Why traditional publishers won’t buy Globe

When the New York Times Co. bought the Boston Globe for $1.1 billion in 1993, many of the nation’s newspaper publishing companies happily would have paid the same price for the same opportunity. 

With the Globe now on track to be sold for a tenth (or, perhaps less) of the value it commanded a decade ago, it is safe to assume that no traditional newspaper publisher will be in the scrum of wealthy individuals and private-equity funds said to be bidding for the honor of owning this iconic brand.  

There is no way of knowing who will buy the Globe. Oft-mentioned candidates range from Aaron Kushner, the publisher of the Orange County Register, to members of the Taylor Family, which pocketed better than a billion bucks by selling the paper to the NYT. Other, less-probable names include Jack Welch, the former General Electric boss, and Ernie Boch Jr., a Boston auto dealer. 

One thing is all but certain.  The traditional newspaper publishers are likely to sit this one out.  What do they know that the newbies don’t? We’ll discuss that in a moment. First, the background:

After writing off $814 million of the value of the Globe in 2006, the NYT Co. put the paper on the auction block last week because the ongoing advertising slide at the paper is proving to be an unmanageable distraction at a time the parent company is seeking to build the Times into an even bigger cross-media brand than it is today by delving deeper into video and digital publishing. 

Like the Wall Street Journal, the New York Times is must reading for the world’s elites in government, politics, business, the arts and academia.  A borderless brand whose appeal is not defined by its geography, the reporting and commentary in the Times is as valuable in Pakistan and Peoria as it is in Park Slope. 

On the other hand, the Globe, like every other metro newspaper in the land, has none of these advantages. With staffing and newshole squeezed in response to the 38.8% slide in revenues in the last decade that brought sales to $394.7 million in 2012, the Globe is trying to remain relevant to a dwindling number of readers and advertisers in a 1,422-square-mile metro area that includes 22 cities and 79 towns inhabited by 3,067,000 people.  (The revenue figures include the sales of the affiliated Worcester Telegram & Gazette, which also is up for sale.) 

With circulation today of 225,482 on weekdays and 365,512 on Sunday – or less than half the audience that NYT Co. bought in 1993 – the paper is purchased by barely 7% of the population in its primary market area.  

Despite the contraction of its business in the years it has been owned by NYT, the Globe, like all metros, must contend with many of the fixed production and distribution costs that were required when revenues and circulation were nearly double what they are today. 

Variable costs, like newsprint and newsroom staffing, were pared over the years to try to salvage a semblance of the historic profit margins that newspapers commanded before the digital media lured their audiences to alternatives ranging from the Drudge Report and YouTube to Beantown Bloggery and 52 Weeks 52 Restaurants.  

With the newspaper audience ferociously fragmenting, marketers are forsaking high-priced newspaper advertising by listing jobs on Craig’s List, connecting with condo shoppers at the Boston Real Estate Blog and intercepting car buyers on Facebook.  

Traditional newspaper publishers, whose advertising sales collectively have fallen by more than half since peaking at $49.4 billion in 2005, have not figured out how to solve identical problems at the papers they already own. So, they are unlikely to belly up for more of the same in Boston, even though the paper probably would sell for, give or take, $100 million –   a historically low price for this once-prized asset. 

Beyond the global (pardon the pun) reasons why publishers would be averse to buying the Boston paper, many of the traditional newspaper companies would have particular reasons for avoiding the auction.  

Digital First, which owns the Detroit News and Denver Post, has explicitly sworn off print.  Ditto, Advance Newspapers, which has gone so far as to reduce print publication to three days a week in New Orleans, Syracuse and multiple markets in Alabama and Michigan.  Because neither of these companies successfully has cracked the digital-publishing code, they are likely to focus their energies on optimizing the web, mobile and social operations at their existing holdings before tackling any turnaround projects.

New acquisitions likely would be off the table for heavily indebted companies like McClatchy and Lee Enterprises, which haven’t figured out how to fix the struggling metros they, in retrospect, overspent to buy in Miami and St. Louis.  The creditors of these companies monitor their activities so carefully that it practically takes a committee meeting to authorize the purchase of extra paperclips. 

