Monday, August 31, 2009

Newspaper ads tracking to $10B sales drop

In round numbers, total newspaper advertising sales are likely to drop by $10 billion in 2009, which would put them roughly one-third lower than they were in the prior disastrous year.

Based on the 29.0% skid in advertising sales in the second quarter of this year that was reported on Friday, consolidated print and online ad sales likely will be no better than $27 billion this year. They could even be worse, depending on the state of the economy.

The projected performance compares to total ad revenues of $37.8 billion in 2008, when sales plunged by 16.6%, which until now had been the worst decline on record.

Assuming the $27 billion projection proves true for 2009, the rate of the industry’s sales decay will have accelerated by 1.5 times in just 12 months. The quickening, sickening quarter-by-quarter sales collapse is illustrated in the chart below (click to enlarge).

Dashing the hopes of publishers for a respite in the ongoing meltdown of their business, the sales decline in the second quarter accelerated in every category but classified advertising, according to data provided by the Newspaper Association of America.

As sales for the period tumbled to $6.8 billion from $9.6 billion in 2008, the quarterly percentage declines in retail, national and online ad sales each fell by a higher rate than ever before. National plunged 29.6% to $1.1 billion, retail skidded 24.9% to a bit under $3.6 billion and online slid 15.9% to $653.1 million.

Classified advertising fell by “only” 40.4% in the second quarter, as compared with a record drop of 42.2% in the first period of the year, bringing sales for the quarter to a bit less than $1.5 billion. To put this in perspective, each of the big three classified verticals as recently as two or three years ago was capable of generating a billion dollars in sales on its own.

Recruitment advertising, a billion-dollar category in every quarter as recently as 2006, fell in the second quarter by 66.3% to $202.2 million. Real estate, which was pumping out billion-dollar quarters as recently as 2007, fell 45.8% to $335.6 million. Auto, which also was capable of generating quarterly revenues of close to a billion dollars as recently as 2007, fell 42.7% to $332.1 million.

The brightest spot for classified advertising was the "other" category, where people sell stuff like like puppies, surplus floor tile and the like. Sales were down 11.7% from the prior year at $620.3 million.

My projection for a $10 billion sales decline in 2009 assumes the industry will produce half of its annual sales in the first six months of the year, as it has done with great reliability throughout recent history. Print and online ad sales amounted to just short of $13.5 billion in the first half, representing a 27.6% drop from the same period in 2008.

When you double the first-half sales, the industry appears to be on track to produce some $27 billion in ad revenue for the entire year. This assumes the drop in sales will not accelerate in the coming months and that the econmy will not stage a sudden and vigorous turnaround by the end of the year.

The last time newspaper ad sales were as low as $27 billion was 1986. On an inflation-adjusted basis, the $27 billion in sales achieved back then would be worth $52.3 billion in 2008 dollars.

By that measure, it is fair to say that the industry today is only half the size it was two decades ago. And there are no signs the decline has been arrested.

Friday, August 21, 2009

How publishers can make web content pay

Third of three parts. Parts one and two.

If publishers are blocked for the most part from charging for content in the inherently open and unruly interactive marketplace, then what can they do? Go with the flow.

And the flow on the web is to provide consumers with unencumbered access to content in exchange for information that will enable publishers to effectively target premium advertising to them. That’s the ViewPass idea, an idea in which I have a commercial interest.

As summarized more fully here, ViewPass would consist of a simple, one-time registration system that would remember users as they moved among participating websites.

Though the system could handle payments for individual articles or subscriptions, its primary job would be to profile individual users from demographic information supplied by them and by tracking the content they viewed as they moved from site to site.

The customer profiles would enable superior ad targeting, thereby improving consumer response. Improved response would generate higher CPMs, boosting revenues as advertisers competed for access to available page views. It is important to note that the information offered to ad networks would not identify individuals, thus protecting their privacy.

Significantly, a number of publishers have proven for themselves the prodigious value of having enhanced information about their web visitors.

Some of the leading members of the Newspaper Consortium say they are fetching rates of up to $15 per thousand by selling advertising through a targeting system developed by Yahoo that, while valuable, falls short of delivering the level of detailed demographic and contextual information that could be provided by ViewPass. (A partnership similar to the Yahoo deal is being planned by Advance Publications and Microsoft.)

