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The newsonomics of Digital First Media’s Thunderdome implosion (and coming sale)

Project Thunderdome is dead and DFM will soon put its newspapers on the auction block. Are the new rounds of investors who bought into newspapers over the past half-decade getting antsy?
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Today, we’ll hear official word of the demise of Project Thunderdome, one of the news industry’s highest-profile experiments in centralized, digital-first, mobile-friendly, new-news-partner content creation. Digital First Media CEO John Paton first announced the creation of what became a 50-plus person, New York City-based operation three years ago.

In the closing, and in other cuts at Digital First Media, we see the impact of unending high-single-digit loss in print advertising. The ongoing devastation in print is overwhelming even DFM’s relatively faster pace of digital innovation.

The move also signals the fatigue of majority DFM owner Alden Global Capital — and that it is readying its newspaper properties for sale. They’re not yet on the market, but expect regional auctions of DFM properties (with clusters around the Los Angeles area, the Bay Area, New England, Colorado, Texas, New Mexico and Pennsylvania) — unless Alden can find a single buyer, which is unlikely.

Closing Thunderdome is just part of a major north-of-$100-million cost cutting initiative that is putting the best glow on some tough financials. The reason for the sale: Despite CEO John Paton’s aggressive remaking of the company, Alden’s investments in cheap newspaper company shares (“The Demise of Lean Dean Singleton’s Departure and the Rise of Private Equity”) haven’t worked out the way private equity bets are supposed to.

The current incarnation of Digital First Media was formed on Dec. 31, with the formal merger of large newspaper companies MediaNews and Journal Register; DFM had been managing both since 2011. And while its name might not be as well known as a Tribune or a New York Times Co., Digital First is a big player. Ask how big, and it won’t emphasize the number of dailies that it owns (75), but rather its digital position: “800 multi-platform products reach 67 million Americans each month across 18 states.”

Some of the biggest impacts from this change will be felt in southern California — already facing an uncertain ownership situation at the Los Angeles Times, questions about sustainability at the Orange County Register (soon to be joined by a Los Angeles Register), potential changes further down I-5 (more on that below), and now DFM’s papers facing question marks.

The idea of Thunderdome was to use DFM’s scale to provide its many local properties with a deeper, richer product than they could produce on their own. Thunderdome produced national-ready topical sections on core topics that could also be localized, which some of the bigger DFM properties (San Jose Mercury News, The Denver Post) have done more of than smaller-staffed dailies. Thunderdome only had time to roll out about eight of its topical sections, less than halfway through its original plan. Those — national/world news, health, tech, travel, food, pets, baseball — are in place at DFM’s 75 sites.

That big idea — using a centralized national news desk to create digital content for all properties within a chain — is shared by Gannett, Tribune, and others. Let local do local, the thought goes, and cut headcount costs by centralizing whatever can be centralized. Thunderdome’s intent, though, was to do that with a twist. The team, led by Robyn Tomlin, looked beyond traditional wire sources. Thunderdome’s optimistic mandate (the Thunderdome blog here):

Thunderdome is Digital First Media’s solution to providing content, support and coordination to its network of more than 100 local newsrooms, each with their own distinct communities and stories. Think of it as the wire service local newsrooms wish they had.

Based on the strength of this network, Thunderdome is able to leverage the most-engaging news reports of the day — produced by DFM journalists and through a growing portfolio of media partners — for publication and distribution on all platforms.”

Those media partners have included numerous authoritative, but non-traditional news sources:

Business: The Street, Mashable

Health: Kaiser Health News, U.S. News (rankings and ratings of local doctors, hospitals), WebMD

World: GlobalPost, Worldcrunch

Nation and politics: Stateline (Pew), Center for Public Integrity, Center for Investigative Reporting, ProPublica

Technology: Mashable, Find the Best

Home and garden: BobVila.com

Education: U.S. News (school rankings)

Autos: Find the Best, U.S. News (auto reviews)

Entertainment: HitFix

In its short life, Thunderdome showed promise, with multimedia and data-rich specials, including Firearms in the Family, Decoding the Kennedy Assassination and an interactive March Madness Bracket Advisor. A four-minute best-of video now will serve as an historic marker of Thunderdome, an experiment short-circuited, another case of digital journalism interruptus.

Jim Brady (“What’s Project Thunderdome, you ask? Inside Jim Brady’s new job at Journal Register Company”) has been a prime architect of Project Thunderdome, most recently as editor-in-chief of DFM.

