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mcclatchey

McClatchy’s stock continues to take a pummeling

McClatchy_logoMcClatchy reported a first quarter net operating loss of $11.3 million and more deep declines in print advertising today as its stock continues to takes a pummeling.

McClatchy shares have been trading between $1.50 and $1.60 the last several days. That is about half where they were at the start of 2015, and they have lost roughly three-quarters since this time a year ago.

Wall Street values the company at a market capitalization of $135 million,  That’s less than $5 million per paper in a collection of 29 titles in 28 cities including the Miami Herald, Kansas City Star and Charlotte Observer.

Continuing the trend of recent earning reports, print advertising was the problem spot, down 15.7 percent year-to-year with national advertising especially bad, off 25 percent. All other revenue sources were up about 1 percent, CEO Pat Talamantes said, and those now account for two-thirds of the company’s revenue. Digital ad revenue was up more than 5 percent and digital-only ad revenue up 15 percent

Talamantes said that Miami and other larger markets were by far the hardest hit.  At mid-sized and smaller papers, the ad base has historically been more local, so they are doing reasonably well.

Given the circumstances, Talamantes spent little time during a conference call with analysts on numbers and instead chose to talk at length about the company’s turnaround strategy. That includes:

  • Various sales initiatives including getting the force “better trained and organized” with oversight from new senior executives.  “That will take some time,” Talamantes said, and results may be bumpy, especially in the second quarter.
  • Similar changes are coming in news, Talamantes continued, emphasizing digital, “What readers want,” he said “in digital and even in print is not the same as it was a few years ago.” (Poynter has a substantial training contract with McClatchy to help accelerate the news-side digital transformation).  Talamantes added that plans do not include any reduction in print frequency such as what the similar-sized Advance chain has done in New Orleans and most of its markets.
  • The company will continue a year-long initiative to expand its video offerings — which typically command higher rates for advertising than do digital text presentations.
  • On the cost side, the company expects to save $25 to $30 million over the course of this year in production and distribution.  Individual papers are prepared to make further expense reductions, Talamantes said, if results don’t improve, at least a little, in the second half of 2015.
  • “The pace of digital transformation in our industry is unrelenting,” Talamantes summarized, and McClatchy would be courting worse trouble later if it didn’t invest in the package of changes now.

    McClatchy sold its stake in two growing and profitable digital classified services in 2014 and applied the proceeds to paying down the huge debt it took on when it acquired Knight-Ridder nine years ago.

    But even with debt reduced to about $1 billion, the company paid $22 million in interest for the quarter. That was about 8 percent of total revenues of $258 million and effectively wipes away earnings from the papers and their digital operations — nearly all run at a comfortable profit margin.

    Though it gets much less media attention than the New York Times Co., McClatchy shares a two-tier stock structure in which family members have the controlling vote.  To date, they have shown no interest in selling the company, shedding its debt in a bankruptcy reorganization or shuffling management.

    That could change, but my read is that investors think that McClatchy will stick to the transformation plan Talamantes outlined  with little regard for short-term profits. So the investment community is sitting on the sidelines waiting to see whether those initiatives work – Hence the low and deteriorating share price.

    The tone of the analysts’ questions was cordial. The toughest came at the end of the call when Talamantes was asked whether he could make more rounds of cuts without damaging the company and making the revenue challenge even worse.

    “That’s what we get paid to do,” Talamantes replied.  He had earlier described McClatchy as a “journalistically accomplished, digital-forward company.”  As for the legacy side of the business, he said, “Print advertising is just a piece we ride out. Some years (the losses are) more, some years less.”

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Caroline Little is stepping down as CEO and President of Newspaper Association of America

littleCaroline LIttle will be leaving her job as president and CEO of the Newspaper Association of America at the end of August, NAA announced this afternoon.

She will have been head of the industry trade association for just over four years when she departs.

Little is a lawyer and served as publisher/CEO of Washington Post/Newsweek Interactive and then as CEO of the Guardian’s North America operations before joining NAA in 2011. Her background as a digital executive figured in her being hired to succeed John Sturm who served 16 years and was a lawyer and experienced lobbyist.