The $15 CPMs that publishers obtain when they sell ads using the Yahoo system spectacularly overshadow the average rates of less than $1 per thousand that newspapers net when they use generic banner ads to fill otherwise unsold inventory. The unsold inventory at many papers, by the way, amounts to half or more of their page views.

A system like ViewPass would help the industry sell more targeted advertising. It also would drive higher CPMs by delivering such prized, but previously unavailable, data as a specific customer’s authenticated Zip Code. The closest the Yahoo system can get, by contrast, is to place a reader within a cluster of five neighboring Zip Codes. To be clear, however, the Yahoo system and ViewPass would be complementary, not competitive.

In short, ViewPass would compensate publishers handsomely for embracing, rather than battling, the culture of the web.

The need for an initiative like ViewPass is urgent, given the massive systemic changes confronting the industry. Here is why:

The strength of traditional media companies historically arose from their control of the means to create and disseminate information in their respective markets and then to sell advertising directed at the large audiences that coalesced around their products.

But interactive technologies have blown up this classic business model by fragmenting audiences as consumers gained the ability to gather information from multiple sources and to view it at the time, at the place and on the platform of their choosing.

Given the growing number of competing interactive sites and the generally declining loyalty of consumers to even the strongest of the media brands, it is highly unlikely that traditional publishers and broadcasters will be able to reverse the disintermediation steadily eroding their respective audiences and advertising bases.

With granular information about individuals bound to replace geography as the most valuable asset a publisher can have, ViewPass would give publishers the unsurpassed strategic advantage of being the sole owner of the definitive database of authoritative information about the demographics, preferences, desires and behavior of each and every registered consumer.

If publishers fail to seize this opportunity as a group, they are likely to fail individually as readers and advertisers over time forsake their one-size-fits-all media products.

It is gratifying to report that several publishers support the ViewPass idea, not the least because it would be owned and governed by the industry instead of third parties like Yahoo and Microsoft, which, of course, have business motives and profit objectives of their own.

“We're excited and appreciative of the work you are undertaking,” the president of one company wrote in an email after hearing a presentation about ViewPass. “Noble work, I might add.”

But the work on ViewPass won’t go forward without a bold commitment from a broad array of publishers to build it. So far, no collective resolve has materialized for ViewPass or any other idea.

Meantime, the year when publishers finally were going to start charging for interactive content is steadily ticking away.

Thursday, August 20, 2009

What stops publishers from charging for news

Second of three parts. Part one is here. Part three is here.

Fear, in a word, is the reason why publishers are treading so cautiously when it comes to charging for the valuable interactive content they have been giving away for more than a decade. It is a good, healthy fear, too.

Of all the dozens of chief executives, editors, interactive experts and business analysts that I have spoken to this year in connection with the ViewPass project, not a single one believes newspapers can make enough money charging for content to offset the drop in ad revenues that would occur when, not if, page views fell in response to the sudden appearance of a pay wall.

Even Steven Brill of Journalism Online, the foremost advocate for a global pay wall for newspaper content, says he believes no more than 10% of visitors will ante up for access to interactive news.

In announcing last week that the un-named publishers of some 500 publications representing 90 million page views have executed letters of intent to explore the use of his service, Brill suggested that the group could collect up to $900 million in revenues by charging the 10% of willing consumers $100 per year for access to content.

But what, publishers rightfully wonder, will become of the other 90% of website visitors – and the $3.1 billion in advertising revenues the U.S. newspaper industry generated on the web in 2008?

If Brill’s pay wall cut into more than a third of web advertising revenue, then newspapers will have made a disastrous and largely irreversible mistake. (One example of the daunting the math is illustrated in the comment below from Anonymous 9:33 a.m.)

Once newspaper site visitors were turned off by a pay wall, it would be difficult get most of them back – especially when plenty of other sites quickly sprung up to provide free access to coverage cribbed from the paid sites. Want to be the publisher of FreeNYTimes.Com? Too late. The URL already has been grabbed.

Publishers will be pretty defenseless in fending off content poachers, too.

