Future of newspapers (or how I ate myself to extinction)

Michael Rosenblum — advocate of video for newspapers — asks a familiar question today: What is a newspaper?

It isn’t a new question. In the past decade it has been asked with increasing frequency. These days those voicing the query often have a note of desperation in their voices.

Rosenblum has some ideas, but they are largely familiar recommendations. However, some still need to be restated.

Treat the web like it’s own publishing medium. This is so true it’s hard to believe any in newspapers would need to have that repeated. But they do. That means not simply converting your print product to online bits then calling it a day. It also means using the strengths of the new media toward typical newspaper ends, e.g. informing the public and selling ads.

He offers a few ideas of his own on his this might be accomplished. 1. Hire out newspaper photography/video crews to shoot weddings. 2. Use those same folks to make advertorial content for big advertisers (Bloomies is having a sale, let’s treat it like a story, then we can charge them for the work and possibly making residual ad dollars as well). 3. Rather than simply have newspaper movie reviewers, set up an online hub where the viewing public can join the fun.

Newspapers with wedding photographers might actually work. However, local movie reviewers or their newspaper employers might be better off cutting a deal with Rotten Tomatoes then trying to compete with the many well-known and well-established online movie sites. Of course, most papers have already showed themselves as very poor hands when it comes to such cooperation.

As for doing video advertorials, that might work if the newspaper folks can a) do a better job than an advertising firm hired by the store, and b) deliver viewers. At least on the web the paper could manage CPMs for something like that in the same way they do pure advertising.

Of course, the problem then becomes that papers with dwindling staff would tend to focus heavily on things they can monetize better. There goes the coverage of local politics unless someone is screwing somebody else. Plus, they might tend to under-report stories about those institutions paying them for advertorials.

There is no doubt newspapers need to reinvent what they are and how they do it. Likewise, there are tons of things they could be doing to try and gain online viewers and marginal income. A first step is focusing on core audiences and realistic untapped sources of revenue. Instead of creating monolithic sites that regurgitate the print product online, can they manage niche sites that focus on narrow interests held by an avid group of readers? Can they escape the compulsion to try and be everything to everyone in order to focus more tightly on their own UNIQUE and COMPELLING content? The rub is that with every layoff and buyout retrenching newspapers further remove themselves (both in manpower and brainpower) from the ability to do anything more than what they do now. In classic fashion they are returning to the bunkers to wait the war out.

Given the aversion to change by newspaper publishers and their print readers it is likely too late for many to make the radical changes needed to thrive in the new world.

The real question for many newspapers isn’t whether they will discover the magic formula for success. It is whether there will be anyone left once the air raid sirens stop howling. The way things are going at the moment, what we may see — at some point in the future — is the emaciated survivors blinking at unfamiliar bright sunlight and recounting tales reminiscent of the Donner party.

Strib defauls

The Newsosaur brought word yesterday that the Minneapolis Star Tribune defaulted for the second straight quarter on debt payments. The former KRT paper that was spun off in the McClatchy deal to avoid conflict issues (MNI already owned The St. Paul Pioneer Press).

The Strib was purchased in Dec. 2006 by a private equity group, Avista Partners, made up of former investment bankers. At the time The Star Tribune has a paid circulation of 361,172 daily copies and 596,333 on Sunday. Purchase price was $538 million, less than half what McClatchy paid for purchase in 1998. At the time of the deal the paper was reportedly still earning a profit.

To finance the deal, Avista borrowed $340 million initially and nearly $100 million a year later. Since then it has been forced to write-down most of the newspaper’s value and now, because of falling advertising revenue, finds itself unable to meet the payments on the remaining debt estimated at about $436 million.

The company is in the process of attempting to restructure the debt, but that will undoubtedly bring higher interest payments. MNI recently had to cut a similar deal and rates on their extended time table could top 10 percent, according to reports.

Here’s the kicker, under the circumstances some are estimating the Strib is now worth $125 million. However, that figure is based on the price one would pay to purchase all of their outstanding debt paper and not other more common ways of valuing a newspaper (i.e. cash flow or assets). But, under the circumstances the figure quoted may be charitable given the increasingly uncertain revenue picture for newspapers and that some traditional newspaper assets (such as brand or goodwill) likely have little intrinsic value at this point.

