Saturday, April 30, 2005

Double trouble in Chicago

Lightning struck twice last week at the Chicago Tribune, which unbelievably and implausibly printed the pictures of two perfectly innocent men who were identified mistakenly as indicted mafia killers.

This wouldn't have happened if a guy like Art Petacque were on the job. But Art died in 2001 and the likes of him don't work at newspapers any more. I'll tell you more about Artie in a moment. But first, here's the tale of the Trib's embarassing double exposure:

Covering the culmination of the biggest mob investigation in years, the Trib on Monday mistook the file picture of a nice businessman named Frank Calabrese for a mobster of the same name. On Wednesday, the paper ran a page-one photo of a gent on a bicycle who was identified erroneously as the fugitive Joey "The Clown" Lombardo. The paper forthrightly confessed its errors, but the damage has been done.

While many of my disheartened friends and former colleagues at the newspaper undoubtedly are wondering how this could have happened, I would submit that the answers are straightforward.

1. The vast newsroom has been computerized, bureaucratized, stratified and balkanized to the extent that dozens of editors, writers, photographers, graphic artists, copy editors, news editors and others are isolated in carpeted, sound-absorbent silos where they fulfill the narrowly defined, tightly constrained, largely abstract tasks required to expedite the production of the next day's issue. Accordingly, interpersonal collaboration is kept to a minimum and no one sees the big picture.

2. Because the cubicle-bound newsroom professionals are physically, intellectually and psychologically far removed from the sights, sounds and smells of a story, they have no genuine feel for the things they are "covering." To put it bluntly, there's not a whole lot of street smarts left in the place.

The first problem can be fixed. But I don't know what they're going to do about the second.

The Tribune, like so many other metro papers, is so big, has so many moving parts and is so hierarchical that no one is in charge. The place just oozes along.

The bureaucratic breakdown was painfully evident last fall when the Trib went to press with a story on the front of the feature section about what the author said was the growing acceptance in polite company of the vulgar word beginning with the letter C that colloquially refers to a woman's private parts.

Notwithstanding the layers of editors at Tribune Tower, thousands of copies of the story were printed before the newspaper's top editor heard about it. To her credit, Ann Marie Lipinski hauled a platoon of underlings to the mailroom, where they spent the balance of the day feverishly yanking the offending sections out of the paper before it could be distributed to readers.

That incident was manifest evidence, evidently ignored, that the Tribune needed to improve communications in the newsroom. The double-whammy this week not only underscores the unresolved problem but also exposes a greater concern:

The Tribune's staff really doesn't know the city. How can a newspaper survive if it is a stranger in its own town?

Which brings us back to the late Art Petacque of the Chicago Sun-Times, who won the Pulitzer Prize with colleague Hugh Hough in 1974. Profane, decidedly unpolished and often downright annoying, Artie wouldn't fit well in today's quietly humming, corporate newsrooms. He came up in the days when hopeful, working-class copyboys auditioned for positions as reporters by chasing down pictures of freshly murdered coeds.

Failure was not an option. Plan A was to knock on the front door and ask the bereaved family for a recent photo of the victim. If the request was rejected, Plan B went as follows: The reporter would set a fire on the porch, knock on the door to alert the residents and then jump into a bedroom window during the ensuing mayhem to grab all the available pictures.

Those methods, of course, are ghastly and inexcusable. But the old ways, repugnant as they are to modern sensibilities, did produce aggressive, resourceful, street-smart reporters who knew the cops, the crooks, the judges, the politicians and everyone in between.

If Artie had been around when Joey the Clown was indicted, he would have barged up to the news desk and told the editors which photo to use and what headline to write. If he didn't like the available pictures, he would have demanded a better one from the cops -- and gotten it, excloo, presumably without setting anyone's porch on fire.

The guys in Art's generation did things and made bargains we wouldn't countenance today. He ran a pest-control business on the side and sometimes exterminated roaches in the home of an up-and-coming police captain to cultivate a degree of reciprocal professional courtesy. He soft-peddled items for certain favored contacts in hopes of getting juicier stories in the future. That worked rather spectacularly when the chief judge of the traffic court called to say he was about to be indicted for corruption. When Artie asked why the judge leaked the story on himself, the jurist said didn't want a good scoop to go to waste.

As Art and the rest of the guys of his generation retired, they were replaced by well-educated, mostly middle-class professionals. For the most part, we weren't inclined to go to the places and do the things that gave Art the hunger, the grit, the contacts and the gut that made him the go-to guy when the cops clammed up on a big story.

When investigators were exhuming bodies from the crawl space under the home of killer John Wayne Gacy, Art reported a higher number of victims than had been observed by the reporter on the scene. Challenged by the the night editor, Art said he would check his sources and call back. "My number is right," Art soon reported triumphantly. "The (expletive deleted) coroner was holding back a few bodies for the later editions."

The lack of moxie and absence of well-placed sources was painfully obvious earlier this year as the once-crackerjack newsrooms of Chicago tried to cover the murder of two members of a federal judge's family. The coverage in both the Tribune and Sun-Times was rote, bland and, as it turns out, mostly wrong. Is anyone worried about that?

