The media business is, at its heart, a consumer products business. A successful consumer products business is built on marketing. Any media company – old or new – that does not understand this simple truth, and live by it, will surely die.

But a lot of people in media refuse to accept the premise. Some will proudly tell you they are in “the news business.” But there is no such thing. News is not a business. News, like all media programming, is nothing but a cost center. Unless you identify, reach, convert and then develop profitable audiences for that programming, the cost of producing it cannot be sustained. From the application of marketing process comes the market and the product to serve it. Or not.

In every other consumer products business but media, marketing comes first. But in media, the product maven still rules. Inside newspapers, the editor still to this day determines the daily product mix. Instinctive editorial “judgment” is still preferred over the systematic application of marketing process. In newspapers, marketing is seen as nothing more than promotion, as selling after the fact what the editor has mysteriously divined. As a result, circulation has been in inexorable decline for 40 years. And not one newspaper company was able to build a genuine digital product, born on the web, the central failure that guaranteed extinction. Newspapers had never mastered the task of market-driven new product development in print, so they sure as hell couldn’t master it in digital.

There is nothing new in this idea about the primacy of marketing. In 1985, the Chandler family, then majority owners of the Times Mirror Company, decided to buck the convention of promoting publishers – former editors – to corporate chief executive. Instead they brought in Mark Willes as chairman and chief executive to turn their newspapers around. A former regional governor for the Federal Reserve, he brought to the job a career in finance and 15 years in the consumer packaged goods business with General Foods. It looked like an inspiring hire, at least to me. I’ve written about Willes before, check out: Mark Willes comes to Times Mirror

His background at General Foods led him to take a look at what the industry was spending annually on market research. Leo Bogart at the Newspaper Advertising Bureau had already figured that out. 0.2% of gross revenues!* For all forms of R&D! Audience, technology, inks, everything. The LA Times was spending even less. They were investing almost nothing in the business and its future. It shocked him. How could that be? Newspapers were in the consumer products business, the marketing business. No consumer products company could hope to survive by spending so little on understanding their market or on product innovation and testing. “You can’t ultimately save your way to prosperity,” Willes told his publishers and editors. “We have to grow. And if you really want to be successful, you have to start with the end user, then work backwards, rather than assuming you can just say we know what we can do, let’s see if we can find someone interested in that.”

His editors and publishers revolted. “Cereal Killer,” they called him. The editor of the LA Times squared off with him in front of everybody in her newsroom. “How dare you march in here and call our newspaper a ‘product?’” she shouted.*

Tribune Tower

Image courtesy Northfoto/Shutterstock

Three recent events triggered these thoughts about marketing and media.

First, on April 12, came Gannett’s unsolicited offer for Tribune Publishing. I was immediately intrigued. The offer triggered memories of my father, clutching my school report and bellowing “I don’t care what you say, two Bs don’t make an A.” What was driving this transaction, I wondered. What does Gannett see here?

The all-cash deal for Tribune was valued at $815 million, including the assumption of $390 million in debt. $815 million, that’s all, for a company that 15 years ago paid the Chandlers $8 billion for Times Mirror, which is how Tribune ended up owning the L.A. Times in the first place.

Gannett publishes USA Today and more than 100 other newspapers, including the Detroit Free Press, Cincinnati Enquirer, Arizona Republic, and Des Moines Register. It was spun-off as a standalone newspaper company from its broadcast sibling a year ago. Tribune Publishing was spun-off from Tribune Media, its broadcast sibling, two years ago. Print was dragging down results, on behalf of shareholders it made good financial sense to split the companies up and park the old declining pieces off to one side somewhere, after loading them up with debt of course.

So why does Gannett want Tribune? Does Tribune have some secret sauce they want to get their hands on? Doubtful. Very doubtful. Tribune CEO Justin Dearborn said on the first quarter earnings call last week – the company lost $6.5 million in the quarter by the way – that he had a plan to “substantially increase revenues.” I sat up in my chair, eager to hear about it. Among the initiatives he touted was the creation of seven international news bureaus in “entertainment markets” – Hong Kong, Seoul, Mexico City, Moscow, Rio de Janiero, Lagos and Mumbai – headed up, no surprises here, not by someone with extensive experience in marketing but by Davan Maharaj, publisher and editor-in-chief of the LA Times. I am not making this up.