Although the Associated Press is preparing to deploy an elaborate system to track pilfered content, its chief value will be to help build a case to prosecute scofflaws after the fact. The system, which is detailed here by Nieman Journalism Lab, won’t be able to do much about the traffic and ad revenue lost to the AP and its members as lawyers tussle for years over the intricacies of international copyright law and the nuances of the impossibly obtuse fair-use doctrine.

Here’s why publishers are sweating: While Brill argues that newspapers can preserve some 90% of their page views and online advertising after erecting a pay wall, publishers consistently have told me that they fear they could lose 75% or more of their traffic and banner revenue if they started to charge for content.

This may explain why the Los Angeles Times reported last week that such major publishers as Dow Jones, McClatchy and Tribune Co. had not signed with Brill. Although I cannot reveal the details of the confidential discussions I have had with several publishers, I can report a number of other big-name companies have not signed either.

Given the widespread skepticism I have heard from publishers over the likely success of pay walls, why did some of them sign Brill’s non-binding, non-exclusive letter? To ensure access, they said, to whatever secret sauce Brill is cooking up. Thus, Brill’s letters, which appear to be little more than agreements to keep an important conversation going, represent more posterior covering than actual forward momentum.

But the hard fact, as many publishers privately acknowledge, is that there will be no secret sauce.

It is true that publishers could be successful in charging for certain types of content, especially information that helps the purchaser make or save money. But most publishers realize it is preposterous to believe they can charge for national news, stock quotes, entertainment stories, sports scores and all the other widely commoditized information proliferating on the web.

If publishers are blocked for the most part from charging for content in the inherently open and unruly interactive marketplace, then what can they do? Tune in tomorrow for the final installment.

Next: How publishers can make content pay

Wednesday, August 19, 2009

Why aren’t we paying for news?

First of three parts. Part two. Part three.

With their backs against the wall, 2009 was going to be the year that newspaper publishers finally got together to charge for the interactive content they have been giving away for free for more than a decade.

Nearly two-thirds of the way into the year, however, there has been far more talk than action.

Apart from determined-sounding utterances from certain notable publishers and new pay walls erected this summer in Harlingen, TX, and Schenectady, NY, the industry has made essentially no progress in figuring out how to effectively monetize the formidable web traffic that represents its strongest asset as print franchises wane.

As discussed in the next installment of this three-part series, there may be far less than meets the eye in last week’s assertion from Journalism Online that it has recruited hundreds of still-to-be-identified newspapers to put pay walls on their sites.

There are two reasons you are not paying for content at newspapers other than the Wall Street Journal, the Arkansas Democrat-Gazette and a few others:

:: Publishers can’t figure out how to charge for content without throttling their web traffic and the online advertising that comes along with it.

:: Individual publishers are afraid to move unilaterally to begin charging for content but also unable to coalesce as a group around a common philosophy and platform for doing so. (Antitrust concerns, while a convenient excuse, actually are not an issue, as there are many ways publishers can act in concert without unlawfully colluding.)

Working for the better part of this year to promote an industry-owned solution to monetize the interactive traffic generated by newspapers, I have gained rare insight into how newspaper and magazine publishers are struggling to solve this intellectually, emotionally and commercially challenging problem at the same time they are facing a host of other, equally daunting intellectual, emotional and commercial challenges.

Readers should understand that I have a professional and economic interest in ViewPass, a system designed to capture the full value of a publisher’s interactive audience by maximizing advertising yield and charging for content when it is appropriate to do so.

At this writing, it is far from clear that newspapers will band together to fund the technology and marketing infrastructure necessary to create ViewPass, which would optimize the revenues and profits that publishers could achieve from the 3.5 billion page views they collectively drive each month.

In their enlightened self-interest (and, candidly, mine), they would be well advised to do so.

But the reason publishers may not act on ViewPass – or any of several alterative solutions – is that they are so worried about being wrong that they can’t decide on whether, or how, to charge for the valuable content that it costs them a fortune to produce.

Although a number of publishers have said from time to time that they want to charge for access to their web and mobile content, few have taken concrete steps to do so. Instead, they are waiting for someone else to go first – and evidently hoping, as my business partner Ridgely Evers says, that “a miracle will occur.”

