Posts about newspapers

The decootification of media companies

LOCALADV DIGITAL PHOTO BY JUSTIN BEST Cooties for a Kristi column.

This pretty much completes the circle: Now Gannett is ready to spin-off its print properties, following Scripps in 2007, Belo in 2008, News Corp. in 2013, Tribune Company in 2014, and Time-Warner in 2014 — not to mention the Graham family putting the Washington Post up for adoption by Jeff Bezos.

Thus ends the decootification of media companies: entertainment here/print there; future here/past there; profitable here/screwed there. In corporate transactions, an unnamed venture is called a newco. In these media transactions, the abandoning parents might as well have called each progeny a crapco. They are not only set off on ice floes like elderly Eskimos awaiting a cold death, but some of their abusive parents — namely Time-Warner and Tribune — saddled them with horrendous debt. A few didn’t. Gannett’s spin-off is to be debt-free. Give considerable credit to Rupert Murdoch — who does love newspapers — leaving News Corp. with no debut and $2.6 billion in cash.

This is happening because the bad news for news isn’t over. The last best category of advertising in newspapers is the distribution of FSIs, free-standing inserts — circulars and coupons — which by one account adds up to 30-50 percent of newspapers’ retail advertising (though retail advertising continues to plummet). The last, best reason to keep printing and distributing a newspaper is FSIs. When you see papers cut frequency of printing or distribution to a few days a week, those are not hot news days; those are the days that bring FSIs and their revenue.

I’ve been saying here for some time that FSIs will go away. About two years ago, I asked a big-box retailer that makes much money from its circulars (from charging brands for presence in them) how long it would be before the circulation of print newspapers would fall below critical mass. The reply: 24-36 months. Note how long ago that was. FSIs are holding on for now but they are bound to start dropping off (a cliff) when (1) newspaper penetration — now running about a third of the country — continues to die off and as (2) consumer adoption of digital and especially mobile couponing rises and as (3) retail itself suffers in the face of Amazon and now Amazon, Google, and eBay all experimenting with same-day local delivery. Add (4): At the PostalVision2020 conference a year ago, the postmaster general described the entire business model of the United States Post Service as an advertising delivery medium; it will compete with newspapers for those last printed circulars and coupons and it is just as desperate for them.

I’ve also been saying here for some time that the real goal of newspaper publishers should be to become sustainable digital enterprises before the day when print becomes unsustainable. I’ve worked with two companies that are trying. Digital First started down the path but hasn’t arrived; it is a more digital and more viable company but still has a way to go to reach the promised land. Advance has consolidated digital and print in its markets, reducing print frequency in some and in all markets making digital the primary product for consumers and advertisers as well as staff and print a byproduct that still produces cash. Other companies have gone for short-term cash-flow fixes — namely, paywalls, whose growth has stalled both at Gannett (about 1 percent after a year) and now at The New York Times (in its latest quarterly report, the paper said growth of core digital subscriptions — apart from new digital products that themselves didn’t sell so well — stalled at just over 1 percent).

The job of turning a legacy news organization into a new digital organization is both wrenching and expensive. It requires urgency. It also requires patience and patient capital to fund reorganizations but especially innovation, which entails experimentation and thus failure — in a word, risk.

What these spin-offs signals is that media companies do not have the stomach, patience, capital, or guts to do the hard work that is still needed to finish turning around legacy media. So they spin them off. What used to be Gannett, Tribune, Scripps, and Belo are now TV companies. What used to be News Corp. and Time Warner are now entertainment companies — companies that might merge not, in my opinion, because that’s such a wonderful deal but because the best path they see to growth is not innovation there either but instead cutting costs and consolidating negotiating power to outmaneuver (with help from legacy telcos) the Netflixes of the future.

I see something else happening here: the end of the mass-media business model built on reach and frequency (unique users and pageviews) — in a word, volume. Google, Facebook, retargeting, programmatic advertising, all the companies and trends that are growing in advertising focus on individuals over masses, on data over mere exposure. If news companies do not figure out how to know people as individuals and find value there, reconstituting themselves as relationship rather than merely content companies, then they will find the ice floes under them melting sooner than later.

: LATER: Here I am on Bloomberg TV Market Makers on this story today.

Attention v. relationship economy

Oddly, Google chief economist Hal Varian analyzes newspapers‘ problems and prescribes solutions strictly from an old-media perspective — based on attention to marketing messages — rather than an internet (namely, Google) perspective of relevance and relationships.