Gannett, the largest and least indebted of the publicly held newspaper publishers, is working assiduously (as discussed here) to position itself as a digital publisher. The last thing the owner of the battered Detroit Free Press wants is to have to explain to Wall Street why it just bought another troubled metro paper.  

The Tribune Co., which owns the Chicago Tribune, Los Angeles Times and Baltimore Sun, is out of the running, because the new, post-bankruptcy managers of the company are planning to jettison its publishing operations so they can concentrate on the broadcasting business. 

Although Warren Buffett has bought dozens of dailies in the last 12 months, he excluded the Tampa Tribune from the Media General transaction because he wants to avoid the kind of metro market that the Globe represents.  Buffett is going after properties in relatively small and isolated communities, where papers can deliver deeper and more closely targeted news and advertising coverage than possible in a highly competitive urban sprawl. 

Notwithstanding the personal joy Rupert Murdoch might have in tweaking the politically liberal Boston market by taking control of the Globe, there is slim chance his News Corp. would make a play for the newspaper.  Murdoch in the past had no problem subsidizing the money-losing New York Post with profits from his highly successful Fox broadcast and entertainment operations.  But the N.Y. Post, the Wall Street Journal and all of Murdoch’s other print properties are being severed from Fox, making it doubtful that the managers tasked with running a batch of challenged print properties from London to Australia would be eager to add another headache to the list.  

With the usual prospective buyers off the table, the odds are strong that next owner of the Globe will be a newcomer equipped with the resources, determination, vision and daring to create a more successful metro publishing model than the industry stalwarts have mustered to date. 

While veteran publishers may generously welcome fresh blood to their fraternity, the initiation is likely to be bracing. 

Why traditional publishers won’t buy Globe

When the New York Times Co. bought the Boston Globe for $1.1 billion in 1993, many of the nation’s newspaper publishing companies happily would have paid the same price for the same opportunity. 

With the Globe now on track to be sold for a tenth (or, perhaps less) of the value it commanded a decade ago, it is safe to assume that no traditional newspaper publisher will be in the scrum of wealthy individuals and private-equity funds said to be bidding for the honor of owning this iconic brand.  

There is no way of knowing who will buy the Globe. Oft-mentioned candidates range from Aaron Kushner, the publisher of the Orange County Register, to members of the Taylor Family, which pocketed better than a billion bucks by selling the paper to the NYT. Other, less-probable names include Jack Welch, the former General Electric boss, and Ernie Boch Jr., a Boston auto dealer. 

One thing is all but certain.  The traditional newspaper publishers are likely to sit this one out.  What do they know that the newbies don’t? We’ll discuss that in a moment. First, the background:

After writing off $814 million of the value of the Globe in 2006, the NYT Co. put the paper on the auction block last week because the ongoing advertising slide at the paper is proving to be an unmanageable distraction at a time the parent company is seeking to build the Times into an even bigger cross-media brand than it is today by delving deeper into video and digital publishing. 

Like the Wall Street Journal, the New York Times is must reading for the world’s elites in government, politics, business, the arts and academia.  A borderless brand whose appeal is not defined by its geography, the reporting and commentary in the Times is as valuable in Pakistan and Peoria as it is in Park Slope. 

On the other hand, the Globe, like every other metro newspaper in the land, has none of these advantages. With staffing and newshole squeezed in response to the 38.8% slide in revenues in the last decade that brought sales to $394.7 million in 2012, the Globe is trying to remain relevant to a dwindling number of readers and advertisers in a 1,422-square-mile metro area that includes 22 cities and 79 towns inhabited by 3,067,000 people.  (The revenue figures include the sales of the affiliated Worcester Telegram & Gazette, which also is up for sale.) 

With circulation today of 225,482 on weekdays and 365,512 on Sunday – or less than half the audience that NYT Co. bought in 1993 – the paper is purchased by barely 7% of the population in its primary market area.  

Despite the contraction of its business in the years it has been owned by NYT, the Globe, like all metros, must contend with many of the fixed production and distribution costs that were required when revenues and circulation were nearly double what they are today. 

