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


Anchorage Daily News homepage _ via Newseum.

Alaska newspaper sale: a second look at money, logic behind purchase

The news out of Anchorage Tuesday afternoon had one of those story lines too good to check — plucky little digital upstart Alaska Dispatch is buying the legacy Anchorage Daily News for $34 million from The McClatchy Co.

Well, yes. But several accounts, including those of The Associated Press and Reuters, neglected to mention that Alaska Dispatch owner Alice Rogoff is married to multi-billionaire David Rubenstein, co-founder of The Carlyle Group private equity firm. The Dispatch, in its thorough takeout on Rogoff, noted that she is wealthy in her own right. Her father was an engineer and businessman who invented a key component of GPS systems and cell phones.

So the financial story is that another rich person has bought another hometown paper.  A little twist was that the Anchorage Daily News was not for sale until Rogoff made her offer. McClatchy shares took a modest bump up the morning after the sale, indicating the stock market is good with this kind of sell-off. We seem to be entering a period where newspaper groups are quite willing to dispose of some titles as The New York Times Co. did with its regional newspapers and The Boston Globe.

Also, unlike other well-off buyers like John Henry in Boston, Doug Manchester in San Diego and Glen Taylor weeks ago in Minneapolis, Rogoff comes with her own news operation. It is a substantial one with about 30 employees overall and a newsroom of about 20.

The buyers said in their announcement that it will take at least six months to put the Dispatch and the Daily News websites together. That is only one of the intriguing questions as the acquisition goes forward. My email request to Rogoff asking for an interview was unanswered. So here are a few issues I think will be worth watching:

Who is in charge?

Rogoff will likely become publisher, and I am guessing that Tony Hopfinger, editor and the founder of Alaska Dispatch before she acquired a controlling interest, will be the top editor of the merged operation. But the pair will need to decide whether the print paper needs its own experienced leaders with daily print backgrounds on both the business and the news side.

A metro or a statewide focus?

Rogoff is a self-described enthusiast for the whole state, regularly flying her own plane to remote locations. The Dispatch has a section on Arctic Region news and Rogoff holds a yearly conference pulling in leaders of Iceland and other far north countries. Hopfinger has written extensively about Alaska’s rural indigenous population and was co-author of a book about Big Oil’s domination of the state.

That’s not to say the Daily News doesn’t have its own generous ration of state news like a series on Alaskans and alcohol. Ideally the merged operation will simply publish more good stuff.  But I do wonder how the eclectic interests of the Dispatch will mix with the daily grind of cops, courts and sports news of the Daily News.

Conflicts of interest?

Pando Daily’s David Sirota weighed in with a piece noting The Carlyle Group’s huge presence in Alaska. So will how will Rogoff’s paper and digital editions cover that story? If she is smart, and by all accounts she is, she will take pains not to mandate favorable coverage of her husband’s firm.

John Henry, for example, has taken pains to say that The Boston Globe’s exhaustive and often critical coverage of his Boston Red Sox should go on unchanged. That is probably an easier call, however, for a sports franchise than a big business with plenty of public entanglements.

My read is that Rogoff like others in the new wave of local owners is motivated by a passion for the place and the conviction that it deserves a first-rate, vital newspaper organization. But drawing the line between caring and pushing pet causes remains an occupational hazard for sole proprietors. Rogoff’s background as a journalist and publishing executive (assistant to former Washington Post CEO Don Graham and a decade as chief financial officer of U.S. News and World Report) gives her an edge in making the right calls.

Profits?

Wealthy owners can put investments both in journalism and in digital transformation ahead of high short-term profits in a way publicly-traded companies cannot. In announcing the acquisition, Rogoff said she will do just that.

Assuming the Daily News is like other McClatchy papers, it runs with a relatively high operating margin of 15 to 20 percent. Executives have been forthright in saying that they would prefer not to be making the cuts in news staff and news space to keep earnings up. But paying interest and reducing debt accumulated from the 2006 purchase of Knight Ridder has been essential to keeping the company out of bankruptcy and in family control.

Rogoff, the pilot, may want to embrace Washington Post owner Jeff Bezos’ felicitous phrase that he brings “financial runway.” She can reinvest as makes sense.

The $34 million sale is representative of the better prices being paid recently for newspapers, having improved from 3 times EBITDA (earnings before interest, taxes, depreciation and amortization) several years ago to 5 times EBITDA. It probably is a reasonable estimate that the Daily News is making an operating profit of around $5 million.

Print + digital or digital + print?

I subscribe to the view, articulated 18 months ago by Earl Wilkinson, executive director of the International News Media Association, that digital isn’t going to wipe out print anytime soon (or vice versa). We are in  a print+digital era, likely to last at least a decade.

The Dispatch/Daily News deal is entirely consistent with that principle. In this instance though, the digital side is challenged with making print work. Call it a digital + print venture. So maybe that initial story line, if misleading financially, is on target going forward. Add Rogoff’s play to the list of notable newspaper experiments (Deseret News, Digital First, Advance) in trying to achieve a business and journalism model with just the right balance.

Related: Online publication buys McClatchy’s Anchorage paper Read more

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Technology background, News text in perspective

What went wrong at Digital First Media — and what’s next?

