Thursday, December 31, 2009

My un-predictions for 2010

I am not a fan of yearend prognostications, because they usually are no more than statements of the obvious or retrospectively fortuitous guesses.

Even though I usually sidestep the idle midwinter idyll of predicting the upcoming year, I am going to make an exception for 2010, because several friends and correspondents have pressed me for answers to three significant questions.

In a moment, I will provide you with the same weaselly answers I gave them, but first here is some insight into the thinking underlying each response.

We are in utterly uncharted territory with respect to the four factors that make a market: (a) the global economy, (b) consumer behavior, (c) advertiser behavior and (d) the potential response to the above variables by the captains of the media. In addition to these known unknowns, any number of unknown unknowns could be lurking out there, too.

Because reliable business predictions can be extrapolated only from well-documented prior experience that reasonably can be presumed to repeat itself in the future, the absence of solid assumptions makes it impossible to offer anything other than the following impressionistic un-predictions:

Will we have to pay for online content in 2010?

In some places, yes. In some places, no. The answer depends on the type of content and the publisher.

While some publishers may get around in 2010 to successfully launching subscription Internet and mobile products, most publishers are likely to adopt hybrid free/pay solutions, with the emphasis on free instead of pay. The few publishers who try to put everything behind a pay wall will be business-to-business publications (like the Wall Street Journal) or those who provide truly unique content to an isolated bit of geography where they have unrivaled control.

Notwithstanding the best efforts to charge for content, interesting and valuable information almost always will turn up in the clear on the web in short order. This unavoidable phenomenon will further incentivize publishers to play whack-a-mole with copyright poachers instead of developing compelling products and services to attract readers and advertisers.

Will advertising sales rise, stabilize or continue to dive?

The answer depends overwhelmingly on whether and how much the economy improves.

If you believe the economy will improve vigorously, then it stands to reason that retailers and car dealers will step up advertising. If the economy expands vigorously, employers will start buying ads to fill jobs. If the housing market revives vigorously, then real estate agents will resume advertising.

Even if all this occurs – and there can be no guarantee that a recovery is imminent or will be sustained – it does not follow, however, that advertisers will return to their former behavior. After being forced to do more marketing with less money during the worst economy since the 1930s, advertisers in every key newspaper and broadcast category have learned to become increasingly proficient at low-cost, highly-targetable, meticulously-measurable interactive advertising.

The thousands of retailers and car dealers who succumbed to the most difficult economic conditions in generations simply aren’t there to buy advertising any more. Several of the remaining big-box retailers use little, if any, newspaper or radio advertising, relying instead on rock-bottom pricing to draw patrons away from independent merchants – the ones who still buy ads – who cannot compete with them.

Auto dealers know that eight hours is the median amount of time consumers spend shopping on the web before contacting a dealer. Car manufacturers and sellers are focusing their efforts on intercepting customers online, not luring them with broadcast or newspaper ads promising free hot dogs and pony rides.

Employers have learned to post vacancies on their own websites or at low- or no-cost job boards targeted to their particular industries.

Real estate argents know they don’t sell houses with newspaper ads. They buy them to please sellers, who want some tangible proof that the agent is trying to market their houses. As more sellers and buyers become accustomed to shopping for homes at sites like Realtor.Com and Zillow, newspaper advertising will become increasingly irrelevant.

In other words, a rebound in the economy will not necessarily translate into a recovery for newspaper, radio or local television advertising.

Will more media companies go out of business?

Some will. Most won’t, absent a complete meltdown of the economy. The question is how wounded the survivors will be and whether they have the imagination, the wherewithal and the will to reclaim anything near their former strength.

Both consumers and advertisers are forsaking the mass media model that made newspapers and local broadcasting such powerful, lucrative businesses in the post-World War II era. Not many years ago, newspapers and broadcasters respectively were able to generate profits of 30 cents to 50 cents on a dollar of revenue.

The abundant profitability of those monopoly-like businesses made it possible for them to stay in the black by whacking expenses when advertising began contracted in 2006 (well before the economy drooped). Some operators were so good at expense management that they were able to sustain amazingly respectable levels of profitability in 2009 in spite of the worst ad recession in modern history.

