Wednesday, July 10, 2013

How to save newspapers

I’ve painted a grim future for newspapers in the last few posts.
So what can be done?
One option for companies is to cash out. Cut costs, raise rates, make as much as possible for and then sell the assets and walk away. 
But let’s assume owners see value in the brands. Postmedia took in $830 million last year and generated positive cash flow. If newspapers can slow the revenue decline, trim expenses to fit a new model and find new audiences, they might have a viable, though much smaller, future.
First, newspaper managers have to admit they’re in big trouble and the business model is broken. Denial and delay kill companies. 
That means planning for a future without a printed product. Postmedia likely spent about $210 million last year printing and distributing newspapers - about one-third of operating expenses. The same information could be delivered online or through mobile devices for a tiny fraction of that amount. Maybe print papers will survive. But I doubt it, and it’s foolish not prepare for the alternative.
And that also means planning for a future with much less revenue. Newspapers, in their heyday, faced limited competition and benefited from barriers to entry.
But in the online world there are countless competitors and new ones emerging every day. Revenues are going to be lower. That means coming up with a new business with a much smaller cost base. (The Seattle PI, online-only for three years, has a 12-person newsroom.)
Second, newspapers have to figure out the distinct things they can offer to attract and retain readers. Newspaper websites are still a grab bag of content, at their base not much different from the print versions of two decades ago. A little entertainment, a little world news, a lot of local coverage organized along traditional lines.
But there are lots of great entertainment sites, and fine places to get world news. There is no reason for readers to go to their local newspaper website.
If newspapers don’t figure out what they want to offer, they can’t cut costs intelligently and ensure their most valuable coverage is protected.
Third, they need to experiment. When I left the Times Colonist for Honduras in 2011, we had the traditional newsroom cake and I got to offer advice. What we’re doing isn’t working, I said, which gives a great freedom to test bold, new experiments. There is little to lose. Try wild things.
Where are those experiments? Lay copies of Canadian daily newspapers from today and 15 years ago down side-by-side and they are eerily similar, despite the dramatic loss of readers. Look at newspaper websites across the country and you find sameness. 
There are small interesting efforts. The Vancouver Sun has developed useful information databases as way to be more valuable to readers. The National Post has decided opinion and analysis are its strengths.
But mostly newspapers have continued with a uniform model that has been in trouble for at least 15 years. Postmedia’s 10 newspapers could test different content, or ways of getting people to pay. They don’t.
What experiments are worth trying?
• A truly overwhelming emphasis on key local content is an obvious approach to test. That would mean making sure all resources are focused on community coverage that matters most to readers. Anything else just wouldn’t get done.
  • Focusing on context and commentary, while creating stars, is worth trying. If a newspaper has the best political columnist, or a specialized reporter, then he or she needs to be promoted as a big reason to read. Newspapers have done a lousy job of selling the quality of their people. And when news is shared in Twitter within minutes of it happening, maybe context and commentary are things people will pay for.
  • It would be good to see a newspaper experiment with being a deep information resource. Report the political news, but also post the videos of the scrums and the tapes of interviews, the key documents and the Hansard transcripts and comments from other media. Put the city council agendas and the video feed of the school board meeting online. Create crime maps. See if people value more raw material.
  • Some paper should try the celebrity/scandal/outrage model, although I’m not sure it would work in Canada.
  • La Presse’s experiment in planning for a paperless future is worth watching. It’s spending $40 million to develop a totally new product for tablets. There is a separate newsroom with about 100 people working on the project. 
  • A newspaper based on reader-generated content would be a good experiment. One of my old employers is launching four community newspapers in Liverpool, and content will come almost entirely from readers. Trinity Mirror has hired 20 community content curators for its papers to handle readers’ photos and stories. People spend time reading each other’s work on Facebook; why not on a newspaper website. (Especially edited and properly presented.)
  • Someone should try a premium product - a brand extension - at an extra cost. Promise special information, hire a staff and charge readers. (Crikey, an interesting Australian experiment, offers news and analysis and has found a niche, with some 16,000 paying customers.)
I’d bet on local, commentary, stars and reader-generated content and make determined spending cuts on anything that didn’t support those areas.
But what’s needed are dozens of experiments, driven by a mix of desperation and hope. And not just in content in presentation and delivery.
The clock is ticking. 
Footnote: Aaron Kushner’s experiment with the Orange County Register is one of the boldest. He bought the paper and has spent heavily adding newsroom staff and content, counting on readers to pay much more for the paper. The experiment is not likely to be duplicated in Canada.


RossK said...

Very interesting Paul--

Personally I like all of the experiments...In fact, I think at least four of the them are included in the way I have my (constantly changing) Twittmachine feed set up right now. But that is still kind of hit or miss and I would be very happy with a well curated and editted version of any/all of them.

So, how to actually make it happen?

Here's one thing that I'm wondering about...

How many of your suggested experiments need be done by existing old media companies as they are currently configured?

