Bob Garfield of NPR’s “On The Media” interviews media superblogger Jeff Jarvis and asks “Can journalism be sustained in the top 25 markets if all the dailies fold?

The question was prompted by a recent project by the City University of New York Graduate School Of Journalism that created economic models for next-generation news organizations. Jarvis says a decentralized, hyperlocal newsgathering infrastructure is not only plausible but quite profitable. Some hyperlocal bloggers are already pulling in up to $200,000 annually in revenue, he says, and that’s without the sophisticated funding and advertising mechanisms that are now being developed. We’d like to talk to one of these people.

The metropolitan news organization of the future will be smaller but no less profitable than that of today, Jarvis predicts. His study foresees a full-time staff of about 45 people with substantial contributions from locals. “It needs to work more collaboratively with bloggers and other locals,” he says. All together, a next-generation metro newsroom could have about 275 regular contributors.

“At the end of three years, our research shows that these businesses bring in margins that are reminiscent of the glory days of newspapers,” Jarvis states. “However, they’re much smaller businesses. A 20% margin on a $30 million business is not the same as on a $400 million business. But it is profitable, and that means it’s sustainable.”

Ever the optimist, Jarvis further states that journalism can become “better and richer” in the new model, Although there’s going to be some chaos in the process, “I believe we can actually improve journalism, not just save it,” he says.

They won’t be doing either in Loudoun, Va. The Washington Post Co. is closing its experimental hyperlocal site, the LoudounExtra, after two years, saying that the business “was not a sustainable model.” There were extenuating factors, however. The executives who launched the site left soon after startup and LoudounExtra never received the appropriate attention from the struggling parent company. One of those execs Rob Curley, moved on to bigger and better things in Las Vegas.

Miscellany

The Chicago Sun-Times Media Group (STMG) may be a few weeks from insolvency. The owner of the Sun-Times newspaper has just $19.3 million in cash left and is burning nearly $1 million per week, according to court documents. Chairman Jeremy Halbreich said he has been talking with several potential buyers who are more focused on cost structure than cash on hand.  STMG has been in Chapter 11 bankruptcy since March 31. If it runs out of money, it would probably have to abruptly shut down without offering severance or other transitional amenities.

The Red Wing (Minn.) Republican Eagle will cut back from five days to two days a week. “Goodhue County’s No. 1 news Web site” will continue to be updated daily. The paper said the cutbacks were being made in order to save money and to focus  reporting on its local market.

In the economically devastated region of South Florida, the 55-year-old Boca Raton News published its last print edition yesterday. The paper had previously cut back from five days per week to three. No employees will be laid off, but the paper’s offices will be closed and everyone will work from home. Perhaps this is precisely what Jeff Jarvis has in mind.

“The New York Times is quietly seeking a buyer for its Santa Rosa (Calif.) Press Democrat,” said the anonymous message that landed in our inbox. Now you know as much as we do.

And finally…

As we enter the last two weeks of summer and news all but grinds to a halt, bloggers are turning to the offbeat and bizarre. Former Baltimore Sun copy chief John McIntyre reviews a third and expanded edition of “The F Word“ (Oxford University Press, 270 pages, $11.53 on Amazon), a book that is all about, well, the “F word.” Author Jesse Sheidlower apparently scoured 500 years of English literature to trace the evolution of everyone’s favorite expletive from its mid-15th century origins on the European continent to Jon Stewart on The Daily Show. In the course of his research, Mr. Sheidlower “read an astonishing amount of Victorian pornography,” McIntyre concludes. We can’t wait till Google gets around to putting it all on line.

We’ve been reading with some dismay recently that the US no longer ranks in the top 25 countries on high school achievement test scores. We don’t want to believe that, but then we see videos like this monologue by a resident of Santa Cruz, Calif. testifying before the city Council last year about, we think, vegetables. It speaks for itself.  (Via Free From Editors.)

It hurts to read Bill Wyman’s blunt, sometimes savage piece on Five Key Reasons Why Newspapers Are Failing, but the veteran journalist says some things that need to be said. Unlike recent analyses that have mainly focused on the industry’s business challenges, Wyman aims his guns squarely at the editors and reporters whom he believes fostered a culture of risk-aversion and self-absorption even as the need for change grew urgent. Although the piece is heavy on anecdotes and light on statistical evidence, we found ourselves nodding in agreement frequently as Wyman ticked off a list of editorial missteps.

Perhaps the most damning point in the 9,000-word opus is when the author lists headlines from a “recent” (actually, it was well over a year ago) features section of an unnamed local newspaper (actually, it was the Arizona Republic). They include: “Post office food drive,” “Fight Crohn’s and colitis,” “Mom and Estában,” “Healthful salsa non-guilty pleasure,” and

“Great gifts for teachers.” The point: “There was nothing there of remote interest [to] just about any sentient being. But that’s not what the paper’s editors were aiming for. The point is that there was nothing there that could possibly offend anyone.”