I reached Little by phone, and asked what she expects to do next. “I don’t really have any future plans right now,” she replied, except moving to Sante Fe, “where I have a husband, a child and a dog — in that order.”

As industry’s revenues have fallen, NAA has sharply downsized.  Sturm was at one time paid north of $1 million and the association had more than 100 employees.  It’s current staff directory lists only 13 professionals (with five more being added), and Little confirmed one of her tasks was to outsource functions to save money.

During Little’s tenure the American Press Institute was merged with NAA’s own community foundation. Both had substantial endowments but outdated missions.  API, with a separate board, hired Tom Rosenstiel as its executive director, and he has changed API from a training organization to a research and think tank mission.

At the end of Sturm’s term and beginning of Little’s, NAA also collapsed three annual conferences to one, now called mediaXchange, whose most recent edition was held in Nashville earlier this month, and typically draws more than 1,000 attendees. (Disclosure:  I have worked on the last two conference programs as a paid consultant).

Little has been at times criticized  – for instance by David Boardman, Temple journalism school dean and former Poynter National Advisory Board chairman — for painting an overly rosy picture of the industry.

On balance, I think it’s a bad rap  – part of a trade association head’s job is to identify the positives and deflect excessive pessimism.

Little told a Harvard-based oral history project in 2013 that she and the NAA board stopped reporting quarterly revenue figures, as I had suspected, to avoid being beaten up so often by negative news.  Annual industry results are due in several weeks and will almost certainly show another loss in total revenues as big print advertising declines persist.

When I asked how the industry had evolved during her time, Little said, “as the revenue mix has changed, people are much more willing to experiment  – there is a lot more transformation than before.”

And will newspapers still be around in another four years?  “No doubt…The mix of circulation (shifting to digital) will continue to change.  But the core of what newspapers do is not going away.” Read more

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Look to the past for lessons on the news industry showdown with Facebook

News and commentary this week that leading news organizations are close to striking a deal to publish directly to Facebook’s platform reminds me, and others, of an industry faceoff six years ago with Google.

As you may recall, Rupert Murdoch had denounced Google for “stealing” content in its news summaries.  William Dean Singleton, chairman of MediaNews and the Associated Press board, threatened a war to protect newspapers’ copyright at AP’s and NAA’s 2009 conferences in San Diego. Google’s Eric Schmidt spoke to the NAA and faced a number of hostile questions.

We all know how that turned out.  Google won.  They continue publishing Google news summaries and referring traffic via search. Except to the AP itself, Google generally hasn’t paid for news it borrows. An AP-led effort to organize a licensing collective (NewsRight), never found its legs.  American publishers have accepted Google as a useful source of digital readers and continue to pay to use Google AdSense and other tools on their sites.

The heart of the parallel is obvious.  Facebook is now quickly supplanting Google as the major avenue to digital content, especially for the millennial/social/smart phone audience so cherished these days.  Publishers might wish it to be otherwise but the dominance of Facebook referrals is a fact of life.

It is what Sir Martin Sorrell, CEO of advertising giant WPP, had in mind when he christened the big tech companies “frenemies,” a decade ago, borrowing a term popularized in teen social chat.  On the one hand, they are competitors — potent ones — for advertising dollars.  On the other hand, making peace, dealing with their ubiquity, and looking for mutual benefit, makes a lot more sense than an unwinnable war.

This frame of reference makes me dubious of the deal-with-the-devil nay-saying popping up in tweets and longer posts.  I am also not so sure the boys and girls at the New York Times, National Geographic, BuzzFeed and other potential Facebook partners need a lot of advice from the sidelines about what deal terms to accept.  The principals may know, but we don’t yet, the splits on ad revenue, the integrity of paywalls, and other crucial details.  So it’s early to say they may give away the store.