The announced shutdown of Digital First Media’s national newsroom Wednesday and the probable sale of its 75 daily newspapers later this year is a significant jolt to those who believe a viable business model for rapid transformation of legacy operations is close at hand.

CEO John Paton’s explanation in his blog that the company has decided to dismantle Project Thunderdome “to go in a new direction” barely hints at the converging economic troubles.

Most basically, the very able editor Jim Brady (a Poynter National Advisory Board member) and his lieutenants were like a crack auto racing team trying to succeed in a highly competitive field driving Chevy Cobalts.

The two companies that were merged into Digital First, Journal Register and MediaNews, have both been through bankruptcies, Journal Register twice. Both had been under-invested for years in content management systems and other essential technology.

Steve Buttry, who was just months into “Project Unbolt” to hasten the break from print habits to digital, told me the four pilot papers for that project all had different CMSes, none of them especially good.

It is myth, embraced by digital future-of-news enthusiasts, that Web publishing is close to free. Paton seemed of that view early in his tenure when he asked newsrooms to use mainly free tools to put out their reports for a week.

But in his most recent manifesto/speech to the Online Publishers Association in January, he said he was looking for another $100 million to invest in the company’s digital activities on top of an earlier $100 million.

To weave quality mobile offerings into the often creaky pairing of print and Web content is an order of magnitude more expensive. And new lines of digital business like other startups come with the cost meter running well before the revenue kicks in.

The leading edge of the bad news was the shutdown of the Project Thunderdome news center, along with the departure of Brady and many other editors and reporters, 50-plus in all.

Several aspects of that operation struck me as odd. Digital First has plenty of company — Gannett, Tribune and others — in trying to centralize production and content generation of national news, freeing local staff (and print news hole) for local content.

But could a staff of 50 or so, however digitally adroit, really generate a range of material suitable for papers of very different sizes and aspirations, competitive with The Associated Press and other wire services?

And with cost considerations looming large, why would you put such a news center not just in Manhattan but half a block from Wall Street?

While not terribly detailed, Paton’s blog announcement said the company would be returning to a more decentralized treatment of national and international topics and let its scattered newspaper clusters do more of the picking of which digital initiatives to pursue. As for what’s next, Paton wrote that while the company will continue to invest in digital, “increasingly our focus will be in local where we are the news and information leader in our markets.”

Paton did not say that the company is being put up for sale. A thorough report from the reliable Ken Doctor said it would be coming soon. I did verify from two other informed sources (who declined to be quoted by name) that the properties have informally been shopped around since the start of this year.

That is not to say definitively that a formal sales process is in place. I am also not so sure that a buyer for the whole company or a set of buyers for its component parts will be found.

But the clear signal is that the money guys behind the company — hedge fund Alden Global Capital — are looking for an exit. Paton, as I have noted in earlier posts, spent several years as an investment banker himself. So he was a logical CEO for Alden, but probably under more pressure than he has let on to clear the firm’s financial hurdles in a timely fashion.

Ideally, investors in distressed businesses like Alden (a.k.a vulture funds) are looking to squeeze out costs, restructure strategically and sell at a profit after a few years.

However, if that scenario doesn’t work out, they are ready to bail out sooner and take their licks. Alden has done that once already, selling its controlling interest in Philadelphia newspapers to local investors at a 50 percent loss after just two years.

Opinion on the dramatic news was split. Many (including my colleague Jill Geisler) paid tribute to the innovative drive of the Thunderdome news operation and wished the talented staff well in finding new employment.

Buttry told me in a phone interview, “if you could succeed by newsrooms embracing digital challenges, we would be a success.” But at an earlier Brady-Buttry collaboration, the freestanding digital TBD site in Washington, the money guys lost patience before the original timetable for the experiment was close to completion.

There was a more negative undercurrent in the Twitter stream from some savvy digital operating executives.

Raju Narisetti, the outspoken senior vice president, strategy, for News Corp, wrote that the episode is “a classic case of media critics and Twitterati enamored by ‘digital first’ talk & not looking at economics.”

In subsequent posts, he called Digital First “a house of newspaper cards” and faulted Paton’s note on Thunderdome’s demise as “all PR euphemism.”

Rafat Ali, who founded the Paid Content site (an early venture covering digital businesses) and sold it at a premium price, blistered Paton in a tweet, writing “at some point people have to stop worshiping false prophets.” Ali has moved on to an ambitious new travel information site, Skift.com.

Neither Narisetti nor Ali could be called stick-in-the-mud legacy nostalgists, as Paton has frequently characterized his critics. But they clearly see more pep talk than substance in what he has done at Digital First.

I have e-mailed Paton, who replied that he was willing to talk time permitting. I will add his comments if I get them.

In earlier conversations, before the second Journal Register bankruptcy, Paton was eloquent on the difficulty of shedding legacy costs and the inevitability of continued print advertising losses.

You could blame the failure of Thunderdome and perhaps the rest of the Digital First experiment on those burdens. Or on a bet-the-store reliance on big digital advertising revenue gains that have yet to materialize. Or both.

In any case, the takeaway, is that the Paton way, peppered with encouraging but selective growth statistics, didn’t add up to those who have seen the books in their entirety. Read more

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Oregonian Digital Shift

Advance defends bonuses for reporters who post frequently and join comment chains

Advance’s quota and bonus system at The Oregonian came in for heavy criticism last week, prompting a rejoinder from the typically close-mouthed private company.