Wyman hammers home this point repeatedly. In his view, advertisers and editors joined in an unholy alliance decades ago in which watchdog journalism was sacrificed to reliable and profitable ad contracts, stable circulation and don’t-rock-the-boat blandness. As a consequence, the guiding principle in editorial departments changed from informing the public to offending as few people as possible. Causing a reader to cancel a subscription was the ultimate sin. Better to under-inform than to antagonize.

As a longtime arts critic, Wyman has some stories to back up the premise. He tells of one arts editor who instructed him to avoid negativity in reviews because readers didn’t want to “hear bad things about their favorite artists over breakfast.” Reviews sections in local papers are almost unfailing positive, or at worst blasé, he notes. Arts sections are filled out with snippets from those stanchions of informational blandness: Press releases.

“Let’s be honest. Most newspapers in the U.S. aren’t watchdogs…Most papers are instead lapdogs, and the metaphorical lap they sit in isn’t even that of powerful interests like their advertisers…The real tyrant the papers served was the tender sensibilities of their readers,” he writes.

Tangled Web

The piece is equally damning in its criticism of newspaper websites, which Wyman believes are too often ponderous, difficult to use and inwardly focused. Search results return rivers of irrelevant promotions that the user doesn’t care about and that exist only to serve the interests of internal constituents, he says. External links are far too rare and readability is managed by people whose expertise is mostly in print. As a result, newspaper websites are some of the least useful properties on the Web, which is a shame because their content should be some of the most useful.

Wyman’s piece makes valuable reading, if only to hammer home the problems of a change-averse culture that still exists in many metro dailies. In part, that attitude is a hangover of management greed that has steadily pared back resources in the interest of maintaining 20% profit tax margins. However, the evils of management are a horse has been beaten to death pretty thoroughly by now. What’s different about Wyman’s perspective is that he takes editors and reporters to step to task for not doing more with the resources they have. Pack journalism and the not-invented-here mentality frustrate efforts at meaningful change. Last week’s acquisition of EveryBlock by Microsoft and MSNBC – rather than by a newspaper company — is just another indication that these businesses don’t move quickly enough.

Bloggers’ Harsh Glare

One insight that we found particularly illuminating is Wyman’s observation that the freewheeling — some would say reckless — culture of the blogosphere has cast a harsh light on the mediocrity that many newspapers have dished out for years. “The Web mercilessly exposes the flaccidness of the content of most papers. It creates a straightjacket for them: As they desperately bland themselves out on land, the material they have on hand to impress in cyberspace is correspondingly pallid,” he writes.

This point deserves special attention. Journalists like to trash talk bloggers for lacking basic journalism skills, but for all its weaknesses, the blogosphere is nothing if not interesting. Put another way, the sudden availability of massive choice exposes boring information for what it is. Big media could get away with mediocrity for many years because readers had no choice. Now that they do, the weakness of the products is magnified.

Wyman’s piece is far from perfect, being at times more tirade than exposé. But it is thought-provoking and — dare we say it — interesting. To hear him tell it, that’s a characteristic that’s all too often missing from the publications he criticizes.

Miscellany

After six quarters of stomachturning losses, newspaper companies finally reported some stability in the most recent quarter, and even a couple of upside surprises. The Wall Street Journal asks if the recovery is sustainable and largely concludes that it isn’t. One unexpected factor in the industry’s recent good fortune has been the plummeting price of paper, which is down nearly 40% in the last nine months. But the Journal expects those prices to come back as the market winnows out some weaker players. It also points to recent research indicating that marketers are more likely to cut newspaper and direct-mail spending than any other line item in the name of increasing their interactive budgets.

Rupert Murdoch’s British newspaper company plans to close the free daily thelondonpaper after reporting a ₤13 million pretax loss. Thelondonpaper is one of two afternoon free dailies, which are targeted mainly at young commuters. It lost ₤12.9 million in the fiscal year ended June 2008 on revenue of just ₤14.1 million. About 60 jobs are affected, though it’s not clear how many people will lose their jobs.

Marty Petty, a Pulitzer Prize-winning journalist-turned-successful-publisher, will leave the St. Petersburg Times after nine years. Calling the apparently voluntary move a “business decision” that reflects the shrinking size of the newspaper, Petty said management must adjust along with employees. Petty was a member of two Pulitzer Prize-winning teams at the Kansas City Star and Times in 1982. She later joined the Hartford Courant, where she rose to the position of associate publisher. She was named the Tampa Bay Business Journal’s BusinessWoman of the Year for media in 2005.

What do journalists and porn stars have in common? Plenty, according to a short piece in New York magazine. Jessica Pressler writes that pornographers who were making good money online just a couple of years ago are suddenly confronting a new threat from amateur videographers who are giving away all the sex you can watch for free. Once highly paid porn stars are complaining that they can’t find work and there’s little new blood coming into the system. Pressler suggests that maybe The New York Times ought to steal a page from the porn industry by focusing more on stars than on programs. That means orchestrating the careers and various activities of its best reporters instead of simply publishing their stuff.

Things are looking up in Seattle. Shortly after the closing of the Seattle Post-Intelligencer just five months ago, the surviving Seattle Times asked publicly if the city was about to become a “no-newspaper town.” Hardly. Since the P-I went under, circulation at the Times has shot up 30% to 260,000 daily readers. The paper has crept back into the black on a month-t0-month basis and is enjoying its best outlook in years.

