Do you want local news – or local newspapers? You can’t have both.

I have a friend. Her name is Anne. She is smart, rich and beautiful. She comes from New Orleans.

I have another friend. His name is Tim. He’s smart too, and he also comes from New Orleans. Poor fella used to work for me. Recently he took up a new position as head of NOLA, the media group in New Orleans owned by Advance Publications, an arm of the Newhouse family. It includes the 180-year-old Times-Picayune newspaper.

I caught up with Anne over the weekend. “You have to put me in touch with Tim,” she says. “I want to know what he’s going to do to bring the paper back. I hope he’s going to invest more in local journalism.”

You have friends like that I’m sure. They just can’t let newspapers go. They worry that when the ‘free press’ finally disappears there’ll be nobody around to keep local politicians honest and local voters informed. (Keeping politicians honest is a sensitive subject down there in N’awlens). They think newspapers are indispensable, that there’s no alternative vehicle for providing righteous, trustworthy local news.

They think that everyone else is passionate about local news too, just like them.

So their answer to the sorry state of newspapers is reflexive: Stop the newsroom cuts and invest in more local news coverage. Yep, that’ll stop the slide for sure.

But they fail to understand that everything about newspapers – not just the business model but everything – is obsolete. They fail to understand that daily newspapers are not suited to the business of providing local news in the digital age. And they fail to understand that making the newspaper available online did not arrest the decline. In fact, it had the opposite effect: It accelerated the fall to extinction. It guaranteed that the core expense of producing a daily newspaper would continue even as print and digital audiences shrank and advertising dried up.

Local news is all that’s left of the core daily newspaper franchise – and therein lies the problem. I’ve said this here before but you may not have been listening: Local news is a weak differentiator Note that I’m talking here only of local news. About a third of all Internet searches have a local destination in mind, but that’s to do with function and utility – not news. Your guess is as good as mine as to why local news does not stimulate broad audience interest. A highly mobile population less loyal to where it currently lives? General disillusionment with the political process? Time compression? A million other media choices? Whatever. Even local television newscasts suffer from perennially declining viewership – and local television stations are the masters of inflated drama and repetitive promotion. Live. Local. Late-Breaking. Local news was always less than 15% of a daily newspaper’s output anyway. In other words, important, but not that important, just a sliver of the content pie consumed every day.

Once the Internet blew up local newspapers’ ancient physical monopoly, their central bundle of general news, sports, business, lifestyle and advertising content was eviscerated. No longer was any of it exclusive, for the walls came down and the competition, suddenly, was just one click away. Classified advertising went quickly, its economic value an irresistible target for digital marauders. Pretty soon local news became the only thing newspapers had left. And it quickly became obvious to all but hidebound newspaper leadership that not enough people cared enough about local news to make the ongoing heavy spending on newspaper equipment, infrastructure and personnel worthwhile. Spending a buck to make a dime is never a good idea.

But the revelation went right to the heart of the newspaper belief system.

“What the human being is best at doing is interpreting all new information so that their prior conclusions remain intact.” Warren Buffett

It was impossible for any newspaper to admit that local news, the raison d’etre, was not strong enough to prop up the franchise, just as it was impossible for them to admit that their famous bundle of content was no longer worth a damn because the New York Times, Bleacher Nation, Bloomberg, the Weather Channel and every other source of information and opinion in the entire world was now just one click away. So as print margins evaporated and digital revenues underperformed, still newspapers couldn’t let the model go. Distribution centers, call centers, layout specialists, composing rooms, photogs, layers of editors, managers and supervisors, you name it, all the fundamental infrastructure designed originally to move pieces of paper around town stayed in place. The endless cutbacks that have gone on ever since have been intended to preserve the newspaper model in amber for as long as possible, when it should have been blown up.

Just as local television stations run on assumptions and economies that are different from those that underpin local newspapers, so the business formula that underpins print media does not apply to digital media. And here’s the thing: That huge newspaper cost structure has zero to do with delivering on the promise of a local news business in the digital age.

So, while I subscribe, I think, to the piety that local news is essential to a well-functioning democracy, my decades in the media business tell me that from a business perspective its value is tricky to find and hard to exploit. Even if you want to leverage the marvelous efficiencies of digital media, you had better take care of the expense side of the ledger. As my fellow commentator Ben Thomson wrote recently over on his blog Stratechery, insisting that a local newspaper is essential for the provision of local journalism is rather like saying a tank should be used to kill a fly. A flyswatter would do the job just fine. Besides, it’s much cheaper. And it would probably be more effective.

