A shock video to keep news execs up at night

“The newspaper model is broken and can’t be fixed, unless you have the same definition of winning as Charlie Sheen,” said Publisher No. 1. “Newspapers will disappear in 10 years unless the model is changed now.”

The high cost of creating original editorial content for newspapers “is not sustainable,” said Publisher No. 2. “I don’t know if it will blow up the industry this year or next year…but if you don’t have the cost of content dramatically lower, then you can’t compete” with the digital media.

Believe it or not, those incendiary remarks opened the annual convention last weekend of the Newspaper Association of America in Dallas. And, for reasons discussed in a moment, those comments are bound to cause many a sleepless night in the coming weeks for editors and publishers alike.

But, first, meet the outspoken speakers who disrupted the normally staid event (and whose extraordinary comments are documented in the second video on this page at the NAA website):

:: Publisher No. 1 is John Paton, the chief executive who in less than two years has taken Journal Register Co. from bankruptcy to what he says was a profit of $41 million in 2010. The company is doing so well at its low-cost, digital-first publishing strategy that every employee got an extra week of pay earlier this month.

:: Publisher No. 2 is Clark G. Gilbert, the CEO of Deseret News and Digital Media Co., who axed 43% of the news staff of his Deseret News in Salt Lake City, merged it with a local television station owned by his parent company and started an independent digital division that he says is on track this year to sell more advertising than its legacy media counterparts.

Chief among his achievements, said Gilbert on the video, is that he halved the cost of producing content for his properties by not only cutting the news staff but also by filling his web pages with low-cost articles produced by 1,000 part-time contributors and material aggregated from other sites.

Gilbert said his company had no choice but to slash content costs if it hoped to compete with the digital competitors who are siphoning readers and advertisers away from expensively produced print newspapers. “We are facing the realities that the economics of print journalism have fundamentally changed” with the loss of nearly half of industry revenues in the last five years, said Gilbert. “If newspaper companies can’t face that, you can’t do [the digital initiatives] we are talking about.”

A former Harvard business professor, Gilbert said the 1,200 journalists at the New York Times represent a staff that is roughly 10 times the size of the newsroom of the Huffington Post, even though their websites have nearly the same traffic at respectively 14 million and 13 million unique visitors per month. (The New York Times, of course, sells nearly 1 million newspapers a day filled with advertising, while HuffPo sells none.)

“I was shocked at how many people can run a business where they don’t know what their core product costs to produce,” said Gilbert. Though Gilbert does not go into specifics on the video, industry sources say he calculated his content cost prior to the layoffs at an average of $227 per story, as compared with $10 for articles at Demand Media or zero for the 9,000 bloggers who contribute to the Huffington Post. Competitors, he concluded on the video, are “putting out content at an order of magnitude less than the newspaper industry.”

At Journal Register, Paton agrees that newspapers are overpaying for journalism. “The crowd creates more content than we do,” he said on the video. “You have to harness them.”

Saying publishers should “disrupt your own business model” by de-emphasizing print and putting the web first, Paton recommends taking on not only editorial costs but also the costs of anything – from ad makeup to technology – that can be outsourced for less. In so doing, he said, he cut a $25 million capital budget in half.

If the dollars earned through print advertising turn into dimes on the web, so be it, said Paton. “Just start stacking dimes.”

This hard-core, hard-nosed call for aggressive change is bound to keep editors and publishers up at night, worrying about these two questions:

:: If Paton is wrong in urging publishers to de-emphasize print in favor of the digital media, then publishers who follow him will be screwed. Remember: Print advertising and circulation today deliver some 80% to 90% of the revenues at the typical newspaper.

:: If Gilbert is wrong when he says investing in tons of staff-produced content is a mistake, then publishers who join him will be screwed. Remember: Authoritative and compelling local content historically has been a key competitive strength for newspapers.

Paton and Gilbert are right that the media business has changed profoundly since widespread consumer adoption to the web began in 1995. They also are right that newspapers have to change the way they do business in order to stay in business. But change is scary. And picking the right path is scarier.

If you watch the video from the NAA – which I urge you to do – you’ll probably have your share of nightmares, too.

A big op to upgrade op-ed at New York Times

The departure of two heavyweight columnists affords the New York Times an unprecedented opportunity to belatedly diversify, ventilate and otherwise modernize its opinion pages by opening them to, quite literally, a world of contributors.

