Rick Edmonds

Researcher and writer for Poynter Institute on business and journalism issues. Co author, State of the News Media 2006. ExSP Times and Phil Inquirer


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Capital flows like water to media companies (of a certain kind)

December has started with a bang-up ten days financially for some leading American media companies.

Vox announced it has raised another $46.5 million in a new round of venture capital bringing its total valuation to $385 million. CEO Jim Bankoff, in a internal memo he made public, announced ambitious expansion plans for 2015.

Outbrain, a content recommendation/native advertising company, indicated it is tentatively planing an initial public offering early next year, with a target valuation of $1 billion.  (Outbrain, like its biggest competitor Taboola, is Israeli in origin but has moved headquarters to New York and plans to be listed on NASDAQ).

Meanwhile expanding Buzzfeed’s growth continues and its investor valuation stands at $850 million.  Editor Ben Smith was lecturing in Australia late last week as the site announced it has hired a star from Wired to be its Silicon Valley bureau chief and is forming a health and science desk.

Shane Smith, founder and CEO of VICE. (John Minchillo/AP Images for PromaxBDA)

Shane Smith, founder and CEO of VICE. (John Minchillo/AP Images for PromaxBDA)

And in case you missed it, Vice attracted nearly $500 million in new venture capital funding in September and now is valued at $2.5 billion. Founder and CEO Shane Smith confirmed that he  wants to try again to buy and repurpose the broken-down HLN franchise from CNN/Time Warner. (CNN chief Jeff Zucker said HLN was not for sale — especially to Smith.

Vice also got a kiss of legitimacy December 1 when the Knight Foundation awarded it an Innovation Prize and partnered with the site and CUNY to create a $500,000 initiative to foster innovative story-telling internationally.

I could go on, but you get the drift.

None of these companies have the asset — or is it a liability — of a legacy operation.  Likewise Outbrain has come from nowhere to being a major player in the sponsored content boom in part because it has no need to modernize a traditional ad agency structure.

The capital markets’ infatuation with these newcomers takes place as tough times for legacy companies just keep on coming. The New York Times did a buyout deal  last week with 60-plus news staffers and will add some layoffs to reach a staff reduction goal of 100.  The same has been happening over the last few months at Poynter’s Tampa Bay Times.

A reporter for the Sacramento Business Journal called me recently asking whether McClatchy can survive as a family-controlled public company.  I think so — but it’s not an unreasonable question.

Venture capital valuations are somewhat different than the market capitalization of an existing public company.  When and if a VC-backed company goes public, it may or may not be worth as much as its investors hope.

With that qualifier, check out how the market capitalizations of some familiar legacy companies (as calculated by Yahoo Finance) compare to the figures mentioned at the top of this post:

*McClatchy — $337 million (considerably less than Vox).

*Tribune Publishing — $584 million (more than Vox, less than Buzzfeed).

*New York Times Co. — $1.93 billion (roughly twice Outbrain but not as big as Vice).

*Time Inc. — $2.55 billion (for now still a little more than Vice).

These numbers speak for themselves in terms of what investors favor in the media space. They also confirm the truism that short term revenue growth prospects matter much more to those placing bets with their capital than longevity or even profitability.

I would add two more short bits of commentary:

*Capitalism’s “creative destruction” dynamic works in part by accelerating the growth of promising new ventures while pulling investments out of fading older ones.  So you could say the money folks, as 2014 rolls to 2015, need no persuading that media transformation is in full gear.

*A small saving grace for newspaper companies as an investment is that a balanced portfolio (appealing also to many individual investors) includes profitable companies that pay a good dividend, even if share price may not move up quickly.  That’s the premise for the relaunch of GateHouse Media as New Media Investment Group, paying out about 5 percent on its current share price, and a likely strategy for other spinoff companies being formed like Gannett Publishing and Scripps’s Journal Media Group.

Unfortunately, as anyone from the boardroom to the back corner of the newsroom knows, it is not so easy to earn enough profits to pay a dividend while also making the needed big investments in new digital news products.  And the industry still has on its to-do list for next year (pardon if I’m repeating myself) achieving net revenue growth. Read more

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A look at 5 successful news partnerships

The Pew Research Center is out today with a new report seeking to define what differentiates effective and sustainable news partnerships from the many that launch with a splash and later quietly fizzle.

At Poynter Online, we regularly report on Pew’s prolific series of studies on digital behavior and news industry trends. There is a twist concerning this particular report, however. In collaboration with Pew Research editors, I wrote it.

So this post is mainly to say, if you are intrigued by the topic, take a look.

partner-site-300Our particular focus was to look at five case studies of collaborations that worked and had staying power. Each was, one way or another, many years in the making.

We were searching for business models and an X factor or two that can be of use as experiments in news partnering enjoy a resurgence. That’s a little different from the nitty-gritty of a single successful joint investigative project like the Dallas Morning News/KXAS-TV expose of poor treatment of wounded veterans, my colleague Al Tompkins ably dissected a week ago.

