Judy Sims’ “Top 10 Lies Newspaper Execs are Telling Themselves” may be painful for newspaper execs to read, but they should read it anyway. In blunt language, she shoots down some of the most common rationalizations newspaper executives use for continuing to do business as usual. Not all of her points are thoroughly supported, but it’s hard to argue with the common-sense thinking behind most of them.

Among our favorite quotes:

The only way newspapers can ensure the survival of their brands and the journalistic principles they hold so dearly is to separate the Web organization completely from the newspaper.

This frames the list’s biggest “myth,” which is that news organizations can prosper online while doing what they’ve always done in print. The nature of online publishing is conversation and community, not top-down communication. Organizations that derive 90% of their revenue from print are never, ever going to give an online division the attention or resources it needs.

Figure out what is truly scarce information to your readers.  Then, maybe you can charge for it.

Yes, yes, yes. Putting pay walls in front of information that doesn’t meaningfully affect people’s lives is a DOA idea, yet it seems to be conventional wisdom right now that readers will pay for stuff like popular columnists and exclusive sports coverage. No they won’t. They will pay for information that saves them money, enhances their appearance or finds them love, and precious little else. Maslow’s Hierarchy wasn’t invalidated by Internet.

We used the paper to help us shop every week…and decide what movie to see at what time and where. How much of the value of the newspaper was derived from news and how much was derived from all these other things?  After all, news has always been free on TV and radio.

See the previous point. Publishers who think readers are going to pay for news are delusional. Not to mention pompous. Half the reason people subscribe to newspapers is for the coupons. News is a commodity. You have to deliver value that affects people’s lives in a meaningful way.

Figure out what is truly scarce information to your readers.  Then, maybe you can charge for it…Do what you do best and link to the rest.

The second part of the quote is from Jeff Jarvis, but the sentiment is appropriate to the “myth” theme. Newspapers have traditionally had to do everything for their readers because readers had no way to find information for themselves. Now that restriction has been lifted, which means publishers should stop spending money on stuff they suck at.

The more cuts are made, the more newspapers are guaranteeing their own demise.

That’s because the people they’re cutting are setting up shop as hyperlocal bloggers and competing against their former employers. Newspaper layoffs are thus giving rise to the next breed of competitors.

If there’s any unifying thesis to Sims’ 10 lies, it is that trying to manage a revolution is futile. Publishers will not iterate themselves to a secure future, nor will they ever bring back the profit margins of the past. The rules have changed forever and that means blowing up a lot of stuff. The process is incredibly painful but it’s necessary for any organization that hopes to make it to the other side of this vortex.

A couple of weeks ago, SeattlePI.com reported that its Web traffic has remained unexpectedly strong after pulling the plug on its print edition and firing 80% of its staff. The Post Intelligencer may have given the rest of the industry a model for completing the transition to the digital world.

Get Comfortable with “Good Enough”

After you’re done reading about 10 lies, head over to Journalism Iconoclast Pat Thornton, who speaks much truth about what he calls the “Down and Dirty Revolution.” Thornton’s main point: Stop thinking like an entity that was the be-all and end-all of information to its community and start thinking like a participant in the digital community. What does that mean? Paraphrasing:

• Make the most of what you’ve got and stop whining about the resources you lack.
• Be satisfied with good enough. You can improve it later. Perfection is the enemy of getting stuff done.
• Stop duplicating effort. “If parents are taking pictures at a high school football game…it makes much more sense to work out a deal with them than to spend staff resources on taking pictures at said game.” So true. Likewise, use Creative Commons photos and stuff people post on Flickr instead of sending your own photographer to shoot the same stuff.

There’s more, but those are the basic themes.

Miscellany

If all goes well, we may soon remove the Claremont (N.H.)  Eagle Times from the R.I.P. list.  A federal judge has given a Sample, Pa. newspaper chain conditional approval to buy the newspaper with the intent to relaunch it. The 7,800-circulation Eagle Times closed abruptly in July when its owner ran out of money. It took with it three small weeklies, which also will be relaunched if new owner Sample News Group has its way. Owner George Sample said his goal is to relaunch the daily before the end of the month with a staff of 25, which would be significantly smaller than the 66 full-timers and 29 part-timers the paper previously employed. Sample also said he plans to relaunch the weeklies at some point. Sample offered just $261,000 for the franchise, which was nearly $4 million in debt when it declared Chapter 7 this summer.

Ryan Chittum runs the numbers and finds that newspaper ad revenues are on track to hit their lowest level since 1965. In real dollars, revenues peaked in 2000. The comeback from the 2001-2002 recession was never very strong and sales have plummeted for the last three years. Real dollar revenue for 2009 will be about half of what it was just nine years ago, a stunning development in an industry that’s been historically known for its stability. Chittum also notes that circulation is the only slice of the revenue pie that’s growing right now while online advertising is declining. In fact, it appears that the online advertising business will only support one spectacularly successful business and that’s Google. A busy comment stream on this month-old piece debates whether online advertising is actually stealing share from print. Right, and global warming is a myth. (If you have trouble reading the chart below, click on it to go to Chittum’s analysis at the Columbia Journalism Review, where you can see an enlarged version.)