Put another way...What if there were, instead, a ton of start-ups that competed for a venture pool of $$ that came from, say, a fund that was generated by an old company or two cashing out (and doing right by their current staff) before they went down the tubes completely?

Of course, something like that would likely require some assist wherein the tax benefits made it possible/financially favourable...But what the heck, given that we are dreaming of wild experiments here, I thought it was at least worth suggesting.


paul said...

Interesting thought. Some of the pilots could be done by other, new organizations. (Though current companies have a lot of the resources in place.) I wouldn't count on any pools of cash in any form from the old companies though.
Did you look at Crikey, the Australian online news and analysis site? The model seems to make sense. (And shows the value of a star columnist; Keane seems to be well-known.) That kind of startup is feasible here.

paul said...
This comment has been removed by the author.
RossK said...

Crikey is good.

I like the star/anchor/magnet idea with a stable built around it...Weirdly, it's kind of how the science business often works best/most efficiently these days (and really helps with bringing in the resources needed to acquire the infrastructure to do things well).

Anonymous said...

If La Presse is spending $40 million to develop a totally new product for "tablets" they don't understand the market.

August 2013 marks the 10th anniversary of the Okanagan fire where more than 200 homes were lost. showed - and still shows - how to do news right in this new(s) digital age.

kootcoot said...

Paul, I totally agree that local news could be important in any kind of success to be achieved by online newspapers. As a resident of a non urban area (the West Kootenays) as I first became familiar with the web and the wealth of information available there, I increasingly noticed the absence of info about local issues.

We are fortunate in my area to have a bi-weekly totally advertiser (with the odd paid subscription by people living away) supported paper that covers the local area of Kootenay Lake, the Slocan and Arrow Lakes region.
Meanwhile the Nelson Daily News, which thirty years ago was a wonderful daily, became part of a chain and gradually became a repository for PR releases from Hollywood and other fluff died an ignominious death after over a hundred years of publication.

Anonymous said...

I'm reading a blog and am in contact with a researcher writing about and working in Mali.

I can watch live streams of the protests in Egypt and "talk" with Egyptians on my phone.

Desktop and laptop sales--sitting in front of a monitor--are almost obsolete. The little screen is the future.

Web or print, a capitalist venture still has to make a profit: the "content" must be massaged for the customers.

1) What is "news" to someone under 30?

2)Why do I need "news" people to gather and interpret the world for me?

3) What evidence is there that "people" want quality content and not celebrities/sports/sex.

paul said...

Anon 10:28: is an interesting and apparently successful experiment. I'm keen to know more about the business model.

Marc Edge said...

Maybe I just don't get it. Postmedia is not just posting positive cash flow, as you state. It is making a pretty nice return on revenue. Operating earnings of $32.8 million in the last quarter on revenues of $191.7 million amounts to a RoR of 17.1 percent. That's a profit margin that most companies would admire. The much-ballyhooed quarterly loss of $112 million is made up mostly of a $93.9 million "impairment" charge representing the reduced value of the company, which is a classic "paper" loss and involves no money going out the door. Another $16.8 million in restructuring costs is non-recurring, except that we'll likely see it in the next quarterly report as well with all the buyouts at Pacific Press. Then, of course, there's the $15 million in interest payments for the quarter. But the newspapers themselves are nicely profitable. So what's the problem? If Postmedia goes bust, the papers will be bought by someone else who will pay less for them and have less (hopefully no) debt to pay interest on. But why would they stop publishing? They make good money. Go online? There's no money in it.

paul said...

Marc Edge:
I hope you’re right.
But I see a few problems with the scenario. The “going bust” process tends to be untidy. Canwest’s inability to pay its creditors led to Postmedia’s ownership of the papers, with its debt problem. Given reduced opportunities to sell, an owner in crisis is likely to opt for a desperate attempt to protect short-term profits that won’t leave much for a new owner to build on. An asset strip, as they say.
Interest payments, depreciation and amortization are real, even if only the former affect the available cash flow.
So are the pension and contractual obligations that make most Canadian newspapers less attractive to a new buyer.
And most importantly, the trend lines are terrible. If you take last year’s revenue and expense reductions for Postmedia and extend them on a straight line basis, the corporation will be unable to make interest payments in 2015 and losing money, on an operating basis, within four years. (Before interest and depreciation and the rest.)
Things might change. Newspapers might cut costs more quickly, or revenue declines might slow. But there is no real reason to think those are the most likely scenarios.
I agree that there is much less revenue potential online. But it seems the only way to ensure a model where the work of good journalists on local issues is widely available.
For better or worse, we’ll have the answers in a few years.