I’m sure folks at the Strib take little solace in knowing they probably aren’t alone. The Philadelphia Inquirer, another spin-off from the KRT deal, is struggling in similar waters. Also, the entire Tribune company (owners of the LA Times, Chicago Tribune and Baltimore Sun) could face default on its debt of $13 billion in the coming year according to some reports.

 

Tags: newspaperdebt, loan default, newspaper future,

Fail Efficiently

“The way to get a great idea is to have many ideas. By definition, most of your ideas will fail. You want to be able to generate ideas very fast, very cheaply and fail very often but at very low cost. Magic Labs is optimized for the efficiency of failure. Among the many ideas, there will be great ideas that bubble up and then we will invest R&D efforts to cultivate the great ideas.”

The quote is from John Wang, chief marketing officer at HTC, the company behind the first cellular handset to be powered by Google Android operating system. Find more of the interview here.

What’s the point? I wonder how many newspapers have an R&D mindset? Retrenchment seems all the rage at newspapers these days. It’s always worked in the past — right? However, some might argue it is simply trying to hold onto a past that has already passed. If now is not the time for radical reinvention then such innovation will be done on the ashes of newspapers.

Speaking of the ashes of newspapers, here is a thought from one of the leading innovators in newspapers: Dean Singleton. According to Singleton, most of newspapers problems are related to the recent economic downturn. Here is what he told Paidcontent.org.

“The biggest thing we need right now is an improved economy, because at least 60 percent of the revenue problem we’re facing today is good-old fashioned economic recession.”

Alan Mutter, of Newsosaur, sees things differently.

Newspaper ad sales didn’t just go the wrong way in 2007. They have been declining steadily since 2001, when the economy suffered the twin shocks of 9/11 and the tech collapse. Even after the economy rebounded in 2003, newspaper sales consistently trailed the growth of the gross domestic product, as detailed here. Newspaper sales actually began falling in the second quarter of 2006 – even though the expansion continued for more than a year – and the rate of decline has accelerated ever since.

However, Singleton doesn’t stop there. He rightly adds: “If we lose $1 dollar in print, we don’t need $1 dollar to come back online. We need 30 cents. Maybe even 20 cents, because of the marginal profit that online produces.”

If that’s true and the money can be found online to enable newspaper survival, should those dollars go to bloated profit margins that serve greedy investors or should they be devoted to innovation and quality content production? Which will better serve the business in the long term?

I bet I know where Mr. Singleton stands on that question.

Tags: Futureof Newspapers, advertising, online model, economy

Q4 newspaper advertising looks thin

Newspaper advertising was falling hard even before the financial markets tanked. Not a good sign heading into the final quarter of 2008.

According to a June Bloomberg News report:

Print advertising sales by American newspapers fell the most on record in the first quarter, tumbling 14 percent as the real estate and job markets shrank and business was lost to the Internet.

Advertisers spent $8.43 billion on newspaper ads in the first three months of 2008, according to the Newspaper Association of America, the eighth drop in a row. Real estate and recruitment ads each fell 35 percent.

The pace of that decline picked up in Q2 of 2008, but NAA is predicting it will stabilize for the rest of the year and the dive will become shallower in 2009. It isn’t clear why they believe the pace won’t continue to accelerate. But chances are all those calculations went out the window in the past few weeks as bank failures and stock market woes have all but guaranteed that advertising dollars will be at a premium for the rest of the year — if not longer.

What a bummer for those of us still trying to make a go in the newspaper business.

Tags: advertising, financial meltdown, future of newspapers

Media stocks slide with Dow

Media stocks didn’t escape the mayhem on Monday, Sept. 29. Newspaper stocks have already been drubbed this year (heck, most have had their pants yanked to their ankles at this point) and some took another beating: Newscorp down nearly 10 percent; Gannett down almost 7 percent; Media General down 4.5 percent.

Oddly, McClatchy — which has dropped more than 90 percent of its value since the ill-fated KRT purchase in 2005 — rose nearly 2 percent. The bump was on news of a new agreement with lenders regarding the $1.2 billion debt it is carrying. But even that silver cloud had a lead lining because the deal — negotiated because of reduced revenue expectations — required the newspaper company to put up more collateral and accept a higher interest rate.

Does it mean anything that broadcasters were hit harder than most newspaper companies? Or is that simply because there is more value remaining in the TV company stocks than in most from newspapers?