Brady’s own career trajectory tells us a lot about the travails of digital innovation in the newspaper industry. A sports guy who, as an early editor of washingtonpost.com, helped make the Post a clear leader in web news, Brady decamped after a major management shuffle at the Post. He moved over to TBD, the Allbritton D.C. local news startup that aimed to create a new model of TV-partnered, blog-driven, visually strong local news. Its rise seemed meteoric, and so did its fall, as advertising didn’t meet expectations and disagreements between Brady and CEO Robert Allbritton torpedoed the project (“The newsonomics of TBD”). Now, Brady’s bid to once again reshape digital news is on hold.

Thunderdome wasn’t universally received well within the company. Talk to the locals and you heard grumbles. Traffic to the new Thunderdome sections didn’t impress them. They didn’t like national imposition on local news judgment. That grumbling, however right or wrong, isn’t surprising: For 20 years, national news chains have bobbed and weaved through different ideas about national news centralization — first in print and then in digital. Only more recently, as the financial vise has tightened further, has accepting such centralization been seen as an inevitabilty. (Consider Gannett’s recent efforts to print sections of USA Today in some of its local dailies.) If it’s inevitable, the big question is execution: How good a product are you giving the readers, and is it better than what individual papers can do?

With Thunderdome folding, the creation and production of national content will presumably fall back to the papers — though don’t expect new resources to be added back, even though some were cut in the move to Thunderdome.

What will happen to all the new sections and the content partnerships that have powered them? It’s unclear. Thunderdome’s staff, in New York and elsewhere, numbered in the low 50s, and almost all their positions will be eliminated in coming weeks and months. Thunderdome’s attracted some impressive talent over the years (including, for a time, former Nieman Lab staffer Adrienne LaFrance), including data people as well as video, visuals, and page creation staffers. (Both Jim Brady and Robyn Tomlin announced their own departures when the announcement became official.)

Whatever the merits of the new Thunderdome sections — my own sense is that they show a good diversity of content and could have evolved well in their presentation — it’s clear that Thunderdome’s elimination is driven by cost-cutting.

One DFM project, Project Catalyst, has swallowed another, Thunderdome. Catalyst is aimed at taking more than $100 million out of the company’s costs, a number a little greater than Tribune’s much publicized $100 million cut ordered by CEO Peter Liguori last fall. Recent DFM cuts in Philadelphia and the Bay Area, eliminating dozens of jobs across all divisions, are part of that process. Catalyst is led by Steve Rossi, a former Knight Ridder COO, who recently moved into that same position for DFM. Thunderdome’s demise, in least in the short term, helps DFM achieve its Catalyst goals, saving about $5 million a year.

The end of Thunderdome has got to be a bitter pill to swallow for CEO John Paton, who declined to comment to me on its termination. Thunderdome has been a keystone of his argument for faster change in the news industry.

The end of Thunderdome is likely to bring a smile or smirk to some of Paton’s detractors in the industry. Some think he’s too much of a showman, and some question his numbers. Paton loves to tweak his fellow newspaper execs, and we can expect a fair amount of publisher schadenfreude at the latest development. As recently as January, at the Online Publishers Association meeting in Miami, he told his audience this about other newspaper CEOs:

Good morning. It’s a very strange thing for me to be preaching to the converted as I am doing here today. I am used to rooms full of print journalists and newspaper executives searching for any flaw in my pro-digital speech. Many of them usually hoping that the Internet isn’t going to get to their town and they won’t have to change what they do. But perhaps — as the digital leaders of your own companies — you will recognize some of the same issues we face. You will certainly recognize them if you are from an old-line legacy business — newspapers, radio, or television — and your corporate leadership believes they have a digital strategy because they stuck the suffix “.com” behind the brand name. Or created a digital division, put you in charge, and then gave you the equivalent of peanuts to run it.

Undoubtedly, though, Paton’s been right on the need for faster transformation. His early presentations showing newspapers’ disproportionate press-and-trucks cost structure were clear-eyed. His investments in marketing service leader AdTaxi, in video, in blogging, and now in mobile stand out. The many efforts of the company, detailed in the Lab’s Encyclo entry, to break out of the newspaper mold are impressive. He says his company’s operating profit is up 40.8 percent from 2009 to 2012.

Paton parlayed a small hand on a way-down-on-the-food-chain (Journal Register Co.) into a major U.S. digital news company. Readers have seen the major changes wrought at the JRC papers, which Paton had run the longest (since the beginning of 2010), though fewer at the bigger metro-oriented MediaNews papers he later took over. Changing the MediaNews metros has been a tougher nut to crack.

Where DFM goes from here is increasingly unclear. How much can now be invested in digital growth, and how much more cost cutting will its owners require? How soon will papers be put on the market, and how quickly will new owners appear?

