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Oct. 29, 2015, 11:55 a.m.
Business Models

Newsonomics: Here are 10 questions we’ll be talking about into 2016

From newspapers for sale to a new wave of paid content; from ad blockers to Watson; from article particles to cutting back on print.

Everyone’s got questions. CNBC’s crew faced the Republican Ten for about an hour last evening until finding themselves in a no-man’s land. In front of them were the candidates who turned the tables on them, asserting that old standby “media bias.” Behind them was a very un-Boulder-like audience (18 percent of Boulder County’s voters are Republicans, and having lived there, I’d wager most live outside the city of Boulder) who cheerfully turned on the questioners as well. CNBC’s Becky Quick, John Harwood, and Carl Quintanilla were lucky to escape that crowd after the second hour.

Those of us who watch the news media business have questions, too. As we head deeper into the annual bloodletting that is news media budgeting for the new year, here are 10 of my top questions that I think we’ll talking about into 2016.

1Will we still be talking ad blockers?

The talk around ad blocking is almost comical, with phrases ranging from “going nuclear” to dealing with “the whitelist mafia.” Since Apple’s release of iOS 9, ad blockers have been framed as the would-be terrorists of the digital news economy. I’ll be reporting more on the topic soon, but early talks with publishers show as much public misunderstanding as understanding of the impact of the ad blockers. Despite the near-hysteria, the phenomenon is nothing new, especially on desktops, and we can see an argument forming that the mobile reading transition may actually make ad blocking more cumbersome.

I have to admit it’s been entertaining reading the recent ad blocking-related confessions. IAB’s “We messed up” may be a fitting coda to this first era of Internet advertising.

The discussion, though, has refocused publishers, properly, on a much larger question: How can they wring money out of commerce in the largely mobile-driven digital world to come? Questions abound about the real growth potential of what comes after dumb, intrusive display ads. Will native advertising and branded content work — and work big — over the long term? Can we count on riches in digital video? Where do local and national news media play in a world in which new ways of selling and buying change the very need to “advertise”? We laughed about Amazon same-day drone delivery a couple of years ago; now Walmart is moving one step closer to making it operational, with huge implications for competitive, local sellers of goods — and how they advertise.

2When will Tribune Publishing play offense?

Tribune has endured a nasty couple of months, since firing L.A. Times publisher Austin Beutner. As I recently detailed, the company’s been playing defense ever since.

CEO Jack Griffin has become understandably wary of the press, given his inability to make the case that his transformation plan is working. The company has hired a media relations and crisis communications company to refine its message. We can expect that Griffin will start taking the offense next Thursday, when the company announces its third-quarter results.

Given the TPUB’s sharp drop in share price since the firing of Beutner — from $25.50 at its inception last year, it’s down to $9.70, off a recent bottom of $7.72 — Griffin will emphasize the company’s tough approach to expense reduction.

As Lynne Marek of Crain’s Chicago Business reported on the buyouts in progress yesterday: “The number of employees who have volunteered to leave comes to at least 100, perhaps at [the] Chicago Tribune alone, and likely several hundred across the company, based on interviews with current and former employees.” I’m hearing more than 50 newsroom staffers have raised their hands in L.A., as well.

That’s the result Griffin wanted from offering the most generous buyout offer seen at Tribune in quite a while. After the severance hit, it’ll means Tribune has a better shot at meeting the revised earnings guidance Griffin gave Wall Street a month ago. It’ll also mean its newspapers and their readers lose thousands of years of community knowledge as older (more expensive) journalists leave the company in disproportionate numbers.

The cost savings are half of the equation financial analysts will want to hear about. They’ll also want to see evidence of transformation — Griffin’s on-message five-point plan — in progress. Expect him to offer more tangible metrics on national sales and progress on local marketing services and content marketing.

There’s one other audience here. Tribune execs have been surprised by the national firestorm of protest against its changes in L.A., believing that their company — and its new strategy — haven’t been fairly portrayed. It’s up to Griffin to make the case for that strategy — and to play offense.

A good parlor game: Who do you think will own the L.A. Times, and other Tribune papers, this time next year?

3How close was Milwaukee to becoming a Tribune paper?

Gannett announced its agreement to buy Journal Media two weeks ago. That’s a deal about regional fit, with Gannett gaining about $35 million in intended cost reductions through U.S. newspapers’ enduring strategy of regional clustering. Gannett can combine operations in lucrative southwest Florida (Fort Myers and Naples), Tennessee, and Wisconsin, among other markets. But there was another synergy to be had — potentially a big one. Tribune officials had talks about buying the Milwaukee Journal-Sentinel, just 1.5 hours from its Chicago Tribune HQ. Like previous Tribune buys around Baltimore, near L.A. (the San Diego Union-Tribune) and in suburban Chicago, a buy would have produced the kind of accretive centralization savings that is a key part of Jack Griffin’s strategy. Gannett, though, won the overall 15-paper chain.