One of the last family-owned major metros in the country, the Times has been weighed down for years by a joint operating agreement that required it to support the money-losing P-I. Fortunately for the Times, it managed circulation for both papers, so when the P-I went under, the Times simply switched subscribers to its circulation list and gave them the option to cancel. A remarkable 84% opted to stay with the Times.

But it gets better. The online remnant of the P-I is beating its numbers. Although SeattlePI.com has only one-eighth the editorial staff of the failed newspaper, it has focused its coverage and kept most of the reader traffic it had before the newspaper went under. Hearst won’t say if SeattlePI.com is making money, but it does say that audience and revenues are ahead of projections.

In other good news, Cox Enterprises has pulled the Austin American-Statesman off the market, saying the bids it was receiving didn’t reflect the true value of the paper. The American-Statesman is one of 29 titles Cox put up for sale nearly a year ago. While there were many visitors and several bids, the offers were in the fire-sale range, said publisher Michael Vivio. “it just did not make sense to sell it for the prices offered.” The story quotes newspaper analyst Ed Atorino speculating that “there are signs that the newspaper industry may have bottomed out. ‘We see hopes for better conditions by the end of 2010,’ Atorino said. ‘It’s been very difficult, and now, maybe, the worst is over.’”

A Reader Revenue Model That Works

Amid the wreckage of the media industry, there is at least one publisher who’s charging readers for content and making a lot of money at it. He’s Christopher Kimball, the intense, non-nonsense publisher of Cook’s Illustrated and Cook’s Country magazines. The flagship Cook’s Illustrated has nearly a million subscribers who pay between $25 and $35 a year for six issues. There’s no advertising. The business is reportedly insanely profitable.

Kimball’s recipe is to give readers exactly what they want: no-fail recipes vetted with exhaustive trial and error in kitchens outfitted with the best gadgetry money can by. You won’t find exotic dishes in the Cook’s magazines. What you’ll find is instructions on how to make the perfect pancake, combined with exhaustive background information on details such as the role of baking powder in the process.

The Boston Globe profile says Cook’s Illustrated enjoys an almost unheard-of 78% renewal rate. Kimball charge for website access and finds readers through intensive direct-mail campaigns and a successful spinoff cooking show called America’s Test Kitchen. Though he’s a multi-millionaire, Kimball can usually be found on weekends at his Vermont farm, testing new recipes. He’s a rigid perfectionist who believes advertising is an unholy alliance that does a disservice to readers. So far, he’s confounding the critics.

Miscellany

The 23^rd annual Veronis Suhler Stevenson media survey is out (TG; we’ve been on pins and needles) and  finds that for the first time last year, consumers spent more time with media they paid for – like books and cable TV – than with primiarly ad-supported media. The study also forecasts somewhat counter-intuitively that media/communications will be the third fastest-growing industry in the US over the next five years, trailing only mining and construction. The growth won’t come from traditional media, though. Rather, it will be driven by new areas like paid product placement, e-mail marketing, in-game advertisements, mobile advertising and video downloads.

The New York Daily News is hiring a social media manager.  It’s joins crosstown rivals New York Times and New York Post in recently putting some bucks behind the explosion of interest in Facebook and the link. The Daily News has a long way to go: it’s roster of Twitter followers is about 1/10^th that of the Post’s.

The Boston Globe interviews New York Times Co. chairman Arthur Sulzberger and CEO Janet Robinson. They say the threat to shut down the Globe unless major union concessions were made was not a bluff. They also don’t plan to sell the paper to the highest bidder. They want someone who’s going to continue a history of quality journalism. And they think the Times Co. has been a splendid custodian of the Globe’s reputation. Sheesh.

We stumbled across a new search engine: Yebol that “utilizes a combination of patented algorithms paired with human knowledge to build a Web directory for each query and each user.” We’re not so sure what that means, but the search results pages are very cool.

Ken Doctor is one of those rare breed of editors who understands the business side of newspapering. After spending nearly 25 years as an editor at papers ranging from alternative weeklies to the St. Paul Pioneer Press, he moved to Knight Ridder corporate to help lead the company’s push into new media. Doctor ultimately worked on editorial, strategy and content services for Knight Ridder Digital, ran its online content division for five years, a position that had him managing a P&L  and scouting out new sources of revenue. He’s currently an Affiliate Analyst With Outsell, a research and advisory firm focused on the publishing, information, and education industries.

Doctor is fundamentally optimistic about the reinvention of the industry to come, but he worries about the estimated 800,000 stories that Americans won’t read this year because reporters around to write them. In this interview, he assesses the various rescue strategies that have been floated, the struggles publishers are having with reinvention and the silver lining behind the nearly 15,00 newspaper layoffs of the last two years.

Paul Gillin spoke to Ken Doctor on August 5th. Here are highlights of the 33-minute conversation.

Listen to the interview (33:23) (right click to download)

“If you look very closely, the small-town newspaper’s business model does and always has resembled a miniature version of the direction the big-city papers will eventually reach.”

