Monday, July 16, 2012

Why ‘future of journalism’ confabs fail

After recently attending the latest in the never-ending series of “future of journalism” conferences, I finally realized why they all fail:  They don’t include the right people. 

While these well-intended yakfests are rich in whining and dining ops, journo-futuramas generate few practical or actionable ideas because they lack the perspectives of four key constituencies:  

∷ Consumers – The actual people who not only consume journalism but evidently will create growing amounts of it in the future.   

∷ Technologists – The actual people who are creating the platforms on which consumers will get and give information in the future. 

∷ Marketers – The actual people whose advertising purchases historically underwrote journalism and, given the right sorts of products and services, might continue to do so in the future.   

∷ Investors – The actual people who could bankroll innovative commercial or non-profit ventures to sustain journalism in the future.   

Instead of bringing together these diverse and strategically vital stakeholders, the usual journo-futurama is composed largely of white, middle-aged newspapermen (or, more likely, former newspapermen) who came up in the day when cold type was the hot new technology. 

While my fellow newsosaurs contribute welcome institutional knowledge and gravitas to any discussion, they represent a significantly outdated view of what journalism is, what it ought to be – and how it may manifest itself in the future. 

Their views were shaped in the pre-interactive era, when journalists, in their sole discretion, decided who to cover, what to report, what to write and when to publish it.  Apart from the occasional crayon-scribbled note that arrived in the mail, readers seldom talked back, leaving little reason to doubt the work was being well received.  This led to the ill-advised belief that journalists, in their sole discretion, were wise enough to know what readers wanted, whether they really wanted it or not. 

Unfortunately, this type of one-way, prescriptive thinking suffuses journo-futuramas. But it is seriously out of step with the real world, where readers not only can talk back to the media but also publish news and commentary on their own.  Politicians, entertainers, marketers and even humble hockey moms can bypass the legacy news media by establishing direct, one-to-one connections with their intended audiences.

Those of us worried about the future of journalism need to understand today’s marketplace on its own terms.  Instead of relying on seat-of-the pants intuition and wistful thinking, we need reliable research and objective data to come up with relevant new formats and forums for journalism.       

That means listening to consumers, technologists, marketers, investors and others who form the many constituencies for whatever shape(s) journalism takes in the digital age. 

The most important things that press vets can bring to journo-futuramas are strong advocacy for the immutable values of public-interest journalism: fair reporting, balanced presentation and effective storytelling. 

Though we hope and trust these values will endure, it seems increasingly clear that the institutions traditionally responsible for supporting journalism may not be as capable of doing this in the digital age as they were in the era of snail media.  

To build next-gen journalism, we will need all the help we can get.  And that means bringing many more players to the table than the usual suspects who turn up at most journo-futuramas. 

If anyone out there wants to do this right, I am ready to help. Otherwise, I am all kvetched out. 

Wednesday, July 11, 2012

What’s next for newspapers?

Not so very long ago, the newspaper business was a snap:  Build the largest possible audience, sell the most possible ads, charge the highest possible rates, print the fattest possible papers and pump out the biggest possible profits.  

This enviable model worked exquisitely for generations, because publishers had little, if any competition.  But it is now clear, as attested by the 50% drop in newspaper advertising since 2005, that the old ways can no longer succeed.   

So, most publishers – after arguably procrastinating far too long – are faced with choosing the best possible going-forward strategy for their mature, if not to say declining, businesses. 

They will be in good company. In the last few weeks, Warren Buffett, the Newhouse family and Rupert Murdoch each embarked on one of the three most likely paths available to newspaper publishers.  Though individually logical and defensible, the three paths are remarkably divergent. 

Who will be right?  All of them? One of them? None of them? Only time will tell.  But one thing is certain: Sooner, rather than later, every newspaper operator will have to pay her money and take her chances on an array of strategies that run the gamut from hope to capitulation. 

Here's a quick way to think about the three approaches: 

∷ Farm It – Keep doing what you do today as well as you can in the hopes of optimizing the existing franchise for as long as possible. This presumes that (a) the company will operate in a reasonably hospitable and predictable market environment and (b) management is sufficiently skillful to execute smartly with the available resources. 

∷ Milk It – Accept the inevitable decline and fall of the traditional newspaper model and then whack costs to extract the most profits from the decaying business for as long as possible. On the day you no longer can turn a profit, throw the keys on the table and call it quits. 

∷ Feed It – Determine that even the most proficient management cannot overcome the fundamental changes in the marketplace that have been cutting readership and revenues since the Internet arrived two decades ago. Instead of retreating, however, you leverage the waning strengths of the legacy business and invest aggressively in new digital products to reposition it for the future. 

Now, let's match a publisher to each strategy: 

Farming: Warren Buffett 

The farmer in the above scenario is the grandfatherly billionaire who last year added his hometown paper, the Omaha World-Herald, to his long-standing ownership of the Buffalo (NY) News.  In May, he bucked the widespread pessimism about the future of newspapers by buying 63 titles from Media General and then quickly adding the papers serving the Texas towns of College Station and Waco. What was he thinking?  