Anonymous said...

and another thing...

media consolidation: 6 companies now control 90% of American media

and they will soon be joined by the Koch brothers buy of the Tribune company:

Burbank Leader, Burbank, California
Daily Pilot, Costa Mesa and Newport Beach, California
Glendale News-Press, Glendale, California
Huntington Beach Independent, Huntington Beach, California
Valley Sun, La Cañada Flintridge, California
Coastline Pilot, Laguna Beach, California
Los Angeles Times, Los Angeles, California
Pasadena Sun, Pasadena, California
Hartford Courant, Hartford, Connecticut
South Florida Sun-Sentinel, Fort Lauderdale, Florida
Orlando Sentinel, Orlando, Florida
Chicago Tribune and Redeye, Chicago, Illinois
Baltimore Sun, Baltimore, Maryland
The Morning Call, Allentown, Pennsylvania
Daily Press, Newport News, Virginia

Spanish-language newspapers:

Hoy, Los Angeles and Chicago
El Sentinel del Sur de la Florida, Fort Lauderdale, Florida
El Sentinel, Orlando, Florida

Cable Television:

Food Network
Chicagoland Television

Broadcast TV:

Los Angeles KTLA 5 (31) 1985 The CW
Sacramento - Stockton - Modesto KTXL 40 (40) 1997 Fox
San Diego KSWB-TV 69 (19) 1996 Fox
Denver KWGN-TV 2 (34) 1966 The CW
Hartford - New Haven, CT WTIC-TV 61 (31) 1997 Fox
Waterbury, Connecticut WCCT-TV 20 (20) 2001 The CW
Washington, D.C. WDCW 50 (50) 1999 The CW
Miami - Fort Lauderdale WSFL-TV 39 (19) 1997 The CW
Chicago WGN-TV ** 9 (19) 1948 The CW
Bloomington, Indiana WTTV 4 (48) 2002 The CW
Indianapolis WXIN 59 (45) 1997 Fox
Kokomo, Indiana WTTK 29 (29) 2002 The CW
New Orleans WGNO 26 (26) 1983 ABC
Grand Rapids - Battle Creek - WNOL-TV 38 (15) 1999 The CW
Kalamazoo, MI WXMI 17 (19) 1998 Fox
St. Louis KPLR-TV 11 (26) 2003 The CW
New York City WPIX ** 11 (11) 1948 The CW
Salem - Portland, OR KRCW-TV 32 (33) 2003 The CW
Philadelphia WPHL-TV 17 (17) 1992 MyNetworkTV
York - Harrisburg PA WPMT 43 (47) 1997 Fox
Dallas - Fort Worth KDAF 33 (32) 1997 The CW
Houston KIAH 39 (38) 1995 The CW
Tacoma - Seattle KCPQ 13 (13) 1999 Fox
KZJO 22 (25) 1998 MyNetworkTV

Radio Stations:

Chicago WGN-720 1924 Talk

Where does 'news' end and propaganda begin?
Is losing money at news just part of the cost of doing business?

Anonymous said...

Who is and who is not a journalist?

If PW writes for the T-C, he's a journalist.

If PW writes for his blog, he's pond scum.

Declan said...

In addition to your sensible suggestions, maybe some newspaper could try reporting from an angle that isn't way over on the right wing.

I used to feel as you do that newspapers were a valuable civic amenity worth fighting to preserve. Now I just see them as a tool used by rich people to get their way and I cheer/fight for their ongoing demise.

Anonymous said...

Sun Media to close 11 newsrooms across Canada

Anonymous said...

When You Account For Pensions, The Boston Globe Sold For Negative $40 Million

The terms under which John Henry is buying the paper stick the New York Times Company with the Globe's pension obligations, which are said to amount to around $110 million. Which is to say that the worth of the overall Globe enterprise is negative $40 million. - The New York Times Company bought The Boston Globe for over a billion dollars in 1993.

Suzanne said...

I'm so very very late to this comment thread, but I feel inclined to add my two cents.

1) What with all of these superannuated and still pretty young reporters out there, I think they should put their severance packages to good use. One idea would be to buy the Vancouver Province and follow one of your suggestions - turn it into an actual slam/bang tabloid. I got this idea while reading the NY Post online, which manages to cover headless bodies in topless bars while also breaking real news stories. Reporters and editors! Stop waiting for "someone" to find a solution. YOU are the solution.

2) Guess what, I subscribe to the New York Times online. And I read TMZ. I'm human. Local and regional papers should cede the international gossip and sleaze fields to those who do it well. I personally also think they should stop being real estate ads masquerading as newspapers, but that's just a pet peeve. This is an additional vote for the "more local".

3) Continuing that idea, maybe a local/regional paper could partner with another national or international paper so your (online) subscription includes either a section from that paper (i.e. international news from NYT) or a certain number of self selected stories each week. So your subscription gets you excellent informed local and regional news and top flight news sources from elsewhere.

4) Maybe the model is something along the line of the Trust that funds The Guardian. Who ever said news organizations had to be profit centres? They were rich men's fancies for many years, and they can be again (Hello Jeff Bezos!). The 1% have to be good for something more than taking expensive space vacations. Or just go non-profit or Community Contribution Company. It's the news version of crowdfunding.

I regret not joining the conversation earlier.