Nieman Foundation at Harvard
HOME
          
LATEST STORY
Hot Pod: We now have new, free rankings to show how podcasts stack up against each other
ABOUT                    SUBSCRIBE
Sept. 4, 2014, 2:54 p.m.
Business Models
washingtonpostpiccc

The newsonomics of the Washington Post and New York Times network wars

A new head-to-head competition between the Post and the Times is brewing as both papers look at expanding their audiences and revenue through digital networks and niche print products.

Call it the newspaper network wars.

The Washington Post’s Newspaper Partner Program has grown from a March-planted seedling into a full-grown fall oak. The initiative now includes more than 120 daily newspapers in the U.S., and could connect with more than 200,000 digital newspaper subscribers or more by the middle of next year. Meanwhile, The New York Times is newly working with newspaper partners, launching its own products. USA Today, too, is now pitching a news partner program across the country.

What’s going on here? Why in 2014 are we seeing both new digital and print partner programs being offered up by three of America’s national newspaper brands? We can chalk it up to two things. Most prominently, the Jeff Bezos era at the Washington Post is fully taking hold. Secondly, publishers —these national ones and the early-adopting regional ones — are getting smarter at working around the edges, figuring out how to add on the smaller things that readers will pay for in this renewed age of reader revenue.

Let’s start with the Post. On Tuesday, Jeff Bezos announced Fred Ryan as the paper’s new publisher. If we had expected that Graham family member Katharine Weymouth might exit about a year after Bezos’ purchase, we were right. The choice of Ryan himself was a well-kept secret, and it is his “Politico” background that most stood out in the buzz around the announcement. It is that reference that tantalizes here. Politico is Example A in how to disrupt legacy media. Though Ryan is as much a TV guy as a publisher, having run Allbritton Communications broadcast property group until its sale in August 2013, he served as a co-founder and CEO of fast-charging (Allbritton-owned) Politico until last month. Birthed under the nose of the then-majestic Washington Post in 2007, Politico offers part of a playbook for a re imagination of The Washington Post in the digital age.

Little Politico, starting from zero, created a trusted well-known political “vertical” product almost overnight, stealing away the sizzle of politics from a strong Post that appeared to be slumbering. Politico fired on all its digital business engines, magnifying media mentions from cable TV to social media, seeming far bigger than its original size. In the following years, it’s been a fast innovator, adding an events business to its repertoire and then figuring out a way to increase its editorial staff by becoming a B2B Internet-turbocharged digital newsletter company, serving seven sectors with high-priced Politico Pro (“The newsonomics of influentials.”). Last fall, the company bought Capital New York, and it is endeavoring to apply Politico business logic to the property in media-saturated New York City.

Politico’s financials are private, so it’s tough to separate its real achievements from its slew of innovative models and ample self-promotion. Yet, this looks like a case of a disruptor being hired to run a legacy operation, and — hopefully — bring some of that thinking, and mojo, to it.

Ryan inherits an operation that has already changed a great deal since Bezos took control last October and promised a “runway” to a beleaguered staff. On the editorial side, we’ve seen an investment of middle to high single digit millions in the newsroom. On a digital level, that’s really about giving editor Marty Baron the resources to expand content capacity, as he detailed in this January blog post. On the business end, the highest profile adventure has been the establishment of the Newspaper Partner Program, led by Post President Steve Hills, the long-standing Post exec in charge of all business operations.

Combine the two initiatives — a reinforced newsroom and a program for greater reach — and you can see the driving strategy that Ryan himself outlined for staff when introduced on Tuesday: “We want the Post to be the most widely read news organization in the world.” The “we,” importantly, includes Jeff Bezos.

That’s quite a proclamation — and it goes a long way to describe both the new partner program and the reason why this looks like the beginning of new head-to-head competition with The New York Times. Observers of history will recall that in their post-Watergate glory, the Times and the Post made polar strategic decisions. The Times staked its claim to a national, and global, audience, and first built out the printing capacity and other resources to deliver on that. The Post went super-regional, focusing on the affluent D.C. Metro area — and thoroughly dominated it in print and then digitally (in audience). The Post published a printed national weekly edition for a while, and later saw its non-D.C. web traffic grow greatly, though organically. Its business, though, has long been focused on its geographic area.

