Local news, emerging from the ashes

The two major newspapers on the east coast, The New York Times and The Washington Post, are duking it out in the national news marketplace. But down in local markets around the country, local newspapers – or at least the companies that own them – find themselves in a classic business conundrum. Faced with a double-whammy of declining share and pricing collapse, they had to decide whether to mine what they have – or make something new. From a shareholder point of view, mining every last dime from the franchise is a perfectly rational decision, and most newspaper companies opted for that approach. To make something new is risky. It’s a drain on depleted capital resources and it requires the kind of long term commitment the Wall Street herd can’t stand. But if your newspaper is up for the challenge, even at this late stage, then here’s a prescription to help you think about it

      1. Scale, of return and expectation:

We are entering the local news business, making the basic 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 in a mass media world. 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% – 7% 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 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 any lifestyle content whatsoever. 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 unless and only unless our targeted audience wants that kind of content in the mix.

Our operating maxim is: No Filler. Ever. And we will never use the phrase “compelling content” not just because it has become a cliché without meaning but mainly because the market and our understanding of the market comes first for us. Content follows. As any successful magazine publisher will tell you – and there are some left –- get a fix on your market and the nature and parameters of the content will become obvious to you. This takes ruthless focus and discipline, but it is essential. More on this subject under Product, below

3. Audience:

We are not a newspaper. We are a news producer. 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 understand the fact that the Internet is direct marketing on steroids. Accordingly, 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 young and design our product for a 20-35-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 BS 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. Having made the classic advertising management mistake of handing pricing control over to third-parties, now they’re doubling down on that stupidity and proclaiming advertising is dead. 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? $5 a month, $60 a year? Does that seem reasonable to you? We will probably vary our pricing for subsequent market segments we enter, but five bucks a month is the level we plan to set in our initial 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. And guess what? Trust is better built when a consistent and expressed position is taken. Claiming objectivity doesn’t make it so, and users see right through the pieties to the inherent bias that lurks behind them.

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.

There are two exceptions to this rule. First and most important is 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. Without it we will be flying blind, just like we did in our newspaper. 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.

The second exception is the recommendation engine we will use. Leading a user to view five pages per session instead of three will make a major difference in terms of our ARPU. It will also increase loyalty and reduce churn. We will therefore invest in this software and this process

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. Max. 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. In a metro market 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?

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.