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The newsonomics of outrageous confidence

Set aside all the talk of doom and gloom for a minute: Here are 8 real reasons to feel optimistic about the future of newspapers.
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Who expected a virtual coming-out party for the newspaper industry in late 2013?

In the past several weeks, we’ve seen new newspaper owners proudly raising the flags of their new enterprises, speaking grandly of their futures and spouting that most legacy of commodities: optimism for the future.

Jeff Bezos toured his new Post before closing the sale and wowed a group of very professional skeptics. Orange County Register president Eric Spitz, part of Aaron Kushner’s ownership group, gave a long interview extolling growth and investment. Then John Henry penned an open letter to the good citizens of Boston and beyond, laying out in fine detail why he bought The Boston Globe. (It’s been a good week for Henry.)

Each of these new owners said a number of intriguing things — sentiments and strategies that we can pick over, puncture, and praise. They all surface elements essential to success. Money? Check. A longer-term view? Check. A respect for the long-time community roles of newspapers? Check. A call for new ideas? Check.

But there’s one other commodity that stands out amid them all — the commodity of confidence. In light of financial downturn of the industry, we could even call it outrageous confidence.

Over time, we’ve seen a shrinking amount of public talk by newspaper company CEOs. What were once monthly earnings calls for the publicly traded firms turned to quarterly, and some moved to the mere issuing of statements. Even as he explained his acquisition of Knight Ridder in 2006, then-McClatchy CEO Gary Pruitt talked about community and journalism excellence as much as he did the bottom line.

That kind of public confidence quickly dissipated, as first digital disruption and then overall economic calamity reduced publishers’ public words — the public markets didn’t want to hear them. Then, in quick order, publishers’ confidence itself was reduced.

I’ve been amazed over the last eight years I’ve covered the industry as an analyst (new, improved Newsonomics site now up) how publishers have refused to associate any of their revenue problems with the diminished budgets for their own products. Sure, maybe, they had to cut as deeply as they did, but few ever acknowledged that serving their communities less and less — even if forced to by forces beyond their control — was part of their business problems going forward.

Confidence in the very basis of their businesses — what news media uniquely do for their communities, local or national — has been shaken so much by revenue loss. Publishers — and their workforces who have sensed the fear, uncertainty, and doubt disabling the spirit of the industry — mistook revenue loss (largely in advertising and largely caused by hurricane forces beyond their control) for brand and community value loss.

Now, that mistake — especially as profound changes have reshaped U.S. ownership over the last year — is finally being redressed.

What does Jeff Bezos see, I’m often asked? (You can substitute in any of the other billionaires/multi-millionaires buying into the business.) I can tick off the various motivations: A sense they are buying at the bottom. Civic sensibilities. Well-developed egos honed by other business success.

At the base, though, across the board — from Orange County to San Diego to Tampa, from Buffett to Bezos to Henry — is a simple thing: confidence. They approach these companies with eyes forward, not with nostalgia for the days of literally printing money.

Is the confidence well placed? We’ll have to check back. One thing I know, though, is that the lack of confidence, the shying away from a public mission, has been a slow death sentence for newspaper companies around the world. Without confidence, there isn’t much of a future. Doubt may still swirl in the back of minds — but confidence itself is a gate to the future.

No one wants to work for the timid. Readers like a news company that asserts its role. Advertisers move toward strength, not weakness. I’ve shared that thinking recently with audiences as different as German and Latin American publishers, and it seems to strike a chord with our common experience.

With confidence in mind, let me put aside for the moment the numbers of the last decade and the continuing loss in print ad revenues and name eight good reasons for confidence. The persistent problems are all real — but let’s make the case for new owners’ optimism. Let’s pretend, for a moment, we’re the billionaires doing the buying.

The huge audience is growing again.

Forget, for just a moment, the revenue losses and concentrate on audience. Digital distribution has defeated the geographical bounds of the old world and delivered audiences of incredible scale to news publishers. For national companies, that’s meant a monthly exposure more than 50 times the old print one; for local ones, it’s a multiplier in high single or low double digits.