Variable costs, like newsprint and newsroom staffing, were pared over the years to try to salvage a semblance of the historic profit margins that newspapers commanded before the digital media lured their audiences to alternatives ranging from the Drudge Report and YouTube to Beantown Bloggery and 52 Weeks 52 Restaurants.  

With the newspaper audience ferociously fragmenting, marketers are forsaking high-priced newspaper advertising by listing jobs on Craig’s List, connecting with condo shoppers at the Boston Real Estate Blog and intercepting car buyers on Facebook.  

Traditional newspaper publishers, whose advertising sales collectively have fallen by more than half since peaking at $49.4 billion in 2005, have not figured out how to solve identical problems at the papers they already own. So, they are unlikely to belly up for more of the same in Boston, even though the paper probably would sell for, give or take, $100 million –   a historically low price for this once-prized asset. 

Beyond the global (pardon the pun) reasons why publishers would be averse to buying the Boston paper, many of the traditional newspaper companies would have particular reasons for avoiding the auction.  

Digital First, which owns the Detroit News and Denver Post, has explicitly sworn off print.  Ditto, Advance Newspapers, which has gone so far as to reduce print publication to three days a week in New Orleans, Syracuse and multiple markets in Alabama and Michigan.  Because neither of these companies successfully has cracked the digital-publishing code, they are likely to focus their energies on optimizing the web, mobile and social operations at their existing holdings before tackling any turnaround projects.

New acquisitions likely would be off the table for heavily indebted companies like McClatchy and Lee Enterprises, which haven’t figured out how to fix the struggling metros they, in retrospect, overspent to buy in Miami and St. Louis.  The creditors of these companies monitor their activities so carefully that it practically takes a committee meeting to authorize the purchase of extra paperclips. 

Gannett, the largest and least indebted of the publicly held newspaper publishers, is working assiduously (as discussed here) to position itself as a digital publisher. The last thing the owner of the battered Detroit Free Press wants is to have to explain to Wall Street why it just bought another troubled metro paper.  

The Tribune Co., which owns the Chicago Tribune, Los Angeles Times and Baltimore Sun, is out of the running, because the new, post-bankruptcy managers of the company are planning to jettison its publishing operations so they can concentrate on the broadcasting business. 

Although Warren Buffett has bought dozens of dailies in the last 12 months, he excluded the Tampa Tribune from the Media General transaction because he wants to avoid the kind of metro market that the Globe represents.  Buffett is going after properties in relatively small and isolated communities, where papers can deliver deeper and more closely targeted news and advertising coverage than possible in a highly competitive urban sprawl. 

Notwithstanding the personal joy Rupert Murdoch might have in tweaking the politically liberal Boston market by taking control of the Globe, there is slim chance his News Corp. would make a play for the newspaper.  Murdoch in the past had no problem subsidizing the money-losing New York Post with profits from his highly successful Fox broadcast and entertainment operations.  But the N.Y. Post, the Wall Street Journal and all of Murdoch’s other print properties are being severed from Fox, making it doubtful that the managers tasked with running a batch of challenged print properties from London to Australia would be eager to add another headache to the list.  

With the usual prospective buyers off the table, the odds are strong that next owner of the Globe will be a newcomer equipped with the resources, determination, vision and daring to create a more successful metro publishing model than the industry stalwarts have mustered to date. 

While veteran publishers may generously welcome fresh blood to their fraternity, the initiation is likely to be bracing. 

Why Digital Natives don’t like newspapers

Several years ago, the Washington Post convened a series of focus groups to learn why most individuals under the age of 45 did not subscribe to the newspaper – a problem persisting to this day throughout the overwhelmingly print-centric industry. 

It’s not that people didn’t like the Post, reported the American Journalism Review in an article describing the research project in 2005. The problem was that the respondents – many of whom happily consumed news on digital devices – drew the line at piles of old newspapers cluttering up their lives.  According to a Post executive quoted by the AJR, more than one respondent declared: “I don’t want that hulking thing in my house.” 

Although the 50%-plus drop in advertising sales since 2005 involuntarily has slimmed down the Post and most other newspapers, the print product remains broadly unappealing to individuals under 45.

