EyeTrack or eyewash?

In yet another example of the newspaper industry's capacity for meaningless and self-delusional research, the Poynter Institute has issued a breathless study proving that, duh, people like to read things that interest them.

"We were amazed by the numbers," says the study dubbed EyeTrack07. We are amazed that they are amazed. And we are even more amazed that this study, deftly debunked here by Alan Jacobson, costs $695.

EyeTrack requires test subjects to wear a klunky set of glasses hooked to a mini-camera that makes them look strikingly similar to the E.T. character recently contrived by the Newspaper Association of America to promote newspaper advertising.

"Any scientist worth his salt will tell you that EyeTrack07's findings cannot say anything conclusive about newspaper readership," says Alan, who eyeballs more newspapers a day than most people do in a month. "Data is meaningless if it isn't useful."

Fuzzy math

With so many members of the American Society of Newspaper Editors having majored in journalism, it is understandable that they may not be enormously proficient at math.

But even a fellow journalism major, like me, can see that the ASNE’s 2007 newsroom census doesn’t add up.

After more than a year of relentless staff cutting throughout the newspaper industry, the ASNE is reporting that the total headcount in America’s newsrooms rose 4% in the last 12 months to reach a record 57,000. How could that be?

The answer, of course, is that the ASNE has changed the way it counts noses. And its new math is as confusing as the old New Math was.

The surprising surge in newsroom staffing results, in part, from the ASNE's decision for the first time to include “full-time” online journalists in its annual census, which is a good (and overdue) thing. The society says 2,000 of the 57,000 jobs are those of staffers who work exclusively at online tasks.

If you back the 2,000 dedicated onliners out of the 2007 staffing total, however, you still get 55,000 newsroom jobs, which is not only 0.4% higher than last year’s total but also higher than any staff level since the economic cataclysm of 2001. That number makes no sense, given all the downsizing that has been going down.

“Newspaper editors report the numbers and we were surprised by them ourselves,” says an ASNE staff member, who didn’t want to be identified. “Although the larger papers have been reducing staff, some small and medium ones have been hiring.”

But the real reason newsroom numbers appear to be rising, says our friend at the ASNE, is that a growing number of online staffs are being merged into traditional newsroom operations. The actual number of newsroom newbies isn’t available, because the ASNE (inexplicably) didn’t track online staffing in the past. So, there’s no way to accurately compare this year’s staffing to last year’s statistics.

The sloppy data-gathering is more than an academic issue. The ASNE’s imprecision is almost certainly obfuscating the extent to which newspaper staffs have shrunken during the industry's long-running economic crisis.

And this the thing I don’t get: Why would a group of editors want to do that?

Thinking different

It’s easy to fault Andres Martinez, the former editorial page editor of the Los Angeles Times, for foolishly hiring the client of his girlfriend, a flack, to be guest editor of the freshly killed op-ed section of Sunday’s paper. But that’s not the worst of it.

While there are ample and obvious reasons to criticize the circumstances surrounding the selection of producer Brian Grazer as the guest editor of Current, the thing that gripes me even more is that this rare honor was given to a successful, white, fifty-something, professional man who is just like the successful, white, fifty-something professional men who largely control the media. The major difference between Brian and most media practitioners is that he is a little – OK, a lot – wealthier than they are.

If the bosses at the L.A. Times wanted some different thinking in their op-ed pages, why couldn’t they think different?

Andres’ stunt, fully detailed here by the courageous Jim Rainey who outed a senior editor of his own paper, was the last thing the demoralized Times needed after years of angrily departing editors, sacked publishers, tumbling circulation, weakening revenues and accelerating profit demands from its embattled corporate parent. Andre resigned today to protest the publisher's decision to scrap the upcoming op-ed section.

Although the idea of installing temporary alterative leadership at Current was innovative and laudable, the aforementioned indiscretion was not the worst part of its execution.

Instead of turning the paper’s Sunday dignity page over to a Hollywood dignitary, the Times could have given the honors to any number of people whose views are not ordinarily reflected in media coverage.

Some examples that come to mind are a resident of Baghdad, an illegal Mexican immigrant, a Los Angeles public school teacher, a cop, a homeless person, an unemployed autoworker, a cancer researcher, some foreign-exchange college students, a visual artist, an uninsured individual devastated by medical bills or, most daring of all, a media critic. If the Times feels absolutely obliged to install a rich guy from the entertainment industry, why not get one of the founders of YouTube?

With proper execution next time around, this good idea deserves to survive this scandal.

Morton & Miles give up

The most authoritative newsletter covering the newspaper industry issued a gloomy prognosis for the business today and then, tellingly, went out of business.

Many newspapers in the largest markets already “have passed the point of opportunity” to save themselves, says the Morton-Groves Newspaper Newsletter in its farewell edition. “For those who have not made the transition [by now], technology and market factors may be too strong to enable success.”