While the op-ed pages of the Times aren’t shabby in comparison with the rest of the American press, this statement unfortunately damns the Times with faint praise, given the weariness (and wariness) of the opinion sections at most other papers. But here’s the problem:

The faces, voices and outlook of NYT’s regular commentators not only are universally NY/DC-centric but also reflect the sensibilities of wealthy, well-educated, middle-aged individuals who are all white, all Americans, mostly men and evidently each come from Judeo-Christian traditions.

With the exit of Frank Rich, who is all of the above, and Bob Herbert, who is all of the above save for being African-American (his departure Saturday means there is no non-white columnist in the line-up), this is the time for the Times to aggressively open its opinion pages to a breadth of commentators from around the world. Here’s why this matters:

Unlike the typically cubicle-bound and increasingly self-referential Maureen Dowd, Thomas Friedman and Nicholas Kristoff do venture beyond the Beltway and Times Square. But even their views are shaped by the fact that they are readily identifiable outsiders in the places they visit, who necessarily must depend on fixers, translators, bodyguards, U.S. diplomats and other intermediaries to interact with indigenous populations who probably have no idea what to make of these would-be chroniclers of their hopes, fears and pain.

For all the skill and gravitas they bring to the their tasks, the Bubble Boys and Girls of the op-ed page haven’t the faintest idea of how the world really looks and feels to people in La Crosse, much less Lanzhou, Lagos, Lahore, Latakia or La Paz. Yet, Asia, Africa, the Middle East and Latin America are the places where the stories are brewing that will shape our times – and should be shaping The Times, too.

How could it be that no one on this side of the world knew that unrest was so profound in recent years that many brave people in Myanmar, Thailand and Iran were willing to risk life and limb to defy their authoritarian governments? How could it be that no one had a clue that Tunisia, Egypt, Libya, Yemen, Bahrain and Syria were about to explode? And where will it happen next? China? Saudi Arabia? Pakistan? North Korea?

The Facebook revolutions we have seen – and the ones that may be afoot as I write this – could not have been possible without tens of thousands of people getting together to voice their frustrations, share their aspirations and make daring and elaborate plans in the global chat room enabled by the digital media. So, how was this missed by the richest and most sophisticated news organization in the richest and arguably most sophisticated country in the world?

Simple: The Times (and for that matter, our government and most of the rest of us) wasn’t listening.

This could have been forgiven in the days of samizdats, the secretly typewritten missives smuggled at great risk among dissidents in the Soviet Union. But nowadays, it’s all hanging out the web, 24/7. You just have to look for it.

As the New York Times reconstitutes its op-ed pages and moves forward with its previously announced plans to retool the Sunday Week in Review section, the editors should leverage the web and the prestige of their brand to seek out and host the most diverse and unfettered opinions they can find.

Tapping into the global conversation is Journalism 101, i.e. asking knowledgeable people enough questions until the answers start to make sense. If the 1,100 or so newsfolk at Big Orange are stumped, a world full of activists, journalists, academics and others will be glad to show them around. All they have to do is ask.

Rather than viewing itself strictly as a gatekeeper of official news written by official journalists (though it would be a disastrous mistake for the Times to pare back the authoritative reporting that is fundamental to its formidable brand), NYTimes.Com should become not only a showcase for the work of the Times but also the world’s go-to place for the development, dissemination, discussion and debate of news, ideas and opinions.

Instead of dedicating the bulk of its limited and precious op-ed space to another generation of slightly more diverse Pooh-Bahs, the Times should publish the best of the online conversations in its print editions.

This would be both good journalism and good business.

It would be good journalism, because the Times rapidly would become a leading destination for cutting-edge information from primary sources about what’s really happening in the world. Today, it is more of a compendium of comments about what officials in Washington, who cannot be identified because they were not authorized to discuss sensitive matters, think is happening in the world.

This initiative also would be good for business, because it would support the digital pay scheme about to launched by the Times by making its web and mobile media significantly more unique and compelling than they are today, particularly for the vast English-speaking offshore audience that only can access the Times electronically. For proof of the commercial value of a lively and well-trafficked digital forum, look no further than the bodacious $310 million that AOL paid for Huffington Post – and compare the value of NYT (only 0.6 times its revenues) with the 10x premium on HuffPo.

A diverse and intelligently curated opinion space at NYTimes.Com would pay dividends for all of us citizens of the world. With U.S. intelligence activities still being run essentially by the same type of bureaucrats who brought us Curve Ball and the non-existent weapons of mass destruction to justify the unjustifiable Iraq War, it would be nice to have a realistic view of what lies beyond our borders.

The Times is uniquely equipped among all American journalistic institutions to do this. How about it, folks?