For the considerable good gained in graduating modern journalism to respectability, we have lost the common touch that once connected newspapers viscerally with their readers. Sadly, it looks like they lost a lot of common sense, too.

Thursday, April 28, 2005

Peer-pressuring the Associated Press

Saying the Associated Press “is planting the seeds of its own demise,” two Scripps executives want other news organizations to help them replace the legendary press co-op with a Napster-like system where members can share digital content freely among themselves.

“If the AP had its collective head firmly inside the 21st Century, it already would be moving at least parts of its services in the Napster direction,” say Bob Benz and Mike Phillips of Scripps in a commentary in the Online Journalism Review. “But the AP is like any business confronted with a disruptive technology. Its first inclination is self-preservation, not cannibalization.”

Accordingly, they say, the AP is spending too much money on costly programs and initiatives to maintain its increasingly anachronistic role as a middleman gathering and distributing content to member news organizations.

In part to send a message to the AP – and in part to see if they really can create the new P2P network – the executives plan to host a meeting among news organizations interested in establishing a news Napster. Although it’s impossible to tell if it will work, the proposal represents the type of bottoms-up thinking that can revitalize the news business.

Bob and Mike decided to put some peer pressure on the AP after the organization announced plans to charge newspapers and broadcasters additional fees as of Jan. 1 for using its previously free content on their web sites. The move will put AP members at an economic disadvantage at a time when so much other free content is available from blogs, open-source journalism and free newspapers, according to the Scripps execs.

The AP was started in 1848 when six New York publishers, eager for the latest scoop from Europe, decided to share the costs of posting a single correspondent in Nova Scotia to meet in-bound vessels and telegraph the news to New York ahead of the ships. There’s no need for such an intermediary today, say Bob and Mike, because news organizations themselves can post their articles, photos, graphics and other digital assets on a common, password-protected web network, where the material can be searched and acquired by members.

Every article on the P2P network could carry an XML tag to alert harried news editors to topics of interest to them. Thus, a story about pollution in the Great Smoky Mountains National Park could be tagged as “Great Smoky,” “national park,” “pollution” and “conservation.” Editors wishing to be alerted to any of those keywords automatically would get the article.

With online assets conveniently tagged, news organizations would have an instant new premium product to sell to subscribers wishing to create individual news reports tailored to their interests.

Production costs in the P2P venture would be reduced sharply, because employees of member organizations, not people on the AP payroll, would create and edit the shared content. “The 21st Century news business needs a peer-to-peer network that lets local operations drive costs out of their non-local news packages, divert resources to local web content creation and operate on a level playing field with bloggers, citizen journalists and internet pure plays,” say the Scripps execs.

The P2P network would be governed by “karmic balance,” say the execs. “The more you make available to the network, the more you can take out,” they explain. “An organization in karmic deficit would have to true up by paying a surcharge on the monthly fee."

The karma-challenged AP can do itself a lot of good by supporting, not hindering, the News Napster Network. In so doing, the AP may find that peer pressure, contrary to what your mother told you, actually can be a good thing.

Wednesday, April 27, 2005

Quit bellyaching and get to work

Our perceptive colleague Tim Porter touched many a raw nerve the other day when he reported on the glum mood in most of the nation’s newsrooms.

With readership, advertising, staffing, newshole and public esteem declining, the industry has plenty to be worried about. So, yes, these are tough times, challenging times, even scary times.

But they could turn out to be the best of times, if journalists quit feeling sorry for themselves and start working on winning the hearts and minds of readers with creative, captivating coverage.

People in the newspaper business today have an unprecedented opportunity to overhaul an 18th Century, Rip Van Winkle-like institution that suddenly woke with a start to find itself smack dab in the middle of the Internet Age. Because the newspaper model has not changed appreciably since Benjamin Franklin was a lad, today’s journalists are in the right place at the right time to remake this vital institution in their own image.

Thanks to the explosive technological developments that have occurred since I started pounding a manual Underwood for living three decades ago, journalists are wondrously equipped with resources that were unimaginable in 1970.

Today’s journalists can locate information and research massive databases instantly via the Internet – a capability unheard of just 10 years ago. They can analyze and process information with enormously powerful computing technology that gets better by the year. They can gather and communicate information in real time with digital cameras, cell phones, computerized graphics, laptop computers and pagination systems – all powered by wireless connectivity that makes it possible to do anything, anytime, anywhere.

The product can be delivered not only via print but also to new audiences around the globe by web, mobile phone, podcast, video blog, CD, DVD, television and radio. New readers, listeners and viewers can find and acquire digital content via ever-improving search technology and broadband delivery systems. Information can be sliced, diced, catalogued and recombined infinitely -- by either editors or consumers themselves -- to create custom products that inform, entertain and, significantly for advertisers, make it easier than ever to spend money.

Thus, newspapers, unlike the ones where Benjamin Franklin and I worked, can operate without regard to time, space or geography.