One unsettled geography looking for answers to those questions is southern California. In the region stretching from Ventura County, north of L.A., down south to San Diego, live 22 million people. Every one of the metro dailies in the region has seen new ownership in the last seven years; at least four bankruptcies have ruptured a once-vital newspapering region (“The newsonomics of the death and life of California news”). Today, the Los Angeles Times is set to become part of the newly spun-off Tribune Publishing, just as the Aaron Kushner’s Orange County Register moves 50 staffers into the county, publishing a seven-day L.A. Register April 16, after buying and beginning to regionalize the Riverside Press-Enterprise last fall. And don’t forget the Koch Brothers-buying-the-L.A. Times intrigue of last summer.

And if Alden puts DFM’s Los Angeles News Group on the market soon, it may not be the only property for sale.

In San Diego, word on the business street, now rebounding among a number of daily publishers around the country, is that the ownership of the San Diego Union-Tribune, now renamed U-T San Diego, wants out. That’s right: Rumor has it that flamboyant owner Papa Doug Manchester (good David Carr rundown on the “pro-business” Manchester era) wants to sell. His sometimes-CEO John Lynch has been assigned the task of finding a buyer, that rumor says. Lynch has previously talked publicly about wanting to buy more papers.

2014 is sure to bring more churn to the newspaper industry — and it’s looking like southern California could end up being the epicenter of all that change.

Photo illustration of a different thunderdome — at Burning Man 2010 — by Mayhem Chaos used under a Creative Commons license.

                                   
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Joseph Lichterman    July 22, 2014
The site known for social media and tech coverage has hired nearly 30 more editorial staffers since October and, like BuzzFeed before it, is expanding into more general interest news.
  • MKGS

    Has anyone looked at how DFM and Media News Group morphed financially over the past few years? What kind of payoffs do Alden, DFM and MNG executives get? Was this ever about newspapering? Just wondering.

  • primafacie

    Few people at DFM papers know what Thunderdome is and what it does. Much of what it produces is amatuerish journalistcally and the few efforts it produces are imposed on papers who can do the same thing from wire services they already buy. Centralized production may sound good in meetings but actual implementation makes little sense at papers with different focuses, audiences and formats.

  • Mark Swanson

    First Patch, now DF’s Thunderdome. Get it?

  • Guest

    “The ongoing devastation in print is overwhelming even DFM’s relatively faster pace of digital innovation.”

    I am a reader of the company’s Connecticut newspapers and websites. DFM has turned the print products to garbage. Why do none of these “journalism industry experts” seem to understand that a poor product will not make money?

    Certainly, print revenue is declining as readership declines. I won’t argue that. But the rate at which it declines is based also on the quality of the product; to ignore that is, well, ignorance of simple business logic.

    If you continually decrease not only the actual quality of the product (by firing copy editors, professional photographers and seasoned journalists in exchange for subpar newcomers who’ll work for pennies, reader-submitted photos and press releases), but also reducing the actual material by 50 percent, people who otherwise would have continued to buy in will no longer.

    I still subscribe to the paper, because I want to support the people I know who still work there. But that’s the only reason; there’s really nothing else to justify the expenditure except maybe the crossword puzzle, and they’ve screwed that up more than once as well.

  • sjcobrien

    I have a lot of admiration for the folks running DFM. And as a reporter at the San Jose Mercury News, I was incredibly hopeful in Sept. 2011 when it was announced that DFM folks were taking the helm of our corporate parent, MediaNews Group.

    But at the same time, ever since then, it’s been less than clear to me what Thunderdome was and what DFM was trying to do in general. Despite Paton’s seemingly endless appearances at industry conferences talking about the need to accelerate change and “stack digital dimes,” the change that DFM promised didn’t seem to come all that fast.

    Part of the problem right from the start was the structure of the organization. It often seemed unclear to those of us in the trenches just who was in charge, and what authority they had over which areas. People talk about MediaNews as a newspaper chain, but really it’s a series of affiliated regional news organizations (ie, the Bay Area News Group) which are part of a MediaNews umbrella.

    Some decisions reside with the regional group; some with the corporate parent. With DFM, there was now a third group in the mix. These groups were related, but not always in sync. Give the common hedge fund ownership, why didn’t the groups just merge outright from the very start? We were never really given a clear answer why they chose to continue such an unwieldy management structure.

    But to give just one example, I was part of a group at the Merc trying to relaunch our tech blog in 2012. The blog, started locally, had been moved to a corporate server in Denver. It took months for someone to give us a password to access the blog. Then more weeks to have it moved back to a local server so we could update the template and re-launch it. What I thought would take a few days, took 8 months.