NYT.Com pay scheme can succeed, but…

The long-awaited, much-delayed digital pay scheme at the New York Times should work just fine, but that doesn’t mean it can be replicated successfully in other markets. Accordingly, other publishers should proceed with caution.

After spending nearly 1½ years to retool its web publishing engine to accommodate what’s known as a metered pay scheme, the Times announced yesterday that it would begin charging for access to the online and mobile content it has given away for free since the paper abandoned its last digital pay initiative in 2007.

The prior pay plan, which was called Times Select and lasted for two years, charged $7.95 a month or $49.95 a year for access to such high-profile columnists as Thomas Friedman and Maureen Dowd.

The new plan, which debuted yesterday in Canada and goes into effect on March 28 in the United States, will allow visitors to read 20 articles for free before being required to pay for additional content on the web, on smart phones and on tablets.

After an initial 30-day introductory discount (pegged at 99 cents in Canada), readers will have to pay $15 a month to access content on the web plus a mobile phone or $20 a month to use the web plus a tablet. For those who can’t decide, the all-you-can-eat package is $35 a month. Home delivery subscribers will get digital access for free. Details are here.

A metered plan enables a publisher to have his cake (generating page views to create as much advertising inventory as necessary) and eat it, too (building a new revenue stream by charging for access to some or all of the site).

As reported here, it is possible for a paper like the Augusta Chronicle to give away so much content with a metered pay system that it can avoid sacrificing page views while tapping into what is likely to be a modest flow of ancillary subscription revenues.

Although the monthly 20-article limit at the Times will be more stringent than the implementation in Georgia, the new Times metering system will let the paper change the limit dynamically to produce as many page views as it needs to fill every advertising order.

An ad-revenue safety net can be put in place by any publisher who installs a decent pay wall system. So, that’s not the challenge to charging for content. The challenge is finding a sufficiently large number of willing buyers when less than 1% of the residents of a typical community are willing to pay for the news.

Unique among its fellow publishers, the Times is likely to be able to assemble a critical mass of paying customers because of the exceptional nature of its audience. Here’s why:

The world’s intelligentsia – including the elites of business, government, academia and the arts –read the Times because it contains information that is mission-critical to their activities. They are rewarded with rich and original international, national, political, cultural, science, fashion, lifestyle and economic coverage that is beyond the capability of any other publisher.

With sincere respect and affection for other publishers and their readers, no other American newspaper, save the Wall Street Journal, is in that position.

The Journal and the Financial Times, its counterpart in the United Kingdom, have proven that it is possible to get wealthy, powerful and busy people to pay for access to the digital media. Although some critics say the fees planned by NYT are high, they are trivial expenses – and just another cost of doing business – for the hard-core readers who rely on these publications.

While the WSJ does not disclose the performance of its online operations, the FT, which pioneered the metered model about two years ago, reported that it had 207,000 digital subscribers as of the end of 2010, representing fully a third of its readership base (the rest being print customers). The paper charges $25.99 a month for an all-platform digital subscription with some limitations and sells an unlimited digital package for $38.99.

Assuming equal distribution of both types of plans and that all subscribers pay for a full year, these disclosures suggest that digital revenues at the FT could be on the order of $65 million a year. Although the likely revenue opportunity at NYT is anyone’s guess (including the newspaper’s management), it seems comfortable to surmise that they can gross something in the low nine figures, given that the number of pre-meter unique visitors at NYTimes.Com is six times greater than the post-meter traffic at FT.Com.

While a revenue jolt like that is sure to grab the attention of any publisher, most newspapers in the rest of country lack the substantial body of compelling, exclusive content and the unparalleled concentration of wealthy readers that are enjoyed by the Times.

What the publishers do have, however, are any number of local broadcasters and other online competitors who will be only too happy to reprise, re-report or otherwise repurpose the stories for which the newspapers hope to charge.

Generally speaking, the bigger the market is, the more competition there will be. In Northern California, for example, no less than 244 local news and blog sites have been identified by my colleagues at the Graduate School of Journalism at the University of California at Berkeley.

This is not to say these sites are out to illegitimately poach anyone’s content. But once news enters the public domain, no one can own it.

This also is not to say that other newspaper publishers should dismiss the Times experiment as irrelevant. They just can’t assume that what happens in New York will play in Peoria, Poughkeepsie, Pomona or anywhere else.

Newspaper ad sales hit 25-year low in 2010

While ad sales rose in every other mass medium in 2010, newspaper revenues plunged to the lowest point since 1985, falling to nearly half of the all-time high of $49.4 billion achieved just five years earlier.