A long-standing value investor, Buffett looks for unique and well-established businesses that happen to have fallen out of favor in the investment community.  In buying his papers at significant discounts to the prices they historically might have fetched, Buffett has gotten his hands on franchises that are as unique and well established as they come. 

The investment thesis is simple:  Monopolies or near-monopolies in the communities they serve, newspapers are widely known and well respected brands with (a) unsurpassed newsgathering capabilities and rich content archives, (b) deep and long-standing relationships with local advertisers and community leaders, and (c) vast (and free) marketing capabilities via the print and digital media that they publish. Even though aggregate industry advertising revenues are half today of the record $49.4 billion realized in 2005, most newspapers produce pre-tax profit margins that put Walmart and Amazon to shame.

Buffett is concentrating on small and medium papers in defensible markets, while steering clear of metro markets, where costs are high and competition is fierce. But he says he has no transformational ideas in mind.  

“I do not have any secret sauce,” Buffett told the New York Times. “There are still 1,400 daily papers in the United States. The nice thing about it is that somebody can think about the best answer and we can copy him. Two or three years from now, you’ll see a much better-defined pattern of operations online and in print by papers.”

Meantime, Buffett has pledged to continue trying to make his new acquisitions the best newspapers they can be.  

Milking: The Newhouse family

Buffett’s welcome vote of confidence in newspapers was overtaken within a week when Advance Publications declared on May 24 that it would reduce print publication to three days a week at the New Orleans Times-Picayune, thus making the Crescent City the largest American metropolis to be deprived of a daily dose of wood fiber in its news diet. 

The tragedy in the cutbacks ordered at the Times-Picayune and three nearby Alabama markets is not the loss of the print medium itself – because we can still tune into a host of digital devices for the weekend weather report and the latest celebrity shenanigans – but rather the loss of the hands who previously produced the local news.  Advance Publications, which owns all four of the soon-to-be-former dailies, is axing 84 of 175 newsroom positions in New Orleans and a total of 153 of 235 journalists in Birmingham, Huntsville and Mobile, according to reports here and here

Once dismantled, the local reporting infrastructure in these four communities almost certainly will never be rebuilt.  The loss of transparency, accountability and advocacy will be incalculable, because the few remaining journalists won’t have the time to calculate it, what with all the 24/7 tweeting, video-making, Facebooking and web updating they will be expected to do. 

Executives of Advance Publications – which is owned and operated by the heirs of S.I. Newhouse, who started building the newspaper empire at the age of 17 in 1895 – were at pains to say they intended to replace the print products scheduled to depart this fall in New Orleans and Alabama with state-of-the-art digital news operations.  (UPDATE 8.8.2012: Steven Newhouse, the family member who heads digital operations, defended the moves in New Orleans and Alabama here as a necessary pivote in business strategy.) 

But that’s the same thing they said three years ago, when they announced a nearly identical strategy to replace the seven-day Ann Arbor (MI) News with AnnArbor.Com.  Staffing in the Michigan newsroom was cut in half and the Sunday circulation of the surviving two-day-a-week paper tumbled to 34,923 this year from 54,207 in 2009, according to the Audit Bureau of Circulations.

The quality of what's left is so poor that even the director of the Knight Wallace Journalism Program at the University of Michigan says he doesn’t read it. “Is discussed much in Ann Arbor? No,” Charles R. Eisendrath told the New York Times. “Is it an authority? No. I don’t trust anything that is done on the cheap.”

As unfortunate as it may be that Ann Arbor, New Orleans or Mobile are deprived of the power of a vigorous press, the strategy evidently selected by Advance makes sense if you believe that the best days of newspapering are behind us. By cutting staff to a bare minimum and printing only on the days it is profitable to do so, publishers can milk considerable sums from their franchises until the day these once-indomitable cash cows go dry. Maximizing the cash you take out of a contracting business – and reinvesting it productively elsewhere – is a legitimate hedge against its eventual demise.   

Feeding: Rupert Murdoch

After coaxing from various advisers and subordinates for more than three years, Rupert Murdoch last month agreed to spin his newspapers out of News Corp. and into a separate company empowered to innovate the traditional publishing businesses into the future.  

If all goes according to the plan Murdoch articulated in a series of interviews after announcing the spinoff, the yet-to-be-named entity is a candidate to become the poster child for the “Feed It” strategy described above. But a lot of things could go wrong between now and then, especially given the inauspicious circumstances surrounding the decision:  

The contemplated spinoff is reminiscent of the tender scene in the Superman movie where Marlon Brando sends his beloved infant son to earth in a rocket so the lad can escape the impending destruction of the planet Krypton. The difference, in this case, is that Murdoch is packing some seriously toxic doses of kryptonite into the soon-to-depart rocket. In addition to the secular woes facing most of the newspapers in the United States, the United Kingdom and Australia, the about-to-be-jettisoned News Corp. properties face additional legal and financial liabilities stemming from the ongoing phone-hacking scandal in the UK.    

But the outlook isn’t entirely hopeless. As encumbered as the new spinoff might be, it will have the advantage of a dedicated management team that is single-mindedly focused on finding next-generation publishing models to assure the future health and well being of such diverse franchises as the staid Wall Street Journal and the randy London Sun. 

