Nieman Foundation at Harvard
Our 2014 stage is set, and oh what a marvelous assortment of characters will be walking across it. Many of these characters — the Bezoses, Henrys, Kushners, Omidyars, and Buffetts — are new non-newsies thrusting themselves into the news world, unexpectedly and in short order. The competition they face is unprecedented, as many media — news and entertainment — converge on the same models of digital advertising and revenue from readers, viewers, and listeners. There’s only so much money to go around, and the losers here are likely to outnumber the winners.
Sometimes, a few words can sum up the futility of a competition. As Ukraine sadly fell back into the arms of the Russian bear this week, one commentator correctly noted that the “European Union had brought a baguette to a knife fight.” Now, as we celebrate 20 years since the first newspaper website, we see that the news industry early on armed itself in the digital wars with the First Amendment, the AP Stylebook, and a rate card — tools that have been little match for the power of databases, aggregation and digital scale.
2014 is Year One for some of the news novices — and Year 21 for those in the print/digital transition since the first news sites launched. Let’s take a look at the year ahead, looking at the big actors, major themes, and tests of the year ahead. Consider these nine big themes that will further separate the winners from the losers when we look back a year from now:
The future is staring down the news industry, and the business doesn’t have an eternity of blinks left. Best practice strategies and their execution — the core of what I cover — are the only way forward, but this year has surfaced the intangible of what I’ve called “outrageous confidence.” Jeff Bezos’ buying of the Post (and the Grahams’ selling) startled people in the press worldwide and crystallized the sense that a new generation of owners may seem a real future in the news business. In 2013, all the new owners — Buffett and his growing BH Media, John Henry and his Globe, Bezos and his Post — have been consumed with getting-to-know-events and rearranging the furniture.
The test for 2014: Will these owners beat their chests, open their wallets, and most importantly fund and support new products, new kinds of customer engagement and new thinking not invented here in Newspaperland? Will they not settle for incremental small experiments but, while staying within journalistic values, make some big new bets?
Here’s our most Darwinian theme. The theory: As first newspaper print and then local broadcast advertising continue to winnow down, there just won’t be enough left to support the number of local media news outlets we have today. Digital advertising and even TV paywalls could help with funding. If you want to be running a local newsroom of significant size in 2020, be prepared to be one of only two or three that may then exist. It’s a only-the-paranoid way of looking at the Blade Runner news future, but it’s also, unfortunately, a logical extrapolation of the last half-decade.
That future could play out in a number of ways. We see one playbook being executed in real time in Southern California. There, new Freedom Communications CEO Aaron Kushner has deployed not one but four strategies in his first 17 months of ownership. His Last Man Standing theory has led him to (1) invest in doubling the size of the Orange County Register newsroom, albeit with about 75 interns as part of that mix; (2) march competitively into neighboring Long Beach with a cavalry of 20 editorial staffers; (3) announce — without additional staffing noted — the creation of the Los Angeles Register, moving into a county 3x bigger than his home one (“New Hollywood Sequel: Aaron Kushner’s L.A. Register”); (4) buy — and start cutting costs at — the next-county-over Riverside Press-Enterprise. Add up the costs and likely revenues of all those forays and it’s not yet easy to see a sustainable business strategy. But clearly Kushner fits the profile of the outrageously confident, one seemingly bent on surviving whatever new traumas are tossed the way of the news industry.
The Southland has been ripe for consolidation for quite a while, as its three biggest newspaper groups all endured bankruptcies. The question has been who would want to stay and who would want to go. I’ve written about roll-up — another route to Last Man Standing — and my friend Martin Langeveld has maybe more correctly labeled the merging of these low-financial-value companies as mop-up.
Consolidation is happening in every legacy industry. 2013 was the biggest year of TV station ownership consolidation, led by Sinclair, Gannett, and Tribune. As cord-cutting begins to age the cable industry a bit faster, Charter is actively pursuing Time Warner Cable, as Comcast considers its options. In Europe, too, we’ve seen the emergence of consolidation. Axel Springer sold two of its standard-bearing German dailies to consolidator Funke Media, while in the U.K., Local World — a roll-up of two big newspaper chain properties — has turned a first-year profit, even as its executive ranks are roiling.
Even when ownership isn’t consolidated, every operation that can be shared in a matured industry will be. As just one of many examples, old competitors in both the Twin Cities and the DFW Metroplex agreed to share presses this year.