But even the companies that weathered the storm are far from being out of the woods, to mix a pair of metaphors.

If advertising demand fails to rebound when the economy does – or, worse, continues to contract because of secular changes in consumer and advertiser behavior – then, regardless of how skillfully media companies slash expenses, the high fixed costs associated with operating the legacy businesses eventually will eat them alive.

The long-term survival of the traditional media companies will depend on their ability to create products and services to attract and delight the consumers and advertisers of the interactive age, whose loyalties last no longer than it takes to click a mouse.

To date, the energy and creativity of most publishers and broadcasters have been focused on trying to salvage the increasingly anachronistic business models of their forefathers. If they don’t change their behavior in 2010 and beyond, they may pass the point of no return – assuming they have not done so already.

Happy new year.

Wednesday, December 23, 2009

What piqued readers most in 2009

An anonymous tirade celebrating the downfall of newspapers provoked the most commentary from Newsosaur readers during 2009.

Here are links to the posts that generated the biggest responses in the last 12 months:

:: The last rant: Failing papers ‘bring me joy’

:: Can grassroots journalism do the job?

:: Why media must charge for web content

:: Journicide: A looming, lost generation of scribes

:: How to charge for online content

:: What I recommended to publishers in Chicago

If you want to escape your relatives for a while during the holidays, you can make yourself look busy by adding new comments to the above threads.

Unless some particularly irresistible development occurs, I plan on hibernating in my native Chicago (pic below) for the balance of the year. Wish me warmth, as I do you.

Here’s hoping we can do better in 2010 than we have in the last few years. Happy holidays.

Monday, December 21, 2009

Presses stopped forever at 140+ papers in 2009

The presses stopped forever at no less than 142 daily and weekly newspapers in 2009, a nearly threefold increase over the number of titles succumbing in the prior year.

The reasons, of course, were the double whammy of the worst economy since the 1930s and a dramatic secular shift in the habits of readers and advertisers.

Bad as things were – and they were plenty bad if you lost your job at the Rocky Mountain News, the Washington (DC) Blade, El Dia in Houston, the Boca Raton (FL) News, the Hopi Tutuveni in Arizona or the Derby (KS) Daily Reporter – the toll seemed smaller than some observers expected.

There are three reasons for that, as discussed more fully below: the residual monopoly power of the industry, the magic of the bankruptcy system and the irrepressible optimism of publishers.

Though things might have been worse, the year was bleak enough for newspapers – and the newspaper workers who were among the more than 90,000 people who lost their jobs in the various print publishing industries in the last 12 months.

The contours of the carnage come into particularly stark relief at Paper Cuts, an invaluable website produced by the talented and indefatigable Erica Smith.

Smith has put a black pin on a map of the United States for just about every paper shuttered since 2008. Last year, the map contained 37 pins. This year, it was filled with 106 pins in every corner of the country, including several single pins representing the shutdown of multiple weeklies published by a common owner.

Although Smith’s count may not be absolutely inclusive, the dozens of black dots on her map dramatically illustrate the breadth and depth of the industry crisis.

In all, Smith tallied 142 daily and non-daily shutdowns in 2009, or 2.7 times more than the 53 papers she listed in 2008. At yearend 2008, there were 1,408 dailies published in the United States, according to the Newspaper Association of America.

The black pins include not only the high-profile Rocky Mountain News, but also such smaller dailies as the Tucson Citizen, the Philadelphia Bulletin, the Baltimore Examiner and the East Iowa Herald.

The Seattle Post-Intelligencer, the Christian Science Monitor, the Ann Arbor News and Asian Week abandoned print in favor of scaled-back online operations in the hopes of carrying their franchises forward on the web.

More than 100 non-daily publications were closed, ranging from tiny independent publications in places like Iraan, TX and Kykotsmovi, AZ, to weeklies operated as satellites to dailies owned by Journal Register Co., the Sun-Times Media Group, Lee Enterprises, Hearst and Gannett.

Smith is reporting that nearly 15,000 newspaper jobs were lost this year on top of a like number in 2009. But the federal employment statistics suggest the toll may well be higher. As of the end of November, the U.S. Bureau of Labor Statistics said 90,000 jobs were lost in the non-Internet publishing industries, which would include books and magazines, as well as newspapers. Pink slips continued to fly even as Christmas approached.