In a note to senior executives shared with Poynter, Advance Local’s President Randy Siegel says that each newsroom “decides how to structure its own bonus program and what qualitative and quantitative criteria will be used.” He adds “every one of our local plans is different and will doubtless evolve over time.”

Siegel also includes recommendations on rewards from “an internal committee of Advance journalists.” It puts quality at the top of the list, and says prolific digital posters should not be considered “exemplary” unless their work rates high on that dimension too.

The Oregonian is in the middle of a switch having reduced print delivery to four days a week and giving higher priority to breaking news on the Oregon Live website. Willamette Week obtained a leaked internal memo establishing targets for daily posts by reporters and asking them to be first commenters on their stories. 

That prompted critical coverage from The New York Tmes’ David Carr and others, summarized well by Nieman Lab’s Mark Coddington (second item). A number of commentators including Poynter’s Sam Kirkland noted that even hot digital-native sites like BuzzFeed and Upworthy do not offer incentives rewarding journalists for traffic or number of posts.

Siegel’s note underlines a bit of a paradox in Advance’s operation. The digital emphasis is a top-down initiative that has been phased in the last five years at most of the company’s 33 papers. But tradition at the company had been to let individual properties operate in a very decentralized way with infrequent visits from corporate bosses and only an informal budget.

The Advance pattern of reorganizing as a digital company and dismissing some senior print journalists in favor of new hires for the digital sites came last week to The (Newark, N.J.) Star-Ledger. Unlike most properties that have made the shift, Newark will have no reduction in print frequency or home delivery for now.

While almost no other companies have made as drastic a print-to-digital shift, Advance has argued that scaling up digital and reorienting newsrooms to primarily focus on generating content for the digital sites is necessary. Siegel’s note says moves to accelerate digital growth are necessary “to offset the inexorable decline of our newspaper circulation and ad revenue.”

The full text of the note follows: 

The Oregonian Media Group in Portland, one of eleven Advance Local digitally focused news and information companies, received a lot of attention recently for a document its editors used to describe a new year-end bonus program that rewards journalists who do good work and engage with readers in meaningful ways.

Since the Oregonian program has stirred up some debate, here is some additional context:

Each Advance Local newsroom decides how to structure its own bonus program and what qualitative and quantitative criteria will be used. There is no corporate plan and every one of our local plans is different and will undoubtedly evolve over time.

Several months ago, an internal committee of Advance journalists put together these thought-starters on how to reward individuals who are excellent performers:

• QUALITY: Quality is an embedded, core competency. Quality is bedrock. As content staff adopts new forms of engagement and storytelling, a focus on quality should guide all work, whether it is live reporting on breaking news, smart aggregation of social media activity or longer-term enterprise projects. Quality is baked into the objectives, so simply hitting a number will not be considered exemplary performance.
• PRODUCTIVITY: How often does the employee post? And how often should that employee be posting? Those two questions begin a process of determining a productivity goal. A couple important points to consider:
» “Post” does not mean traditional inverted pyramid story. A post can be a video, an aggregation of links on a beat, etc.
» Consider how to set posting goals. The recommendation is to assign posting totals that relate to the expected productivity for a beat. They need a different posting goal. Peer groups and like beats – public safety, Tier 1 sports, entertainment, etc. – need goals appropriate for that group. Some will likely be higher than others.
• ENGAGEMENT: Engagement refers to the interaction an employee has with the public. For reporters, this can be how many comments they contribute, it can be how many comments their stories generate, or it can be how many times they participated in a public event. It might include social media activity. The key here is an audience focus: Listening and responding to what the audience wants leads to a more relevant report.

IS THIS ONLY ABOUT THE NUMBERS? Absolutely not. The primary goal always will be quality and impact in our journalism, and that is a topic built into competencies and objectives. At the same time, our ability to grow audience and engagement is directly related to our success as a business, and we need to build a culture that embraces growth and accountability.
We are fortunate that our newsrooms have the largest and most accomplished staffs in each of the communities we serve. Thanks to their commitment to quality journalism, five of the top 10 newspaper-affiliated websites in the U.S. for local market penetration are Advance Local websites, according to the latest Scarborough research. And our combined sites, which now reach 33 million readers each month, currently rank #8 nationally in comScore’s General News category, which includes sites such as Yahoo News, CNN and NBC.
As we scale our digital operations and accelerate our digital growth to offset the inexorable declines in our newspaper circulation and ad revenue, we will continue to hire more journalists and expand our news-gathering capabilities, including significant investments in the mobile and video platforms we need to succeed.  And our newsrooms will continue to measure their successes in a multitude of ways while rewarding the many talented individuals who are doing outstanding work and engaging more than ever with our rapidly growing audiences.

Longtime Oregonian editor Peter Bhatia announced earlier this month he is leaving for a teaching job at Arizona State University.

At a number of Advance papers including The Oregonian, the emphasis on digital has been accompanied by moving most of the newsroom to new, generic office space. That is meant to jolt reporters and editors from a print-first mentality that might persist in the cozy and familiar old quarters.