We had seen some leveling off of audience growth as broadband/Internet penetration itself leveled. Now, though, smartphones and tablets have doubled the number of Internet minutes used every month. Most of that traffic goes elsewhere, but news publishers are telling me they are seeing a mobile-inspired leap of another 10 to 20 percent in usage.

What’s more, newer Pew research shows that the more devices we use, the more minutes we spend getting news daily. Tablets will outship PCs for the first time this quarter and reach an installed base of 900 million worldwide by 2017.

Paywalls have proven that readers will pay for digital access.

This revelation — counter to what most people believed way back in the ancient year of 2010 — is the biggest positive of this half-decade for the industry. Let’s not underestimate it.

While not a panacea, it is the most important building block for the future of the news industry — and paying professional journalists — we’ve seen. Free digital access is now restricted in some form at more than 500 daily newspapers worldwide. The new circulation revenue is the headline. Having readers assume a direct responsibility for paying for the news they want is the bigger lesson here.

The next generation of paywalls is set to begin in 2014.

If 2011 to 2013 has been Paywalls 1.0, then 2.0 is around the corner. The New York Times’ new paid digital products will launch in the spring, and other major publishers are telling me they are preparing their own paid topical products. The data is being mined, customer patterns and preferences are being evaluated, and pricing is started to be tested. If the basic subscription works, new ways to sell niche products, single-copy digital products, and price discriminate among first generation digital/all-access subscribers all promise more reader revenue in 2014 to 2016. The big question: How much more?

Publisher/customer relationships have never offered this level of closeness.

In the old days, publishers literally threw their papers at their customers and knew next to nothing about them. Now digital subscriptions requiring registration offer a trove of data — and ways to newly understand individuals and groups of readers. Similarly, publishers pre-digital worked only larger ad accounts and sold space. Now the digital services movement forces a consultative relationship – and offers the chance for a new closeness with merchants. All of this requires execution several degrees higher than the old world demanded, but its potential payoff is much higher as well.

Digital economics will be a godsend.

When, you ask? My crystal ball says 2018 or 2019. When I switched over my Wall Street Journal subscription from print to digital, I calculated my savings: 17 percent. The Journal, forgoing costly printing and distribution, is charging me 83 percent of the print price for pixels. Of course, it doesn’t gain as much from that great margin until most of its readership switches — and enough higher-priced digital ads accompany the switch. When it does, though, being a publisher will once again become a higher profit enterprise.

My favorite example: Check out the Financial Times’ subscription page. You’ve got two choices: a nice, bright yellow banner offering premium, taking up as much as two-thirds the width of the page or a one-third neutral gray bannered offer, offering well, the ordinary sub. Fully a third of signups take premium — and pay 113 percent of the print price.

We’re at the beginning of a new age of storytelling.

From the reality and near-myth of The New York Times’ Snow Fall to content marketing and native ads, storytelling is finally taking advantage of the whole digital toolbox. There’s editorial storytelling and commercial storytelling, both built on the same tools of video and visuals, interactivity and immersiveness, voice and view. The best storytellers — and isn’t that a core of what journalism has always been about? — will be among the winners.

Fresh minds are rethinking news.

Our fear here should be that the newbie owners do too little rather than too much. Sure, there will be excesses and wrong turns under new owners; we’ve already seen those. But fundamental, outside-the-newspaper-box thinking is required at this point in history. Build innovatively on reader revenue and work those merchant relationships differently, but also rethink new ways to make money and support journalism. That’s one reason Bezos’ sudden appearance on the scene has been electrifying — Amazon is a business-model buster many times over.

Our democracies have never needed high-quality news more.

Can we track the wider ennui of democracies around the world with the decline of robust journalism? It would be tough, but it’s clearly part of the reason communities and societies are doing some an abysmal job of coming to grips with big issues — education, health, immigration, climate change, and lots more — before them. Dailies always did an uneven job of surfacing issues and challenging readers and leaders to tackle them. Now that capacity has further diminished.