Some of the differences now and then are relevant to the developing Facebook story too:

  • Google had a simple and powerful negotiating stance with publishers. If you prefer not to give away a news summary in return for the resulting traffic, feel free to opt out.  Few even tried and those who did (including more recently some German and Spanish publishers) found the pain far exceeded the gain.Facebook’s relationship to content and platform issues generally are far more complex now than then.  There is plenty of room to negotiate and define mutual advantage.
  • In particular, data and customized news and advertising content, barely nascent concerns in 2009, are on the radar of any big publisher now.  At the same time, catching up to the Googles and Facebooks, in data sophistication, not to mention their massive raw numbers of users and pageviews, really is not in the cards.
  • The Google showdown was newspaper centered.  Newspapers thought of themselves as the unchallenged center of the news universe.  Walled gardens were still in style. They were also reeling from the sharp revenue declines as a deep recession piggybacked on the secular shift to digital content and advertising. Hence the anger — and search for a convenient scapegoat in Google.Only one of the three named first players headed for the Facebook publishing platform is a newspaper — the Times itself.  BuzzFeed is all digital, and not much affected by the ad revenue split question since it relies on live-anywhere native ads and does not run banners.  National Geographic is a venerable  magazine brand remaking itself of multiple platforms.   Terms that fit for each of those three and other players to be named could be different.
  • Facebook has a lot to gain.  If it directly publishes a much higher volume of quality content, that could bring on board the 15 or 20 people who are not already members.  And it could help hold the group experiencing Facebook fatigue and ready to drop — in the case of the youngest users for a mix of other social platforms.
  • Facebook directly addresses a pain point for publishers.  Evidence accumulates nearly daily of how slow load times, especially for video on smart phones, causes potential users to quit before they even get started.  Facebook has solutions to what even big publishers struggle to perfect on their own or with expensive vendor help.
  • The initial New York Times story was less than definitive about whether we are talking about publishing all of a news organization’s content or some of it.  I am guessing the latter, at first anyhow, which leaves plenty of room for adjustment after the beta pilot.

So, yes, not without peril, but this could be the beginning of a beautiful friendship.  In the not too distant future, publishers and big tech partners may no longer see data as mine versus yours, but rather as ours.

For that matter, six years down the road, tech giant Z, yet to be invented, may be challenging Facebook’s place as the behemoth which publishing cannot afford not to deal with. Read more

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Ken Doctor: News sites looking for new readers focus on millennials, mobile, and social

Media analyst Ken Doctor was at Poynter this week to speak to our international media tour group and do a webinar. Doctor, who writes for his own Newsonomics site as well as Capital New York and Nieman Lab, focused on building digital audience and ties to communities. I asked him to elaborate on a comment he made to the tour group that now we may be entering a period of several years in which digital audiences are up for grabs:

I also asked for Doctor’s thoughts on the many changes in newspaper ownership with spin-off public companies, private venture funds and local billionaires among the new owners. What are the implications for journalists and the future of journalism?

For more, watch Ken Doctor’s Poynter NewsU Webinar on Building Strong, Profitable Relationships with Digital Audiences. Read more

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Gigaom’s Mathew Ingram: “I don’t think anyone expected this”

At 5:57 Pacific Standard Time yesterday evening, the managers of Gigaom posted one last news story: it was shutting down.

Gigaom, the business and technology news site that was widely regarded as one of the world’s most crucial sources of industry news, shocked that very industry by shutting down last evening, laying off all of its employees, and offering nothing more than a cryptic item on its Web site: “Gigaom recently became unable to pay its creditors in full at this time. As a result, the company is working with its creditors that have rights to all of the company’s assets as their collateral. All operations have ceased.”

Phone calls to the company’s West Coast office were met with this equally mysterious notice: “Hello. We are not available now. Please call again. Thank you for your call.”

Just like that, one of Silicon Valley’s must-reads collapsed without a word of warning. According to Mathew Ingram, a senior writer at Gigaom and one of the site’s most respected reporters, the staff had no idea that the company was bleeding money so fast. “We all knew we were losing money,” Ingram said. “But we’ve been losing money for eight years. I don’t think anyone expected this.”

