Sunday, November 30, 2008

Newspapers eye extreme cuts as crisis grows

Fearing that newspaper sales may fall as deeply next year as the record plunge in prospect for 2008, publishers are preparing contingency plans for cutting costs in previously unimaginable ways.

In the best of cases, publishers will continue aggressively nipping and tucking at staffing, benefits, newshole, and the footprint of their circulation areas. In the worst cases, some newspapers will be shut down – or endure only as skeleton-staffed online operations.

In one of the most startling of the potential initiatives, an amazing number of publishers of all sizes are giving serious consideration to eliminating print editions on certain days of the week, according to private conversations with operators who requested anonymity.

Monday, Tuesday and Wednesday editions, which typically carry the least amount of advertising, appear to be at the most risk.

With demand for newspaper advertising this year plummeting in every category (including online since March), industry ad revenues in 2008 are likely to be no better than $38 billion, or nearly 25% less than they were when sales hit an all-time peak of $49.4 billion in 2005.

In the third quarter of this year alone, sales plunged $2 billion, or a record 18.1%, in a historic, across-the-board rout paced by a nearly 31% drop in classified revenues. Bad as the third quarter was, publishers are bracing for worse, because the bottom did not fall out of the economy until the last two weeks of the most dismal three months in the history of the newspaper business.

The revenue trend in the first nine months of the year suggests that ad sales will be some 17% lower than they were in 2007. Given the deterioration of the economy that has occurred since mid-September, many publishers are planning for the possibility that sales will drop by a similar magnitude in 2009. Here’s why:

With the economy in turmoil, employers have stopped buying recruitment ads because they are not hiring, auto dealers are not advertising because no one is buying cars and real estate agents are not buying ads because they aren’t selling houses. Absent a miraculous turnaround early next year in the sectors that traditionally have generated 30% to 40% of newspaper advertising, the classified drought will continue into the new year as far as the eye can see.

The only relatively bright spot left for newspapers is retail advertising, which represents close to half of their revenues. Publishers report that many merchants are spending everything they can afford on advertising in the fourth quarter of this year in hopes of generating maximum sales during the make-or-break holiday shopping season.

By most accounts, all the heavy promotion was successful in driving post-Thanksgiving sales volume. But heavy discounting aimed at clearing out dearly financed inventories may not translate into profits for many merchants.

Thus, publishers are concerned that retail ad demand will collapse in the new year, as the recession shakes out the weakest merchants and simultaneously forces the survivors to tighten their belts. More than a dozen national and regional retail chains already are in liquidation, including Mervyn’s, Linens ’N’ Things and Whitehall Jewelers. Others, like Circuit City, are hanging on by a thread.

Fearing that next year could be worse than this one, many newspaper companies have stopped preparing the usual 12-month budgets and resorted, instead, to producing rolling, three-month (or shorter) forecasts to try to manage the impact of what appears to be a continuing slide in ad sales.

While no one knows how bad things could get before they start getting better, one thing is sure:

With approximately $12 billion in ad revenues vaporized in just three years and no economic turnaround in sight, many publishers are no longer scrambling mrely to sustain a certain level of profitability but are battling, instead, to keep their businesses solvent during the indeterminate time it will take for the economy to recover.

Even after a recovery materlizes, it will be a while before anyone can honestly say how much newspaper advertising is likely to return. Meantime, newspapers are in for the fight of their lives.

Tomorrow: Where the cuts may come

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Friday, November 28, 2008

Newspaper sales fell almost $2B in one quarter

Newspaper advertising sales dived by a record 18.1% in the third quarter in a historic, across-the-board rout paced by a nearly 31% plunge in classified revenues.

Eking out $8.9 billion in print sales in the three months ended in September, the industry shed a bit less than $2 billion in revenues from the same period in the prior year, according to statistics published quietly on the afternoon before Thanksgiving by the Newspaper Association of America.

Ad sales in the quarter dropped by record high percentages in every single category, including interactive sales, which the industry had hoped would offset deep secular declines in print ad demand.

Falling for the second quarter in a row, online sales slipped by $23.2 million, or 3%, to a bit under $750 million. The category fell 2% in the second quarter, the first time ever that it posted a sales decline.

Retail advertising, which delivers some 45% of the industry’s advertising revenue, dropped 11.7% in a year’s time to a bit under $4.5 billion.

The debacle was worst in the three principal classified advertising verticals:

:: Recruitment classified sales plunged 43.6% to $497.5 million.

:: Real estate classifieds tumbled 38.6% to $629.3 million.

:: Automotive classified fell 29.2% to $563 million.

The performance in the third quarter was affected only partially by the worldwide financial panic that froze the credit markets in mid-September, throttling the already waning demand for hiring, auto sales and home purchases.

