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March 31, 2017, 2:42 p.m.
Business Models

Newsonomics: Seven strange media questions for foolish times

Seven questions in what’s already been a very strange year.

Just swipe your phone these days and it feels as if The Onion’s done a hostile takeover of the known news world. Even Tronc’s escapades seem tame compared to the wider news of 2017. As April Fool’s Day approaches, I offer seven (real) questions in this springtime of the news business.

What’s the connection between this week’s FCC’s twin deregulation moves and Rupert Murdoch buying the L.A. Times? The de-reg friendly FCC, under Chairman Ajit Pai, moved to loosen data privacy rules and allow more concentration of local TV station ownership. The FCC touches every corner of American life through its actions and reversals on those two issues (as well as net neutrality), and cross-ownership is a big concern to those watching the local news business.

The rule that dominant newspapers can’t own significant local TV stations, and vice versa, has been in place for decades. Now, though, after what may be a couple of years of hearings, filings, and lawsuits, that rule could go away. It’s an issue both abstract (today’s digital-centric world isn’t the printing-press-and-broadcast-tower one of the mid-20th century) and concrete. Who will become the buyers and the sellers of local news operations if the strictures are loosened or eliminated? Broadly, who will own the assets? Who will decide who to hire to report the news? Who will decide what news is?

We’ll have a field day taking on the possibilities here, but for now, as a warm-up, just consider one possibility: a Fox News/LA Times combo. Rupert Murdoch doesn’t let go of his empire-building dreams: Witness his steadfast pursuit of full control of Europe’s Sky TV. Rupert has long wanted the LA Times (and also expressed interest in Tribune Publishing, now Tronc, overall), but his ownership of LA’s KTTV and KCOP were an obstacle as recently as four years ago.

There’s at least one big irony in all this cross-ownership talk, which is now supported by both newspaper and broadcast trade groups. In the last five years, led by News Corp, almost every media company that owns both newspapers and TV stations (usually not in the same city, given the cross-ownership rules) split in two. TEGNA took all of Gannett’s TV businesses (and digital ones as well) and left the newspapers in the smaller, less shareholder-valued new Gannett, for instance. New times, new arguments, and recombinant media DNA to come.

Does Michael Ferro’s ongoing privatization make a difference to the readers of the L.A. Times, Chicago Tribune, Orlando Sentinel, and more? After a winter’s respite, Tronc hijinks resurfaced last week. But what does the fate of the troubled Tronc (the second-largest public newspaper company in the U.S.) mean for readers? While Ferro treats the public company like a private fiefdom, Tronc still must be quarter-by-quarter responsive to investors, so the potential benefits of being truly private don’t surface. That’s a possible allure of Patrick Soon-Shiong’s now long-distance run to take at least the Times, if not all of Tronc, away from Ferro.

In the abstract, longer-term, private-oriented ownership is better than shorter-term, public company ownership. There are caveats, though. Ownership needs to be both longer-term-oriented and private, with some deeper pockets to absorb the shocks of further print ad declines and the transition to digital. Those private owners (the Hearsts, Bezoses, Henrys, Taylors, Rogoffs, Blethens, for instance) exemplify this movement in metro newspaper stamina. Meanwhile, the private and more short-term-oriented Digital First Media stands as the best example of private ownership giving its communities little long-term hope. Public companies, of course, try to walk a tightrope that’s perilously thin, maintaining small profits to keep shareholders mollified while cutting at every corner.

So where do we — and all those readers of Tronc’s nine daily operations — stand now?

In the last week, Soon-Shiong took his complaints about Ferro public. Very long story very short, Soon-Shiong’s demand letter could likely be the run-up to a lawsuit and a lawsuit could be a run-up to Soon-Shiong’s bid for buying Tronc overall. I laid out the likeliest scenario for such a foray last week at the Lab, with early 2018 still the likely conclusion of such a battle, should Soon-Shiong show staying power. His claim, broadly: the Tronc chairman has used the company he seized control of just a little more than a year ago as a personal piggy bank. Ferro’s $2.7 million lease of a personal jet service only serves as the most high-profile of those claims.

If Soon-Shiong’s attorneys do file in court, such a case is unlikely to accelerate the timeline for a resolution a year from now. Ferro has played his hand and the calendar expertly, and shows little sign, publicly or internally, of relinquishing his prize. Despite early claims of transformation, we’ve seen little reinvestment in Tronc’s journalism in this Ferro era. Mostly, we’ve heard pronouncements that tinker on the edge of the business, but seem to take for granted or ignore the kind of content-first, product-first strategies that have propelled the L.A. Times’ big brothers, The New York Times and Washington Post, to new heights.

Maybe Ferro will see the news business for what it is, and build atop it. In the meantime, we’re left to wonder what Patrick Soon-Shiong’s private ownership of the Times and the San Diego Union-Tribune might look like. Could it begin to look like the Globe or Star Tribune in its commitment to positive, content-focused change? We don’t know. Of course, that’s just one of the many questions for Tronc watchers. If Soon-Shiong ends up getting his hometown prize, what will become of the Chicago Tribune, Baltimore Sun, Orlando Sentinel, Fort Lauderdale Sun-Sentinel, Hartford Courant, Newport News Daily Press and Allentown Morning Call?