Tough as things were, some observers wonder that they weren’t worse. One of them is Dan Kennedy, a journalism professor at Northeastern University, who observed in an email query over the weekend that “it seems as though fewer newspapers went out of business than might have been expected.”

There are three are major reasons why the papers carrying on are still carrying on. They are:

:: The residual monopoly power of the industry.

While newspaper profits have been bludgeoned by an epic and accelerating downturn in advertising sales since April, 2006, most publications continue to make substantial sums of money, owing to their monopoly position in most of the markets they serve. Essentially unrivaled control of print publishing over the years enabled publishers to build highly profitable businesses by extracting high prices for advertising.

Even though increased competition from the interactive media in recent years has been exacerbated by an unprecedented decline in the economy, most papers continue to operate profitably – though nothing like the nearly 30% operating margins many formerly enjoyed – by cutting headcount, squeezing newshole, trimming circulation and outsourcing a wide variety of functions to cheaper vendors.

These one-time-only savings cannot be replicated in future years and, in fact, may serve to weaken demand for the hollowed-0ut products now produced by most publishers. If advertising demand returns when the economy recovers, publishers may be able to reconstitute their publications to reinvigorate consumer and advertiser demand. The risk is that increasingly compelling interactive media, combined with the self-cannibalization of newspapers, have turned off many readers and advertisers forever.

:: The magic of the bankruptcy system.

Instead of investing in the creation of new Internet and mobile businesses, publishers took advantage of the cheap interest rates in the middle years of this decade to borrow billions of dollars to either purchase other newspapers or take publishing companies private. The success of this strategy depended on robust and reliable increases in sales and profits in subsequent years, which, as we know now, spectacularly failed to materialize.

While many newspapers continue to turn out respectable profits in even these straitened times, a half dozen publishing companies landed in bankruptcy court when they were unable to generate sufficient profits to keep up with payments on the enormous debt they had assumed. The magic of bankruptcy is that the court has the power to wipe the slate clean, relieving publishers of debts they cannot pay, unpaid invoices accumulated prior to the bankruptcy filing, leases they no longer need and, in certain cases, obligations under union contracts.

Companies like Journal Register, Sun-Times and Minneapolis Star Tribune got a fresh start in bankruptcy court in 2009 to try to build businesses that can profitably sustain themselves in an era when newspaper readership and advertising appear to be in an irreversible decline. Economists call this a secular contraction, which is different than a cyclical contraction that reverses when business conditions improve.

The Tribune Co. and Philadelphia Newspapers LLC are hoping to be discharged from bankruptcy court in 2010 so the very same managers who unwisely piled too much debt on the companies can get a fresh whack at running them again. Some of the unwise lenders who lost billions at Tribune and hundreds of millions in Philly are wisely petitioning the court to install new leadership at each company.

:: The irrepressible optimism of publishers.

Hope springs eternal among publishers that the woes of the newspaper industry are not a secular shift in their business but nothing more than a severe by-product of the worse economic downturn since the 1930s.

By cutting costs, renegotiating debt or seeking bankruptcy protection, newspaper executives have done a masterful job of staying afloat (albeit by throwing tens of thousands of colleagues over the side) during the most treacherous business conditions most of them have ever seen. They are counting on an uptick in the economy next year to stop on a dime the four-year skid in advertising sales that began well before the economy tanked.

Like the construction industry, manufacturers, retailers and people in every other type of business but Goldman Sachs, newspaper publishers have kept their battered companies on life support in the hopes that a turn in the economy will rescue them. While you can imagine the day that construction will revive, manufacturing will pick up and consumer optimism will return, newspapers face a set of more profound fundamental challenges than most other industries.

If unbridled cost cutting and raw optimism are enough to save newspapers, they will be just fine. If it takes more than chopping expenses and praying for the economy to rebound – which seems to be the prevailing industry strategy – then, unfortunately, we haven’t seen the last newspaper close.

Thursday, December 17, 2009

What the heck are publishers thinking?

A positively effervescent survey of more than 500 newspaper publishers yesterday predicted that advertising sales would drop only 0.2% in 2010 after plunging 28.4% in the first nine months of this year.