    DFM did immediately require local managers to embrace digital first to keep their jobs. And that did have a real impact locally. People I had reported to for years who only wanted to talk about print were suddenly talking about digital finally.

    But DFM also didn’t provide much guidance about how they should meet these new pageview goals. In fact, DFM left it up to local managers to devise the strategy that would accomplish this. The result was that a lot of well meaning local managers who were belatedly focusing on the Web were left to fend for themselves, and were re-learning lessons about how the Web worked that many others had learned years ago. At the Merc, there were several newsroom committees created that met over several months to devise a new approach. With the industry in crisis, this seemed like this was time that couldn’t be wasted.

    I had hoped DFM would come in with a roadmap for papers like the Merc, but most of their attention seemed focused on building Thunderdome which involved renting offices in NYC (??!!) and hiring a lot of folks (All very talented, but…). Part of me was glad to see someone investing, but again, the payoff for the local news org was unclear.

    DFM also set aggressive pageview targets. But this worried me from the start. Online ad rates were already starting to decline thanks to the shift to mobile. Even if the papers met the targets, it seemed like at best they would be running in place. As it turns out, they were still falling behind, just more slowly. I figured things were bad when the company announced it was going to start trying some paywalls, which Paton had always mocked as a strategy.

    I see people today saying it looks like DFM had an interesting strategy but just wasn’t given enough time. Perhaps. But I wish things have moved faster right from the start, that the messy organizational issues (eventually they did merge the companies) had been fixed right away.

    And in retrospect, I wish the focus had been on more than just pumping up online ad revenue, which seems like a failed business model for local news in general.

    This failure hits harder than most. I’m sure some interesting lessons will emerge, but it feels like most local news organizations are running out of time to learn them.

  • John Paris

    I don’t think it was ever about newspapering. Go back to
    http://www.niemanlab.org/2011/09/a-wave-of-consolidation-some-context-on-medianews-journal-register-and-alden-global-capital/
    for background; “hedge funds don’t want to be long-term operators.” What does Mr. Paton walk away with?

  • experienced user

    Thunderdome could have worked. Many in the field hoped it would deliver on the promise of a) not costing any positions and b) freeing people up to cover local news. Neither happened.

    Though a few key leaders (certainly not the CEO, who consistently treats DFM properties like luddite lepers) talked a good game of cooperation with the locals, that wasn’t how it played out.

    The inexperienced people on the ground level and mid-level leadership of Thunderdome never wanted to listen to the field. Instead of posting news that was of interest to the crowd far from Manhattan, they gave us wall to wall Sandy coverage, political news with a “youthful” bias and frequent mistakes.

    As for interacting with local properties, Thunderdome by and large thought they knew what the audience wanted better than the local people did. They even shut out the core group of digital-first believers who could have been their allies.

    They weren’t bad people, but instead got caught up in the we-are-the-chosen-ones-who-will-deliver-peace-to-the-unwashed hubris of the CEO.

    Thunderdome had fans and allies. Then it just had allies. Then it had neither. That’s on Thunderdome, not the field.

  • experienced user

    Thunderdome could have worked. Many in the field hoped it would deliver on the promise of a) not costing any positions and b) freeing people up to cover local news. Neither happened.

    Though a few key leaders (certainly not the CEO, who consistently treats DFM properties like luddite lepers) talked a good game of cooperation with the locals, that wasn’t how it played out.

    The inexperienced people on the ground level and mid-level leadership of Thunderdome never wanted to listen to the field. Instead of posting news that was of interest to the crowd far from Manhattan, they gave us wall to wall Sandy coverage, political news with a “youthful” bias and frequent mistakes.

    As for interacting with local properties, Thunderdome by and large thought they knew what the audience wanted better than the local people did. They even shut out the core group of digital-first believers who could have been their allies.

    They weren’t bad people, but instead got caught up in the we-are-the-chosen-ones-who-will-deliver-peace-to-the-unwashed hubris of the CEO.

    Thunderdome had fans and allies. Then it just had allies. Then it had neither. That’s on Thunderdome, not the field.

  • SocraticGadfly

    Several questions:
    1. Can Alden even get a single buyer for DFM? Per Ken’s article on the Trib’s print spinoff, that’s going to be enough of a lead anchor on the market.
    2. What does this say for other companies looking to build not just pagination but news source hubs? Living in Texas, I think immediately of Gatehouse.
    3. Given that one can find basic-level editorial content for free on sites like Metro Creative, if I’m a chain that has primarily non-daily papers, why would I even create such a newshub in the first place?