The outlook for the final period of the year is worse, when the three classified verticals are likely to experience the full impact of the economic meltdown.

Newspaper sales fall in historic rout

This item has been replaced with updated post here. Sorry for any inconvenience.

Wednesday, November 26, 2008

Buyout Sex, the other severance benefit

Who knew layoffs could be a turn on?

Mary F. Pols, a movie critic who accepted one of the scores of buyouts at the Contra Costa Times, made the best of a traumatic situation by having an affair with a fellow scribe at the California paper, she revealed in Modern Love, the most consistently delectable feature in the Sunday New York Times.

“Buyout Sex,” as Mary (left) dubbed it, affords a journalist the rare opportunity to get up close and personal with a colleague without having to worry about “postcoital workplace awkwardness.”

In Mary’s case, the affair began with drinks with a guy from the office who also was thinking about forfeiting his position in exchange for an enriched severance benefit. After an initial, vodka-propelled rumble in the cramped back seat of the colleague’s car, Mr. Buyout Sex and Mary embarked on a months-long relationship.

“In the following weeks, we continued to meet for long nights of sex and conversation, both of which were more naked than I would have expected,” wrote Mary. “After years of knowing each other, we were finally getting to know each other. He didn’t take the buyout after all, so he could fill me in what was going on at the paper, and the connection felt warm and cozy, especially as I confronted my own undefined future.”

Sadly, the affair ended as suddenly as it began.

“I was miserable and mystified when he pulled his vanishing act,” said Mary. “I decided Buyout Sex deserved an exit interview as well, so I asked him for one. Diminished by one-third, the newsroom still had a thriving grapevine, from which I’d learned that Doomsday had presented him with other drunken opportunities.”

It wasn’t her, Mr. B.S. explained to Mary. It was he.

“Whatever the case, our time together managed to turn a singularly depressing event into something exciting and alive,” concluded Mary. “We all do what we can to get through hard times. And although our escapade may also have borne the stamp of a shelf life, it was, however briefly, far sweeter than a farewell cake.”

Each to his own, folks. But I would have been satisfied with an extra slice of cake.

Monday, November 24, 2008

One exec’s savvy take on the news biz

A nationally prominent investor offered a number of penetrating observations the other day about what ails the newspaper business. His rundown is worth a quick read.

:: A monopoly mindset: “The newspaper business basically grew up as a monopoly, and like every other monopoly, it built processes and approaches that reflected its monopoly status.”

:: Order taking vs. effective ad sales: “You need a Ph.D. in order to understand the rate card. In the days where the customer had no options, you could give him the rate card and say, 'Take it or leave it.' But today, that doesn't work. I think the newspaper industry truly still doesn't understand that it is in a business with customers, and the business must reflect the needs and demands of the customer.”

:: Order taking vs. effective ad sales, cont’d: “Every single newspaper has a cadre of salaried salesmen.... I've never seen any kind of a sales force that was effective if, in fact, they had no incentives.”

:: Giveaway subscription rates: “If you buy a newspaper from a vendor, you will pay 50 cents. But if you get it home-delivered, which costs the company 10 times as much, you pay 30 cents. I don't understand. Okay? I mean, you try and make those numbers work, and it don't make any sense.”

:: An outmoded concept of news: “When I grew up, the definition of 'breaking news' was [the newspaper delivered to] your front door…. Well, that's not the case anymore. Now, you hit your homepage, now you turn on CNN, or some other news-TV program, and that's how you find out what the latest news is.”

:: The chief competitive advantage: “Most…newspapers do not have a comparative advantage on international news…. On the other hand, [they] have staff and people and knowledge locally that nobody else has…. That’s the only thing I can't find from 10 other sources.”

:: The chief competitive disadvantage: “Eighty-six percent of the cost of the newspaper business is print, paper, distribution, and promotion. That's untenable long-term and short-term…. If you attack the problem and solve it, you then make newspapers a much more economic advertising venue. Right now, that infrastructure sets the floor. That makes newspapers uncompetitive.”

The executive is Sam Zell, who made the comments (available here in their entirety) at the recent Foursquare media conference in New York. 

While I don’t necessarily agree with the way he is addressing several of the issues and the debt on his precariously financed Tribune Co. is selling for as little as 9 cents on the dollar, you have to admit that he at least has identified the problems correctly.

Thursday, November 20, 2008

Out of kilter: Stock slide hits NYT activists

A chill wind may be blowing up the kilt these days of Scott Galloway, the colorful investment strategist who persuaded a giant private equity fund that he could show the New York Times a better way to run a newspaper company.

A onetime Internet entrepreneur who earned an extra 1.5 minutes of fame a couple of years ago when he modeled a kilt at a New York charity gala, Scott is the guy who persuaded Harbinger Capital Management to buy almost a fifth of the common stock of NYT Co.

