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Net To Newspapers: Drop Dead

Newspapers are cockroaches. No matter what is introduced into the media ecosystem, the oldest of the Big Media survives. Despite decades of doomsayers, newspapers prospered through radio, through TV and cable, through video games, through the Internet....

Not so fast. Suddenly, even sober Wall Street analysts think something new is afoot.

What looms now "is different from all other threats," says Lauren Rich Fine (no relation), a Merrill Lynch & Co. (MER ) analyst who has covered the industry since the 1980s. Consumers are shifting decisively to online information, says Fine, especially the young, and are no longer yoked to the local newspaper. "Ads are following the eyeballs to where they make transactional decisions." Fine recently forecast that newspapers' profit margins are set to enter a long period of decline.

The new and troubling reality for newspapers is that even if they excel as purveyors of information to appreciative audiences, they still face tough business terrain. "They can try to be the destination where you go online and [can] be really successful with citizen journalism and blogs," says Fine. But such innovations are "not going to pay a lot of bills."

Newspaper execs are groping for some killer app, but nothing has yet taken hold. Charging for online content works for The Wall Street Journal, where Web-only subscriptions cost $79 -- still far below the $215 print subscription -- but no other brand-name newspaper dares to follow. The New York Times will charge Web users to read its columnists' prose later this year, but the Los Angeles Times just lifted the fee for its arts listings site, calendarlive.com. Washington Post Co. (WPO ) Chairman Donald E. Graham has said he won't charge for washingtonpost.com.

INTERNET DAMAGE WAS QUANTIFIED in an April McKinsey & Co. report on online classified ads that bluntly talked about "price destruction." The Internet's effect on help-wanted classifieds, the study found, cost newspapers $1.9 billion in revenue between 1996 and 2004. And classified-ad categories like real estate and automotive may not be exempt from such trends, the report warned. (The report is "a very shallow and superficial effort," says P. Anthony Ridder, chairman and chief executive of Knight Ridder Inc. and a past chairman of the Newspaper Association of America, which commissioned the study.) Newspapers have been hurt by the quiet march of free (or low-cost) classifieds on craigslist.org, which now serves more than 100 U.S. regions and 33 countries and logs more than 2.5 billion page views a month.

Further pressure may be discerned in analysts' studies showing recent increases in discounted newspaper subscriptions. This coincided roughly with widespread broad-band adoption, enabling painless perusal of endless free content. And it has occurred alongside the advent of free dailies from the likes of Sweden's Metro International (MTOAF ) and Knight Ridder, which in February bought five free dailies in California.

Companies like Knight Ridder and Tribune Co (TRB ). have also moved aggressively into low-cost and free classifieds online. But holding share via ultra-low prices means, in bottom-line terms, that "you lose for winning," says Fine, substituting lower-margin for higher-margin business. Knight Ridder exec Hilary A. Schneider disputes the lower-margin claim, pointing to successes with online and offline classified packages. But that doesn't convince. Given the Internet's vast, almost infinite, expanse, scarcity will never drive ad pricing online. "There's just so much inventory out there," says Deutsche Bank analyst Paul Ginocchio.

No medium disappears quickly, and it will be a while before rusting newspaper boxes creak vacantly in the breeze. Newspaper companies now pursue digital deals. Recently, Gannett (GCI ) acquired online ad tech provider PointRoll, and E.W. Scripps (SSP ) snagged comparison shopping service Shopzilla. Diversifying means snapping up Web outfits -- and therein lies an unpleasant reminder. Newspapers are cockroaches. But the Net's starting to resemble Black Flag.

credit: http://www.businessweek.com/magazine/content/05_27/b3941024.htm

Differing views of newspaper paywall potential

By paulgillin | - 11:55 am - Posted in BusinessModel, Newspapers, Paywalls, Solutions

In places where paywalls are working – and yes, they are working in some places – publishers have abandoned the metaphor of a wall and focused instead on bundled subscriptions that looked a lot like cable television. So writes Poynter’s Rick Edmonds in a summary of a report by the International Newsmedia Marketing Association (INMA) that looks at 15 successful paid subscription models.

No two are exactly alike, and some even challenge credulity, such as the Oklahoman, which charges 20% less for a combined print/digital package than for an online-only plan. That’s right, they pay you to take the newspaper. All the models have one thing in common, though: they’re working. Instead of being positioned as obstacles, they’re marketed as ways to serve  readers’ need flexible consumption via computer, smart phone, tablet or some combination of all three.