In 2006, technology reporter Om Malik founded Gigaom as a Silicon Valley-centered news aggregation site and soon built it into one of the industry’s most-read Web sites, employing roughly 22 editors and writers and attracting 6.4 million viewers a month. The company relied on three revenue streams to recoup its creditors’ investment: research, news reporting, and hosting expensive technology conferences. According to Ingram, reporting was the least lucrative of these ventures, but at least it drew eyeballs to the site.

“It was a great way to get people to see us and build new customers and get people to go to our conferences,” Ingram said.

But as time went on, Ingram added, other news media outlets began to see the value in hosting conferences. And as outlets such as the Atlantic and the New York Times began organizing high-minded TED Talks, the entrance prices for such conferences began to decline.

“Everyone decided that conferences was a great way to make money. But now everyone has piled onto the market,” Ingram said. “Over time, that decreases your market share.”

As advertising revenue has been wiped out by the rise of Craigslist, Amazon, and Google, media companies have been struggling to find new ways to make money. Om Malik found a way early on by organizing conferences and drawing smart people together for a price. Now the secret is out, and every other outlet is in the game. If gatherings of experts and charging money to hear them talk can’t pay the bills, what can?

Ingram had a feeling something was wrong with Gigaom a few weeks ago. Still, he said, when the hammer came down last night, the mood among the staff was one of surprise and dismay.

“One minute you’re working on a story, and the next minute someone is telling you you don’t have a job, and they’re turning the lights out.” Read more

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Ken Doctor: Newspaper companies should focus on news apps

kendoctor150Ken Doctor, media analyst and President at Newsonomics recommends that publishers continue to develop reader revenue while print advertising continues to fade. He spoke during a session at the Media Innovation Tour seminar held at the Poynter Institute in St. Petersburg on March 9.

Reader revenue is the new source of revenue for most newspaper companies, but the boost from paywalls has now hit a bump. Newsrooms, he said, now need to “earn their way back to the community.”

The particular focus should be on the number of loyal customers who are paying for subscriptions or news apps for access, Doctor said.  The future of news business lies in “relationships with community,” so news organizations should focus their attention converting their readership from “users – to readers – to subscribers – to members.”

That requires reconnecting with the community and becoming part of their news. “Relationships matter. We have seen less progress with communities and civic news,” said Doctor. He also emphasized the importance of “little data” – data about readers that tell us who they are, what they read, what they shop for and when and where they read.  Newsrooms need to figure out how to make that data make sense.

Finding out more about their readers is now the most important way to form those connections. “It is gold in this new era of reestablishing and deepening the relationships with the community,” said Doctor. News organizations have to change their thinking from “not what do I have that I can give them, but what do they want.” They can offer quality products and think about increasing costs of their products.

Focusing on unique visitors alone is not the best thing to do

Doctor said that even though 52 percent of US newsrooms have paywalls, the number of people actually contributing to the revenue is really small. “We are juiced up on Google and Facebook” and continue to pay attention to wrong metrics of page views and unique visitors. 93 percent of unique visitors are fly-by visitors, who visit the news site once a month. Only one percent of unique visitors are actually paying customers, according to Doctor.

Newsrooms must generate enough quality content so that they can offer a better product to the readers. “Quality is associated with business success.” Newsrooms are asking for trouble if they continue the recent trend of offering less product for more money and expecting revenue gains.

His advice was to pay close attention to the amount of money newsrooms are investing in better content creation. Paying customers are loyal customers, and we need to increase our cache of loyal readers.

Smartphones may be the best way to connect

Mobile is the new source of revenue. Google and Facebook are effectively using mobile to increase their market share, but the news industry has so far done too little to capitalize on it. Smartphones are now the primary connections and establish an intimate connection with readers. Doctor said that if you look at the smartphone screen of a typical person, you will find very few news apps on the main screen.

Observation of user habits and behavior and producing content and services that deliver the content they want will probably get news organizations loyal, paying readership. News organizations that are somewhat successfully doing this are offering a variety of products based on better understanding of reader data. By 2020 desktop readership will go down to 25% or less of digital. Mobile will be up to almost 75 percent within the next five years according to projections.