His timbers probably were shivering today when NYT’s stock hit an all-time low after Harbinger disclosed it has begun unwinding its aggressive position in the publishing company. Depending on the timing of the sales, Harbinger’s losses could range into the nine figures.

The precise extent of Harbinger’s apparent drubbing is not possible to calculate, because the Alabama-based investment firm has been buying and (recently) selling stock in NYT for something close to 12 months. Harbinger apparently still owns a significant position in NYT, so there is no way of knowing what the shares will be worth when they eventually are sold. But this much is sure:

When Harbinger disclosed in March that it had acquired 19% of the common shares of NYT Co., its position was valued at exactly $487,122,157.68, according to a statement filed with the Securities and Exchange Commission.

With NYT’s shares closing today at an all-time low of $5.71 apiece (before the company announcedthat is slashing its dividend), a 19% share of the company would be worth approximately $156.3 million, or about $330 million less than in March. That is a 67.9% haircut, if you are keeping score.

The founder of the Red Envelope online gift service, Scott today is a business professor at New York University who also heads an investment-strategy firm called Firebrand Partners.

In that latter capacity, he convinced the $16.4 billion Harbinger fund that NYT’s shares were “dramatically undervalued in terms of their potential” and persuaded the investors to accumulate enough shares to force the publishing company to add him and three other activist directors to its board. After a bit of haggling last spring, Scott gained a seat for himself and one colleague on the NYT board.

Around the same time Scott began lobbying for a seat at NYT, Harbinger grabbed several million shares in Media General in the hopes of getting representation on that board, too.

While Harbinger had a 9.1% stake in Media General back in January, the exact size of its position today is not clear, because the investors have both bought and sold shares throughout the year.

What is known is this: If Harbinger still held a 9.1% position in MEG, its initial investment of $50.8 million would be worth less than $8.4 million today. The 87.7% plunge in value would be enough to flap anyone’s kilt.

Related post

New reasons to take NYT private

Tuesday, November 18, 2008

Why feds won’t bail out newspapers

If a federal bailout for General Motors might be good for America, how about one for newspapers, too? Ain’t gonna happen. Here’s why:

Like the Big Three domestic automakers, most newspapers are suffering from weak customer demand, falling sales, suffocating fixed operating costs and shrinking profitability that together are eating into their financial reserves. But the similarities end there.

Unlike the auto industry, the failure of any or all of the newspapers in our country would have a negligible impact on the greater (or lesser, as the case may be) economy. If economic stimulus is what bailouts are all about and scant impact would be gained by slipping publishers a few billion bucks, then there’s no point in doing it.

Beyond pure economic considerations, of course, there is the emotionally persuasive argument that the press needs to be saved so it can fulfill its unique role as the watchdog for the oldest democracy in the world. The problem is that it is difficult to imagine how the vigor and independence of the press would be maintained if the industry depended on the largesse of the very government officials it is supposed to be watching.

Let’s examine the economic issues first.

After numerous layoffs in recent years, newspapers today at best employ 325,000 individuals, or 0.2% of the nation’s labor force. It would be a tragedy for any of those folks to lose their positions, but, to put this in perspective, the total employment of the publishing industry is equal to just 1.3 times the number of jobs that were lost across the entire country in the month of October. The liquidation of the newspaper industry would be a minor blip in the unemployment statistics.

With newspaper ad and circulation revenues this year likely to be no greater than $50 billion, the industry represents about 0.36% of the gross national product of $13.8 trillion. The auto industry argues fairly convincingly that it produces 4% of the GDP, making its contribution to the economy some 1,110% bigger than that of newspapers. It is far from clear that even the auto industry deserves to be rescued after decades of indolence, extravagance and unwarranted self-satisfaction. If big, ol’ Motown isn’t worth saving, are newspapers?

The combined market capitalization of all the publicly held newspapers has tumbled to $26 billion, or 0.2% of the value of all the stocks traded in the U.S. markets. If you factor out News Corp., which single-handedly represents three-quarters of the consolidated market cap, the combined value of all of the remaining publicly traded publishers is $7 billion, or a mere .05% of the total U.S. equity float. Shareholders on average lost 83% of their newspaper investments in the last 12 months. What's a few more bucks, either way?

Because the shutdown of the entire newspaper industry would have a nearly imperceptible impact on the nation’s economy, there is no reasonable commercial case for bailing it out.

The next-best argument for rescuing newspapers would be that they serve an indispensable role as guardians of our democracy. Notwithstanding the great and small failings of newspapers over the years, the absence of an inquiring press would be at once unprecedented and frightening.

Unfortunately, the idea of government-subsidized newspapers is pretty frightening, too.