Now, it’s clearly throwing down the gauntlet to what has been a paywall-resurgent Times. Backed by Bezos’ money and his philosophy to build a long-term business, with short-term profit a smaller concern (just ask long-standing — some would say long-suffering — Amazon shareholders, who welcomed the company’s CFO stepping down on Wednesday), the Post can be expected to contest the Times on a number of battlefields — and ones of its own choosing. It’s asymmetrical warfare, with divergent tactics that may seem like a hodgepodge now but will take shape and form over time.

The Newspaper Partner Program lays out that groundwork. Its notion is simple for local publishers: If your regional daily has a paywall (which most now do), you can offer your subscribers additional access to Washington Post content, at no extra fee. No money changes hands between the Post and local publishers. Publishers give their readers more content at no extra cost. That’s the easy-to-get value proposition for subscribers.

The value proposition for publishers: An ability to better satisfy paying customers. That should result in the ability to both increase prices annually and to reduce subscription cancellation, or churn.

The value proposition for the Post: Building the Post brand and reach — and gaining access to the email addresses of tens of thousands of customers. Jeff Bezos knows “customers.” If you are a subscriber to the Toledo Blade, Minneapolis Star Tribune or Dallas Morning News, for instance, you must “authenticate” your subscription with The Washington Post. Once you do, you become a known, and trackable, customer of both the Post and the local paper. While the program’s first priority is simply building reach, the Post will be able to monetize all those new readers via digital advertising. Down the road, we can expect the exploitation of e-commerce opportunities, likely connected to Amazon, which the Post apparently experimented with in August. Regional publishers aren’t worried about Post incursions into their audiences; the deal seems like a fair balance to them — for now.

Among the other companies that have signed on: Digital First Media, Scripps Newspapers, Calkins Newspapers and Tribune’s Orlando Sun-Sentinel. This week, the program went global. Tokyo-based Yomiuri, the world’s largest newspaper with its circulation of about 10 million, agreed to become a partner. For now, it only includes Yomiuri’s 30,000 circulation English language edition, but the deal makes a competitive statement.

At the Star Tribune, 14,000 subscribers have signed up, or 6.8 percent of the 205,000 subscribers eligible for the opt-in. The Morning News has signed up 4,300 people, or about 1.5 percent of its subscription base. Early take-up on the Post deal runs from 1-2 percent to as much as 4-5 percent of subscribers. Let’s look forward and figure that 3 percent of the participating newspapers’ subscribers sign up for the program by mid-2015.

Consider the math. With a subscription base of seven million among the regional partners so far, 3 percent would mean 210,000 or so Post-authenticated readers. That would represent the acquisition of lots of reader-customers, at a very low cost. We can also expect both the overall subscription base to grow over time as new partners are added and more readers opt-in as they get repeated notices about the product.

Even further below the public radar are print network programs moving into place in several markets. These programs are growing from local publisher innovation, starting with the Toronto Star. Five years ago, Star publisher John Cruickshank looked deeply into reader research and came up with a back-to-the-future contrarian idea: Paid, niche newsprint. You can read more on Cruickshank’s thinking and odyssey here at the Lab: “The anatomy of the Toronto Star’s C$10 million niche print business.” In short: the Star approached the New York Times Syndicate with the wild notion of selling a new product to his Sunday readers — a weekly New York Times section focused on international news and books. He’s now selling that product to 70,000 Sunday subscribers, or a little less than a quarter of the Star’s Sunday circulation. The Star’s total annual reader revenue for the Times paid print product, and two other niche print products: More than C$10MM annually. (One Canadian dollar now equals 92 U.S. cents).

Jim Moroney, Dallas Morning News publisher and CEO, sees a similar opportunity. He plans to start selling the special Times section to his Sunday subscribers this fall, after completing talks with the Times. After a four-week sampling period The Morning News will charge $1.99 a week for the section, sharing revenue, as does the Toronto Star, with the Times. The Times is calling the program its Opt-In Model. Expect more dailies to talk to the Times about the program as well, as the company decides how and how much to expand the model in the U.S.

Moroney, the fastest newspaper diversifier in the West (or East), won’t stop there. He’ll separately offer his readers a second paid print supplement — that of The Washington Post. When Moroney first heard of the free, digital add-on Post partner program, he said he’d sign on — but wanted a paid print offer as well. The Post’s Steve Hills agreed, and that supplement — focused on national and political news — will likewise debut in this fall, priced at 99 cents a week, with reader revenue split between the parties. While the Post was at first reluctant to create and offer the 16-24 page tab, it agreed and is now in the process of extending the print deal to other newspapers. Why the reluctance? “Our big play is digital,” emphasizes Hills. He wants a clear distinction between the free digital access program and paid Sunday print supplement as completely separate deals, with the latter producing cash and better relationships with partners.