Miracles, however, appear to be in short supply.

Next: Why publishers are afraid to charge

Monday, August 17, 2009

How did newspapers lose Everyblock?

How could MSNBC.Com have scooped the newspaper industry by buying Everyblock.Com?

If ever there were an application designed to fast-forward newspapers into at least the late 20th Century, then this was it.

The fact that the leading hyperlocal website was snatched up by a multimedia partnership operated by NBC and Microsoft shows a dismaying lack of imagination, foresight and, perhaps, economic resources on the part of the companies operating the nation’s struggling newspapers. Terms of the deal, first reported here, were not disclosed.

Everyblock is a clever online compendium of all sorts of community data that enables users in selected cities to drill down to, well, every block to see what crimes have been committed, what property has been sold, what zoning cases are on the docket, what liquor licenses are pending, what restaurants have been cited by health inspectors and much more.

In Chicago, where the site originated, Everyblock covers 233 distinct neighborhoods and maps information in a simple but elegant format. Everyblock even pointed me to a 2-for-1 coupon for dinner at a restaurant near my old address in Chicago.

If the last, best hope for print and interactive newspapers is unmatched domination of local news, then the information and advertising opportunities provided so efficiently by Everyblock were strategically essential to newspaper publishers.

Instead, the franchise seeded with a Knight Grant and developed by Adrian Holovaty and five-man team, will be owned by MSNBC, which intends to operate the site as an independent business that will be rolled out in far more places than the 15 cities it serves today.

With Microsoft, NBC and MSNBC feeding Everyblock resources and traffic, the site has the opportunity to take as big bite out of local news and advertising as Craig’s List took out of classified advertising.

While newspapers could make a belated attempt to catch up to MSNBC by building me-too sites, they will be late to the party. If they take their sweet time, as they usually do, the party may be over before they get there.

Newspaper publishers should have seen this coming. How could they have let this happen?

Monday, August 10, 2009

How long should dead paper linger on web?

There is a special drawer in my house containing a neatly wrapped copy of the final edition of the Chicago Daily News, where I worked until it ceased publication on March 4, 1978.

So, I understand the affection and enduring sense of loss felt by a staff that has had a newspaper shot out from under it.

Still, I can’t help but wonder why the final website of the Rocky Mountain News remains online today as an uncomfortably maudlin reminder of the paper’s demise nearly six months after it closed.

The beautifully produced site (image below) attracted hundreds of comments – mostly sympathetic – when the E.W. Scripps Co. shut the paper on Feb. 27 after suffering tens of millions of dollars in operating losses that it said it could not staunch.

But the last of those comments came on March 3, which seems about the right length of time for a proper mourning period.

While the site attracted more than 600,000 unique visitors a month when the paper was going strong, traffic dropped to 132,000 visitors in June and has fallen off the radar since then, according to Compete.Com.

There’s no reason to visit, either. The site, which effectively captured the shock, grief and anguish of the paper’s talented staff at the moment it was closed, hasn’t been updated since then.

So, there it sits, frozen in time, evoking an awkward mawkishness that ill becomes the proud men and women who made the Rocky the hard-charging paper it was.

When does a newspaper get to rest in peace?

Friday, August 07, 2009

Modest newspaper sales bounce predicted

Newspaper advertising sales are likely to bottom out after four straight years of decline in 2009, but they aren’t headed back to where they used to be, according to a new projection from Borrell Associates.

In what passes nowadays for an upbeat take on the newspaper industry from an independent observer, the Virginia-based market research firm boldly predicts that print advertising sales for the nation’s 15,000 daily and weekly papers will bottom out at $35.9 billion in 2009 after peaking at $57.3 billion as recently as 2005.

Borrell forecasts a 2.4% sales rebound in 2010 to $36.8 billion and modest annual gains to take sales to $39.0 billion by 2014. With the over-all size of the national advertising pie likely to shrink in the next five years, Borrell believes newspapers could regain a 15.9% share of the advertising market in 2014 vs. 14.4% in 2009.

As detailed in the chart below, newspaper advertising demand from national advertisers will remain remarkably consistent – and flat – through 2014. As always, the main revenue engine for newspapers will be ads sold to local retailers and classified accounts.