PaidContent.org has an interview with Josh Cohen, senior business product manager of Google News. Cohen has been schooled well to say little in a lot of words, so don’t expect any great insights. The main takeaway for us was that Google has no intention of sharing with publishers any revenue generated on Google’s site but that the company really wants to work with news organizations to make sure content behind pay walls is visible to Google’s search engine. In conversations like these, we hear Google executives sounding more and more like Microsoft officials did in the early 90s.

Speaking of Google, have you seen Google Fast Flip? It’s a new Google Labs project that “lets you browse sequentially through bundles of recent news, headlines and popular topics, as well as feeds from individual top publishers,” according to an entry on the Official Google Blog. “As the name suggests, flipping through content is very fast, so you can quickly look through a lot of pages until you find something interesting.” The service is the product of a partnership between Google and “three dozen top publishers, including the New York Times, the Atlantic, the Washington Post, Salon, Fast Company, ProPublica and Newsweek.” The idea is that if people can access news more quickly, they’ll read more news and that will result in more advertising revenue. Google continues to try to extend the olive branch to publishers who see nothing to like in other Google services that they claim steal their intellectual property.

Final bids for BusinessWeek are due today and Bloomberg LP is reported to be the leading contender. Other possible buyers include Bruce Wasserstein, Lazard, OpenGate Capital and ZelnickMedia, but Bloomberg is said to have the top bid. BusinessWeek revenues are on track to be down 43% from last year’s levels.

Did you know they still do paste-up at the San Diego Union-Tribune? That’s just one of the revelations in a story about the new openness of the U-T’s management, an openness that is apparently playing very well with employees. Having laid off more than 300 people since taking control of the daily in May, Platinum Equity is now forecasting a profit of $5 million this year, which would be a major turnaround from the $8 million the paper was on track to lose when new management arrived.

The extent of the new ownership’s transparency about the paper’s finances and operations apparently surprised and pleased staffers, who had been privy to almost no financial information under former owners the Copley family. They learned that the U-T’s revenues have dropped 53% since 2006 while profitability has plummeted from $67 million that year to the expected $8 million loss this year. They also learned that the paper has shed nearly half its staff in the last 21 months. However, cuts like that are what set the stage for a return to profitability. Staffers apparently liked what they heard. They told Voice of San Diego that Platinum’s decisiveness was a welcome change from the plodding pace of change under the Copleys. Now they need to work on getting rid of those paste-up boards.

Platinum’s early success at the U-T is apparently not typical of private equity firms. Yesterday’s blockbuster announcement that Reader’s Digest is bankrupt cast a harsh spotlight on Ripplewood Holdings, which bought the publisher for $1.6 billion in 2007 and which has now seen that entire investment wiped out by bankruptcy. Reader’s Digest magazine, which was once a coffee-table staple, has suffered circulation declines of more than half over the last 30 years and 40% in the last decade. The company is staggering under $2.2 billion in debt. Under the proposed reorganization, creditors will now own 92.5% of the company, which publishes more than 100 titles. Even after the debt is restructured, though, Readers Digest will owe four times its annual earnings to lenders.

Meanwhile, the owner of Philadelphia’s two largest newspapers has proposed an audacious plan to get creditors off his back. Brian Tierney wants to swap $300 million in debt for $90 million in cash, real estate and bankruptcy costs. Under the proposed deal, creditors would get little ownership stake in Philadelphia Newspaper Holdings, while the company would walk away from most of its debt. Tierney appears to be betting that the alternative of total insolvency will scare lenders into accepting the deal, but an attorney for the creditors calls the plan a “horrible proposal.”

Miscellany

The Financial Times began charging for access to its website in 2002, and history is vindicating the London-based publisher. With media leaders like Rupert Murdoch now openly advocating for pay walls, the FT is stepping up its experimentation with new paid-content models. It plans to add a micropayment system for access to individual articles and it recently launched an online newsletter for investors in China that costs $4,138 a year for a subscription. The FT newspaper has only 117,000 paid online subscribers, compared to more than one million for The Wall Street Journal, but it charges $300 a year for Web access. CEO John Ridding says he’s pleased that the industry is finally coming around to seeing things the way the FT has seen them for many years. “Quality journalism has to be paid for,” he tells The New York Times.

