• by Dave Morgan , Featured Contributor, October 2, 2008

The U.S. newspaper industry is in tough times, and it's getting worse. As many of you know, I worked in the newspaper industry a number of years ago and like to write about it from time to time. Given the financial predicaments that many U.S. newspaper companies find themselves in these days, particularly those that publish metropolitan, or "big city," papers. I thought that I would use today's column to offer some of my suggestions for "reconstructing" the American metropolitan newspaper. Here goes:

Face reality. Until newspaper companies face the reality of what's happening, change won't occur. Newspaper companies and their management teams have to recognize that their problems -- falling circulation and readership, plummeting ad revenues, disappearing classifieds, and exploding fixed cost structures that won't go away -- are secular, not cyclical. It is disingenuous to claim that the economy is killing newspapers. It is not. A confluence of factors undermined newspaper business models, and many of those factors were at work for the better part of the past 30 years.

Prepare for disassembly and reconstruction. Most U.S. newspapers have been monopolies in their markets for decades. They dominated local advertising and news, and could raise rates and circulation prices largely at will. Over the years, they vertically integrated their supply and distribution chains -- from trees to trucks -- to maximize their margins and to eliminate dependencies. Along the way, they discovered sub-franchises like classifieds that delivered extraordinary profit margins and permitted them to extend cost structures that significantly over-reached their historical local news franchises. Today, in no small part because of the Internet, newpapers are monopolies no more and can no longer dictate artificially high ad rates. Their survival requires that they disassemble their bloated cost structures and give up control over a number of parts of their businesses and underlying capital structures.

Shrink print products dramatically. I believe that consumers and advertisers will want and consume local printed news, information and promotion products at least for the next ten years or so. However, neither consumers nor advertisers will continue to accept the multiple-pound packages that hit their doorsteps today. They are wasteful. The future of print will be about smaller, better-packaged products, many with subscription prices that are significantly above where newspapers are today. General news products won't be delivered every day, but will avoid days when there is little ad support, like Mondays and Tuesdays. These products will range from free products delivered to households with high value to marketers, to niche products targeted to lifestyles or life-stages like golfing or parenting, to premium, magazine-like products with more impactful copy and advertising.

Dramatically reduce and refocus newsrooms. Today's newsrooms were created to build and fill big broadsheet newspapers with big profit margins. They were wonderful at this task -- but filling large daily broadsheets with subsidized circulation is not the future. Instead, the successors to today's newspapers will focus on delivering news, information, advertising, commentary, conversation, conscience and community to people when, where and how they want it.

Newspapers won't get there if they don't shrink and refocus their editorial talent into a few critical areas of reporting like local news, government and community events, and put the vast majority of their focus on providing and promoting a platform for their readers to report and comment about the issues they care about, whether schools or roads or the local economy or youth sports or local elections or crime.

The newsrooms will no longer set the agenda; they will "curate" the work of those who do. These contributions won't just appear digitally -- on newspapers' Web sites, newsfeeds and social pages -- but will provide great fodder for analog products as well.

Partner nationally. Local papers need to get out of the national and international news business, certainly in print. A national newspaper like The New York Times needs much more print circulation and readership, or it will never reach the critical mass that advertisers require to really make a long-term go of it with their print product. There should be a partnership there. Why not use the metro newspaper to "wrap" a reduced national version of the NYT? Or the WSJ, now that Murdoch is getting more aggressive with it? In many markets, the metro paper is already printing and distributing one or both of those papers, so why not take it one step further and combine the products? Not only would there be cost savings, but if done in multiple markets, this could add millions of readers to the national products and their advertisers. (Note: I don't care about whether this move would pass muster with ABC circulation rules. Following these archaic rules is one of the things that got U.S. newspapers in this mess.)

Exit printing and distribution. Printing presses, massive mailrooms, fleets of delivery trucks and drivers don't belong in newspaper companies any more. Newspapers should either outsource their printing and distribution or, failing that, try to consolidate all of the printing and distribution in their market, and then spin off that business as an independent entity. The days of trees to trucks vertical integration are over, as are their distractions.

It's all about local marketing services, focus on that. The key to local advertising is no longer in maintaining distribution monopolies, but in helping local businesses best apply their marketing spend, whether in media, direct marketing, public relations, local event marketing, paid search, search optimization, lead generation or lead conversion. Most local businesses, and certainly a large number of small and medium-sized enterprises, cannot do this on their own. This is a great opportunity for newspaper companies to exit the order-taking world of print ad sales and enter the marketing services world that is part ad agency and part strategic media seller. Whoever controls these local marketing services will not only control local media, but will someday have the market capitalizations and profits that newspapers once had.

Reconstructing the American metro newspaper won't be easy, pretty or painless, but the alternative is far, far worse. What do you think?