There remains one big prize atop Tribune’s potential buy list: the Orange County Register. I’ve been suggesting that Tribune’s rollup and completion of a vast singular southern California operation, from northern L.A. to the Mexico border, is just a matter of time. That clock, I’ve learned, is starting to tick again. Expect a “cleanup” — through a packaged bankruptcy or similar means — to free up the Register for sale. That cleanup is done by next spring. Sources say almost all preparations toward that event are now in place. So when the time comes, will Tribune Publishing be ready and able to close that deal, adding the most significant property between its Times and U-T?

4Will the digital-onlys test reader revenue?

I’ve written about the new Big Four of digital news media: Vice, Vox Media, and BuzzFeed have seen hundreds of millions in investment, and Business Insider was just bought by Axel Springer for more than $400 million.

Now, we have word that BI will test reader revenue, likely next year. Two good reasons back the idea.

First, the future of the digital ad business is only getting murkier, as ad-blocking, mobile-majority, and continuing viewability issues all make forecasting future revenue harder. Second, Springer CEO Mathias Döpfner deeply believes that reader revenue must be part of digital news publishing’s future (“What are they thinking? Eight principles for Mathias Dopfner’s transformation of Axel Springer”).

Business Insider has smartly carved a middle niche in what we thought was an oversaturated (Dow Jones, Thomson Reuters, Bloomberg, FT, etc.) business news market. Within that market, it can count tens of thousands of fervent, habituated readers. So expect a meter that will aim to capture the top 1 percent or so of BI habitués, with a lower-than-the-Journal price point — maybe $99 a year.

Even more interesting: Who will follow suit? Might BuzzFeed, Vox Media, or Vice test premium subscriptions? And might Quartz, BI’s peer in business news innovation, do some testing of its own next year?

5Can local papers find a way to get digital reader revenue unstuck?

McClatchy CEO Pat Talamantes offered a blizzard of numbers (and found a very engaged financial analyst audience) on the company’s Q3 financial conference call Wednesday. He could cite lots of digital growth in revenue, and minimized the worst — if expected — news. McClatchy lost money — $1.1 million — for the quarter and reported overall revenues down 7 percent. Given the continuing woes of print advertising, that number wasn’t surprising.

McClatchy, though, was also down 2 percent in audience (or circulation) revenues. One culprit, as pointed out by an analyst: a 5.2 percent decline in Sunday print. Talamantes also talked some about digital-only circulation: It’s at 77,000 for all the McClatchy papers, just a little more than Tribune’s total count, and The Boston Globe’s tally as a single paper. Almost all those numbers have stayed stuck during 2015. Into 2016, newspapers have three options: (1) reexamine the product offer; (2) price it up for those who have agreed to pay, and (3) figure out new ways to segment audience and market like hell.

A little McClatchy math: At 77,000 subs, that represents 0.2 percent of the company’s 45 million unique visitors across the country. Compare that to The New York Times, which is at a little less than 2 percent of its uniques, and we see in a nutshell the growing divide between the fortunes of the national and local press.

6Is Berlin the next best test of convergence?

You remember convergence. It seemed crystal clear: The route forward demanded both traditional local print and broadcast skills combined in what we can multimedia, multiplatform publishing. (I guess we’re there. But we don’t hear those words much anymore.)

But then all the American newspaper/broadcast companies, one by one — Belo, Scripps, Media General, Tribune, Gannett — swore off the notion of convergence, and split their newspapers from their TV properties. Once-promising convergence experiments, from Tampa to Phoenix, fell by the wayside.

Now, ever-energetic Axel Springer is testing a major convergence of its own: WeltN24. I’m told the company’s new newsroom will be ready soon, and that 2016 will represent the big test of news convergence, as the staffs of its national quality daily Die Welt and its recent acquisition n24 merge.

7When will IBM declare it’s a media company?

On Wednesday, IBM bought the digital assets of The Weather Company. Wired’s Klint Finley well describes how IBM can use the power of Watson (remember those recent Bob Dylan ads on TV) to change the nature of “weather news.” Watson and its next-gen natural language cognitive computing systems can — and I believe will — change how news itself can be produced and presented. This is a beginning of Big Data, tamed for lots of little news (and other) uses. It also reminds us: Every successful publisher will also soon have to be a data science company to succeed.

8Will the Post become the fourth “national newspaper” in 2016?

This year, Jeff Bezos’ Washington Post strategy crystallized. Those who were hoping he would create a new model for local sustainable, high-quality journalism end the year have been disappointed. While the Post does a creditable job in the D.C. area, Bezos’ strategy is profoundly national — and then, likely, global. His bolstering of national news coverage, largely represented by 2014 investments, has been followed by low-priced subscriptions. Tens of millions of Amazon Prime customers now join Kindle Fire owners as able to get six months free and then pay a few dollars a month. The Post launched a vast national network, working with newspaper partners. The Post is putting more fish (lots of stories) into the Facebook Instant Articles pool than most publishers. The new Post game plan is mass, and building huge audience — and then, like Amazon, monetizing it down the line.

