Wednesday, November 23, 2005

Having spent more than nine years at Knight Ridder's Miami Herald, I've been watching the fallout from investors' recent calls for the company to put itself up for sale in order to produce better financial returns for shareholders. So I found it interesting when an illustrious group of Knight Ridder alumni issued a public call (via a blog) to "reassert" John Knight's belief "that excellent journalism is good business."

I really want to be sympathetic to their point of view. The signers of the petition are right that in the name of shareholder value, Knight Ridder has already reduced the quality of its papers' journalism. But investors' demands for high profits are not, at the core, what is ailing the newspaper industry. And, unfortunately, investing in more "excellent journalism" (as journalists define it) won't cure these ills. Even if investors suddenly lowered their profit expectations, Knight Ridder and other newspaper companies would be faced with declining (and aging) print readership, advertiser migration to the Web, and print revenues that aren't keeping up with print expenses. These realities would persist even under Jay Rosen's "imaginary" outcome: Knight Ridder seeking local buyers for each of its papers.

The week after General Motors announced plans to lay off 30,000 workers, it's hard not to draw parallels between newspapers and the auto industry. GM has had 30 years -- since the first wave of high-quality Japanese cars started becoming popular with U.S. consumers -- to adjust its business model. The newspaper industry doesn't have 30 years. It desperately needs to find new business models for electronic distribution that will generate the revenue needed to support the cost of creating content. The components of a "new newspaper" online strategy are becoming clear:

• Create new content in niches (such as business and sports) where the cost already can be supported by online advertising.
• Find ways to enlist non-journalists (who can be paid little or nothing) as content creators -- or acquire sites that do this, as The New York Times did when it purchased About.com.
• Think of the Web not as a place to build a new destination, but, instead, use it to solve the "old" media world's biggest content dilemma: the fact that many people who would value any particular piece of content never become aware that it exists. This means embracing RSS, seeking out blog links, submitting articles to Google Base, syndicating content to other sites, optimizing content for search engines (I still see many stories where the HTML title is something like "Newspaper Name: Local News" instead of the headline), delivering content to mobile platforms, etc.
• Invest in technologies that enable targeting of ads based on content, demographics and user behavior.
• Enable businesses to buy online ads themselves instead of going through sales representatives -- and take the time needed to train local merchants how to use these tools effectively.
• Install Web analytics and ad-management systems that enable advertising managers to identify clusters of content (or clusters of users) that can attract the highest possible prices on a CPM basis.
• Hire people who can sell online advertising effectively -- as a separate buy, rather than bundled with print ads.

Unfortunately, in the short run, each of these tactics will cost more money than it will generate. And even successful implementation will probably result in lower profit margins than newspaper company investors have historically wanted. But these tactics at least offer the hope of audience and revenue growth -- which it's clear cannot be achieved via the core print newspaper. Could the leadership of Knight Ridder (or another publicly traded newspaper company) ever persuade investors -- if not today's shareholders, new ones -- to accept lower profit margins in return for an online growth strategy? If not, a newspaper company's best hope is to merge with (or be acquired by) a company whose business model rests on distribution and/or online ad targeting.

Important as journalism is to our society, the future of publicly traded newspaper companies will not be determined by journalism "quality," but by investor confidence that the journalism is produced efficiently, reaches the largest possible audience and attracts the greatest possible ad revenue.

E-mail this item | Add/View Feedback (2) | QuickLink this item: A92618



E-Media Tidbits Archive

View items published between:		and
	(MM/DD/YYYY)		(MM/DD/YYYY)

MAIN | Back to Top