The man who conducted the survey doesn’t believe the publisher forecast. I don’t believe it. And neither should you. Which leads me to wonder: What the heck are publishers thinking?

In a survey of more than 500 newspaper executives, Kubas Consultants discovered that publishers evidently believe they are about to arrest the queasy slide in advertising revenues that has been accelerating since April, 2006.

Their lips to God’s ears, as my mother used to say. But does anyone see the economy recovering rapidly and powerfully enough to stop the long-running decline on a dime?

Take a look at the table at left, which compares the category-by-category forecasts in the Kubas survey with the actual performance of the newspaper industry in the first nine months of this year:

Do the publisher projections seem reasonable to you? Me neither.

Even the man who produced the survey has doubts about it.

“No, I don’t believe that ad sales will be down only 0.2% next year,” said Ed Strapagiel, the executive vice president who produced the Kubas poll. “On the other hand, I do believe 500-plus newspaper people would like to believe it.”

There could be “lots of reasons” for the chipper response from the publishers, said Strapagiel in an email from Toronto. His list, which follows in its entirety, certainly doesn’t contain any sparkling new initiatives to support the encouraging outlook:

:: “Wishful thinking.”

:: “Print people over-estimating the potential of online (which is the sole factor contributing positive gain).”

:: “Corporate insistence to make the online look better.”

:: “If I don't show better numbers, they'll cut my budget.”

:: Optimism is better than slitting your wrists.”

Tuesday, December 15, 2009

Putting bite back in newspapers

Journalistic purists winced yesterday when the New York Times reported that coverage in the Wall Street Journal has taken a partisan turn since Rupert Murdoch bought the paper two years ago.

Although the top editor of the Journal dutifully denied the accusation, no one should be shocked at the idea that the Aussie-born proprietor of the Fox News Network might be putting a bit of english on his coverage.

While the conventional reaction is to say Murdoch is out of line, he may be on to something. Given the wobbly economics of the media today, conscientiously opinionated coverage may be the tonic that many newspapers and other news outlets need to revive reader interest and revenues.

News with an attitude is hardly the exclusive domain of News Corp. From the early days of the republic through well into the modern era, the annals of the American press are rich with tales of publishers who were far more partisan and politically manipulative than Murdoch.

In the interests of tossing a potentially unwelcome ingredient into the roiling stew over the future of journalism, I’d like us to consider for a moment whether a more outspoken, less diffident, more opinionated and less dreary press might be welcomed by journalists and readers alike.

While I am not arguing that journalists go back to the days when newsmen were employed as bullies and shills by self-dealing publishers, I am suggesting that it may be time for journalists to shift out of neutral in order to start calling things forthrightly the way they ought to be called.

Opinionated journalism flies in the face of the cherished canon of “objectivity,” the ephemeral and often unattainable construct that publishers adopted around the middle of the last century when spirited, multi-newspaper competition ended in most cities. Objective reporting enabled the sole surviving publisher in a market to make the most of his monopoly position by offending the fewest number of readers and advertisers.

For several decades, the doctrine of objectivity served the public and publishers well. But down-the-middle journalism looks wimpy in the Internet era. One way newspapers can regain their competitiveness is to leverage the discipline of traditional reporting by asserting themselves more affirmatively and unambiguously than most have done for the last few generations.

Before the purists rise up to denounce me, I would like to note that I long ago established my bona fides as one of your number.

When Murdoch bought the Chicago Sun-Times in 1984, several dozen of my colleagues and I quit on the spot after the new management said they were going to steer our beloved paper down-market and to the right. Most of us resigned with no immediate prospects at hand, though almost everyone eventually landed just fine.

So, I feel the pain of the anonymous Wall Street Journal staffers who told David Carr in yesterday’s New York Times that Murdoch’s editors have been putting an unwelcome partisan spin on headlines and stories – a charge that managing editor Robert Thomson heatedly denied.

But we live in a different time than we did 25 years ago. The competition facing newspapers is fierce and the financial situation facing most of them is dire. In some cases, nothing less than survival is at stake.

There’s not much question that a bit of editorial attitude – OK, a lot of editorial attitude – has been good for business at News Corp. To pick one prominent example, the journalistically unencumbered fulminations at Fox News have blown the doors off the other cable talkers.