  • What’s the market for the content to be generated from these bureaus?
  • What in particular is special – differentiated – about that content?
  • Has that differentiation been qualified and quantified in some way?
  • Does that differentiation inform a comprehensive marketing plan designed to both brand the product over the long term and also to build audience efficiently and quickly?
  • What will the audience pay to use the product? What advertisers are on the hook to support it?
  • Will the content drive the development of successful new digital products that audiences cannot live without?

Alas, no light was shed on these essential questions of marketing. I slumped back in my chair again, my mood stuck once again in what is now an all too familiar place, a place that lies somewhere between derision… and dejection.

Look, it’s obvious that there is no secret here, no breakthrough product insight that Gannett wants to exploit. And since there’s not, the attempted takeover is nothing but financial arithmetic. It’s value re-distribution, not value creation. As Warren Buffett has said, a roll-up means little unless it triggers some kind of multiplier that accelerates earnings across the bigger platform. In the absence of such an effect, there is nothing here but a story intended to string Wall Street along for another year or so, a story about embedding USA Today branded content inside a bigger network of local newspapers in order to create a national-local print news and advertising network from the bottom up that one day, some glorious day, will be switched, just like that, to a digital platform, thus magically ensuring a vibrant digital future for Gannett. Do you buy it? If you do, ask yourself – when was the last time you read USA Today, print or online?

Yes, I thought so.

The essence of capitalism is the efficient allocation of funds, right? The markets drive investments to promising businesses and deny them to those destined to die. And newspapers, print or online, are destined to die. A good story can prolong the agony, but at some point and sooner than the folks at Gannett themselves can currently see, the clock will strike twelve and all will turn to pumpkins and mice. Meanwhile the two companies will do the dance. Tribune will invoke a poison pill. Gannett will sweeten. Posturing. Threats. Recrimination. Another sweetener. Handshakes. Stocks will rise. Then stocks, assuredly, will fall.

The value of marketing again came to mind when I read of the departure of Alan Rusbridger from The Guardian, the darling newspaper of the British left wing. Studiously rumpled in the way of the fey Oxford intellectual, Rusbridger was lauded by his peers as one of the finest journalists of his generation and under his tenure, The Guardian was often talked about as a digital media innovator. But last year it lost $65 million and this year the company is cutting its workforce by more than 300 positions. The final straw was his adamant refusal to charge online subscribers. He insisted that a digital paywall was counter to his newspaper’s editorial mission. Really, he did. And all he ever offered was his newspaper, online. That was his singular answer to the central challenge of digital. As you can see here, he views himself as an old-fashioned newspaper man, far removed from the grubby world of business and marketing: Alan Rusbridger says farewell

This was never about the newspaper online, or indeed the future of “newspapers” themselves. It was always about the search for assets deep within them that might be leveraged successfully into brand new digital products. There’s no reason at all why newspapers could not have invented Yelp! Groupon. HuffPost. Vox. Or Buzzfeed. But editors like Rusbridger, blinkered by their historical allegiance to the newspaper way of doing things, were precisely the wrong people to lead such a search. Editors make lousy marketers. It’s not their fault. They just, are.

And then, thirdly, I came across an old post in the august Harvard Business Review entitled “Traditional marketing is dead.” You can read it here if you like:  Marketing is dead I was intrigued at the revelation and read further. It soon became apparent that the writer was making the common mistake of equating marketing with advertising. And I thought to myself, jeez, even given the error of definition, his conclusion seems odd. US advertising spending has been growing consistently at around 4.5% over the last several years and digital advertising itself has been skyrocketing at a 20% rate year over year. It occurred to me then that it’s not just newspapers that fail to understand marketing. Many of today’s digital luminaries don’t know jackshit about it either. They live on Mars. Consumers live in New Jersey.