A partnership of Microsoft and MSNBC made off with EveryBlock and Alan Mutter can’t quite believe it. “If ever there were an application designed to fast-forward newspapers into at least the late 20th Century, then this was it,” he writes. Funded by a Knight Foundation grant, EveryBlock (screen grab at right) is perhaps the nation’s most visible experiment in hyperlocal news. It covers 15 cities with news focused on tight geographic segments. Under Microsoft/MSNBC ownership, expect that coverage to expand dramatically. Microsoft was actually an early innovator in hyperlocal publishing with its Sidewalk city guides more than a decade ago. Sidewalk bombed, but the concept may simply have been ahead of its time.

Things continue to rock and roll under new ownership at the Waco Tribune. A few weeks ago, the paper made headlines when the new owner added the words “In God We Trust” under the front-page logo. Now it has jettisoned rock musician and gun activist Ted Nugent as a columnist after Nugent refused to tone down invective and personal attacks in a weekly guest column he writes. Editor Carlos Sanchez makes it clear that he was somewhat reluctant to carry out the new owner’s orders to reprimand Nugent, but he was stunned and outraged by the tactics Nugent used to lodge his protests.

The AP has one of those charming throwback pieces about The Budget, a 119-year-old newspaper that serves Amish and Mennonite communities and which seems to have none of the problems or pressures of its Internet-addled counterparts. In fact, the 20,000 readers seem to be quite militant about keeping The Budget in print and delivered by mail to their homes each week. The Budget’s owners and editors aren’t Amish, but they’re careful not to offend their pious readership. Ads for alcohol and tobacco aren’t accepted and much of the content consists of homespun diary entries submitted by a network of unpaid correspondents. To the geographically dispersed Amish, The Budget is kind of a hard-copy Facebook. It’s the way they keep up to date on births, deaths and the price of wheat. Circulation has stayed strong even during the economic downturn.

Newspaper executives met in semi-secrecy this week to ponder collaborative solutions to the industry’s troubles.

They heard a big idea from Alan Mutter called ViewPass, a subscription service that would be jointly owned by publishers. ViewPass would aggregate editorial content and collect visitor data that could be used to sell higher-priced ads.

Mutter’s network, which he has been building quietly over the last few months with collaborator Ridgely Evers, would create profiles of paying subscribers based upon information they volunteer as well as their reading habits. It would provide a means to monetize content through subscriptions and micro-payments but, more importantly, would develop rich information about members over time. Mutter estimates that a system like this could more than double the CPMs that publishers charge advertisers. There would also be a penalty for content providers who abused copyright: they would be booted off the system. The Nieman Journalism lab has a two-page PDF description, if you’re interested.

Attendees at the meeting also discussed ideas for regulating the reuse of content along the lines of a model deployed for nearly a century by the music business. Music publishers license songs to bars, radio stations, shopping malls other outlets through organizations that represent the copyright holders. The best known of these is ASCAP (American Society of Composers, Authors and Publishers and Broadcast Music). Outlets can buy blanket licenses to play copyrighted works in public, with composers and performers getting a percentage of the fees.

The big concern with any consortium is legality, but The Wall Street Journal quotes several experts on antitrust law saying that the music industry experience is a valuable precedent for the news industry. If publishers argue that the survival of their industry depends upon regulating fair use of their content, the Justice Department would be hard-pressed to object to a consortium.

A Different View

On the other hand, a lot of people think the paid-content debate is pointless flailing. Xark’s Dan Conover writes a blistering critique of the industry’s search for salvation. Rather than changing the existing model, he writes, publishers are fumbling around for a solution that requires readers to fundamentally change their behavior. People aren’t going to start paying for something they’re accustomed to getting for free, so the debate is simply hastening the demise of the industry by delaying the search for useful solutions. Innovation requires examining all possible alternatives, and newspaper publishers aren’t the kind of people to do that. “They’ll do anything to survive… so long as it doesn’t involve change,” he writes.

Conover makes the point that pay walls involves a trade-off: the more you charge, the fewer people come to the website. Lower traffic means lower advertising revenue and the income from readers won’t make up the difference. Tim Windsor weighs in with a comment noting an earlier column he wrote at the Nieman Journalism Lab documenting that traffic declines after the imposition of pay walls at could be on the order of 95%.

“When the Los Angeles Times walled off its entertainment content in 2003, ‘total visitors to the site — people who read and interacted with content — plunged from a high of 729,000 in July 2003, the month before the wall went up, to about 19,000 total registered visitors. That’s a drop of 97% in actual audience.”

Our Two Cents

The newspaper industry’s paid content debate sounds more and more like the desperate protests of the music industry when file-sharing began to dismantle its business model. The two industries have some characteristics in common. Both are mature, traditionally stable and highly profitable businesses with predictable growth and high barriers to entry. The people who gravitate to such industries excel at managing costs and limiting risk.