Whether the moves are working for readers or as a business remains an open question. On the one hand, the sites (nola.com is a good example) post breaking local news much more frequently and have seen audience growth and a younger demographic.

But for readers who prefer their local news report in print – still more than half according to a recent Newspaper Association of America analysis -- they have lesser frequency or convenience and may be pushed to the alternative of a digital replica edition online.

Growth of digital advertising generally has been disappointing for newspaper sites the last several years, with average rates continuing to fall.  Advance has not been specific about how digital ad gains compare with print revenue losses. There is no digital audience revenue because the sites remain free.

That may not be a huge issue. The real test will be whether Advance’s early swing to digital leaves the company’s sites and papers better positioned and more profitable several years hence.

Correction: The Oregonian’s print delivery is provided four days a week. An earlier version of this story included a different number. Read more

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Pew finds embattled newspaper industry still pulls in more than half of all news revenue

Pew’s 11th annual State of the News Media report, out this morning, offers fresh measures of news media revenue and news staffing at digital-only start-ups. Both findings are arresting for those of us in the news-about-news business but also shed light on the well-being of the industry as a whole.

Among the highlights:

  • The Pew research team attempted a revenue estimate for all the branches of the United States news industry it has covered in past reports. The surprising conclusion: Even though newspaper advertising revenue has fallen by half over the last decade, including subscriptions and other revenue, the industry still accounts for $38.6 billion of $63.6 billion in news revenue per year. That is roughly 61 percent of the total.
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At Newspaper Association of America conference, content — and passion — make a surprise appearance

I went to last week’s NAA mediaXchange conference in Denver anticipating I would hear plenty of talk of big data, native advertising, mobile apps and social media. And I did. A less expected discovery: the concept of focusing coverage in a given paper’s print editions and website on a handful of “passion topics” particular to that community is picking up steam.

Make no mistake. Advertising sales and revenue are still the main event when 1,000 business side execs and vendors gather. But having attended many an NAA or investors conference where news and journalism made only a cameo appearance, I am heartened to see distinctive content given its due as a strategic investment in the industry’s future. Read more

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Young woman in office working on desktop

Time to ditch uniques and page views for engagement in measuring digital audiences

When Nieman Lab’s Josh Benton asked me in December for a New Year’s prediction, I leaned toward the bombastic and led my wish list for 2014 as follows:

Ditch uniques and develop a better metric. Then-Newspaper Association of America president Mark Contreras was right when he made this case four years ago. It still hasn’t happened. One- or two-time visitors are not a business opportunity — they are an accident.

So we are two-and-a-half months into the year, and I am sorry to report that uniques and its evil twin, page views, are still with us — offered as the basic yardstick for digital audience for both individual sites and whole industries.

But I took cheer last week when three separate sources made the case that attention and engagement matter more.

Chartbeat CEO Tony Haile led off with an iconoclastic essay for Time.com titled “What You Think You Know About the Web Is Wrong.”

Chartbeat’s existence and success are themselves indicators of the imperative to get beyond clicks. Chartbeat’s products are real-time measures of traffic, time on story and time on site that editors rely on for decisions on how to play pieces and how long to leave them up in a prominent position.

In my recent profile of USA Today, I found that its national news desk, like many other digital operations, keeps a billboard-size display of Chartbeat indicators in plain view.

Haile’s whole piece is worth reading. His lead graf postulates:

We confuse what people have clicked on for what they’ve read. We mistake sharing for reading. We race towards new trends like native advertising without fixing what was wrong with the old ones and make the same mistakes all over again.

He continues his case that attention should trump visits and clicks:

At the core of the Attention Web are powerful new methods of capturing data that can give media sites and advertisers a second-by-second, pixel-by-pixel view of user behavior. If the click is the turnstile outside a stadium, these new methods are the TV control room with access to a thousand different angles. The data these methods capture provide a new window into behavior on the web and suggests that much of the facts we’ve taken for granted just ain’t true.

Other highlights:

  • An internal Chartbeat study of 2 billion visits found that stories with strong news content far exceeded clickbait in time spent.
  • Many people who share stories on social media do not actually read them. Ditto the recipients. The same internal research found that only eight of 100 articles read were accessed by Facebook and only one in 100 via Twitter.
  • Banner advertising is not as dead nor are native ads as vibrant  as current coverage would have you believe. Part of the reason, Haile said, is that nearly two-thirds of those accessing a home page go “below the fold” of the first screen to see what else is being featured.

Jeff Jarvis, with whom I don’t always agree, played off Haile’s piece in a BuzzMachine post on:

What the right metrics for media ought to be….How do we create positive feedback loops that improve the news not degrade it as uniques, page views and other relics of mass media have done?

Drawn from his persistent efforts at City University of New York to birth sustainable local news sites, Jarvis considers time spent (maybe efficiency summarizing news should matter too), then suggests several other measures of engagement: outcomes, follows, bookmarks, citations and embeds.

Finally my colleagues at Pew Research (whose annual State of the News Media report will be out a week from today) offered a study documenting what you might expect — direct visitors to websites spend more than double the time there than those who come via a Facebook referral, search or other side doors.

As this post is being edited and produced, I am on my way to Denver for the annual Newspaper Association of American mediaXchange conference. I will be moderating several panels and auditing the rest.

