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June 18, 2014, 4:31 p.m.
Business Models

Print still matters, even if some would like to believe it shouldn’t

The future is digital, of course — but in the present, the revenues generated by print are absolutely critical to supporting local newsrooms. So it makes sense to pay attention to print strategy.

I have to say, I find it funny to be called an apologist for the legacy news industry, as Clay Shirky suggested in an overnight post.

Ask Steve Forbes or Lex Fenwick what they think about that, given my columns of just a few months ago. Or ask Aaron Kushner himself, who was none too happy when I published confidential financials from the company’s pitch deck to investors back in January — and exposed the fact that the company’s bare $6 million in cash pointed to deeper problems. Early on, when I began my Newsonomics analyst work, the daily press took pains to call me a pessimist for my realistic, journalistic take on my own industry.

I call ’em as I see ’em — the dunderheads and the dreamers, and all in between. My quest remains the same: finding new and more sustainable ways to pay good journalists to do their work. To that end, any ill-humored attempt at forensic psychiatry seems like wasted time. (Clay, I have to warn you that delving into the recesses of my mind and motivations can be a dangerous exercise. I’ve been there. A little Left Coast suggestion: Look inward, my friend.) Would it be useful or fair to malign Shirky for the market failures of Digital First Media, to which he has served as an advisor, as that company prepares to be parceled out and sold? I don’t think so.

I make no apology for my coverage. Could I have ramped up the skepticism 20 percent? Sure, and maybe I should have, but the balance of concern was there. (Voluminous detail for Shirky and anyone with too much time on their hands, below.) As I covered Kushner’s Orange County Register revolution — and let’s recall all of it has happened in less than two years — I figured better to give the guy his rope, even if ends up wrapping it around his neck in record time. Better to do that then deride him out of the gate as a clueless print lover and let it go at that. Within the Register model, wherever it goes from here, there were and are many good ideas. We’re journalists. We should separate the wheat from the chaff rather than throw out the whole harvest. To take one example, should we not have paid attention to Patch just because we had questions about its model?

Though Kushner’s recklessness now seems clear, as I detailed recently (“The newsonomics of the Orange Country Register’s swerves all over the freeway,” June 4), there were plenty of speed bumps along the way, for anyone who took the time to read. Maybe it was the scene of the action — some 3,000 miles from the would-be epicenter of all news, Manhattan — that has something to with Shirky’s dyspeptic take.

In truth, the Register expansion was one of the biggest stories in the news business in the last two years. It represented both the largest hiring of daily journalists anywhere and served as a neat counterpoint to Advance’s day-slimming strategy. What some people miss in the Register staff hiring is that much of it simply replaced Register journalists who’d been lost in the Great Recession and bankruptcy. While papers like The Dallas Morning News and the Star Tribune, among others, did a much better job of holding on to their core newsrooms than others, the Register — in a top-20 market — had seen disproportionate staffing losses. At the beginning, the Register foray was a rebuilding — a solid business strategy — rather than empire-building.

More deeply, the digital-or-die argument just seems tired. Clearly we are moving toward a mainly digital and majority mobile world. The smartest publishers would love to throw the switch from print to digital and just be done with it. Costs are so much lower, likely profit margins so much higher, and the pain of transformation reduced. But 75 percent or more of the money flowing in to pay the journalists still come from print — and we know there is no digital business model yet able to pay for large local newsrooms. FiveThirtyEight and Vox maybe — The Miami Herald, Star Tribune, or Dallas Morning News, no.

So print matters, even if some would like to believe it shouldn’t. It has driven the revolution of reader revenue, and that’s a revolution important to all journalists worldwide. People, we now know, will pay for digital news, but for many that transactional leap starts with print. It may be an inconvenient fact for some worldviews, but it’s a fact nonetheless.

In light of the Register’s recent reverse course, Shirky isn’t the only one to point out that I’d covered the Kushner adventure more than most. He’s just the only one to take it personally and to have a public allergic reaction. I hope he recovers quickly; his sober voice is a useful one to us all.

I understand the value of cherry-picking quotes to reinforce a point. It’s a practice, though, that we learn is unfair in those journalism schools that Shirky also takes time to malign. (Good Dan Kennedy rebuttal on that black/white Shirky description.)

With 2015 — the midpoint of this decade — coming on fast, I say let’s move on and tackle the real issues and models.

