June 24, 2014

It seems like only yesterday, but we are closing in on five years since Advance Publications shook up the newspaper business by stopping daily publication of the Ann Arbor News, dissolving the company and reincorporating as a web-dominant enterprise.

I was reminded to take a look back at the relentless, if controversial, strategy when Advance Local president Randy Siegel released one of his regular six-month progress reports to senior executives Friday and e-mailed me a copy.  (The full text follows at the end of this post).

In the manner of such communiques at Advance and other newspaper chains, the report was upbeat, noting big increases in web traffic and digital ad sales, spiced with mentions of journalism of note and editorial prizes.

As measured by comScore, Advance’s 31 properties were up 43 percent in visits year-to-year in April and 37 percent in May, Siegel wrote, and collectively comScore ranks the sites ninth among general news sites nationally.

“All of our local markets are generating significant year-over-year growth in digital revenues,” Siegel added, led by a 66 percent increase at its Pennsylvania properties.

This prompted me to ask (and not for the first time) how Advance’s digital revenue gains compared to continuing print advertising losses.

Advance, like most private companies, does not release revenue or profit numbers, but Siegel did reply:

Our goal from the beginning has been to offset our secular print revenue declines with digital revenue growth and lower overall expenses. We have made promising steps toward that goal, but we have more work to do, which is why we are so focused on building our digital audience and digital ad revenues.

He also confirmed that with the addition of Portland and Cleveland papers and the company’s New Jersey Group, all now have made the transition to a digital first emphasis.  The New Jersey papers and hometown Staten Island Advance did not reduce print frequency or home delivery as all the rest did.

So take that as evidence that whatever critics may say about the strategy, Advance and its Newhouse family owners are sticking with it.

Back in 2009, the changes in Ann Arbor (and parallel action at Advance’s other Michigan holdings) seemingly came from the blue and were jaw-dropping.  A highly literate university town the first to lose its only daily newspaper?  But Advance explained that the paper and its website had begun losing money, and that it saw no realistic way to reverse that without changing the publishing pattern.

Advance brought the same approach to New Orleans in 2012, reducing the Times Picayune to a three-day-a week schedule and touting its NOLA.com site as the substitute go-to place for a daily report. Laid-off legacy staffers — joined by some loyal print readers and local politicians — howled in outrage. Advance stuck with the plan, though, and said it would not entertain local offers to buy the paper.

The Baton Rouge Advocate began circulating in the city and later launched a New Orleans edition, prompting the Times-Picayune to restore print on some days of the week that had been eliminated.

My fellow media business analyst Ken Doctor and I expressed similar reservations about the New Orleans strategy at the time it was announced.  With digital ad sales disappointing and rates falling, the commitment to building that as a primary revenue source seemed quixotic.  And by keeping all its sites free, Advance also has been sitting out the bump in circulation revenue the majority of newspaper companies have achieved with paywalls and higher priced print + digital access subscription plans.

Very few have followed Advance’s lead. To me that does not necessarily mean that Advance’s long-term view of the industry and the need to pivot to digital is wrong so much as it is premature.  A pullback to Sunday print (and maybe one or two other days) is likely in the future, but most companies think print, accounting for about 85 percent of revenue at most papers, still pays the bills and needs to be kept as strong as possible.

In other ways, though, the last five years have been kind to Advance’s assumptions.  Print advertising has not stabilized as many had hoped.  I am hearing that this year, especially in the second quarter and especially with national advertising in metros, is nearly as bad as the last two, with print ad ad revenue declines approaching 10 percent in both 2012 and 2013.

Also we are are inundated with reports (recently the New York Times in-house innovation study) on how hard it is to break the habits of daily print culture — even when that is what top management aims to do.

So Advance just may be vindicated over time in thinking that the sooner you start on radical culture change, the sooner you get there.  But the transformation is costing some serious money (and upset in Advance communities) in the meantime.

The full text of Siegel’s June 19 memo follows:

Advance Local mid-year update

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
Rick Edmonds

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