These are the last people you want to run operations at a time of crisis. Crisis demands innovative thinking, fast reaction times and tolerance for risk. One reason we’ve seen so little of this in the newspaper industry is that the people at the top have no capacity for making dramatic changes. The innovation that we’ve seen comes almost entirely from startups or skunkworks operations that publishers have had the sensibility to leave alone.

Paid-content models may gain some limited traction in markets that place a high premium on a certain kind of content. Bloomberg continues to charge high fees for information because it innovates so well in the ways it analyzes and presents it. But that’s Wall Street. It’s hard to believe that much of what now appears in newspapers is going so compelling that the average consumer is going to pay for it. Hyper-local and database content may have more commercial appeal but a lot of newspapers will need to change the way they gather and publish content in order to cash in on that opportunity.

The industry is still too dependent on advertising. Ideas to squeeze more blood from that stone have value, but they aren’t going to alter the economics of a fundamentally broken industry.

Consider the analysis from Moody’s Investors Service Senior Analyst John Puchalla, who says high costs are squeezing the life out of the newspaper industry. Only 14% of the industry’s costs are related to content creation, Puchalla says. Unless the number can be brought down significantly, the high fixed costs, combined with crushing debt loads, will make it impossible for publishers to acquire new funding. Debt ratings will continue to sink, making capital even more expensive. Cross industry collaboration and outsourcing could lighten some of the burden, but it will be very difficult for publishers to compete with the vastly superior cost structure of online media.

There’s plenty of buzz in the blogosphere about an under-the-radar meeting that took place last week between top newspaper executives to discuss issues of common concern, including the possibility of charging for online access to news.  Speculation centers upon whether the participants, which included McClatchy’s Gary Pruitt, Dallas Morning News Publisher Jim Moroney, Lee Enterprises’ Mary Junck and E.W. Scripps Mark Contreras, allowed the discussion to stray into the terms under which their organizations could erect pay walls in front of content.

The Newspaper Association of America (NAA) says price was never discussed during the meeting, and that’s good, since federal antitrust laws are pretty specific about such things.  There’s no law against competitors discussing common issues, but setting prices is a no-no.

Conventional wisdom says that newspaper price-fixing would be dead on arrival, but some people argue that the Supreme Court’s 2007 decision in Bell Atlantic Corp. v. Twombly set a precedent under which an aggregator representing multiple properties could get away with charging fees for access. Slate’s Jack Shafer weighs the possibilities and concludes that collusion would be an exceedingly risky move under an administration that has promised to be tough on businesses.

Pat Thornton sees the devil in the details. People aren’t going to pay for to read the police blotter and it’s going to be even tougher to sell them on having to buy services that used to be free, he says. “You can’t charge for something that has been free for years without drastically improving it,” argues Thornton. Given that news organizations have been cutting resources left and right, it’s pretty difficult to argue that the product is getting any better.

There actually is precedent for Web publishers charging for services that were once free.  In the heady days of the dot-com bubble, nearly everything was gratis on the web.  After market realities forced businesses to create sustainable models, photo- and video-sharing sites that were once free began to charge membership fees.  Some businesses and specialty publishers also began linking Web access to paid print subscriptions, a model that persists to this day at publications like Advertising Age.

Perception of Value

Thornton has got it right that perceived value is the crux of the issue.  Consumers understand that technology isn’t free and accept that publishers must charge for niceties like unlimited storage.  They also appreciate that unique, unduplicated services are worth a subscription fee if the information is vital to their job or avocation.

We personally like the model of Geocaching.com, the website that serves the addictions of millions of avid gamers who search for treasures stashed in outdoor locations around the world.  A basic subscription to the site is free, but services that significantly enhance the pleasure of playing the game demand a $30 annual subscription.

Geocaching.com enjoys the advantage of being a near-monopoly in its market.  There’s nothing wrong with that, though.  The publisher has succeeded in providing a comprehensive database of information that its constituents can’t get anywhere else.

We continue to believe it’s highly unlikely that publishers will succeed in establishing an industry-wide paid content model.  Anyone who fails to join the consortium could potentially disrupt the whole deal, and too many alternative sources of free information already exist.  CNN, for example, will never join such a group.  Instead, it will benefit from the vast traffic that will stream to its website when the pay walls go up.

Individual publishers may succeed in charging for content, but they’ll do it with content that serves a vital interest or need in their communities.  There are plenty of possibilities, but they will be exploited by innovative people at the local level, not mandated from the top by a few executives who are motivated more by self-preservation than serving the interests of their audience.

Industry watchers are applying some mathematical discipline to various proposals to bail out the newspaper industry.

