NP Refugee

High Operating Leverage Pressuring Newspaper Companies

The impediment facing the newspaper industry is not with it's operating cash flow, but rather, with the debt load. Servicing the debt as part of the cost structure is crippling the newspaper industry's ability to create new forms of content, and thus, create value. Until newspaper companies can shed debt, they are going to struggle--plain and simple.

FT on the Future of Newspapers: Nyah, Nyah

Until there is a true introspective approach for the companies that own newspapers and produce/distribute content, I really doubt there will be a solution for them. And a solution may not exist--except to usher the old out the door in exchange for the new. Town criers really aren't in great demand anymore either, come to think of it (a wink to the Newspaper Nexters who run around talking about how no medium has ever fully replaced another medium--I beg to differ).

The real issue here is that there are readily available substitutes in a fast-paced information age that have quickly come into the market, at a pace no other medium has ever experienced. Newspapers are not only having to deal with better mousetraps, they aren't really used to even having to contend with another mousetrap at all.

But to lay it all at the feet of content points to just one problem. A true examination would find that the assault on the traditional newspaper model is coming from several directions. Delivery--the speed of news to a desktop is superior to someone driving by a house at 5:30 AM and dropping what's already stale in the yard (and entrusting the most critical customer relationship link to the weakest in the chain--another topic altogether); News--so many sources for what the newspaper used to claim as a local franchise are available in so many places. We're talking the exact editorial content--wire stories, comics, syndicated editorial. The newspapers have lost their exclusivity in the local market. Perhaps the FT can charge because a large volume of what they have as their franchise is exclusive. Exclusivity is a conversation that has to take place within every newspaper in the country, because that which isn't exclusive has far less value in the current environment. I've never heard a newspaper talk about their exclusive content, because to them, they've considered all of it exclusive to date. No longer the case.

And then, there's the substitution of their lifeblood: classified advertising. Craig Newmark may have done a lot more to damage newspapers than Google ever thought about in their news aggregation. Even in the mid nineties, we used to calculate and project the cost in operating profits from just a 15% loss in classified ad volume, were it to occur. As I recall, the loss in overall newspaper profits was calculated to be around 35%, since classified advertising was such a high profit margin sector of the business. Even then, we were contemplating the peril and knew trouble was brewing. Remember a little thing called "Classifieds 2000?" And what about Microsoft's Sidewalk project? They were just slightly ahead of their time but they got our attention. Craig Newmark, however, was right on time.

So the problems are, and have been coming from all sides, not just one, creating a perfect storm for newspapers. Jeff, while your primary focus is on the news/journalism/content side of the equation in your piece, the issues are far broader and more complex. Thus, any solution will likely be the same. But it really starts as a discussion in market microeconomics, readily available substitution, and exclusivity.

Dealing with those as fundamental problems are where the solution, if one exists, lies.

On the Constitutionality of a Newspaper Bailout

Sorry, dude. Things get twisted all the time. How we went from allowing freedom to worship in the 1st amendment as a constitutional ban on any reference to religion is exactly why the slippery slope rule applies. After all, they "dumped a bunch" of money into GM, and the next thing you know, the president is firing the CEO. So the editorial board of newspapers will all of sudden be full of ACORN.

No thanks. The day they accept a dime from Uncle Sam is the day I'm an ex-newspaper reader because any sliver of credibility they have will be gone. Then they can dump all the money they want into it and it will be "red all over."

And if the newspapers accept a dime, they might as well be Robert Johnson at the Crossroads because their editorial souls will be gone. As it is now, they're teetering--maybe that's part of the problem.

Some Stats on an Unsustainable Model: Print

So... I didn't see anything about the insert business. We've known for quite awhile that the bread and butter for newspapers is now the insert business. The good news is that they have it. The bad news is that it, too will go away with much of the other advertising. After all, I can see the Best Buy circular online anytime.

Rescue vs. Reinvention: For Newspapers or Banks, Bailouts Reinforce Status Quo

If it passes, we can all kiss the 4th estate bye-bye.