Unlike the relative ease with which the feds can make a loan, investment or guarantee to the likes of AIG, American Express, Fannie Mae or Wells Fargo, it seems difficult to see how the government could help a newspaper without running afoul of the First Amendment stricture that bars the government from “abridging” the freedom of the press.

Because a reasonably strict level of accountability presumably would be associated with any government payment, would newspapers suddenly find themselves having to defend to government bureaucrats their decision to spend money investigating bridges to nowhere? Would Congress ding newspapers if they stopped covering future out-of-the-running presidential hopefuls like Ron Paul or Dennis Kucinich? Would publishers be called to account by the White House for emphasizing the number of civilians accidentally killed in Afghanistan, instead of the number of terrorists ostensibly taken out of action?

Although the federal government covers approximately one-fifth of the budget supporting public broadcasting (the balance coming from foundation grants, sponsorships and viewers like you), the system historically has not been immune from political pressure – especially during the last eight years.

The Bush administration in 2005 installed a partisan operative as the chief executive of the Corporation for Public Broadcasting (CPB). He lost no time in policing the perceived politics of broadcasters and their guests, going so far as to brand Republican Chuck Hagel a “liberal” in spite of the Nebraska senator’s favorable ratings from such conservative organizations as the Christian Coalition and the Eagle Forum.

Although this chilling brush with Big Brother-ism ended in fairly short order, the administration’s assault on public broadcasting continued this year, when the White House proposed cutting by half the $820 million federal contribution to the CPB.

Even if someone could figure out a way to give newspapers a few billion without compromising their editorial independence, it’s not clear how much good it would do. Federal handouts are not enough to rescue a business losing customers because it has failed to objectively assess its shortcomings, understand the strengths of its competitors, capitalize on new technology and adapt to new market realities.

Newspapers don’t need a bailout. What they need is to get real about their problems and then get busy solving them.

Monday, November 17, 2008

It’s time to bust up Yahoo

With Yahoo’s disparate components worth more than the whole and its stock near a nine-year low, this would be a great time for a smart investor to buy the company and break it up.

If Yahoo were sold off in pieces, it would mark the end of the first new media company that tried to act like an old one. And its fate would serve as a lesson to any old media company that still thinks a one-size-fits-all business model is sustainable in an age of limitless consumer choice.

A major potential obstacle to the prospective unbundling of Yahoo was overcome today when founder Jerry Yang agreed to resign as soon as a successor is identified.

His departure will be small consolation to the stockholders who watched their shares dwindle to a third of what they were worth earlier this year when Jerry refused to sell the company to Microsoft. Yahoo today closed at $10.63, gaining slightly in after-hours trading when Jerry’s promised departure was announced.

Now that the founder is ready to relinquish a job that probably was not the best use of his talents, an objective assessment of the company’s prospects is possible. Any clear-eyed observer can see that Yahoo’s patchwork of unrelated business units is unwieldy and unsustainable. This year, it has been steadily less profitable, too.

There are more than 100 different ways to Yahoo, ranging from search to free email, from stock prices to horoscopes, from greeting cards to posting photos at Flickr and from a social-bookmarking network to help-wanted ads at HotJobs.

Because Yahoo is forced to juggle a portfolio of so many unrelated products, many of its subordinate sites (the YouTube wannabe in the klutzy embed below, for example) have failed to achieve technical or market dominance in their verticals. Because there is no obvious relationship between a build-it-yourself website and a forum on reptiles (unless someone wants to build a site for newt fanciers), there is scant synergy among the audiences of the many unrelated Yahoo efforts.

Even though Yahoo was one of the original Internet search sites, the company lost its way so badly for a time that it actually farmed out search to the then-upstart Google. Until a few weeks ago, Yahoo was set to turn over a portion of its search-ad inventory to Google before the rival company became worried about potential antitrust implications.

With due respect to the revenues Yahoo derives from classified and keyword-search advertising, the chief business model at this pioneering Internet company has been to generate as many page views as possile to accommodate what it hoped would be an endless stream of banner ads. In other words, it was a modern-day reprise of the old-media trick of maximizing reach in order to sell bellybuttons by the carload.

But big, undifferentiated audiences don’t cut it in a world where advertisers can pinpoint their prospects by subject matter, demographics, geography and much more. Instead of building a portfolio of carefully selected sites and making them the go-to places for their intended audiences, Yahoo spread itself even thinner than a schmear of Skippy.

Now, Yahoo is such a sticky mess that the best use of all those pieces and parts would be to auction them off to the highest bidders.

Hot Girls Burping Symphony @ Yahoo! Video

Thursday, November 13, 2008

Newspaper profits swoon, more cuts likely

Relentless expense reductions at America’s newspapers this year have failed to stay ahead of falling sales and uncontrollable fixed costs, eviscerating the industry’s profitability and suggesting that more drastic cuts may lie ahead.