The INMA report cautions that hybrid subscriptions aren’t any easy sale. Readers need to have options and explanations laid out clearly, and digital can’t be positioned as an afterthought. However, readers have adopted so-called “digital replica” editions with surprising enthusiasm, indicating a fondness for the look and feel of print even when reading on a screen. The report also indicates optimism that paid subscription models can work when tuned to the needs of the specific audience.

Start by discarding the concept of a wall. Digital subscriptions need to be seen a convenience rather than a barrier. The emergence of multiple digital platforms may be the best thing that has happened to publishers over the last decade. It has given them a way to make simplicity a feature worth paying for, and audiences are proving to like that story.

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Andrew Birmingham isn’t quite so optimistic. The CEO of Silicon Gully Investments and a former associate publisher of the Australian Financial Review pens a lengthy piece in the Australian edition of CIO magazine arguing that pay walls are a fundamentally defensive strategy undertaken by panicked publishers whose entire business models are collapsing around them. “The time to implement paywalls was 15 years ago when [editorial content] was worth paying for,” he writes. “The time to invest in editorial was also 15 years ago when [publishers] should have been erecting paywalls.”

Birmingham’s conclusions aren’t particularly novel, but his explanation of the spiraling downward cost of online advertising is worth reading. Advertising networks in general, and Google in particular, come in for particular criticism. Both promised publishers easy money in the late 1990s, when times were good. The consequence, though, has been cannibalization leading to a plunge in advertising prices “from hundreds of dollars per thousand to $1 to $2 dollars per thousand in Australia across general news websites,” Birmingham writes. “In the US, they are now measured in cents per thousand.

Publishers did this to themselves, of course. Few understood the implications of the Internet on their businesses in the early days and most saw online advertising as simply frosting on the cake. Most are making the same mistake with social networks today, choosing to believe that Facebook is simply another publishing medium rather than a reinvention of the way people consume information. It’s good to see some paywall experiments paying dividends, but it’s also hard to believe that publishers will get themselves out of this mess. New entrants will have to figure that one out. In the meantime, playing defense probably makes sense.

Miscellany

Over in the UK, a hyper local startup called the Port Talbot Magnet is trying the direct approach: It’s asking readers to contribute donations to fund its news coverage. Visitors can pledge amounts starting at just £2 to sponsor a court reporter for a day, and PayPal is accepted.

Adverts, adverts, and finally adverts

Newspapers' reverse-publishing idea flawed

Newspaper production teams scored a big win when technology allowed for stories entered into a print publishing system to be sent automatically to their online CMS. No longer did they need multiple employees to copy and paste text from one medium to the other. And everyone gets the same content, be it online or print.

So the concept of reverse publishing, or publishing stories first online that will later be sent to the print product, will only improve things, right? Not quite.

The feeding of stories from print to online on an automated basis worked for a Web 1.0 world. This technology was a crutch for newsrooms to limp into online journalism.

But as most of us know by now, you can't change how folks use the Web by vomiting print-centric stories online. The two mediums are used in a different manner: 1,000-word stories don't translate into bytes.

Granted there are steps that can be taken to make those print stories amenable on the Web. You can break them up using subheads or with multimedia such as photo galleries, audio, video or interactives. But unless you're hacking paragraphs off that story, it's still going to be a problem -- users don't read long stories online (unless it's a really relevant story to that user).

So why would we want to employ a reverse-publishing model when it doesn't address the problem of not producing content appropriate for the medium?

Most newsrooms have separate print and online staff with some, such as The Roanoke Times, utilizing a combined newsroom. I think that although print and online newsroom staffs need to be merged, there needs to exist different responsibilities for each medium.

Online content producers should concentrate on collecting and disseminating information for that medium. Things like breaking news, database creation and multimedia should be their raison dêtre.

The print content producers will be deployed on stories that play well on paper. Examples of this are long-form storytelling and in-depth perspectives of issues. This will not be the inverted-pyramid approach to the previous days' news.

I'm not suggesting that the online team shouldn't produce content that is in-depth. To the contrary, much of their content will require an approach similar to the print content. It will be disseminated for the Web however.

A newspaper that employs this theory probably won't be able to produce a daily newspaper; a weekly would suffice. And that's OK. This makes sense with the media audience shifting from print to online.

So the only positive benefit to using a reverse-publishing model for newspaper content is perhaps the cost-savings associated with one system into of two. Though I think this would quickly be negated when you consider the complexity of such a system, and the size of the IT staff required to support it.

I think this method would improve content for both print and online while taking into account the wants of both the users and journalists alike. What's not to love?