McClatchy to give pay wall a pass

One of the largest newspaper chains in the U.S., McCatchy Co., is giving a big thumbs-down to the idea of charging for online content. McClatchy, which publishes such major dailies as the Miami Herald and Kansas City Star says it plans to keep access to its news sites free. CEO Gary Pruitt said Tuesday the company is "comfortable" with an ad-supported model without pay walls. "We are very comfortable with free content supported by advertising," Pruitt said. "We don't view it as fatally flawed. That said, if we could make ad revenue with paid products we would." Pruitt added in a speech to an online advertising conference in New York that McClatchy has no plans to block search engines such as Yahoo and Google because they drive 20 percent of traffic to McClatchy Web sites. "To disengage is to risk marginalization," he said. According to industy magazine Editor & Publisher, Pruitt said McClatchy has found the advertising-support search model profitable.

In fact, McClatchy credits its success in building online revenue to its alignments with several different Internet players including Yahoo, Cars.com and CareerBuilder. Pruitt told the Borrell conference that online revenue in 2009 accounted for 16% of total revenue -- up from 11% in 2008.

This kind of thinking is countintuitve amid the panic that has gripped other publishers lately in a declining economy. The New York Times recently announced it will erect a paywall in an attempt to boost revenues to make up for lost advertising revenue.

The Future of Newspapers and New Business Models for Growth

The intensive debate about the future of newspapers and print media is focused almost exclusively on news reporting and journalism. My focus is on commerce and the primary importance of establishing local newspaper sites, first and foremost, as the primary source for their communities' commerce needs and interests. The ongoing debates often miss the key point that consumers once relied on newspapers as their exclusive source for information on everything local for sale: to find houses, cars, jobs, restaurants, events, entertainment, products and services. As much as business concerns and issues may appear to be at the forefront in the corner offices at most major newspaper companies, it is the editorial product that management perceives as the core deliverable to consumers. Ads are the "fill" packaged to fit into and around the editorial content. But it should not be lost on the newspaper industry that those papers that continue to do well – pennysavers and local weeklies – design their content with advertising at the forefront and editorial content packaged around it. The debate today should revolve around the shifting relationship between editorial and advertising – and where the industry's priorities should be.
In today's full report available to subscribers, I share my recommendations for rebuilding the newspaper business and why I believe many newspaper and magazine publishers should be replaced in their jobs. I share an innovative new model for incorporating advertising into Kindle content and smart phone applications. I suggest that universities develop a new business curriculum focused on newspaper and media management, and argue for refocusing the fundamental discussions taking place in the corporate offices of leading newspaper and magazine publishers. I also include a new recommendation for generating $100 million in incremental subscription revenues for The Wall Street Journal.
If newspapers re-engineer their business models as I outline in this week's report, they will have an opportunity to regain their economic footing, enabling them to once again invest in journalism that is unfettered by economic concerns. In the long run, foundations are also likely to step up to underwrite journalistic enterprise. National news and investigative units will be underwritten by multiple newspaper organizations. Once local newspaper sites re-establish themselves as the primary source for their communities' commerce needs and interests, their news reporting and journalistic components will once again be allowed to thrive.
To communicate with or to be contacted by the executives and/or companies mentioned in this column, please email your information and the column headline to Jack directly at jm@jackmyers.com.

Gannett profit falls to 20%!!!

Another sure sign of the apocalypse for newspapers came this week when the country's largest newspaper chain reported its annual earnings. Despite the rotten economy, Gannett Inc. posted operating earnings of $219.1 million on revenues of $1.1 billion. That’s a profit margin of practically 20 percent. In its extensive broadcasting division, Gannett raked it in even faster in 2009, with operating income of $79.2 million on revenue of $183.2 million, which is a whopping 43 percent rate of return. So this is good news, right? Well, not according to investors, who punished Gannett’s stock with a one-day drop of almost 9 percent following release of its earnings. As one blogger noted, it’s all about expectations, realistic or not.

Gannett reaped $31 in EBITDA for every $100 sales in 2005 but its operating profits were only $20 for every $100 in revenues in 2009. Most companies would be tickled to have EBITDA of 20%, but that number looks fairly anemic when a business is accustomed to getting 31%.

Keep in mind that we’re talking about operating income, which shows that Gannett’s media businesses are still very profitable. However, if you take into account extraordinary, one-time charges against income, the picture becomes a bit bleaker. The company incurred restructuring costs in its recent downsizing that led it to an overall loss of $4.71 billion last year, but those cuts will help make the company more profitable in the future. Also, keep in mind that the profit measure we are using is return on revenue, which topped out at $8 billion in 2006 and have plunged 30.1 percent to $5.6 billion in 2009.

Online pay walls "a bad idea"

The editor of the Guardian, one of the UK's leading newspapers and online news sites, claims the folks at the New York Times have got it all wrong if they think they can make money by charging readers to visit their website. Alan Rusbridger called pay walls "a hunch" and warned that they could drive readers away.

If you erect a universal pay wall around your content then it follows you are turning away from a world of openly shared content. Again, there may be sound business reasons for doing this, but editorially it is about the most fundamental statement anyone could make about how newspapers see themselves in relation to the newly-shaped world.

Instead, the Guardian editor told an audience of academics and journalists in London that media should focus on doing good journalism. "If you think about journalism, not business models, you can become rather excited about the future. If you only think about business models you can scare yourself into total paralysis." Sound familiar? "If you build it, they will come," was the mantra of Field of Dreams.