Combined print and online sales at newspapers slid 6.3% in 2010 to $25.8 billion, according to end-of-year statistics released yesterday by the Newspaper Association of America, the industry’s principal trade association.

The last time sales were this low was 1985, when newspaper ad revenues were $25.2 billion, an amount that, adjusted for inflation, would be equal to $49.6 billion in today’s dollars.

As the economy struggled out of the worst recession in a generation, newspapers were the only traditional advertising medium to suffer a sales setback in 2010. Instead of rebounding like the other media, newspapers extended what has proven to be an unprecedented five-year decline in ad sales.

While newspaper sales contracted…

:: Internet advertising sales leaped 13% in the first nine months of 2010, according to the Internet Advertising Bureau, an industry trade group. (Full-year stats have not been published.)

:: Broadcast television sales rose 11% through September, 2010, according to TVB, the television trade association. (Again, full-year figures are not available.)

:: Radio revenues climbed 6% for the full year, according to the Radio Advertising Bureau, a trade group.

:: Magazines managed a 3% sales gain, according to the Publishers Information Bureau, a trade organization.

The one bright spot for publishers in 2010 is that digital ad revenues edged slightly past $3 billion, a gain of 10.9% over the prior year. Even this improvement remained about $100 million short of the peak online sales achieved by newspapers in 2007 and 2008.

Strong as they were, digital sales accounted for only 11.8% of the industry’s total ad sales in 2010, hardly enough to offset the deep – and traumatic – declines in every print ad category since 2005.

Total print advertising last year fell 8.2% to $22.8 billion, reducing the principal revenue source for newspapers by 51.9% from the $47.4 billion booked in 2005. Here are the details:

:: Retail advertising, the largest remaining vertical of print advertising, skidded 9.1% in 2010 to a bit less than $13 billion, representing a 41.7% drop from $22.2 billion in 2005.

:: Classified advertising, the most battered category in the last five years, fell 8.6% to $5.6 billion in 2010, finishing the year at well under a third of the $17.3 billion produced by employment, auto, real estate and other types of want-ads in 2005.

:: National advertising last year fell 4.6% to $4.2 billion, representing a drop of 46.6% from $7.9 billion five years ago.

The 6.3% tumble in newspaper advertising in 201o was the least worst since 2006 and far more tolerable than the staggering drops of 27.2% in 2009 and 16.6% in 2008. And publishers can take some comfort in the fact that sales slid "only" 4.7% in the fourth quarter of last year vs. 9.7% in the first period and about 5.5% in each of the second and third quarters.

These less-bad declines may be the prelude to a turnaround. But we ain't there yet.

Paper erects pay wall – and traffic goes up!

They (including me) said it couldn’t be done, but the Augusta Chronicle put up a pay wall without losing traffic.

In fact, page views rose a nifty 5% in the three months since the Georgia newspaper installed a metered system similar to the one just implemented at the Dallas Morning News and soon to debut at the New York Times.

Traffic remains healthy at the Chronicle because its pay wall is about as impermeable as a badminton net. Still, the Augusta experience provides valuable insight into how a metered system could make it possible for NYTimes.Com to have its cake (ample page views for advertising) and eat it, too (charging for access to its content).

A metered pay system allows site visitors a certain number of free views before they are urged to subscribe. Visitors who don’t pay are blocked from some or all of the content on the site for the rest of the month. Then, they get a chance to come back the next month and start all over again.

While the system implemented in Augusta in December has established the principal of charging for content without, to date, affecting traffic on the site, it is unclear whether it is making any money – or ever will. But that’s fine by Executive Editor Alan English.

“The act of placing a value on our journalism may be more important than any penny we ever collect,” said English in a telephone interview and a series of follow-up emails. “It’s a powerful statement from the publisher and positions us distinctly in the market. If readers still get a certain amount [of content] for free, that's OK.”

According to Omniture data provided by English, traffic at his site counter-intuitively rose by 5% in the three months since the pay system was turned on. Combined page views from December, 2010, through February, 2011, were 23.6 million vs. 22.4 million in the comparable months in the prior years.

The surprising uptick in Augusta contrasts with the loss of nearly half the web traffic 2½ hours to the north at the Greenville (SC) News, which installed a hard pay wall in July that demands $2 a day or $9.95 a month from a visitor who clicks on any article on its site. The 516,821 monthly visits to Greenville Online in January, 2011, were nearly 47% lower than in the same month the previous year, according to Compete.Com.