In various interviews after announcing the planned spinoff, Murdoch promised to launch the new company with no debt and ample cash to aggressively pursue digital publishing opportunities across a variety of platforms. “News is the most valuable commodity in the world,” Murdoch told CNBC. Though there may be near-term staff cuts at some units in Australia and the UK, Murdoch said:  “Net, around the world, we will be increasing  [staffing] numbers, operating costs and, hopefully, revenues.”  

Murdoch says it will take at least a year to sort out the internal details and obtain the regulatory approvals necessary to finalize the spinoff.  A lot could change in that time.  If the spinoff materializes in anywhere near the way Murdoch is spinning it, however, it could turn out to be a model for iterating the way forward for newspapers.  

Even if the plan falters, Murdoch seems to be  thinking about things the right way:  Get off the decaying planet as fast as you can, so you can test your superpowers on a new one.  

Tuesday, July 10, 2012

A digital publishing model that works

There’s a publisher whose sales doubled in the first quarter of this year, with display advertising revenues climbing 73%, subscription sales rising 90% and recruitment revenues gaining 122%. 

The publisher’s name is LinkedIn and the quarter was not unusual.  The sales of the digital networking and recruiting site grew by 114.8% in 2011 – at the same time interactive revenues at America’s newspapers collectively advanced by 6.8%.

Why is LinkedIn doing so much better than newspapers, which dominated the employment vertical not so many years ago? 

Because LinkedIn is executing crisply on a state-of-the-art digital publishing model that contrasts rather sharply with the approach newspapers have taken since they segued into interactive publishing nearly two decades ago. 

Newspapers can learn a lot from LinkedIn, which was built from the ground up to exploit a carefully targeted, revenue-rich vertical:  

The hundreds of millions of business people who want to make valuable connections to advance their careers – and the tens of thousands of recruiters who are seeking the best possible talent. 

LinkedIn encourages people to publish free, detailed profiles of themselves and, then, to begin building connections among as many friends and strangers as they can.  You can link directly to someone you already know or can request intermediaries to help you contact people you would like to meet.  Taking a cue from computer games, LinkedIn even keeps score of how many connections you have made.   

The depth and breadth of its audience has established LinkedIn as the unchallenged social network for commerce, making it the place to seek new business contacts or to recruit fresh talent for your company. Perhaps the single greatest appeal of LinkedIn is that your profile acts just like a resume, so you can openly make yourself available to new job opportunities without running afoul of the boss.  

LinkedIn’s traffic has quintupled since 2008, rising to 150 million registered worldwide users at the end of 2011, according to the company. 

The steady growth has created a deep, rich and eminently searchable database, thanks to the carefully structured way that LinkedIn gathers information from individuals as they create and update their profiles. 

With all the pieces in place, LinkedIn’s triple-play revenue model produced a triple-digit sales increase in 2011: 

:: The company generated 54% of its sales from recruiters seeking to identify, evaluate and contact potential job candidates. The recruiting service includes not only access to LinkedIn’s steadily growing global database but also a suite of tools that allows an employer to manage the entire hiring process from beginning to end.  

:: LinkedIn drew 25% of its revenue from the sale of display advertising to an audience that it says rivals the high-end demographics of the Wall Street Journal. 

:: The company got 20% of its revenues by selling premium services to individuals and companies who want more and deeper access to data than the free platform permits.  The most popular aspect of the premium service is the ability to send an email directly to a contact you don't know, rather than trying to connect through an intermediary in your extended network. 

To be sure, LinkedIn is in a different business than newspapers – but not that different.  As recently as 2000, publishers collectively sold $8.7 billion in recruitment advertising.  Last year, the vertical tumbled to $743.4 million, the lowest production since 1977. 

What went wrong? While newspapers stuck with the classic model of putting job ads in front of thousands of people in hopes of matching employers with job seekers, LinkedIn leverages the full power of digital publishing to identify ideal candidates for employers – even when they’re not looking for jobs. 

Publishers planning to venture beyond websites that simply repurpose their print products – and everyone should be – can learn a lot from the factors that fueled LinkedIn’s success:  

:: Be targeted.  Rather than try to be all things to all people, LinkedIn serves a large, valuable, carefully selected and carefully cultivated audience. 

:: Be focused.  Where print and digital newspaper products pride themselves on carrying something for everyone, LinkedIn puts cycles only into things that will enrich the data it sells. 

:: Be interactive.  While newspaper websites for the most part are staff-produced, one-way media designed to serve essentially passive readers, LinkedIn is powered efficiently by users who continuously build – and, therefore, build the value of – its ever-growing database. 

:: Be viral.  Because LinkedIn explicitly is about networking, it is by definition viral.  By fulfilling the needs of its community, LinkedIn grows organically and inexpensively, reducing both  the costs of creating content and marketing its brand.  

Final factoid: As of June, LinkedIn’s stock market capitalization of $9.7 billion was greater than the combined value of the shares of the A.H. Belo, Gannett, GateHouse Media, Journal Communications, McClatchy, Media General, the New York Times Co., E.W. Scripps and the Washington Post Co.  Does that tell you something? 

© Editor & Publisher