  • http://www.contentthatworks.com Dan “Patio” Dalton

    Ken, I read the news here first and all I can say is, “Wow!” Best, Dan

  • SocraticGadfly

    You got it with the “shift to mobile.” Those “digital dimes” are starting to become “mobile nickels,” and will do so more and more in the future.

  • Kevin Slimp

    I wrote this column two weeks ago. The response has been overwhelming, with CEOs, publishers and newspaper execs of all stripes writing to me in droves.

    I don’t agree with much of what you wrote here, Ken, although some will. Digital First tried to scare the industry into buying it’s products, only to find that gullible only lasts so long.

    Here’s the column I wrote about John Paton and Digital First two weeks ago:

    http://kevinslimp.com/kevin-agrees-with-upton-sinclair-cms-246

  • El León Blanco

    JRC = DFM = Dirty, Corporate Money Grubbing Whores. They could give two turds about journalism

  • primafacie

    DFM: Dummies, Fools and Morons.

  • Marty Carry

    Uh – Hello – people still want to read newspapers and by the way most of them make a healthy profit. Perhaps we could spend a little more time on the part of the business people utilize the most, works the best for the advertisers and the baby boomers WANT.

  • Jade

    You want to see their profits? Look at the former huge Denver post building, the acres of land that the San Jose Mercury News once sat on and now sold. Also, if you reporters do your research thoroughly, you will find John Paton’s name on old FCC filings for the mysterious Alden Capitol…before he join Journal Register. MKGS…you are on the right track…dig in and you will find your answers…As they say…follow the money….

  • http://www.bostonstrong.com/ Stanley Brick

    8 year Unemployed Photojournalist seeks Innovation Studio location for bostonstrong.com

  • phelpshawkins

    Wondering … if all these newspapers, digitally-astute or not, are failing yet the Oracle of Omaha continues to buy them up, what does he know that, apparently, the rest of us don’t?

  • MT

    Paton has failed here so many times along with his group of corporate cronies. They bark about the “digital first” transformation while ignoring the driving force behind 80% of their revenue stream which is print. They all have fancy titles that start with VP, SVP, EVP, RVP, and not one single MVP on the whole team. They ride in on their white horses (actually its a yellow VW bug and they all have on big shoes and red noses) and act like they know your market and hand down the corporate agenda. The only problem is the corporate agenda has failed time and time again. When does the attention hungry PR junkie Paton get axed? Its a long time coming in my book and they need to eliminate a bunch of those non MVP’s at the same time. When does Alden finally see that he has done more harm to these community newspapers than good? Lucky are any of these papers that get sold off and have a new chance at life without DFM.

  • christ1075

    Was Thunderdome and it’s new daily content really needed?
    Whats more needed is a way for MNGi and DFM to effectively share the content they already create every day. So I guess were back to square one.

  • Brian Haas

    At what point do we get to stop listening to John Paton? One bankrupt company apparently didn’t do the trick. Will this failure finally do it?

    Amazing how failure is rewarded so richly.

  • Ryan M Healey

    This is not shocking. Paton was right to speed up digital offerings, he was wrong to ignore print offerings and chant “digital FIRST’ over and over when there were plenty of people who still embrace a print product and plenty of local advertisers still needing to reach the community via in-paper ROP and national advertisers wanting to insert their weekly circulars into a newspaper that is welcomed into the home instead of by much more expensive USPS “junk mail”.

    Of course online is vital. However, you can’t toss the print products on the back burner and expect their brand to retain value.

    Now the papers are stripped of all good employees, resources are scarce, there are no costs to ring out to increase profits and Alden doesn’t want to invest in rebuilding the papers/brands in each market. End result, auction off what you can, close the rest and move on. John Paton was better than Bob Jelenic but he won’t be remembered as a genius.

  • corones

    I’m a casualty of Thunderdome’s demise and this comment is the best assessment I’ve read.

  • Guest

    Beyond efforts at centralizing services, newspapers have only invested in solutions that improve the engagement around their declining assets and innovation stops at trying to drive their performance (likes and re-tweets) on social media. They miss the opportunity to leverage their massive assets; content and readers, into a new, more meaningful engagement platform.

  • ONAHILL

    What about how they laid off their entire creative team and OUTSOURCED TO INDIA! These companies should be taxed to the max .I am still on unemployment ,seriously needing those extensions . DFM never cared about professional journalism ,just sucking the life out of their advertisers and workers …you reap what you sow .Hedge fund managers as newspapermen? What a joke .

  • ONAHILL

    Well said ,it’s even people in management they manage to pretend are qualified ,that’s the reason for low pay ,poor quality . Don’t bother to subscribe ,if they loose their job ,it really will be for the best ! Been there!