If I ever got back in the media game, I’d try to persuade whoever had been foolish enough to hire me to shutter the company’s newspapers and bid farewell forever to the nostalgic dreams of monopoly margins and the nightmare of managed decline. Oh sure, there is still some cash to be extracted, a little bit of print advertising yet to be harvested. But I’d leave those last few nickels and dimes on the table in the interests of advancing a genuine digital alternative.

Advance, the company my pal Tim now works for, is that rare beast, an intellectually honest media company. About five years ago the company stopped publishing daily newspapers like the New Orleans Times-Picayune seven days a week. Times-Picayune ends daily publication They were lambasted from all quarters. It wasn’t just journalists who went nuts. Otherwise quite reasonable people, some of them experienced business people, accused Advance of failing in its “civic duty.” “Is it about the money and that’s all” they asked. Really?

It reminds me of the time my pal David Hiller, when publisher of the L.A. Times, tried to get advertising on the front page of the paper. This heretical initiative precipitated an emergency meeting in the boardroom of the paper where leading denizens of L.A. society, people like George Schultz and Casper Weinberger and Shirley Black, gathered to vent that “their” paper simply must not be prostituted in this way. Republicans all, too. So much for conservative business principle.

In fact, by falling back to three days a week the hard-headed Advance was not just acting out of its best short-term business interest – after all, newspapers make 75% of their money from weekend editions. They were also looking to manage expenses in order to prolong the slide down, so they could buy time for a digital transition. In the end their honesty didn’t matter. Still they found themselves trapped in the newspaper product metaphor and functionally incapable of evolving out of it. You can’t manage your way out of a mental trap like that. You have to force it, abruptly, harshly, categorically. The Wall Street herd might have its head up its collective ass. That doesn’t mean you have to put yours up there too, not unless you want to live like the miserable people who run once-great local newspaper franchises like the McClatchy Company. McClatchy woes

So, on day one in my new job I would mount a frontal attack on the newspaper magisterium, on that sense of noble superiority that has crippled their competitive response to the challenge of the digital age. I would try to shutter them, all of them. And damnit, if my boss persuaded me there was still too much cash in them to forego, I would at the very least completely separate them from my attempt to build a new local news digital franchise. I would make sure the newspaper did not encumber my new business in any way – not financially, not operationally, not in sales, not in product and above all else, not culturally. The newspaper can keep on doing whatever it wants as far as I’m concerned, my attention is elsewhere. I don’t even want free newspaper promotion, print or digital. I’ll buy it at market thank you. Nor do I want a link to their local news operation for copy, I’ll go get my own contributors and my own newsfeeds. Newspaper journalists are not blessed with special access and privileged insight and anointed judgement, though they sure act like they have a lock on all that. My new business must have full running room in the same marketplace as my newspaper, with no restrictions, no advertising side deals, no special carve-outs, no editorial “advice.” Why? Because I want to think like the newspaper’s competitor. I want to kill it. I want to replace the newspaper local news franchise with something else, a brand-new digital media product that makes local news an indispensable ingredient in the self-curated media feed of any millennial consumer.

This is the central formula we used at Cox when Chip Perry and Scott Whiteside launched AutoTrader.com. The idea of building a market by enabling local car dealers to automatically post every car they had for sale in a market – for free – spelled death in that category for newspapers. Once our newspapers stopped laughing at the preposterous notion and saw the danger, they saw they were stuck. The only defensive option was to replicate what we were doing – but that would mean dinging income from their largest classified franchise for as long as it took to run us out of town. So they came looking for a deal. “Do it to other newspapers, but not to us,” was the essence of their argument. But Cox, as it had done with radio, then television then cable, held the line. “If we don’t do it to ourselves, someone else will do it to us,” the chairman said .

AutoTrader.com now has about 20 million unique visitors a month and some 20,000 dealer clients. Last year Cox Automotive, which in addition to AutoTrader.com includes such category brands as Manheim, Kelley Blue Book, vAuto and NextGear Capital did more than $7 billion in revenue…

To the victim, you see, disruption need not necessarily mean destruction. It also holds the promise of regeneration. When disruption comes knocking at the door, there is a hard choice to be made between resignation or counteraction. How any enterprise makes that choice is entirely dependent upon the imagination and conviction of its leadership. Trouble is, it is a rare leader who is willing to apply the very same tools of disruption against his or her own company, to cannibalize today’s business for tomorrow’s vision.

