Thursday, July 04, 2013

How I killed newspapers, Part Two

OK, I didn’t really kill newspapers.
But my career began when newspapers were doing extraordinarily well, and continued as they did less and less well. For much of the time, I was in newspaper management. So I’m hardly blameless.
Looking back, it’s amazing how many mistakes we made.
In my early days at The Red Deer Advocate, we published two 96-page newspapers in the run-up to Christmas. Advertisers needed to use the paper, and we benefited. (The paper made lots of money, circulation was increasing and we were adding newsroom staff every year.)
A chunk of that advertising was from big grocery and department stores, which would buy six or eight pages of advertising at a time.
Then the stores thought of a cheaper way to reach readers. They printed flyers and pay us to insert them in the newspaper. Eight pages of actual ads might have cost them $7,000. The flyer would cost about one-third of that.
The newspaper industry didn’t like flyers, naturally. One response was to charge high rates to insert them in the paper. (Arguing in part that the charges were justified because being part of the newspaper added value.)
So other businesses charged less and grabbed the business, especially community newspapers that were emerging, in many markets, as strong competitors.
Newspapers were nicely profitable in those days. Revenue was strong and subscribing to your local paper was practically an act of citizenship. Technology was reducing labour costs. The days of a reporter typing a story and then having editors hand the copy to a higher-paid composing room employee who would type it again to produce the type were ending.
But there were already warning signs of trouble ahead, and not just from low-cost competitors. Any research showed newspaper readers skewed old. The younger people were, the less likely they were to pick up the paper. We made small and ineffective efforts to reach them, but mostly told ourselves they would grow into our products. And readership fell, for almost all papers, year after year.
The world changed much faster than we did. Newspapers were slow to experiment with the Internet and online distribution of news and information. We watched as Craigslist scooped away classified advertising. (A double blow that meant lost revenue and one less reason for people to read the paper.) 
And we never really worked at understanding how people’s information needs - and sources - were changing. In the mid-90s, when I was at the Times Colonist, we did a research project on readers’ needs and interests. After polling and focus groups, the consultant reported people in Victoria had very low news needs. They just weren’t interested in news as much as they were in working in their gardens or sailing. That’s partly a reflection of Victoria’s population, but I suspect they were in vanguard in terms of their attitudes toward news. Around the same time a young woman told me she didn’t need the media because if something important happened, someone usually told her about it. That attitude, amplified by a flood of information, is increasingly present.
There were certainly a few efforts to tinker with the product. But not many. And few sustained, bold experiments. (The National Post was innovative when launched, but hardly a bold new direction for newspapers.)
Why? I’d suggest four big reasons.
First, newspapers were a “mature industry.” Ian MacDougall, a consultant whose work involves corporate lifecycles, warns that stage brings the risk of complacency and an environment where innovation or even raising problems is discouraged. Short-term financial results take priority over long-term growth.
Second, corporate ownership brought a focus on short-term results. Corporate managers needed to report growing quarterly profits, or investment analysts would write bad reports, shareholders would sell and stock price would fall. Investing in research or new products doesn’t get much support in that kind of environment. And the response to any drop in revenue is to look for quick expense reductions, even if that risks long-term damage.
Third, many papers - most larger papers - had costly, inflexible union agreements, signed when times were good. National advertisers, for example, began sending completed ads for publication in the 1970s so they had control of the way they looked. Union contracts gave some composing rooms jurisdiction over all production. So, as a compromise, compositors typeset and made up versions of the ad, which was then thrown in the garbage. The Vancouver Sun and Province quit accepting inserts last year. The union contract called for mailroom staff to be paid more than $90,000 and ‘stuffers,’ who put the flyers into the papers, to be paid the equivalent of more than $60,000 a year. 
And, fourth, many people in the industry at every level were delusional. I started writing about newspapers after after a lively exchange on Twitter, which was started by a tweet from a journalist that “you can't beat your daily newspaper for value... less than a cup of coffee... ante up, folks.”
We kept telling each other what great value we were and how much people needed us, even as they were sending the opposite message. And, in many ways, we still are.
So what will work? That’s another blog post.

