Wednesday, June 22, 2011

How to sell content by making it easy to buy

A resolute consortium of media companies in, of all places, Slovakia appears to be proving that you can charge for digital content, so long as you (a) hang together as a group and (b) make it simple for the consumer to pay.

The companies, which include seven newspapers and two television broadcasters, are the charter members of a new service called Piano, which allows a user to register at one participating site and then acquire premium content with no further ado from any other member of the consortium.

The content-vending combine says it has collected more than €40,000 (US$57,600) in subscription fees since it launched on May 1. Perhaps even more significantly, at least one of the publishers in the group reports a 14-fold increase in pay subscribers in the weeks since the service launched. More on that in a moment.

The seemingly successful start of the consortium is the culmination of more than a year of work by Tomas Bella, a former online director of one of Slovakia’s biggest newspapers who now is the chief executive and a major shareholder of Piano Media, the company running the payment system.

Bella pulled together a group of competing and independent-minded publishers and then built a flexible pay-wall system that allocates payments among the media partners according to how much content is consumed at each of their sites. Bella is taking 30% of sales in the first year of the venture to defray development and operating costs, but intends to reduce fees for publishers as the service scales up.

Bella’s hunt for a way to charge for content actually goes back to 2006, when he launched the first pay wall for SME, the large national daily where he headed digital operations. That initial effort “was a horrible failure,” said Bella in a Skype interview. “While people understand content is expensive and can’t be free, they have a big problem, not with the cost, but with the inconvenience of paying for it.”

Bella’s early pay wall, like those attempted by several North American newspapers, was a one-off system that was unique to his newspaper and required customers to choose from a complex array of content tiers and payment plans. Taking that experience into account, Bella figured it would “be easier for people if they knew there would be one payment that would let you read as much as you want, anywhere you want it.”

Here’s how Piano works:

After the customer pays €0.99 a week, €2.90 a month or €29 a year for access to premium content at any one of the participating sites, she normally is recognized and granted access to paid content at all the sites operated by the other members of the consortium. In keeping with the convenience meme, consumers can acquire a Piano account not only from participating publishers but also at book shops, through SMS payments on their mobile phones and through their Internet service providers.

Publishers, who have considerable flexibility in the amount and type of content they put behind the pay wall, are paid for the amount of time individuals spend on their sites, not by page views or any other metric. Some publishers are experimenting with charging for access to comments or permitting Piano subscribers to place free classified ads.

Bella and his media partners are reluctant to discuss the specific results of the venture in its first six weeks. But Bella says paid subscriptions at the opinion pages of his alma mater, SME, are 14 times greater today than they were under the in-house system in place before Piano launched. Bella says paid subscriptions rose six-fold since May 1 at Tyzden Magazine, which also previously had a proprietary pay wall. To keep things in perspective, those gains probably are coming off pretty small starting numbers.

“We thought we would have to wait for several months to see if this would work,” said Bella. “After only six weeks, however, we are talking to publishers in five western European countries and hoping to launch a second country in autumn.”

Bella’s not-so-secret advantage is that he only had to bring together a small band of publishers in a country of 5 million residents speaking a relatively obscure language. Could his approach work equally well in the English-speaking world, where competition is far more intense than Slovakia?

“You might not be able to immediately persuade the Washington Post, the New York Times and USA Today to join our system,” he responded. “But if you put all the hunting and fishing magazines together on one pay platform, you could sell a lot more content than any one magazine could ever hope to do on its own.”

Monday, June 20, 2011

Cable news overdosed at the Weiner roast

Anthony Weiner disgraced himself, his family and his constituents by his bizarre misbehavior on Twitter, but he has an explanation: He has some sort of psychological problem.

The cable channels and other news organizations that whipped his indiscretions out of all reasonable proportion have no such excuse. They were being cheap, cynical and opportunistic. And they ought to be ashamed of themselves, though I know they won’t.

To be sure, the Weiner story was a proper matter of public interest and the republic is better served with him in sext rehab, whatever that is, than flexing his pecs for his BlackBerry at the congressional gym.

But a sad aspect of this tawdry tale is that the media allocated a stunning 17% of the available newshole in the week of June 6-10 to roasting
this emotionally arrested loser, according to the national coverage index published by the Pew Research Center’s Project for Excellence in Journalism.

The worst offenders in this journalistic travesty, of course, were the brain-dead cable news networks, where fully a third of the airtime was devoted to flogging a matter of no major import and no enduring consequence.

The story made for great cable fare, because it represented a simple narrative about a titillating subject that was easy to get people to fulminate about. Does their cynicism know any bounds?

By contrast, Pew said, newspapers allocated only 7% of their ink to the yarn, proving why we need healthy newspapers more than ever.