Too Many People Don't Care If Newspapers Die

Within the news ecosystem, there are many parasites who exist off of newspapers and their editorial departments. People just don't realize the vacuum that will be created. At the same time, newspapers may have to die in order for news to become resurrected in other forms (not unlike the big auto guys). News has become commoditized in many markets, but the source is usually the newspaper. There's not a local radio station who doesn't start their day by opening the newspaper to write their scripts. Same for broadcast TV.

How the news business will be resurrected will make for an interesting case study. There will be winners and losers. I don't believe that the insert business will all go direct mail, either.

This Week in Saving Newspapers

I grieve the death of the 4th estate. Talk about being too important to fail...

Like watching the Senate go away, or something. Removing an all-important leg of the stool. They are too important to democracy. Don't count on radio, tv, or Inet to do what the papers do. I just wish they would take their responsibility more seriously and report with less bias and a mission of fairness over their own political ambitions. Of course, it's been that way since the 1800s, so it's unlikely to change anytime soon.

I don't mind the collusion thing, but nobody seems to be talking about the arcane cross-ownership rules. Let the NPs work with and own TV stations. Both are in real peril. Allowing cross-ownership could be a real shot in the arm. The FCC, through the cross-ownership rules, imposes barriers that are not only unnecessary, but they also are incremental acid eating into the 1st amendment.

Many forget that most television stations were begun by newspapers in the first place.

Several newspaper companies have sought to have the cross-ownership rules overturned, yet, those in power have no incentive to have the watchdogs get stronger. They use the unique, independent voice argument as though media is limited in the same way it was in the 1950s. They're really just fine with being able to control the press.

That's the story that's not being told in this whole argument. We should certainly start there. By having one news department for television stations and newspapers, the cost would be contained and the reporting might be better--but the goal at this point should probably be existence.

And exNewspaper is obviously bitter, lacking understanding that most of the news that is read over radio, put into television newscasts, and blogged, all comes on the backs of an editorial dept somewhere. Without newspaper editorial departments, democracy is toast... and the bloggers would have to become investigative reporters. I love the blogs, but let's face it; they would have to put on clothes and get out and do the work of the newspapers in order to have any sort of future in a post-newspaper world. They would face the same economic challenges in a world of entitlement, where everything on the Internet is free. Who would pay their travel expenses? How would they be compensated?

I so want to see newspapers survive, but they have so many fundamental flaws that are deeply rooted that anything short of radical metamorphosis will be woefully short of the necessary transformation required to survive.

Newspapers and the Internet: Opportunities Lost

Sorry, but the edge NPs had is gone. Who, other that cave-dwellers and mushrooms truly considers any NP an unimpeachable source for news anymore? Every study I see shows that most people find them lacking in credibility and don't trust them. Ship's already sailed. What used to set them apart just makes them a "me too" these days.

The 2008 presidential election is a case in point.


On Jan 07 12:10 PM common sense 2 wrote:

> I know that everyone think that papers are dead because of the web.
> What they fail to take into account is that the news on the web could
> come from the back room at some 14 year old house, who thinks that
> he is god's gift as a tell all editor. In a lot of websites there
> are no checks and balances about the turth. Just because it's on
> print on the web does not mean it's true. Look how many "Urban Myth's"
> are sent out in emails and online at the whole truth. Since these
> webpages can be started for less than $100 everyone is a publisher
> if they wish to be.
> I am sure thaere are a lot of hate groups spewing there from of truth
> and half truths to an audiance that will believe anything.
>
> You can find all the rumours you wish on the web, but can you really
> trust the information????? I am sure that there is a lot of dis-imformation
> being presented also.
>
> In the rush to be first to publish information, the internet publishes
> more trash, read by more readers than any newspaper ever has.