If publishers intend to make good on their long-stated pledge to pivot from print to digital products, it is important for them to understand the profound difference between the consumers they have vs. the consumers they wish they had. That’s what we’ll do in a moment. First, a few facts: 

∷ Print newspaper readership ranged from 16% of forty-somethings to only 6% of those in their twenties, according to a survey released last year by the Pew Research Center.  By contrast, Pew found that 30% of Americans aged 50-64 and 48% of those over the age of 65 had read a newspaper on the prior day.

∷ The repudiation of the print delivery system by young people is probably the single greatest factor in the sharp decline Pew detected in newspaper readership in the last decade.  Pew found that only 29% of the American population read a newspaper in 2012, as compared with 56% in 1991 – the first time researchers asked the question. 

∷ If you compare newspaper readership against the age distribution of the U.S. population, as I have done, then you will find that approximately three-quarters of the audience at the typical newspaper is 45 years of age or older, even though individuals in this cohort represent only 40% of the entire population.  Attesting to the rapid shift in news consumption patterns, only half of newspaper readers were older than 45 when I ran the same numbers in 2010.   

∷ The mature skew of the newspaper audience is a clear and present danger to publishers, because the sale of print advertising and subscriptions generates some 80% of the revenues at the typical newspaper. The industry’s dependence on print is a particular problem because geezers are not only undesirable to many advertisers but also can't be expected to live forever.  

In light of the above, any serious effort on the part of publishers to migrate to digital publishing requires an understanding of the Digital Natives — the Generation Xers and Millenials  — who grew up in front of all kinds of screens: televisions, computers, Xboxes, iPods, Razrs and, today, Androids and tablets. 

Unfortunately, the digital strategy undertaken to date by most publishers is to port their newspaper-style content to the web and then repurpose the material to mobile devices.  The warmed-over digital fare offered by the typical newspaper falls well short of the expectations of two whole generations of individuals who are not only empowered by technology to consume media but also know how to use it to make their own. This explains the explosive growth of Facebook, YouTube, Twitter and a host of other do-it-yourself media. 

As the Washington Post discovered years ago in its research, one of the biggest reasons Digital Natives don’t read newspapers is that they travel light: favoring renting over owning, flexibility over commitment and convenience over cost. 

The distinct mindset of the Digital Native was captured in a recent presentation (pages 59-79 here) by Mary Meeker, a partner at Kleiner Perkins Caufield & Byers, one of the top venture-capital firms in Silicon Valley. 

Dubbing the Digital Natives the “asset-light” generations, Meeker notes that young people don’t want to own CDs, haul around books, buy cars, carry cash, or do their own chores. Instead, they use their smartphones to buy, borrow or steal media; rent shared cars at home or book shared rooms when they travel; hire people to buy groceries or cut the grass, and use apps from Starbuck’s and Target to pay for lattes or redeem coupons.  Many of the Digital Natives even prefer short-term gigs that allow them to arrange their work around their lives, rather than arrange their lives around their work. 

Meeker believes the digital generations will change everything from the travel and credit card industries to the way health care and education are consumed.   

The newspaper industry already has been profoundly disrupted. The only remaining question is what publishers will do about it.   

© 2013 Editor & Publisher

How mobile coupons could clip newspapers

The rapidly expanding adoption of mobile couponing is poised to become a major challenge to one of the most profitable and important revenue streams remaining for newspapers: preprint advertising circulars. 

The good news for publishers at the moment is that newspapers carry 90% of the printed coupons issued annually by consumer-products companies in the United States, according to a mid-2012 survey by NCH Marketing Services, a division of the Valassis direct-mail company that serves as a clearinghouse for many of the billions of coupons redeemed every year. NCH says 305 billion coupons were issued in 2012. 

But things could be about to change, as consumers and marketers rapidly embrace the power of mobile phones to deliver the right deal at the right place and time to exactly the right customer. While only 6.0% of mobile phone owners used mobile coupons in 2011, the number rose to 16.3% in 2012 and is projected to leap to 24.3% by 2014, according to eMarketer, an independent research company. 

