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Oct. 31, 2013, 10:52 a.m.

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.

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.

POSTED     Oct. 31, 2013, 10:52 a.m.
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