The reporting, writing and editing of the Pew Research report spread over nearly a year.  So I ended up talking at regular intervals with Steve Beatty, editor of The Lens in New Orleans, at a particularly challenging time for the plucky non-profit, which turns five this month..

The Lens went into 2014 faced with a budget shortfall and the need to cut staff. It explored a partnership with local WWNO public radio that was only a partial success. Now it is ending the year on a bright note with two collaborators agreeing to pay for its coverage and good prospects for a major operational grant from a national foundation.

I also became reacquainted with Laura Frank, who quixotically decided she would try to launch an independent, multimedia investigative unit when her employer, the Rocky Mountain News closed in February 2009.  Frank passed through Poynter early on as she planned the venture and has since built I-News from a one-person shop to a unit with a staff of 12.  In  early 2013, I-News became the news department for the PBS station in Denver and its statewide (Rocky Mountain PBS) network.

Quality, high-impact investigative work is the base for growth and win-win partnerships, but I learned from Beatty and Frank what’s even better:  choosing a big investigative topic that triggers community dialogue, sponsored forums and eventual action.

Each has done a showcase data-driven project with the title “Losing Ground” that fits those specs — though on two entirely different topics.  The I-News report was on how Colorado’s economic boom in recent years passed the state’s poorer, minority residents by. The Lens was more literal about “ground,” using mapping and aerial photos from collaborator ProPublica to show dramatic continuing erosion of Louisiana delta lands over decades.

A phrase I heard from nearly every principal in the collaborations was
“win-win.”  Legacy media outlets have come to recognize that they need more quality stories as business pressures have forced newsroom cuts. The old bragging rights standard of “we do it all ourselves” fades by the day — even at bastions like The New York Times and Washington Post.

New non-profits, for their part, (and some forward-looking legacy operations too) critically need wider exposure of their work to build a news brand.

That said, several of the successful collaborations are simple and informal.  Often no money changes hands; nor are there detailed contracts specifying who contributes exactly what.

The slow part is cultivating mutual trust, sometimes starting with small or partly flawed first tries that eventually blossom into bigger collaborations.

In picking cases, we avoided extremely well-chronicled successes like ProPublica, the Texas Tribune, MinnPost and Voice of San Diego, but four of the five have received attention from outlets like Nieman Labs or CJR or in several earlier Knight Foundation and Pew reports.

The one exception:  McClatchy news chief Anders Gyllenhaal (an incoming member of Poynter’s National Advisory Board) pointed me to an unusual transnational investigative collaboration between the Toronto Star and the Spanish-language El Nuevo Herald of Miami.

What common interest could those two news organizations possibly have?  I could tell you, but I would rather again invite you to click to the full report and see. Read more

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Deception? Price gouging? Subscription scam? Top magazine titles won’t say a thing

In mid-October, I wrote about the New York Times offer to refund overpayments to customers who fell for an unauthorized third-party renewal solicitation. The Times also warned subscribers in print and via e-mail not to fall for the scam.

I noted that the same company had been blanketing magazine subscribers with these notices for years before broadening to newspapers as well in 2013 and 2014. I couldn’t immediately get a comment from magazines.

Three inquiries later, spokespersons for top publishers Time Inc. and Conde Nast are still stonewalling me. It’s the full Bill Cosby  — they won’t say a thing, not even what they charge for a renewal of Time or Vanity Fair.

From which I infer that they wink and take the money from the scammers (operating under various names but identifiable by a distinctive format and a White City, Oregon return address). Renewals or new subs are fulfilled, and unless a customer complains, it’s caveat emptor about being overcharged 15 percent or more.

Meredith Wagner of MPA, the magazine trade association. was a little more forthcoming,  replying by e-mail:

Renewal scams are a persistent problem with the potential to undermine the trust that consumers have in our industry. Needless to say, magazine media has taken a variety of steps to continuously publicize the issue to subscribers by aggressively posting educational material on their websites and in ads in print magazines. Additionally, customer service reps are informed and trained to work directly with impacted customers. As an industry that strives to meet the highest levels of customer satisfaction, we are committed to finding solutions that protect our customers and minimize these threats.

Rita Cohen, an MPA senior vice president/ legislative and regulatory policy, amplified in a phone conversation. The association is well aware of the problem and has sought to interest the FTC, U.S. Postal Service and several state attorneys generals in crafting a legal response — so far to no effect.  A renewed push in partnership with the Newspaper Association of America is under discussion.

One complication, Cohen added, is that it is sometimes hard to prove that the solicitations meet a legal definition of fraud rather than a clever form of sharp dealing.

Despite Cohen’s assurances, my sense is that industry concern over the scams is muted at best. In a Google Search, I could only find only The Nation and The Atlantic offering warnings and refunds as the Times did. Cohen and Wagner sent me a couple more examples from Guideposts and the Harvard Business Review.