The great metrics debate is not formally on the agenda but may come up in segments on big data, a new American Press Institute study of audience behavior tracking news and another panel on advertisers’ perspective.

If I hear something new, I will report on it when I’m back. Read more

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A USA Today newspaper box is shown in Charlotte, N.C., Tuesday, Sept. 29, 2009. (AP Photo/Chuck Burton)

USA Today’s two-year strategic overhaul gains traction

(This case study, the fourth in an occasional series, was underwritten by a grant from the Stibo Foundation.)

USA Today has probably changed more in the last two years than in its previous 30.

Always a circulation-driven enterprise, the paper now has a radically different audience strategy, substituting mobile app traffic for the rapidly falling readership of its legacy print edition and folding a new condensed USA Today section into the largest 35 of Gannett’s 81 community newspapers.

Publisher Larry Kramer and his hand-picked editor, David Callaway, brought several decades of digital experience to the formidable task of finally breaking away from a print-first culture in the USA Today newsroom.

That these things happened has been reported by the company in recent presentations to investors, in two stories by the Wrap’s Sharon Waxman and in a nice summary piece this week by David Cay Johnston at CJR.com.

How it all happened is quite a tale as well — a combination of bold moves and smart mid-course adjustments, a case in point of digital transformation generally but also one that required shedding the particular baggage of USA Today’s brief but turbulent history.

In spring 2012, Kramer, 62, founder of MarketWatch, was wealthy from its 2005 sale to Dow Jones and enjoying semi-retirement pursuits like consulting, writing a book on digital news and teaching at Syracuse University’s Newhouse School.  But he was intrigued by the pitch to take over USA Today.

“The brand was wonderful, still very strong,” he said in a phone interview, but at the same time “everyone was worried.”

In particular, the newsroom was only nominally digital, Kramer said, and it was past time to integrate USA Today with the rest of Gannett’s news-gathering. “That was an attractive challenge.”

By Kramer’s assessment, USA Today was early and successful with the design of mobile apps, “but just not very digitally savvy….The content was mostly wires. Then the USA Today version of the story later was dated (as far as attracting digital traffic) by the time it came out.”

“There was no editor and no publisher at the time,” he said, and the operation was “fairly adrift.”

A second part of Kramer’s diagnosis was that despite years of top-down pushing to build a digital presence, “the newsroom hadn’t gone along.”

So one of his first decisions was to bring on board Callaway, his stable mate at MarketWatch for a decade as editor. “There were no high-ranking digital people, and in my judgment, one coming in at a lower level would get eaten alive. People thought of David as a business specialist, but I knew he could do general news, too.”

USA Today creates a national news desk

“We began working right away on creating a national news desk for the entire company.” Physically, Kramer said, the operation, which now has grown to 45 editors and writers, is arrayed in an outward facing circle, looking at big-board display of traffic metrics. When an important story breaks, they turn around, huddle at a table in the center and coordinate plans. Then they go back to their desks with plans for USA Today itself, the community newspapers and Gannett’s large television group.

These days, Kramer said, 90 percent of breaking stories are USA Today staff written and that has helped drive traffic growth for the site since search engines value original content over generic wire coverage that might be found in a variety of places.

Callaway told me that, in the last 18 months, USA Today has advanced to fourth place in digital traffic, trailing only Yahoo, CNN and NBC.

Part of the trick, Callaway said, is to differentiate print and digital to match reading habits on the platforms. For instance when USA Today in print ran a lengthy narrative of how General Motors came to order a massive recall, the condensed digital version was a timeline of nine things GM knew and when they knew them. Even more recently, USA Today digital has produced stories like “Five things that happened in Ukraine over night.”

USA Today has also dipped into the “personal brand” approach to building traffic, notably in media where Rem Reider was added as editor and columnist and Michael Wolff writes flamboyant-by-design commentary.  (Kramer added that increased media and tech coverage has also helped raise visibility with advertisers). Prominent columnists like sports Christine Brennan and Washington Bureau Chief Susan Page turn up with increasing frequency on cable TV.

So why didn’t all that happen earlier? Kramer cited USA Today’s early history, a decade of borrowing reporters and editors from community papers which continued to pick up their salaries. That fostered a relationship that was “respectful but not endearing,” Kramer said. The community papers “with aspirations of covering national and international news themselves,” were dug in, insisting on independence.

That began to change with offers of modular USA Today sports reports and a USA Today news page, paving the way for the special sections introduced over the last six months, six to 12 pages on weekdays, bigger on Sundays.

Special USA Today section for community papers

Versions of that plan had been on the shelf at Gannett corporate for some time, Kramer said. But suddenly it was a solution to a pressing problem.  The company had introduced paywalls throughout the chain along with big price increases for bundled print + digital subscriptions.

The company had recognized the move would raise questions about the volume and quality of news in papers that had been much slimmed down over the years. Indeed digital-only subs attracted fewer readers than hoped and moving new subscribers to print + digital from introductory to full rates was also proving difficult.

So a new bonus section of USA Today content provided a potential solution and has tested out well in every market. Kramer credits Bob Dickey, head of the community publishing division, with an important wrinkle that helped seal the deal for subscribers on the fence.