That’s one of several gems in this splendidly written essay by ME Sprengelmeyer (right), a former Washington correspondent for the Rocky Mountain News and now the proud publisher and editor of the Guadalupe County Communicator, “the sixth-smallest weekly in the 36th most populous state.”

Writing on the blog of John Temple, former editor and publisher of the Rocky, Sprengelmeyer explains how his 18-month track across the US chasing the presidential candidates had the secondary objective of helping him find a new home in small-town journalism.

What he found was a century-old model that looks much like the future of big market dailies. ” They have tiny staffs – only what the day-to-day cash flow can sustain. They aren’t afraid of reader-generated content. They outsource many functions, such as printing and distribution…they keep their communities addicted to the print product because they…do not give away a whole lot of material for free.”

Most don’t make much money — in fact, some lose money — but that’s usually because they aren’t particularly well run. Big media organizations don’t bother with small markets and even if they cared, the cost of opening bureaus in thousands of small towns would cripple them.

Sprengelmeyerwrites about the “caravan of great journalists” who showed up to help him relaunch his paper. They spent the weekend strategizing, mapping the local area and redesigning the product. Then they left. “I cried some more,” Sprengelmeyer writes, “because then I was alone again, facing my first week on the job with the scariest boss in the world: myself.”

The account is an inspiring story of personal discovery and reinvention. It may make you cry, too.

The Times Regrets All the Errors

The New York Times published a jaw-dropping correction from its July 17 “appraisal” of Walter Cronkite’s career. Among the eight errors in the story where Wikipediable factoids such as the date of Martin Luther King Jr.’s assassination. Ombudsman Clark Hoyt files an explanation with this blunt assessment: “A television critic with a history of errors wrote hastily and failed to double-check her work…editors who should have been vigilant were not.” The critic, Alessandra Stanley, is apparently much admired for her intellectual coverage of television, but is so careless with facts that in 2005, “she was assigned a single copy editor responsible for checking her facts.” Those were the days…

According to Columbia Journalism Review, Stanley’s latest miscues have vaulted her into the top five most corrected journalists on the Times staff again and guaranteed her more special attention. Hoyt’s play-by-play is a fascinating glimpse into the operations of a journalistic institution and the mishaps that can bedevil even the most rigorous quality process.

It’s also a commentary upon editors’ willingness to overlook screw-ups because of perceived countervailing virtues. Be sure to read Mark Potts’ remarks upon the Times incident, in which he relates a few war stories of careless reporters he’s known. “I edited a reporter who had little or no concept of how to use commas; another who would submit long stories with gaps labeled ‘insert transitions here;’ and a third who infamously spelled a type of citrus fruit as ‘greatfruit,’” he writes. His account will make you alternately laugh and groan.

Daylife Draws Big-Media Attention

The New York Observer profiles Daylife, a startup that is partnering with media companies — and increasingly with commercial clients — to build cells of thematic content. With a small staff of 26, the New York City-based venture has already signed up the Washington Post, NPR and USA Today as clients. It takes a different approach to reporting the news. Editors are skilled not only at identifying important stories but also assembling webpages on the fly that combine all sorts of widgetized information.

The big difference between the Daylife approach and that of conventional media, explains founder Upendra Shardanand, is that Daylife assumes that news is a living and evolving organism, not a shrink-wrapped package. Investors include the odd pairing of The New York Times and Craig Newmark, whose Craigslist is considered the great Satan by many in the newspaper industry. Headlined “The Aggregator That Newspapers Like,” the story merits at least a quick read from publishers seeking reinvention, because these guys are doing something right.

Miscellany

Newspaper websites attracted more than 70 million visitors in June, who collectively spent 2.7 billion minutes browsing 3.5 billion pages, according to the Newspaper Association of America (NAA).  The figures are part of a new measurement methodology developed by Nielsen that measures a larger sample size and reports more granular information, according to an NAA press release.

The trade group has been on a campaign recently to stress the value of newspaper advertising.  It released a report last month showing that six in 10 US adults use newspapers to help make purchase decisions and that newspaper ads are more valuable than ads in any other medium.

The NAA’s timing may not be so great. Online ad spending declined 5% in the second quarter and the situation isn’t expected to improve much until the middle of next year, according to two reports released today. In the US, the rate of decline was 7%, or slightly above the global average. Classified ads fell 17% and display ads were down 12%. A J.P. Morgan report issued this morning said that search advertising, which has been one of the few bright spots in the market over the last year, dropped 2% in the second quarter, mainly due to poor results at Yahoo and AOL. Results were also dragged down by a 31% decline in ad sales at Monster.com.

Google has quietly quadrupled the number of articles in its News Archive Search service. The oldest newspaper digitized to date is this June 2, 1753 edition of the Halifax Gazette. Google hopes to make money by selling targeted advertising against the archives, a market that has traditionally been the source of some revenue for publishers themselves.

Two groups of former Los Angeles Times journalists have organized themselves into contract editorial groups selling journalism and photography. They’re called the Journalism Shop and Pro Photography Network.

