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RSSMost newspapers don't have a core competency. They have several. They are much closer to vertical monopolies than they are to point solution providers. They are not just news gatherers and reporters and editors. They are printing companies. They are distribution companies. They are ad sales companies. They are direct marketing companies. They are digital media companies. Many are good at all of these functions. Digital competition and audience fragmentation are fracturing the business models that have built these great, vertically integrated companies. While they are clearly not sustainable as they are, they might be quite sustainable in horizontal pieces. Here is my thinking:
- Local news and news editing. Newspapers are generally pretty good at local news and news editing. The problem is, they can only leverage that capability in their print newspapers and on their Web sites, and the two together are not likely to be able to pay the bills required to run great newsrooms. OK. Why not spin them out as news companies, continue to have them providing news to the print and Web precuts, but permit them to service any number of other businesses, from newsletters to specialty weeklies to global news services? Let them free to do what they do best and to develop new and diverse customer bases.
- Distribution. Newspaper companies are one of only a few companies that pass virtually every home in their markets once a day and have the capacity to deliver physical products. Many newspapers have had success converting their distributors into alternative distribution networks, delivering everything from magazines to marketer samples to other print news products. Let these folks free to find the best ways to pay for the trunks, cars, drivers and gasoline.
- Ad sales and direct marketing. Newspaper companies are generally the leading sellers of advertising in their markets. Why sell just for the newspaper? Why not sell for other local media? Why not sell for national media to local advertisers? Why not become local marketing solutions companies, since most local markets have very few ad agencies that have expertise beyond creative and strategy? Let sales sell, and let them fill up their quiver with lots of other media and marketing solutions.
- Printing. Printing is very expensive, and getting more so. The commercial printing business is growing fast, and many newspapers run commercial printing as a sidelight, to help defray the capital investments in printing and plant and the expenses to run them. Why not make commercial printing the primary role of the operations and make the newspaper just another client? Let the printers print for everyone.
- Digital. Most newspaper companies have local Web sites and digital teams. While they help the newspaper "go online," many of the things they do go well beyond the normal role of the local newspaper, whether it be in Web site design, email newsletters, qualified lead generation, search marketing, and much much more. How about letting the digital folks free to build the best digital businesses possible, and just have them license the news feeds and leverage the sales company, if they so desire.
Is disaggregating a newspaper company much easier said than done? Certainly. Is doing it probably one of the keys to survival for many newspaper companies? I think so. What do you think?
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Disaggregating Newspapers Won’t Help Most Dailies Posted on Friday 21 December 2007 |
In an interesting post yesterday, Dave Morgan (Executive V.P. of Global Advertising Strategy for AOL) suggests that by disaggregating their businesses and opening up each component part to operate and even compete independently, daily newspapers can save themselves from complete oblivion. Clearly, there is some merit to Morgan’s argument, and some papers (mostly in the weekly newspaper and alternative publishing segments) have already started to take small steps down this path. I also agree with Morgan that the vast majority of dailies in the U.S. will eventually have to transform their business models (radically in most cases) in order to survive. The problem is that very few daily newspapers are equipped to manage such a transformation. Not only is management, for the most part, completely resistant to change, but the core, fundamental characteristics of the daily newspapers themselves are simply not suited for the types of changes that Morgan and the shifting, competitive landscape demand.
Local News & News Editing - Morgan proposes that local dailies license their news, reporting, and investigative journalism content to other local, national, and international sites. Unfortunately, the quality of this product has been curtailed dramatically over the past few years as the dailies have reduced staff, eliminated columnists, and shut down bureaus. In the past year, I have kept loose track of the major local stories that I read about first in other newspapers or on the web (from both professional sources and blogs), and it’s astounding how rarely the Star Tribune (our local daily in Minneapolis) is the original source for local news. There is simply not enough value in this product to allow local dailies to sell, in sufficient volume, their content.