With national and international content largely moved to the USA Today section “that added space for local news to the papers” in the A-section.  Dickey, Kramer said, “encouraged every paper to have an explicit plan for using that space and to promote it as well.”

It may seem a little ironic then that digital guys Kramer and Callaway’s most visible initiative, the so-called Project Butterfly is a print one. But Kramer said as he got deeper into his job, he had plenty of reasons to pay close attention to print.

While building digital, Kramer said, “I realized that I needed to preserve print circulation as long as I could. We still get a lot of revenue from print (circulation and advertising).” Print advertising, way down after the recession, grew in 2013 and stands to benefit in 2014 from the enormous added circulation of the inserted sections.

“This brings in 2.5 million more readers daily and the same or more on Sunday,” Kramer said. So if, for instance, “Procter and Gamble wanted to congratulate one of the Olympic athletes it sponsored,” they could now put that message out to a huge print audience overnight.

Elephant in the room: hotel circulation

Also overhanging USA Today was a fundamental challenge the digital era had brought to its longtime print circulation strategy. The core audience had always been business travelers, served with copies at their hotel door or in airports. But rather quickly, beginning in the mid 2000s, the typical business traveler began carrying a laptop or mobile device and could access a variety of reading options, including his hometown paper.

By the time Kramer came on board, hotel distribution was already beginning to shift from at-the-door delivery to a stack available to those interested by the elevators or in the lobby.

Also, Kramer said, the long-run of USA Today’s distinctive TV-style boxes was winding down (though they had a certain legacy standing, dating back to the Al Neuharth start-up days). “Some were only selling a paper or two a day.”

For a fix, Kramer instituted a series of interlocking moves. Exploiting new Alliance of Audited Media (AAM) rules, he began counting downloaded mobile apps as part of total circulation. So even as paid print plummeted, the total increased (despite USA Today’s site bucking the paywall trend and remaining free).

Gannett also negotiated with AAM to treat the USA Today section inserts as a “branded edition,” which can be a condensed version of the original under the auditing agency’s rules. So USA Today will be adding hundreds of thousands of new subscribers as Project Butterfly rolls out during this six-month period and the next.

USA Today’s paid print had already fallen in just a few years from 1.7 million to 1.2 million in the period ending in September of last year. And, clearly ready to accept bigger print losses, the company doubled the single-copy price that month to $2.

“No one carries eight quarters around in their pocket,” Kramer said, and in fact not all that many had been feeding four quarters into the boxes for a single-copy purchase. So the price increase became the occasion for pulling the boxes in and eliminating the considerable cost of stocking them.

Now, Kramer said, USA Today has evolved to having most single-copy sales in stores and newsstands. And home delivered subscriptions, hit with a smaller price increase than single copies, now make up the majority of USA Today’s paid print for the first time in the publication’s history.

USA Today has received attention for a deal with the Hilton chain in which the Web version of the paper is prominently featured as guests plug into a wireless connection in their rooms. But don’t look for hotel distribution to go all-digital anytime soon.

Hilton, Kramer said, “has the same wi-fi provider everywhere but not every chain works that way.” Besides, he said, “hotel lobbies are still a place many people like to use newspapers.”

Bringing TV to the party, selling more digital ads

Part of the content “integration” Kramer and Callaway are aiming for involves Gannett’s 43 TV stations, a total expanded with the acquisition of Belo’s properties. On the one hand, the stations provide an increasing volume of video for USA Today’s site and apps. Conversely, the new national news desk now pump out content to the TV stations as well as the community papers that they can adapt.

Both cited an investigative piece last fall, timed to the NSA snooping revelations, about as Callaway put it, “how police are tapping into your phones.” It was a big front-page splash for the national edition but also easy for the community papers and TV stations to make their own with some localizing.

Business changes on the digital side have been less conspicuous. Previous management had pushed for vertical sites on all of USA Today’s color-coded topics. Sports, travel and tech remain, Callaway said, but the rest have been pulled way back, allowing more staff to rove over a variety of topics rather than narrowly focus on one.

In digital advertising, Kramer said, “the big decision was to get rid of roughly 75 percent of the ad units.” The objective was to cut back on cheap remaindered space and make most ad availabilities prominent, scarce and premium-priced. But, he conceded “that has been painful at first…not all of our advertisers were ready to produce those kinds of ads.”

Coming next in 2014 will be offering the condensed USA Today section to non-Gannett newspapers. “We have had a half-dozen major inquiries,” Kramer said, and refining the idea will move to the front burner as the community paper rollout is completed at the end of this month. Kramer likes to refer to this as a “network/affiliate” model, analogous to NBC offering its content both to stations it owns outright and to affiliates, with advertising opportunities divvied up so each side benefits.

Another likely 2014 project will be launch of a weekend edition of USA Today, since the national news desk is a seven-day operation and is preparing the condensed version for Saturday and Sunday papers already.

Kramer used the boxing term “the tale of the tape” as an indicator of success to date. Which is to say that print and digital audiences and advertising are all up. The company stopped reporting USA Today revenue and earnings separately around the time of the great recession of 2008 and would not provide me with current figures.

But I’m not sure last year’s or even this year’s bottom-line results are all that important. Like Digital First and Advance, Kramer is walking the walk of disruption and the real test will be whether the gain outweighs the pain and transitional expense in three to five years.

