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. If anything, I think it’s worse. Too many days, I see stories online that are simply rewrites of stuff that was first broken by the NYT, WSJ, Washington Post, People, US Weekly, etc.
To make up for a smaller newsroom, the paper is publishing more content from Gannett’s community papers and TV stations; that’s also one of Kramer-Callaway’s initiatives. That would be fine if those papers and stations were all well-staffed regional media outlets. But they’re not. Instead, they’re small papers and stations in very small markets — Poughkeepsie, N.Y.; Asheville, N.C.; Shreveport, La., Salem, Ore., etc. Kramer can call this “curated” content all he wants, but it’s still small-town news of little interest beyond those markets….
Too often the stories aren’t sufficiently edited by the Gannett national desk for a national audience. They read like what they are: local stories without the sweep and context that make them suitable for a coast-to-coast readership.
What are the takeways?
Even if we count the last two years as a provisional success rather than a fully achieved one, I see at least seven case study lessons for those early or only midway in the process of transformation:
  • Bold moves and sharp breaks with the past are needed.
  • A publication’s particular history may stand in the way of modernization.
  • Refine the details of those big moves as you go (Kramer found that everyone wanted USA Today sports content in the community paper sports sections so that is not a part of the inserts).
  • Completing one set of changes may, in turn, suggest next steps.
  • Digital veterans are likely to see ad and content opportunities that had not occurred to legacy execs trying to “do digital.”
  • Take some care to conserve and re-imagine print. There is revenue there and will be for years.
  • At the end of the day, news drives the train.
Analyst Ken Doctor offered a discerning take on the Kramer regime just as it was starting. He did not quote the new publisher but may have had some background thoughts whispered in his ear. Doctor offered this nut graf summary:
The future of USA Today — still America’s top circulation newspaper — offers all kinds of resonance for basic survival questions of the press. It’s unique in some ways, certainly, but in its quest for a future, the issues Kramer has now taken on mirror those of the wider industry here and in the developed world.
Kramer ended our 50-minute, barely-pausing-for breath interview in similar fashion: “We are excited about this. We think we have a real shot to do something to change the structure of the business.”
Or as Callaway put it, a bit more casually, as we began to talk: “We’ve done a ton, and we think we are making progress.”

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