The following figures are from Al Tompkins blog.

News Corp. and Viacom hit their lowest levels in more than four years, while CBS and Time Warner fell to one-year lows.

Here’s my summary:
News Corp. down 9.6%
Viacom down 7.83%
CBS down 7.14%
Belo Corp. down 4.27%
Time Warner down 9.22%
Walt Disney Co. down 9.22%
Gannett Co. down 6.59%
New York Times Co. down 3.82%
Media General down 4.33%
Washington Post Co. down 4.18%
McClatchy Co. actually rose 1.78% on news that a new debt agreement had been struck with lenders.
Hearst-Argyle Television was only down 2.87%
Meredith Corp. was down even less, only .69%
Charter Communications down 2.38%
Cablevision Systems Corp. down 5.47%
General Electric Co., a Dow Industrial Average component and parent of NBC Universal, saw a 8.51% stock price drop Monday.

The illusion of floating

An explanation for the long delay between posts:

Dwelling daily on the cataclysmic decline of the newspaper business, especially when one takes ones living from said business, can be difficult. Perhaps not surprisingly, the stress of wondering whether you will have a job or a career tomorrow (as that may affect whether you have a house soon after) can cause physical issues. Still, it caught me off guard.

I’ve spent nearly 30 years in the newspaper business and know now that each day could be my last. If that should come to pass I won’t be going on to any other newspapers because they won’t be hiring. Heck, if I’m right many won’t even exist in the not too distant future.

Besides scaring my hair straight, that prospect made it difficult to sleep, hard to eat, and seems to have conjured a whole litany of actual physical ailments. Perhaps anti-anxiety meds will enable me to keep blogging on the subject. Then again, perhaps not.

There is not much in the way of an audience for my thoughts. This is predominantly to provide some small illusion of control over the monumental events swirling around me. I will simply stop if it contributes to the sense of being swallowed rather than floating on top.

What’s the plan?

Newspapers are in the midst of the greatest retrenchment in their modern history. Almost weekly there are reports of a few hundred more jobs being cut or eliminated. According to the Paper Cuts web site, created to track the loss of jobs at US newspapers, there have been nearly 11,000 jobs lost this year and there are still three months to go. That’s up from about 2,200 in all of last year.

It isn’t like this hasn’t happened before. There have been multiple rounds of buyouts at the newspaper I now call home. The most recent will reduce editorial staff by almost one-third. At my last paper, a mid-sized daily in the Philadelphia area, I survived three rounds of layoffs. In one round I saw a photographer with 12 years at the paper ushered out the door because he had the least seniority in that department.

But the difference in the past was that the newspapers didn’t really need a plan. They cut back and rode it out, confident that the economic factors affecting their bottom line would eventually be reversed and all would return to business as usual. That doesn’t seem likely this time.

The newspaper industry is in the midst of the longest and most severe advertising revenue downturn in US history. And rather than finding a floor, indicators are that everything up to now has just been the beginning of a deepening decline.

Here is what Alan Mutter at Newsosaur had to say on the subject:

In the longest sales setback ever, advertising revenues at newspapers declined for 9 or 10 consecutive quarters in the period ended on June 30, 2008. This surpasses the downturns in 1990-91 and 2001-02, when sales in each case slid for six of eight consecutive quarters before they revived.

If sagging newspaper sales don’t turn around in the second half of this year – which few expect they can do – then the decline will be on track to be twice as long as any in history.

What will make matters worse? More major retailers are expected to go bankrupt and the credit crunch will discourage others from spending cash on hand for newspaper ads. But what may be most telling is that advertisers are losing confidence in newspapers.

As evidence Mutter cites a report to the NAA Retail Advertising Forum that just concluded in Dallas, TX.

While most of the retailers appearing at the NAA conference continued to profess their appreciation for newspaper advertising, David T. Clark of Deutsche Bank said in the report that nearly all of them are moving ever-greater percentages of their advertising budgets to the interactive media – especially when young people are the targets.

Marketers “are ‘flummoxed’ by the multitude of media choices they have right now, so there is an opportunity for newspapers to step in and offer a multi-platform ‘big idea’ to major retail advertisers,” says Clark. “However, it is unclear whether many newspapers are up to the challenge, though there appear to be some that are.”

And newspapers may have a limited window in which to prove they deserve continued advertiser support. According to Clark.