Doctor mentioned that any new product that news organizations think about creating should take into account the power of mobile, the promotional aspects of social media and the new readership amongst millennials. Social is probably not going to generate enough revenue for a news organization, but it is a great tool to promote the quality content that news organizations produce.

The crucial question that we need to ask, said Doctor, is “Can we earn our way back into our readers’ lives?” Focusing on the paying readers and what more can we do for them may be the answer. Experimenting with new products and services based on smart user data analysis may still get the industry out of its revenue hole.

For more, watch Ken Doctor’s Poynter NewsU Webinar on Building Strong, Profitable Relationships with Digital Audiences.

 

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Stock market darling New Media Investment keeps growing, books small profit

Acquisitive New Media Investment Group reported its fourth quarter results today and tallied the score on $538 million spent buying newspapers over the last year and a half.

The company’s business plan calls for $1 billion in acquisitions over three years, so more of the same is on the way.

New Media also increased its quarterly dividend which yields investors 4 to 5 percent annually. And the company’s shares were up more 6 percent for the day and nearly 50 percent in the last six months.

Besides offering the generous dividend, New Media targets smaller papers that have been less affected by digital competition than metros.  After the acquisition of Stephens Media, announced a week ago, is completed in March, the largest circulation titles in its roster of 125 dailies will be the Las Vegas Review-Journal, the Sarasota Herald Tribune and the Providence Journal.

Year-to-year comparisons are not entirely meaningful given the fast pace of acquisitions.  But borrowing a phrase from retail chains, the company reported “same store” revenues for the quarter were up 1.2 percent compared to a year ago — a better performance than that of other public newspaper companies.

Classified revenues, led by obituaries and legal notices were down for the year but nearly even for the quarter as the economy and auto sales.  The company also described its pre-print insert business, down less than 1 percent, as stable.

When the Stephens transaction closes, New Media papers will have a combined Sunday print circulation of 1.9 million copies.

Net income for the quarter was $11.5 million on revenues of $955 million, a margin of 1.2 percent.  For the full year it had a net loss of $3.2 million.

Beyond its unusual expansion strategy, New Media is following a relatively standard playbook.  It aggressively controls costs with a design center in Austin doing page layouts and some copy editing for the entire chain.  It also is investing in the growth of a new and fast-growing digital marketing service arm (Propel).

When it acquires smaller chains like Halifax Media or individual papers like Foster’s Daily Democrat in Dover, N.H., that were doing neither, CEO Mike Reed explained in a conference call with analysts, New Media can improve operating results relatively quickly.

The company incorporates the former Gatehouse Media and is under the wing of investment giant Fortress.  Its acquisitions have included the former local groups of the New York Times Co.(sold earlier to Halifax) and Dow Jones/Wall Street Journal.  Both chose to exit local newspapering to concentrate on their national titles and associated businesses.

Reed said that total transactions for newspaper companies have ranged between $600 and $800 million each of the last four years and that he expects the same in 2015.  New Media will continue as a buyer, he indicated, but may pause on bigger transactions during the first half of the year to digest the Halifax and Stephens purchases.

Though Reed was not asked directly, that would appear to put New Media out of the bidding for Digital First Media, a chain of 75 papers up for sale since September..

An analyst asked how New Media was able to buy so many properties at a reasonable price.  Most of the market, Reed replied, accepts the notion that “newspapers are dying and nobody reads newspapers anymore.  The facts don’t support that” especially at smaller papers, he continued, “and we benefit from the disconnect.”

Unlike more established newspaper companies, New Media publishes a detailed quarterly supplement with additional statistics and an updated story on company strategy.

Even so there remains a bit of mystery about how the company is doing what its doing and, as a Yahoo Finance analysis yesterday, was headed, “prints cash for Wall Street.”  New Media pays 3.5 to 4.5 time cash flow when it acquires companies but itself trades at nearly 10 times cash flow.