Larger organizations may not communicate directly to subscribers, Cohen conceded, so as not to alarm the majority who have never received the notices. Cohen also noted that not all magazines are equally affected.

As an avid magazine reader, I receive a steady stream of the White City solicitations.  Here is how they work:

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The form looks vaguely like an invoice but isn’t. Disclosure language on the back says so.  And it’s not exactly a notice, but rather a solicitation.  And National Magazine Services is just a trade name — an independent agent that does not necessarily have any direct relationship to the publication offered.

The price is typically somewhat higher than buying directly from the company.  The difference in the two prices is the White City group’s take. In the case of Time, a direct renewal mailing from the company offered a year for $59.95 — $10 less than the White City price.

More fine print discloses that the “Notice of Renewal” can also be applied to ordering a new subscription.  Since new subscriptions are typically offered at a discount, the price gouging and White City take are that much greater.  The company recently offered me a year of People at $179.95 — a markup of 35.5 percent of People’s own blow-in card new subscriber offer of $116.07.

The magazine industry has probably set itself up for the White City scam, with a series of its own subscription practices, some dating back at least 50 years:

(1) Once you subscribe, the company almost immediately begins mailing a series of renewal offers. I have received several “expiration notices” this month for subscriptions that run to mid or late 2015.  So the White City notice might hit you on a day when your bank balance is healthy and you are in a mood to renew.

(2) Magazines regularly sell their subscriber lists, a nice additional revenue stream.  They likely would not sell to the White City organization, but a list broker might.

(3) Third-party sales are standard and deep-rooted. Publishers Clearing House, school fund-raising drives offering magazines, and young adults knocking on doors saying they are trying to earn  a scholarship or some other prize all date back to the 1960s. These are inferior sources of long-term subscribers for magazines, but they can juice up circulation totals.

(4) That’s important because a great many magazines offer a rate base to advertisers — a guaranteed number of copies distributed. If the magazine doesn’t make rate base number, they owe advertisers a refund or make-good free ads.

(5) Magazine publishers (and newspapers too) have been pushing self-renewing credit card subscriptions. Theoretically these plans are a convenience, but they also keep circulations numbers up by forcing customers to cancel rather than simply letting a term subscription lapse.

(6) Print subscription levels have fallen at many magazines.  Profitable full-price single copy sales at newsstands have fallen even more.  So defensive steps to keep numbers up may be more important than ever.

This confusing jumble of deals allows for some borderline tactics on the consumer end as well. My wife received a deeply discounted “educator’s rate” on The New Yorker for 20 years after she had left the profession for an investment banking career.  Some bargain hunters let introductory subscriptions lapse, then re-up a few months later, again at the reduced rate.

I would also acknowledge that smart publishers have their eye on the digital ball these days.,With the high stakes and huge challenge of digital transformation, they may understandably treat traditional print subscription practices as business as usual.

My bottom line: Magazine buyers should never respond to a White City solicitation, saving themselves money by dealing directly with the publishers.

But it wouldn’t hurt either for magazines to get with the era of transparency, follow the New York Times example and clean up their act.nbsp; Read more

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Other privacy concerns overshadow worries about media choices

A new Pew Research Center survey on Internet privacy concerns, released today, has a nugget of good news for organizations producing targeted website content and advertising.

It would overstate the finding to say Americans don’t care whether information is collected about the media they like and their purchasing habits. About a third of those surveyed do. But those two were literally last on a list of 16 concerns Pew sampled.

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My take is that the flurry of concern about blocking cookies, seemingly on the rise a couple of years ago, has been overtaken by more recent bigger-deal security breaches — specifically identity theft and government monitoring.

Lee Rainie, who directs the Pew’s Internet Project, said in a phone interview that interpretation is roughly right. “We didn’t ask people directly to compare one concern to another.  But it’s fair to say that over the last 18 months a host of things have come to the top of people’s agenda.  There is also a general sense that they are losing control (of their personal information).”

Digging a little more deeply in the Pew survey, there are suggestions that certain new media offerings might yet prove problematic.  For instance, a very clear majority, more than 80 percent, said that they were very sensitive or somewhat sensitive about providing access to “details of your physical location over a period of time.”

Any number of nascent news sites and advertising shopping apps aim to be more personalized by pinpointing where you are.  But in my experience the prevailing practice seems to be to ask permission to serve a location-appropriate ad.

A separate question asked whether users appreciated the “efficiency” of being served personalized content and advertising based on harvesting of data about their habit and preferences.  Only 36 percent said yes.  Rainie noted, however, that “people do like free, and a substantial number will volunteer to share information about themselves with a company if they get something free in return.”

I also asked Rainie whether people might be more upset if they realized how much data is being collected by dozens of third parties from news organizations sites and aggregators like Yahoo.  “Yes, they would,” he replied.  “It fits with the general sense of losing control.  They don’t really know what bits of data are being gathered and particularly how that data is being combined.”

Privacy policies (here’s one from the Tampa Bay Times site) are typically buried in small print at the bottom of a directory and baffling to read.  So requests to opt out of such tracing are rare.