The newsletter was launched in 1976 as the Newspaper Newsletter of Morton Research, and initially written solely by John Morton, the dean of American newspaper analysts. In 2002, John was joined by Miles Groves, a former economist for the New York Times Co. and the Newspaper Advertising Bureau. Both men will continue their independent consulting practices.

Tweaking “the free-riders who read but did not subscribe” to the newsletter, John and Miles said that, “sadly, we have concluded that the financial reward” of continuing the publication “is not worth the effort required.”

In a parting missive entitled “Passing the Inflection Point,” the newsletter delivered the following synopsis of the industry’s weakening vital signs:

:: Industry profitability grew from an average of 15.7% in 1990 to 22.6% in 2002, but slipped to 17.8% in 2006. (Newsosaur comment: Would that the industry had the wisdom to invest in its future during those fat years.)

:: Advertising share declined from 24.9% in 1990 to 15.8% in 2006.

:: Although 62.4% of adults read a newspaper on an average weekday in 1990, the Newspaper Association of America reported that “regular readership” dropped from 51% in 1997 to 46% in 2002. The NAA hasn't issued a comparable figure since then, according to John and Miles.

Exiting with a bang, not a whimper, John and Miles said publishers had the chance to leverage “the power of the local brand” to shift from “ink on crushed wood” manufacturing to modern marketing and customer-service enterprises.

“Sadly, the ‘straw man of failure’ provides a barrier that industry stakeholders have not been able to shake,” they write. “Instead of making the technology, personnel, marketing and product investments critical for success, industry leaders have accepted that desirable circulation levels are not sustainable and declines are inevitable.”

No respect

It makes no sense for the Tribune Co. to go into hock to pay a juicy special dividend to the disgruntled shareholders who still won’t respect the company the morning after the check clears.

Yet, that seems to be the path the Rodney Dangerfield of media companies is pursuing, as it seeks to reclaim Wall Street's esteem after failing to find anyone interested in paying a decent price for its seemingly enviable assets.

The latest “self-help plan” apparently being considered by the management of the beleaguered company is to sell assets and/or borrow money to pay shareholders a fat, one-time didvidend to help them feel better about a stock that has declined 43% in the last 26½ months.

But more debt will put additional operating pressure on the company without making the shareholders any happier. So, why bother?

Shareholders led by the Chandler family had their shot at trying to force the liquidation of the company at what proved to be a decidedly inauspicious moment to be selling metro newspapers or television stations.

If restive investors don’t believe the company's performance is likely to improve – or are too impatient to wait for that to happen – they are welcome to sell their shares. Or, they can sit tight and let management focus on the business of running the business, instead of being distracted, as executives have been for more than a year, with such non-productive matters as investor relations, M&A efforts and financial engineering.

Any additional debt incurred to pay the dividend would make it that much harder to turn the company around. Here's why:

While the thrill of a special dividend would be fleeting, the fresh debt necessary to pay it would linger on and on and on, requiring a combination of higher sales or lower expenses to cover the interest owed on the additional borrowed money.

Tribune’s $5 billion debt burden today is approximately 3.5 times its operating profits, a relatively conservative amount that enables the company to enjoy fairly inexpensive interest rates even though its credit rating recently was downgraded. If the company were to take on a significant amount of additional debt, its lenders likely would require higher interest rates to offset the perceived risk of potential default.

Although higher debt requires more operating profits to be earmarked for interest payments, a publisher could handle more debt if its sales were rising. But they are not. Print sales, which still represent better than 90% of most newspaper revenues, fell 3.7% in the fourth quarter of 2006, following declines of 2.6% in the third quarter and 0.2% in the second quarter, according to the Newspaper Association of America.

Given the ongoing weakness in newspaper advertising sales, a prudent management team would have little choice but to whack expenses sharply to assure that sufficient cash were on hand to service its increased debt. Thus, Tribune would be forced to reduce things like staffing, newshole, marketing, new niche print products and digital initiatives at the very time it should be investing prudently in these areas to fend off competition and build for the future.

If a plump dividend check made shareholders happy enough to bid up Tribune’s stock, then it all might be worth it. But it won’t.

A one-time dividend won’t levitate Tribune’s stock by so much as a nickel after the dividend is paid, because investors know the only way the stock will go up in the future is if the company improves its operating performance.

The stock has fallen by nearly half, because the general sentiment at the moment is that the magic is gone for Tribune and most other newspaper stocks. Unless and until Tribune's performance improves, its stock will remain in the doldrums. There are no other rabbits to pull out of the hat.

If Tribune can raise new cash by selling some of its assets (without doing so at fire-sale prices), it should not use the proceeds to pay a special dividend to investors. Instead, the company should invest the cash in strategic initatives to improve its core publishing and broadcasting busineses and to fund the new-media initiatives necessary to compete in the 21st Century and beyond.