That’s a sweet deal for Fortress and public investors tagging along — as long as it lasts. Read more

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5 Ways McClatchy is a model for a new breed of stand-alone newspaper companies

McClatchy has been a steady presence in the 15 years I’ve been writing about media business with a commitment to serious journalism even while shrinking newsrooms, aggressive digital expansion and continuity of leadership.

Looking at the company’s fourth quarter results Wednesday and listening to CEO Pat Talamantes describe 2015 plans, it occurred to me that McClatchy could now also be a bell-cow for the new generation of spun-off, newspaper only companies.  That group includes Tribune Publishing, early into life on its own after a split from parent Tribune late last year. Later in 2015 Gannett’s publishing division and the merged publishing operations of Journal Communications and Scripps will go that route too.

Here are five ways, McClatchy may be providing a preview:

  1. Revenue replacement race: Like other companies reporting in recent weeks, McClatchy had even worse print advertising results than expected, could not make them up with other mostly digital ventures and thus continues to shrink. And having sold its big digital investment in Cars.com — $632 million for a 25 percent share — it has little left in the cupboard. Newspapers, their websites and other digital offerings will need, going forward to get to some organic growth entirely on their own.
  2. Little love and attention from Wall Street,: The earnings conference call was lightly attended. As best I can tell, no one but two Sacramento papers and the Charlotte Observer even did a story on the results beyond the press release. Shares were down 7.5 percent for the day, back up some this morning after an announced corporate reorganization. Public company investors are not going to be excited about these companies until there is a stronger revenue trajectory.
  3. Cost control matters a lot: McClatchy, like others, declined to offer a forecast for 2015. At a minimum, Talamantes said, he believes the company can further reduce “legacy costs in distribution and production.”  and that will “help to stabilize cash flow in 2015.” But if the year turns sour, more cuts — including more newsroom layoffs — could be in the offing.
  4. Profits have a new meaning:  McClatchy has a history of strong operating margins at its 29 properties and that continues. But most of those don’t drop to the bottom line. The cash (and the proceeds of the Cars.com stake sale) largely goes to paying interest and paying down debt. Most of the rest goes to investments in growing digital or new ventures. So for the most recent quarter net income from continuing operations was a scant $11 million on revenues of $317.6 million — a margin of 3.5 percent.

An  analyst asked Talamantes what he would do were the economy go into recession some year in the future, sending ad revenues down 15 to 20 percent.  Talamantes response was revealing:

Where we might see something play out is if we were in a recession that is bad as you are talking about, we might not be in a position to reinvest as much as we have been doing in the last few years. (An) awful lot of our expense reduction has been plowed back into the business to grow our company for the long-term. And so in that situation we might baton down the hatches a little bit more than we have been doing recently. For example, we have a significant video initiative for 2015, where we are growing the business in that category. (In)…that kind of the situation that you are talking about maybe that’s something that gets delayed a little bit.
-transcription from Seeking Alpha

Time for a new generation of digital: Digital subscriptions, website advertising, basic digital marketing services and direct marketing are all maturing businesses.  So what’s next?  Talamantes said:

What we have seen is, we don’t add a lot of value in terms of traditional web hosting services. We do it here and there. We have experimented with it, but it’s not a core component of our offering (to small and medium-sized businesses). Where we are able to leverage our expertise for client is more on helping them identify additional audiences in our markets beyond what’s available on our website. So in terms of reaching viewers on even national websites within our markets we are able to through audience extension products and using programmatic(automated buying) to go out and find additional audiences for them and then presenting that in one tightly integrated package for them. That seems to be where we generate more value and that we add to that we have reputation management products, social media products…

I’ve been asked as recently as this week if there is a breakthrough approach out there for metro and regional newspaper organizations.  Not so much, in my view.  Even as digital transformation accelerates, McClatchy and its new neighbors as stand-alone ventures will be grinding out the details over a period of years. Read more

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Digital video arms race continues — and little guys can play too

I wasn’t sticking my neck out far in a late December post predicting a boom year for non-broadcast video. Six weeks into 2015 plenty is happening:

*Publications of all kinds (Fortune for instance) are announcing new services and upgrades.