The Boston Globe is said to be considering an option to become a nonprofit organization as a way to bail itself out of its current financial woes. Columnist Howie Carr of the rival Herald pens this vicious satire of the idea, calling his crosstown rivals “the bowtied bumkissers.” If you’re a disciple of editorial savagery, there is no more skilled practitioner than Carr.

The Fresno Bee will begin charging 29 cents a week for its TV supplement.

If you like the Amazon Kindle, you’re going to want to keep an eye on a new product from Britain’s Plastic Logic, which is due to launch early next year. The razor-thin reader will reportedly sell for around $300 and will have a flexible screen that makes it easy to carry. It’s also larger than the Kindle, which should warm the hearts of newspaper executives who don’t want to give up their broadsheet format. Here’s a video:

A lot of good ideas are being incubated to reinvent the publishing revenue model. We’re going to begin profiling some of these ventures under the label “Revenue 2.0.” If you’d like to be considered, send us a description of your product or service along with contact information. Please don’t send ideas; there are plenty of those. We’re looking for going concerns.

Pete Groverman can’t believe it’s so difficult to buy a newspaper ad.

“If you want to place an ad in every newspaper in Philadelphia, you have to either contact each paper directly or hire an agency or a broker to do it for you,” he says. “It takes about two weeks and it’s a pain in the neck.”

The 26-year-old Philadelphia entrepreneur thinks he has a better way.  Groverman and a small crew of bootstrap-funded dreamers have developed Tapinko, a sort of eBay for advertising. “It’s the online marketplace for offline ad space,” he says.

Like eBay, Tapinko helps buyers and sellers find each other but doesn’t disrupt the normal sales process.  Prospective advertisers can log into the service and find a list of outlets for their ad.  They select the opportunities that interest them and submit their request to the system.  On the other end, advertisers field and respond to individual inquiries, either selling at posted rates or negotiating side deals. Tapinko takes a small commission from the publisher for each successful sale.  The service also includes a variety of tools for tracking and managing ad campaigns.

Tapinko launched into the college market and has signed up more than 125 college newspapers.  Emboldened by early success, the seven-person startup are now seeking alliances with mainstream publications.  In May, they signed their biggest deal to date, a partnership with Greater Media Newspapers of Freehold, New Jersey. Advertisers will be able to buy space in Greater Media’s 12 newspapers via the Tapinko service.

Where Google Went Wrong

Tapinko’s approach is reminiscent of Google Print Ads, a service that the search giant shuttered early this year.  Groverman believes Google’s mistake was in messing with the existing process. “Google Print Ads was a Priceline approach where buyers named their own price and Google owned the brand,” he says. “Newspaper sales reps had no incentive to recommend the service.”

In contrast, Tapinko merely serves as a connector. Buyers still do business with individual publications at individual rates.  Ad reps still collect their commissions. “We’re piggybacking on the way advertising has been sold for hundreds of years,” he says.

And it turns out clients don’t have to be traditional publishers.  Among Tapinko’s list of media outlets is a young woman who offers to display a client’s bumper sticker on her car for a monthly fee of $75.  Another man will display a company’s logo as a tattoo for free as long as the advertiser pays for the tattoo.

The fledgling venture was recently accepted into the Philadelphia-based Dreamit Ventures startup foundry and is now seeking venture capital.

Miscellany

As expected, Sun Newspapers is pulling the plug on half its Ohio weeklies this week, consolidating 22 titles into 11 and laying off one third of its staff. The move is part of a sweeping plan to reduce the company’s workforce by 115 people that was announced last month. It’s unclear whether other shoes have yet to drop, since the 17 jobs eliminated in the consolidation are a tiny fraction of the planned total. The company announced plans to eliminate 45 editorial positions last month.

About 30 staffers at the Milwaukee Journal Sentinel just took a very generous buyout offer. The offer was so attractive, in fact, that many of the departing journalists are Sentinel lifers. Get this: the buyout offers two weeks’ pay for each year of service with an additional 10 weeks added on for people with more than 15 years. So It’s probably not surprising that people like broadcast media columnist Tim Cuprisin (23 years), theater critic Damien Jaques (37 years), books editor Geeta Sharma-Jensen (20 years), education reporter Alan Borsuk (37 years), pop music writer Dave Tianen (21 years) and music/dance writer Tom Strini (27 years) are exiting the scene. Jaques and Borsuk will each draw checks through early 2011, which isn’t a bad deal at all.

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

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

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

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

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

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

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

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

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

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

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

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

The New York Times Co. swung to an unexpected profit in the second quarter, although the turnaround had nothing to do with an improving business. Revenue at the company plunged 30%, which was even worse than the decline in the first quarter. The Times Co.’s success in reducing costs was the hero; expenses in the quarter were $450 million lower than a year ago. However, total revenues clocked in at $584 million, which was $19 million less than analysts expected.  The news did nothing to lift shares of the company’s stock, probably because analysts weren’t impressed by the sales performance. Even online revenues were down 22% because of weak recruitment advertising sales. The good news: The company has cut its debt from $1.3 billion to about $1 billion and is expected to slash that burden further with the expected sale of the New England News Group and the company’s share in the Boston Red Sox.