Thanks to improved reporting and production technology, journalists have gained the gift of time to think about what to cover, how to cover it or when to deliver it. With headcounts down and newsholes tight, journalists will argue that they are too busy to think. But that’s exactly what they have to do, if they are going to reverse the cascading crisis of confidence among readers, advertisers and themselves.

To appreciate their opportunities and grasp the vast opportunities that lie ahead, journalists have to un-embed themselves from routine thinking, rote reporting and canned presentation. This is a decidedly low-tech exercise that merely requires reporters to get out of city hall, the cop shop and school board meetings, so that they can identify stories on these beats that resonate with their readers.

Although journalists will and ought to be the primary information gatherers, newspapers can open their print and web pages to articles and commentary by outside experts and ordinary citizens. Blogs are nice, but they alone are not the type of mainstream assets that will save the day.

The people presenting information for print (and other products) need to take their cues from other media, emphasizing eye-catching, at-a-glance appeal. As the Readership Institute at Northwestern University has found, readers are looking at multiple points of entry to a story. In-depth reporting, good writing and great photographs have to be combined with imaginative and informative graphics, pull quotes, Q&As and more.

Content has to be pollinated across media platforms, so newspaper articles reference podcasts, transcripts, blogs, additional online video and websites containing original source material. Turnabout being fair play, the digital manifestations of the newspaper shouldn’t be coy about touting the print product.

It is fair enough to argue that the industry spent too many cycles trying to defend and preserve an old, decaying and increasingly irrelevant model. Because almost everyone now agrees radical change is inevitable and mandatory, this is the ripest possible moment for creative, passionate and agile thinkers to bring their vision to reality.

Far from being one of those former journalists who is glad to be out of the business, I envy each of you this extraordinary opportunity. So, with all due respect, quit bellyaching and get to work.

Related previous posts

Fee, fie, faux self-flagellation
We have met the enemy and he is us

Sunday, April 24, 2005

Sgt. Schultz takes command at PBS

Ken Ferree, the new chief executive of the Corporation for Public Broadcasting, sounds just like Sgt. Schultz of Hogan's Heroes, whose trademark refrain was "I know nothing."

Asked in an interview in the New York Times Magazine if his predecessor, Kathleen Cox, was axed two weeks ago because she had incurred the wrath of conservative groups, he responded:

All I know is that on Friday afternoon the board chairman came in and asked if I would serve as interim president. I had no idea until the 11th hour that this was happening. I don't know what led to what.
Prior to joining CPB for what proved to be a short-term stint as its No. 2 executive, Ferree was the right-hand man, so to speak, of Michael Powell, the former chairman of the Federal Communications Commission. It is believed by many commentators that Mr. Ferree has been placed in his new position to right, so to speak, what conservatives believe is a left-leaning tilt at the Public Broadcasting System and National Public Radio.

Only time will tell if his presence will bring about major changes in coverage. The indisputably alarming aspects of his appointment, however, are his unfamiliarity and professed lack of interest in the programming of the company he heads.

Asked in the New York Times Q&A to name his favorite PBS programs, he responded, "I'm not much of a TV consumer."

Asked his opinion of National Public Radio, which he also runs, Mr. Ferree said: "I do not get a lot of public radio for one simple reason. I commute to work on my motorcycle, and there is no radio access." He won't wire his cycles for sound, either, because "they're stripped down deliberately to look cool."

Most chilling were his comments on the NewsHour with Jim Lehrer, a reliably thoughtful, in-depth discussion of the day's major news events featuring painstakingly balanced panels of newsmakers and independent experts.

"Yes, Lehrer is good, but I don't watch a lot of broadcast news," said Mr. Ferree, continuing:
The problem for me is that I do the Internet news stuff all day long, so by the time I get to the Lehrer thing . . . it's slow. I don't always want to sit down and read Shakespeare, and Lehrer is akin to Shakespeare. Sometimes I really just want a People magazine, and often that is in the evening, after a hard day.
Looks like Ken Ferree's hard days may turn into a lot of sleepless nights for the fine folks in public broadcasting.

Friday, April 22, 2005

Network TV: On the blink, on the brink

Television broadcasters need to diversify -- or prepare to die. So says Igal Brightman, the worldwide chief of the media and technology practice of Deloitte Touche Tomatsu, the audit and consulting firm.

"The global broadcast television industry is undergoing fundamental, unstoppable change that is steadily rendering the traditional network business model obsolete," says Igal in a new white paper. "The age of a few dominant channels, funded by advertising, has long been disappearing and may soon be turned off for good."

One measure of the decline is illustrated in the chart below, which shows the combined audience for network evening news has fallen 44.7% since 1980 in the United States. The story is the same around the world for both news and entertainment programming.

The reason, of course, is that people, thanks to cable, satellite, digital video recorders, DVD players, the Internet and mobile phones, have tons of choice in what they watch and when they view it. Fully 90% of the 109 million U.S. households with televisions subscribe to either cable or satellite TV. More than 48% of the TV households have either a DVD player or TiVo-like digital recorder. DVRs have the additional appeal of letting the user fast-forward through commercials.