Wednesday, July 03, 2013

How I killed newspapers: Part One

Found myself in a lively Twitter exchange today about the future of newspapers, sparked in part by Postmedia’s grisly quarterly report.
Things look bleak for most newspapers. Postmedia is Canada's largest newspaper company. Its report set out the problem. Revenue - ads and circulation and digital - was down 9.4 per cent on the previous year. Expenses were down 9.1 per cent, thanks to a big cost-cutting drive. Based on those numbers alone, next year’s financial performance will be worse, and the next year worse still.
Circulation - the number of newspapers sold - is down by 14 per cent in the quarter. Some of the decline reflects the decision to kill Sunday papers in Ottawa, Edmonton and Calgary, which were judged money-losers. But that’s still a huge loss in readers.
Postmedia newspapers have been losing about five per cent of their subscribers a year. Which means a paper can shed 25 per cent of its customers in a little over four years.
Newspapers once sold themselves as mass media. Buy one ad, in the 1990s, and you had a chance of being seen by more than two-thirds of the adults in a mid-size city. (Numbers were higher in small communities, lower in big ones.) Now an ad might reach 50 per cent of the population in a mid-size city. Advertisers will pay much less - or find a more targeted media.
When everyone read the paper - or it seemed that way - there was pressure to subscribe. Otherwise, you might not be in on the next day’s conversation at coffee break.
And, of course, fewer readers means less circulation revenue.
Paywalls and digital subscriptions were supposed to help address the problem. It’s not a bad short-term strategy to pull in some revenue. But the early evidence is that - for almost all newspapers - the hope that people’s payments for online content will come close to covering the bills is delusional. (Which is the subject for another blog post.)
Postmedia has tested paywalls and introduced them in all its papers. The quarterly reported noted 100,000 people had signed up as digital subscribers. But it didn’t disclose how many were existing print subscribers, who would pay nothing, and how many were real, new, revenue-producing online readers. Which means there were not that many paying customers. Companies like to share successes.
Overall digital revenues - online ads and subscriptions - were up 2.2 per cent for the quarter. 
That’s not good. The corporation lost $21 million in ‘traditional’ revenues, and gained $500,000 in new digital revenues. Postmedia management has been pitching a “digital first” strategy, counting on double-digit revenue growth to help offset print declines. It hasn’t happened.
That’s a fairly bleak look at the industry. 
But we haven’t even got to one of the big problems.
Michael Brown, then the slightly scary head of the Thomson Corporation, talked about the virtuous circle. Newspapers would invest in the product and get more readers and advertisers, and use some of that revenue to make the paper even better, and on and on. (Brown made the decision to sell off Thomson's newspapers in the mid-90s.)
Now, the focus is on cutting costs. And the chosen approach involves reducing the quality of the newspapers, which will mean fewer people will buy them and more cost reductions will be necessary. The opposite of Brown’s virtuous circle is the death spiral. Why start paying for a newspaper as it cuts content?
Doom and disaster aren’t the inevitable outcomes. 
But they aren’t a bad bet. It was hard to see anything in the Postmedia report to shareholders that hinted at a strategy to build a sustainable business based on providing news and information in Canadian cities. 
Many Postmedia papers - like the two in Vancouver - are still operating with crushing cost structures. The  contracts were freely negotiated by both sides in the good old days. But paying a semi-skilled mailroom employee $90,000 a year, as the business crumbles, is folly. 
It’s not a pretty picture. But there is a powerful argument for the importance of newspapers, or at least news organizations that pay competent, trained people to report what’s going on, and offer commentary. That is not a slag on bloggers and citizen journalists. (I am one.) But there is value in having a paper that will stand behind you when you are sued, or come up with a cheque every week while you check out stories and gain understanding of issues. 
But the industry isn’t responding in a way that shows it understands the crisis. That is consistent with at least 30 years of failure in responding to change. 
That’s tomorrow’s blog post. (The post title - How I killed newspapers - is tongue in cheek. But I did work in the biz during the years of decline, for many of them as a manager. It's hard not to feel some blame is in order.)

Tuesday, July 02, 2013

Where have all those post-Olympic tourists gone?