In a speech to Italian journalists, Varian says that “the basic economic problem facing news is increased competition for attention” and that newspapers must use such tricks as tablets and dayparts to get people to spend more leisure time with news so they can show them more ads (ignoring, for one thing, the fact that advertising abundance — championed by Google — lowers advertising prices and takes from newspapers the pricing power they once had). “The fundamental challenge facing newspapers is to increase the time people spend on their content,” Varian says. “More time reading the newspaper online translates into more online ad revenue.”

I couldn’t disagree more. Pardon me for suggesting to a Googler that we would be better off asking, what would Google do?

Google reinvented the advertising model, moving past attention as a proxy for intent (“if they see my ad I can convince them to buy my product”) and placement as a substitute for relevance (“men read the sports section and men buy tires, ergo we will advertise our tires in the sports section”). Google also killed the beloved myth of mass media that supported it for a century: All readers see all ads so we charge all advertisers for all readers. Google understands that users have variable value that is increased the closer it can get to delivering relevance and intuiting intent through signals — search, location, context, behavior as well as consuming content — which come from having a relationship of mutual value with the user.

The last thing newspapers should do is continue to try to shovel their old relationships, forms, and models into a new reality. No, don’t just sell space for messages to advertisers (for they’ll soon wake up and realize the pointlessness of the exercise). Don’t try to recreate old forms in new devices like tablets. Don’t measure the value of relationship as page views or time spent. Don’t think your primary value is manufacturing content that you then try to sell.

Newspapers and other former media outlets should become — as Google is — services that still inform — that is their core value — but now can use their own signals to learn about and return relevance to people as individuals and communities rather than masses, thus deriving greater value in the transaction.

For example, through my use of its Maps, Google knows where I live and work. My local newspaper doesn’t. When I ask for “pizza” in search, Google doesn’t give me a hundred archived articles with the word “pizza” in them but gives me the nearest pizza (soon, I hope, the best pizza, the pizza I’d most likely enjoy, the pizza my friends like with ever crisper relevance … and crusts). If my newspaper knew where I lived and worked — if it gave me reason to reveal that — it could target content to me the way it already tries to target ads. Why does *every* newspaper site still treat its home page as a one-size-fits-all print page when it could prioritize news that might be more relevant to me?

The reason: because newspapers still believe in the myth of mass media; they want to hope that with enough time you will look at all the pages they make and all the ads on them. That is the old attention-based media model Varian still recommends. This is also why newspapers continue to sell advertisers space for messages when instead they should be helping those merchants build better relationships with customers. But first, newspapers have to learn how to build relationships themselves.

That is the lesson Google teaches us. That is the new media market Google, more than anyone, created.

Jeff’s Post problem

One issue I’m surprised I haven’t seen discussed regarding Jeff Bezos’ acquisition of The Washington Post is what his tenure will mean to local advertisers.

They don’t like him. He’s helping putting them out of business.

Haven’t you seen: retail is in the tank. Stores have become showrooms for Amazon’s sales. Looking at the golf club? Go to the pro shop and try it out and learn about it and get advice about it, then go to Amazon and buy it for a better price.

Amazon is going into local markets with experiments in same-day delivery. He will do that in competition with local merchants.

eBay, on the other hand, says it will serve local merchants and help them with same-day delivery and online sales. Google is looking to test same-day local delivery and I would imagine it, too, would work with local businesses, who are its advertisers as well.

The New Republic wondered whether Bezos wants The Washington Post’s delivery trucks. I doubt that. Though as I remember, the Post was one of the first papers in the country to shift from large-scale delivery to small-scale (trucks to station wagons), the system is still not set up to do what a UPS truck does.

So how will Bezos finesse this? He’s not big on finesse, Jeff. He could come and find ways to reassure local advertisers. He could involve them in his local delivery scheme, just as he handed over his sales and technology platforms to more merchants. He could shrug and not worry about retail advertising since he’s killing retail anyway.

As with all speculation about the Bezos era in journalism, we’ll just have to wait and wonder.

Lessons from Waze for media

Screenshot 2013-06-11 at 4.30.34 PMNow that I’ve written my commuter’s paean to Waze, allow me to get a bit journowonky now and examine some of the lessons newspapers should learn from the success of the service:

1. Waze built a platform that lets the public share what it knows without the need for gatekeepers or mediators — that is, media. That’s how it keeps content costs at a minimum and scales around the world.

2. Waze does that first by automatically using the technology in our pockets to — gasp! — track us live so it can tell how fast we are going and thus where the traffic jams are. And we happily allow that because of the return we get — freedom from traffic jams and faster routes to where we’re going.