As consolidation happens, newspapers should not have the sense they have a guaranteed position in the 2020 standings. Consistent with that local TV consolidation and the WCPO Cincinnati experiment, big broadcast companies want to be in the survivor group. Then there’s public radio, profoundly trying to be come public media. Monday’s announcement that NPR had put together six of the leading big local public radio players to produce a “seamless local-national listening platform” is indicative of that movement. Maybe as important will be the individual development of top station’s own local public media experiences, such as the just-launched KPCC tablet product in L.A. Consider the moves a five-year strategy to be one of those possibly few substantial local newsrooms when 2020 comes around.
The test for 2014: As we witness newspapers trying to do video, TV stations trying to write stories, and public radio aspiring to be text/audio/video producers, who will get it right first? Don’t expect the definitive “right” within a year, but 2014 is a pivotal year to get legs up on the competition.
Face it, print advertising is becoming a niche, even if it’s a big one. Through the end of last year, newspapers’ print ad revenues were down 60 percent since the height of 2005, to $18.9 billion from $47.4 billion in the U.S. That’s almost a $30 billion difference in seven years. This year’s decline should roughly match last year’s of 9 percent, and many publishers project about the same loss for 2014. If those numbers hold, that means by the end of 2015, print ad revenues will total $15.6 billion — only around $4 billion more than where reader revenues may then come in.
The continued decline of print advertising is the very dark cloud hanging over the news industry and the darkening ones looming over the magazine industry. While digital advertising overtook print advertising in 2012 in the U.S. and globally, the accelerated pace of the print to digital movement is clear and fairly unwavering.
The test for 2014: How can publishers mitigate their print losses, pulling from an expanding toolbox of sponsored sections, events packages, custom publishing, and more to minimize as much as possible a near-universal negative number?
Last year, U.S. newspapers were up 4 percent in digital advertising, to a total of 11 percent of revenue. This year’s reports indicate that growth could well be less, closer to flattish, with many publishers struggling near the zero point. Yet some, which we’ll investigate in early 2014, are in double-digits. That’s a combination of executing on some of the ad buzzwords of the time — content marketing, native ads — but also on much less glamorous and written-about work like audience extension and yield optimization.
The test for 2014: With print ads spiraling downward, will the failure to execute on a strong and diversified digital ad strategy doom news organizations to even deeper cuts in staff and product?
Paywalls perfumed an otherwise overripe business model over the last year. Astounding, more than 40 percent of U.S. newspapers will have one in place by mid 2014, with at least 650 titles globally by then. Consumer magazines have embraced them. Circulation revenue is up — probably another 5-6 percent in newspapers this year, following similar results last year — and that growth is one steady plus line in most newspaper company reports.
It’s important to acknowledge that success, and its valuable contribution to any kind of digital transition, as even long-time critic Digital First Media’s John Paton recently did. Getting long-time print readers to pay for all-access (including digital) is a big step in the mostly digital future. But too many publishers mistake this first step as a leap. They’ve made the long jump and are busy taking satisfaction of where they stand in the sandpit. Fine, they deserve to take a bow for a move that has smartly adopted across industries in record time — but they better not stand there for long.
Few publishers are selling many digital-only subscriptions to non-print subscribers; the highest metros reaching to 40,000-plus. While The New York Times has worked that digital-only niche well — moving into a go-to checkpoint role on smartphones and apps and racking up more than 700,000 digital-only subs — its success is not being replicated well enough in the regional press. The goal here is simple: sell more stuff to new and old customers. The now-decade-old problem is that too few people at news companies know how to create new products. And newsroom walls have only exacerbated the problem, as Raju Narisetti outlines so clearly in his year-end prediction.
One print product development area getting too little attention is Sunday. It’s the one print product with the longest shelf life and longevity and it’s the fulcrum for many long-time readers’ print/digital toggle.
Look at the trend lines and we can see that the bump publishers have gotten from reader revenue should hold, but they may well have trouble finding future growth.
The test for 2014: How will publishers prepare for the soon-to-come leveling off of reader revenue increase by producing what I’ve called Paywalls 2.0 products? The New York Times with its planned spring launches (“The coming of the New York Times’ Paywalls 2.0”) is one of the few to make such products a key next-wave reader revenue strategy. If other publishers don’t, they should expect to find the plateau of reader revenue at which the pioneering Times has already arrived.