Broadcast TV competes not just against other video-delivery media, but also against such other attractions as the radio, the Internet, audio, games and -- dare I mention it? -- print. As previously reported here, high-income adults spend a bit less than a third of their media time with TV. As noted here, kids under the age of 18 spend about 30% of their media time with TV (often while doing something else like working at their computer or doing their homework).

Consumers "are drowning in choice," says Igal, and "consumer spending will be spread across -- and fractured by -- a wide range of options, as fragmentation tightens its grip." Because viewership will continue to erode "for the foreseeable future," he continues, broadcasters need to "offset the fragmentation of their audiences, and generate income from entirely new activities."

Like our other favorite legacy medium, the newspaper, TV broadcasters may be able to save themselves by leveraging such powerful assets as their unique content, semi-monopolistic franchises and strong customer relationships. But they have to get busy.

A key success factor will be the ability of networks to extend the life cycle of their branded content beyond the 30 or 60 minutes of fame typically accorded a program now, says Igal. He recommends stepped-up efforts to syndicate content and to sell it via both hard media and through on-demand services on cable TV, satellite, the Internet and -- soon -- call phone. Igal also urges the aggressive development of interactive segments involving audience participation, voting, purchasing, games, webcasts and mobile phone downloads.

Above all, he argues for innovation. Agile broadcasters and content providers who can redefine the scope, shape and scale of their network will thrive. "Those that remain chained to the past," he concludes, "will not."

Thursday, April 21, 2005

$4 billion in want-ads circling the drain

Some 8.6% of newspaper revenues could vanish within two years as $4 billion in classified-ad revenues flow to eBay, Monster and free online sites like Craig’s List, according to McKinsey & Co.

Although the loss of auto, real estate and employment ads would blow a major hole in the top line of the industry’s $46.6 billion in annual sales, the impact on the bottom line would be even more devastating. That’s because classified ads are, by far, the most lucrative segment of the business.

"Online is capturing all the growth," says Luis Ubinas, of the prestigious consulting firm. As far back as 1995, he told the annual convention of the Newspaper Association of America, the migration of classified advertising to the Internet has been shrinking the share of the market previously owned just about exclusively by newspapers.

In 2003, help-wanted classifieds were down 50% from the levels that would be suggested by historic trends, according to an online report of Mr. Ubinas’ remarks by Advertising Age. The $4 billion revenue losses by 2007 would occur if the same degree of market-share erosion spread to automotive and real estate classifieds.

Although the size of the potential revenue loss is the largest predicted to date, the story has been told many times before. If newspapers are going to head off the train wreck, they need to act quickly to preserve this business.

One approach is for newspapers themselves to start giving away free want ads on their web sites. When users post online ads, they can be encouraged to pay to list their ads in the print product. A few publishers experimenting with this idea have been pleasantly surprised at the boost they achieved in their print classified revenues.

A more daring variation of the above idea is for newspapers to partner with Craig’s List, where patrons submitting free listings could be encouraged to buy a print ad, too. The resulting revenues could be split with Craig, enabling him to at once build his business and make good on his expressed desire to ensure the long-term health of the mainstream news organizations.

“I'm trying to figure out how to help, maybe just a little, by encouraging people to preserve and expand what's right about mainstream media while encouraging the new stuff,” Craig wrote recently in his blog. “There's a lot of good people and infrastructure in newsrooms and bureaus, like fact checkers and editors. How do we keep all that, and maybe increase funding for investigative journalism? I don't know, want to help, but don't want to be a loose cannon.”

Perhaps it’s time for Craig to stop praising the newspapers and pass them some ammunition. We can only hope they don’t shoot themselves in the foot.

What’s love got to do with it?

“Do readers love us?” asked the outbound leader of the nation’s newspaper publishers in his farewell speech to their annual convention. “Do they need us?”

The answers, in no particular order, are “no” and “no.”

But one good question deserves another. So, here’s one for Gregg K. Jones, the co-publisher of the Greeneville (TN) Sun and the former chairman of the Newspaper Association of America: “What’s love got to do with it?”

I don’t love Google, MarketWatch, Craig’s List or the text-messaging feature on my cellphone, but I am glad they are there when I need them.

I don’t love or need Boing-Boing, the Drudge Report, Dan Gillmor's blog, the AutoBlog podcast, the iTunes jukebox, Yahoo’s video search function or the 3,259 incarnations of the Law and Order TV show, but I am glad to have them for the information or amusement they deliver.

Apart from having perhaps a bit more than the average amount of time to spend perusing the media, I suspect I am like most people. I give my attention to the things that dependably enlighten, stimulate or amuse me. My loyalty, if any, lasts only as long as I like what I am getting.

"Our customers these days are a slippery bunch" Gregg Jones moaned to his colleagues. “They are harder to find and harder to hold on to.”

With all due respect, Gregg, the customers aren’t the ones to blame.

Getting smart about dumbed-down news

Not that there was much doubt about it, but a new study has proven empirically that readers are more interested in poker and Paris Hilton than in stories about foreign policy.

