My (newspaper-centric) predictions for 2013 in a nutshell:
Let’s look at each of these in detail.
I’ve been suggesting since 2008 that to transition from a print-centric business model to a digital-centric one, newspapers need to go through an essential and strategic transition: cut print publication from six or seven days a week to two or three days. And when they do this, the printed product should be understood as a niche byproduct of a news organization that understands itself as being above all a digital-first enterprise.
In 2008, the financial and technological environment had not yet created much urgency around this question. But the industry has now experienced 25 consecutive quarters of advertising revenue declines. Print readership has declined to the point that only 23 percent of US adults “read a printed newspaper yesterday.” The industry has reacted with multiple rounds of cost-cutting, managing to preserve a semblance of its high historic profit margins in the process — and thus further postponing the day of reckoning. For example, at the McClatchy Company, which is a pure newspaper play and good stand-in for the industry as a whole, the cash flow margin (EBITDA) in 2011 was still 25.4 percent, and it is on track to match that in 2012.
A company making that kind of EBITDA doesn’t have a big incentive to reinvent itself, which is why we haven’t seen many frequency reductions at newspapers. But one company — Advance Publications — has been moving aggressively to cut frequency at its newspapers, usually from seven days to three. Its first experiment was in 2009 in Ann Arbor, Mich., where it replaced a seven-day paper with a rebranded twice-weekly, and its most notable conversion was the New Orleans Times-Picayune in October this year. Advance has also thrown the frequency switch in Birmingham, Huntsville, and Mobile, Ala., and at its eight Booth newspapers in Michigan including Grand Rapids and Flint. It has announced plans to cut frequency in Harrisburg, Pa. and Syracuse, N.Y., and is in a decision process for similar cuts in Cleveland and possibly Portland, Ore. All together, this represents more than half the dailies owned by Advance.
Elsewhere, in Detroit the jointly-operated Free Press and Detroit News moved to 3-day home delivery in 2009 while still printing newsstand editions on the other days; a handful of newspapers have dropped one or two days from their weekly schedule, and in Canada, Postmedia’s Calgary Herald, Edmonton Journal and Ottawa Citizen dropped Sunday editions this year.
But despite the continuation of healthy profit margins, I’m convinced that moves of this type are being contemplated in every newspaper company’s executive suite, and that the prime mover in these discussion is the seismic shift in readership habits brought about by tablets.
The newspaper moguls are digesting a slew of recent findings from the Pew Research Center’s Project for Excellence in Journalism: Currently about a quarter of US adults own a tablet, and nearly half own a smartphone. More than half own at least one or the other. About two-thirds of tablet and smartphone owners get news on their gadgets, with 37 percent of tablet owners getting news on it every day. And there’s much less age-related skew in this than you might imagine: 32 percent of 65+ tablet owners go to it daily for news. Moreover, Pew found that many tablet owners (31 percent) report that they spend more time with news since acquiring their device, and they report spending an average of 51 minutes — daily — consuming news their tablet (54 minutes for those who own both a tablet and a smartphone). That’s an astounding finding. Imagine what this does to the ability to sell a printed newspaper when tablet penetration triples and begins to approach 80 percent — which it is certain to do as it follows historic adoption curves for everything from AM radios to cellphones. The advertising dollars are following the eyeballs to mobile platforms.
Publishers are doing their best to hide the fact, but the zooming tablet trends are clobbering what’s left of printed newspaper subscription and single-copy sales levels, which had already been dropping at an accelerating rate since peaking in the mid-1980s. This downtrend is no longer regularly reported every six months as new “ABC FasFax” reports come out, because by lumping together the reporting for print and digital editions in the last few years, newspaper owners have engineered Audit Bureau of Circulations reporting so as to obscure the print declines. It takes a little digging now to find the print decline numbers. Alan Mutter, the Newsosaur, ran the numbers last spring when ABC reported a total print/digital combined gain of 0.7 percent, and found that in contrast to the total circulation, at the top 25 dailies, print circulation had plummeted 7.3 percent year-over-year during the six months ending March 31. I’ve rerun those numbers for the fall reporting period, and found a similar 7.9 percent decline at the top 25 dailies (Mon.-Fri.) for the six months ending Sept. 31.
Folks, I know I’m laying on a lot of statistics here, but the point is that numbers like that are not the hallmark of a sustainable business model. That’s why the Newhouse family is systematically converting their Advance Publications newspapers into two- and three-day print operations. And that’s why the rest of the industry is trying to figure out when, not if, they should follow suit. As noted, count on a lot of conversions during 2013 and an avalanche during 2014 and 2015.
It has been interesting to follow the arc of the conversation around paywalls since 2009, when Walter Isaacson urged their adoption in a Time Magazine cover story and Steve Brill launched an outfit to make them widely possible. Both of them endured considerable derision from the journoblogosphere, and indeed, adoption was cautious. Currently, some 400 papers have a paywall of some kind (which means about 1,200 are still free), with more set to impose them in 2013. That it has taken four years to get that far is an indication of the resistance to change that still permeates newspaper organizations, but you can also see how how attitudes have evolved when various analysts jump on The Washington Post for not having a paywall yet.