Sale of the New England News Group? Editor & Publisher‘s Jennifer Saba listened to the earnings call and heard evidence that the Times Co. may not be in such a hurry to sell the Globe after all. Cost cuts combined with circulation revenue increases have apparently put the enterprise on more stable ground.

McClatchy results were similar to the Times’, with ad revenue falling 30.2% and overall revenue tumbling 25.4% from a year earlier. Still, McClatchy managed to post a 43% increase in income on the back of stringent cost-cutting. Employment classifieds were off a gut-wrenching 62.5% as overall classified revenue fell 41% to $80 million from $135 million a year earlier. McClatchy CEO Gary Pruitt said digital advertising was up as a proportion of total ad revenues, but that’s only because total revenues were down so much.

Miscellany

Of all the tributes paid to Walter Cronkite over the last week, nothing topped this recollection from the Christian Science Monitor’s John Yemma. The story epitomizes Cronkite’s quiet greatness.

Meanwhile, Slate’s Jack Shafer takes a contrarian view, arguing that Cronkite’s legacy of trust emanated from a single survey of dubious quality combined with FCC regulations that required news broadcasters to remain impartial. Trust isn’t all it’s cracked up to be, says Shafer, noting that PBS’ critically acclaimed News Hour is actually losing viewers to the partisan and popular news programming of the cable channels.

Ken Doctor says Yahoo’s new deal with AT&T is bad news for the beleaguered newspaper industry. The partnership means AT&T’s 5,000 yellowpages.com ad sales people will now be out in the field selling small and mid-sized businesses on the glory of the Yahoo ad network. Until now, that role was filled almost exclusively by reps in the Yahoo’s 800-member newspaper network. Doctor says newspapers are finally getting religion about the merits of small-business advertising, a market that is estimated to exceed $25 billion annually. With national account display advertising falling like a stone, newspapers have to make a more compelling play for the local dry cleaner. Many of them are doing that, but the addition of 5,000 new competitors selling the same product can’t be much help.

The Ann Arbor News published its last daily edition last week, ending 174 years of continuous operation. The new Ann Arbor News will be a twice-weekly print newspaper with a continuously updated website.

The Associated Press will cut fees to print nad broadcast subscribers  by $45 million next year on top of $30 million in fee reductions already enacted this year. Total revenues are believed to have declined more than 6% this year and another big drop is forecast for 2010. A reduction of about 10% of its workforce is ongoing through the end of this year.

JD Lasica riffs on a meeting that we also attended last week with representatives of 10 mid-sized newspapers. The assembled editors and publishers were challenged to come up with ideas for reinventing their organizations and, while Lasica believes they still could have gone farther, he’s heartened by their innovation and positive thinking. One problem many participants complained about, however, is that they will go back to their managers and be challenged to show 25% first-year returns for their ideas. Some executives still just don’t get it.

Gannett gave the industry some welcome good news by posting quarterly results that actually exceeded expectations. In the wake of three layoffs of steadily increasing scope over the past year, conventional wisdom was that Gannett would lay a stinker on investors when it reported earnings this week. Instead, its stated results of 46 cents per share beat Wall Street expectations by nearly a dime. “Demand seems to be firming up a bit in some categories and in some geographic locations,” the CFO said.

Maybe those results are a harbinger of better times, because it looks like advertising spending is going to drop 2% next year. That would ordinarily be terrible news, but in 2009 it’s cause for celebration. That’s because ad spending is off 14.5% this year and 18% in the second quarter alone, the worst showing since the Marx Brothers were movie marquis headliners. The new estimates come from Magna, a unit of the Interpublic Group and a closely-watched monitor of advertising activity. The forecaster expects growth to resume in the second half of 2011 but to expand at an anemic 1% annually through 2014. Online advertising – particularly search – will lead the way, although local TV, national cable and outdoor venues will also grow. Not surprisingly, the big losers are newspapers (3.7% annual decline through 2014) and magazines (3.3% over the same period). Magna’s Brian Wieser says the newspaper industry is in “terminal decline.”

Buy BusinessWeek For Less Than a Copy of BusinessWeek

Have you always wanted to own a newsweekly? Well, you can buy BusinessWeek for $1. If that sounds like a bargain, keep in mind that the magazine is reportedly set to lose $75 million this year. That’s down from profits of up to $100 million during the dot-com boom. Times certainly have changed.

Alan Mutter’s prescription is for BW to niche itself at the high end, doing deals with peddlers of pricey Wall Street reports that funnel subscribers their way. He also suggests that the magazine could become the ultimate destination for crowd-sourced financial information, since there are so many smart people out there who want to give advice. His ideas would be plausible if they didn’t involve completely reinventing the culture and the brand at a business that’s hemorrhaging money right now. Perhaps a buyer could effect that transformation by firing 90% of the staff and starting over. There’s also the small problem of the complete irrelevance of a weekly in a world that can barely even support dailies any more.