Presented in the last few days at the respective national conferences of America's publishers and editors, these new findings are about to hit the nation's newsrooms like a grenade in a bunker. It's worth discussing them before anyone does anything rash.

Although the study could be taken as a license to dumb down the news, it really suggests quite the opposite approach. It is a mandate for journalists to work harder to find intelligent, imaginative stories they can present in creative, compelling ways.

Conducted by researchers at the Minneapolis Star Tribune and the Readership Institute of Northwestern University, the study found that a newspaper edited to push a reader’s hot buttons will resonate more strongly with young adults than the standard-issue product. The need to attract young readers is urgent. About a third of adults under the age of 30 read newspapers today, or approximately half the number who read them 15 years ago, according to the institute.

"Newspapers tend to talk about topics, keeping a distance between themselves, the topic and the reader," said Nancy Barnes, a member of the research team. "In this experiment, we actively sought to talk to readers directly, and engage them every step along the way. That makes the newspaper seem more personal."

The researchers created what they call an "experience newspaper" to evoke the "feelings, emotions and motivations" that would encourage people to read it. The team asked 140 adults under the age of 30 to give their reactions to not only an original, conventional edition of the Star Tribune, but also to alternative versions containing more gut-grabbing stories, headlines, artwork and writing.

The front page of the "experience paper" -- which put poker and Paris in place of George Bush and a yawner about blogging politicians -- won by a large margin. Sixty-five percent of the group liked the “experience” paper vs. 15% for the original issue.

The "before" and "after" front pages are reproduced below so you can experience the “experience” yourself. Although I am over 30 and read newspapers too often to qualify for the panel, I agree the "experience" version is better, but not necessarily because they substituted Paris for the Prez. Let's look at what they did:

The top half of original front page was dominated by the day-old story of Bush's trip to Europe plus a huge spread about a woman who intends to walk each and every street in Minneapolis. Those stories, as well as the piece about blogging pols, were eliminated altogether from the "experience" paper.

The front page of the revised edition was dominated by a story on the pros and cons of legalized poker. Interestingly, the poker story was listed on the news budget for the original paper but never actually saw print. A story on identity theft wrested from the middle of the financial section was souped-up for the front page by adding a photo of Paris Hilton and a reference to the private numbers stolen from her mobile phone.

One story that survived from "before" to "after" was the piece on a proposal to collect DNA samples from anyone arrested for a felony. The traditional third-person headline and first paragraph were replaced with a breezy, "License, registration and saliva, please" -- the better, evidently, to help potential felons identify more closely with the article.

Because the "after" paper is arguably more lively, seemingly more relevant and perhaps more visually appealing than the original, there is a temptation to conclude that sizzle, shallowness and style trump substance when it comes to attracting young readers.

I would argue, however, that the "after" paper is not better because it contains a revised mix of articles, but rather because the researchers worked harder to present the chosen stories in more clever and engaging ways than the pieces carried in the original. With an equal degree of thought, effort and time, the stories dumped from the original paper could have qualified for a place in the "after" paper, assuming they were worth doing in the first place.

The lesson is not that journalists have to dumb down the news to save their industry. Actually, it is quite the opposite. They have to get smarter.

Tuesday, April 19, 2005

Beginning of the end for free content

In a move that could spell the beginning of the end of unlimited free content on the web, the Associated Press has decided to start charging its members for using its stories online, just as it always has charged for material in print and on the air.

In so doing, the AP may force newspapers, broadcasters and other traditional news outlets to discontinue history's longest-running free introductory offer: The free use of all the material produced daily by most news organizations.

"The need for online licensing is clear," says Tom Curley, the CEO of the media-owned news co-operative. "For the Associated Press to endure during this digital transition, we must be able to preserve the value and enforce the rights of our intellectual property across the media spectrum."

When the new policy goes into effect on Jan. 1, the AP license will be a new cost for the newspapers and broadcasters who already spend prodigiously to gather and publish the "complimentary" content they provide on their web sites. With the notable exception of the Wall Street Journal and a few other newspapers, most media companies publish their entire daily report on the web for free.

Although the AP license undoubtedly will be modest in comparison to the other production costs shouldered by the media companies, the pain of writing the check -- and the principal articulated by Tom Curley -- likely will motivate publishers to reconsider their long-term generosity. Accordingly, it is fair to predict that at least some of today's complimentary content will carry a pricetag in 2005.

About 300 commercial web sites, including popular destinations such as Yahoo, AOL and MSN, already pay for the use of AP content, according to the news organization. The AP reportedly is discussing a licensing agreement with Google, which earlier this year was sued by Agence France Presse for using its content without paying for it.

Although most of the legacy media companies are afraid of being the first to start charging for their valuable product, some 40 of the nation's 1,456 daily newspapers have tried it -- with mixed success.

:: The Wall Street Journal, the most successful paid site with 731,000 subscribers, charges print subscribers $39 a year to read its web site and requires online-only users to pay $79 annually. Revenues approach $40 million a year.