The average profitability of newspapers tumbled 18½ times faster than sales fell in the third quarter of this year, according to an analysis of a dozen companies that segment their financial statements in sufficient detail to isolate the performance of their newspaper divisions.

In a three-month period when advertising and circulation sales among the 12 publishers dropped by an average of 10.3% from the prior year’s level, the average operating profits of the group in the third quarter plunged by a staggering 198.3%.

The term “operating profits” refers to what is commonly called EBITDA, a newspaper’s earnings before interest, taxes, depreciation, amortization and one-time events like severance programs or accounting adjustments to write down the value of acquisitions that in retrospect are deemed to be overpriced. The respective sales and earnings drops at each of the 12 companies are presented in the table below. Click the image to read the fine print.

The steep plunge in profits suggests that the industry may have to be more aggressive at cutting expenses in the future, if it intends to either halt or reverse the earnings collapse.

The need would be seem to be particularly acute for the companies that borrowed heavily in recent years to finance acquisitions. Because GateHouse Media, Journal Register, Lee Enterprises, McClatchy and Tribune Co. are committed to steadily increasing principal and interest payments to satisfy their debts, they would appear to be candidates for some of the most draconian expense cutting.

But they are not alone. Heavy cutting may lie ahead, as well, for three companies that suffered not just earnings declines in the third period but outright losses.

They are A.H. Belo, whose operating loss of $12.8 million represented a 189.9% drop in earnings from the same quarter in 2007; the newspaper division of the Washington Post Co., which lost $10.6 million for a 220.6% drop from the prior year, and the Sun-Times Media Group, which lost $7.8 million, representing a 1523.5% decline from the prior year.

The losses at these three companies significantly skew the average earnings performance of the dozen companies covered in this analysis. Even when you back out the trio's losses, however, the average drop in operating profits at the remaining nine companies is 51.8%, or five times greater than the 10.3% decline in sales.

Among the nine companies that did post operating profits in the quarter, several reported enormous drops in their margins. EBITDA skidded 91.2% at Tribune, 87.7% at Journal Communications and 78.7% at New York Times Co.

Every publisher covered in this analysis has been cutting expenses throughout the year, concentrating notably on headcount and newsprint consumption. In some markets, ad production, customer service, printing or delivery have been outsourced in the face of disintegrating ad sales and sharply rising costs for newsprint, energy and health care. A few papers have eliminated print editions on some or all of the days of the week. Other publishers are talking about shutting down newspapers altogether.

Notwithstanding these efforts, not one publisher in the group of 12 was able to prevent its profits from falling faster than its revenues.

As discussed previously here, many publishers until now had been more profitable than many Fortune 500 companies. If the deteriorating economy leads to a further ad sales decline in the fourth quarter and beyond – which seems increasingly likely – publishers will have only two alternatives: Cutting significantly more expenses or accepting lower profitability.

With profits already seriously pinched, publishers may have no choice but to take up their hatchets before the year is out.

Motown's meltdown, redux

With the idea of a multibillion-dollar bailout for the auto industry front and center in the news, here is a an encore presentation of a post originally produced two years ago. It is relevant not only to the auto industry but the media business, too.

The hubris that led to the humiliation of the American auto industry was painfully evident 30 years ago, when I took a brief spin on the beat for the Chicago Daily News.

Even at this late date, my Motor City adventure is worth revisiting, because the complacency and self-deception I witnessed then are alive and well today in other industries facing fundamental, disruptive change. Among those that come to mind are – you guessed it – the media business.

As you read this, kindly bear in mind that I visited Detroit just three years after the Organization of Petroleum Exporting Countries had throttled the world’s oil supply, creating frantic gas lines and introducing a taste of the pain we would come to feel when Shell-ing out $50 for a fill-up. Here goes:

To put the press in the mood to write about its new 1977 gas-guzzlers, one auto maker hired Benny Goodman to play at a banquet featuring a booze-rich reception, a seafood appetizer accompanied by a fine white wine, filet mignon accompanied by a fine red wine and baked Alaska accompanied by vintage cognac and fine cigars.

After dinner, a reporter could head for the hospitality suite, where a complimentary hot buffet and fully hosted bar succored the suckers at the marathon poker games.

Some of the reporters (not me) received first-class airline tickets from one or another of the car makers to travel to Detroit. A few enterprising souls downgraded to coach and pocketed the extra cash.

Several of the reporters (not me) scribbled their bylines on a few press releases and handed them, otherwise untouched, to a Teletype operator who wired them – “Collect, night press rate, Honey” – to the correspondent’s waiting paper.

With the gentlemen of the press sufficiently lubricated and sated, I saw my colleagues rise up angry only twice.