“The next year to 18 months may be ‘make or break’ for the newspapers,” he said in the report. All signs point to weak retail sales and lean advertising budgets for the balance of this year and much of next, [making] it “unclear” whether newspapers “are moving fast enough to secure local market share for when the economy climbs out of its hole.”

What’s your newspaper doing? Do they have a plan to stop their slide or climb out of the hole? Or are they just cutting jobs and hoping it will all turn around on its own? And what are you doing to prepare yourself for what comes out of their plan?

Tags: futureof newspapers, advertising, revenue, employment

My predicition? Pain

One of my favorite line’s from a bad movie comes from Clubber Lang (aka Mr. T) in the lovably bad Rocky II. When asked by a TV person about his expectation for his fight against defending champion Rocky Balboa (aka Sly Stallone).

“My prediction,” Clubber snarled. “Pain.”

What’s the prognosis for metro newspapers? Don’t take my word, listen to two private owners who have built media empires around the big-city paper. They recently indicated a belief it will be too painful to endure.

“The intentions of Copley Press and Advance Publications to explore the sale of two of their signature properties represents a discouraging new lack of confidence in the future of metro newspapers,” Alan Mutter wrote in an Aug. 4 Newsosaur post.

“The potential sale of the San Diego Union-Tribune and Newark Star-Ledger at the worst time in the history of newspapering can mean only one thing: The publishers don’t think the business will get any better.”

Mutter pointed out that the traditional newspaper response to a negative economic climate was to cut back wherever possible and then wait for the tide to turn. That they are looking to sell at a time when there will be few buyers and anyone interested will be offering far less than what would have been considered market value just two years ago.

“With the publishers deciding … to pursue potential exits at a time buyers are few and far between, the irresistible conclusion is that they foresee only a steady wasting of the assets they have held for multiple generations,” Mutter wrote. “Their willingness to consider dumping their papers at what most likely would be fire-sale prices amounts to a repudiation of the businesses that helped build their family fortunes.

“Because Copley and Advance do not appear to be under pressure to divest assets to raise cash to pay down debt, they would seem to be in a position to wait for a more propitious time to sell. Their lack of patience suggests a lack of confidence that better days lie ahead, at least with respect to these two properties.”

I’m not sure which is more depressing. Two major private owners moving, possibly, to simply eliminate newspapers that have been a cash suck. Or the slow, painful, and — ultimately — futile efforts by some of the major public chains to shore up their share prices by dumping more people. Gannett announced 1,000 job cuts across the country and got a modest boost in their bludgeoned stock price. That bump lasted less than a week and their stock closed yesterday almost $2 below the closing price the day before the layoffs was announced.

The following is from Gannettblog, an unofficial community that has sprung up to follow what is happening with the McLean, VA-based chain. It lists the share prices for GCI stock over the last week.

• Wednesday: before GCI confirmed layoffs: $19.26
• Thursday: after layoffs confirmed: $21.31
• Friday: $20.65
• Monday: $19.54
• Yesterday: 18.65
• Today: $17.40

Folks at the Star Ledger can at least look at the eventual demise of their employer as the result of financial losses. The paper reportedly lost tens of millions of dollars over the past two years. Gannett has been profitable until this year, though their collapsing revenues may put them in the red for 2008.

However, Newsosaur’s Mutter says the decision by Advance Publications and Copley to consider selling or closing papers means they have reached a conclusion not yet embraced by the publicly traded chains.

“Presumably, the Newark and San Diego papers could be operated indefinitely with lower margins than companies like Gannett, Lee Enterprises or McClatchy [which] need to pay dividends, cover interest payments and try to reverse Wall Street’s unprecedentedly negative opinion of their stocks.

“But the plan to explore the sale of the paper(s) explicitly signifies that the controlling family is not only approaching the limit of its charity but also has lost faith in the possibility of an eventual turnaround.”

Mutter predicts the vaunted San Francisco Chronicle may be the next major metro to be put up for sale or have its metaphorical head on a block.

What’s the up-side here? Is there any hope?

“While the short list of potential buyers would seem short indeed, it is conceivable that the Newark paper could be of interest to Cablevision, the new owners of Newsday, whose Tri-State cable-TV interconnect coincides relatively closely with the paper’s footprint in New Jersey,” Mutter wrote.