:: The Spokane (WA) Spokesman-Review allows print subscribers free use of its web site, but charges online-only readers $7 a month to get beyond the headlines on its home page. The primary aim in charging for the site is to encourage subscription to the print product, according to Ken Sands, its online publisher. To date, the newspaper, whose print circulation is a bit more than 100k, has added about 550 new paying subscribers. Because traffic to the site dropped when the newspaper started charging, advertisers were nervous, reports Ken. But he plans to introduce more unique and compelling content to the site to build traffic.

:: The Los Angeles Times permits free use of its online news, but restricts certain features in its entertainment section to either print subscribers or online-only users who pay $4.95 a month. Because traffic to the site has declined, the paper is reviewing the decision to charge for it, according to the New York Times.

:: Most newspapers charge a nuisance fee of $2 or $3 to retrieve old articles and clippings in their archives. This is required by the contracts the larger papers have with such database services as Lexis-Nexis, which charge for use of their services. As the industry moves toward charging more widely for the use of content, it is to be hoped the mugging or morgue readers will cease.

So long as a number of major news sites continue to provide free access to their content, none but the bravest publishers will bolt from the herd. In taking the first step on behalf of the legacy news industry, the AP not only is clearing the way for its members to act but also emphasizing dramatically that the new media are the future of publishing.

Monday, April 18, 2005

You get what you pay for. Or do you?

Newspaper companies are emphasizing profits instead of investing in the future of their embattled franchises, because their top executives are being paid to maximize near-term earnings at the expense of the long-term health of their companies.

It is perfectly reasonable to encourage executives of a robust and growing industry to maximize profit growth, so as to increase stock prices for the shareholders to whom they ultimately answer. But this is a dangerously bad idea for newspaper companies, which, as discussed at length here and elsewhere, are losing credibility, circulation and advertising market share all at the same time.

So long as newspaper executives are paid to prioritize bottom-line growth, they will continue to focus on profitability, instead of building new audiences and developing the fresh, sustainable revenue opportunities that will ensure the long-term health of their enterprises.

In the absence of the healthy sales gains the industry lately has not been able achieve, the only way to build profits is by cutting spending. Thus, newsroom staffing has dropped 4% since 2001 and publishers reportedly are trimming -- rather than expanding -- their investments in the new media that could strengthen their weakening market positions.

Even though most newspaper executives know they should be investing more, not less, in their businesses, they are trapped by a compensation system that explicitly forces them to manage their companies to please the stock market, which prizes steady, predictable gains in profits. A Gannett filing to the Securities and Exchange Commission exemplifies the language typically employed by the other public newspaper companies:
The award of these stock options continues to be an effective way of aligning [Chief Executive Officer Douglas] McCorkindale's financial interests to those of the company's other shareholders, because the value of these stock options is directly linked to increases in shareholder value.
Given the size of their compensation packages and their presumed desire to ensure their future job security, you can't blame newspaper CEOs for playing by the rules.

The average pay last year was more than $2.5 million among the chief executives of the eight publicly held newspaper companies with $1 billion or more in annual sales, according our survey of the proxy statement filed by each company with the SEC.

The largest paycheck, $5.7 million, went to Mr. McCorkindale, whose company was by far the biggest with $7.38 billion in revenues in 2004. The smallest paycheck, $821,576, went to Donald E. Graham of the Washington Post, who can console himself with interests in more than $3 billion of stock in his family company. (Full details are in the table below.)

Although a publishing CEO's multimillion-dollar pay package is considerably higher than Newspaper Guild scale, it is well within the norm for the chief of a large U.S. corporation. And it's downright puny when compared with the collective $160 million hauled out of Viacom last year by CEO Sumner Redstone and his two top lieutenants.

As is the case in nearly every industry, the CEO's cash comp is only a fraction of his or her over-all compensation. The really big money is in the amount of stock and stock options an executive can accumulate during his time at a company.

A word on options: Options enable an executive to buy shares of his company at a discount after a certain period of time. If the stock fails to rise enough during the prescribed period, the options may become worthless. If the stock price rises higher than the cost of the option, then the options are deemed to be "in-the-money." The table below includes the estimated value of in-the-money options as reported by the companies. Between now and the time the options are exercised, the value of those options could change -- and even evaporate.

Apart from Mr. Graham, the biggest accumulation of stock and options among the eight CEOs is held by Robert W. Dercherd of Belo, who owns nearly $223 million in his company's securities, based on the value of Belo's stock on April 18, 2005. The smallest portfolio, $8 million, belongs to Gary Pruitt of McClatchy Newspapers, who, ironically, is the only CEO in the group whose company's value is higher today than it was on Dec. 1, 2004.

Despite the aggregate $20.4 million in cash compensation and the more than $3.7 billion in securities in the hands of the eight CEOs, the stock of only two of their companies increased materially in value in 2004. Stock of the closely held Washington Post rose 24.21% last year and McClatchy gained 4.38%. The shares of all the other companies fell in 2004, trailing both the Standard & Poor 500 and the collective performance of all the shares in the media group. (Other gauges of performance are detailed in the following post.)

