Tuesday, March 29, 2011

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.

8 Comments:

Blogger katetiowa said...

I don't know what it takes to run a huge media company that has a ton of competitors and has been watching business move to the Internet or at least away from their products. I do know exactly what it takes to run a solid local newspaper that dominates the local market precisely because it runs local content, produced by solid journalists as well as members of the community. Small town newspapers that report on all the things that matter to our readers aren't dying today and I don't believe they will die tomorrow either, no matter what the Huffington Post does. The Huffington Post won't cover our local school board or city council and won't have pictures of our school kids, their parents and their neighbors. Maybe the big guys need to panic, but I don't see it happening in small town America.

7:16 AM  
Blogger John Arthur said...

These guys would be more convincing if either one of them put out a decent product. The Huff Post is a scam, as has been pointed out by people smarter than me. I can open a porn site, or a site about cute rodents, and get plenty of hits, too. But what does it prove?

6:48 PM  
Blogger Frank H. said...

I would bet a lot of money that of the $41 million earned by Journal Register Company last year $40 million came from print....I would say all of the $41 million but I want to win the bet...newspapers need to be on the internet and complete with mobile apps... try 20% of $1. vs. 20% of a dime! Then expand the math... Ink on paper will make a majority of the money for newspapers for years to come....especially for "Commmunity" newspapers as opposed to Metro's or Suburban newspapers... which is where most of Journal Register newspapers reside...under the umbrella of a Metro is circling the drain for one or both!!!

4:31 AM  
Blogger Ramblin' Man said...

"...by filling his web pages with low-cost articles produced by 1,000 part-time contributors and material aggregated from other sites." Why not call it what it is -- hacks and pillaging. I'll bet 1,000 part-time contributors don't produce a single story as deep, accurate, thoughtful and useful as one solid reporter.

6:55 AM  
Blogger andy said...

All of the arguments in favor of the current model make the assumption that people (audience) want the in-depth journalism that the newspaper provides. For many of the papers the issue is loss of audience that is followed by loss of advertisers. The rise of the mobile phone has shown that the people will sacrifice quality for cost and convenience. As sad as it is this also seems to be the case when consuming media.

This leaves the newspaper with either having to figure out how to survive with a smaller audience - perhaps a higher quality audience. Or adapt to maintain audience and find new ways to sell that audience.

The road is littered with high quality products that where run over by an inferior product that had a larger adoption rate.

8:58 AM  
Blogger Steve Ross said...

The video feed is almost a metaphor for the NAA's lack of technical prowess. It streams at about 1 Mbps, which is too fast to watch comfortably (without constant stuttering) on all but the fastest broadband connections (that's 400 MB for an hour, roughly). There's no direct download permitted (why?), but anyone with RealPlayer can fool the system and download anyway, as I had to. The video is, of course, Flash, so iPad or iPhone users (which would have bandwidth problems anyway) need not apply. and I trust these folks to tell me how to run a newspaper?

10:46 AM  
Blogger Stephen said...

http://paidcontent.co.uk/article/419-uk-times-claims-79000-digital-subscribers/

The Times of London has about 79,000 digital subscribers now whereas it had 50,000 digital subscribers 4 months ago. It's now making over 1M per month in digital subscriptions and this is growing at an over 300% annual rate. This is more than they probably ever made on digital ads before. And guess what? They're probably making MORE on digital ads now, since the only people behind the pay-wall are people with money to spend.

So all you "news wants to be free" losers... are you starting to see the light? Are you starting to hear the second half of the sentence "but it also wants to be expensive"? Are you starting to realize that water is free but that it can be bottled, made more quality assured and convenient and SOLD? You suckers just wait till the 1 year numbers come out for the NYT digital. You're gonna get your brain punished.

4:23 PM  
Blogger rknil said...

So, let me get this straight:

You say newspapers need to find a way to compile and deliver the news more cheaply. But a few posts back, you also say they need to find a way to stay pretty and sharp-looking, and somehow they need to dedicate the resources to those goals.

So, if I infer correctly, you want fewer resources for content and more for how that content looks. Right? Or are we living in the same fantasyland inhabited by pseudoeditors of presentation, where somehow we dedicate more time and resources to one thing with a limited staff, but we are never really cutting anything?

I'd add my conclusion about what these ideas mean for the future of newspapers, but I think you started blocking posts that questioned the industry's long-term viability, even when you question it yourself.

1:48 PM  

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