It’s not as though Weiner-gate broke at a dull moment the news. There were any number of economic stories to populate the news agenda, ranging from the battle over the national debt to the slump in the stock market to the European economic crisis. On the international front, the Mideast was roiling. Back in the U.S., much of the country was broiling.

But the bullies in the media trained their big guns on a weenie.

Monday, June 13, 2011

The value of journalism, sir, is not ‘zero’

John Paton, the chief executive piloting the radical remake of the Journal Register Co., declared last week that the value of journalism is “about zero.” But he is dead wrong.

First and foremost, Paton is wrong to dismiss the intrinsic value to society of vigorous, ethical and independent journalism that is committed to comforting the afflicted and afflicting the comfortable. There is no other institution to perform this function, making journalism – and journalists – not only valuable but also well worth saving.

In addition to being way off base, Paton’s conclusion is oddly illogical, inasmuch as he is counting heavily on journalism to turn around the recently bankrupt company that he is trying to restore to financial health.

Here’s what Paton said in remarks prepared for a keynote speech last week to the WAN-IFRA International Newsroom Summit in Zurich: “As career journalists and managers, we have entered a new era where what we know and what we traditionally do has finally found its value in the marketplace and that value is about zero.”

Explaining that the digital media have empowered everyone, everywhere to report or comment on the news, Paton pronounced “traditional journalism” to be dead, according to a text of the speech he published at the blog he maintains to motivate the employees of his company. “The Crowd collectively knows more about any subject, city or event we choose to cover than we do.”

In steering Journal Register out of the bankruptcy occasioned by the financial over-reaching of his predecessors, Paton has decided to outsource almost every aspect of his business – from ad make-up to information technology – so he can concentrate on its two unique competencies: content production and advertising sales.

To be successful, Paton necessarily must rely on the skillful production, aggregation and curation of reporting, writing, photography and other content to create high-quality, authoritative and compelling products that people want to read – and where advertisers want to appear. While some of the content can, and should, come from the crowd instead of paid staffers, someone is going to have to make sense of all the yadda-yadda on the web.

In other words, the value of Paton’s publications in the eyes of readers and advertisers will require them to be professionally put together.

That will require journalists performing journalism. So, how can he say that journalists – and journalism – have no commercial value?

Even if, arguendo, there were no “commercial value” to journalism, the pursuit of disciplined and open-minded inquiry into public affairs and social issues has an incalculable value to society. Whether they are working for a media company or blogging for free, ethical and professional journalists contribute just as much as artists, scientists, academic researchers and people who dedicate themselves to fighting to assure honest government, enhance social justice and alleviate human suffering.

Given the flood of free content available on the web, publishers may not have to pay journalists what they are worth. But that doesn’t make journalism, or journalists, worthless.

Tuesday, June 07, 2011

Time to bring back a P.M. news product

Back in 1940, 80% of the 1,877 of the daily newspapers in the United States were published on the afternoon cycle, meaning that editions were printed some time prior to noon for delivery to consumers coming home from work. And it was good.

By 2000, 52% of the nation’s 1,480 newspapers were publishing on the morning cycle to accommodate people who worked later, had longer commutes and were more interested in watching TV than reading a paper when they got home from work. And things were still pretty good.

In 2009, according to the latest statistics published by the Newspaper Association of America, 62% of the remaining 1,387 newspapers were produced overnight for delivery around 6 a.m. But things lately have not been very good, with newspaper circulation down by a third in the last 20 years.

Now, a bit of interesting market research suggests that going back to an evening news product may be one way for newspaper publishers to build new audiences and revenues. But the evening product of the 21st Century would be delivered on mobile and tablet platforms, not in print.

Here’s why a Nightly eNews product could hit the spot:

Newspapers today face a Bermuda Quadrangle of competition in the hour (or less) around 8 a.m. when people check their smart phones, their computers, their iPads, and their Facebook accounts to see what the day holds in store.

In research released earlier this year, ComScore, the digital ratings service, found that mobile phone, computer and tablet use spikes in the morning, as consumers get ready for work. Separately, Dan Zarrella, a social-media marketing researcher, found that the early-morning action on Facebook rivals the spike in activity the site experiences in the after-dinner hours.

Newspapers unfortunately operate at a disadvantage in the battle for early-morning mindshare.

Unlike all other competitors, newspapers don't ring, beep, buzz, tweet, friend or vibrate to get your attention. Papers also contain generic information that is less mission-critical to most individuals than, say, an email from the boss, a tempting GroupOn offer or a picture of your cousin’s new baby. All too often, the trusty print product piles up, mostly unread, until the consumer finally cancels her subscription.

Electronic intrusions may not be as much of a problem with the older-than-50 readers who represent about half of newspaper readership as they are with the sub-50 cohort. But young’uns are the audience that publishers have to acquire if they hope to have a future. Given the un-affinity most young consumers have for print, newspapers are going to have to find another way to reach them.