Mark Potts buries a hatchet in the idea that paid subscriptions are the salvation of the newspaper industry. Hauling out the spreadsheet, he suggests that the $10 million a good-sized daily could realize from selling 500,000 subscriptions at $20 each would be substantially offset by advertising revenue declines triggered by reductions in website traffic. Some people estimate that pay walls could cut page views by up to 90%, effectively obliterating that revenue stream. And charging a higher price will only drive traffic lower. Potts says newspaper owners aren’t doing nearly enough to optimize their online ad revenue streams. They should focus on selling ads to local businesses and shift from a reliance on traditional big display ad campaigns.

Taking a more expansive view, Ken Doctor handicaps the odds of various rescue strategies, ranging from pay walls to cable bundling to government handouts. The best bets are Cablevision’s idea of bundling Newsday into cable subscription fees and Hearst’s plan to distribute free wireless e-readers, both of which he rates at 2-1 odds. But even those have major downsides. The longshot: charging for premium content. Newspapers just don’t have the goods, Doctor says. Odds: 4-1.

Down and Out in Denver and San Francisco

If you want detailed background on what exactly happened in Denver prior to the Rocky Mountain News‘s closure last week, read this interview with David Milstead, the Rocky columnist and business reporter who broke scoop after scoop about the behind-the-scenes machinations. At nearly 5,200 words, the transcript is of epic proportions, but interested readers can learn about why Scripps chose to be the bad boy to abandon Denver, Media News CEO Dean Singleton’s’ decision not to buy the paper, the emergence of a possible buyer late in the process, the mood in the Rocky newsroom after the closure was announced and the possibility that Milstead’s critical reporting denied him a job at the rival Denver Post.

Singleton is also at the center of a San Francisco Bay Guardian analysis of what could be done to save the Chronicle. The report documents the extreme cost-cutting campaign at Hearst Corp. which is seeking to derive half its revenue from circulation by 2011. Among the news that was buried in the announcement of the Chronicle’s for-sale offering was layoffs of more than 55% of the newsroom at the San Antonio Express-News.

The only conceivable buyer for the Chron is Singleton’s MediaNews, which has gradually bought up nearly every other newspaper in the Bay Area. However, MediaNews is unlikely to want to take on a money-losing property when it is already so highly leveraged. The story also says the Society of Professional Journalists is calling for a public discussion of the Chron‘s predicament, saying the potential loss of such a large news source is an “urgent civic challenge.”

Layoff Log

• The Fort Worth Star-Telegram will cut its workforce by 12% and enact wage reductions ranging from 2.5% to 10% on employees making more than $25,000 annually. The paper cut 18% of its workforce last year and initiated other cost-reduction efforts, including a joint distribution agreement with rival Dallas Morning News and real estate sales. In addition to the layoffs, the paper is offering buyout agreements to many of its workers.
• Canada’s largest newspaper will lay off 60 unionized workers. The cuts mainly hit the advertising department, where 38 employees, or about one quarter of the unionized staff,  got their walking papers. The leader of the Southern Ontario Newspaper Guild calls the cuts outrageous in light of the $8 to $11 million package CEO Rob Prichard is getting to step down in May.
• Having announced 60 layoffs last week, the Arkansas Democrat-Gazette is now requiring newsroom employees to take off one work day out of every 20. The plan applies to salaried and hourly employees who work the equivalent of a full-time schedule.
• The Myrtle Beach Sun News will cut 20 positions and reduce pay and hours for all staff.

Miscellany

The Connecticut attorney general thinks it’s pretty audacious of Journal Register Co. to pay up to $1.7 million in bonuses to 31 people when the company owes the state $21.5 million in back taxes. However, we should point out that the bonuses are tied to the achievement of cost reduction objectives.

Add The Wall Street Journal to the ranks of outlets now tracking US layoffs. Its interactive layoff tracker sorts job reductions by industry, company, date, size of layoff, percent of workforce and stock decline. The Citigroup numbers are especially ugly.

And Finally…

The Associated Press wraps up the debate over public and non-profit funding for newspapers, concluding that the economics could work for a few large players but not for most metro dailies. The New York Times would need an endowment of about $5 billion to sustain its current newsgathering operation, for example. The more promising and popular approach is a targeted for-profit model like MinnPost.com and investigative journalism foundry GlobalPost.

The latter example is particularly interesting because GlobalPost was founded as a nonprofit but switched to a for-profit model after potential donors demanded too much accountability. The venture later raised $8 million from individual investors.

Steven Coll, former managing editor of the Washington Post and now president of the New America Foundation think tank says some big paper is going to go the endowment route eventually and “is going to have an advantage.” However, the piece also points out that the St. Petersburg Times, which is owned by the nonprofit Poynter Institute, has had to lay off 30% of its staff, just like everybody else.

”Why a once-profitable industry suddenly seems as outmoded as America’s automakers is a tale that involves arrogance, mistakes, eroding trust and the rise of a digital world in which newspapers feel compelled to give away their content,” writes the Washington Post’s Howard Kurtz, in a tight summary of the last 50,000 or so words posted to this blog.