(Note to G’ville management: You can copy and paste any URL on your site into any search engine, click the story atop the results and read the entire article for free. You might want to fix that.)

English credits the gain at his site to increased efforts in the newsroom to update the presentation of the website on an hourly basis and to post more material from more staffers more often, including photo galleries and short video snips.

“We had a digital growth strategy before we decided to implement the subscription system,” said English, who vigorously eschews the term “pay wall.” The decision to launch a pay strategy, he said, was a call to action throughout the newsroom, adding: “We told ourselves that we had better make good on doing what we told ourselves we needed to do.”

For all the improvements English and his colleagues may have made in their digital operation, the principal reason his traffic was unaffected by the pay system seems to be the generous amount of content a user can access for free before even learning that she is supposed to pay for it. Here’s what I mean:

While the Chronicle says it will allow free access to 25 premium articles a month before a visitor has to pay, dozens of other non-premium articles can be viewed without limitation. I clicked through 21 page views before encountering a screen that told me I had used up five of my 25 allotted premium articles. It is impossible to tell which articles are premium and which are free, but English considers the confusion a plus, not a problem.

The Dallas Morning News, by contrast, readily identifies premium articles on its website but gives few free samples before forcing visitors to pay for access that costs $2.31 a week or $9.24 a month. This hardball approach, which is clearly aimed at building a robust flow of subscription revenues, is likely to put a considerable dent in the paper’s web traffic.

Given the liberal amount of free content available at the Augusta Chronicle, it is hard to imagine how many subscriptions the paper is likely to acquire. Although English won’t disclose how many he has sold, he said “we saw a couple hundred subscribers in the first few days” and “we pick up two to eight new people per day.”

Subscriptions are $6.95 a month for digital-only access and $2.95 a month if you take the print edition. Purchases are evenly split between the two plans, said English, adding that he has seen almost no churn.

Based on the experience to date and assuming a constant number of new subscribers on every day of the year for 12 months, the annual revenue from the pay system could range from about $43,000 (if two people subscribe each day) to $173,000 (if eight people subscribe each day).

So long as the newspaper has enough page views to produce enough advertising inventory to satisfy demand, the subscription revenue would appear to be sufficient to support one to four additional bodies in the newsroom (although there can be no guarantee that this is where the windfall would land).

It’s too soon to say whether the Chronicle can sustain the pace of even a couple of fresh pay subscribers per day. And page views are likely to drop when the Chronicle dials down the number of free views it permits, which English said is likely to occur in the near future.

“I would not draw too many conclusions from the early numbers,” he cautioned. “It’s very early in our game and we are still building our strategy. But we are glad to be part of the wave of people who are putting forth the value proposition for content created by professional journalists. Giving it away for all those years was a mistake.”

Schiller case shows fed media funding problem

The back-to-back resignations this week of two top National Public Radio executives are dramatic proof that federal funding is unhealthy for public broadcasters because it persistently puts them in the crossfire of national politics.

NPR boss Vivian Schiller reportedly was forced out of her position yesterday after Ron Schiller (no relation), the network’s fund-raising chief, was caught in an embarrassing sting video denouncing Tea Party members as racists and “gun-toting” Christian fundamentalists who had “hijacked” the Republican Party.

The tape also shows Mr. Schiller – who was hired by Ms. Schiller – saying that NPR would be “better off in the long run” without federal funding. This statement was perhaps the most unsettling of all to the public broadcasting community, because Republicans in the House are trying to kill some $400 million in annual appropriations for the Corporation for Public Broadcasting, which flows federal support to NPR and the Public Broadcasting System.

But Mr. Schiller is right. Public broadcasters would be better off without federal funding after twisting in the political crosswinds for many of the last 40 years.

Richard M. Nixon challenged what he viewed as the liberal slant of the public media, Ronald W. Reagan slashed funding for public broadcasting and George W. Bush installed a number of highly politicized executives at CPB in yet another effort to combat what was regarded as liberal bias on the public airwaves. Liberal lawmakers, for their part, spanked the corporation in the 1970s for a lack of programming for racial and ethnic minorities and for employing only two non-white individuals among its top 29 managers.

Caught in this seldom-abating maelstrom, journalists and managers at the public media often are forced to second-guess themselves almost as much as they are second-guessed by their critics.

Had Ms. Schiller worked for a media company that was not supported by federal funding, she might or might not have been able to survive this week's kerfuffle or the firing via mobile phone last year of commentator Juan Williams after he made controversial comments about Muslims on Fox News.