But. Can we really imagine a future, a few years out, where all of America’s newspapers have paywalls on websites and subscription-based apps on tablets and smartphones? Can those newspapers retain any semblance of leadership in their communities? Won’t they simply be yielding the field to Patch.com, the Huffington Post, local independent news sites and topical news sites of all stripes? Is there really nothing better than the rather simplistic metered paywall, in which you get 5, 10, or 15 stories every month, and then a pop-up that keeps you away until the first of the next month?
Well, yes, there is. The alternative is a membership model, which is far more attuned to addressing the needs of readers than any paywall. It’s nothing new — public radio and television have been doing it for decades. The Texas Tribune has very consciously followed that model with a range of membership tiers that offer monthly newsletters, online recognition, invites to receptions, “conversation series” events, and even reserved parking for events. If this works for the Austin nonprofit (and for others like MinnPost) why shouldn’t it work for for-profit local news sites?
And consider this: In the membership model, the news organization can know far more about individual subscribers than they do in a simple paywall model — ranging from detailed socioeconomic metrics to topical interests and buying habits. This in turn allows them to deliver more targeted advertising and offers, both in print and online, at higher CPMs.
Among newspapers, one pioneer on this front is the New London (Conn.) Day, which launched a membership model in Sept. 2011 and is a partner in the development of a “data-driven audience management system” with Leap Media Partners LLC, and is now lining up additional newspapers to follow the same model.
At The Day, there’s a tiered set of membership options, all of which include enrollment in the paper’s The Day Passport “membership rewards” program. Membership has its privileges, including discounts on events and services, chances to win gift cards and tickets, and (occasionally) invitations to special events.
But these membership arrangements, in my view, are just scratching the surface. Look at it this way: As a member of a community, you have certain needs. Those needs include news (knowing what’s going on), connections (to shops, restaurants, and service providers), as well as entrée (mixing and mingling in the right places). The Texas Tribune, The Day, MinnPost, and others are offering packages including those ingredients. But there’s even more to being a member of a community than that. You need recommendations and answers to questions; you want curation in the form of best bets; you want to connect socially with neighbors; you want to spend wisely and locally; you need things delivered and stored; you have personal needs ranging from exercise to art lessons. Those are your “jobs to be done,” and smart publishers can help you with them.
As Michael Skoler suggested a couple of years ago in Nieman Reports, when paywall thinking gives way to membership thinking, the business model becomes community rather than audience. “To harness this model,” Skoler wrote, “news organizations need to think of themselves first as gathering, supporting, and empowering people to be active in a community with shared values, and not primarily as creators of news that people will consume.”
Community as a business model is not a new idea. A few decades ago, some publishers (and some readers) liked to talk about their papers as “community glue.” And indeed, just about all the threads of a community connected via the printed newspaper — politics, religion, commerce, education, health, entertainment, sports, births, and deaths. Now that model is fragmented, the newspaper’s reach and connectivity is diminished. The glue has dried up. The membership approach offers a way to begin to bring the threads back together in a viable enterprise, or perhaps a network of enterprises.
Outside of print-only local newspaper readers who don’t watch TV news, does anybody still get most of their news in one place? Nearly everyone who gets news online is used to skipping from source to source, especially when hunting for more details on a breaking story. News comes to us — we don’t go to the news anymore — and it comes to us from multiple directions: social networks, blogs, aggregators, news organizations of all kinds.
So as the ecosystem around news evolves toward a membership model that solves “jobs to be done” problems for consumers, doesn’t it make sense for one of those jobs to be access to lots of news, from multiple sources, with a single sign-on — sort of an E-ZPass for news? Imagine signing into your trusted local or regional news site or app, and then having access, without any further tollbooths, to a network of news sources. This network could be one of your own choosing, or one assembled by that local news organization. In it, you’d find local and regional news sources, national and international news sources, and topical news of various kinds — sports, travel, food and wine, gardening, design, finance — whatever you select, or whatever the network infers from your behavior is interesting to you.
Disclosure: I’m a partner in CircLabs, a back-burner startup (with an out-of-date website) that aspires to supply services to such a network and is currently developing a demonstration project under a contract with the University of Missouri’s Reynolds Journalism Lab.
This can be accomplished through limited, defined, cooperative networks established by individual agreements, or by a grand, global collaborative agreement among news creators. Somewhere in the background, there’s a settlement system that allocates subscription and advertising dollars among the content suppliers (as described in my Nieman Lab suggestion for an “ASCAP for news,” (a business model to which the AP spinoff NewsRight could still make a smart pivot).
Some industry execs (like MediaNews chair Dean Singleton) have long held that the future of the newspaper is consolidation. But even with major newspaper properties selling for negligible sums (essentially the value of the real estate they own, or less), there hasn’t been much movement in that direction, nor is it clear that at the end of the day, consolidation offers any solution to the long nightmare of declining readership and advertising. Ultimately, consolidation is just a mop-up strategy — one that simply squeezes out the final remaining profits before the lights are turned out.
Given the depths to which newspapers have declined, and their overall lack of entrepreneurial spirit and investable resources, perhaps a mop-up is the only realistic thing left. But at least in some quarters, there’s hope that a collaborative strategy of networked access to content, along with the membership approach, could pay off.