*Reuters, traditionally a business-to-business provider, has made good on promises to launch a daring gamble — Reuters TV, a direct- to-consumer video app, targeting millennials and their smart phones and programmable into a customized 5 to 30 minute show.

*My friends at the American Press Institute published a good report last week on best practices in video production and revenue.  Serial entrepreneur David Cohn, who recently passed through Poynter, has a good riff today on avoiding tired broadcast conventions.

But I also stand corrected on one bit of common wisdom — that video only works for big organizations and that even they are challenged to scale sufficiently.

Les Simpson, publisher of the Amarillo Globe-News, is nearly a year into a video initiative aimed to disrupt local TV and said in an e-mail and subsequent chat that the venture is doing just fine.

The AGN-TV story has many fewer zeros than most you read about digital video but many of the principles are the same, Simpson said — keep it simple and aim for a high volume of self-contained stories.

With a start-up expense of $100,000, he said, he has come close to making that back in the first year, “and we hope to grow it into a major six-figure revenue source” in years to come.

For the effort Simpson hired one former newscaster but otherwise simply tasks his entire news staff of 35, substantially the biggest in town, with regularly producing video stories at outside locations or from simple office studios. With the occasional eye-catcher from elsewhere (like Monday’s implosion of a Las Vegas hotel-casino), AGN-TV is posting 400-plus segments a month and has had 1.1 million views since its launch at the end of March 2014.

The pieces are short and simple.  One I saw on a first visit, running a minute and a half,  recounted that a rancher had been found dead by his truck (of natural causes) while out working.  A typical piece may garner a couple hundred views.  The stories are displayed cafeteria style, not assembled into a newscast.

For advertisers, Simpson targets only local businesses –”banks, car dealers, home improvement services” –  many of whom have short video ads on hand adapted from TV commercials.  As yet, AGN-TV does not offer creative to make pre-rolls for customers.

Simpson figures the paper has several things going for it as a disruptor of local TV news.  “People don’t necessarily want to wait until 5 or 6″ for their local news, so anytime access works in a market where digital is not getting much emphasis from the stations.

He figures their business model is ripe for disruption in the age of Facebook and YouTube, much as print newspapers have been challenged in the last decade.  About 70 percent of AGN-TV’s traffic comes from mobile and tablet, Simpson said, compared to 30 percent from its website. He is relying on 15 to 20 core advertisers so far.

The local option may work best in a smaller TV market, Simpson added in our e-mail exchange.  Stations in a big metro are likely to be more competitive in posting the right sort of video clips to their sites through the day.

Geographically, Amarillo itself is a plus — a city of only about 200,000 but the only one of any size in the Texas Panhandle, thus drawing reader/viewers and shoppers from some distance.

“Tech has been a problem for us,” Simpson conceded.  One of the days I sampled, ads did not seem to be displaying at all.

Though the Gazette-News is owned by Morris Communications, a proactive company in digital transformation, Simpson said that he cooked up the plan on his own rather than as a test sent down from headquarters.

I asked what advice Simpson had for publishers thinking of doing likewise.

“We promoted the heck out of it for three months before we launched, and that’s essential,” he said.  “Also, go all in or don’t go at all.” Read more

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Analyst Gordon Borrell sees local digital ads soaring in 2015, but not for newspapers

Gordon Borrell, among the best known of digital advertising analysts, was predicting two years ago that the newspaper business would stabilize, with some companies growing their digital revenues 30 percent a year.

Now he has reversed course, predicting another boom year for local digital advertising in 2015, but with newspapers and other legacy media badly trailing “pure plays” like Trulia, Angie’s List and Yelp in capturing a share of that.

Based on surveys of local advertiser plans, Borrell said in September:

They’ve changed their story on me…The storm for newspapers isn’t over, though I’ve been predicting for two years that things are about to get calmer. Turns out, the shift to digital is accelerating.