The prime-time audience of nearly 2.4 million viewers at Fox last Monday was roughly four times greater than each of the 734,000 viewers at Headline News, 693,000 viewers at MSNBC and 623,000 viewers at CNN, according to the website TV by the Numbers. In other words, Fox outpulled all three competitors combined.

Most modern journalists, like the salami makers at Hebrew National, like to think they answer to a higher authority than Mammon. And, lest you have any doubt, I think they should.

But the first business of a newspaper is to stay in business. If that means responsively and constructively amping up the attitude, then I am all for it.

You got a problem with that?

Monday, December 14, 2009

Newsosaur, the accidental blog, enters 6th year

Sipping a fine single-malt scotch after dinner exactly five years ago, I fired up my laptop to see if I could begin to understand what the blogging craze was all about.

After registering for an account on Google’s free Blogger service, the first question you are asked is the name of your blog. That stopped me cold. Inasmuch as I had no intention of actually writing a blog, I had no name in mind. That got me thinking…

If I were going to write a blog – which I have no intention of doing – I suppose it would be about how changes in technology and consumer behavior would rock the world of the traditional media.

Given my background as a newsman-turned-businessman, I could – if I were going to write a blog – leverage my ongoing involvement in Silicon Valley to provide some objective commentary on how newspapers and other traditional media companies could parlay their then-dominant market power into preserving quality journalism in the emerging wired world.

So, the title of the blog – if I there were going to be one – would be “Reflections of, er, um, Something or Other.” And then, after a few more sips of scotch, it hit me: “Newsosaur.”

Once I completed the registration process, I was invited to write a post. And, for reasons that elude me to this day, I did. Then, I wrote another. And another. And, well, you know the rest.

As the odometer on this effort clicks over to the sixth year, I discovered in the State of the Blogosphere Report from Technorati that I have entered a rather rarified crowd. Of all the 200 million-ish bloggers in the world, only 13% have been doing it for six years or longer. The rest undoubtedly have better things to do.

I attribute the durability of this entirely accidental effort to the dumb luck of being in the right place at the right time.

When I started writing about the looming threat to the mainstream media, the traditional companies couldn’t have been fatter or happier. Newspapers, which have been brought to their knees in the last four years, actually achieved record high advertising sales of $49.4 billion in 2005. This year, they will be lucky to eke out $28 billion in sales.

As a lifelong journalist who loves newspapers and cares about preserving vigorous, professional journalism, I found the rapid unraveling of the MSM to be not only an important story but also an irresistibly fascinating one to cover.

While the tale has gone through a number of unimaginable twists and turns in the last five years, some things have stayed remarkably the same. One constant theme is the inability of newspaper publishers to accept and embrace the changes they should have made to their venerable, but no longer relevant, business model.

One of my very first posts called out the problem on Dec. 13, 2004. It is as valid today as it was back then. Here is what I had to say:

Making lemonade out of lemmings

My old friend Steve Yahn, a scrappy journalist who has helmed such publications as Ad Age and Editor & Publisher Magazine, once referred to our bosses at the late Chicago Daily News as “rabbits.” I could tell by his tone that he didn’t mean it as a compliment.

“What do you mean?” I asked, as battered Smith-Coronas clacked loudly through the smoky newsroom and a Rube Goldberg-style conveyor belt whirred over our heads, carrying wads of hastily edited copy to the clattering composing room.

“They've got no guts,” Steve huffed, swigging a cold gulp of see-through, vending machine coffee in the pre-Starbuck’s era of 1978. “They just run like rabbits to their holes.”

Not long after that, the newspaper was shut down and about 300 colleagues and I were encouraged to explore new career opportunities.

In fairness to the rabbits, there wasn't much they could have done to save our distinguished evening newspaper from declining circulation; rising production and delivery costs, and perhaps the greatest culprit of all – prime-time TV.

Newspapers in 1978 were produced pretty much the same way they were made in 1878, 1778 and, heck, 1478.

No one debated the nuances of the “business model.” It was older than Benjamin Franklin himself. There were only two choices: sell more ads or cut costs. The most radical variation on those themes was doing both at the same time.