So, now that I’m the boss, establishing absolute separation between the newspaper and my new digital local news company is the first and most important thing I need to get done. It will be tough politically, but I don’t care, as long as my new boss has my back. Then the following axioms must also apply:

1. Scale, of return and expectation:

We are entering the local news business, making the central assumption that we can render out content sufficiently interesting that our targeted audiences will find great value in it. But let’s kick the gorilla out of the room right here. Everyone involved in the new business will understand that the return on our new local news business will never come close to the returns enjoyed from monopoly newspapering. We will scale our business to the scale of the opportunity, realistically, not according to past convention. A partner of mine has modeled several scenarios. He has a Wharton MBA so he’s brilliant at this kind of thing. On the other hand my philosophy professor at college once told me I was little more than a naïve realist – in his world it was the nastiest epithet he could think of. What that means is that when it comes to things like financial modeling I’m the guy in the room asking all the dumb questions. Between the two of us, we get it right more often than we get it wrong. First, if 15% of the output of a typical metropolitan daily newspaper in the good old days was dedicated specifically to local news, then let’s assume that sets the scale of our business. Yes, I know, I should caveat this a million different ways, in a sense classifieds was local news for example, and a local perspective imbued a lot of general content, like sports for instance, and the local news section was never as productive in terms of advertising revenue as national news was, but let’s assume the 15% assumption holds, if only for argument’s sake. 15% of newspaper revenues 15 years ago before the shit hit the fan puts our new business at around the scale of the biggest weekly newspaper in town. Second, the margins in the new business come in at 5% – 10% after four years, nowhere near the 35% – 40% levels newspapers took for gospel back then. Now you know why newspaper executives either cut and ran or chose managed decline as their operating philosophy. From their vantage point, a business dedicated specifically to local news looks ridiculously diminished and unimportant. When you and those around you have been enjoying the profits of a monopoly for a half-century, it’s hard to take a business operating at more normal profit margins seriously

2. Content Programming:

We will offer no news content that is not local, no regional news, no national news at all, and no international news, unless it is directly relevant to our town and you had better be able to demonstrate that. Nor will we offer any opinion piece that is not local. We see no point in competing with David Brooks – or the global universe of social media, and the blogosphere, too. And we will not offer lifestyle content. Buzzfeed and TMZ can keep all of that stuff, the gossip, the celebrity scoops, the horoscopes and the rest, and we don’t care. We will not do restaurant reviews either, or local business rating services, or sports reporting. We will only venture into those content areas when it is newsworthy, and deemed so for our particular market. Our maxim is: No Filler. Ever. And we will never use the phrase “compelling content” because the market and our understanding of it comes first for us. Content follows. As any magazine publisher will tell you, get a fix on your market and the nature and parameters of the content will become obvious to you

3. Audience:

We are not a newspaper. We are not in the mass media business, trying to be all things to all people. We are not enabled by monopoly distribution and driven to deliver a broad range of content to support our broad base of advertisers. No, we are a niche business. Our category of business is the delivery of local news. And we are going to niche it up even more, by targeting just a segment of our local market. Since we are designing a forward-looking business our inclination is to skew kind of young and design our product for a 30-45-year-old market segment, but ultimately we will make hard, data-driven decisions about who to design it for and deliver it to and it what order of priority. We will segment precisely by demography, income, education, affinity, proven interest, political preference, home ownership, family size and other relevant market qualifiers, knowing that to win loyalty we must make deliberate market choices and not program outside them. We will not stray from our initial target market until and unless it does not prove worthwhile, but we intend to subsequently build out from it into other market segments over time, adapting our news content mix, tone and presentation as appropriate in each case. In other words, we intend to re-construct the newspaper news  franchise, market segment by market segment. It’s a radical re-build. We will assume that eventually we can program news for a variety of local market segments and that even young Generation Z audiences are not lost forever to celebrity gossip and will consume a genuine news product if it speaks to them.