In the meantime, a more balanced short compendium of my take on the Register would also show these admonitions:

  • “Long story short, it’s possible the Register could take in about as much new money in circulation revenue as it is putting into its expanded news products. It still wouldn’t be enough to make up for ad revenue decline, but that’s a problem common among metros.” (“The Newsonomics of Aaron Kushner’s virtuous circles,” Jan. 31, 2013)
  • “The Register will charge one price — a dollar a day or $365 a year. Get digital or print or both…In the abstract, the Register’s reasoning makes sense. In practice, expect that few non-print readers will fork over that much money, initially, for tablet and smartphone reading.” (“The newsonomics of Orange County Register’s contrarian paywall,” April 3, 2013)
  • “Finally, there’s that hard paywall. It’s the biggest enigma of the Register plan…It’s been the meter — with its flexibility and open site sensibility — that has fueled the paywall movement…The move means that the Register will surely lose more pageviews than if it went with a meter. Figure that it will lose 20-30 percent of them, where new metered paywalls lose about half as much. [Register president Eric] Spitz says he, too, believes, in sampling, and that the Register will do that…Maybe that will work. I’m dubious. Hard paywalls, no matter their intent, create a psychological barrier for readers, as The New York Times’ TimesSelect proved years ago. It doesn’t matter how clever you are; readers don’t like running into walls. That’s going to be especially true as news publishers confront the next challenge of paid digital readership. Properly, they’ve focused on their core print readers, extending them into higher-priced all-access. That makes sense, but doesn’t provide enough growth, and those readers are averaging almost 60 years old. How are they going to convince younger, not-habituated-to-paying readers to join the paywall revolution?

    For the Register, that’s a huge question. It’s down to 124,000 seven-day subscribers, with its official audited reporting pointing to 160,000 daily circulation. On Sunday, that number is 280,000, but it’s unclear how many of those are fully paid. Kushner and Spitz inherited a crazy-quilt of pricing when they took over the Register in June 2012. Their ability to weave a new rational pricing structure will make or break their out-of-the-box strategies.” (“The newsonomics of Orange County Register’s contrarian paywall,” April 3, 2013)