Another question in the survey found that 61 percent of respondents said “they would like to do more” to protect the privacy of information online — though it is not clear what doing more would mean.

The survey did not explore in depth how people feel about social media giants like Facebook and Google compiling personal profiles of users. But Rainie said that the overall finding of newer, bigger privacy concerns applied.  Facebook’s privacy policies are complex and revised frequently, and the company has occasionally stumbled, as in a 2012 test revealed this year of serving a positive news feed to some users for experimental purposes.

But Facebook users, Rainie said, have come to accept being served ads based on their activity.  “That’s the deal,” for a free service millions find valuable.

The survey, compiled from interviews of 607 adults in January 2014, is described as Pew’s first attempt to study “privacy perceptions and behaviors.”  The research center plans “to examine this topic in depth and over an extended period of time.” Read more

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Tribune Publishing’s first earnings report: ‘We have much work to do’

With downbeat third quarter results already recorded by McClatchy and the New York Times Co., Tribune Publishing followed suit today in its first quarterly earnings report and conference call as a public company.

Tribune Publishing operated at roughly break even, recording a tiny net loss (less than a tenth of a percent) on revenues of $404 million. Advertising revenues were down 9.5 percent compared to the same quarter in 2013 when the company was a division of Tribune.

National advertising was a particular culprit, down 17.1 percent for the quarter and 12 percent year to date. And with papers in Los Angeles and Chicago, national is a bigger slice of the total for Tribune Publishing than at Gannett’s 80 community papers or McClatchy’s 29.

CEO Jack Griffin, in his initial conference call with analysts, noted weak movie advertising in Los Angeles and loss of a leading grocery chain in Chicago.  But he avoided making excuses.  “We are not satisfied with the company’s ad sales performance in the third quarter,” he said, and promised that a newly appointed chief revenue officer will be bringing changes.

Similarly, Griffin said that the company was not yet doing all it could to control costs.  “We have much work to do to get operating margins in line with our peers,” he said.

Specifically, Griffin said Tribune Publishing has barely started in offering digital marketing services to local businesses in its eight markets — an activity already yielding a significant  new revenue stream at Gannett and other companies.

On the positive side, Griffin noted Tribune Publishing is rolling out updated digital apps for all of its papers and is marketing them aggressively.  He characterized the company as being in the “early steps of (digital) business transformation” but said the pace will increase over the next year.

Tribune Publishing’s spinoff was completed Aug. 4, so the quarterly report included one month as a Tribune division and two as an independent company.  An assortment of transitional  expenses affected costs, so the company’s financial picture could change as those are completed.

Perhaps as a result, the call attracted relatively little analyst interest with only two posing questions, and it ended after just 35 minutes.

By contrast to the continued tepid newspaper results, two local broadcast companies today reported huge revenue gains for the quarter, buoyed by the political advertising boom.  Sinclair Broadcast Group, the largest, was up 48 percent year-to-year for the quarter; Gray Television’s was up 49.2 percent.

Tribune Publishing shares had been trading at a little under to $20 since the spinoff, but they were off nearly 20 percent — to $15.50 — in midday trading. Read more

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9 takeways from the New York Times Co. 3rd quarter earnings call

The New York Times building in this 2009 file photo. (AP Photo/Mark Lennihan)

The New York Times building in this 2009 file photo. (AP Photo/Mark Lennihan)

The New York Times Co. joined McClatchy yesterday in booking a rare operating loss for the third quarter, $9 million or about 2.5 percent on revenues of $364.7 million.

But the many moving parts of the Times digital transformation effort had a number of positives mixed in as well. Here are nine takeaways:

  1. About that loss. It was driven by high costs associated with staff reductions ($20 million) and investment in new products. The first will be a one-time blip. But the Times will be launching and relaunching new digital versions for some time to come. Each is expensive to develop and market, and significant new revenues may be slow in coming.
  2. Equilibrium in ad and circulation revenues. A 17 percent year-to-year gain in digital advertising for the quarter roughly offset a 5 percent decline in print. Similarly revenue from a net gain of 44,000 digital-only subscribers offset revenue losses for print and print-digital subscriptions. That’s an achievement. On the ad side, most of the industry is not yet growing digital and other revenue fast enough to cover print ad losses — and Times execs, in a conference call with analysts, concede that they don’t expect to do so again in the fourth quarter.
  3. Room to grow digital audience. The 44,000 quarter-to-quarter gain, the largest the company has recorded in several years, CEO Mark Thompson said, came mainly from new international customers and the “consumer education” sector (i.e. discounted subs to students). Thompson said that with improved marketing abroad he expects to continue growing that group of subscribers.
  4. Too expensive? The Times has raised print subscription prices this year, but the higher revenue per customer, chief financial officer James Follo said, was “outweighed by volume declines.” Daily print circulation was off 5.2 percent year-to-year and Sunday 3.2 percent. With the cost of a seven-day print subscription outside the New York metro area inching close to $1,000 a year, the Times may find renewals, new subscriptions (and newsstand copies) a tougher sell — especially as a range of much cheaper digital options are available.
  5. About those executive changes. Thompson had little to add to the announcement earlier this week that 26-year veteran Denise Warren was leaving the company after her chief digital officer job was split in two. But he did drop a hint, saying the Times would be looking for “an injection of specialized digital expertise.” Warren was an experienced and talented generalist who moved from overseeing advertising to the successful completion of the Times paywall strategy. But deeper digital roots may be needed in the executive suite for the next round of growth.
  6. Women in leadership. Warren’s is the third high-level executive departure in three years, following the firings of Thompson’s predecessor as CEO, Janet Robinson in December 2011, and Executive Editor Jill Abramson this May. The Times did add a woman in its top advertising job, hiring Meredith Kopit Levien away from Forbes in July 2013.
  7. Mobile advertising progress. Kopit Levien said mobile advertising is finally gaining some traction, accounting for about 10 percent of digital ad revenue. On the other hand it lags mobile audience which now accounts for more than 50 percent of the digital visits to Times’ sites and apps.
  8. Newsroom hiring. Thompson said he expected a modest wave of hiring following the well-publicized downsizing by 100 jobs. But as at many publications, the newly hired will have different job duties like audience development rather than traditional reporting and editing roles.
  9. Lower revenue per customer. Several questions and answers in the earnings conference call focused on so-called ARPU, jargon for average revenue per user (or unit). With the changing product mix, ARPU is falling at the Times, though Follo said by only about 5 percent year-to-year.

That spotlights a huge financial challenge for the industry. As business moves down the price chain (both ads and circulation) from print to desktop/laptop to smartphone, a company can end up running fast just to stay even in revenues. And that’s likely to persist for years not just quarters.

New York Times shares traded down about 5 percent at market close. Read more

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Why the newspaper industry is leaving six-month circulation reports behind

For several years now, the Alliance for Audited Media (AAM) has been reporting more and more detail on print and digital audience numbers for individual newspaper organizations while saying less and less about the industry as a whole.

That progression reaches its conclusion today with AAM’s final six-month report, to be supplanted by required quarterly updates and monthly digital numbers too if a company chooses.

Related: USA Today, WSJ, NYT top U.S. newspapers by circulation

The current six-month reporting format, now called Snapshot and previously FAS-FAX, has been in place since 1968, AAM spokeswoman Rachael Battista told me.  But audited newspapers have been compiling six-month averages, she added, since the organization (formerly the Audit Bureau of Circulations) was formed in 1914.

The changes aim for greater timeliness, AAM executive vice president Neal Lulofs said in a phone interview, and need regular adjustment as organizations explore varied and more complex audience strategies.

Along the way, a bottom-line of paid print circulation has give way to a measure of total circulation, including paid digital on several different platforms and some non-paid but “qualified” or “verified” print edition distribution.

The way circulation numbers had traditionally been reported in news stories was one casualty of the changes.  A total circulation projection for the industry, compared to previous years, would be highly imprecise now because of constant rule changes and some double-counting.  Similarly comparisons between newspapers or a Top 25 circulation list are close to meaningless, given different strategies and considerable leeway in what a given paper chooses to count.

Some examples:

  • USA Today now claims more than 4 million total circulation, more than double what it was reporting two years ago.  But that growth has been entirely generated by digital and Gannett’s decision to insert a section of USA Today news into its 35 largest regional papers. Digital and the insert section now account for roughly three quarters of USA Today’s circulation. Its paid print circulation in news racks and subscriptions is actually falling fast.
  • In recent years,  AAM instituted, then rescinded, a requirement that papers report a five-day weekday print average, though many still do voluntarily.  Advance’s Plain Dealer, in Cleveland, would rank in the Top 25 for the two weekdays it still home delivers a print edition — but that circulation cannot be intelligibly be compared to papers like the Boston Globe or Dallas Morning News with high-price subscriptions and seven-day a week delivery.

Some industry critics would characterize the jumble of new rules and new totals as a smoke-and-mirrors exercise to obscure newspapers’ continued losses of core paid print circulation. It is worth noting, however, that AAM’s board has a heavy representation of advertisers, who have agreed to the changes and typically care more about a detailed breakdown for a given newspaper organization than comparisons among them or industry totals.

Among the complications AAM has dealt with in recent years is the widespread adoption of Sunday Select products, bundles of inserts with little or no news content delivered to non-subscribers in certain zip codes.  These are now counted as “branded editions,” a designation that also applies to clusters of papers published under different titles owned by a single company, like Digital First’s Los Angeles and San Francisco Bay groups.

Also the majority of mid-sized and large papers have now instituted digital paywalls.  That creates a new group of digital-only subscribers and an even larger group who get digital access along with a print subscription. Some subscribers pay for and use desktop/laptop sites, tablet editions, smart-phone apps, replica digital editions and versions for Kindle or Nook devices.