Newspaper shares have fallen by $13.5 billion in value in the last two years because investors are concerned, rightfully, about the industry’s long-term potential to sustain its once-reliable sales growth and profitability. But newspaper stocks also are suffering, because investors have become increasingly concerned that most publishers don’t have the vision, courage and know-how to restore their struggling companies to their former strength.

Wads of cash paid to crybaby investors won’t rebuild Wall Street's confidence in the newspaper industry. The only way to revive newspaper shares is by tending to the fundamentals that drive every successful business: Well conceived products that satisfy well defined consumer needs; shrewd marketing and aggressive sales, and disciplined but enlightened cost control.

Tribune and the other publishers can’t buy love on Wall Street. The only route to regaining the respect they have lost is by earning it, the old-fashioned way.

Rattle your dags

This dispatch comes to you fresh from New Zealand, where newspaper publishers have a chance to build formidable franchises on the Internet in a way their American counterparts didn’t have the foresight (or 20/20 hindsight) to do.

If the Kiwi publishers are to succeed, however, they will have to fast-forward their pre-1995 web strategies to suit a post-2007 environment. If they don’t rattle their dags, as the saying goes, someone will rattle their dags for them.

Since I only last week became acquainted with the concept of dag rattling, it is entirely possible that other residents of my native hemisphere might not be familiar with the expression, either. Hence, the following brief digression:

A dag is the slang term in Australia and New Zealand for the dried fecal matter that accumulates in a sheep’s fur in the 12 months between shearings. As the dags get larger, I am reliably informed, they click against one another, making a characteristic sound as the animal trots away. When you want someone to get a move on, you urge him to rattle his dags.

Notwithstanding New Zealand’s boundless and unspoiled natural beauty, superb cuisine, crisp pinot noirs and the charm of an unfailingly hospitable population, the enchantment unfortunately does not extend to a telecommunications infrastructure that is 10 to 20 years behind the times as the result of an incompetent, state-sanctioned telephone monopoly called Telecom Corp. of New Zealand.

One consequence of NZ Telecom’s inadequacy is that Kiwis pay far too much for far too little Internet connectivity. Owing to the high cost and limited availability of DSL in New Zealand, only 37% of Kiwi homes and businesses have broadband Internet connections, as compared with 72% of U.S. homes and even a higher percentage of businesses. (The United States, BTW, isn’t even among the top ten most wired nations in the world.)

Where DSL is available in New Zealand, it costs many times more than you would pay in most U.S. markets. Downloads are strictly limited and violators pay hefty surcharges for their transgressions.

Adding insult to injury, NZ Telecom doesn’t guarantee any particular download speed or, for that matter, whether it can or ever will bring DSL to your neighborhood. We met people who recently got a refund on their DSL deposit, having been told after a yearlong wait that the promised service wouldn’t be available in their neighborhood for the foreseeable future.

In response to the growing frustration of the otherwise genial population, the government of New Zealand has taken initial steps to break up the NZ Telecom monopoly. The phone company responded with uncharacteristic alacrity by offering a plan to open its now-proprietary network to competing service providers. Assuming one or another of these plans progresses apace, YouTube-starved Kiwis some day will enjoy the same cheap and unfettered Internet access to beer-freeze videos now widely available to the rest of the Western world.

Before that happens, newspaper publishers in New Zealand would be well advised to develop more thoughtful and aggressive web businesses than they have to date.

The online fare available from New Zealand’s press, which is reminiscent of U.S. efforts in the mid-1990s, consists of little more than articles recycled from the previous day’s print product. Some papers don’t even bother to mention the URL of their web sites in their print editions.

Web sites like Stuff.Co.NZ, the online presence of the several Fairfax publications in New Zealand, lack many of the popular features that attract and hold online audiences, such as video, podcasts, user-contributed content and personalization tools. Even though search represents 40% of global online revenues, Stuff has a limited search solution that often returns no useful results – and runs none of the keyword ads that have made Google and Yahoo the fearsome competitors they are.

The site of the Otago Daily Times, a family-owned paper in Dunedin that claims to be the oldest newspaper in New Zealand, is even more primitive. It publishes all the day’s news for free but will sell visitors a subscription to view the entire paper in a klunky PDF format for US$170 a year.

With last weekend’s Wellington Dominion Post bulging with 24 solid pages of employment advertising, it is perhaps understandable that its online classified environment carries little more than summaries of its print ads. As U.S. publishers learned to their dismay, this business is extremely vulnerable to low-cost online upstarts. Yet, the Kiwi publishers evidently have taken, at best, baby steps to begin defending and extending this and their other lucrative classified lines. In fairness, Stuff, does have a Craig's List-cum-eBay environment where users can sell cars or spare sheep.

It is only a matter of time until New Zealand’s telecom infrastructure catches up with rest of the wired West. If Kiwi publishers don’t want to suffer the same fate as their struggling American counterparts, they had better rattle their dags.