But that was then and this is now.

Today, as you might have heard, we have the Internet and cell phones and iPods and wireless PDAs and what-all. Each of these technologies offers unprecedented opportunities to give and get information. And each suggests a rich variety of new revenue and profit streams.

Yet, the proprietors of the press are oblivious, walking arm and arm with Poor Richard to Armageddon.

You couldn't blame the rabbits in 1978. They were simple creatures, obeying their instincts, doing the best they could with the information and resources available to them.

But the guys who run today’s newspapers have no such excuse. When are these lemmings going to learn how to make lemonade?

Friday, December 11, 2009

Next for outsource? News production jobs

The jobs of news editors, photo editors, copy editors and page designers may face wholesale elimination at some newspapers in the new year as publishers seek to cut costs by outsourcing editorial production to cheaper vendors.

While several publishers struggling to sustain profitability over the last few years have shipped ad production to low-priced contractors, they largely have kept editorial production in the building out concern for the integrity of the product. But that may be about to change.

The relentless decline in advertising is prompting publishers and senior editors to look more favorably on what many admit is the unsettling idea of turning their news product over to vendors who say they can edit stories, write headlines, crop pictures and lay out pages for up to 55% less than it costs for papers to do it in house.

Dean Singleton, the CEO of MediaNews Group, told fellow publishers at a convention in October that his company is looking into having “one news desk for all of our newspapers...maybe even offshore.” In an age of computers and instantaneous communication, he told USA Today, it doesn’t matter “whether your desk is down the hall or around the world.”

Outsourced editing moved from talk to action last month at the Toronto Star and the New York Times Co.

To save about $4 million a year, the Toronto Star eliminated 78 editorial positions, or nearly a fifth of its newsroom staff, by contracting editing and page production to Pagemasters North America, an affiliate of an Australia-based company. Production will stay in Canada for the time being, but be located in a less expensive location than Toronto.

To save an unspecified sum, NYT is shifting up to 30 New York-based editing positions to the offices of its Gainesville Sun, which already provides editorial production services for some of the company’s other papers in Florida. “The plan for the news service calls for the Gainesville Sun, whose newsroom is not unionized and has lower salaries, to take over editing and page design,” a NYT spokeswoman told Editor & Publisher, which itself will close at the end of the year.

Bigger and far more dramatic deals may lie ahead, said Tony Joseph, the chief executive of Mindworks Global Media Services, a company that runs outsourced editorial production in India for publications in the United Kingdom, Hong Kong and already has done a few pilot production jobs for U.S. publishers.

In an email from New Delhi, Joseph said two large U.S. publishing groups are in “advanced” stages of discussions to move their editing operations to India and that three others are in the “early” stages of such talks. He declined to identify the potential clients or provide further details.

“Our experience with newspapers suggests that improvements in work flow and productivity could generate savings of up to 30%, even if outsourcing is done on-shore,” said Joseph. “Off-shoring could provide additional savings of 35% to 55%, depending on the location and cost structure of the client newspaper.”

For publishers running out of options to shore up their profits after four years of steadily shrinking revenues, those are seriously big savings.

Thursday, December 10, 2009

E&P magazine shutting down after 125 years

Editor and Publisher, the trade journal that has covered the newspaper industry for 125 years, is being closed by the end of the year, staffers were told today.

The magazine and website, along with Kirkus Book Reviews, were not included in the sale of a clutch of business publications announced today by their parent, Nielsen Business Media.

Most of the Nielsen business publications are being acquired by e5 Global Media Holdings, LLC, a new company formed jointly by Pluribus Capital Management and Guggenheim Partners. But E&P and Kirkus were not included in the deal, leading to the decision to cease operations at both orphaned publications.

With the pending shutdown of the authoritative trade magazine and the reduction in the last few years in the number of securities analysts covering publishing, there will be scant independent reporting and commentary on the troubled industry at a time it most needs objective and honest feedback.

Although the next issue of E&P is just 10 days from press, the magazine’s New York-based staff was told in a hastily called meeting this morning that their publication would be shut and their jobs would be eliminated as of Dec. 31.

The full memo on the shutdown is at Romenesko and reaction is in the popular Fitz and Jen blog at E&P's website. Mark Fitzgerald and Jennifer Saba, the authors of the blog, are among the staffers who will lose their jobs.

