When newspaper executives pitch their companies to investors and analysts at twice-yearly meetings in New York, there is always a buzzword or two in the air. Last week it was "transformation." Or, as a variant: "transformational." In other words, the industry may be stuck in the mud financially, but big changes are in progress.|
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The company devoted the first third of its presentation to a detailed description of the "information center" strategy that it unveiled earlier this fall and plans to implement in all its newsrooms. In short, CEO Craig Dubow said, effort "isn't focused so totally on producing daily newspapers."
Some highlights:
- The concept was pre-tested at six sites and drove surges in audience and "stickiness" -- that is, the time users spent on the newspapers' Web sites.
- Public service will remain a priority but some of that work will be done by citizen journalism "crowd sourcing," in which readers volunteer both information and expertise. The company provided a recent example from its paper in Fort Myers, Fla., The News-Press, which relied on extensive citizen assistance in an exposé of excessive charges for sewer hookups.
- The company plans to train 362 print journalists as videographers by the end of January.
- As an example of the new paradigm, the company showed a Web clip of a Palm Springs wildfire, splicing footage shot by a golf writer at the company's paper there along with footage provided by a citizen.
- As the information-center program matures, the print paper will become smaller, and will be targeted at a 45-year-old-plus audience that is typically middle- and upper-income with post-high school education.
In other presentations, there was a reaffirmation of commitment to first-class newspaper journalism. Washington Post Co. CEO Donald Graham opened with a slide showing that, among the company's various properties, the newspaper ranked fourth in the first nine months of this year in contribution to earnings. The paper trailed the booming Kaplan Inc. education business, broadcast television and even the company's tiny cable TV business. The newspaper's margin was about 10 percent, Graham reported, and 5 percent when a special charge for buyouts is included in the calcuations. The buyouts, of course, will yield savings in subsequent years.
But, Graham said, "We are proud of what The Washington Post and WashingtonPost.com can mean to our community and nationally." Later, he added in response to a question, "The paper means one hell of a lot to me personally."
New York Times Co. CEO Janet Robinson closed her presentation by saying that, despite agitation from several institutional shareholders, the Ochs-Sulzberger family has no intention of changing a dual-class stock structure that gives them voting control. That would be opening the Times "to the forces that are tearing apart other companies," she said, an allusion to the demise of Knight Ridder and the possible sale or breakup of Tribune Co.
Above all else, she added, the structure ensures that The New York Times newspaper will remain independent and editorially strong, quoting Executive Editor Bill Keller to the effect that the paper's ambitions require a big and expensive force of journalists.
Robinson also said that New York Times Co. management is not considering going private, as some have speculated. She was more equivocal on whether The Boston Globe might be sold, saying that the company had "done a lot of work" this year on the paper and was "confident we will see improvements" in results that have been among the worst in the industry.
The McClatchy Co.'s Gary Pruitt and Belo Corp.'s Robert Decherd also splashed cold water on the notion they might go private any time soon. That option "has some onerous elements," Decherd said. "It's a financial strategy not an operating strategy, and we're operators..." he added. "Why go public unless you have only a five-year horizon?"
Some other topics of note from the conferences:
Local Search. Developing this business will be a likely focus and battleground in coming years. Gordon Borrell, CEO of Borrell Associates Inc., forecast that search and e-mail will be the biggest areas of online ad growth between now and 2010. Despite healthy yearly increases in online revenue, he said, newspapers are beginning to lag industry growth rates. They are overly dependent on classifieds and too few organizations have salespeople dedicated just to building online business.
Newspaper companies' presentations seemed to acknowledge the point. Gannett's most recent acquisition is Planet Discover, a small company that specializes in the technology that enables local search. McClatchy's top online priority for the last year has been developing local search, though integrating the systems of the 20 Knight Ridder papers it bought has proved a powerful distraction.
Still, it is hard to escape the impression that newspapers are playing catch-up. Borrell proposed this test: Pick a term like "DUI attorneys" and a locality. Compare the volume and ease of getting useful results from Google to what's available on your local newspaper Web site. If newspapers are the kings of local advertising, they ought to be a force in his business, but, by and large, they are not.
Yahoo and Google Deals. Recent collaborations between newspapers and the two Internet giants were part of what the companies were touting as transformational. Yahoo's agreement with nearly 200 newspapers begins with employment-classified assistance through its Hot Jobs subsidiary. But it could grow to include content sharing and application of Yahoo's technologies to the local-search conundrum. The partnership is structured so that other newspaper companies can join in on the same terms as the founders.
Google's deal is entirely different: a 90-day pilot in which Google Inc. is placing print ads in more than 50 newspapers. The company will allow its search-advertising clients to bid for ad space in participating papers. Originally, the placements were targeted at so-called "remaindered space," unsold positions typically filled with house ads. But now, guaranteed placements are being added. James Conaghan, of the Newspaper Association of America, said Google reports doing as much business in the first three weeks as it had projected for the entire three-month trial.
Take it as a marker that newspaper companies have moved beyond merely wringing their hands at the rise of these potent competitors and are figuring out ways to make money together with them.
Moms. Another coming thing is newspaper Web sites directly targeted at busy moms. Content would consist mainly of listings of camps, schools and the like, with advertising from local merchants and services. Based at The Dallas Morning News, this was the most promising of six pilot projects to emerge from the yearlong Newspaper Next innovation project, which was completed in September. Gannett has already followed suit at The Indianapolis Star, generating 100,000 visits in three weeks and unsolicited calls from advertisers who want in. Another such site has been launched at the Milwaukee (Wis.) Journal Sentinel. Watch for many more.
2007 Prospects. Companies were sparing or silent on how next year is shaping up financially. In other words, it looks pretty bad. Real estate advertising, a bright spot for most companies, is certain to slow with the industry mini-crash now in progress. Companies with substantial television holdings (Gannett, Belo, Media General, Journal and Washington Post) were buoyed in 2006 by election and Olympics advertising. Neither will be a factor in 2007.
McClatchy's Deal: CEO Gary Pruitt devoted the first part of his presentation to the Knight Ridder acquisition, completed in July. McClatchy has realized $70 million in savings and synergies, making for an effective purchase price of eight times the pre-tax earnings. It sold a dozen of the less-profitable Knight Ridder papers in slower growing markets for 11 times earnings. A steal of sorts, though Pruitt conceded the timing was awful, just ahead of sharp advertising downturns in the third quarter of 2006.
Investors and analysts were disappointed not to hear any company promise big dividend increases or other major financial restructuring. The companies are sticking to the story that they can grow on new platforms, and now they are beginning to offer some specifics, though no guarantees of success.