  • “Mouths were flapping at all of the activity, and wider questions about the depth of Aaron Kushner’s pockets, and his ability to stay the course on what is self-acknowledged to be a long-time strategy. Those mouths are now agape.” (“New Hollywood sequel: Aaron Kushner’s L.A. Register,” Dec. 13, 2013)
  • “While the reader-focused content plan is well-intentioned, it has run into the hard realities of print publishing. Though up in circulation revenue, it is down both in print advertising (in mid single digits) and in digital advertising, where its hard paywall has diminished traffic by 40 percent. The L.A. Register move then is intended to spread the high costs — which got a further $10-12 million investment this year — across a wider geography. The L.A. Register is a scale play, largely using the resources already invested in to find new profitable revenue.” (“New Hollywood sequel: Aaron Kushner’s L.A. Register,” Dec. 13, 2013)
  • “What we don’t know is the big question: How is the news for the nation’s largest county — with twice the population of Chicagoland’s Cook County — going to be produced?…Indeed, the expansion and enthusiasm in the Register newsroom stands out in a industry experiencing a half-decade of loss. It sounds like that newsroom is going to be stretched, with fundamental questions being how much and where…How exactly will the L.A. Register offer similar local depth and breadth? It seems unlikely that it can, or will…Unless the L.A. Register foray is funded with significant new staff to cover what is truly L.A. local, it will borrow less from the lessons of the Orange County editorial investment, or even that in Long Beach, and more from other ‘clustering’ strategies other publishers have tried over time. It may make waves in the Southland, but how big will the waves be? Indeed, the L.A. Register could be a game-changer, but is more likely, given what we know today, to be more of a nibbler on the Southern California news landscape.” (“New Hollywood sequel: Aaron Kushner’s L.A. Register,” Dec. 13, 2013)
  • “Kushner’s adoption of the libertarian mantle is a curious one. The Hoiles family, long-time owners and builders of the O.C. Register, were among the leading libertarian voices of their times. Kushner, though, didn’t make much of a point of his politics in the early O.C. Register expansion. In L.A., it seems, it makes a good talking point…How local will L.A. Register readers find the new paper? Today’s first Local section is an uncertain metro assemblage, fronted by Kareem Abdul-Jabbar’s picks of his favorite movies about L.A. and an interview with restauranteur Wolfgang Puck.” (“Six things to consider about the new Los Angeles Register,” April 16)
  • “Think you know what’s going in Orange County and southern California, as Aaron Kushner’s Freedom Communications unveils surprise after surprise? Think again. The most watched news-investment experiment of 2013 — with millions of dollars spent, adding 170 newsroom full-time and trainee positions and forests of newsprint — is now the scene of lots of new change, some of which seems to contradict the Register’s audacious early strategy. Soon, the O.C. newsroom may have 100 fewer newsroom staffers than it had a few months ago — though still more than it had before Kushner arrived. Kushner and Eric Spitz, Freedom’s president, wheeled and dealed their way through 2013. It was a whirlwind of change. Now a new set of shifts for 2014 has already begun. Kushner shocked his own newsroom last week by announcing the layoff of 32 Orange County Register newsroom staffers and the departure of the paper’s four top editors.” (“The newsonomics of the Orange County Register’s new, newer, newest plan,” Jan. 23)
  • “Hiring. Firing. Expansion. Contraction. Selling. Buying. Zig. Zag. It may sound like barely controlled chaos — a set of moves that has raised eyebrows skyward across the industry. But for Aaron Kushner, it’s all in a year’s work. ‘Just running our game plan,’ Kushner cheerily offered this week, as we talked through those zigs and zags and numerous others. ‘Our strategy hasn’t changed.’ What others see as lurches in strategy, Kushner sees as tweaks.” (“The newsonomics of the Orange County Register’s new, newer, newest plan,” Jan. 23)
  • “That’s where the Register’s true contrarian move raises questions: its embrace of print and downplaying of digital. Overall, the 2014 Freedom performance is a crapshoot. It has to find a way to resurrect its digital ad business. There have been talks about reforming the hard paywall; a metered approach would help regrow audience. It will face a tough slog in growing circulation revenue at that 16 percent pace from last year. Its one-price-fits-all, $365-a-year strategy will make it hard to find new, younger subscribers. Cutbacks in the O.C. Register may hamper subscription efforts as well. If it needs to, Freedom can do what so many of its peers have done: cut its way to profitability. In fact, in last week’s layoffs, we may seeing the start of that strategy.” (“The newsonomics of the Orange County Register’s new, newer, newest plan,” Jan. 23)
  • “The Register’s continuing embrace of print — especially as it has moved into Long Beach and now into L.A. — is perplexing. The rest of the newspaper industry is moving away from it, at differing speeds…The Register’s competitive street-fighting is unusual in time of retrenchment. Not many papers have been raiding their neighbors’ markets lately. Freedom has been unusually aggressive, first with the August launch of the Long Beach Register and now in Los Angeles. But the impact of the forays may be marginal, aiming to pick up low five digits of circulation.” (“The newsonomics of the Orange County Register’s new, newer, newest plan,” Jan. 23)
  • “It cajoled financing — ‘It’s a tough market to finance newspaper acquisitions,’ Kushner acknowledges — to complete its Riverside paper purchase for $27.2 million in November. It’s been moving forward with the final $12 million (of $30 million) preferred equity offering over the last two months, offering fairly favorable terms. In November, it had about $6 million in cash on its balance sheets. If all goes as planned, with all properties sold and operating targets hit, Freedom could emerge debt-free some time in 2014. And then there the several lawsuits in which the company is embroiled, with uncertain financial impacts.

    Kushner seems fairly serene for a man in the midst of so much change. Maybe that’s because he created it. True to form, he seems largely oblivious to the reaction to his strategic shifts. Asked why he didn’t explain the reasons for the Register layoffs, Kushner offers his entrepreneurial mantra of change, believing that should be good enough for the world and reminding us that he is running a ‘private’ company. I talked to one of his investors recently and noted that Kushner could be brash; the investor said I was being too charitable. Sure, his unrepentant zeal could crown him king of L.A. newspapering. But it could also strain his credibility — among readers, advertisers, would-be community partners, possibly financiers, and certainly staff.

    The newsroom’s high has been punctured. Rob Curley is the new top editor. Curley is an industry innovator, whose peripatetic adventures (Washington Post, Las Vegas Sun, Naples Daily News) are well known in the industry. He found a new niche at the Register, but takes the top job with little experience in overall big newsroom management. As Kushner’s freewheeling ways inevitably blur lines (as they’ve done with school-sponsored editorial sections), how will the new editor react to unorthodox commercial forays? “Never complain and never explain” may have worked for Disraeli, but it might work less well for a community-advocating newspaper publisher like Aaron Kushner.” (“The newsonomics of the Orange County Register’s new, newer, newest plan,” Jan. 23)

Photo of newspaper stack by J E Smith used under a Creative Commons license.

POSTED     June 18, 2014, 4:31 p.m.
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