The mass protests in Brazil are big news down here. In part, Brazilians are mad that the government is spending billions to host the World Cup and the Olympics, and don’t buy promises of economic benefit.
B.C.’s post-Olympic tourism stats support the protesters’ skepticism.
The promised increase in visitors didn’t happen. In fact, two years after the Games British Columbia actually lost ground as a tourist destination.
In 2007, B.C. had 4,837,000 international visitors, 26.9 per cent of the Canadian total. The numbers plummeted in 2008 and 2009, not surprising given the global recession and financial crisis. International visitors increased slightly in 2010, fell in 2011 and inched up 1.1 per cent last year.
The number of international visitors in 2012 - 4,220,000 - was 13 per cent below the 2008 total.
And B.C.’s share of the total visitors to Canada was 25.9 per cent - the lowest in  at least seven years.
You can rationalize changes in the raw numbers, pointing to external factors.
But B.C.’s tourist visits aren’t just flat-lined. They’re declining. The Games impact has been non-existent.
That’s not surprising. How many British Columbians decided to visit Turin after watching the 2006 Games?
But in selling the public on the Games, the government promised big benefits. It commissioned a study in 2002 that predicted the Games would result in 1.7 million to 2.7 million additional international visitors between 2008 and 2015. That’s at least 200,000 per year.
Those were among the benefits a contribution from taxpayers equal to some $450 per person - kids included - to pay for the Games.
And the promise of tourism increases has turned out to be entirely empty.
Those Brazilians have good reason to be worried.

International visitors

BC Share

Sunday, June 30, 2013

You don't have to be religious to help - but the people who do mostly seem to be

I’d certainly argue that you don’t have to believe in God to help others. It seems a natural thing to to do for any thinking, feeling creature.
But it’s striking that the people who actually show up to help in Honduras are driven by their faiths. 
A posse from a Louisianan church was here this month to help an orphanage/care home in Copan Ruinas. They built beds for the kids, with cupboards for personal stuff. They worked hard, dealt with the inevitable problems and left the home much better off. The kids were big fans of the guys. The new units replaced wrecked beds with stinking mattresses, where kids often slept two to a single bed and gave them a place to store their few possessions. It simply would not have happened if the guys from Louisiana had stayed home.
There is personal satisfaction, I’m sure. A chance to see a new country. But really, the group were here because they believe helping others is a tenet of their faith. It’s what Jesus wants them to do.
There are many others. Last year, I rode up into the hills with a church group from Tyler, Texas. They were working on a water project. The core group had been doing annual missions for at least 12 years. Projects in their community and another country were built into their church plan each year.
When we were in Tomala, we bumped into a mission group doing eye care. They had collected thousands of eyeglasses back in the U.S., and volunteers had tested each pair, and labelled them with the prescription. The group tested people in poor communities and gave them the correct glasses so they could actually see to perform basic chores.
Missions are a big deal here. There are some 2,000 a year, according to an article in Honduras Weekly. Most days in the San Pedro Sula airport you can spot people - Americans - matching t-shirts, often with religious slogans. Honduras got about 286,000 U.S. visitors last year; 34,000 were on missions or aid work.
They aren’t all alike. Some groups are more interested in proselytizing than the day-to-day problems of Honduras. Some are poorly planed, and it probably would have been better if the people had just collected the money they spent on travel and donated it to an organization down here. (Although there is merit in simply giving North Americans a chance to see life in a poor country firsthand; no amount of reading offers equivalent understanding.)
And there is a lot of debate about the projects, and whether some actually have a negative impact. Will struggling communities learn that it’s easier to wait for a bunch of gringos to come down and fix the collapsed school roof, rather than come up with a solution? Will there actually be a teacher for the school? Will the new water system break down within a year because there’s no money, or knowledge for maintenance? (About 50 per cent of water projects in Honduras fail within five years, a consultant said at last year’s Project Honduras Conference.)
Those are all arguments for well-planned mission trips, not against the concept. (Or excuses for inaction.) And a certain percentage of failures - for missions, NGOs or anyone else - is just part of the process in a country like Honduras.
There are lots of people travelling here to contribute who aren’t religious. But they are wildly outnumbered by the faith-based groups who come down to work, or send cash or contributions. 
That’s true in Canada, too, according to most research. People who go to church give more to charity - secular charities, not just their churches - and are far more likely to volunteer.
I’m not prepared to draw any sweeping conclusions. And I still believe religious faith is no prerequisite for acting to help others.
But it is sure striking that the people doing most of the heavy lifting in Honduras are brought here by faith.