Saturday, February 28, 2009

Local News Sites can make $$

Check out David Westphal's blog at the Knight Digital Media Center.

Recession? Local news sites are hanging tough

He's talked to several former journalists who are making a "for profit" go of it with local news sites. Real journalism. Real money.

Pace of Change: Astounding

Spend five minutes watching this You Tube Video credited to Karl Fisch, Scott McLeodfrom, and Jeff Brenman and you'll be amazed at the pace of change in technology, demographics, work place and consumer habits. It took 50 years for Radio to reach an audience of fifty million, TV took 13 years, but it only took Facebook two years to reach that kind of audience (its audience is now almost four times that size--and Facebook did it without any ADVERTISING).

The amount of information available to all of us is literally overwhelming. On the one hand, we want someone to help us sort it out, the job editors historically did, but at the same time, we want to do it ourselves, using filters provided by Google, Amazon, Netflix, and the like.

We don't trust the gatekeepers anymore, but we bemoan the loss of experienced newspaper editors. We want to "know" without being "told", but don't trust the anonymity of the web. Figuring out the right business model, one that builds on those mutually exclusive desires, and takes account of the rapidity of change and revolutionary technology, now...that's the challenge isn't it?

Wednesday, February 25, 2009

The genie is out of the bottle. Consumers won't pay.

"Did the industry make a mistake giving away for free on the web content generated for a profit in print? I don’t know if it was a mistake or not. It really doesn’t matter anymore."

--Still a Newspaperman

Why Are Newspapers Going Bankrupt?

Several reasons, really. The economy, particularly the slide in retail spending and related advertising. The internet, which "spiked" newspaper classifieds. Irrational bankers, and all the money they loaned based on unrealistic growth projections. And in some cases, greed.

Philadelphia. Seattle. Los Angeles. Minneapolis. San Francisco (See the latest WSJ story on possible closure of the Chronicle) . In all these cities, papers are either facing bankruptcy or already there.

Much of the immediate problem has to do with the heavy debt on those institutions. It is amazing to me that banks loaned such HUGE amounts at incredibly high multiples of EBITDA(cash flow). They did it before 2001 (my company benefited from it) and then even after losing millions in the last downturn, they did it again. Not anymore.

Didn't anyone at these banks think the economy might sour or the internet might devastate the print business. (Oh that's right, those were the same bankers making home loans to people without proof of any income.)

Didn't anyone at those newspaper companies think they might not be able to service the debt?

Alan Mutter's Reflections of a Newsosaur offers an excellent summary of the debt of major newspaper companies. Particularly like his Default-O-Matic chart. (Above.)

I've had some personal experience with the problems of huge debt and declining cash flow. It ain't fun. But it can be overcome.

In 2001, our B2B publishing company, 101communications, which exclusively served the technology marketplace, faced a severe meltdown in advertising spending. Then in the aftermath of 9/11 folks stopped traveling to our trade shows. And the anthrax scare killed our direct mail, list rental business. We had $50 million of debt on the business and couldn't make the interest payments.

But we survived. We learned to distinguish between "essential" and "nice to have". We had to downsize by 30%, and stopped publishing six of our 16 magazines. We renegotiated our debt. And the reality of a possible bankruptcy made us aggressively shift to web publishing and innovative ways to attract internet revenues. Then we grew profits at a rate of more than 20% per year for about five years. So it is possible to survive, recover, and thrive.

Unfortunately, it may be too late for some of our newspapers.

Leading and Managing a Media Enterprise in this Economy

"As the executive leader at your media company, you have to provide stability but demand change, inspire risk-taking, but play it safe, cut costs while growing market share."

-From my "Executive Perspective" column in December 2008 issue of Folio: magazine.

In case you missed it, here's the full column.
“I’ve never seen anything like this before.“

That, it seems, is a common refrain in the halls of publishing and Internet companies across the nation. (Not to mention auto dealerships.)

My, but don’t we all have short memories. Where were you on September 12, 2001? Not only were advertising budgets slashed in the weeks following the 9/11 attacks, but travel budgets disappeared overnight, and folks were afraid to fly to trade shows and conferences.

I’ve lived long enough now to remember vividly several so-called “unprecedented” downturns in the economy: The 1987 market crash. The 1991-92 advertising recession, made even worse by the Persian Gulf War, as consumers stopped spending. The 2001 NASDAQ slide down a steep cliff. The virtual freeze on spending, traveling, and advertising that followed 9/11.

In each case, publishers who relied on advertising had to wrestle with a seemingly sudden and severe downturn in revenues. They reorganized, cut circulation, reduced travel, instituted layoffs, eliminated glossy covers and worried that it would never end. But in each case, it did end. (And the Dow Jones averages recovered as well—in only two years after the 1987 crash, but it took more than four years after 2001.)

And so we’re at it again. Only this time, it seems like it might be different, that there are structural abnormalities in the financial system, and in the consumer psyche, that will take us deeper into the depths of recession and last longer, perhaps much longer.

Is It Really Different This Time?