The first time was when the newsmen circulated an angry petition to protest the serving of fish, instead of red meat, at a luncheon hosted by one of the Big Three. The PR guy swore it wouldn’t happen again and was promptly forgiven.

The second time my colleagues erupted was when they hooted me down at a press conference for asking Henry Ford II why his company didn’t make safe and fuel-efficient cars. “We tried it once,” responded Hank the Deuce. “That stuff doesn’t sell.”

With that settled, we went to lunch. My colleagues, unfortunately, did not excuse me as readily as they forgave the flack who served them snapper. But they seemed genuinely happy that no halibut would be harmed in the making of our meal.

While everyone partied hearty in Detroit, Toyota, Datsun and Honda were busy, building tinny little clunkers they often upholstered in grotesque, psychedelic plaids. In the intervening years, as we know full well, the newcomers got smarter and more sophisticated. Now, Toyota, a leader in hybrid technology, is poised to overtake Ford as the second-largest seller of cars in the United States.

What went wrong?

:: The auto makers lost touch with their customers. For all the resources potentially available to research and develop new vehicles for the future, the companies were too smug to imagine the market for their products might change, much less recognize that it already was getting away from them. Too comfortable for their own good, they attempted, when challenged, to emulate their historical successes, instead of embracing the risks and potential rewards associated with innovation.

:: The auto makers competed with the wrong guys. Detroit was such an insular fraternity that executives benchmarked their efforts strictly against their peers across town, each matching the other and none daring to differ. As history soon proved, the American auto market was not a zero-sum game to be dominated by a threesome of self-selected players. While the Big Three cozily conducted business as usual, the initiative was seized by efficient, inventive and bold new competitors who weren’t in the club.

:: The auto makers stuck with a failing strategy for too long. Faced with growing competition, declining share and a marketplace they hadn't taken the pains to understand, Detroit fixated on optimizing a rapidly unraveling business model. The Big Three severed workers and closed plants to cut operating costs and offered ever-escalating incentives to reverse sagging sales. The problem is that their fleets are loaded with cars people don’t want to buy. Worse, Detroit doesn’t have many market-pleasing alternatives readily available in the pipeline. Still worse, they wouldn’t know how to build them efficiently.

For the most part, the auto industry’s woes were self-inflicted by decades of insular and unimaginative senior management. The problems are not the fault of the workers, the customers, the suppliers, OPEC or the competition. They result from management’s lack of vision, objectivity, originality and courage.

If everyone hadn’t been in such a rush to go to lunch 30 years ago, maybe Toyota wouldn’t be eating Ford’s sushi.

Sunday, November 09, 2008

It’s time to rip the lid off

The mad rush among consumers to buy the historic editions proclaiming the Obama presidency is at once a validation of the power of newspapers and a reminder of what ails them.

It is a welcome confirmation, because it shows people still value a newspaper as perhaps the most authoritative and tangible artifact of a memorable event. Last week’s papers are likely to be preserved more carefully over the years than the YouTube videos, blogs and campaign ephemera that were created and consumed during the presidential campaign.

While the enthusiasm generated by the post-election editions proves on one level that newspapers still matter, the long-running decline in circulation also shows that newspapers in large measure have lost their ability to emotionally engage their communities on most of the other 364 days in a given year.

Newspapers can regain at least some of their diminished relevance by reinvigorating that connection. And they must do so quickly, if the industry is to endure.

The nation turned to newspapers after 9/11 and a stricken New Orleans embraced the inspired coverage of the Times-Picayune in the aftermath of Hurricane Katrina. But it should not require an act of war, an act of God or a stunning turn of history for newspapers to touch the hearts and minds of their readers.

All but the most aggressively down-sized paper can generate excitement on a day-to-day basis by practing the sort of muscular, crusading journalism that afflicts the comfortable and comforts the afflicted by kicking over rocks, exposing social injustice and holding public officials and corporate leaders to account.

Because newspapers still have more staff and more time to develop stories than any other local medium, they can do this immediately by training their firepower on truly significant matters, if they quit staffing meaningless press conferences; penning fluffy features; rewriting self-serving publicity releases; laboring over elaborate but inane graphics; obsessing over crime news, and transcribing dull but unimportant civic meetings.

This is not to say that all press conferences, features, new releases, graphics, crimes and civic meetings are meaningless. They are not. But it is to say that considerably more editorial imagination and discretion could do a world of good right about now.

Newspapers need to get off their haunches, boldly pick their shots, and then rip the lids off their respective towns, turning themselves once again into confident and thundering voices delivering coverage that compels attention and delivers results.

In so doing, they, and not the waterskiing squirrel on YouTube, will come to dominate the chatter at the watercooler.

Although modern workers now commune with computers instead of colleagues as they sip bottled water in their cubes, newspapers can leverage the ubiquity of interactive technology by supplementing their coverage with crowd-sourced contributions, a wide range of expert commentary and lively discussion forums.