However, Alan M. Webber thinks BW is a steal at $1. The Fast Company co-founding editor thinks the title is perfectly positioned to become the American foil to The Economist, which seems to be doing just fine these days. “BW could bring fresh energy, opinion, and perspective to all of the change in business that is so hard to make sense of,” he enthuses on Huffington Post. So what are you waiting for, Alan? Just a buck.

Shirky on Journalism’s Future: Put Down the Phone!

Clay Shirky may not always come up with breakthrough ideas, but he has an uncanny ability to derive sensible trends from apparent chaos. Read Shirky’s views on the future of journalism from the Cato Institute. His basic insight: journalism as we’ve know it has long been supported by advertising inefficiencies that made it possible for coupon clippers and automobile buyers to fund journalism that they didn’t personally care about.

The Internet has removed so much inefficiency from the market that these subsidies are no longer viable, so journalism must find sustainable new models. Shirky sees three: crowdsourcing or “participatory” journalism, database mining and patronage.

Working journalists might be most interested in his description of Off the Bus, a Huffington Post venture that monitored polling places using a crowdsourced model last year and achieved remarkable success. Off the Bus couldn’t have worked without a dedicated team of behind-the-scenes editors who made sense of reports filtering in from across the country. That’s journalism, but it’s not what Shirky terms “the ‘phone call’ model of reporting — one paid journalist talking to one source at a time.” Instead, the journalist is an organizer and interpreter.

Shirky  also likes the database-driven style of journalism practiced at The Smoking Gun, which mines public documents and databases for insights. Again, the idea that journalism requires phone calls and reportorial shoe leather is losing relevance in an age when shoe leather is becoming free.

Miscellany

San Diego Weekly Reader and the new owners of the San Diego Union-Tribune are engaged in a vicious battle over allegations by former employees of U-T owner Platinum Equity Partners that the investment firm engaged in ritual acts of sexual harassment, including sex-for-favors and hush-money payments.

The dispute originated from lawsuits filed anonymously by three former employees in 2007, which were ultimately dismissed. Reader describes the allegations in detail and also republishes a lengthy warning shot letter by a Los Angeles lawyer called “Mad Dog” Singer that threats all kinds of terrible consequences if Reader goes ahead with its story (which it did) or publishes Singer’s letter (which it also did). The dispute tarnishes some of the shine on Platinum, whose rescue of the U-T staved off possible closure of the paper. The Reader also tells of Platinum’s latest venture: to take over bankrupt auto-parts maker Delphi Corporation with help from General Motors and Federal bailout money.

Mark S. Luckie has been running 10,000 Words for nearly two years now and he celebrates the liberation of unemployment in an uplifting essay entitled “Why being an unemployed journalist is the best thing to ever happen [sic] to me.” Luckie celebrates his layoff last December as a chance to redouble his efforts to become a multimedia journalist and do the blog right. He also praises other grass-roots efforts by former employees of the East Valley Tribune and the Newark Star-Ledger as evidence that “all the talk of journalism dying is hooey.” Several unemployed journos contribute supportive comments about their own reinvention, but one notes that Luckie fails to address a basic question that also occurred to us: how is he making a living?

Last week’s demise of The Printed Blog evidently didn’t put the final nail in the blogs-in-print coffin. A UK startup called The Blog Paper is taking a run at the same idea. It’s inviting bloggers to submit their stuff to a community ratings machine that will determine which entries are most print-worthy. Co-founder Anton von Waldburg thinks this Digg-like functionality is distinctive as he repeatedly tells Online Journalism Blog. One of the most highly-rated entries on the site today is an idea to put advertising on keyboards (right). Good luck with all that.

Two upstate New York newspapers have dropped a day from their publishing schedules. The Tonawanda News cut its Monday edition and will now publish Tuesday through Saturday. The Medina Journal-Register eliminated its Tuesday edition and now publishes four days a week.

Did you know that 4,000 bloggers contribute to Huffington Post, all of them for free? Michelle Haimoff cites this statistic in a HuffPo column proposing a rewards system for bloggers. Haimoff says her proposal is a way to “create a sustainable business model in the long term,” but we think getting people like John Kerry and Larry David to write for free is a pretty good model to begin with.

Back in January, we told you about The Printed Blog, a venture by serial entrepeneur Josh Karp that sought to flip the online publishing model by delivering blogs in print. The idea was to take the best entries by local bloggers and rush them into print for consumption by busy commuters, whom advertisers would want to reach. “If his idea reaches its full potential, he’ll have hyper-local twice-daily editions in thousands of communities around the US,” we wrote. “Chicago alone could support 50 localized Printed Blogs.”

Well, it turns out Chicago could barely support even one Printed Blog for more than a few issues. Josh Karp shut his doors last week, having poured more than $100,000 of his own money into a venture that barely got off the ground. The Printed Blog published 16 issues in seven regions and it was a pretty interesting read. Its slogan – “Like the Internet, only flammable” – betrayed its playful nature and the website is the essence of Web 2.0 shareability. The venture was a victim of a harsh economy, in part, but also the reality that people apparently don’t want to read 13-hour-old blog entries about the White Sox in print, as the Christian Science Monitor account points out. It was a long shot that drew skepticism from the start, but it generated huge publicity for Karp, who we hope will quickly find a more successful outlet for his ample creativity.

