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Tired of playing defense and readying itself for offense, the New York Times’ (NYSE:NYT) formal announcement of its San Francisco “edition” this week shows us how a world is moving and how the Times and Wall Street Journal (NASDAQ:NWS) (which also will offer an SF edition soon) is taking their battle to a city near you.

In this case, it’s a new inside-out world.

Forever it seems, the U.S. has press has been dominated by metros. This vast country of 300 million only supports three national dailies, and one of those, USA Today, is largely supported by the hospitality industry and business travel.

The New York Times and the Wall Street Journal built national (and budding global) franchises, but make minor inroads in any single city, five percent or less of print market share in most places. They’ve served an intelligentsia.

It was the metro daily that brought us our worlds. Yes, local, but also heavily national and international news, all sports news, business news, movies, TV and entertainment. They picked and chose what we needed to know about the world and we bought the package for decades.

The metros picked out a few Times and/or Journal stories, among other “wires” and put them in the package.

What we see in the Times’ regional push is now inside out. We bring you the world, the Times is saying, and now, we’ll bring you some local, too. After, all, local is important, but it’s just a (small) part of what you want to know about the world everyday.It’s a smart strategy, one born out of the Times’ new understanding of potential unlocked by the web and one born out of the cratering of the metro press. Why and why now?

  • The metro press seemed like an impregnable castle. It assembled a mass audience, a mass market, and the barriers to compete against – those castle walls of printing presses, distribution systems, ad sales forces and huge newsrooms – told competitors: “Don’t even try.” Internet competition exposed cracks. The recession is forcing a downsizing of the industry by a third or more has now left the castles’ flanks open. In the Bay Area, the Mercury News flank is wide open, having seen a newsroom of 400 in 2000 now cut to 125. The Chronicle's loss in staff are similarly dramatic. Why not start with the Bay Area, a highly educated, affluent, now under-served market?
  • Web economics provided a new path to start-ups and get-biggers. Into the openings are rushing a variety of competitors. In the San Francisco Bay Area, that means such forces as KQED public radio, Warren Hellman’s new start-up (both we believe to allied with the new New York Times’ push), emerging broadcast-based websites and others. Across the country, we see dozens of start-ups, awakening public radio stations, and TV broadcasters seeing that assembling a half-dozen to a dozen to a few dozen people and creating a digitally-based news organization is now possible. Foundations have become enablers, as they see civic conversation drained of its fundamental food, news.
  • The Times’ new edition now gives something more to print subscribers – more regional pages on Friday and Sunday to start. That’s as part of a retention strategy – remind me why I should keep paying more and more for this print edition, when I can get the Times free online? – as it is a new print customer one. Hold onto to those print customers as long as you can, and each year the ad revenue helps you make that digital transformation.
  • The Times’ can now play with a more complete inside-out idea – bringing its online customers the whole world. It can deliver reports from Afghanistan, Jerusalem and Belfast and your local and hyper-local news. It just needs good local editors and good local partnerships to do the latter. Imagine the Times’ Global Edition toggle button getting a new buddy: Local Edition, tuned to a mix of national and your local news.

One question the Times (and the Journal) will have to answer: How much do we do ourselves? NYT Publisher Scott Heekin-Canedy has said the Times will offer "local stories as only the Times can report them." Yes, its 10-person bureau will be a big asset toward that, but they are still only 10 -- and oriented to finding stories all Times' readers are interested in. Adding staffers is highly expensive. Finding the right local partners is key.

Overall, this a is new level of competition, and competition’s good, right? That’s what we believe in U.S., we keep telling ourselves.

For the metro dailies, this new competition is another reminder that coming out of the recession won’t bring them back to the challenging, but still profitable, times of 2006-2007. These are new times with new competitors. Recovery will brings lots of competitors out of the woodwork. As the Detroit papers retrenched in home delivery, the Journal made noises about expanding its Detroit presence and doing what the Times has announced in the Bay Area. So expect these two increasingly head-to-head competitors, the Times and the Journal, to map the U.S. and decide where to go when. In addition, in the recent Bloomberg/Washington Post announcement, we see the further re-writing of the national/local rules. Bloomberg says to daily newspapers, which have rapidly retreated from business news coverage (good TalkingBizNews sum-up), we'll be your business section online. (And, of course, in beefing up with Business Week, it adds more heft.)

What we're seeing is the onset of a new set of re-knitting edited packages of news. News publishers, and editors, are trying to find new formulas to bring readers back from the ping-ponging effect of Yahoo News, Google News and the like, saying, stay on our site, we'll bring you a better package of news, drawn from the best sources. Expect to see lots of combos and re-combinations as experiments multiply in 2010.

For metros, the gauntlet is thrown down: You say you’re local, prove it.

Metros have cut back on their nation/world reports in print, and often online, re-orienting their diminished staffs more toward local. Yet, to readers, it seems like they keep losing things and gain little new in return. Now, we see the Dallas Morning News setting out in a new direction as publisher Jim Moroney has signaled an aggressive strategy and doing local with more gusto. In Seattle, Miami and Charlotte, aided by Knight Foundation (KRI) match-making and money, metros are figuring out how to partner with good local, reporting-oriented blogs as well. All metros will have to move aggressively, figuring out the formulas that cause readers to pause and see their brands in new light.

Otherwise, this new unexpected competition of the global (Times, Journal) re-combining with the other local (public radio, start-ups, broadcasters) will pull away readers and advertisers just as metros have re-gaining some small optimism for the coming year. Curiously, I wonder about the Times' holding onto the Boston Globe (at least for now) in this light. Yes, the cuts and givebacks, combined with the bottoming of the recession, has convinced the Times that it can operate the Globe at least at break-even+ for the coming year. Given, though, this new strain on metros (wouldn't we expect Rupert Murdoch to make the Boston a target for WSJ metro strategy, just to spite the Times?), how stable is the Globe? Or maybe, the Times will pick a page or two from the Dallas or Seattle+ experiments?

Curious times as we enter the next decade. When you turn the world, inside out, on its head, who knows what will fall out?