Ms. Schiller's rapid ouster over Mr. Schiller's intemperate remarks – even though she evidently was as surprised to learn of them as the rest of us – suggests that Ms. Schiller was removed not for any direct misfeasance on her part but, rather, in hopes of placating the political powers who control the purse strings for NPR and PBS.

Although there may be more to the story than we know today, the irresistible conclusion from the available facts is that Ms. Schiller and her colleagues operate in an environment that forces them to tread a treacherous and uncertain path between journalistic fearlessness and political correctness – a pair of opposing objectives that are as hopelessly incompatible as they can be.

Fortunately, as discussed previously here, there is a way out: Public broadcasters can tell the feds to get lost.

Thanks to nearly $9 billion of sometimes-grudging federal support since 1969, public radio and television have become mature, powerful and self-sustaining businesses that derive only 15% of their funding from Uncle Sam. With some belt tightening and a few more pledge drives, most public broadcasters can carry on without federal funding.

They should get off the federal dole, too, because there is no logical or ethical reason for the government to continue funding public broadcasting at a time that health, education, welfare and job-generating programs are on the chopping block.

Federal funding has created a healthier and more powerful public broadcasting infrastructure than the original founders could have hoped. Now, it’s time for public broadcasters to claim their rightful independence. They – and viewers and listeners like us – will be glad they did.

Will classified advertising come back?

Nowhere have newspapers suffered as mightily in the last five years as in the meltdown in classified advertising, where nearly $14 billion in highly profitable revenues were vaporized between 2005 and 2010.

The classified ad crash, of course, resulted from the worst global economic calamity since the 1930s. The real estate market collapsed. Employers stopped hiring. Two of the three domestic automakers plunged into bankruptcy. Nervous consumers held off on buying everything from cars to pedigree puppies.

The impact on newspapers was rapid and profound:

While classified advertising delivered more than 40% of newspaper revenues as recently as 2000, want-ads produced barely 22% of the industry’s revenues by the end of 2010 – the lowest contribution in 50 years. To put it another way, the classified crash was responsible for 58% of the drop in revenues that brought total newspaper ad sales to some $26 billion at the end of 2010 from an all-time high of $40.4 billion in 2005.

Now that the economy is – sort of – on the mend, the big question for publishers is how much the classified advertising market will rebound. Although economic upswings historically have reinvigorated classified advertising, this time may be different.

The principal reasons that classifieds may never regain their former strength are that people are hunting for jobs, buying cars and shopping for homes in decidedly different ways today than they did even five years ago. They have moved to the web. And employers, car dealers and real estate agents are enthusiastically following them.

The migration, which began with a trickle in 2006, turned into a torrent as the economy unraveled and continued declining in 2010 despite the nascent recovery. Here is where we are today:

:: Total recruitment advertising revenue at American newspapers was about $750 million last year, or 85% lower than the $5.1 billion produced by this vertical in 2005.

:: Real estate sales were approximately $1.1 billion at the end of 2010, or 76% lower than the $4.6 billion achieved in 2005.

:: Automotive revenues were about $1.2 billion last year, or 73% lower than the nearly $4.6 billion booked in 2005.

The above projections are based on actual data published through the first nine months of 2010 by the Newspaper Association of America; the projections for the final three months of last year are mine.

To be sure, classified advertising is likely to improve if the economy continues to recover. Employment advertising, for example, jumped 5% in the third quarter of 2010 but still remained deeply depressed against historic levels.

Fundamental shifts in consumer and advertiser behavior in each of these major verticals suggest that they never will return to their former glory. While many publishers recognize the enormity of these secular changes, others still have not come to accept them. But every publisher has to face these facts:

:: Employers have learned to post vacancies on their own websites or at low- or no-cost job boards targeted to their particular industries. In recruitment as well as the rest of the classified verticals, the online media are significantly cheaper – when they are not simply free – than the rates traditionally charged by newspapers.

:: Auto dealers know that eight hours is the median amount of time consumers spend shopping on the web before contacting a dealer. Car manufacturers and sellers are focusing their efforts on intercepting customers as they make their decisions online, not luring them to dealerships after the fact with broadcast or newspaper ads promising free pony rides. In addition to avoiding the nuisance of cleaning up after the ponies, interactive marketing enables dealers to get the names, email addresses and phone numbers of live prospects – something you just can’t do with print.

:: The vast majority of real estate argents have said in countless surveys that they know newspaper ads don’t sell houses. Agents buy ads to please sellers, who want some tangible proof that something is being done to market their houses. As sellers and buyers become accustomed to shopping at sites like Realtor.Com or Zillow.Com, real estate agents will put more of their dollars into those venues, which not only are cheaper than newspaper ads but also make it possible to make contact with prospective customers.