Final day at the Rocky Mountain News

Kurtz uses last week’s closing of the Rocky Mountain News as a jumping-off point to tap into the industry’s angst over What Went Wrong. The story sheds little new light on the problem or the solutions but sums up the issues and possible solutions so much more succinctly than self-important opuses like the one last week in the New Republic. And it has a striking quote from Joshua Micah Marshall, whose Talking Points Memo (TPM) is often held up as an example of the focused model that may replace sprawling daily newsrooms. “If all the big papers disappeared right now and we replaced them with 50 TPMs, it wouldn’t come close to doing the job,” says Marshall, who employs just six people. “But we’re in a broader transformation where models like ours and others are going to evolve that can fill the void.”

TechDirt’s Mike Masnick rants about what he sees as the absurdity of newspapers’ plans to charge for content. He’s especially put out that Newsday, which has poor audience affinity to begin with, should lead the way. Charging for access to news websites isn’t just dumb, it’s arrogant, he says. Newspapers “always made their money selling the attention of their community to advertisers. But when they treat that community with contempt at the very same time that the community has many other options, it should be no surprise that the community goes away.” Masnick sees no chance for pay walls to work out. If anything, it will only accelerate the emergence of free alternatives.

Layoff Log

• Two large upstate New York publishers are taking the ax to their payrolls. The Albany Times Union needs to cut its costs by 20% in order to stay viable, said Publisher George Hearst III. Employing blunt language, Hearst said the cuts were needed or the paper would be at risk. “The very survival of our enterprise hinges upon cost-cutting that must include the departures of people who are part of this company,” he said. While no numbers were mentioned, the paper’s total employment of 453 indicates a forthcoming reduction of about 90 jobs. Hearst called the advertising slowdown unprecedented. “I’ve been here two decades and I’ve never seen anything like this,” he said.
• The Buffalo News plans to lay off 52 employees if union negotiations fail to achieve a breakthrough, says WKBW-TV. The station got hold of a memo publisher Stan Lipsey that lists 33 layoffs in circulation, eight each in editorial and classified advertising, two in accounting and one in marketing. The paper also extended a buyout offer that so far has had only lukewarm acceptance. While Guild negotiations continue, the paper has taken other cost-cutting measures, including a wage freeze for non-union employees and closing the Niagara County bureau. The newsstand price was also increased to 75 cents.
• The Columbus Dispatch will lay off 45 people by April 3, citing an advertising slowdown. “We avoided staff reductions as long as possible long after many other news organizations took such action,” Publisher John Wolfe said, adding that readership is holding up pretty well but advertising is way down.
• The Sacramento Bee will lay off 25 to 27 employees, but only if the Newspaper Guild agrees to a set of cost reductions that include pay cuts of up to 6 percent, limitations on vacation time and other sacrifices. If the union doesn’t agree, 11 additional newsroom jobs could be cut. The union represents 268 of the Bee’s 1,126 full- and part-time workers.
• The Wilmington (N.C.) Star News says it will outsource the printing of the newspaper to a company that has not yet been named. Nearly 40 full-time workers in the mail room and press room could be laid off as a result.
• The Bellingham (Wash.) Heraldis cutting 10 staff positions and reducing remaining workers’ salaries by up to 5%. A similar tack is being taken by the Myrtle Beach Sun News, which will cut 20 jobs, reduce the length of the work week and cut pay for all salaried employees.

Miscellany

The Salt Lake Tribune has so far managed to avoid layoffs, but its decision to cut a half page of op-ed material nevertheless drew cries of outrage from readers. Columnist Vern Anderson asks readers to keep it all in perspective. Circulation has held steady, but the situation in the industry is “somewhere between grim and dire.” Everyone is cutting back, he says.

Last Friday’s final edition of the Rocky Mountain News ”sold like wildfire,” according to an article in India’s Sify News. “Some buyers who succeeded in getting a copy wasted no time reselling them on eBay. Multiple copies of the paper were posted to the online auction house, with prices ranging from a penny to $14.99.”

And Finally…

Former San Franciso Examiner Editor Phil Bronstein identifies the one person who deserves the blame for the newspaper industry’s troubles: It’s him. Bronstein contributes a wry, Web-savvy and ultimately engaging insider’s perspective on the sequence of events that began in 1992 when he saw his first Web page and culminated last week with a colleague slumped in his chair muttering, “I thought I had this job till I retired.” Having read what sometimes feels like hundreds of angry screeds by resentful editors over the last two years, we were refreshed to find a refugee who’s managed to keep some perspective on it all and even find some humor. We guess we live on what Bronstein calls the “scold side” of the business.

The New York Times marked a milestone of sorts yesterday with the announcement that it has passed the one million paid digital-only subscriber mark, less than four-and-a-half years after launching its paywall. The milestone is validation that paywalls can work, especially if you’re The New York Times.

