Public equity companies are not the first to asset-strip newspapers. Private owners did the same for years, denying their companies the funds for even basic research and development. But the fundamental issue facing local newspapers today is not just a lack of cash, it is their ongoing inability to build new digital products, born on the web, for new audiences. Unpacking the newspaper content bundle and reconstituting it as a local digital network of vertical news products for segmented audiences may offer a way out. The business scale will be smaller, revenues will be smaller, but margins may be better and the prospect of growth may actually become feasible again.  Email newsletters on the Axios model may be the best place to start

There are many ways of getting to sleep. What I do is imagine a newspaper editor banging on about public equity companies hollowing out newspapers and rendering them incapable of surviving on the internet. Or I imagine her proclaiming that it is no longer possible to support digital media products with advertising. I swear to god, each of these is better than Ambien. The other night I used that second one about advertising and my head fell to my chest so hard that for a moment I thought I had bust my clavicle. I now go to bed with a pillow under my chin as well as under my head, just as a precaution.

I’ve written previously on this pretentious notion that digital media advertising is dead, so you’ll know by now that as a matter of fact, $110 billion was spent on digital advertising in the U.S. last year. You see, it’s not that advertising is dead, what’s dead is tonnage advertising shotgunned to unqualified audiences. Unfortunately, when legacy newspapers and even some pure-play digital news companies think of advertising, tonnage (they call it “scale”) is what they think about. For some bewildering reason, the structural shift from mass to class in the media marketplace escapes them.

Yes, I’ve written about that before, here, and here, so instead let’s focus on that other dream-weaver, the one that goes newspapers are doomed because private equity has gotten its grubby little fingers all over them. The unexpressed corollary thought of course is that life was better back when private owners were in charge.

Look, I loathe the ghouls at Alden as much as anyone, I’ve written about their unique brand of corporate hospice before, too but it’s not their greed that drives me nuts, it’s the fact that they think we’re all stupid. Because they have mastered the art of talking out of both sides of their mouth at once, they think we’ll believe it when they claim to be saving newspapers as they suck the lifeblood out of them. Puh-leeze. But that notwithstanding, the fact is that nobody, nobody, hollowed out their newspapers like private family ownership did.

Private owners treated their papers like personal cash machines. Back in the 70s and the 80s, margins across the broad middle swathe of daily newspapers typically ran at 30% – 35%. Yet a great industry researcher called Leo Bogart found at the time that the industry as a whole was spending just 0.2% of gross revenues on research and development. 0.2%! You can figure out for yourself where the rest of the money was going, right?

Even as they took their companies public, media company private owners managed to maintain preferential access to the cash machine. Beginning in the 1980s they pioneered the use of dual-class stock structures that established uneven voting rights to keep them in control. Keeping control kept the right people in charge of the family bank. The Grahams of the Washington Post, the Ochs-Sulzbergers of the New York Times, the Bancrofts, owners of Dow Jones & Company, the McClatchys of Sacramento, the Dechards of Dallas and the others all secured continuing control through super-voting Class B shares. That meant the families could keep their noses in the trough without any second-guessing from manic depressive public shareholders. In the case of newspaper companies, public shareholders were nothing but spectators. This is yet another thing that drives me nuts. Dual class equity is anti-democratic, but now of course everybody does it. “Do No Evil” Google has a triple-equity-structure, for godsake.

But procreation becomes the problem when the family has control. Doesn’t it always? Dispersal of profit might begin with the founder and his family, but the family tree broadens generation by generation and the group of secondary stockholders keeps on expanding. Eventually distant in-laws and second cousins and former first and second and even third spouses come to expect a regular piece of what they see as their prerogative — and so pressure on the people actually doing the work increases. Often the secondary stockholders demand a voice at the boardroom table too.

Lineage is never sufficient qualification for running anything. Want proof? Go back and look at Knight Ridder. Tony Ridder is the luckiest newspaper guy of all – he was forced out at the top of the market. He sold to McClatchy and everything in the newspaper business went to hell in a handbasket the very next day. Under his stewardship Knight-Ridder talked a good game but missed everything. It’s not surprising, an emotional association with the past blinkers the strategic vision of family ownership and since their dividend substitutes for regular income, they naturally resist risk and change. Family members long ago dispensed with a diligent day and are unwilling to make the personal sacrifices that any career executive accepts as part of the job. If they’re smart, they bring in professional management. If they’re even smarter, they listen to them. Most of the time they don’t. The weird thing is that don’t ever seem to get into trouble with dual stock structures until the balance sheet weakens and free cash flow dries up. Then, when the company reduces the dividend or rejects the possibility of a share buyback, the public investors start to howl. When it’s too late. Before then, there was always plenty of money around to keep them quiet.

So you see, this is why I find all the banging on about Alden and the rest of them sufficiently tedious to put me to sleep. But it’s not just tedious of course. It’s also convenient. It diverts responsibility. The fundamental reason newspapers are rolling towards extinction is the historic inability of newsrooms to create successful new digital products, born on the web to serve new markets. Product development was never their thing. That’s why newspapers were running out of gas a long time before the internet arrived. And public equity got involved.