Ironically, a strengthening economy will chew into sales of the strongest line of classified advertising left at most newspapers: Legal advertising.

While no one in the industry tracks the volume of legal advertising, some publishers report anecdotally than notices associated with mortgage foreclosures, tax delinquencies, bankruptcies and other legal matters recently have been providing up to 30% of their total ad volume.

Because a lot of legal notices will dry up as the economy improves, publishers are worried about their dependence on such business. The hope, of course, is that the traditional job, auto and realty categories will perk up to offset the decline in legal notices.

But will they come back to 2005 levels? Don’t count on it.

© 2011 Editor & Publisher

So long again, Chicago Daily News

"It's fun being the publisher when things are going well," squeaked the young man who stumbled awkwardly to the top of a battered desk in the unusually silent newsroom of the Chicago Daily News. "But it's no fun today."

Swallowing a nervous giggle, Marshall Field V cleared his throat and read the assembled staff the short, typewritten death warrant of one of the most distinguished newspapers in American history.

An agonizing month later, on March 4, 1978, the Daily News signed off with the jaunty banner, "So long, Chicago."

The line was written by the late nightside copy desk chief, Tom Gavagan, a chain-smoking, working-class Irishman who seemed to own only two shirts -- one in burnt orange, the other in avocado green. The tears in Gav's eyes weren't from the smoke.

Although it happened 33 years ago, the story is worth telling today, because many of the zany, brainy people who made that paper sing aren't here to talk about it any more. They were my mentors, comrades and friends, and I cherish their memories. I am republishing this post, originally written in 2005, in their honor.

But this isn't just ancient history. It is a valuable reminder to today's media companies of what happens when you run out of readers, revenues and ideas all at the same time.

The Daily News, like most afternoon newspapers, succumbed at the age of 102 to a declining audience and rising expenses.

Its readers had moved on. On to the suburbs, where delivery trucks couldn't reach them with a paper that didn't come off the press until afternoon. On to the sofa, where they favored Three's Company on television.

There were no home computers, no Internet, no iPods and no cellphones to get between our readers and us in 1978. Still, circulation dropped. The management was changed. Circulation dropped. We redesigned the paper. Circulation dropped. We tinkered with the product. Circulation dropped.

In the end, there was nothing left to do. Some 300 people lost their jobs, and Chicago lost a great newspaper.

The Daily News, in its best days, was a cutting-edge conscience in conservative Chicago, a husky, brawling town that wasn't always ready for reform. The paper stood fast against official incompetence and government corruption and stood tall for civil rights and the little guy. For years, the Daily News stubbornly held its price to a penny, so as to be affordable to laborers heading home from work.

It was one of the first newspapers to have foreign correspondents, to print photographs or to cover that new-fangled medium, radio. Its widely syndicated coverage won 13 Pulitzer Prizes, including three for meritorious public service.

The Daily News cultivated a limitless array of talent over a century, including Eugene Field, George Ade, Ben Hecht, Finley Peter Dunne, Carl Sandburg, Peter Lisagor, M.W. Newman, Lu Palmer, Lois Wille and our latter-day franchise player, Mike Royko.

The list is too long to print here. But the Daily News, in its classy way, printed the name of everyone working on the staff on the day the paper folded.

My name was on that list. It remains one of proudest, and saddest, moments of my life.

Facebook comments: Friend or foe for pubs?

In its highly successful effort to insinuate itself into every aspect of our lives, Facebook now is offering publishers the opportunity to outsource comments on their websites to the social networking juggernaut.

This slick idea could be one of the best things anyone ever did for newspapers, magazines, broadcasters, bloggers or anyone else who thinks he has something to say on the web. Or, it could be a dangerously beguiling trap.

First, I’ll tell you how it works. Next, we’ll look at the pros and cons. Then, you can be the judge.

Announced earlier this week, the Facebook comment plug-in lets a publisher put a bit of code on her website so readers can use their Facebook log-ins to make comments on the site in the same way they can leave a comment today. The system, which has been deployed under this article at GigaOm.Com, allows publishers to moderate comments to filter out spam and other objectionable content.

The difference between conventional commenting and the Facebook system is that the comments don’t just sit on the publisher’s site but are immediately propagated across the Facebook network. That means they show up on the Facebook pages of the commenter and all her friends. When an individual logs in as a Facebook member at the publisher’s page, the plug-in cleverly elevates comments from her Facebook friends to the top of the comment stack.