Besides, the overdue full integration of USA Today into the rest of the company appears to be nearly complete, so it may make progressively less sense to view USA Today’s revenue contribution in isolation.

A skeptic’s view

While I found Callaway and Kramer candid, I also realize they were spinning the positives. Analysts and investors have liked what they are hearing and Gannett stock has had a long upward run — probably mostly due to broadcasting results and expansion, though change on the publishing side has been well-received as well.

But might I be missing some blemishes? I asked Jim Hopkins, an often fierce critic of the company who shut down his Gannett Blog after a six-year run about a month ago. In a return e-mail, Hopkins credited Kramer and Callaway for “pumping up the circulation numbers,” integrating USA Today into the rest of the company, and having “sped up the assembly line so more content is now appearing faster online and in digital apps.”

But Hopkins did voice a reservation:

I don’t see any significant improvement in the quality of editorial content.
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Marc Andreessen (AP photo)

What Marc Andreessen got right and got wrong in his future of news manifesto

When the history of journalism’s turnaround is written some years hence, I think 2013 and 2014 will go down as years when Internet billionaires, the new Carnegies and Rockefellers, stepped into the fray in a big way — Jeff Bezos, Pierre Omidyar (and let’s not forget more traditional rich guys John Henry and Warren Buffett).

Now comes Marc Andreessen, Netscape founder and venture capitalist, with a take on the future of the business that is wildly optimistic, dare we say, irrationally exuberant.

His essay last week on where news is headed, well summarized in a Wired piece and readable itself, projects exponential growth in market demand. Andreessen sees solid Internet businesses with strong financial backing coming into their own even as legacy platforms continue to falter.

Much of his analysis is persuasive if not totally original. He is surely right that rebundling of news is booming. New aggregation sites with a social media twist, led by BuzzFeed, are working ingenious variations on the first wave like The Huffington Post. Google, Facebook and Yahoo — the biggest of the digital bigs — are redoubling efforts to build a branded news presence of their own.

And I can’t quarrel with three concise paragraphs capturing how newspapers and magazines have been battleship-slow turning themselves around:

There are some artifacts and ideas in the journalism business that arguably are counterproductive to the growth of both quality journalism and quality businesses. It’s why some organizations are finding it so hard to move forward.

An obvious one is the bloated cost structure left over from the news industry’s monopoly/oligopoly days. Nobody promised every news outfit a shiny headquarters tower, big expense accounts, and lots of secretaries!

Unions and pensions are another holdover. Both were useful once, but now impose a structural rigidity in a rapidly changing environment. They make it hard to respond to a changing financial environment and to nimbler competition. The better model for incentivizing employees is sharing equity in the company.

Andreessen’s final section, advocating the standard right stuff — including vision, nimbleness, experimentation and an entrepreneurial mindset  – is stylish, canny and upbeat.

The best approach is to think like a 100% owner of your company with long-term time horizon. Then you work backward to the present and see what makes sense and what remains. Versus, here is what we have now, how do we carry it forward?

So the theory is solid. But the facts and numbers? Not so much.

Andreessen casually asserts “the demise of scads of newspapers.” Assuming he hangs with a Silicon Valley crowd, who endlessly repeat the dying industry meme, the mistake is understandable. But very few American papers of any size have closed in the last decade and most of those have been the weaker title in two newspaper towns. Add in Newsweek, if you like (though it has been reconfigured and plans to return to print this month) or some international titles like FT Deutschland.

What would be truer would be to say that nearly all American newspapers, and many abroad, have been significantly shrinking in revenues and news effort during the last decade. And they face more of the same in the near term until they can generate enough digital and other revenue to cover continuing print advertising losses.

A second of Andreessen’s assertions had my jaw dropping:

The total global expense budget of all investigative journalism is tiny —  in the neighborhood of tens of millions of dollars annually.

How’s that? ProPublica alone has a budget north of $10 million, the great majority of it directly applied to investigative reporting. The Texas TribuneThe Center for Investigative Reporting and The Center for Public Integrity all operate on a similar scale. And that’s not counting the New York Times, the Guardian and another 1,350 or so American dailies.

Andreessen may be thinking only of very high-end investigations like the WikiLeaks and Snowden disclosures. But surely the Bergen Record and The Wall Street Journal exposes on the Christie administration bridge traffic debacle qualifies. While local broadcast fare, helping the little guy straighten out problems with shoddy contractors and unresponsive bureaucrats, is not my favorite, I’d count it too as investigative reporting,

Andreessen would be right to say it does not take billions and billions of dollars to do the world’s investigative reporting. But the total is certainly hundreds of millions, not tens.

A major order-of-magnitude issue also afflicts Andreessen’s central contention — that the news industry can grow 10 times to 100 times its current size over the next 20 years.

He is talking about the whole world, a potential market, he says, of 5 billion people.  Give them all a smart phone and an iPad, and consumption will rise. And the new era of news has ample room for many aggregators, many tech innovators and many vendors — all turning profits.

But I cannot get to 10 times, let alone 100, unless 240-hour days are right around the corner. There is only so much time, and only so much time for consuming news, even with double screening. And part of the news industry’s problem is competition for that time from non-news entertainment content and diversions like games and Facebooking.