Distribution - Newspapers do have the potential to add revenue streams from their distribution networks, but is it big enough to warrant a separate business? And as newspaper subscribers continue to decline, the number of households served will diminish over time, and the value of the network will deteriorate.
Ad Sales & Direct Marketing - Morgan suggests that newspapers can sell advertising for media vehicles other than just the daily paper. I cannot imagine a media business ever turning even a portion of their sales operation over to the dailies. Daily newspapers have never developed a true sales culture within their organizations. Ever. As monopolists in their markets, at least until the arrival of the internet and alternative weeklies, their sales forces have always been and largely still are simply order takers who do little more than ask for a credit card number and the print-ready copy of the ad to be placed in the paper. Despite some pretty favorable attributes they enjoyed a decade ago and what was then a decent head-start lead over the web (which has obviously evaporated since), newspapers have struggled massively to transition to a more sales-oriented culture that can effectively sell to customers who are increasingly demanding a unique, measurable, and significant value proposition. Other than an extremely small number of exceptions, newspapers will never be able to generate revenue by selling advertising for other media properties.
Printing - Most newspapers are already generating revenue by turning their printing operations into a profit center. Unfortunately, this hasn’t helped much to this point as evidenced by the horrendous performance of the large newspapers around the country.
Digital - Morgan suggests that newspapers could help themselves by letting their web teams loose to compete in the open market. Much like the argument against them letting their sales force loose, I cannot imagine turning to the local newspaper’s web/digital teams for anything. Most local newspaper web sites (and I mean local - not the Washington Post, New York Times, or Wall Street Journal) are poorly designed, difficult or impossible to navigate, utilize antiquated search, and annoy readers with features and advertising that few care about. Even worse, most newspaper sites are years behind in the adoption of web technology. This is precisely why newspapers are in the predicament they’re in - they simply aren’t able to compete against smaller, smarter, nimbler, more innovative companies that have grabbed market share away from them. So why would anyone suspect that those same in-house assets have the faintest hope of competing in the marketplace?
Disaggregating newspapers into smaller businesses will not save most daily newspapers. Having said that, however, I do think that many will do exactly what Morgan advocates - some by choice, and some because they have no choice. But in the end, it won’t make much difference. The newspaper business has seen its best days.
1. The printing press as printing company idea is not new and has been in practice at least 15 years I know of. Jerry Zenick, Fort Worth Star-Telegram, was doing that in the early 90s. At the same time, the S-T was even leasing out bandwidth back to the phone companies from the high-speed fiber-optic lines that went from the downtown office to the southside plant. So there's another "horizontal" for you.
2. Yes, newspaper sales reps are not good at even repping newspapers, for the large part. Packaging of ads (daily, special sections, internet, coupons) is difficult for the average rep when it's spelled out with little check boxes in front of each item. I've seen at least three separate print properties, jazzed up on some digital fusion or mobile initiative with clear, creative, strategic value, get thumbs up through all departments only to wither and die on desks in ad sales. The epitath is always the same: "Our ad people are trying to wrap their brains around it." It, being everything that is not a display ad, coupon or banner.
3. Even small publishers in local communities will tell you that news itself is fading fast into a commodity. The hyper-local strategy that many papers are fostering relies on community participation, and doesn't sell well out of town. The big story items like train wrecks, natural disaster, etc.? There's a little cooperative called the Associated Press that most newspapers belong to, and the old United Press International ran out of gas years ago. "Free" the news folks to do news? It's bad enough to re-invent the wheel, let alone re-invent the wagon wheel.
4. As has been observed by so many, the newspapers sat out the internet boom until it blew up in their faces. Yes, people in the news orgs do get it, do lobby for change, and some papers are leaders - but only comparatively. News companies, ironically, aren't very nimble. Google has raised plaigarism to the most highly paid science, wherein orignators of actual "content" are reduced to share croppers.
Possible answers:
1. Do what you can with cooperatives like Kaango for classifieds, to build a new mutual network yet guard home turf, on the internet.