This could be a boon for publishers for the following reasons:

:: Publishers can increase the number of comments on their site, since it’s a snap for any of the more then 500 million global Facebook users to log in and dash off a few lines. While some backwards-thinking publishers limit or prohibit comments on their sites, feedback actually is a valuable way to build ongoing interest and traffic on a website. The more comments, the busier a site will be. What publisher wouldn’t love that?

:: Because comments are shared across the burgeoning Facebook platform, publishers will enjoy increased exposure for their sites. By some measures, Facebook has surpassed Google as the top referrer of traffic on web. When a comment appears on Facebook, it contains a link not only to the comment but also the article that inspired it. As everyone knows, there is nothing more potent than word-of-mouth in marketing. What publisher wouldn’t love more traffic?

So, what’s the downside?

:: The known knowns: If this plug-in is adopted widely, the already formidable power of Facebook will be enhanced to the potential detriment of other digital media companies. By aggregating the likes (and dislikes) of its users through the comments they make, Facebook will gain deeper and more granular insight into each participating individual than it now possesses. Facebook without doubt will leverage this information to sell ever-better-targeted advertising at ever-higher prices. Publishers, on the other hand, will get bupkus for generously creating the content that generates the comments that Facebook spins into gold.

:: The known unknowns: In addition to selling advertising with the information gained by aggregating and cataloging user comments across a broad spectrum of sites, Facebook will know a lot more about its users than any of the individual publishers who kindly helped them build this splendid, one-of-a-kind database. How will Facebook use this information? Can’t say. But you know this savvy company won’t let this valuable asset go to waste.

:: The unknown unknowns: While the comment plug-in could prove in the long run to be more beneficial to Facebook than to publishers, can publishers afford to forgo this rare chance to knit themselves deeper than ever in the growing Facebook ecosystem? Feel free to comment.

Get the gray out of America’s newspapers

In 1995, the Society of News Design counted a dozen American newspapers as among the best-looking in the world. By 2010, there were none.

Though it may not be fair to judge the problems of American newspaper publishers strictly by their covers, you can’t help but wonder how much their weary- and retro-looking products are contributing to their faltering readership and advertiser support.

The shutout last year of U.S. papers on the World's Best Designed list wasn’t a fluke. Since 2000, only three U.S. titles have won the annual competition conducted by the international association of news designers.

American publications have been outclassed in recent years by papers like “i” in Portugal, Der Freitag in Germany, Azkia in Russia and Rzeczpospolita in Poland.

It wasn’t always so. As you can see from the table at left, several U.S. papers each year collected top design honors in the late 1990s. When papers like the Jackson Hole News, Spokane Spokesman, Detroit News and The (Columbia, SC) State snared top honors in 1995, they shared the podium with 11 international publications. The full historical list of winners is here.

In the last decade, only three U.S. papers made the list: The New York Times (2009), Hartford Courant (2000 and 2004) and the San Jose Mercury-News (2001). The bankruptcy of the owners of both the Courant and the Mercury-News subsequently have forced sharp reductions in their news staffs and news holes. This may explain why we haven’t heard from them lately.

While those fortunate enough to still have jobs in America’s down-sized newsrooms may argue that they don't have the time it takes to dream up glitzy graphics and layouts, I would argue that the industry can't afford to stick to the predominantly gray and text-heavy formats that characterize most newspapers.

The look of most American newspapers harks back to the limitations associated with setting hot type one letter at a time from the 1500s to the mid-1900s. But that era ended a good 50 years ago. Today, the increasingly mobile Internet makes it a snap to acquire text, data and images in real time, while powerful computers and software make it easy to create and fine-tune layouts in full WYSIWYG Technicolor. Sorry, folks: No excuses.

Good design is more than eye candy for readers, although there is nothing wrong with that, since loyal and growing readership is elemental to the long-range health of any publication. Because good design requires up-front thinking and advance planning, it shapes and sharpens all the content that goes into the newspaper, including words as well as the charts and illustrations that can wondrously improve reporting and storytelling when they are executed well.

Last but not least, good design is good for business. American publishers would be well advised to take note of not only the visual appeal but the business success of the global papers that have elbowed them off the best-dressed list.

In the inspiring video embedded below, Jacek Utko, a designer who has won numerous awards for revamping papers in Eastern Europe, makes the compelling case for how a well designed paper can improve both content and circulation.

If you care anything about healthy newspapers, please take a few minutes to watch it.