The Wired piece and several contributors to its comment chain say that for venture capitalists like Andreessen market opportunities are never just big, they are huge. By his own description, he is “more bullish (on the business) than almost anyone I know.”

In sum, Andreessen’s interest is a plus just by itself. His ideas are useful. He makes a good case that the news business will soon clearly be recognized as expanding not contracting. But apply a generous discount to Andreessen’s measuring-the-market numbers before you take them to the bank.

We’ve asked Andressen through his company Andresseen Horowitz if he’d like to write a post for us on his views. Although we haven’t heard back, that invitation remains open. Read more

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NAA: ‘Print only’ still more than half of newspaper audience even as digital grows

A new analysis of the most recent newspaper audience reports suggests a surprising split in reading habits. Digital audience continues to grow. Mobile audience is growing quickly. Mobile-only audience, though much smaller, has grown to 7 million.

Yet more than half of newspaper audience — 54 percent as measured by Scarborough research in 150 large markets — still read their local paper’s news report only in print.

There is an important qualifier to that finding. The 54 percent may consume a substantial amount of national news on various digital platforms, but even with the growth of print + digital access subscriptions, they do not visit their hometown paper’s website.

John Murray, the Newspaper Association of America’s vice president of audience development, generated a number of other headline findings in his analysis published on the NAA site (members-only) earlier this month:

  • Total daily circulation was up 3 percent year-to-year and Sunday circulation 1.6 percent among 541 daily papers reporting results to the Association of Audited Media (AAM) for the six-month periods ending Sept. 30, 2013 and September 30, 2012.
  • The daily circulation gains were entirely driven by digital gains at the largest newspapers. Sunday gains also reflected the heavy use of “Sunday Select” products — packets of inserts to non-subscribers — by larger papers. At the great majority of newspaper organizations reported digital audience did not offset print circulation losses.
  • Print circulation continues to decline as a share of total circulation — now 71.2 percent daily and 74.9 percent Sunday. A year earlier, print was 85 percent of the daily total. That is to say that the industry — especially the largest papers — is using changed AAM rules to substitute digital audience for print.

I wondered, given the much lower cost of digital ads, whether the substitution maneuver contributes to continuing print and total ad losses, roughly 6 percent in 2013 if recent reports by public companies are representative.

To an extent that is true, Murray told me in a phone interview, but perhaps not as much as the raw numbers would suggest. In the first place, advertising is concentrated in Sunday editions and a few weekdays. Sunday-only and three-day print subscriptions keep those numbers higher than an overall daily average.

Run-of-the-paper ad rates do not correlate closely with circulation declines. Pre-printed insert revenues do, Murray said, but advertisers have been accepting of the “Sunday Select” products as an equivalent.

Overall, Murray’s paper concludes, these results show differing audience strategies, including discrepancies among papers in what they choose to count in their AAM reports: 

Newspaper readers are increasingly using digital products with the most substantial increases among the mobile platforms…The majority of newspapers are posting smaller declines in traditional print circulation (than national and other large papers). Most offer digital products to their readers that are similar to the largest newspapers, but they are not necessarily reporting use of these platforms in their AAM total circulation metric….

AAM circulation data is more insightful, expansive and transparent for individual newspapers due to changes in reporting rules. These changes also mean that using AAM “total circulation” as an exclusive metric across the industry is an exercise in looking at the sum of disparate parts. But a closer examination of the elements, supported by readership data, does confirm a steady transition to digital reach among newspapers and a healthy print readership base for readers and advertisers.

My takeaway is similar. The transition to digital and to mobile-only users continues to advance at a rapid pace. Indeed it has probably gone further by now than the studies in Murray’s analysis suggests. The digital audience is younger and newspapers have it in their power, especially as they improve smartphone news products, to speed the growth of that share.

But remaining print readers, described by some as hardcore and by others as geriatric, are slower than I would have thought, to read a newspaper organization’s report in both print and digital. The Scarborough report Murray highlights finds only about 30 percent of a given paper’s audience uses both print and digital (versus 15 percent digital-only and 55 percent print-only).

You can look at that division from a half-empty or half-full perspective. I agree with Murray that print continues to hold a smaller-than it-once-was but well-defined, upscale audience. These readers are attractive to advertisers. As the success of increased subscription prices shows, they are also willing to pay more than newspapers had traditionally asked.

On the other hand, advertisers may be quicker to move, in whole or in part, to digital than newspaper readers. As digital-only options proliferate, advertisers most likely will continue to scale down print budgets, to pay for more of the new. Read more

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A depressed teenager walking towards the light

Deseret News, Atlantic find common ground for collaborative series on fathers

Content partnerships have been quite the vogue lately, and this morning The Atlantic and the Deseret News add a new chapter — a jointly produced four-part series on absent fathers and broken families, running on the sites of both publications.

At a glance this would appear a long-distance odd couple — the church-owned newspaper in Salt Lake City and the venerable Boston-bred monthly, now based in Washington. But there is an affinity — each is recognized as a leader in digital business model transformation. New approaches to content are part of the innovation formula.

“Collaboration will be a fruitful model going forward,” Deseret editor Paul Edwards said in a phone interview Friday. “Editorial specialization is a logical response to the nature of the Web. So there needs to be trading to acquire content and share expertise.” Read more

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