Karp posted several closing entries on his blog, including this one about the lessons he learned from the venture. Among the half-dozen he lists are this one: “Instead of focusing on one thing – revenue – on a small enough scale to prove our model, I decided to try and publish the paper in Chicago, San Francisco, New York, and Los Angeles… I got carried away, and we spread ourselves too thin too fast.” We’re going to be seeing a lot of entrepreneurs try to fill the void left by dying newspapers in the coming years and they would do well to read Karp’s advice. Or even bring him on as a publisher.

The Flap Over Free

We don’t know if you’ve followed Wired editor Chris Anderson’s latest book, Free: The Future of a Radical Price, but the premise is worthy of attention from publishers. Anderson’s premise is that the Internet has created a new competitive dynamic that is relentlessly forcing the price of all things digital – and some things physical – toward zero.

Software that once commanded six-figure license fees is now free.  The entertainment industry has all but abandoned efforts to copy-protect music. Artists now give away music and make money on concerts.

Anderson further argues that other businesses may be pulled into the low-cost business model orbit. T-shirts are basically free, but the cost of a Major League Baseball logo is $30. Casinos give away flights and hotel rooms and make it back on gambling. Ryan Air has staged promotions in which its flights are given away for free while revenue is derived from value-added services like luxury meals or gambling.

This has big implications not just for publishers but for anyone whose value is predicated upon delivering content. Anderson’s premise is controversial and scary to many people. Others simply don’t buy it, including Malcolm Gladwell, who penned a well-argued review in The New Yorker last week. Gladwell points out that Anderson’s argument ignores the value – and cost- of the distribution network. He notes that YouTube makes most of its money from advertising sold against professional programming that it buys from entertainment companies. Thus, the company’s supposedly free content model is really underwritten by real cash money.

Anderson fires back with a respectful rejoinder, telling the story of GeekDad, a blog he started a few years ago that is now run by a largely volunteer workforce. These writers do a heckuva job delivering a product that would have formerly required an expensive publishing infrastructure, and they do it for personal fulfillment, Anderson says. He suggests that this is where the news model is going: “I can imagine far more subjects that are better handled by well-coordinated amateurs than those that can support professional journalists. My business card says ‘Editor in Chief’, but if one of my children follows in my footsteps, I suspect their business card will say ‘Community Manager.’ Both can be good careers.”

True to form, Anderson is giving away digital copies of Free (you can read the whole thing here) but charging for the book. Publicity will no doubt help sustain his five-digit speaking fee. That’s further support for the book’s premise. It isn’t helping his magazine, though, which is among the worst-performing print magazines of 2009. Free can apparently only get you so far.

Miscellany

The Cincinnati Enquirer appears to be shouldering more than its share in the latest round of Gannett Co. layoffs. The paper has laid off 101 people out of a total staff estimated at between 800 and 920. It has also laid off the entire staff of CinWeekly,  companion publication aimed at young readers. Meanwhile, the Detroit Free Press is escaping the axe entirely, but that’s because it and its JOA partner the Detroit News have already cut 17% of their combined workforces since December.

More than half of business communicators surveyed by Ragan Communications think Twitter is a fad that will crest and decline as people run out of interesting things to say. The 28% of respondents who have a microblogging policy in place credit it with improving employee engagement, helping customer service, building reputation and boosting website traffic. Another 40% have no microblogging plan in place. EMarketer remarks on Twitter mania, noting that when people start attributing world-changing characteristics to a new technology, it’s time to start worrying.

The New York Times Co. has extended until late this month the deadine for bids on the Boston Globe. The move is intended to give prospective bidders (three at the moment) time to see if advertising revenue has leveled off and whether the Newspaper Guild approves a tentative contract containing $20 million in concessions. Meanwhile, a lively discussion is going on within the Guild ranks over whether to approve the proposed deal.

A federal judge has cleared the way for Journal Register Co. to emerge from bankruptcy with 90% of the company in the hands of its debtors. The company’s reorganization plan had been held up pending resolution of a dispute over a $1.3 million “shutdown” bonus, which will pay some senior managers to lay off staff and shut down publications. Opponents argued that the bonuses are excessive and unwarranted, but Judge Allan L. Gropper ruled that the fact that the fact that the plan was approved by secured lenders and the company’s creditors committee justified its validity. Under the reorganization plan, JRC gives up 90% of the company in exchange for $225 million from lenders.

And Finally…

The comedy team of Bob & Ray once had a skit about an idea called edible food packaging. It turns out the notion may not have been so far-fetched, as publishers are trying every possible idea to make their print products palatable. In Moscow, the the GazetaPacket is delivering news, crosswords, recipes and advertising on printed paper bags. It’s been running since last August. Editors Weblog tell of other ideas, like Bill Shein’s suggestions for edible paper, martini-flavored ink and naked women on the cover. That last one’s been tried and apparently doesn’t work, but you know what they say about if at first you don’t succeed…