Is this BuzzFeed’s last chance to cash in? With word that BuzzFeed is now more urgently planning for a 2018 IPO, it’s worth putting the news in perspective. Snap’s IPO helps, though as Mathew Ingram points out, it’s a media company and Snap’s largely a platform one, largely. Even beyond Snap’s $3.4 billion IPO, BuzzFeed may — if it moves fast enough — be able to tap into investors’ irrational exuberance, though 2018 is a long way away in economic time.

Further, BuzzFeed stands at a crossroad of value. It’s been among the most adaptable of the big “news” startups, mastering virality, video, and content marketing ahead of others. At the same time, the fierce digital ad competition from Google and Facebook, combined with the maturation in the size and usage habits of the U.S. population, offer big challenges. BuzzFeed’s own revenue growth was questioned last year. In addition, we know that its digital audience (measured by conventional measures that may not fully account for its successes on Facebook and other platforms) is fairly flat and has been stable with 70 to 80 million monthly uniques since 2015.

Investments in new digital media startups have slowed, so the question becomes how to cash in on the few that have gotten big enough fast enough. Overall, as BuzzFeed balances an 11-year head start with a quite uncertain future, it’s a good time to try going public.

Journalistically, BuzzFeed continues to confound in its joyful catholicism (“So the Boston bombings happens, and immediately all of the most popular content on the site is hard news. Then there’s a slow news week, and the most popular content is lists or quizzes or entertainment, or fun content,” says CEO Jonah Peretti.) That’s its DNA, but still impressive this political season is its keen focus on Russia. (See: “The strange case of the Russian diplomat who got his head smashed in on Election Day.“)

How long will it be before the “Nyet My President” hats, shirts, and Twitter headers start appearing? “No matter what the question, the answer to most any question offered over the next three months should be ‘Russia,'” one savvy newspaper company CEO suggested to me this week. On Monday, the Russia circus reopens for business as the Senate Intelligence Committee begins to call at least 20 witnesses. While the Trump administration’s own Deep Throat capers on White House grounds look like tomfoolery, the specter of our long-time enemy playing all of America for the fool should be top of mind for all citizens, as my CEO friend suggested. In the past, that story would have crowded out all others, but now the news media is newly challenged. It’s an unprecedented balancing act. It must separate the facts from the surmises and coincidences on Russia while fielding the many other balls the new promise-keeping Administration scatters on the public field. Fair and balanced, indeed.

Is fake news now becoming its own industry? How many invitations to fake news conferences, webinars, and whitepapers are you getting? Lots of things to talk about, of course, but why not monetize the discussion along the way!

While we rightly focus on trust as a new currency of the digital news age, I don’t know how much will be gained by the infinite parsing of “fake news.” Do we really need an evolving taxonomy to tell the Macedonian hackers from the more conventional wingnuts?

The best medicine here: Flood the zone with trustworthy, fact-based analytic reporting, and recognize we’re treating a chronic disease by-the-second, unfettered digital transmission has aggravated the condition, but it’s been with us for centuries, and it will never go away.

How would you like to be in the printing press business? Can it be? Print ad declines continue at the same rate, even after the past couple of years of woe. Moody’s recently surveyed the field and offered this stark, antiseptic observation: “Moody’s expects that newspaper print ad revenue will decline by low-to-mid teen percentages through the first half of 2018, falling more steeply for national newspapers than for community newspapers.”

That’s bad enough, but the rearview mirror look is astounding, though not surprising to all those who have lived through it.

In 2004, newspapers took in about one quarter of all advertising dollars in the U.S. Now that number is less than 10 percent. Remember the notion of print dollars becoming digital dimes? This quarter-to-dime comparison tells us even more. As digital advertising becomes the leader in the U.S. for the first time this year, beating out TV, print media’s inability to get more than a few crumbs of it spell the story of decline.

Who’d have thought that student subscriptions would be hot business? At last report, The New York Times has announced that its “Sponsor a Subscription” program has provided 1.3 million digital subscriptions, largely to high school students.

What’s the goal here? It’s not to get the Times closer to CEO Mark Thompsons’ aspirational 10 million subscription goal; the Times won’t be counting those subscriptions in its circulation tally, the company tells me.

Clearly, there’s a long-term benefit, acculturating students with the Times early on to hook them as readers into their twenties. The program offers schools two choices for access: to be used either only on school premises or both within and outside school. About 60 percent of the schools have chosen on-and-off-school-property access.

The Times has taken in about $2 million in reader contributions, with one anonymous donor putting in $1 million and more than 15,000 individuals responding to Times ads. The Times says it matches those contributions, resulting in more than 1.3 million students gaining access.

A student subscription averages $3 a year, which is an interesting number. The Times doesn’t disclose how it got to that number, but it may tell something about the digital, paper-less future. Is $3 close to a fulfillment cost, the cost of actual digital manufacture and distribution? With the print world rapidly disappearing, the low actual cost of digital news delivery revolutionizes the business model of the 2020s — that is, if publishers can produce sufficient valued content at scale.

POSTED     March 31, 2017, 2:42 p.m.
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