Bezos, Buffett, Henry, and Kushner all highlight community connectedness and the value of agenda-setting as they go public with their plans. Now let’s see what they do to rebuild that capacity.

Photo from Winooski, Vermont, by Don Shall used under a Creative Commons license.

                                   
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Joseph Lichterman    Aug. 26, 2014
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  • Barry Johnson

    It’s hard for me to get the image of Sam Zell, the last zillionaire savior of newspapers, out of my head…

  • lgants

    It is certainly important to find the “right” price for digital subscription, but the preoccupation with pricing strategies misses the point. There needs to be more focus on innovation.

  • Rebecca Theim

    Another name should be on your list of emerging, outrageously confident newspaper owners: New Orleans businessman John Georges. Georges in April acquired the-then primarily Baton Rouge Advocate, and has invested significantly in its fledgling New Orleans edition. All of this was in response to the cutbacks at the dominant Times-Picayune, which in October 2012 became the most prominent guinea pig in Advance Publication’s “digital first” experiment.

  • jrhmobile

    Agreed, although I’d add to that the idea of a genuine value proposition that appeals to customers.

    It’s arguable that the unique position of the New York Times’ national and international reporting provides enough of a unique value proposition that people will offer real money to get past the paywall and read what it has to say. The Dallas Morning News has brought down its paywall because it discovered that putting “the news” behind one, when its nearby print competitors and all its rival TV stations in the market reported “the news” for free, did not offer that unique value proposition.

    So that innovation in the market has to extend beyond technology and delivery systems. That innovation first needs to be applied to what content media properties provide, as clearly discussed in this post. In fact, news media looking for new revenue streams first need to determine what they can do better and differently than anyone else, deliver on it, and develop ways they can effectively sell that to their customer base — before they expend Big Bux for expensive technology they might use to deliver it to them.

    McLuhan didn’t quite have it right. In today’s terms, the medium delivers the message. And if that message doesn’t provide a unique value proposition to your audience, elaborate digital delivery systems aren’t going to change that.

    You’re just burning up capital, in both financial and human terms. And blaming new media isn’t going to fix it either.

  • jrhmobile

    You wish.

    The T-P provided the opportunity. It remains to be seen if hopes in going up against your alma mater come to pass.

  • http://www.siliconvalleywatcher.com/ Tom Foremski

    Optimism does nothing to prove that the business of newspapers can be made into a sustainable business. The greatest single failure of the Internet is that we haven’t yet found a way to create sustainable news businesses. And the problem cannot be solved with just one publication.

    The facts [Pew] are that technology enabled media companies such as Google and Facebook and Twitter offer far cheaper advertising campaigns covering far larger regions than any newspaper group, than even all the newspapers put together. Optimism is foolish under such circumstances. Surely it’s better to recognize the reality of a situation and take action than to point to a few optimists who aren’t considering the business fundamentals?

    Journalists have a long tradition of choosing to be ignorant of how a news business works and what it takes to create a sustainable business platform. Why should the fact that they are optimistic now prove the future is bright?

  • Anon

    yes

  • Alan Timms

    Whilst subscriptions will raise revenue, I’m pretty sure that advertising dollars contribute a much larger slice of a news organisations income. With this in mind, I believe newspapers should be investing a lot more thought and effort into the value proposition they are offering to advertisers – rather than simply seeking every avenue they can make (or save) a buck.

    Digital publishing has many advantages over print; however, it can never overcome the two biggest assets that a hard copy has; reach (in a confined circulation area) and space (a banner ad hardly offers an advertiser the same value as a double page spread).

    I’m surprised more papers haven’t removed their cover price and become free papers, as this would allow them to boost circulation and be a more attractive proposition to advertisers.

  • Peter Weinberger

    Ken, excellent perspectives. You have not changed a bit.