The news comes less than two months after the World Association of Newspapers and News Publishers reported that global newspaper circulation revenues surpassed advertising revenues for the first time this century (good slide presentation here). The association didn’t say when was the last time circulation was the industry’s biggest revenue contributor – or even if that information is known – but we’d guess it was more than 50 years ago.

The newspaper industry became addicted to advertising in the 1960s – and thus began its downfall. With 80% of revenue coming from advertising by the late 1970s – and circulation functioning as a loss-leader to build audiences – the business had all its eggs in one basket. When the Internet tore a hole in that basket, there was nowhere else to turn.

A painful decade later, there is evidence that newspapers are rebuilding online around the paywall model. They have lost a lot of blood, though, and circulation revenue will never be as large or profitable as advertising was. Wired notes that only one-third of the Times‘ revenue comes from digital subscriptions. It will need a lot more subscribers – or alternative revenue sources – to keep the business stable.

Source: World Association of Newspapers and News Publishers

“There is no longer a defined final destination for talented journalists,” writes Emily Bell in The Guardian. “The New York Times is surprised to find itself a stepping stone.”

Bell is writing about the sudden and surprise defections of a number of top Times journalists to other media outlets, often for substantial amounts of money. The Times lost three prominent editorial staffers in one day last week: Brian Stelter (right) quit to go to CNN, Sunday editor Hugo Lindgren is off to places unknown and chief political correspondent Matt Bai will join Yahoo News. Last month, gadget specialist David Pogue left to go to an unnamed Yahoo startup. In an unrelated move, Jay Rosen has also joined an unnamed startup founded by Pierre Omidyar of eBay fame.

All of a sudden media is cool again, or at least some media. While traditional publishers continue to struggle with declining revenue, money is flowing into new media companies. Buzzfeed has raised $46 million. AOL is investing in a big overhaul and expansion of Engadget. Snapchat just turned down a $3 billion offer from Facebook, indicating how frothy the social networking market has become. B2B community Spiceworks has raised more than $50 million for its novel media model that uses software and a community as delivery vehicles. Even the Washington Post is expected to get an infusion of cash from its new owner, Jeff Bezos.

This is translating into career opportunities for some accomplished journalists whose brands now arguably transcend the publications they work for. Bell suggests that the star-making apparatus of the media world is shifting in their favor. Not long ago a job at The New York Times was considered the ultimate career plum for news journalists, but belt-tightening has hit the Old Gray Lady just as it has everywhere else (although not as hard). With all-digital operations suddenly flush with cash, the appeal of working for publishers whose survival strategy is to wall off content from non-paying visitors is diminishing.

In many ways, traditional media companies dug themselves into this hole. In their rush to produce more content and add more advertising inventory, they turned some of their best reporters into rock stars. Thanks to blogs, video podcasts and branded talk shows, journalists now get unprecedented visibility. That makes them prime targets for new media firms who want to trade on their personal brands.

Turnover may also be an unplanned consequence of paywalls, which will soon be in place at 41% of US newspapers. The problem with paywalls is that they shut readers out, and readership is what journalists live for. The Times‘ famous Times Select paywall was abandoned six years ago in large part because the paper’s signature columnists complained that their readership had evaporated. The models have improved since then, but no paid-access plan comes without some loss of audience.

So while newspapers  erect barriers to readership, new media entities like Buzzfeed figure out novel ways to get people to share their sponsored content. Is it any wonder that ambitious journalists with growing personal brands are seeking opportunities to spread their work to wider audiences instead of hiding it behind credit card forms?

Even reporters who don’t have million-eyeball reach may have new ways to monetize their audiences. A startup called Beacon has launched a service that enables journalists to derive revenue from their most loyal fans and share a little bit of the spoils with fellow contributors. Mathew Ingram sums up the model succinctly:

Each of the site’s journalists (there are currently about 50) has a page where their content lives, and a discussion forum. When someone subscribes to them for $5 a month, Beacon takes a cut — the amount is in flux, but writers keep around 60 percent on average — and then the reader gets access to all of the site’s other writers. Some of the proceeds from each subscription also go into a pool that is shared by all of the journalists on the platform.

It doesn’t sound like anyone will get rich from this business, but at least there is a direct correlation between work and reward. And we suppose Beacon could be a launchpad for a few new superstar journalists who build their audiences there. Like the crowd funding site Kickstarter, Beacon builds and manages the community. It’s then up to the participants to give the audience something of value. May the best journos win.

Related articles

• Beyond the paywall: Beacon wants to make it easier for journalists to become like Andrew Sullivan
• Journalists are on the move in America – and creating a new vitality
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Paywalls continue to spring up across the news landscape while new-media enthusiasts warn that gated news is a throwback to a bygone age.