Fortunately, the ComScore research contains a hopeful nugget. The company found that iPad use rises considerably during the after-dinner hours, when consumers evidently make time to catch up on articles they have cached or bookmarked during the day.

Newspapers can take advantage of the quiet time consumers apparently set aside for reading by publishing products delivered on the mobile and tablet platforms in the hours between roughly 6 and 8 p.m.

The Nightly eNews product would contain a certain amount of standard newspaper fare, including late-breaking news, a wrap-up of the day’s major headlines, weather, sports scores and stock market news. But it also should be a tool for getting the most out of life, including:

:: Community calendar, featuring things to do and places to go – for you and your kids.

:: Hot picks for movies, music and television shows.

:: Daily deals and shopping tips.

:: Advertising and prominent promotions for upcoming features in the daily and Sunday print editions.

Packaging is just as crucial as content. Long, windy and gray stories must give way to brief, engaging content that is easily downloaded and consumed on a smart phone or tablet. At-a-glance graphics and quick video clips should replace words as much as possible. Displays should be held to a single screen that can be read conveniently on a mobile gizmo held in the landscape position.

There have to be places to comment, upload user-generated content and – very significantly – share articles with friends.

Up for grabs is whether this should be a free or subscription-only product. Free most certainly is the course of least resistance but some publishers may be bold enough to try to sell subscriptions at something like the 99 cents that The Daily is charging for weekly access to its iPad app.

Even if the product is offered free, however, publishers should require users to register (directly with the publisher or via Facebook or Google), so they can begin profiling the location, preferences and behavior of users. (Make sure your privacy statement matches the policy you pursue.)

For a guy who started on an evening newspaper whose offices were turned into a café when it went out of business, it’s fun to see how everything old is starting to look new again.

© 2011 Editor & Publisher

Thursday, June 02, 2011

Newspaper sales crisis enters sixth year

Following an unexpectedly sharp decline in advertising demand in the first three months of this year, newspapers now appear to be entering the sixth year of an unprecedented collapse that has vaporized half of their principal revenues since 2006.

The Newspaper Association of America, the industry’s trade association, reported yesterday that print sales fell by a steep 9.5% in the first three months of the year, dropping industry-wide print sales to $4.7 billion, a level not seen since 1983.

Print sales in the first quarter of 2011 were only 45% of the $10.5 billion in revenues produced by the industry in the first quarter of 2006, the last three-month period in which newspapers collectively showed positive year-to-year growth. As illustrated in the chart below, print sales have been falling relentlessly since April 1, 2006.

In the first quarter of 2011, real estate classified advertising slid by 19.3% from the prior year, while national tumbled 11%, retail fell 9.5% and auto classified was down 4.7%. Only employment classified gained by 4.3%.

With publishers reporting anecdotally that these negative trends are continuing in the current quarter, it is all but certain that the revenue crisis has entered its sixth year.

Although the growth of digital advertising since 2006 has offset some of the decline in print sales, total ad sales for newspaper industry in the first period of this year declined by 7.0%, according to the NAA. At a bit less than $5.6 billion, industry ad sales in all categories in the first period of 2011 were exactly half of the $11.1 billion in consolidated ad sales achieved by newspapers in the first quarter of 2006.

Seeking to find whatever cheer he could in the industry’s first-quarter sales performance, John Sturm, the soon-to-retire chief executive of the NAA, noted that online revenues now represent a historically high average of 15% of newspaper ad sales.

But Sturm’s statement underscores the fact that print remains the predominant revenue stream for newspapers. And the problem with print sales is that they began falling before the recession began, plunged vertiginously during the downturn and have failed to rebound ever since.

As reported previously here, television, Internet, radio and magazine advertising recovered in 2010 from the pummeling that all media companies took during the slowdown. At the same time ad sales at competing media moved into positive territory, however, newspaper sales fell by 6.3% in 2010.

Even though newspaper sales were slower to bounce back than other media, most publishers believed – or at least fervently hoped – that a steadily improving economy eventually would stabilize their sales. “Flat is the new up,” quipped more than one publisher last fall in summarizing their revenue hopes for 2011.

But it was not to be. After print sales slipped by about 7% per quarter in the last nine months of 2010, newspaper executives were stunned to see sales fall with a renewed vengeance in the new year.

The reason newspaper sales are not recovering is that consumers and marketers are moving ever more aggressively to the digital media.

Consumers can find more information, can obtain more choice and can transact business more efficiently on a laptop or a smart phone than they can with even the very best newspaper. Advertisers understand this.

Further, advertisers know they can target customers more efficiently via the digital media than they ever can with print – and at a much lower cost per transaction, too.