For another, similar perspective on re-constructing the newspaper news franchise, read the Poynter Institute’s interview with Frédéric Filloux: The new newsroom

4. Model:

We are a subscription business. That is not because we do not believe in the value of digital advertising. We do, despite the nutty pretention of those currently proclaiming that digital advertising in its entirety is worthless. Every piece of advertising research I have read in over 40 years in the media business informed me with great certainty that consumers hate advertising. This does not square with their use of it and the conclusion should be regarded with grave suspicion. The consumer is basically a bullshit artist when it comes to such things, saying one thing and doing another. We may begin as a free product to ramp penetration and customer acquisition quickly in our targeted market, but even if we do start free, we will evolve to paid subscriptions once we have proven our indispensability, audience thresholds in our key market segments are met and we have tested price sensitivity. Since we figure that the current annual ARPU – average revenue per user – of New York Times Digital is $145, what ARPU might we reasonably expect from our highly-focused local digital product in our optimal target market? $10 a month, $120 a year? Does that seem reasonable to you? We will probably vary our pricing for subsequent market segments we enter, but 10 bucks a month is the level we plan to set in our lead market. To improve on subscription revenues over the long term our model will eventually evolve to include advertising, probably sponsorships and paid edit, but we want to start with subscriptions because if we are to break through, our exclusive focus will need to be on the user, the user experience, the content mix, the product and nothing else. Our economies of scale will be different – we will be a low-cost operation and that plays to our advantage in a subscription business. Besides, in an advertising age characterized by targeting and measurement, undifferentiated mass audiences are low-value commodities, all reach and no frequency, and that’s not the kind of audience we plan to build. And let’s not forget that approximately a million earnest attempts to crack the local news market have buckled early under the expense of sustaining a local sales force. So we’ll wait a little on that. We’ll focus on building the audience first

5. Product:

No filler. Ever. Remember? People do not pay for online newspapers for one reason: They’re not worth paying for. Their content is inferior to what can be found elsewhere. We will not make the same mistake. So we will emphasize quality over quantity. We must earn repetitive revenues from our chosen customers, so we must, excuse the nod to Socrates, both delight and inform. We will provide a basic rundown of the day’s local news, maybe just the top 5-10 quick stories, each just a paragraph or two, and several links out to other interesting local reporting and commentary we deem relevant to the needs and interests of our target market.  In addition at first we will produce just one or maybe two expansive quality local pieces a day, also developed precisely for our target market. By quality I mean quality of information as well as quality of presentation. Digital media marks the end of instinct as a guiding journalistic principle, thanks be to God, and rather than being driven by our copious gut, we will be performance driven and data-driven. We will know our customers better then they know themselves and we will willingly consign ourselves to living in an endless feedback loop, refining and refining again our content mix as we watch how our customers respond. Every single person on the team will be able to describe the product vision and the customer profile in minute detail. Finally, we will not bother to extend coverage deep into neighborhoods, like the defunct AOL Patch and Chicago’s Wrapports and so many others. It’s a ridiculous idea. It warps the expense line, quality suffers and nobody really cares anyway

6. Presentation:

We will dispense with the self-serving newspaper cant about editorial objectivity and neutrality. First, it’s BS. The Media System is Broken Second, the digital world is a big, bountiful world where users feel a lot like a mosquito flying over a wall into a nudist camp – it all looks so good, the bug doesn’t know where to begin. So clear product differentiation is critical. That means news with a voice. News with attitude. Taking a position. In news, personality matters. A lot. We will make a series of hard decisions upfront to govern the tone we use to present our product: Conservative, or liberal? Strident, or measured? Serious, or sassy? Erudite, or populist? Voice is the organizing principle around which digital news products coalesce. Buzzfeed’s voice is irreverent, disrespectful of convention, populist, pitched directly at a younger audience. Vox is serious, elitist and clearly progressive on the issues it covers. Vice is true to its alternative magazine roots. The most successful digital news products deliver a consistent voice – and signal immediately to a subscriber where they stand on the issues of the day. Accordingly, we will brandish our affiliations deliberately, openly and with consistency. A couple of other things. First, we will not be afraid of user opinion. We will try to leverage it, for the collective knowledge of users will always be greater than that of the most seasoned writer. And secondly, as you would expect, there will be no wall between editorial and business. Everyone who comes to adventure with us will share one singular focus: The customer

7. Platform:

The growing proportionate percentage of revenues that newspapers are paying for business operations as top line revenue declines has nothing to do with the provision of local news. We will leverage third-party Internet software to a fare-thee-well. The software for subscription management, billing, customer contact, digital promotion, hosting and – perhaps, ultimately, advertising placement – will be third-party and web-based, and managed by one person. The only exception might be the marketing database we use to conduct our audience analytics. It is the lynchpin of our business so despite our eagle-eye on infrastructure expense we may be willing to make an exception and invest in a proprietary marketing engine if we think it’s warranted. It is so important that we will allocate one dedicated marketing database person in our headcount to manage this piece of the business and run our product and user analytics