Frankly, I don’t know how different it is. In past downturns, companies went out of business (anybody remember Pan Am Airlines or Home Savings and Loan) or were bought up at discount prices. But certainly not like the parade of notables we’re seeing today: Lehman Brothers, Wachovia, Merrill Lynch, maybe even General Motors. Financial and automobile advertising are the mainstay for many of us.

Whether we are in a shallow, short-lived recession, or a deep, long-lasting one, it’s not easy to operate a media enterprise in the face of so much uncertainty in the economy. In addition, the dramatic movement from traditional advertising to new media continues unabated and “old” media has to innovate and invest in order to compete effectively.

What to do in the face of such uncertainty and structural change?

It’s time to take a look at your business and decide what is truly essential. “Nice to have” is no longer worth keeping. A useful exercise I’ve used in past recessions, and borrowed from McKinsey and Co., is to determine how you would run your business if you had to reduce expenses by 40 percent. The 3 percent to 4 percent cuts are easy, but if your cost base is going to be almost cut in half, you’ll have some hard discussion about what is essential to your mission.

As the perceived value of print advertising slides, it is important to evaluate your circulation strategy. If advertisers want to pay less for print, they may have to accept reaching fewer readers.

Don’t Just Talk Online, Be Online

At the same time that you are considering major expense reductions, it can seem almost impossible to try to inspire and spark innovation. But innovation and investment is absolutely necessary for long-term survival, particularly in the midst of the structural revolution we are experiencing in consumer and advertiser behavior. Between 2001 and 2006, consumer magazine advertising increased 1.2 percent annually and business magazine advertising was up 4.1 percent, while the online alternatives were up 20 percent and 14 percent respectively, according to investment bank the Jordan, Edmiston Group.

If your Web sites are static, if you’re not experimenting with social networking and multimedia, if you’re not thinking of new ways to monetize the data that you collect, there won’t be much left of your business in a few years, maybe even sooner.

So while you are reducing staff and expenses in one area, you should be willing to pay top dollar to the few talented executives and editors who really understand the Web.

It takes more than talking a good game. CEOs need to feel a part of the electronic revolution and actually spend time on the Internet. Discover the latest experiment on some college campus, or even watch You Tube’s latest upstart competitor. It is not only legacy editors that can slow you down, but legacy CEOs as well.

In short, as the executive leader at your media company, you have to provide stability but demand change, inspire risk-taking, but play it safe, cut costs while growing market share. No one ever said it would be easy.


Tuesday, February 24, 2009


I've gotten about ten emails from folks who've tried to post comments unsuccessfully. This system is new to me so I'm not sure what the problem is. I've changed the settings so you don't have to enter those annoying letters in a box, and if you don't have a gmail or other specific account, your best bet is to use the anonymous selection. But if you do, please include your name in the post so we can see who is saying what. Thanks.

If anyone else knows how to fix this problem, please let me a comment, if you can.

Sunday, February 22, 2009

Pay For News

With newspapers falling by the wayside, news weeklies and other magazines next, and the long term profitability even of cash cow TV news in question, we'll have to figure out some new ways to fund quality journalism.

There are some great experiments. Paul Steiger's pro publico. The Center for Investigative Journalism is raising money to fund a Sacramento bureau. And now, there's a web site, that gets readers to "bid" on stories, and agree to make small payments to help fund investigative journalism. Here's LA Times' Jim Rainey's take

Seems like a bit of a stretch. But worth watching.

JOUR M02 Writing and Reporting for the Media: Former L.A. Times Publisher
Will Run LDS Holding Company

JOUR M02 Writing and Reporting for the Media: Former L.A. Times Publisher <br>Will Run LDS Holding Company

Saul Daniels blog spotted this news item about Mark Willes, former CEO of Times Mirror and Publisher of the Los Angeles Times. Called the "Cereal Killer" by the NY Daily News because of his decisions to shut down New York Newsday and the afternoon paper in Baltimore, as well as his background as an executive at General Mills, it's amazing to think that newspaper folk may now look back fondly at his era.

Thursday, February 19, 2009

Memo to Newspaper Publishers

When I left the Los Angeles Times in late 1998 to start a new magazine and internet publishing company, I never imagined how bad it could get at my long time employer. I had spent 15 rewarding years at the paper in a variety of legal and management positions. I knew the Times was caught in a time warp, refusing to recognize the real and serious threat of the internet. I knew it was a slow-moving aircraft carrier where committees and departmental fiefdoms slowed down decision making. I knew it was arrogant and didn’t care enough about the changing reading and buying habits of its readers. But I never expected it would be part of a company filing for bankruptcy.

In retrospect, it is easy to see where the newspaper industry, and the Los Angeles Times in particular, went wrong. The Times once had more than $350 million in classified advertising revenues, about 35% of its total revenue pie and the most profitable part of the newspaper. On a stand alone basis, the classified section actually made more money than the entire newspaper. Classified was dependent on real estate, help wanted, and automotive advertising, three of the categories that were to become the most successful on the world wide web.