>
>
> Just what are we letting the youth see on the internet... how to
> make a bomb, hate groups to brain wash them? Remember that for the
> most part it's a wide open frontier, and because of that quite lawless
> on what is given as fact.
>
> I wonder if during the 1800's that they considered the cities as
> bygone era because of the wide open land available, instead of the
> trash and waste running down the city streets.
>
> Not everyone trust the internet for good reasons, but through 100
> years of publishing most people feel they can trust papers, even
> if they don't always agree with them. They know who to complain to
> and hold accountable for there stories.
>
> That internet site could be just a group of college students from
> around the globe, each haing there own section to worry about. If
> you complained would they even read it? or would it just go in the
> wastecan of email or an automatic trash disposal.
>
> I would perfer my information to come from a reliable site, not just
> a teen editor.
>
> And one other point. If you have all the answers, why not start your
> own internet /or paper product rather than complaining about the
> ones that try. I don't mean just wrinting a column, slanted toward
> what will sell at this time. I am sure if you wrote the praise of
> newspapers no internet site would pay you for it.
>
> my 2 cents worth.

Newspapers and the Internet: Opportunities Lost

Agreed. But there are many examples where there was deviation from the normal NP model; and many times, the new models were met with resistance from guess who? The editors. To them, "new and innovative" is a new special section with the same old crap. Any attempt to do something different was always met with cries from the editorial tight-shorts who took any true innovation as irreverence to the craft.

Web opportunities still exist, but most editors are too mired in self pity to get off their journalistic rear ends to do something new and exciting. It's still not too late for newspapers, but it is high time to get the boring journalsaurs out of the picture and produce interesting content. Let's face it: even the "edgy" products that were supposed to be innovative are quite boring as compared with the truly edgy stuff that is more engaging.

But the problems aren't just with the content. That's a start. Bring me more options with delivery. History will tell us that the beginning of the end for newspapers was the death of the afternoon paper. NBC figured out that people don't stay up until 11:30 PM anymore to watch Leno. Can't NPs figure out the same thing? Logistical hurdles aside, if survival depends on it, they'll have to find a way. Imagine the immediate boost an afternoon paper would have on readership if it were fresh news from a fresh perspective, written for today's audience! They might find that 50% of potential readers don't have time for the morning paper but would appreciate an evening digest.

Telling Statistics on the News Business

As someone who was there in the NP online fray since late '95, I am of the opinion that there are some givens:

* An editorial dept will never be sustained by online ad revenue in neither the current online ad model, or the current editorial newsroom model-at least for most NPs that would be considered local and not national. For that model to work, CPMs would have to be multiplied by a factor of 10.
* The answer is/has always been there, but ego and arrogance have always kept the NP industry from solving their problem. They've never been able to get out of their own way.
* The traditional NP can't be fighting with the online group, whether the online is treated as internal or as an external entity.
* The NP industry has allowed the AP to sell its birth rite to the search engines where the money is being made. What a great deal! NPs pay to create the content, GIVE it to the AP (or pay the AP for the privilege for accepting their content), who, in turn, takes money from the search engines to undercut both the print and online editions of the papers.

The ONLY answer I see (trust me--14 years of experience here) is for the NP industry to create their own news search engine, market it heavily in a collaborative effort, etc. Their NP search engine should allow for search results to be organized by release date. Imagine the ad revenue that would shift from the search engines to the NPs!! Whatever they do---keep the AP out of the equation; they are part of the problem, not the solution.

Newspapers: Defensive, Depressed and Desperate?

I agree with most of what you're saying... arrogance... monopoly... blah, blah, blah. I do believe that NPs are essential to democracy. Are we going to trust the bloggers to hold politicos accountable? They get most of what they write from guess where? NPs.

Where I disagree is that all the newspapers could, in concert, turn off the outside world without a subscription. That ignores the fact that most people can already get most of the content of a newspaper without that subscription. The AP already sold out to Y! and Google. Comics.com has the comics. And as for local content, the local TV stations would have quite a boost in traffic to their sites. I'm sure they'd love to compete against a paid model for eyeballs. NPs have no monopoly on local news and information in any local market and for any doggone syndicated piece of content they run in the interactive realm. Sorry to be the one to break the news....

I have always found it amusing that NPs thought that they could, in their monopolistic view from their monolithic lens, cut off their websites from the world and there would be no competitors in the digital realm--just as there is not in the printed realm. How misguided and naive...