8. Promotion:

As the web has shifted to social and mobile consumption, the nature of news and way it is discovered has shifted to. We no longer live with the Internet. We live in it. A user sees a news story flashing by in the hectic flow of a social feed on a phone, just another media object lost amongst the memes and photos and videos and recipes and posts and endless text messages. One tweet can drive serendipitous discovery faster and more directly than any newspaper subscriber discount promotion. We know all this. We will be very good at it. We will be helped by the geographic base of our audience segment because that makes the market somewhat easier to access, and by how well we understand that market. Email promotion will be the most important initial promotional channel for us, just as it is for other digital news properties like Vox, Politico, Mike Allen’s new offering, Axios and the Mirror, the regional product of the Connecticut News Project: CTMirror Personalized email is a primary driver of usage, triggering click-thrus from subscriber mailboxes and trial from non-subscribers. One person will be dedicated to SEO, social media strategy and community management

9. Talent:

Yes, this section is called “Talent. Not “People.” Of all the problems newspapers faced, the biggest was that their newsrooms never offered a refuge for the best digital talent in town. It went elsewhere, where it felt welcome. We luck out here, because digital talent needs one thing above all else – an urgent sense of mission, a shot at something meaningful, like re-inventing the local news business from top to bottom. We will have one honcho. But the manager is not just a manager. He or she is primarily responsible for product integrity, that is, for ensuring a consistently perfect fit between the product and the market. He or she is the champion of the subscriber. Think of this person as a magazine publisher. And we will have three producers at first. Not one will have worked as a newspaper journalist, we don’t have the time to manage such a transition, but we will look for other media experience. A prior background in radio or magazine journalism is helpful – Colin McIntyre, my old editor at BBC Television, used to call our CEEFAX operation “printed radio.” It was a remarkably valuable  insight, especially given that CEEFAX was the first-ever digital news service for the consumer market. We will look for specific, complementary skill-sets. First, a senior producer will act as managing editor, selecting the daily running order, leading the development of special productions, securing the inputs we need for our daily round-ups and asking the hardass questions that need to be asked to preserve accuracy and honesty. Second, the ability to distil a complex news event down to its bare essentials in just two or three short paragraphs requires that we hire an extraordinarily-skilled writer – mobile delivery has reinforced the need to quickly condense and synthesize without losing expressive voice. The third skillset is the ability to package text, graphical content and video together in one multi-media production. Formerly separate media are colliding and integrating on the Internet, merging into a new, singular, immensely powerful media channel. We need to master the competences necessary to do that well

So our headcount tally in Year 1 is Technology (1), Database Marketing (1), Promotion (1) Production (3) and one Manager. That’s seven people. The typical newsroom of a daily newspaper operating in a market of 200,000 people might employ 50 people or more today…

10. Culture:

We are going on a mission. Pedal to the metal, 24/7. If you want a “typical” job with set hours and “work-life balance” you have come to precisely the wrong place. Our work will be professionally and personally purposeful – we are going to succeed in a space where nobody has triumphed, or we are going to die trying. We are going to be a tight team, committed fiercely to each other and the mission. We will communicate directly, respectfully, honestly and without social fear, and our organization will always be flat to ensure we can make high-velocity decisions with minimal delay. Each of us will bring high energy and optimism to our work, nobody will be a carry for long. We will experiment and take carefully-considered risks and challenge conventional wisdom and live with the consequences, accepting that sometimes we will fail and that’s okay providing that we remain dedicated to learning from our failures. The decision-making structure will be explicit to all. So will the mission, the business objectives and the plan

Sound good? Like to have a shot? Are you sure you’re up for it? Initial investment is $500,000. You’ll turn the corner in Year 4 and start building a profit in Year 5. It will be a tough slog. It will never be what our silly digerati friends out in the Silicon Valley herd call a ‘unicorn,’ a billion dollar windfall that comes out of nowhere, but if you’re in the newspaper business right now, like a lot of other BlastofWinter readers, let me ask you: Do you want to hang on in quiet desperation like the English do in that Pink Floyd classic, or would you rather go on an adventure?

As for the rest of you, at the very least, like my dear friend Anne, it’s time for you to let newspapers go.  They have little to do with the ongoing media revolution and besides, it’s time to stop looking back. This is the time to look boldly towards the future.

Given Donald Trump’s insane presidency and its accompanying reactionary glorification of ignorance and civic animosity, someone needs to embark on the re-invention of popular and profitable local news.

Someone needs to lead the revival.

 

 

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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