We’ll see the impact of those forays next year. Already, the Post nips at The New York Times’ heels in monthly unique visitors, if not time of engagement (“Is The Washington Post closing in on The New York Times?”). In the meantime, I think we can acknowledge that the U.S. now has four “national newspapers.” The Post looks like it will join the Times, The Wall Street Journal, and USA Today as we look how the most important legacy newspapers make their digital transition. Among those, we’ll watch these two questions: How close does the Journal get to Dow Jones CEO Will Lewis’ 3 million subscriber goal? And: Which new product forays now in testing at the Times will hit the 2016 marketplace?

We’ll also watch one other big national “newspaper” launch. The Boston Globe will soon launch Stat, its ambitious life sciences product. The business aim: build a national/global product that can establish a new profitable business, while continuing to bolster and reinvent the regional Globe.

9How many will follow Advance’s 2012 move to cut days of print publication?

Three years ago, Advance shocked (“The newsonomics of Advance’s advancing strategy and its Achilles’ heel”) its communities and peer publishers by cutting back print production and distribution in New Orleans and Alabama, a strategy it then took to most of its markets. Few of those peers have followed suit, suspecting that breaking the daily print habit would simply speed up the decline of their businesses.

Now, Gannett, the U.S.’s largest newspaper company, is testing one significant market with three-a-day-a-week printed papers. The Salinas Californian has now adopted the strategy, as explained by publisher Paula Goudreau:

According to market analysis, the median age in Salinas is 28.6 years, compared to 35.2 for California and 37.2 nationally. Data show that 44.8 percent of the Salinas population is aged 24 or under, a demographic that prefers to get its information almost exclusively from mobile devices. The Californian’s digital audience has grown across multiple platforms, especially across mobile with mobile page views trending more than double last year’s, up 121 percent.

That’s the audience angle. The advertiser angle points to the same kind of math Advance performed:

For the past couple of years, nearly 90 percent of the print advertising dollars in the Californian have been aimed at Wednesday, Friday and Saturday editions.

Yes, it’s a relatively small — and maybe unusual — market. Print circulation is at about 6,000 daily and 9,000 on the weekend, down from 7,700 and 11,000 just three years ago. So is this a big Gannett test? No, says Gannett spokesperson Amber Allman. “[It’s] not based on a broad strategy,” citing the same local-specific factors as Goudreau. Indeed, I hear Gannett CEO Bob Dickey doesn’t think much of day-cutting overall.

Still, with the economics of local print deteriorating quickly with print advertising’s decline, we may well see more such cutting next year.

10Will we see news particle theory in practice?

I have no doubt we’ll laugh in 2025, when we look back at the current Stone Age of digital news presentation. While we’re beginning to see some semblance of news judgment in the smartphone home pages of the Times, Guardian, and Post, among a few others, most digital pages on both phones and desktop are still fairly flat. They may be doing a better job of telling us the news of the day, or the moment, but they show far too little context and relevant related information. It’s not that editors don’t want to include context; the tools just haven’t been available, despite worthy experiments like Circa.

“The Future of News is Not An Article”, Alexis Lloyd’s post, lays out a much smarter — and likely attainable — future.

“The form and structure of how news is distributed hasn’t been questioned, even though that form was largely developed in response to the constraints of print (and early web) media,” writes the creative director of the New York Times R&D Lab. “Rather than look to large tech platforms to propose the future of news, perhaps there is a great opportunity for news organizations themselves to rethink those assumptions. After all, it is publishers who have the most to gain from innovation around their core products. So what might news look like if we start to rethink the way we conceive of articles?”

Her one-word answer: Particles. “In order to leverage the knowledge that is inside every article published, we need to first encode it in a way that makes it searchable and extractable. This means identifying and annotating the potentially reusable pieces of information within an article as it is being written — bits that we in The New York Times R&D Lab have been calling Particles. This concept builds on ideas that have been discussed under the rubric of the Semantic Web for quite a while, but have not seen universal adoption because of the labor costs involved in doing so. At the Lab, we have been working on approaches to this kind of annotation and tagging that would greatly reduce the burden of work required.”

This notion may seem abstract, or reserved for techies, but it’s not. In fact, if news companies can unlock the deep and wide value of their related content — and relevant archives — their digital products will become greatly more valuable to news readers — and thus able to be priced higher.

Photo of question marks on pavement by Véronique Debord-Lazaro used under a Creative Commons license.

POSTED     Oct. 29, 2015, 11:55 a.m.
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