How 4 newspaper organizations created new revenue streams
U.S. newspaper organizations are shedding print ad revenue far faster than they can generate replacement dollars, reported Pew's Project for Excellence in Journalism a year ago, and those organizations remain stubbornly resistant to innovation -- except for a few outliers. For a follow-up, PEJ has just released a study on four such outliers that are making much faster revenue progress than the norm.
One of those cases, Clark Gilbert's Mormon-owned Deseret News, will be familiar to those who follow the industry's transformation efforts. The three others provide fresh looks and results:
- ad sales reorganization at the Naples (Fla.) Daily News;
- a digital marketing agency homegrown at the Santa Rosa, Calif. Press Democrat;
- and a barrage of experiments at the tiny Columbia (Tenn.) Daily Herald.
Mark Jurkowitz, principal author of "Newspapers Turning Ideas into Dollars," found a common thread in the success stories: strong, barrier-busting leadership and a vision of change much more sweeping than the tweaks and incremental improvements that fit the industry's comfort zone.
The case studies
In Naples, Publisher Dave Neill set out to restructure and transform the sales force at the E.W. Scripps paper. The heart of the plan, breaking fully from the good old days of serving advertisers by geographic "territories," was to make the sales teams specialists by category like health care or fashion.
That allows what Neill calls a "more sophisticated" sales conversation in which the representative is likely to understand the customer's business and needs rather than just pushing what the paper has to offer generically. Other elements of the Daily News plan were to gear up the sort of recognition incentives (like quarterly awards parties) that sales people love and to integrate new digital sales with a continuing emphasis on print.
Press Democrat Publisher Bruce Kyse, in Santa Rosa, created a conspicuous "Media Lab" space off the paper's lobby, to develop and demonstrate digital marketing services for local businesses. In my observation, this has fast become one of the industry's most promising new revenue opportunities. Companies know they need to build out social media capacity and drive traffic to their sites with search engine optimization. They need help, and the local news organization can provide it.
By acting early, Kyse has been pitching his local businesses when demand is at its hottest; latecomers may find someone else got there first. Also, by developing the Media Lab in-house, the Press Democrat gets to keep more of the proceeds than it would contracting with a big national vendor like Hearst's popular Local Edge.
Also Kyse has grown the lab, which he expects to account eventually for 40 percent of digital revenues, in a year during which the Press Democrat was sold twice -- by the New York Times Co. to Halifax Media Holdings and by Halifax to a local group.
In some ways the most striking of the studies is of publisher Mark Palmer's Daily Herald in Columbia. Based in a small city of 35,000, 50 miles south of Nashville, the paper, owned by Stephens Media, has a circulation of 12,800, with a staff of just 13 people in the newsroom and 8 in sales.
Nonetheless, Palmer has charged ahead with a host of experiments. The paper is about a third of the way to replacing $300,000 in (gone forever) print advertising, he said, and by the end of this year expects to have grown digital from close to nothing at the beginning of 2011 to 15 percent of revenues.
Among the ventures that would seem unlikely at such a small operation are an online ticket sales program, a steady stream of online contests to seed reader contributions and a just-launched men's lifestyle magazine.
Deseret qualifies as a twice-told tale, especially as Gilbert continues to present lessons learned at forums like the American Press Institute/Poynter Transformation Tour. But the Pew study rounds up fresh detail and extracts what I think is the main point: Though a special case in some respects, Deseret shows what can result from detailed study of strengths, weaknesses and opportunities, together with deep cultural change that may take months or years to complete.
Gilbert's innovations included bringing in digital ad sales specialists and other executives from outside the industry, and directing print and online coverage to family values topics lightly covered elsewhere but of particular interest to his Mormon constituency. He also built a new business, Deseret Connect, to curate contributions from citizen writers (i.e. mostly free) on the same content themes.
The common threads
Santa Rosa, at the northern tip of Wine Country, and Naples, a destination for wealthy Florida retirees, were two of the strongest growth markets in the country at the turn of the century, and remain areas of opportunity. The digital age allows Deseret to reach beyond its Salt Lake City home to a community of Mormons nationwide and worldwide.
In addition, several of the publishers bring strong local knowledge with some other special and relevant experience. The Press Democrat's Kyse, for instance, had several decades at the Santa Rosa paper before five years working on innovation initiatives for the New York Times Regional Media Group in Tampa, and then returning to California in 2010. Gilbert was a business school professor whose work focused on the industry's tepid response to disruptive change and was tapped to put theory into practice at the church's media empire.
That is not to minimize the ingenuity and persistence the PEJ study found at each of the four organizations. There is a wealth of detail worth reading in the 34-page report that I only briefly summarized here.
The report summarizes the takeaways for other news organizations:
Manage the digital and legacy businesses separately.
Keep developing niche editorial products.
Decentralize decision-making power.
Establish the digital agency as an independent business.
Rebuild your editorial philosophy around what you do best.
Don't give up on print.
I don't think the report defines a single best model for transformation that can be accomplished in any market. The Naples and Santa Rosa cases center on finding one big thing to change, then undertaking hard and multi-layered work to bring it off. Columbia is more a case of trying a series of unrelated experiments in succession.
The Naples sales specialist reorganization is an idea worth stealing but might not fit so well in a spread-out metropolitan area like Philadelphia or Boston. In fact, none of this round of success stories is at a big metro, perhaps underscoring the truism that their challenges are the most difficult.
Case studies, always a staple of trade group conventions and publications, are more in demand than ever in the current climate. Newspaper executives are eager to get beyond generalities to the architecture of what is working.
Nonetheless, a good case study is tricky to pull off. Last year's success may hit a bump this year. Key executives move on. Some with a story to share choose not to for competitive reasons. Even the leaders cooperating in the Pew study held back some key financial details. These initiatives are new enough that a few may yet prove meteors rather than settled exemplars.
Still I credit my Pew colleagues with significantly advancing the conversation on new revenue options and providing a modest burst of optimism that industry reinvention is not a lost cause. Not that scaling up such change will be easy.
The report's overview concludes:
One common theme that emerges from the publishers featured in this report is that there is still too much innate caution and ambivalence in an industry that must take significant risks to build a sustainable revenue model.
"We need to be fearless, and we need to operate in that mode," says Naples Daily News publisher Dave Neill. "And we don’t."
Disclosure: Edmonds is co-author of the newspaper chapter for PEJ's State of the News Media annual report, whose 10th edition will be published in March. He also provided a few small suggestions as this research was being prepared.