The bad news for publishers in the first-quarter figures is that the stubborn refusal of ad sales to recover removes any remaining doubt that newspapers are experiencing a secular change that will radically change their businesses forever. A secular change like, say, the move from kerosene lamps to electric lights is one that does not reverse itself when the economy improves.

The worse news for newspapers is that tumbling ad sales are reducing the resources and, thus, the time that publishers have to reinvent their franchises to meet the expectations of modern consumers and advertisers.

Newspapers have phenomenal assets that any other business would envy: high-profile brands, large sales forces, unparalleled content-creation capabilities and the power of their existing media to promote new digital products and services.

But they have to use them or lose them. And they will have to be faster and bolder in the future than they have been for the last five demoralizing and terrifying years.

Wednesday, June 01, 2011

Will newspaper values recover?

Dan Walters, the star political columnist at The Sacramento Bee, is not only the celebrated dean of the statehouse press corps in California, he also has been a loyal shareholder for 22 years of the company that owns his paper. But his faith in his employer, McClatchy, has not been rewarded.

After buying his first stock when McClatchy went public at $18.98 a share in 1989, Walters kept accumulating shares as they soared past $74 in 2005 and watched in horror four years later when they plummeted to less than 50 cents apiece. Undaunted, Walters scooped up a bunch of shares at the bargain price and sold them at a profit when the stock hit $4 and $5 earlier this year before settling to around $3.50.

Walters won't rule out making similar opportunistic trades again. But he is no longer making long-term investments in his company because he is worried about the future.

"I haven't bought any shares for a couple of years, because the price was too high in relation to what it is likely to be," said Walters, who is 67, single, and sufficiently well off to collect boats as a hobby. "The appetite for information and analysis is as strong as ever, and newspapers are flailing around to try to make it. McClatchy has as good a chance as anyone, so I hope the stock goes up. But if I were young and had a family, I would be thinking about getting into another line of work."

Walters' analysis mirrors the general skepticism among sophisticated investors about the prospects for the newspaper business. Like Walters, the pros think the value of publishing companies has a scant chance of advancing from its current, historically anemic levels. In a moment, I will tell you why. First, the background:

Although the shares of publicly traded newspaper companies have recovered from the all-time lows they hit in the trough of the Great Recession, few independent analysts foresee the day a newspaper will be worth six, eight, or 10 times its operating profit, much less the bodacious 20, 30, and 40 times earnings that some publishers paid for trophy acquisitions in the era when McClatchy's stock peaked at 20 times what it is worth today.

As of the end of the first quarter of this year, the enterprise value (market capitalization plus debt) of the publicly traded newspaper companies averaged 5.5 times its earnings before interest, taxes, depreciation, and amortization (EBITDA) in the prior 12 months. The enterprise values ranged from 2.5x EBITDA for A.H. Belo to 5.2x for McClatchy to 13.4x for GateHouse Media (whose value was inflated by its $1.3 billion in debt, not the sub-$10 million value of its stock).

To be sure, newspaper values generally are stronger today than they were in 2009, when a private equity firm picked up the otherwise-unwanted San Diego Union-Tribune for an undisclosed price believed to be less than a fifth of the value of the $100 million in real estate bundled into the deal for the paper. A few years before the fire sale in San Diego, the daily might have fetched something in the very high nine figures, if not a full billion bucks.

Publishers gasped and newspaper brokers gagged in 2010 when I reported that the value of The Daytona Beach (Fla.) News-Journal plunged to $20 million from $300 million in just four quick years. That means the paper was valued at 3x its EBITDA in 2010 vs. 29x in 2006.

Considering the outlook for the industry, the average enterprise value of 5.6x EBITDA for the publicly held publishers at the end of March is about as good as it gets, according to a bottoms-up analysis completed by Moorgate Partners, a New York-based investment banking firm specializing in media.

"I don't see a good trend for newspapers," said John P. White, a partner in the firm, who projected the likely future revenues, expenses, and profits of the public companies.

While some publishers may pay premium prices from time to time for strategically valuable acquisitions that either eliminate a competitor or achieve significant operating efficiencies, White pegs the intrinsic, long-term enterprise value of the average newspaper at no better than 4.5x EBITDA - or a full multiple higher than where they stood as this column went to press.

There's no mystery behind White's reservations: With an ongoing erosion in advertising cutting industry sales almost in half since 2005, he says newspapers are burdened with unavoidably high fixed costs for content-gathering, newsprint, production, and distribution at the same time digital competitors - unencumbered by such overhead - are building profitable, reader-pleasing businesses.

The only way for publishers to combat the deteriorating value of their assets, White said, is "to find other ways to capture subscriber-based businesses."

But we already knew that, didn't we?

© 2011 Editor & Publisher