Archive for October, 2008


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.


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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

“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 profit margins that serve 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.

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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.

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