So if the Times begins providing these new supplements in both Toronto and Dallas, does it find itself in a new network business? Yes — kind of. The weekly print supplement business is an old one, but it’s been a product offered outside the U.S., in Latin America, Europe and elsewhere, with more than two dozen higher-quality publishers participating. In that program, publishers pay a fee to the Times — and don’t charge their readers anything extra for the package. Given Cruickshank’s moxie at the Toronto Star, a new version of that idea — and a business — has been born and the Times must decide how to proceed with it.

For the Times, that’s going to be a decision on how a print initiative fits with its own all-digital push. It’s not clear how the Times, which drives more than 10 percent of its 831,000 digital-only subscriptions from outside the U.S., wants to play the digital/print subscription/supplement game.

After disappointing 2Q financials and underwhelming sales of NYT Now and other new paid niche products, the Times in this late summer is in the midst of a strategic re-think. One new competitor it best consider is the resurgent Washington Post, which will seek ways to outflank the Times wherever it can.

Finally, there’s one more player — the third of America’s national news suppliers, if we consider The Wall Street Journal as the nation’s business newspaper rather than a general news company.

USA Today Publisher Larry Kramer has been out on the hustings pitching his own print weekly supplement lately. Gannett’s “Butterfly” program has been a key part of its local paper paywall/overall cost reduction strategy, as USA Today puts a condensed edition into many of Gannett’s dailies. Now, even as USA Today proceeds with painful layoffs, Kramer is aiming to turn that work into a profit center. He is negotiating with several companies to include USA Today in their pages as well. The business model includes fees and potential revenue sharing on advertising sales. Though the fledgling program is print only at this point, Kramer says new digital syndication plans are developing.

Star Tribune Publisher Mike Klingensmith buys the USA Today rationale: “I think the USAT move is very smart. Research has consistently told us that including more national and international news makes our product seem more valuable and more important, and interest in those areas, for our readers, is nearly equal to local news.”

That’s just one of the curious things about this spate of newspaper networks: They are as print-based as digital. Even The Washington Post digital access program really works because so many print subscribers – who have been upgraded (“opted in” in many cases) – will value the Post content. It is still the 30 million or so print newspaper subscribers in the U.S. that provide about 30 percent of all newspaper revenue. Even if the whole world slowly trends towards digital, these programs can be highly valuable, intended to reward both readers and the local publishers by harnessing one tried-and-true thing: Higher-quality journalism.

Photo of Washington Post building signage by niawag used under a Creative Commons license.

POSTED     Sept. 4, 2014, 2:54 p.m.
SEE MORE ON Business Models
SHARE THIS STORY
   
Show comments  
Show tags
 
Join the 15,000 who get the freshest future-of-journalism news in our daily email.
Hot Pod: We now have new, free rankings to show how podcasts stack up against each other
Plus: Parsing the RadioPublic announcement; premium podcast subscriptions; Bill Simmons oversimplifies things.
BuzzFeed is building a New York-based team to experiment with news video
It is the “center of a Venn diagram” between BuzzFeed Motion Pictures and BuzzFeed News.
With NYTEducation, The New York Times is taking its expertise and access to the classroom
“People come to learn with us because they want something that feels Times-ean in the experience.”
What to read next
0
tweets
The Verge launches Circuit Breaker, a gadget blog-as-Facebook page
The Verge is launching a new gadget blog that is built for Facebook. (Articles will also run on The Verge’s website.)
0Millennial-focused local startup Charlotte Agenda is expanding its model to a second city, Raleigh
The North Carolina startup says it’s profitable and is looking to expand its reach — but it’s not seeking outside funding.
0With a scripted daily comedy news show, Mic looks to add a little late night TV to the social video mold
“We don’t just present a bunch of headlines and say what we think. Our videos are chock-full of facts and research.”
These stories are our most popular on Twitter over the past 30 days.
See all our most recent pieces ➚
Encyclo is our encyclopedia of the future of news, chronicling the key players in journalism’s evolution.
Here are a few of the entries you’ll find in Encyclo.   Get the full Encyclo ➚
Groupon
The Bay Citizen
The Christian Science Monitor
USA Today
Crosscut
Minneapolis Star Tribune
Chicago News Cooperative
NPR
GlobalPost
The Philadelphia Inquirer & Daily News
NBCNews.com
InvestigateWest