I'm afraid their problems are content, content, and content. They're not making papers people want to read--just as Detroit isn't making cars people want to buy.

So much could be learned by studying the HBO history, when VCRs, release windows, and proliferating cable nets all eroded the content value for their service. They figured somewhere that they weren't in the MOVIE business, but were in the ENTERTAINMENT business. Along came The Sopranos, Sex and The City, and lots of other original, can't-get-it-anywhere-... content. NPs are in a similar position: the product is largely commodity; competition against earlier release windows. They need to step back and see what about their product is unique, entertaining, and has wide appeal.

Or maybe they could go niche and print everything on a ditty press for those who still care about everything within a 5 block area of city hall. You're right, Jeff, they are self-inflicted wounds. The only remedy is total reinvention; even the content they port over to the net isn't strong enough to support a sustainable franchise where the websites provide payment for the news stories online. But I don't think they KNOW what people aren't reading. They only do readership studies. Perhaps they would be well served to do NON-readership studies to find out what people WOULD read.

Newspapers: Reinvent Yourselves... Or Else

What a buffoon!

I'll admit that newspapers haven't been bold enough to go where they need to. Mark apparently is writing from a perspective devoid of history. He doesn't know about the many things that have been done and the way that newspapers have tried to reinvent themselves online--many times being successful. Ever heard of Cars.com, Mark?

Where I think David is going is the right question in need of a solution. I still believe the day when the newspapers can all get together, close the door on Google and start their own news search engine will be the day they can start getting the money that Google gets (or at least their fair portion). Frankly Google makes money at nps' expense. What a great gig--the newsrooms across america produce content for which Google pays very little, if anything, and makes gobs of money off it selling ad words. While the move may be bold, it's where the NPs need to be. I'm not suggesting the NPs have one more "hail Mary," but this is no time to be shy. Between Cox and Gannett, there are at least 2 pieces of technology already in place to make it happen. NPs still have the umph to make the marketing happen and establish brand recognition.

[The AP is NOT the organization to do this. Their agenda should make anyone dubious. They are proving to be fairly colonial in their pursuits under TC. I wonder which will occur first--will the AP outlive its usefulness or wear out its welcome?]

I do know that Gordon B. is right: you'll never be able to pour money in the top faster than it's going out the bottom without an initiative the likes of a news search engine.

The NP industry tried to do all this in the mid-nineties, as many-a-colleague will remember, yet the egos of the individual companies made it all collapse. Perhaps such times as these will make for an environment where such initiatives could be revisited. I doubt Mark is even old enough to remember the New Century Network. I've said many times that NCN was ahead of its time.

Can Anything Save Newspapers?

The answer is, as you said, to band together.

If they could ever agree (and they can't) the newspaper companies would turn off Google, Y! (although the consortium makes that difficult) and MSN and start their own news search engine. Sell the same contextual ads that Google is selling to make most of their bucks. The big con was that the newspapers are dependent on Google. I think it's the other way around.

Imagine what that revenue split would look like.




On Dec 10 04:13 PM hierofalcon wrote:

> There are certainly some cyclical problems - house and auto ads spring
> to mind.
>
> The real problem is that someone sold a couple of big names on providing
> free content on the internet with the hope of some web based advertizing
> dollars. If not totally free, then just for the cost of an on-line
> registration. The advertizing dollars from the web barely pay for
> the web presence, let alone the journalists that provide the news
> that people come to the site to read. For most smaller papers, it
> doesn't even cover the web costs. Yet the content is there and is
> free for browsing any time any person wants to look, 24/7.
>
> Unfortunately, I don't see much of a way out. Band together to abolish
> free content so you can get subscription fees coming in (either web
> based or print) and the anti monopoly people will be all over you.
> Leave everything free and only a couple major organizations will
> be left with no local news at all. Even with fee based web content,
> most of it will flow to major papers hurting smaller community papers.
>
>
> As a middle aged person who works on a computer all day long, I can't
> imagine trying to read the news on a computer - headlines and an
> occasional article are fine from Google News, but for real news I
> much prefer the printed paper at night. As for TV news - bah! Sound
> bites R Us isn't real news. I want to be able to read what I want
> and skip what I want without having talking heads repeating the same
> story every 15 minutes.
>
> The real question is how to make news relevant to the younger generation.
> We've lost a generation that cares about what happens around them.
> That they have the attention span of a gnat just aggravates the problem.
>
>
> The internet without the journalism backing of print media and TV
> media isn't worth much as a news source. Yes, it's fun to blog -
> at times. But like it or not, the major journalism sources (whether
> TV based or print based) provide good content for the net. Lose that
> and you've lost a lot of value. If I'm looking for reliable information
> about some headline - I pick the names I know and trust and not joes-blogging-news-liv...
>
>
> The trouble is that the major TV based sources (CNN and the like)
> are only focused on big events and don't really care about local
> news. Kill off print, as one poster suggested, and you lose much
> of what keeps a community bound together. You may rely on TV news,
> but it is in just as much trouble as print news. Local news is going
> away there too without some drastic changes. As more lawsuits crop
> up against web sites of independent bloggers or advertizers over
> what content they post, this may drastically change the landscape
> for the free world of the competition. There is value in that stodgy
> old editor that is only beginning to be seen by the do everything
> online crowd.
>
> Many of the items mentioned by former insider are correct. I'm not
> as convinced the carrier interface is all that important. Getting
> the paper to me by the same time is important, but face contact really
> doesn't matter to me. I'm not particularly a union fan and I'm sure
> those rate high in the problems to be solved department.
>
> As a newspaper stockholder, I wish I had better answers.

Can Anything Save Newspapers?

You've hit the nail squarely on the head.

I've heard the cyclical thing for so long it makes me want to hurl. Maybe cycle is sort of like a death spiral. Dave Morgan is one of the smartest people I've ever known, too. He knows what he's talking about.

When was the last time a reporter got out of their chair to go do an interview--look the person in the face? Lazy.

Point is, their model is dead. Why even have reporters come in? With today's technology, they should be in the community reporting. News flash: you can email your story to the copy editor. Get out in the community, for heaven's sake. There should be no reason for a reporter to come in unless there's a meeting. Reporters should be paid based on production in specific categories. Problem is, unions (see US Automakers) are geared toward minimum production for maximum pay. Guess what? The golden goose is on life support.

And I agree that the salespeople don't know how to sell. They wait for the phone to ring. No cold calling, no spec, no needs assessment.

The only hope for these guys is to take them all private, lower the price to whatever it takes to regain circulation, and then understand that they can't report as though everyone lives 3 blocks from the downtown metro center. And quit reporting yesterday's events as though we all live in a cave. Providing context and applying meaning should be a newspaper's pursuit. They'll never win on breaking news, so they should stop insulting the reader.

Lastly, they have got to reestablish the relationship between the carrier and the customer. I believe history will show that carriers' anonymity will be a contributing factor to newspapers' demise. Why would any business make its most critical link the weakest. Were it me, I'd reinvigorate the relationship between the carrier and the customer. Leaving a message on a recording when my paper is wet is not going to keep my business. Get the carriers digitally connected so they can serve their customers. We used to before the cyber age; technology should make it easier. They certainly don't have SO many customers these days that they can't provide a little personal attention.

Even Newspaper Next guys are getting frustrated trying to teach the old dog to do a trick. Lying on the floor waiting to be fed is not working.

CNN's New Wire Will Shake Up the Newspaper Business

So, ole buddy...

Do we really believe the AP owners will be able extricate themselves from the dinosaur? There's so much invested in the relationship, albeit dysfunctional, that I wonder if they can ever quit long enough to do something different. And do you think Tom Curley will just roll over? We both know of manifestos in the past that were described as "tempests in a teapot," but this seems to be real.

Here's my guess: Tom C. will back off rate increases, will promise more transparency and will politic his way into making the CNN thing go away by lots of calls and visits with the owner members.