Broadly AAM’s approach has been to measure each type of audience separately, accepting that some readers will be double or triple-counted.  To fix that confusion, it is currently experimenting with a Total Consumer Accounts metric, that would capture how many subscribers are paying for either a given platform or total access.

More changes in circulation practices and AAM rules are in the offing. The Washington Post has been offering free (for now) digital subscriptions to paid digital subscribers of regional papers and is reviving a national weekly print summary that papers may insert in their Sunday editions.

The New York Times counted both its new, slimmed down smartphone-targeted news product, NYT Now, and its international edition in the final AAM six-month report. Like the Post, the Times is starting a weekly print supplement for insert in regional papers.

Over time almost all papers except very small ones expect growth of digital readership while accepting continued erosion of paid print circulation.  A few — mainly papers owned by Advance publications — are trying to accelerate that movement by eliminating home delivery or print editions entirely several days a week.

John Murray, the Newspaper Association of America’s top circulation executive, has generated several studies analyzing trends that can be identified in the AAM numbers.  He may do so again, Murray wrote me in an e-mail, but had no immediate comment on what the final Snapshot report says about the industry. Read more

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Tough times at McClatchy — A quarterly loss and four assets sold

McClatchy closed the books today on a rocky third quarter with an earnings report yesterday showing a small loss of $2.6 million (1 percent on revenues of $277.6 million).

But CEO Pat Talimantes instead opened the conference call with analysts offering commentary on a much bigger issue, what he described as “important events that have sealed our financial flexibility.”

An unfriendly commentator might describe those “events” as a yard sale. So far in 2014, McClatchy has sold four separate and substantial assets. The largest of them, in a deal with Gannett closed the first week in October, was a 25.6 percent stake in Classified Ventures’ Cars.com, which will bring in $631.8 million before taxes, $406 million after.

Earlier this year McClatchy sold its stake in Apartments.com (another part of Classified Ventures)  It also sold its half of McClatchy/Tribune Information Services to Tribune and the Alaska Daily News to wealthy investor Alice Rogoff.  Those transactions generated another $181 million.

Talamantes said the cash infusion will go to investments in “digital transformation” and to pay down some high-interest (9 percent) debt.

On the operating side McClatchy had a year-to-year third quarter decline in advertising of 8.2 percent. Print advertising was down 11 percent. Though national advertising makes up only a small part of the total (about 7 percent), it was off 23.2 percent for the quarter compared to 2013, which was not a good year for national either.

Trends were better in audience revenues and remaining digital businesses, Talamantes said. With continuing diversification the company now gets 64 percent of revenue from categories other than print advertising.

Under questioning from analysts, Talamantes said McClatchy was unlikely to acquire any of the 76 Digital First papers or others up for sale. “We would rather invest n opportunities in our markets … (with) greater digital resources.”

McClatchy continues an affiliation agreement with Cars.com and Apartments.com., but going forward it will need to split some the proceeds of sales with the new owners, thus reducing the revenue it realizes.

Also, while McClatchy will continue to look for savings, he declined to predict that expenses will fall in t he fourth quarter or in early 2015. Digital transformation is essential, Talamantes said, “and that requires some investment.”

For the day, McClatchy shares were up slightly in mid-afternoon trading. However they have now lost roughly half their value from a 2014 high April 2 of $6.81. Other newspaper-only stocks including the New York Times Company (which has sold many non-core assets in recent years)  and Lee Communications have declined in value since the spring but not nearly so much. Read more

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The politics of reforming digital audience metrics — don’t underestimate the status quo

Long-time critics of imprecise unique visitor and page view metrics like me have had reason to cheer in recent months.

Both the Financial Times and Economist have started to offer advertisers the alternative of rates based on time spent rather than raw traffic numbers.

Chartbeat corrected a major flaw in existing measures of time spent, then got its system “accredited” by the influential Media Ratings Council. And Chartbeat CEO Tony Haile has been an effective evangelist in interviews and speeches for a more sophisticated way of looking at the attention of digital audiences.

That’s real progress. But plowing through dozens of articles and interviewing a few key sources, I have concluded that it is way early to declare victory and a new day dawning in digital measurement.

Oddly, although we like to think of the digital world as fast-moving and progressive, there is an established status quo for counting digital audiences backed by powerful vested interests who remain mostly happy with the unholy triad of uniques, page views and clickthroughs.

Start with the digital big guys — Facebook, Google, Yahoo, AOL. They lead the pack in traffic volume as conventionally measured. With targeting capabilities, they suck up a huge share of digital ad spend — even more now with the shift to smartphones than they already did in the desktop/laptop era.

Uniques and page views have also been good to the most popular start-up digital-only content providers — Huffington Post, BuzzFeed, Upworthy and more.

A more surprising source of resistance is a large slice of the advertising industry, as spotlighted in Ad Age’s excellent takeout a month ago, “Is Digital Advertising Ready to Ditch the Click?” It summarized the resistance this way.