Britain’s Telegraph and Sun announced plans to erect paywalls almost simultaneously after successful tests. The Telegraph, which claims to have the largest circulation of any U.K. daily, will give away 20 articles free every month and charge £1.99/mo. thereafter for unlimited access to the website and smartphone apps. The Sun‘s move is timed to make the most of parent company News International’s £20M deal to show near-live clips of Premiership football highlights on its websites beginning in August.

In Canada, Postmedia Network will roll out paywalls across all 10 of its properties, including the National Post. The move completes an experiment that began two years ago and has been deployed in stages. Digital-only subscribers will have to ante up $9.99/mo. for reading more than 10 articles in any title within a month.

Perhaps most indicative of the surging popularity of paywalls, though, is Politico’s decision to experiment with the idea. The Washington, D.C.-focused news service, which was once personified the new breed of digital-only publishers, has given in to the reality that advertising rates continue to fall and subscriber revenues must become part of the business. “We believe that every successful media company will ultimately charge for its content” said a memo signed by several of the Politico’s top executives.

Circling the Wagons

We continue to be more interested in experiments that break new ground in publishing economics than efforts to resurrect old models. There’s plenty to report there, as well.

Ken Doctor kicks us  off with a fine analysis of where NewsRight went wrong. NewsRight was a consortium of 20 publishers that sprung out of the Associated Press in early 2012 with the mission of tracking down copyright violators while also creating a subscription model that would permit digital publishers to license quality content for redistribution.

“Publishers have seethed with rage as they’ve seen their substantial investment in newsrooms harvested — for nothing — by many aggregators…” writes Doctor on the Nieman Journalism Lab, “…but rage — whether seething or public — isn’t a business model.”

Bingo. Consortia are good for only two things: setting standards and raising awareness. They’re a terrible way to create new products. The idea of pursuing copyright violators individually is ludicrous, anyway. It’s like trying to stamp out ants. There are always more where the first batch came from.

The only anti-piracy tactic that works is a public awareness campaign, and the newspaper industry has shown little interest in that. NewsRight died because the members inevitably had conflicting priorities, and it was impossible for everyone to find common ground when everyone had something to lose.

Does BuzzFeed Have it Right?

Doctor points to the work being done at NewsCred, BuzzFeed and Forbes, among others, as examples of new ideas worth developing. “In 2013, we’re seeing more innovative use of news content than we have in a long time,” he writes. We’re particularly interested in BuzzFeed, the viral content engine started by Jonah Peretti and others in 2006. At first glance it looks like any other new-age news site, with a bottomless home page stuffed with a jumble of seemingly unrelated content ranging from the profound to the ridiculous.

As New York magazine points out in a lengthy profile, though, there’s a lot more going on there than cat photos. BuzzFeed is tuned to create content that people want to share, and it could care less who the authors are. The home page blithely mixes contributions from staffers and advertisers with minimal labeling. Every element within every story can be shared on every social network you can imagine. Every page is designed to maximize audience interaction with the content.

BuzzFeed makes little effort to segregate advertiser contributions from the work of its own staff. A photo essay on “12 Tips to Have An Amazing Barbecue” from Grill Mates sits next to “Just The London Skyline, Made Out Of Sugar Cubes” by staffer Luke Lewis. Some of the branded stuff is actually pretty good, like, JetBlue’s “The 50 Most Beautiful Shots Taken Out Of Airplane Windows.”

Is this serious journalism? Well, no. We don’t think corporate brands will ever produce that. But if they want to run their grilling tips next to similarly lightweight content from professional editors, why not let them? The genie that goes by such names as “brand journalism” and “content marketing” isn’t going back in the bottle. A recent survey concluded that corporate marketers and agencies consider branded content to be among their most effective branding tactics, and that 69% plan to spend more money on it in the coming year.

The bigger issue is whether sustainable publishing business models can be found that don’t rely entirely upon display advertising or subscription revenue. BuzzFeed and NewsCred are making some progress there. We don’t believe they produce serious journalism, if sex, gossip and voyeurism can attract a large enough audience to support real journalism, then we’re in favor of it. The idea isn’t new. It’s worked in the U.K. for decades.

Related articles

• Does BuzzFeed Know the Secret? (Andrew Rice/New York Magazine)
• BuzzFeed business news wants to be scoops (Chris Roush/Talking Biz News)
• Get your cat on: BuzzFeed creates new section where readers can publish [GigaOM]
• They put the U in UGC: BuzzFeed builds a Community vertical as a talent incubator
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In a dying industry, the sensible thing to do is to maximize your revenues before you die. Paywalls might well make money for newspapers. But that doesn’t mean that newspapers aren’t dying. Quite the opposite.

—Felix Salmon, Reuters

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

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

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

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

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

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

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

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

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

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