There’s simply no way to over-emphasize the centrality of getting smartphone and tablet experiences right for news customers. This year, we’ve seen newspaper access move from around 25 to 35 percent mobile access, with TV stations in a similar range. Startup news sites, significantly, report 50 percent or more of their views coming from mobile. As importantly, mobile advertising in the U.S. will double to $9.6 billion from $4.4 billion. Google will take about half of that, Facebook 15 percent, with only a couple of dozen publishers are taking in serious money.
The test for 2014: If news publishers don’t make 2014 the year of mobile-first content and sales development, they have slim hopes of growing digital ad revenue over the next several years.
We’ve seen a bigger divide between those companies (global, national, and regional) who harness analytics to drive their business and those who don’t. Just yesterday, I heard from a news-facing tech company about cookie licking and browser entropy fingerprinting.
We need to go no further than the Lab’s predictions this year to take in a new language of how technologists view the business of news-making. From The New York Times’ Allen Tan: “Ambient interfaces will begin to appear as data trickles into watches, televisions, clocks, cars — but with new affordances. While smartphones and tablets are deeply personal and interactive, these new devices sit in communal space, in the background: How do you design something that accepts minimal input but is aware of its environment? What does glanceable information look like?” Ready to take a holiday break before you begin tackling the tech-infused challenges of 2014?
Data science is at the core of the major global news brands’ agendas — and sketchy across the rest of the news landscape. Hiring one nerd to figure it out is so 1999. Not only is data science driving ad and reader pricing, much of the best storytelling of the year was accomplished by pairing journalists and technologists.
Then there is the data-as-assets opportunity/challenge, as companies move to allow publishers to “control” and perhaps market their own data in exchanges. Of course, the biggest story of the year — unveiling the massive government spy apparatus, post-Snowden — points further to how much technology remains the biggest underlying driver of many businesses, now including publishing.
The test for 2014: Can your company pass a basic tech literacy test? Your customers expect that you can.
The three iconic U.S business magazines are in the throes of change. Forbes is on the block. Fortune is going off with the new Time Inc. spinoff and casting for how to find new digital audience. Bloomberg Businessweek is showing some signs of vigor, in ads and brand campaign, but faces the same print trends as its peers. All confront what it means to be a print creature in a business world that is digital-dominant, one now being exploited by interlopers like digital-only Quartz. In the digital world, the magazines’ reader and ad competition is Bloomberg overall (with its own identity issues), the FT, and The Wall Street Journal. Then, of course, all the big digital companies can sell business-like audience profiles out of their deep data. Something’s gotta give, and much of it will in 2014.
The test for 2014: How soon will the business magazine space change as radically as the once-seemingly-permanent reign of newsweeklies Time, Newsweek, and U.S. News & World Report?
In the year ahead, we’ll see the naked results of publishing assets set adrift from bigger, diversified companies.
2013 was the year of the big publishing quarantine. With print advertising in deep freeze and digital ads largely lukewarm, spinoff and separation was the name of the game. At mid-year, News Corp hived off its newspapers, reeling in a three-continent downturn, putting its growth-oriented TV, video, and movie operations into the forward-reaching 21st Century Fox. Tribune, avoiding the backlash of a Koch Brothers buy, spun its top-drawer newspaper brands (L.A. Times, Chicago Tribune) out of sales mode and into spin-off. Those newspapers, drained of real estate and digital classifieds assets, may go into a separate company, unless they are sold first (Joe Cahill picks apart the new “Tribune Publishing Company” financials). Time Warner Inc., finding new buyers for Time Inc., spins off its assets about the same time. In each of these deals, the questions of which assets and liabilities move to the new company is big (Allan Sloan dissects that part of the Time Inc. spinoff).
All the plays here are about maximizing the public value of the non-publishing assets. With the first new News Corp results, the continuing loss of major publishers only becomes more clear, as the previous filings of the media conglomerates purposely clouded poor publishing performance. Tribune and Time titles are being tossed into the public markets as they’ve cooled on publishing assets and the biggest movement has been from public to private hands; we’ll see how long both companies stay public.
The test for 2014: How fast can these new companies hit the ground running, paying more attention to their competitive marketplaces than to the internal reordering or organization and power?
Photo by Dan Moyle used under a Creative Commons license.