In the 90’s in the newspaper industry, we paid lip service to digital media, and wasted money and time on partnerships, experiments and lots of talk. But we failed to actually internalize the real threat to revenue streams; we were more concerned about cannibalizing our existing dollars than going full bore into new enterprises. It’s the same reason why it was Apple that created a paid online music system, not one of the music labels.

Even now, with several newspapers in or facing bankruptcy, and an economic slide that has accelerated the inevitable shift to digital media, there are still many legacy publishers and editors unwilling to embrace the new era, with its changed readership and habits. Newspaper journalists--for all the “change” that they cover--are an incredibly conservative bunch who themselves are often unwilling to embrace change.

There are some things that newspapers publishers in general, and the Los Angeles Times in particular, should be doing to insure survival. First, acknowledge that print is dying. It is not a question of “if” it will die; it is only a question of when. It may not be in a year or two, and it will never completely disappear, but print simply ain’t gonna last as a viable self contained profitable medium. Internalize that, and you’ll make different decisions across the board.

The Los Angeles Times never grew up and decided what it wanted to be—it always wanted to be “all things to all people”. That was bad enough in the eighties, when the primary competition was the Orange County Register, but today, with competition from every corner of the world, it just won’t fly. The Times couldn’t decide whether it was a paper focused on the epicenter of the “Pacific Rim”, as one regime put it, or wanted to compete with the New York Times coverage of Moscow. It couldn’t decide whether it should compete with the LA Daily News in the San Fernando Valley, or the Washington Post. So it did everything. To survive in the new world, the Los Angeles Times, and every newspaper for that matter, has to make hard choices, and set priorities, rather than simply arriving at indirect priorities based on which departments get the fewest job cuts.

The Los Angeles Times should be able to exploit its brand name, journalism excellence, story telling and analysis capabilities and survive financially and journalistically, delivering a news and information product to readers in ways other than print on paper.

With that in mind, there are many short term efforts that will shore up profits, and maintain cash flows to fund innovation and development of an effective digital delivery system of great, but focused journalism.

In today’s blog, I won’t get a lot into the ways to improve on the web, but here are a few of the difficult, but critical steps, the paper should make to de-emphasize print and insure long term health and growth.

· Dramatically raise print circulation price—double or triple them--let circulation slide to a profitable level, and have users pay more of the cost of printing and distributing the print product.

· Simplify advertising pricing—its way too complicated; media buyers don’t understand it. It will also make it easier to sell, and require fewer sales people.

· Eliminate editorial zoning—do your geographic and demographic customization on the web site.

· Standardize production—limit pages, rethink section configuration, do everything necessary to reduce the number of press runs and related costs, even if you have to turn away advertising (but then try competitive pricing bidding for the scarce resource--print pages).

· Decide what kind of news coverage you do best, what’s really exclusive, invest in it, but rely on other providers for the rest. Take a lesson from blogger and journalism professor Jeff Jarvis, who has offered up a strategy for building a news room from scratch, and other ways to think about new business models.

· Develop new revenue streams. The B2B media has been using webinars (online training), white papers, email newsletters on niche topics, microsites and a slew of creative efforts to attract web advertising. Newspapers need to do a lot more of this, exploiting all the great content they already have.

I’m glad I no longer work at a newspaper. It’s been a difficult and depressing decade for newspaper employees in the ten years that I’ve been away from the business. But it doesn’t have to be. Make the hard decisions. Size the staff to the realities of today. And then join the digital world. There are so many important stories that can be told with new technology, networking abilities, reader contributions and multimedia.

Wednesday, February 18, 2009

Introduction Blog

So I've decided to become a blogger. I've spent 30 years in the media business, as a First Amendment and entertainment lawyer, a newspaper executive, the founder of a B2B publishing company. I've taught Media Business Strategies and Media Law at the University of Southern California. And I've written a lot--about the law in a weekly column for 10 years at the Los Angeles Times, in a regular column called "Executive Perspective" for Folio, the magazine about the magazine business, and for various journalism reviews.

I've been on Facebook for years and even started twittering a few weeks ago.

So I guess I'm "somewhat" prepared for the world of blogging. In this blog, I'll be writing about the changing media business, but from a business perspective. What business models work, what key metrics drive the business, how it is changing, and what it will mean to consumers, to advertisers, to society.

I'll try to share what few insights I have, and link to others who provide thoughtful, incisive commentary.

We're in a media revolution.

The editors are no longer gatekeepers. The amount of information we can consume is intense. There are no more geographic boundaries. At the LA Times, I spent a year leading a task force to develop a local news "zoning" strategy. We decided we needed 44 different zones to adequately provide local customized news in Southern California. But we couldn't cost effectively print and deliver 44 different sections every night. It almost seems quaint now,doesn't it? Because SoCal is much more than 44 different communities, it is made up of literally hundreds of geographic communities and countless more demographic ones. The Times can't print 44 different sections, but the web can provide hundreds of even smaller zoned, personalized news sites.

Figuring out how to create news and information sites that have sustainable, profitable business models is the challenge.

So we begin.