There is nothing about digital that upends the fundamental principles of consumer marketing. Getting to a sale – acquiring a user, a customer – is still a function of the famous 4 Ps, product, price, place and plan. And the process of figuring out the delivery end of a marketing plan is still a process of evaluating the role to be played by the four basic promotional instruments, advertising, sales promotion, direct marketing and publicity. Digital doesn’t eliminate any of them. Digital is just a new channel, a new tool in their delivery. So the same old rules that have always governed media still apply, because until you efficiently reach somebody and demonstrate why they should care  passionately about the stuff you create, you’re nothing. Video can’t save you. Nor can a morning briefing app, a Snapchat channel, a spot on Facebook Instant Articles or a Twitter partnership. Nor, interestingly, can scale save you, no matter what the Silicon Valley digerati say. Raw numbers don’t trump engagement or attention. Humans are not consumption machines.

To build a passionate audience takes more than publish-and-pray. It takes market definition, knowing your market inside and out and developing a plan to reach into it for trial and conversion, a plan that goes beyond the glib notion that advertising is dead and all you need now are SEO techniques and “viral co-efficients.” Building a product and marketing plan is hard work. And no algorithm can do it for you.

Problem is, digital marketers live in an echo chamber of pretentious slogans. “Content marketing is the only marketing left,” someone called Seth Grodin said recently. He was formerly Chief Revenue Officer at Mashable, need I say more? Stop it with the precious language thing. Content marketing is simply, sponsored edit. Over at Andreesen Horowitz, one of my favorite blogs, they like to say that software is eating the world: Software is eating the world It’s not. The world is drowning in bullshit. Rather than inventing new terminology and presenting it as rare insight, digital media people would perhaps find it more productive to help their advertisers think about applying digital within the context of marketing techniques developed and refined over the last 100 years. And maybe they could even apply those techniques to grow their own media products.

Years ago, just before Tribune went nuts and gave the Chandlers their $8 billion, I recruited Chip Perry away from Times Mirror to join us at Cox. He became the founding CEO of Autotrader.com, our auto classified play. One of the first principles he established was that the new company would never fall into the trap of arbitraging traffic from Google. “We’re in the long term, big brand building business,” he said. So while SEO and other digital investments were of course critical elements in the mix, up at the top of the funnel were multi-million dollar advertising investments on the Super Bowl and during the World Series. ATC.com is the largest digital auto sales property in the world today. By far. By applying basic marketing principles, Chip and his team built an enduring brand and with it, enduring financial value in the billions of dollars.

I make this point not because I believe that every digital media start-up should go out and make a big television buy. Rather, every start-up should have in place a comprehensive marketing plan that is the result of an open-minded and empirical assessment of all the promotional options. Contemptuously dismissing traditional media’s power in the marketing funnel is foolish. Assuming it’s too expensive is also foolish. Free is not necessarily better. It hardly ever is. Every start-up business plan I see always under-estimates the necessity and expense of traditional promotion. Yet it always has a role to play in building an audience for any digital media product.

If you still don’t buy into the idea that marketing should come first in new product development, that marketing analysis trumps editorial hunch, that marketing is not simply promotion or advertising, that digital does not somehow pre-empt the established rules of marketing discipline, then at least do one thing for me. Of all the great things that Buffett’s mentor Charlie Munger has said or written, here’s the best. Ready? “You want to deliver to the world what you would buy if you were on the other end.” I don’t care if you’re in product programming or advertising, can you at least do that?

In the absence of sound marketing practice, that small commitment would at least take us one little step closer towards a world with less content schlock, less bot-driven banner advertising and maybe even, with a bit of luck, less pretentious twaddle.

Okay?

 

Footnotes: “Press and the Public,” Dr. Leo Bogart, 2nd Edition, 1989, p354 / Cited in American Journalism Review, July/August 1995, Carol Pogwash, editor

 

 

Posted by Peter M. Winter

Peter is a traditional media veteran and a digital media pioneer. He is an active angel investor and occasional consultant. He advises established companies on cultural regeneration and also consults to digital start-ups, helping them incorporate management process without sacrificing speed. He holds five technology patents. Peter is an award-winning public speaker and writer. His new book "Cowboys and Cannibals," will be published in 2017 - it is the ultimate insider account of the battle to find a digital future for newspapers when the Internet came to town. He blogs on media and leadership at BlastofWinter.com and publishes his unconventional ideas about management on his LinkedIn page. His collection of short stories can be found on Medium.com, at Peter Winter's Life of Fiction

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