After the stock market was hammered broadly last week, only one newspaper stock, McClatchy, is still worth more today than in January, 2004. Newspaper stocks "had their worst week in memory, despite already low expectations going into the week," said securities analyst John Janedis of Banc of America Securities, adding that missed 2004 sales targets "offset by cost controls were not enough to satisfy [market] concerns of another disappointing year [in 2005]."

So, not only are credibility, circulation and market share crumbling, but stock prices are falling, too. Why?

The market moves for many mysterious reasons, but this one is obvious: Investors, who generally like to bet on the long-term upside of a company, are worried that the publishers don't have a plan for the future of the newspaper business.

While existing shareholders for the moment may be comfortable harvesting the properties for profits, there is not enough new money confident in the long-term prospects for newspapers to lift the value of their stocks.

If newspaper investors want their shares to rise significantly in the future, they are going to have to encourage management to emphasize top-line, not bottom-line, growth. If they don't, they some day will wake up to find the news business has gone the way of the once indomitable Penn Central Railroad.

To change management behavior, the incentives offered to newspaper executives have to reward the development of new products that leverage the existing strengths of their franchises to create sustainable and growing revenues from both existing and new audiences.

Opportunities abound in everything from direct-marketing programs to cellphone text messanging and from targeted, free print editions to paid, premium online content. But newspaper companies won't explore these and many other potentially lucrative paths unless their executives know they can venture outside the box without getting their ears boxed.

The current compensation system not only doesn't encourage change. It all but prohibits it.

Newspapering by the numbers

Stock prices are only one measure of a newspaper company's performance. Other barometers include its level of profitability; its annual sales growth and its year-to-year increase in profitability.

The table below summarizes key operating statistics for 2004 of the eight largest publicly held newspaper companies. Highlights among the rankings:

:: Net profits last year averaged 10.7%, with Gannett, McClatchy and Knight-Ridder surpassing the average and the rest of the companies falling below it. Gannett was, by far, the most profitable with a net of 17.8%. Half of the companies were unable to produce double-digit profits.

:: Sales of the companies rose an average 6.53% in the 12 months, with the Washington Post, Gannett and Dow Jones beating the average. Sales of three of the largest publishers -- New York Times, Tribune and Dow Jones -- each grew by less than 2.5%.

:: Net profits on average fell 2.18% between 2003 and 2004, but the performance ranged widely. Profits at the Washington Post increased by 38.3% from the prior year, while earnings skidded 36.9% at Tribune and 41.5% at Dow Jones.

Tuesday, April 12, 2005

The never-ending introductory offer

Our leading newspaper companies intend for now to continue providing the free meat and potatoes for the gravy trains operated by Google, Yahoo and other major online aggregators of their content.

In so doing, they curiously are serving an elegant blue-plate special to the guys eating their lunch. As reported earlier, Yahoo News draws three times more traffic than the New York Times, the highest ranking newspaper site among the top 10 destinations for online news. The NYT ranks as No. 5 behind Yahoo, CNN, AOL and MSNBC.

The willingness of newspaper publishers to permit the use of their content without compensation runs contrary to the decision of Agence Presse France to force Google News to pay royalties -- or else. Perhaps inspired by AFP, the Associated Press is negotiating a license with Google News, according to the Los Angeles Times. If the AP is successful, the publishers may reconsider their generosity

In the meantime, however, Reuters, the New York Times Co., Gannett, Knight-Ridder and other major publishers are not pressing for compensation from the online biggies.

"The[ir] use of our content drives traffic to our sites," explains Tara Connell, vice president of corporate communications at Gannett. "It works to our advantage at this time. If we were to license or sell our content, we would not necessarily increase traffic or improve the incentive to go to our sites."

Reuters and the newspaper publishers rely on referrals from the dominant online publishers to build the traffic that enables them to sell more ads on their own sites. "Our web site revenues are predominately advertising supported," says Susan Allsopp, the PR chief at Reuters. "Google News is an important driver of traffic to our site."

With soaring online revenues playing a formidable role in propping up the otherwise desultory sales of publishing companies, it is understandable that publishers are afraid of asking to be paid for their work. Online revenues, for example, contributed as much as 47% of the increase in ad sales last year for both NYT and Knight-Ridder.

If Yahoo and Google were forced to choose between paying royalties or eliminating links to the publishers' web sites, they just might tell the newspapers to get lost (especially if they cut a deal with the Associated Press, which has the rights to reuse the content of every news organization that belongs to the AP). Without exposure on the online mega-sites, web traffic and ad sales would nosedive at newspaper sites.

The newspapers have to live with the online aggregators because they can't live without them.

But the bargain is lopsided, because the newspaper companies pay a much higher price to draw traffic to their sites than do the online aggregators. While print publishers bear the full (and considerable) costs of producing original content, the online aggregators pay nothing for the material they liberally cull from newspapers to build page views and ad sales.

Why is the newspaper industry subsidizing an industry helping put it out of business by fragmenting its audience and fracturing its traditional advertising base?

