Chip Griffin: Pardon the Disruption

Newspaper Publisher Says Free Content the Problem, Not the Cure

While many in the newspaper industry seem headed toward making more and more content available for free online and pursuing an advertising strategy, the publisher of the Arkansas Democrat-Gazette, Walter E. Hussman Jr. wrote yesterday in the Wall Street Journal that free content may be the problem that ails the newspaper industry rather than the solution.  In his provocatively titled column, "How to Sink a Newspaper," Hussman explains very clearly why his paper hasn't gone the free route and instead keeps its online content behind a pay wall.

Some of the highlights of his argument:

• Young people don't have newspaper subscriptions because they're smart enough to know that there's no reason to pay for content that they can get online for free
• Newspaper web sites generate 78% of revenue from classified advertising (Borrell Associates)
• Newspapers generate between $500 and $900 per subscriber to their print editions and $5 to $10 per unique web site visitor
• The online edition of the Wall Street Journal has more paid subscribers (931,000) than the print editions of all but three newspapers (WSJ, NYT, USA Today)
• The Columbus Dispatch dropped its online pay subscription model on January 1, 2006, while the Arkansas Democrat-Gazette maintained its pay model.  For the six months ending September 30, 2006, the Columbus paper lost more daily subscribers than the Arkansas paper in that time period (-5.8% vs. -0.4%).  However, Sunday subscription losses were about the same at -1%.
• American newspapers spend $7 billion on newsgathering and AP adds another $600 million. 

I discuss this at some length in my latest podcast, but this issue merits further discussion and thought.  While I am a big believer in the concept that Content Does Not Want to be Free, I also don't think pay subscription walls are necessarily the answer for the newspaper industry. 

Part of the problem for newspapers is that it becomes increasingly difficult for them to differentiate themselves from each other.  For most newspapers, an increased focus on local news would be the best way to retain subscribers and eyeballs.  Ultimately, state/national/international/sports/business news all has so many outlets focusing on it that it becomes hard for smaller papers to have their own unique selling proposition to readers.

To me, the most powerful newspaper web sites are the ones that extend the value of the print edition by incorporating the content of the print product along with community tools and multimedia supplements that go beyond what can be distributed in newsprint.  In addition, the web site serves as a great resource for breaking news or supplemental information, original source documents, and stories that may not have been able to make the print edition due to space considerations but may still be worth distributing.

I hope to be able to write more on this topic in the near future as I have had a number of recent posts on the newspaper industry and it has really gotten my mental gears churning.

In the meantime, Jeremy Liew offers some good insight and some potentially profitable advice for Mr. Hussman. Others addressing this bit of contrarian advice include: Bob Glaza and David Reich.

For a complete frontal assault on Hussman's view, check out Jeff Jarvis, though I think it is hard to dismiss the concerns Hussman raises quite as easily as Jarvis does. 

Technorati tags: newspapers, future of Newspapers, print media, monetization, content, paying for content, online subscriptions, subscription model, advertising, classified advertising

Online Ad Revenue for Newspapers Slipping

From PaidContent:

as the earnings for the NYTCO, Gannett and Tribune have shown, interactive ad dollars are not growing as expected (Dow Jones and the smaller Journal Register Company represent the exceptions). And as WaPO prepares to release its Q1 earnings, the CEO of its online division tells the WSJ that online ad growth is slowing across the board.

Technorati tags: newspapers, advertising, online advertising

Magazine Circulation Down, Number of Ad Pages Up

Fewer people are reading more ads.  That's the conclusion one can apparently draw from dueling reports this week.  A New York Post piece today that more and more magazine readers appear to be headed for the web for content. 

While some titles are enjoying banner sales and strong comebacks, many of the old standbys are suffering double-digit declines in the second half of this year compared with a year earlier, such as the nation's biggest seller, Readers' Digest, which tumbled 12.2 percent to 10.1 million circulation.

Other legends also withered, including Woman's Day, off 20 percent to 4 million; Redbook, down 28.6 percent to 2.4 million; and even Anna Wintour's Vogue, off 6 percent to 1.3 million.

Steve Rubel pointed earlier this week to data that showed the number of pages of magazine advertising increased in 2006. 

According to the Magazine Publishers of America, magazine advertising pages climbed to nearly 250,000 pages last year. While they're down from their 2000 high of 286,000 pages, the trend line has been going up. (Advertising pages tally up the total number of pages in a magazine that have advertising on them. They are a general indicator of the health of the magazine publishing industry.)

While both items mention the migration to the web, neither addresses whether the combined readership of the affected publications, including both online and print, are up or down.  Presumably when you add in online readership, the numbers would be much better.  Of course, from a business perspective one would want to know whether total revenue was enhanced enough by the web audience to make up for the lost print circulation.

Steve does conclude with a good observation, however: "The takeaway here for me is that media is often additive. One format does not always replace another."  He's right, print media is here to stay.  The publishers and titles that evolve with the times will thrive; those who continue to do business the old way will suffer.