3. Waze does that next by easily enabling commuters to share alerts — traffic, stalled car, traffic-light camera, police, hazard, etc — ahead. It also lets commuters edit each others’ alerts (“that stalled car is gone now”).

4. Waze rewards users who contribute more information to the community — note I said to the community, not to Waze — by giving them recognition and greater access to Waze staff, which only improves Waze’s service more quickly.

5. Waze lets users record their own frequent destinations — work, home, school, and so on — so they can easily navigate there.

6. This means that Google as Waze’s new owner will now reliably know where we live, work, and go to school, shop, and so on. We will happily tell Waze/Google this so we get all of Waze’s and Google’s services. Google will be able to give us more relevant content and advertising. We will in turn get less noise. Everybody happy now?

How could, say, a local newspaper company learn from this?

1. Use platforms that enable your communities to share what they know with each other and without you getting in the way.

2. Add value to that with functionality, help, effort (but not articles).

3. If you knew where users lived and worked and went to school — small data, not big data — you could start by giving them more relevant content from what you already have.

4. You could give them more relevant advertising — “going to the store again? here are some deals for you!” — increasing their value as a customer by leaps and dollars.

5. You could learn where you should spend your resources — “gee, we didn’t know we had a lot of people who worked up there, so perhaps we should start covering that town or even that company.”

When I say that news should be a service and that the news industry should be a relationship business and that we should act as platforms for our users and that small data about people can lead to more relevance and greater value … this is what I mean.

So now go ask Waze how to get there. Oops. Too late. Google got there first. Again.

Why The Daily is counting its days

The Guardian asked for my take on the death of The Daily. Here it is (with links that fell out on the way to London):

On Twitter, I’ve already been accused of schadenfreude over the death of News Corp.’s soon-to-die, pay-walled, tablet-only, once-a-day news venture called The Daily.

Not so. I’d have loved to have seen an online-only news service make it. But The Daily was, in my view, doomed from the start because of all the adjectival modifiers listed above.

First, the pay wall: News Corp. proprietor Rupert Murdoch has elevated charging for content to a religion. He says people should pay for his products (though I’ve never seen a successful business plan in a competitive market built on the verb “should”). He turned his Times from an internet presence of note into a footnote because he insisted upon putting it behind a wall.

With The Daily, Murdoch wanted to prove that he could start and we would buy a news product online. But he forgot a key lesson of selling subscriptions, one he surely learned when he owned magazines: that it takes a lot of marketing expense to acquire customers. It costs money to charge money.

When it started, I calculated that The Daily would need to net at least 750,000 subscriptions — 1 million when accounting for cancellations (aka “churn”) — to break even on an operating basis, what with a share of sales going to Apple on the iPad. Murdoch promised he would sell “millions.” In the end, it reached 100,000 subscribers, not nearly enough to compensate for a reported $30 million in development cost and $500,000 per week burn rate.

Mind you, I am not against charging for content. I will happily sell you my books. But The Daily wasn’t much worth paying for. Though it looked quite nice and its content was competent, that content was all-in-all just news and news is a commodity available for free in many other places. Larry Kramer, publisher of the much-larger USA Today, just said with admirable candor that he can’t put up a pay wall online because his product “isn’t unique enough.” Ditto The Daily.

Next, The Daily started as an iPad-only offering. Eventually, it branched out to the iPhone and to Android tablets (but only for Verizon telephone customers) and the Kindle. I hope that other publishers learn from this misguided “mobile” strategy. Too many have dreamed that the tablet would return to them the control over brand, experience, and business model that the web and its links took from them. Too many think they need to create new products just for so-called mobile devices (though we actually often use them when stationary, at desk or on couch).

No, a news organization should have a strategy built around relationships with individuals, serving them wherever, whenever, and on whatever platform they like. My needs don’t change just because the device in my hands does.

Finally, there was the absolutely befuddling decision to make The Daily daily. News was only ever daily because it was forced into that limitation by the means of production and distribution of print. The internet freed us from those shackles of time. Why put them on again? Nostalgia?

In the breakup of News Corp. that is the real outcome of the London news scandals and the Leveson inquiry, the new company had to start cleaning up its books, getting rid of money-losing ventures. The Daily was the first to go. But there are more in that stable, starting with the New York Post, which loses, by one account, $110 million a year just to give Murdoch what he has long called his “bully pulpit.” Now he has a bully pulpit with almost four times more subscribers for free on Twitter. Can The Post’s obit be far behind?

The news we can afford

I want to see news organizations grow again. But first, they must finish shrinking. They must decide what they can afford to be.