The future isn’t bright for print and broadcast media, I’m sad to say. While I believe that they have a place in today’s media carnival, I also think they’re beginning to look more like an old-time carousel amid the more thrilling anti-gravity rides and looping roller-coasters. Don’t shoot the messenger. We’re just reporting where the screams of excitement are coming from.

In a more detailed January forecast, Borrell says local digital ad spend grew 40 percent in 2014 and will increase another 42 percent this year.  Newspaper digital ad revenues will improve some, but with continued print declines, total newspaper industry ad revenues will fall by an estimated 4.8 percent.

When I spoke with Borrell in October 2012, he was bullish in part because he expected print revenues to stabilize or grow over the next five years, especially at smaller papers. That didn’t happen with print declines approaching 10 percent year after year.

Why the reversal, I asked in a phone interview?

“First, we got the forecast wrong,” Borrell said.  “We usually have the right direction but may be off in the timing.  But this time we were spectacularly wrong and that hurt,” because reliable analysis is the company’s main product.

He added that the forecast was “reflecting some of the optimism out there…about a third of our clients are newspapers.”  Also, over the last two years local businesses began swinging faster to targeted digital options than they had predicted in the surveys that are the basis of the forecast.

Borrell said that he “faults the industry too…They got a little distracted by digital, neglecting print, (still) the big engine that fuels revenue.”

Editors and reporters (Borrell was one himself before turning to consulting) may consider another of his findings especially disappointing:  In the local marketplace strong digital news content, even if it grows audience, does not carry the day with advertisers.

Rather they embrace targeted sites that will find real estate shoppers, car buyers and others actively searching for a specific product or service.  And the big national players like Google and Facebook are killers at gathering data, then targeting ads to user interests, as local publishers remain novices at mining data.

Long an advocate of a dedicated digital sales force, Borrell told me, “You want an ad rep who understands what (the client) is trying to get out of the business…It’s truly a consultative role and has nothing to do with content.”

In fact in the current climate, some of the legacy companies successfully investing in new digital entities,  Borrell said, “have decided their longtime respected media brands were more baggage than asset” and have picked names unrelated to “the big-time media parent.”

Borrell’s take on the industry is not entirely negative.  He credits companies like The New York Times, The Washington Post and McClatchy newspapers for getting a quarter to a third of ad revenues from digital (though that reflects print declines as much as digital growth).

A low rate of growth is not always a bad sign, he added.  For instance McClatchy’s digital ad revenue was roughly flat in 2014, Borrell said, but that reflects earlier success “saturating” their local ad customers with digital options.

Borrell also thinks low profits can indicate progress — if a company is taking what it still earns from print and plowing the cash into digital investments rather than the bottom line and dividends.

His January report describes three types of legacy strategies:

Traditional media companies stuck in the analog world, selling a little digital stuff because it’s easy, but not really believing there’s good money in it; traditional media companies that are more excited about the prospects but still reticent (or unable) to invest more in order to grow quickly; and traditional media companies that have seen the light and are determined to grow again, investing heavily in digital by hiring people or
acquiring companies.

local-online-growth

In our interview, Borrell said that he puts about half the companies in the first category and a quarter in each of the other two.  But he also expects those in the middle either to revert to being “dabblers” or to step up their pace of digital acquisition and investment.

Still, he cautions that the thousands of Internet pure plays will be formidable competitors in any case.  “They have gobbled up share at the local level,” he writes in the report. “In 2015, these independent companies will account for nearly three-fourths of all digital advertising, elbowing out local-media competitors who have tried for two decades to use their existing sales forces to also sell digital advertising.”
who-grew-who-shrunk
Borrell’s forecast comes on the eve of fourth quarter and full-year  reports from legacy companies, along with updated 2015 forecasts.  Gannett and New York Times will kick off the earnings season Tuesday.

Note:  Borrell’s forecast is of locally-placed digital advertising.  So it does not count some of the national advertising in regional and community papers and does not measure national campaigns that are the backbone of the ad base for the New York Times, Wall Street Journal and USA Today.  The full January forecast can be purchased from Borrell Associates.

 

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