The annual sales numbers used by Borrell are significantly higher than those reported by the Newspaper Association of America, which counts the sales of a more limited subset of publications produced by the publishers of daily papers.

The NAA, whose figures typically are cited in this blog, reported that the industry generated $47.4 billion in print ad sales in 2005. Earlier this year, I predicted that print sales for the papers covered by the NAA were likely to amount to about $28 billion in 2009.

There are too many unknown unkowns for me to forecast any further than that.

Tuesday, August 04, 2009

Current TV cheers after 140 days of silence

After remaining scrupulously silent for the 140 days that two of its journalists were held captive in North Korea, Current TV pulled out all the stops today after receiving word that Laura Ling and Euna Lee were safely on a plane home.

The women, who had been arrested at the Chinese border in March and sentenced to 12 years of hard labor, were pardoned Tuesday after former President Bill Clinton traveled to North Korea to seek their release.

“Welcome home” greetings festooned the cable channel and website operated by the San Francisco media company that blends professionally produced video with audience-generated content.

In keeping with the grassroots flavor of Current TV, its website invited visitors to send greetings (see embed below) to Ling and Lee. Using this slick tool, it was even possible to use your webcam to upload a message like this or this.

The multimedia celebration contrasted sharply with the tight-lipped approach Current took from the moment the women were captured on March 17 after straying across the North Korea border from China while reporting a piece on North Korean refugees.

Rather than following the approach often employed by news organizations to focus a heavy degree of public attention on captured journalists, Current TV resolutely declined all public comment on the plight of the two correspondents.

The capture of the Ling and Lee roughly coincided with the detention in Iran of Roxana Saberi, a contributor to National Public Radio who was released in April after some four months in captivity.

NPR and other media covered the Saberi case continuously in the interests of generating sufficient pressure to gain her freedom and Newsweek is employing a similar high-profile strategy in trying to gain the freedom of its reporter Maziar Bahari, who was detained in Iran in June.

Current TV, which is owned in part by former Vice President Al Gore, took the opposite approach in the belief that quiet, back-channel diplomacy – as opposed to public pressure – might have a greater impact on the secretive North Korean government.

As it turned out, the under-the radar-approach employed by Current TV was hardly novel.

At the time Current TV was working feverishly behind the scenes for the release of Ling and Lee, the New York Times successfully persuaded several media outlets for seven months not to report on the kidnapping of one if its correspondents held for ransom in Afghanistan.

In the end, neither public nor private efforts freed Timesman David Rhode. He escaped his captors in June by climbing over the wall of the compound where he was being held.

Monday, August 03, 2009

Sun-Times sags in Chi-town showdown

Like a pair of proud but over-the-hill prizefighters, the Sun-Times and Tribune are slugging it out in a deadly duel to determine who will remain standing as the sole daily in Chicago.

Both newspapers are operating under Chapter 11 protection and both have seen far better days in terms of circulation and advertising sales. But it’s hardly a fair fight. With an overwhelming advantage in weight, reach and stamina, the Tribune almost certainly is going to win.

Sooner rather than later, the recession, the secular decline in newspaper advertising and a legacy of dysfunctional management will kill the feisty Sun-Times, leaving the Trib alone to serve a metropolitan area of nearly 9.8 million souls.

It’s sad but true: Even in a town as big, bold and vigorous as the Windy City, there evidently is no longer enough business to support more than one metro daily.

The Tribune already dominates the market, selling 501,202 daily papers to 312,141 for the Sun-Times, according to the Audit Bureau of Circulations, an industry-funded group. On Sunday, the day of the week that traditionally produces half of a newspaper’s advertising revenues, Trib circulation thumps the Sun-Times by a threefold margin of 858,256 to 254,379.

On the web, the Tribune outdraws the Sun-Times by nearly 2 to 1. The Tribune attracted 4.8 million unique visitors in June vs. 2.8 million for the Sun-Times, according to Editor and Publisher.

As the largest paper in the market, the Tribune not only sells more advertising than the Sun-Times but probably is gaining market share at the expense of its money-losing competitor.