A former Slate staffer agrees that pay walls are a bad idea and says the media have it all backward in their search for a viable business model. "Since the web is built on links and open access, barring visitors for any reason is a big deal," writes Scott Rosenberg on the PBS website Media Shift. According to Rosenberg, trying to preserve the business model of Old Media on the Internet is asking the wrong question.

The newsrooms of today acquired their size and shape and structure thanks to the business model that supported institutions of their size. The world has changed; that model is vanishing. We shouldn't be asking "What sort of business can support a newsroom online?" The question is, "What's the best kind of newsroom that the online business can support?"

New Financial Models Part of Newspaper Future

New Financial Models Part of Newspaper Future
Web News Operations Expanding Beyond Digital Newspaper Component
Nov 29, 2009 John Seidenberg
Newspapers are facing changes beyond their print and Web versions. Competing non-profit online news sites are being created, sometimes with unique sources of funding.
The online presence of news operations is expanding beyond a digital component for newspapers. With the decline of many papers and their reporting resources, new financial models are being employed to establish, or in other cases revive, news enterprises.
Among fledgling examples of new non-commercial journalism through the creation of non-profit news sites are the New York Times joining with the Chicago News Cooperative, a non-profit news organization made up of several former Chicago Tribune staff to provide content for the Times’ local Chicago edition.
Texas Tribune Established as Non-Profit News Site Accepting No Advertising Revenue
The Texas Tribune is a new Texas-based non-profit journalism Web site which Texas venture capitalist John Thornton founded and is being run by Evan Smith, longtime editor of Texas Monthly magazine. The site plans to cover the entire state with its own reporting, columns, and blogs assembling content from other news sources, as well as original audio and original video content. Texas newspapers and television stations, if they wish, may use any of the material without charge.
It “is designed to fill the gap left by the shrinking number of newspaper reporters at the state capitol in Austin,” Howard Kurtz wrote in “Texas-size test,” in the November 2, 2009 Washington Post. Thornton decided to start the operation instead of purchasing existing troubled newspapers.
“The Texas Tribune, which won’t accept advertising, is being underwritten with tax-deductible donations from the likes of former lieutenant governors Ben Barnes ($100,000) and Bill Hobby ($50,000), and oilman T. Boone Pickens ($150,000),” Kurtz said. “There are 50 corporate sponsors, including AT&T, JP Morgan Chase and the Texas Association of Business.”
Coming Challenge to Washington Post on Local News Coverage From New Web Site
Another front on which digital news operations are challenging newspaper is local news coverage. Robert Allbritton, publisher of Politico and politico.com, whose family once owned the now defunct Washington Star newspaper, hired Jim Brady, a veteran Washington Post staffer who helped start the Post's Web site, to establish a new online news site.
"Politico challenged the Post's command of national politics: the new venture will take on the Post's coverage of local news," Harry Jaffe noted in "Allbritton and Politico Attack the Post on a Second Front," in the October 29, 2009 Washingtonian magazine. The Web sites of the two Washington television stations Allbritton owns, one on cable and the other the local ABC affiliate, will become part of the new operation.
"The real challenge will be paying for the new new journalism," Jaffe wrote. "Politico might hype its Web site, but its big revenues come from the print newspaper distributed on Capitol Hill and mostly funded by lobbyists."
In addition, the Wall Street Journal is assembling a local news staff in New York for a New York-only news section, in continuing to go beyond its traditional coverage of business news by adding customary city desk beats such as courthouses, City Hall, and the state capital.
New Hampshire Government Guarantees Bank Loan to Newspaper in State
Citing prospective job creation, the government of New Hampshire agreed to provide specific aid to a struggling newspaper in the state, the Eagle Times of Claremont. The state is guaranteeing 75% of a $250,000 loan from the Claremont-based Connecticut River Bank to the new owner of the paper.
Under the agreement, the New Hampshire Business Finance Authority and the state would be liable up to $187,000 if Egale Printing & Publishing LLC, a Pennsylvania newspaper chain which bought the Eagle Times, defaulted on the loan.
"The loan itself is secured by business assets at the Eagle, including inventory and accounts receivable, and is also backed by 'the unlimited personal guarantee of George Sample,' the managing member of the newly formed Eage Printing & Publishing and the publisher of Sample News Group in Pennsylvania, according to the BFA document," John Gregg wrote in "State to fund loan to save ailing newspaper," in the Nashua Telegraph of November 10, 2009.
The paper filed for bankruptcy and ceased publication in July, ending employment for 66 full-time and 29 part-time workers. Under its new ownership the Eagle Times resumed publishing in October with approximately 25 full-time employees, the Nashua Telegraph reported.
However, this precedent of a state backing a loan to a privately owned newspaper generated criticism over the paper becoming beholden to government-supported financing and the strong appearance of a conflict in its coverage of the state's government.
Use of government in any capacity to subsidize print or online reporting operations may seem to put it in the position of propping up news enterprises that might not be able to function on their own. "Noncommercial news ventures sprouting around the country are feeling some blowback from their for-profit cousins, who don't seem inspired by the new journalism paternalism," Dirk Smillie wrote in "The New Front Page," in the November 2, 2009 Forbes.com.Read more at Suite101: New Financial Models Part of Newspaper Future: Web News Operations Expanding Beyond Digital Newspaper Component http://newspaper-journalism.suite101.com/article.cfm/new_financial_models_part_of_newspaper_future#ixzz0dfpzPsAM

Murdoch to Charge for Internet Content; May Pull Sites from Google

Murdoch to Charge for Internet Content; May Pull Sites from Google

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Rupert Murdoch On the Fate of Newspapers

Rupert Murdoch On the Fate of Newspapers

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