account has gathered 40,000 followers in just 15 days as well as a literary agent who wants to score a book deal.