As reported here previously, preprinted ad circulars represent about a quarter of the advertising volume (chart below) of an industry whose aggregate revenues last year likely came in at less than half the all-time high of $49.4 billion achieved in 2005. Final 2012 statistics have yet to be reported by the Newspaper Association of America, so this projection is based on the industry’s performance in the first nine months of the year.

In addition to being a major revenue source for publishers, preprints have an even bigger  impact on profitability.  “Preprint advertising accounts for 70% of the Sunday revenues at the average newspaper,” said one industry executive who declined to be named because he is not authorized to speak for his organization. With the Sunday paper producing “most of the profitability” for many publishers, he added, the health of the preprint business has a significant bearing on the bottom line of almost every publisher. 

Carefully targeted mobile coupons appeal to consumers not only for the money they save but also for the uncanny immediacy and relevance they represent. Mobile coupons appeal to marketers because they are highly targetable and granularly trackable; can be issued on the fly in response to changing business conditions; are cheaper and more reliable to distribute than printed circulars, and – perhaps best of all – much more likely to be redeemed. 

NCH, the coupon clearinghouse, reports that only 1.1% of coupons in free-standing newspaper inserts and only 1.4% of coupons in run-of-paper ads were redeemed in the first half of 2012.  But mobile-coupon advocates say they can do way better than that – at a fraction of the cost. 

Referring to FSIs as “f-ing Sunday inserts,” Adam Lavine, the chief executive Fun Mobility, one of the many emerging companies hoping to cash in on mobile couponing, told a meeting last week of the Mobile Marketing Association  (MMA) in San Francisco that the effectiveness and efficiency of mobile delivery was bound to divert marketing dollars away from print.  


“This is happening a lot faster than you think,” said Chris Wayman, the head of the mobile marketing practice at Merkle, a direct-marketing agency, who appeared with Lavine on a panel at the trade group's conference. Without identifying his clients or other specifics, Wayman said some of his travel-oriented campaigns resulted in 25% to 40% redemption rates while driving purchases that are 12% to 14% higher than via traditional channels. 

The shift from print to mobile couponing “is reaching critical mass,” agreed John Morgan, the executive director of the Association of Coupon Professionals, a trade group whose  members include such advertisers as Campbell Soup, Coca-Cola, Kellogg, Target, Unilever and Winn Dixie.

The Starbucks mobile app illustrates the potential for this emerging medium, said Brent Hieggelke, the chief marketing officer of Urban Airship, a provider of mobile publishing technology. The free app is built around a customer-loyalty program that allows customers to pay for products at the same time they accumulate points toward free drinks. Hieggelke said he used a recent award to sample a cup of Starbucks' new individually brewed coffee.  “Even though it costs twice as much as a regular coffee,” he said, “I sometimes now buy it on my own.”      

Noting that mobile couponing captures more actionable data about customers than print, Forrester market analyst Sarah Rotman Epps said the biggest value in mobile couponing may be in “upselling and retaining customers, not in initial acquisition.”   

One of the obstacles to increased mobile couponing is that there is no ecosystem to support marketers like the one long in place for print. To address this shortcoming, the MMA has launched an initiative to create industry standards for the creation, distribution, discovery, redemption and reconciliation of mobile coupons. 

As discussed in this prior post on the master apps coming from the leading tech companies, mobile couponing also will get a boost from such native smartphone tools as Apple's Passbook and Google's Wallet. 

Up to now, said Epps, no one has put together “the right mix of convenience and value” to bring mobile couponing to scale.  But, she added, it is only a matter of time “until new entrants will disintermediate the existing channels.”

Unless publishers get together to leverage their relationships with local businesses to create their own mobile-coupon ecosystem, they almost certainly will be among the disintermediatees. 

NAA battles to halt Valassis deal

In another challenge to their long dominance in couponing, publishers were jolted last summer when the U.S. Postal Service gave Valassis, the competing direct-mail distribution company, a discount that will allow it to mail certain types of national retail preprints for 42% less than newspapers are required to pay. 

A federal appeals court in September denied an emergency injunction requested by the Newspaper Association of America to block what it characterized as  a “sweetheart” deal.  The NAA reports that it will continue to challenge the rate break in a series of legal proceedings scheduled for the spring.