That is what is happening with Advance reducing publication schedules and resources in New Orleans and other of its markets. That is what happening with Journal Register as it declares bankruptcy to restructure its liabilities given present reality. I recommend you read Josh Benton’s and Rick Edmonds’ analyses of this latest business move.

Now please take what I say here not just with a grain of salt but with a salt lick as I advise both Journal Register and Advance, where I also worked for a dozen years. I was not part of these decisions. But I support them because I want to see newspaper companies find their water level of sustainability so they can again invest in the future.

Of course, there is not one answer to the question of what they can afford. In his statement on Journal Register’s move, CEO John Paton said that legacy costs undertaken under different circumstances are now unsustainable. Bankruptcy presents an opportunity to renegotiate many of those costs, including leases, contracts, and pensions.

These are hard decisions with difficult consequences for many people. But not addressing the issue will only turn out worse, squandering dollars every day the tough decisions are put off.

After too many years in denial, we all know now that newspapers, no longer monopolies and having lost their pricing power in the face of abundant competition, must be smaller if they have any hope to survive; there is no magic bullet that will set things “right” and return the business to what it was. They must find new efficiencies through consolidation (see Digital First’s Project Thunderdome and other companies bringing together shared work), collaboration (with the community and a larger news ecosystem), and specialization (do what you do best — in the case of local newspapers, that is being local — and link to the rest). They must reconsider their business models, looking for new opportunities, and also their relationships with the public.

I do believe that newspapers, rethought, can be sustainable — that is, profitable. The first step is to make hard financial decisions such as the ones discussed here. The next is to make the transition to digital, to put digital first, to become sustainable digital enterprises.

But all that gets us is survival. Then comes the real work: rethinking what a newspaper is, what its relationship with its community can be, where it adds value and how it may then — and only then — extract value. That is why I also spend my time trying to challenge assumptions about the forms, relationships, and models of news, asking unpopular questions such as whether we should even consider ourselves a content business. That is why I teach entrepreneurial journalism: to empower students to start new businesses based on new visions without the drag of legacy assumptions and obligations. But I do believe that newspaper companies can also find their sustainable future. That’s why I work with them as well. I want to see them survive and once again prosper, innovate, and grow.

None of this is easy. Much of it is unpleasant. But it is necessary.

The responsibilities and opportunities of the platform

Technology companies and news organizations have a lot to learn from each other about the responsibilities of running platforms.

I have been arguing that news organizations should reimagine and rebuild themselves as platforms for their communities, enabling people to share what they know and adding journalistic value to that. As such, they should study technology companies.

But technology companies also need to learn lessons from news organizations about the perils of violating trust and the need to establish principles to work by. That, of course, is a topic of conversation these days thanks to Twitter’s favoring a sponsor when it killed journalist Guy Adams’ account (later reinstated under pressure) and its abandonment of the developers who made Twitter what it is today.

One question that hangs over this discussion is advertising and whether it is possible to maintain trust when taking sponsors’ dollars — see efforts to start app.net as a user-supported Twitter; see Seth Godin suggesting just that; see, also, discussion about ad-supported NBC ill-serving Olympics fans vs. the viewer-support BBC super-serving them. I have not given up on advertising support because we can’t afford do; without it, my business, news, would implode and we’d all end up with less and more expensive media and services. So we’d better hope companies getting advertiser support learn how to maintain their integrity.

In the discussion on Twitter about Twitter’s failings in the Adams affair, Anil Dash suggested drafting the policy Twitter should adapt. Even I wouldn’t be so presumptuous. But I would like to see a discussion — not just for technology companies but also for media companies and governments and universities of institutions in many shapes — of the responsibilities that come with providing a platform.

For the opportunities and benefits of building that platform are many: Your users will distribute you. Developers will build and improve you. You can reach critical mass quickly and inexpensively. As vertically integrated firms are replaced by ecosystems — platforms, entrepreneurial endeavors, and networks — huge value falls to the platforms. It’s worthwhile being a platform.

But if you lose trust, you lose users, and you lose everything. So that leads to a first principle:

Users come first. A platform without users is nothing. That is why was wrong for Twitter to put a sponsor ahead of users. That is why Twitter is right to fight efforts to hand over data about users to government. That is why newspapers built church/state walls to try to protect their integrity against accusations of sponsor influence. That is why Yahoo was wrong to hand over an email user to Chinese authorities; who in China would ever use it again? Screw your users, screw yourself.

I believe the true mark of a platform is that users take it over and use it in ways the creators never imagined. Twitter didn’t know it would become a platform for communication and news. Craigslist wasn’t designed for disaster relief. That leads to another principle:

A platform is defined by its users. In other words: Hand over control to your users. Give them power. Design in flexibility. That’s not easy for companies to do.