“Agencies are among the entrenched interests,” said Benjamin Zeidler, director-research and analytics at digital-marketing agency Tenthwave. “They’re good at buying ads. They know how to do it. It’s probably scary to change the mode of how they do business — how they sell it, price and benchmark it.”

Also, as you may have heard, these are boom times for “programmatic buying” — eliminating the middle men of sales people and media planners and instead relying on algorithms to locate and book available inventory at the lowest possible rate. Thoughtful consideration of a range of attention metrics would only get in the way of that process.

Pay-per-click may be a relic of the early days of internet advertising. But the measure still makes sense for a certain kind of ad — trying to grab attention for the unfamiliar — like the pitches for Harry’s Razors or the Bellroy Skinny Wallet that stalk me as I move around the web.

A middle-of-the-road constituency may buy in intellectually to a case for more varied metrics, but as a practical business matter needs to keep selling the way most advertisers are buying.

That was the drift of a thoughtful rejoinder from News Corp.’s Raju Narisetti to an earlier screed of mine this spring denouncing uniques and page views. In his view, some of this kind of criticism comes from print traditionalists who would prefer not to give audience metrics a prominent role in news coverage decisions.

Narisetti made the additional good point that metrics like page views per visit or repeat visits per month, “variations on relatively conventional” measures, are a reasonable way to identify attention.

Trade groups like the Newspaper Association of America and the MPA magazine association also do versions of the straddle. Both have working groups exploring new metrics that may capture what they see as unique strengths of their digital offerings for advertisers. But neither is abandoning the standard measures just yet.

NAA, for instance, puts out regular releases on industry gains in uniques and page views. That has always been a charm of the two measures — between the steady movement of audience to digital platforms and the easy tricks available to inflate the numbers, a growth story is all but sure to emerge.

Another slightly different middle ground position fits auditing, rating and standards groups like the Alliance for Audited Media (formerly ABC), Nielsen and the Interactive Advertising Bureau. They naturally watch carefully for any new metric offerings in their core business. The IAB even has instigated important reform with work showing that the majority of “impressions” as measured a few years ago were not even seen (because they did not load fast enough or were too low on a screen page).

But the heart of the auditors’ business interest is that if something new is going to be measured, they want the contract to be the recognized verifier of those numbers. For example, Nielsen, facing some new disruptive competitors like Rentrak, announced Tuesday a collaboration with Adobe on a new set of measures it is developing for digital viewing of television shows and other video.

I also need to concede that the reformers have a self-serving agenda of their own. The Economist and Financial Times have strong paywalls, dedicated high-demographic readers but relatively modest total audience numbers. So it is to their advantage to shift the discussion with marketers to time spent engaged with their quality content and accompanying ad messages.

Chartbeat and CEO Haile have made a great case for the flaws in traditional measures and the logic of shifting to time and attention (which are finite) from “impressions” which seem to multiply endlessly and are often fleeting at best.

Chartbeat in its accredited “time spent” measure also did the good deed of correcting earlier stabs at such a metric — the loophole that counted a tab left open while the user shifted to something else conceivably for minutes or hours, as time on site. The Chartbeat refinement is that “time spent” is counted only if some indicator of viewer action registers every five seconds.

Haile also announced this week that he will make the company’s methodology public, aiming for even further credibility, accepting some risk of giving away competitive secrets to a knock-off vendor.

All that said, Chartbeat (and the similarly oriented Moat in the video sphere) are fighting the good fight for what they have to sell against established competitors who have built a good share of their business around uniques, page views and clicks.

More sophisticated digital agencies like Razorfish are also in the camp advocating a combination of metrics and strategies they provide that are missing from more perfunctory ad placement methods.

Where does this state of play leave legacy media or local digital startups in searching for a business model in the digital sun? Even the pioneers like the Financial Times are hedging their bets — their minutes viewed metric is being offered to a limited number of pilot advertisers in a beta test (going well according to Haile) while the majority of ads are still sold the old-fashioned way.

I would look for companies like the New York Times, with good raw traffic numbers, to also explore alternative attention metrics. And the trade associations are likely to at least give a nudge to consideration of a suite of metrics in measuring audience and pricing ads rather than just the conventional big three.

Jerry Hill, Gannett’s top audience executive and chairman of the newly formed NAA task force, told me the group is starting by surveying advertisers and agencies about “what they look at” now in evaluating effectiveness. The next step, he said would be to identify new measures that could be validated and “communicated out in simple terms.”

The MPA has launched what it calls the “360-degree brand audience report,” a monthly update by participating magazine sites that measures audience on multiple dimensions in a standardized format, including, for instance, referrals from five social media channels.

Mark Contreras, then of E.W. Scripps, led a crusade for better digital audience metrics during his term as NAA chairman in 2009. He hoped to establish a better “gold standard,” perhaps with a nudge from government, as happened with a move from chaotic claims from competing vendors measuring television audience in the 1950s and early 1960s to the agreed-upon methodology Nielsen and others now follow.