A staff member who is being laid off said there are five editorial and three advertising employees at E&P. Staffers were told E&P was losing money and had not made budget since August, 2008. The extent of the operating losses were not revealed.

A newspaper to inspire you all over again

I stood in line with half a dozen people yesterday waiting patiently to buy a newspaper, wondering if I ever would witness anything like that again.

It was inspiring to see people eagerly scoop up a paper so fat with news that you had to take care that some of its 12 sections didn’t come tumbling out.

And the paper indeed was fat with news, real news. Real stuff I didn’t know about. Real stuff about my city, my country and my world. Real stuff I hadn’t heard anywhere else.

The paper was the one-time-only issue of the San Francisco Panorama, a broadsheet produced – as sort of a cross between a statement and a stunt – by McSweeney’s, the refreshingly idiosyncratic publishing house operating in San Francisco’s Mission District.

Most of the 20,000 copies of the $5 paper sold out without hours of hitting the street on Tuesday, which some newspaper people seized as a sign that even the hip, jaded and highly wired residents of San Francisco still cared about newspapers.

But the depth and ambition of this newspaper, whose price bumped to $16 on Wednesday and still is being offered here, were unlike anything you’ll see nowadays in most American cities.

While the enthusiastic response to Panorama cannot rightfully be construed as a vote of confidence in contemporary newspapers, it is well worth examining by publishers and editors eager to put new life into their increasingly lifeless publications.

And it is well worth celebrating by all of us who love newspapers, because it reminds us of how compelling a newspaper can be.

Smartly reported, sharply written and striking to behold, Panorama brims with passion and compassion for the Bay Area and the larger world we – and our kids – all inhabit.

Though Panorama is presented as a very broad broadsheet printed on newsprint, it reworks and updates the conventional format of a newspaper. Articles are long and written a in a literary, un-telegraphic style. Layouts emphasize storytelling, not story count. Most important of all, the content is meaty and provocative.

A page-one investigative piece as fine as I have seen in years ripped the lid off the inept reconstruction the long-overdue new bridge to Oakland. The project, Panorama predicted, eventually will cost $12 billion – or twice as much as we had been led to believe – “a figure that leaves even the officials in charge ‘staggered.’”

A second in-depth report details how the unbridled cultivation of illegal pot in scenic Mendocino County is poisoning wildlife, wrecking the environment, poaching scarce water assets and exploiting illegal immigrant workers. A report about gold mining in remote Imperial County tells a disturbing tale of environmental exploitation and corporate greed. Another piece delves deeply into the economics and politics of water in California, the scarcest commodity and the most politically charged issue in the state.

Farther from home, Panorama covered the wars in Afghanistan with short but incisive backgrounders, rounded out with first-person stories of two of the enlisted men bearing the brunt of the fighting – one of whom has served five tours at the front. A full-page infographic about the Congo crisis truly demonstrates how a picture can be worth thousands of words.

Perhaps the most moving feature in the publication was an article entitled “Lying to Live.” It is a series of translations of confessions extracted under torture from Iranian dissidents held at the infamous Evin Prison, where the only hope a prisoner has to survive is to tell the guards what they want to hear. “Jail officials’ kindness created a positive atmosphere in this jail, where I could think and get close to God,” said a statement attributed to journalist Saeed Shariati. His fate was not made clear.

Panorama didn’t stint on sports and entertainment, and even included two of the rarest things in most newspapers today: A 116-page, saddle-stitched Sunday magazine packaged in slick cover stock, plus a full-dress, 100-page, bound book section. Also included is a 16-page, full-color comics section containing nothing but deliciously edgy, home-grown strips.

Panorama even excelled in what it left out, eschewing the daily Tiger Woods hot-body count and coverage of the crashingly boring White House party crashers.

It’s not fair to measure conventional newspapers against the one-off issue of Panorama, which took 11 months to produce without the economic, staffing and deadline constraints increasingly encumbering most other publications.

But this experiment serves as a refreshing and inspiring reminder of the strength of journalism and the possibilities of print. Best of all, I am happy to report, the folks in line with me could hardly wait to read it.