“A case could be made for consolidating the Star-Ledger’s operations with those of one or both of the New York Post or New York Daily News. This outcome would become more plausible if the dueling tabs move forward on their reported discussions about combining their printing, distribution and back-office activities.”

It’s a dim hope and may imply more confidence than almost anyone has at the moment that troubled US newspapers will ever return to any type of prosperity. But that’s what us dedicated newspaper folk do, we embrace dim hope even in the face of expected pain.

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Tags: newsbiz, stock, future of newspapers, hope

How to become a millionaire

An old joke is making the rounds for newspaper folks these days. It goes like this: Want to know how to become a millionaire? Invest a billion dollars in newspapers.

That bit isn’t funny to anyone. But it is true for people investing in newspapers these days. Newspaper stock values are crashing. McClatchy has lost 95 percent of its stock value since purchasing KRT. Gatehouse Media stock has essentially become a penny player. Journal Register company stock is basically worthless. Even the strong public chains have lost significant amounts of stock valuation (Gannett down 80 percent since the beginning of 2005, New York Times down 70 percent for the same period, Newscorp down 36 percent).

If one had invested $1 billion three years ago in some of the world’s biggest public newspaper companies, there is a good chance it would be worth less than $1 million today.

So what’s the good news? For those who like to see the world through a rosè-tinted wine glass, there is the possibility of a white knight. Or maybe just a gray one.

Alan Mutter writes at Newsosaur:

With a growing number of newspapers on the market at a time they most likely will fetch historically low prices, somebody is going to start buying some of them. But don’t count on the usual suspects.

Start thinking, instead, about such unconventional potential purchasers as the multibillion-dollar investment funds created by countries like Singapore or the sheikhdoms of the United Arab Emirates.

The upside is those non-traditional players all have multiple billions to pour into newspapers. The downside(s) — numerous. Mutter points out many, including both the agendas some of these investors might hope to push with their media properties and the potential backlash of having the local paper owned by a group of dimm fur’ners (as my Alabama relatives would say).

However, few traditional media players have the where-withal, desire or stock-holder backing to buy the newspapers that are (or soon will be) on the market. Most are cash-strapped, debt-laden or revenue challenged at the moment. But even those who aren’t would have to know something that has escaped the perception of most media analysts before plunking down anything for those rags on the blocks. That something would be how to stop the bleeding.

Mutter has some thoughts on that, as well. Maybe I will get to them tomorrow.

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Tags: newsbiz, stock value, newspaper investors

13 Things that piss me off

Thirteen things that piss me off about my newspaper.

1. We don’t know who we are, in print or online.

2. We talk local but chase national, even international.

3. We claim to know our audience, then discard the coverage of greatest interest to them.

4. We let attrition consume our local bureaus, we virtually cease covering high school sports, then we complain because our readers abandon us and our advertisers follow close behind.

5. We lack the courage to go all out, even on those things we insist our crucial to our continued existence. We dabble in hyper-local, we create half-assed web sites buried in the rising ash-heap of our online presence, we chase professional and college teams only if the teams are winning, we pretend that no one really cares about local sports even though there is little competition in covering them. We send people to the Olympics then don’t have the people or equipment to cover a story right across the street. We create online teams within our newsroom, but under-cut their efforts by refusing them authority, resources and personnel.

6. We insist we know better than our audience.

7. The people in charge can admit they don’t understand the internet, but they won’t get out of the way.

8. We dither rather than do. We talk projects to death. We create can’t-do excuses.

9. When we finally act it’s like silly schoolgirls at the beach. Stick a toe in the water then talk about whether we should wait to see if the ocean will warm up.

10. We focus on revenue as a reason not to do lot’s of things (if we don’t think it will make enough money, why waste the effort). Then drop wads of cash on things unlikely to ever find an audience, much less make money.

11. We act as if demoralizing our staff is our primary mission. Maybe people do work harder when they think unemployment is inevitable.

12. We talk about strengths newspapers can bring to the internet game, then proceed to drive away the young and enthusiastic as well as the older with any transferable skills as if keeping those who are too scared or unskilled to leave will help us transfer our inherent strengths to the web.

13. When the people in charge worry, it only seems to be about the bottom-line or posterity. They can’t seem to concentrate on what we can and should do now.

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Tags: newsbiz, identity, coverage, hyper-local