Until the last person turns out the lights in the last newsroom – a day I hope will never come – newspapers will have it in them to raise the sort of constructive ruckus that makes readers and advertisers take note.

If they do it right, they’ll attract the attention of a bunch of new readers and advertisers. If they don’t regain their once-commanding voices, newspapers may be silenced altogether.

Wednesday, November 05, 2008

How one paper solved its 'Monday problem'

The Lawrence (KS) Journal-World solved the problem of weak advertising on Monday by creating a themed edition for women that generated some $340,000 in revenues at launch from mostly new accounts.

In the following guest article, Al Bonner, the general manager of the 20k-circulation daily, tells how the paper sold almost all the ad positions for a year within a matter of weeks.

By Al Bonner

Like most newspapers, Monday and Tuesday editions are “weak” days, with little or no advertising and a lower overall page count. Over the years, we have tried incentives and packaging to increase ad count and revenues for these issues, but the results still end up the same over time: no advertiser interest and a dwindling news product.

Instead of looking at eliminating one or both of these issues to save expenses, we took another more radical approach. We had nothing to lose and everything to gain.

Our objective was to develop an entirely new product and an entirely new audience from the ground up. Our target audience was time challenged, younger women (age 25 to 45) with families and a wide range of interests like fashion, schools, home design, raising their kids, saving time, and improving their health, their mind and their spirit.

To attract this reader, we needed to create a colorful, dramatic design, in a smaller format with advertising and information they valued. The product needed to be open and ads needed to be modular and unique in content and format. We also needed to test our content and theories on readers and non-readers to make sure we launched with a high degree of calculated customer satisfaction.

From a circulation/subscription perspective, we needed a brand new product that would stand out in the racks and our dealer locations, and be valuable enough to entice more non-subscribers to purchase or subscribe to the Monday paper or a combination of Sunday and Monday. To start with, we did not package issues that, up until this point, women non-subscribers have had no interest in. Hopefully over time, they will want to receive the newspaper seven days a week.

The development of GO started with a very different collection of employees. As noted above, we were looking for a radical approach. Instead of our normal process of the news department designing the product, we decided to use a fresh set of eyes and ideas.

As a result, we brought in a designer and manager from our advertising ad design team. We charged them with designing a prototype and making content suggestions with examples. Both were female and part of the target age group. The result was a colorful, magazine style product that was much more in-tune with the target audience. Our news staff loved the design, as did our sales team. It was a perfect non-traditional approach to creating a new print product.

We printed several hundred copies of the prototype on our own presses, using heavy, bright-white stock. We hired a professional focus group coordinator and held four different focus groups. The first group was a mix of current subscribers, male and female. The second was just female subscribers. The third was female non-subscribers in our target demographic. The fourth was a group of 25 and under females. We also gave the prototype to a variety of female groups along with a questionnaire. This produced a variety of different opinions and suggestions that drove the changes we made in a second prototype. The second version was used by the sales team and for further feedback and ad sales.

Our sales managers sent our sales team out to show advertisers the prototype and get them excited about the product. Feedback was very positive. Businesses were invited to one of two presentations held in our conference room here at the newspaper. The goal was to only sell new advertisers or add-on business.

The product was introduced with a presentation from our design, advertising, marketing and news teams. A large board with all 32 pages of ad positions was posted in the conference room. Advertisers were signed up on the spot. Sixty-five percent of the ads were sold at the meeting and the rest of the ads were sold over the next 2 weeks before launch. Ninety percent of the ad positions were sold out before launch, resulting in $340,000 in new revenue. Contracts were sold for either 52 weeks or 26 alternating weeks. So, GO was nearly sold out for 52 weeks.

To draw attention to GO, we positioned the tabloid to be the primary product on Monday. GO was wrapped around the regular, two-section newspaper, so that the first thing a subscriber saw was GO. There was a little confusion on the first day, but that went away after the second issue.

Three thoughts drove this positioning. One, we wanted the product to be considered part of the newspaper, rather than a special section. Two, we wanted women non-readers to see the product in the rack and on the newsstands and be immediately drawn to the color and the cover. Three, we wanted the product to have high importance and high visibility to attract maximum attention.

We plan to continue to position the product in this manner.

In addition to the product positioning noted above, we delivered approximately 1,500 free copies of the first two issues to medical offices, coffee shops, all of the participating advertisers and other key businesses. Our objective was to get GO in the hands of as many women as possible.

We also began sampling home-delivered copies of GO to 600 non-subscribers for eight weeks. We will keep in contact with them about the product and offer them a Sunday, Monday subscription, as well as a special seven-day offer. A postcard was mailed to the targeted households a few days ahead of the product launch, letting the customer know they had been chosen for an eight-week sample of our new magazine. Every eight weeks, we will begin sampling another 600 non-subscribers.