But, of course, it’s not just users who make a platform what it is. It’s developers and other collaborators. In the case of Twitter, developers created the applications that let us use it on our phones and desktops — until Twitter decided it would rather control that. If I were a developer [oh, if only] I’d be gun-shy about building atop such a platform now. Similarly, if a news organization becomes a platform for its community to share information and for others to build atop it, then it has to keep in sight their interests and protect them. So:

Platforms collaborate. Platforms have APIs. They reveal the keys to the kingdom so others can work with them and atop them. Are they open-source? Not necessarily. Though making its underlying platform open is what made WordPress such a success.

In the discussion about Adams and Twitter, some said that Twitter is a business and thus cannot be a platform for free speech. I disagree. It is a platform for speech. And if that speech is not free, then it’s no platform at all. Speech is its business.

When a platform is a business, it becomes all the more important for it to subscribe to principles so it can be relied upon. Of course, the platform needs to make money. It needs to control certain aspects of its product and business. I don’t think anyone would argue with that. But if it keeps shifting that business so users and collaborators feel at risk, then in the long-run, it won’t work as a business.

Platforms need principles.

All this can, of course, be summed up in a single, simple principle: Don’t be evil. That’s why Google has that principle: because it’s good business; because if it is evil, it’s users — we — can call it out quickly and loudly and desert it. As Umair Haque says, when your users can talk about you, the cost of doing evil rises.

There are other behaviors of platforms that aren’t so much principles as virtues.

A good platform is transparent. Black boxes breed distrust.

A good platform enables portability. Knowing I can take my stuff and leave reduces the risk of staying.

A good platform is reliable. Oh, that.

What else?

The (not so) daily news

I have more conflicts than a Louisiana politician when it comes to the news of the New Orleans Times-Picayune reducing its frequency from seven to three days a week: I was in charge of digital content in the parent-company division that started its sister site, NOLA.com; I worked on Advance’s Ann Arbor project; I was involved in the early stage of its Michigan project; and I’m working with Advance on another effort — though I am privy to nothing about New Orleans today. So take anything I say with a grain of salt the size of the Gulf of Mexico…. Still, I can’t not comment on the news.

Mathew Ingram and Ken Doctor will take you through the economic reality at work in New Orleans and Advance’s Alabama and Michigan markets: The cost of printing seven days a week is becoming unsustainable. It’s still profitable to print two or three days a week, not because those are the only days when news happens but because newspapers are still in the distribution business and those are the most lucrative — still-lucrative — days to distribute inserted and printed ads.

That could change again when and if (a) newspaper circulation falls below the critical mass needed to distribute coupons and circulars and (b) local advertisers become more savvy and finally move online themselves. Then printing and distributing paper will become even less profitable, even less sustainable. That’s when print could — mind you, I didn’t say “will” as I’m not predicting the form’s demise; I repeat, “could” — disappear.

By then, newspapers had better be ready. That is, they had better have become digital companies. That is the essence of the digital first strategy: become sustainable, successful online companies that can survive without (or with) print. And grow again from there.

That’s the process we’re witnessing here — that and a continuing cutback brought on by falling circulation and advertising revenue; not a new story, of course. This is a most difficult transition.

Guardian editor-in-chief Alan Rusbridger has been talking about this transition for years. Back in 2005, he talked about buying the last presses. Later, he talked about trying to move his newspaper over what he called the green blob — the great unknown that stands between declining print and ascending digital. That is the job of the editor and publisher today: to make that transition. Shifting content, staff, readers, and advertisers from print to digital is necessary. Improving digital is necessary. And rethinking print is necessary.

If profitable, I think there could continue to be a role for print. In the Guardian’s case, I’d propose that it follow the very successful model of Die Zeit in Germany and publish once a week as the Weekend Observer, turning the Guardian into an online-only, worldwide brand, which it pretty much already is. See, I’m not against print.

But we have to make print beside the point. Of course, it’s not the manufacturing and distribution we should care about preserving and advancing. It’s the journalism and service. It’s not the past we want to protect. It’s the future.

You can argue with the strategy undertaken by any newspaper company undergoing this difficult transition. But better a transition than the alternative.

LATER: Postmedia in Canada just announced that it, too, is cutting frequency, ending Sunday papers (which are thin like Saturday papers in the U.S.) in Calgary, Edmonton, and Ottawa. The National Post is suspending Mondays in the summer and looking at its schedule. The company is moving page production to a shared facility in Hamilton, Ont. Disclosure: I’m on the digital advisory board for Postmedia.