The argument, of course, is that the content giveaway is an "investment" in building traffic on newspaper web sites. That also is the reason most newspapers freely publish their entire report on the web every day.

This makes sense if newspapers have a strategy to leverage their online audiences to build significant and additive new-media businesses, such as direct-marketing programs, couponing, paid premium content, shopping services and so forth.

Absent such initiatives, which haven't materialized in a meaningful way in the last 10 years, newspapers are squandering their most precious resources -- their valuable content and their cash -- for no good reason.

If newspapers don't capitalize soon on the decade-long, free introductory offer they have made on their web sites, then this epic investment may amount to little more than history's longest-running, biggest-ticket, going-out-of-business sale.

Tuesday, April 05, 2005

They shoot messengers, don't they?

The Terri Schiavo case proves once again that our most respected media organizations can't stop being suckered into covering the kinds of trumped-up stories that increasingly dominate the national news agenda.

As a direct consequence, newspapers, news magazines and the Big Three networks are losing credibility at an alarming rate, endangering not only their valuable franchises but also the very health of our democracy.

Though George W. Bush can't articulate a simple, declarative sentence, his spinmeisters have hijacked our headlines by skillfully pushing polished messages through a well-coordinated network of bloggers, partisan columnists, fake video news releases, compliant congressmen, bureaucratic operatives and even the White House press office.

The trumped-up tales include, but are not limited to, the phony intelligence that led to the Iraq invasion; the Swift Boat Veterans for Truth baloney that helped torpedo John Kerry, and, perhaps most excruciatingly cynical of all, the Schiavo charade. In every case, the press surrendered its independence, suspended sound judgment and blindly bought into the story without questioning its underlying premise.

No one seriously challenged the assertion that Iraq had weapons of mass destruction; the issue was what to do about it. The claptrap about Kerry was dignified as a legitimate campaign issue, rather than properly written off as a below-the-belt dirty trick. And the Schiavo case was treated as a national calamity, instead of what it was: a private family tragedy usurped by political opportunists.

Though these contrived stories respectively dealt with issues no less momentous than war and peace, the election of a president and the sanctity of life itself, the shallow coverage produced by the media, in the end, made the press, not the perpetrators, look foolish.

Once forced onto the public agenda, the concocted stories were treated under the long-standing rules of journalism as legitimate news. Rather than challenge these clearly fabricated stories, the media accepted them on face value because it was easier, cheaper and less politically and economically risky to do so. With several of the major media companies engaged in broadcast businesses licensed by the federal government, the economic and regulatory pressures are evident.

The problem for the press is that the American people don't blame the clever operatives who get the presses and TV cameras rolling on a trumped-up story and then quietly melt away. They blame the press for dishing out bad information.

Unfortunately for the media, the public increasingly is in the mood to shoot the messenger, judging by the continuing collapse of confidence in the media's credibility.

The queasy drop has been documented once again by Abandoning the News, a study just released by the Carnegie Foundation. The study shows how the public -- and especially younger people -- are rejecting such traditional, professionally edited media as newspapers and network TV for the News McNuggets served on cable news and the Internet.

As illustrated in the table below, the disorganized, derivative and often unreliable Internet is in rapid ascendancy as the go-to source for news, while our newspapers -- once rightfully regarded as the most authoritative medium -- have been marginalized as untrustworthy, late with the news, and, perhaps worst of all, boring. The national network TV news programs scarcely rank higher in the public's esteem.

Some frustrated news executives blame readers and viewers for a lack of perspicacity. But I would respectfully submit that the media have brought this on themselves by relaxing the stringent, critical standards by which they traditionally have judged stories. Beyond pressure from the righteous right, there are two additional major factors contributing to the dumbing down of the news:

First, the news cycle today never ends. On cable TV and the web, no news is not only bad news but it also is not an acceptable option. Immediacy, especially when dramatic video is involved, has become the primary consideration in determining coverage. Even our proudest news organizations now feel the pressure to write first and ask questions later.

Second, great damage is being caused by the economic squeeze forcing newsrooms to produce more stuff in less time with fewer resources. To grow profits twice as fast as they increased sales, the nation’s newspapers last year squeezed staffing, news hole and other resources. The Big Three broadcasters also trimmed headcount to make their profit targets.

Strapped for resources, editors and news directors know it is cheaper and easier to cover the Schiavo death watch than to determine how many indigent people died for want of medical care in the 15 years the courts have been tussling over her fate. Unfortunately, Ms. Schiavo could not be saved. Countless infants, children and adults could be alive today, however, if proper medical care had been available to them. Where are the stories that could have put some depth and proportion around the compelling issue of health care?

So, the problem is twofold. First, the press, which ought to know better, has been bullied and bamboozled by W's Base into covering phony stories. Second, the media have budgeted themselves into a situation where a few official mega-stories gain outsized attention and hundreds of important stories, including some very big ones, either are undercovered or overlooked outright.

Compelling coverage always has and always will build audiences. The more our big, important media outlets forsake bold, quality coverage, then the faster confidence, eyeballs and revenues will erode.

They need to get a grip. Fast.