Our ad managers visited or talked with every contracted advertiser to get his or her feedback and to thank the advertisers for their purchases. We will be maintaining weekly contact with the advertisers to make sure we are delivering the results they were expecting. All of our advertisers were very pleased with their ads and the product. We also visited many other businesses to introduce them to the product to tell them about the great feedback our readers were providing.

Thus far, reader reaction within our target audience has been extremely positive. We plan to do follow-up surveys after readers have had an opportunity to use the product for six weeks or so. We have had only a few complaints from some older readers who do not like GO.

A couple key points: Readers love all the color, the openness of the design, the positive and useful content and the fact it was presented in a tab format. Many commented that they would like to see the regular newspaper printed in the same format.

Early on, we are very pleased with the steady increase in single copy sales. After week two, we had seen an increase of more than 15%. While it’s very early in the life of the product, we expect sales to continue to grow in the coming weeks.

Sunday, November 02, 2008

Campaign ’08: MSM’s last hurrah

The 2008 presidential election likely will go down in history as the last hurrah for the mainstream media when it comes to its influence over national politics.

The once pre-eminent authority of newspapers and broadcast networks in national campaigns will be diminished sharply in the future by three major and seemingly unstoppable trends:

:: Shrinking audiences and decaying advertising revenues respectively will reduce the reach and resources that the mainstream media traditionally have enjoyed in covering presidential campaigns.

:: Any remotely competent national campaign in the future will go over the heads of the media by emulating the successful interactive tactics that Barack Obama employed to raise record campaign funding; build highly effective real and virtual networks, and energize a previously apathetic generation of young and heavily wired voters.

:: The new generation of media-savvy voters will take full advantage of the abundance of news, commentary and raw information (campaign finance reports, voting records and polling data) available to them on the web. They not only will use those resources to educate themselves but also, in many cases, will add their voices to what is bound to become a national, 24/7, no-holds-barred town hall meeting.

While it may be great for our democracy to have more citizens more actively involved in the political ferment, the consequence is that MSM will be marginalized as never before in terms of audience and credibility.

In fact, the marginalization is well under way.

The 33.5 million households watching Obama’s 30-minute infomercial last week represented a larger audience than viewed either American Idol (28 million) or the interminable final game of the World Series (19.8 million).

The infomercial dwarfed the evening news audiences of the Big Three networks, which last week were 8.4 million households for NBC, 8.1 million for ABC and 6.2 million for CBS. Bill O’Reilly, who typically is the top draw on cable news, attracted an average audience in October of 3.1 million households, according to TV Newser.

Newspaper circulation has declined so much in recent years that it has fallen back to where it was in the mid-1940s, when the country’s population was half the size it is today. Only 18% of Americans now buy a daily newspaper vs. 36% in 1945.

Public confidence in the mainstream media has been eroding for at least a decade.

The Pew Research Center for the People and the Press reported that only 19% of respondents trusted their local newspapers in 2006, as compared with 29% in 1998. In the same period, trust in national newspapers slid to 21% from 32%, broadcast news fell to 22% from 27% and cable news slipped to 25% from 37%. Confidence in the National Enquirer, however, doubled to 6%.

With the credibility of the media sagging well before the 2008 presidential campaign got under way in earnest, the MSM did themselves little good by repeatedly misreading the tealeaves throughout the primary cycle.

Wrapping up the race this weekend in the Washington Post, the distinguished David S. Broder characterized this as the best campaign from a journalistic perspective that he has covered since 1960. But his piece also is a vivid reminder of how often the national media were wrong about such things as the inevitability of Hillary Clinton or the improbability of Mike Huckabee winning the Iowa primary and John McCain topping the Republican ticket.

MSM haters won’t let us soon forget the uncommon number of times that the common wisdom proved incorrect among the gaggle in the bubble on the bus.

The last indignity for the MSM – and the one that virtually assures the decline of its future influence – will be self-inflicted.

As soon as the election is over, the Washington bureaus and national desks at most newspapers, magazines and networks are almost sure to be dramatically reduced by their parent companies to offset the sustained declines they have been suffering in advertising sales.

In the process, we will lose the insights and efforts of many of the talented professionals who over the years have attempted to inject a degree of honesty and balance into the inherently ill-disciplined realms of government and politics.

The MSM haters may be glad to see the correspondents go. But I won’t, because the online tsunami of misinformation, dirty tricks and invective that inevitably will replace them will overwhelm and confuse the national discourse, making it far less civil in the bargain.

For all that was wrong with the MSM – and there was a lot – their usually constructive contribution to the political process will be sorely missed in the frighteningly fractious free-for-all that likely lies ahead.