Like I say in “About this Blog,” it’s human nature to relate the unfamiliar to the familiar. The automobile was the “horseless carriage.” Radio was once the “wireless.” Personal computers look like typewriters. For newspapers, the Internet meant simply their newspaper, online. Trapped in the prism of print, all they saw was a chance to throw away the ink and paper and sell the trucks, the same product delivered at less cost.

Here’s the question, then: Did newspaper company executives take a look at the extent and expense of the product and marketing challenge, and decide to duck it? Were they afraid to ask their shareholders — private or public—to tolerate the cost of building new products that might produce lower margins and returns, maybe at the expense of the established, highly-profitable business? Wouldn’t you be afraid to do that, to put your livelihood on the line for such a gamble? It’s not as if these people were asleep. Cox founded Autotrader. Advance jumped into Reddit. Hearst owns a piece of Buzzfeed. And Pandora. The Washington Post even had a windfall from the Netscape IPO, and that happened back in the age of carbon.

Or were they, like the high priests in their newsrooms, trapped by self-belief and unwarranted faith in the fictional power of their mastheads, while underestimating the magnitude of the threat?

Was it risk aversion? Or was it hubris? I know what I think. How about you?

No matter what, they put their newspapers “up on the Internet” — and that’s all they did. No search, no social, no new relationship with users, not even a user database, no original engineering, no disciplined, marketing-led process of new product development, not a single trace of digital sensibility — just a continuing belief that the best way to deliver journalism, even in the digital world, was via the newspaper bundle.

The amazing thing is they still seem to believe in that bundle. Even though the first dismantling occurred when the classifieds were stolen away 15 years ago and became great standalone vertical market products like AutoTrader and CareerBuilder and Ebay.

If there’s to be a new kind of digital news product in local markets, and if newspapers are to own it, then the first thing they have to do is unpack the bundle. The bundle of content. And the bundle of audience. I mean, you can no longer keep national and international news bottled up in one place forever. And any mass market is actually an agglomeration of individuals. But it seems that nobody wants to take the first step. So once again we have the same essential question. Is it lack of imagination, or fear that unbundling the general news product — going vertical — will destroy what’s left of margin?

If I was thinking about how to unbundle the newspaper, the very first thing I would do is subscribe to Axios:


I would do that because I would want to study how this savvy digital news company refurbished the newsletter email model and broke even by doubling revenue – principally through advertising — from $12.5 million in 2017 to $25 million in 2018. I think what Axios is doing could be applied successfully in local markets.

There are many reasons for its success. I like these three:

  • First, a tight focus on vertical markets and therefore, vertical audiences. About 20 Axios Newsletters focus on not just national and international news, but on China, space, science, sports, future tech, the markets, energy, health care…This vertical focus promotes content depth. It also fuels the user database, providing audience insights that can be leveraged for ongoing product refinements, which attracts more users. The same data is used to produce superior ad inventory that attracts advertisers
  • Second, an emphasis on product personality. Each writer is an expert in the field but each is positioned more as a host than an anonymous, all-knowing scribe. This fosters brand connectivity which in turn fosters user loyalty. You know how newspapers never pout and say ‘come hither?’ How they never say anything that rocks the boat? It’s possible their editors may spend their evenings strangling cats and watching jihadist videos on YouTube, but you would never know. They rely instead on their self-perceived “high-quality” journalism to attract you. As if. Axios doesn’t make that mistake. Axios has style
  • Third, a product conception — “smart brevity” — with disciplined formatting that forces writers to produce fast takes on the news that matters in their vertical, with links back to the main Axios site for users who want more. Years ago, when I worked for BBC-TV CEEFAX, a teletext service and the first-ever digital news product, my editor, an unheralded pioneer by the name of Colin Macintyre,  coined the phrase “printed radio” to explain what we were trying to do. Printed radio. That’s what Axios is.

The net effect of these three characteristics is that Axios newsletters have high open rates and low churn. These days digital media investors look for high DAU (daily active users) because that signals engagement. And they look for high MAU (monthly active users) because that reveals levels of retention. Axios has both. That’s why they were able to easily raise another round of capital late in 2018. And why they’re on track to augment revenues with paid subscriptions.

Several newspapers have returned to the newsletter business recently, including the New York Times and the Washington Post. They are even — at last — deploying personalization software that has been available in the consumer products industry for decades. But these initiatives are intended to boost the parent newspaper business, by increasing subscriptions or loyalty to the central newspaper, print and online. I think email newsletters offer a new business opportunity in their own right, an opportunity to redefine markets, segment audiences and serve them with a new, contemporary set of news products.

It’s not just about unbundling the newspaper — spending a buck to make a dime will always lead to calamity. No, it’s unbundling the newspaper — and reconstituting it in a different way, rebuilding audience and financial return market by market.

But putting Humpty Dumpty together again may just be asking too much of newspapers. It may just be too late. And the ghouls may not be willing to invest.

That means someone else is going to do it, I guess.

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, "The Cannibal in the Room," will be published soon — 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 here at and publishes his unconventional ideas about management on his LinkedIn page: His collection of short stories can be found at

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