The publishers don’t release detailed ad sales statistics for their individual properties, but it is well known that economic downturns historically have been hard on No. 2 newspapers in the few cities still fortunate enough to have competing dailies. That’s because advertisers tend to channel a greater percentage of their dollars into the dominant paper when recessions force them to cut over-all spending.

To make things worse, the most severe recession since World War II hit at a time when budget-conscious advertisers already had begun diverting dollars away from newspapers to the cheaper and more targetable interactive media. Advertisers in Chicago, as in the rest of the country, have cut back on newspaper expenditures in every major category: retailing, employment, auto and real estate.

Although the Sun-Times is in no position to wait for the economy to improve, the Tribune is.

The Sun-Times Media Group, the parent of the newspaper and some five dozen other weeklies and dailies in the Chicago area, was down to a mere $23 million in cash at the end of June, according to bankruptcy filings provided by reporter Ann Saphir of Crain’s Chicago Business.

Despite continued aggressive cost cutting, the Sun-Times Group lost $2.3 million in June. Assuming no change in the burn rate, the company, which is desperately seeking a wealthy patron to buy it in what would be a prodigious act of civic charity, would be broke within 10 months.

Meantime, the Tribune Co., which owns the eponymous newspaper, delivered a 15% profit in June. The company sought bankruptcy protection in December just days before the one-year anniversary of the $13 billion transaction that recklessly overburdened it with debt.

The Tribune Co., which owns an array of broadcast and publishing assets across the nation, generated a net profit in June of $43.9 million on revenue of $289.7 million, according to Trib columnist Phil Rosenthal. The company ended the month with $740.5 million in cash, or nearly 32 times more of a cushion than the struggling Sun-Times.

The Tribune shrewdly is pressing its advantage, too, as the dominant, multi-media force in town. In addition to publishing the flagship newspaper, Tribune Co. blankets Chicago with:

:: A jazzy, free, youth-oriented tabloid called the Red Eye that has been chewing into news-stand sales for the Sun-Times since 2002. Some 200,000 free copies of the Red Eye flood the market every business day, with 130,000 copies distributed on Saturday.

:: A tabloid edition of the broadsheet Chicago Tribune sold side-by-side with the Sun-Times at vending machines and transit stops. Home-delivery subscribers still get a broadsheet.

:: Hoy, free a daily Spanish-language tabloid newspaper and an affiliated website, ViveloHoy.Com.

:: Some 65 hyper-local Triblocal weekly print supplements and websites to combat a similar number of daily and local community properties and websites published by the Sun-Times.

:: Powerful broadcast properties including WGN television, a CW affiliate; WGN-AM, a major talk-radio outlet, and CLTV, a 24-hour cable channel featuring local news.

:: Chicago, a slick monthly city magazine.

:: The Metromix entertainment website and a new compendium of 60-plus local blogs called ChicagoNow.

A great example of how all this media power was brought to bear occurred in the spring, when Target wanted to promote the designer brands featured in its bargain-priced stores by opening a Bullseye Bazaar in downtown Chicago.

A Bullseye Bazaar, which is known in the trade as a pop-up store, is opened for only a few days in a prominent location to capture the attention of consumers and press. Then, it is shut down.

As luck would have it, the Chicago Tribune happened to have prime, ground-floor retail space available at its headquarters building on tony Michigan Avenue. The space at the Tribune Tower recently had been vacated by the McCormick Freedom Museum, a collection of exhibits promoting the First Amendment.

Randy Michaels, the chief operating office of Tribune Co. explained how the Tribune capitalized on the opportunity in a memo to the staff:

“Target bought a four-page wrap-around section in RedEye, additional ads in Chicago Tribune and on its website, The stars of The CW’s ‘Gossip Girl’ attended the press preview of the store.”

The ad purchases were accompanied by some nice ink in the Tribune and favorable play at CLTV.Com. The Sun-Times helpfully pitched in with some buzz, too.

“Target, a major client, is extremely happy,” Michaels said in his memo. As further proof, take a look at the graphic below, where a Target ad is stripped across the bottom of the front page of yesterday’s Tribune.

“In a tough ad environment” the close collaboration of a media company and its advertisers “means a lot,” Michaels told the staff.

In fight to the finish wth your cross-town rival, it may mean even more.