Technorati tags: Steve Rubel, New York Post, circulation, magazines, ad pages, advertising, magazine publishers, online media, web audience

The Future of the Newspaper Industry

Just days after we learn that the publisher of the New York Times expects not to be publishing a print edition -- perhaps in as short as 5 years -- BusinessWeek runs an interesting story about a private equity firm buying up hundreds of small local newspapers.  Fortress Investment Group began rolling up these guys into GateHouse Media and presently controls over 400 publications.

GateHouse went public in October, raising $248 million, before Fortress, which still holds a 60% stake, resumed gobbling up local papers.

Given the parlous state of the newspaper industry, sinking money into print may seem contrarian, crazy even. But as national chains are broken up and young readers and advertisers flee to the Web, Fortress has spotted an anomaly: There's good money to be made publishing newspapers in small towns and exurbs.

For those not familiar with private equity (or "PE") firms, these guys don't get involved if it isn't going to make a buck for them.  Usually in short order, although in this case the article notes "Fortress seems less likely than its private equity counterparts to cash out quickly."  (I should note the author provides no basis for this contention.) 

The article touts the consolidation of back office operations and economies of scale that can be achieved by having all the publications under one roof.  Web sites are being run on the same platform and being improved to take advantage of expanded audiences for content.  And they're even using the Creative Commons license for much of their content to encourage bloggers and other web sites to reuse it.

The key lesson to take from this is that when it comes to "hyperlocal," there is still a vibrant market for classified and display advertising.  And it is still an area that Google really doesn't excel in from an online perspective; they have begun working on the local angle but there are so many factors to consider that it isn't an easy cure. 

I found it especially intriguing that the rollup allows regional local advertising in such a way that it can potentially compete with major metro dailies.  The example cited is in Massachusetts where GateHouse owns 125 publications around Boston and will seek to leverage that to get major retailers to advertise with them just as they do today with the Boston Globe and Boston Herald.

Of course, this news also comes at a time when we're reading in the New York Times that the McClatchy purchase of Knight Ridder isn't going well.  McClatchy is performing poorly as a stock and has seen revenues off sharply at a number of its papers.  The same article notes that other newspaper companies -- including the New York Times Co. itself -- have been forced to take significant cost-cutting measures of their own.

So what does this mean for the future of the newspaper industry?  These stories would suggest that the hyperlocal market might continue to survive, but that the future of major metro dailies is in question. 

It would be imprudent to imagine that newsprint will go away any time soon, even at the level of major papers.  Though many who read this and other blogs may have made the leap to reading most, if not all, news online, we must remember that we are in a distinct minority. 

The threat to newspapers goes beyond the transition from print to online by readers.  Portions of their business are being threatened by non-media competitors.  The key example is classified advertising which increasingly seems to be headed down a path where little of it will be tied to content in the future.  The likes of eBay, Craig's List, Monster, Jobster, and their ilk will continue to pick away at the revenue once controlled by newspapers.

Fundamentally, newspapers must continue to innovate or face extinction.  It's not something that the publishers and owners alone can solve.  Editors, reporters, and readers must all be part of the mix to help find a path to success in the future.  Print media will be around for a good long time -- likely until e-paper solutions become ubiquitous -- but the shape of it will be determined by the changing marketplace and likely a few innovative thinkers.  Watching to see what they come up with and where those thinkers come from will be interesting.

Technorati tags: newspapers, New York Times, BusinessWeek, McClatchy, Knight Ridder, classified ads, GateHouse, Fortress, private equity

The Wall Between Print, Web Continues to Crumble

Reuters reports that The Washington Post will soon have its print editors working more collaboratively with its web editors in order to generate "more three-dimensional ways that you can present that news," in the words of Executive Editor Leonard Downie Jr.

It seems this really just formalizes and extends what the Post has already been doing.  In many respects, the paper has been a pioneer of sorts in the newspaper industry and has used its web site fairly well to extend the content of the publication.  More than just breaking news updates, the Post for a decade or so has used its web site to offer original documents and other materials too cumbersome or wordy to include in the print edition.  The paper has also embraced the concept of conversation, through online chats, links to blogs, and the like.

But by making this announcement prominently, the Post will put pressure on its brethren in the dead tree media to better integrate their editorial operations.  Publications are coming to the fundamental realization that the medium is merely a tool for message delivery.  Frankly, businesses across the board, as well as political campaigns, and non-profits, are realizing the same thing.  Whether the message is a "straight" news story, an editorial, a marketing pitch, or political plea, a multimedia approach makes the most sense.

This, of course, is good news for PR, marketing, and branding professionals.  The increasing availability and reach of web outlets enhances the ability to communicate key messages.  And as content becomes ever more easily accessible online, it improves the ability of organizations to quickly monitor and rapidly respond to articles, discussions, or other information -- to amplify or clarify as appropriate.

The Reuters article points out that this is obviously not merely an editorial decision in the interests of the Post's readers, but also a business necessity.  With newspaper revenues (and consequently stock prices) in decline, the industry must continue to evolve with the times (no pun intended). 

Innovative thinking will be the key to the future success of the newspaper industry.  By embracing technology and the new means of improving discussion and transparency, the readers and the companies themselves will benefit.