2. For God's sake, mobile is upon us. Quit pining about the old days and pretending you can get audience back with web models that should have been thundering from print entities in the mid-90s. Don't repeat history. Don't sit out the second digital revolution. This mobile era is coming up fast. Be in it with something that makes sense and capitalizes on local in an intelligent, useful, right-size format. Local newspapers everywhere and every size happen to be sitting on real turf, not algorythmic assumptions. Make your local media name all over again and bring this medium to the audience that thrives on niche interest and short messages and handheld hardware. Cordon off Bermuda Triangles in your organizations where initiatives disappear. Hire sales people who get it. Otherwise, print companies spreading thin into badly conceived horizontals will just make a perfect sandwhich for the search engines' lunch. I guess that would be freeing. In a Bobby McGee sort of way.
I can tell you unequivocally that newspaper as an industry suffers from a complete lack of imagination. "Order takers" is a charitable term for the sales departments. Entire generations of sales departments at newspapers have never had to sell in a competitive environment. Yes, order takers are there for generations, trust me. As the local newspaper monopoly there has been no challenge to their ineptitude. But they are not alone as the reason why most newspapers will not survive the digital revolution.
Editorial departments have grown fat and lazy. It's too easy to fill open edit space with wire stories and press releases. Why would you want to go out and actually report the news? When was the last time your local paper actually blew the lid off something news worthy? Hard nosed around the clock reporting is far too much of a stretch for newspaper editorial departments.
As a former newspaper publisher, I can tell you that newspaper distribution leaves a great deal to be desired in terms of efficiency. It is certainly not the first place I would go to distribute product unless it's a sample with the paper. That's because you can rest assured that when the paper doesn't arrive the subscriber will call for follow up delivery.
Printing is already a profit center for most small to medium sized newspaper publishers. That is if what you need printed is broadsheet, tab or flyer. Most publishers lack any real capability beyond those products which are quickly being replaced by more affordable "slick" media in the form of small magazines.
Unfortunately, newspaper's web presence is all over the place. Newspapers like most print publishers cum Internet publishers fail to use the full functionality of the web. Stories no longer have to be type only. The occasional photo is a failure to understand the power of video combined with in depth reporting in adjoined print. The newspaper writer of today should be equipped with laptop, cellular uplink and digital video camera. The stories are out there and a new age reporter can bring it to the reader.
While my outlook my sound bleak, I actually believe that newspapers can survive the move to the web but that means they will have to begin today reinventing themselves. If newspapers will firmly invest in strong sites that support the latest in rich media and move to a 24 hour news cycle they could become important local news outlets moving forward. The paper version of the publication will have to be downsized along with the large staffs. The new streamlined entity can be as profitable as its print forefather but it will take vision and imagination that is not present in most of these organizations today.
A consultant (from Bain?) argued a similar case at last year's small market roundtable before the NAA Marketing Conference (sorry, lost his name), although he stopped a bit short of Dave's solution. He noted that a great deal of a newspaper's business is tied to volume. But as circulation goes down, the routes remain the same length, but with fewer stops. With fewer subscribers, there are fewer bills to mail out (why are we still doing that at all?) , yet there are still the same number of people in the accounting department. With a smaller newshole and less advertising and fewer subscribers we're printing less, but the cost of running the press remains the same (less a bit of paper and ink). So...why not free up cash flow by outsourcing any and every variable expense? (A few papers are now outsourcing ad production, which would seem to follow the same model.) And free up capital by selling the printing press -- or at least do what Dave suggests, and make it the best commercial printer around. Then take the money and invest it in the web and video and mobile.
The net places the power in the hand of the individual user, allowing them to be judge, jury and king.
There is comfort in knowing one day, the net will be just like papers, functioning more as information centers with an abundance of watered down opinions. If papers can somehow hang in here, keeping their brand in the fore-front, they'll be fine.
Now if I could only be Bill Gates or Jimmy Wiki or Mark Cuban or ________.....