A gold standard does not appear in the cards right now, but movement to a more  varied and logical set of metrics has at least started. Contreras, now CEO of a small private TV and newspaper company, Calkins Media, told me in a phone interview that the logic remains unchanged: “For local papers, relying on a CPM (cost per thousand impressions) economy is not going to grow digital ad revenue as we need to.”

One alternative, Contreras added, is to “find niches and sell sponsorships” on roughly the same principle as “soap operas did in the 1950s,” aimed at stay-at-home housewives. Targeting is more important than a raw audience count for a sports site or a food site, and smartphone apps or specialized sites lend themselves to the “brought to you by…” format.

A number of the articles on this fall’s metrics developments stumbled upon the same summary phrase — “a step in the right direction.” That seems about right. The current system is unlikely to be turned on its head anytime soon.  But content providers who think they can offer sustained attention are beginning to get some tools to make the case to advertisers that they offer a superior value. Read more

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Gannett

Gannett earnings strong, but publishing revenues continue a steep slide

FILE - This July 14, 2010 file photo shows the Gannett headquarters in McLean, Va. Gannett Co. reported Overall company revenue growth of 15 percent. The media company said, Monday, Oct. 20, 2014. (AP Photo/Jacquelyn Martin, File)

FILE – This July 14, 2010 file photo shows the Gannett headquarters in McLean, Va. Gannett Co. reported Overall company revenue growth of 15 percent. The media company said, Monday, Oct. 20, 2014. (AP Photo/Jacquelyn Martin, File)

Embedded in otherwise excellent third quarter financial results reported today by Gannett are some sobering numbers on the continuing decline of revenues for its newspaper division.

U.S publishing ad revenues year-to-date are down 6.3 percent. At Gannett, that difference is more than made up by booming broadcast operations and freestanding digital ventures like CareerBuilder.  So revenues for the entire company are up a healthy 13.4 percent.

But I also consider USA Today and Gannett’s 81 community newspapers a reasonable proxy for the entire newspaper industry, which has stopped reporting its financial results quarterly.  If the rest of the year is roughly in line, newspapers are on track again in 2014 to lose $1 billion-plus in advertising.

That’s against a 2013 base of $17.30 billion industrywide in daily print advertising or $23.57 billion including all form of advertising, according to estimates by the Newspaper Association of America.

Gannett’s advertising decline to date (-6.3 percent) roughly matches the industry rate in 2013 (-6.5 percent).  So 2014 is proving no better than 2013.  Recent waves of staff cuts as companies budget for 2015 suggest that revenue growth is not expected next year either.

At Gannett (and probably most U.S. papers) circulation revenues were up slightly for the quarter and holding even for the year. The papers are now cycling past one-time revenue gains of roughly 5 percent in both 2012 and 2013 from introduction of paywalls and price increases for print and print + digital subscriptions.

Digital advertising is increasing, mostly at USA Today, but not nearly enough to offset the print losses.  And the continued growth of digital marketing services, sold to local businesses, is another plus.

In an earnings conference call, CEO Gracia Martore said another bright spot for the company has been the introduction of a section of USA Today news at its 35 largest papers.  Surveys show a positive reader response, she said, in some cities justifying another round of subscription price increases.

There is an echo of that strategy throughout the industry.  This weekend both The New York Times and Washington Post introduced print supplements which regional papers can include in their Sunday editions.  The Post had earlier made a free subscription to its digital report available to digital subscribers of partnering regional papers.

This arrangement allows papers to focus on their local news report, while offering subscribers, especially the older demographic that prefers print, a fuller report of national and international news, as was standard in better financial times.

Gannett’s broadcast revenues are up 97.2 percent year-to-date in large part because the operation is much larger after acquisition of Belo’s 20 stations. Retransmission fees paid by cable systems to local stations continue strong, up 61 percent for the quarter.

And political advertising is booming beyond expectations.  At the company’s Denver station — where Colorado has both a competitive governor’s and U.S. Senate race — this year’s revenues are even outpacing those of 2012, a presidential year, said Martore.

The different trajectories of broadcast and print have prompted Gannett to plan splitting those operations into two companies, a spinoff Martore said should be completed by mid-2015.

News Corp., Media General, Tribune and the Washington Post (now Graham Holdings) have already completed such a split and Scripps and Journal Communications plan one as part of a merger.

Other public newspaper companies, New York Times, McClatchy and Lee, do not own TV stations. So, soon there will be no combined print and broadcast operations among public companies, and some larger private companies like Hearst have separated TV and newspaper divisions as well.

In theory the print-only companies will benefit from management focused exclusively on their digital transformation, audience and advertising issues.  And they won’t be competing internally with fast-growing broadcast for capital.

All that, however, leaves the big question lingering — can the companies slow the print advertising losses, generate enough digital ad growth, increase circulation revenue and bring in enough income from new ventures to make up the difference. Read more

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