Wednesday, December 09, 2009

The daunting reality facing newspapers

If chief executives get the big bucks for their ability to put the best face on bad situations, then newspaper bosses really earned their pay this week at the annual UBS media conference in New York.

With straight faces, the chiefs of McClatchy Co., the New York Times Co. and other major publishers told investors that things were looking up for the newspaper business because their sales would be down only 20% to 25% in the fourth quarter of the year after tumbling as low as 30% in prior periods.

While a slowdown in the industry’s sickening sales slide beats the accelerating revenue deceleration that has been eating away at newspapers for the last 42 months, it’s time for a reality check. So, here goes:

Newspapers are on track this year to produce their lowest advertising sales since 1986, representing a 43% drop from their all-time peak of $49.4 billion in 2005.

Based on the historic sales slide in the first nine months of the year, newspapers are likely to generate no more than $28 billion in advertising revenues in 2009, thus shedding more than $21 billion in sales since 2005.

In other words, newspapers appear to have gotten mighty close to losing almost half of their revenue base in a mere four years – a decline that began well before the economy began unraveling.

Advertising sales matter because they traditionally have generated 80% of the revenues at most newspapers, with circulation fees providing the balance. The profound contraction of the advertising market has caused some publishers to begin ratcheting up subscription and single-copy prices, but the industry at the moment will live, or not, by advertising.

While some demand for newspaper advertising undoubtedly will return when the economy recovers, a good deal of it will not, because many of the traditional advertisers have moved on.

An alarming number of the staunchest newspaper advertisers – including thousands of retailers and auto dealers – succumbed during the worst economic calamity since the 1930s, so there literally is no hope of regaining their business.

Many of the surviving advertisers – including retailers, employers, real estate agents and car dealers – are shifting ever-larger portions of their advertising spend away from newspapers to the web, where the costs are lower, audiences are highly targetable and response can be meticulously measured.

As illustrated in the chart below, the speed and severity of the sales plunge since 2005 is unprecedented in the heretofore remarkably charmed history of the newspaper business in the post-World War II era.

The collapse of the newspaper business most assuredly was aggravated by the downturn in the economy. But it is important to note that the sales decline was well under way before the economy cratered. It is a grave mistake to think, as some industry leaders apparently do, that the industry’s problems will be solved when the economy improves.

Here’s the perilous position newspapers are in – and how they got there:

From the end of World War II through 2005, newspaper sales climbed vigorously and almost continuously with only occasional minor setbacks during recessions. There was one frighteningly deep 9% sales plunge in 2001 caused by the tech wreck and the 9/11 terror attacks, but the industry quickly recovered when the economy rebounded in less than two years.

Thanks to the housing boom and the cheap-financing bubble in the middle years of this decade, newspaper ad sales reached an all-time record of $49.4 billion in 2005. The rapid recovery for newspapers after the 2001 scare evidently led publishers to believe they had dodged the competitive threat posed by the Internet, which began emerging as a commercial force in the mid-1990s.

In fact, as we know now, the interactive media in the last four years did more harm to publishers than they ever could have imagined, particularly by destroying their formerly lucrative classified advertising business.

The want-ad business, which until a few years ago produced 40% of publisher revenues and better than 40% of their profits, was picked clean by lower-priced, consumer friendly websites offering highly optimized environments for searching deep inventories of employment, automotive and real estate listings.

Based on projections derived from the industry’s actual performance in the first nine months of the year, classified advertising in 2009 is likely to total no more than $6 billion, or fully 65% less than the $17.3 billion in sales booked in 2005.

The financial crisis and recession that commenced last year carved deeply into national and retail revenues. Many heavy newspaper advertisers went out of business. Most of the remaining advertisers trimmed their spending to save money, while directing ever-greater percentages of their purchases into low-cost and highly targetable interactive media.

Based on the industry’s performance in the first nine months of 2009, national advertising appears to be on track to total some $4.3 billion for the full year, or 45% less than it was in 2005. Retail advertising, which is the meat and potatoes for almost every newspaper, is likely to drop this year to $14.8 billion, or 33% less than it was in 2005.

It is difficult to think of another industry that fell so far so fast and ever regained its former vigor. If someone knows of any examples, please let me know.