It is time again for the annual December media conference for investors in New York City, starting today. And once again, borrowing the well-worn line from “I Love Lucy,” executive teams from publicly-traded newspaper organizations “have a lot of ‘splaining to do.”
No doubt about it, 2011 has been another terrible year financially for the industry – though the “why” matters. Will news organizations blame it all on a soft economy? Or will they talk candidly about competition for digital marketing dollars, the one part of the advertising pie still expanding, with an array of potent competing players?
I see four other related questions that make sense to ask right now.
What about 2012? Analyst and consultant Ken Doctor wrote a few weeks ago that newspapers are budgeting for continued ad revenue declines of 10 percent or so (on top of those in 2007, 2008, 2009, 2010 and 2011). If that’s the case, where will they find more savings or significant new revenue? Can they be profitable?
How much would a recovering economy help? Just in the last few weeks, there has been mildly encouraging economic news on jobs and real estate. Autos continue to do well. A revival in these three traditional key categories would be particularly helpful to the hardest hit newspaper organizations in Florida, California and other slumping Sunbelt cities. It would also be a test of which companies have done best following the old classified business into digital formats. And it might shed light on how much of the steep advertising declines of the last five years tracks the economic cycle and how much is loss of share.
So where do the companies stand in transformation to multi-platform and, eventually, mostly digital companies? The “we-get-it” story about the need to grow digital and escape over-reliance on print advertising has been around for quite a while now. Check the Gannett home page and you will find no mention of newspapers — though print still accounts for roughly 40 percent of the company’s revenue (my estimate, Gannett financials are inexact on the point).
I think the time has come for candid talk about which new revenue streams are growing or about to take off and which remain stuck in low gear. I’m also ready to hear about the relative profitability of print, digital news products, and non-news digital streams like shopping directories, mobile coupons or deal-of-the-day clones. But that would require some realistic allocation of news, sales, marketing and management costs over the three product lines. I assume companies are doing that internally, but I haven’t heard much persuasive discussion of it in public reports.
One simpler indicator — are digital revenue gains covering print ad revenue losses? Not even close at most of the companies.
What about the news core? At the risk of being obnoxiously repetitive, I have been fretting for most of my decade on the news- about-news beat over shrinking newsroom staffing and shrinking news reports. I don’t think it’s disputable that the cuts forced by revenue declines run the risk of losing some of those readers who still like print. Lesser circulation numbers and lesser engagement then reduce the value of the print edition to advertisers.
Publishers seem to be reviving the story line that they can sell subscriptions on multiple platforms and that there is huge digital advertising growth potential, especially on smart phones and tablet devices.
But some awkward details need to be examined. Is advertising paired with news going to support a notable news effort? The jury has already weighed in on websites. Most do not generate enough ad revenues to cover news, production and sales costs.
And will the smaller newsrooms of this decade be able to produce quality reports on multiple platforms, reports almost everyone agrees need to be tailored and reworked to yield a satisfying user experience?
This will be the 39th Media and Communications Conference for sponsor UBS, which claims it is the longest continuously running investment conference on any topic.
News organizations are only a slice of the action, which also provides insight into the entertainment, cable television and advertising agency businesses.
This is also the 10-year anniversary of my first trip to the Big Apple for these affairs. The first I attended was sponsored by a competing investment firm, held at the Plaza Hotel (now mostly condos), and featured Chairman Arthur Sulzberger Jr. boasting about the New York Times’ fabulous 9-11 coverage.
A number of the stalwarts of those earlier conferences are not around any more. Knight Ridder, Tribune, Dow Jones, Journal Register and Pulitzer have all gone private or been acquired by bigger companies. Lee Enterprises filed for a “fast-track” bankruptcy just Friday.
But — and this is a fact the “dying industry” crowd ought to consider — nearly all of the 100-plus individual newspapers of those companies are still going concerns. Many are emaciated, to be sure, but they are still publishing print editions daily while fighting the good fight to grow successful digital ventures.
For me, that makes the state of newspapers still a fascinating business story, if no longer a main event for public-company investors. And with the New York Times Co. batting leadoff for the newspaper organizations Monday afternoon, I expect the conference to yield legitimate hope for the future despite the hard times and hard questions.
We have made it easy to comment on posts, however we require civility and encourage full names to that end (first initial, last name is OK). Please read our guidelines here before commenting.