For many, it represents the unique New York City politician whose presidential flirtations reshuffled our politics for a time. For some, it’s his immense wealth and the places — both philanthropic and political — it flows. Then there’s “the Bloomberg,” the business news terminal that built Michael Bloomberg’s company and fortune, and which remains a cash cow today.

What it didn’t represent until relatively recently was streaming video — an online channel first known as TicToc and then, when the app TikTok annexed the world’s mindshare, rebranded as QuickTake.

QuickTake is Bloomberg Media’s latest product push, and another piece of evidence that the company is a long-term, high-impact news media players — even though it gets relatively little coverage compared to its peers.

As COVID-19’s financial damage deepens, there aren’t many media companies in the position to be able to take advantage of a recession — and invest. Bloomberg Media, headed by CEO Justin B. Smith, is investing in QuickTake, with a staffing up to 100, and big plans for fall.

“Starting in September, we’re actually creating full streaming programming with anchors and shows and new series,” Smith says. “We’re going to be unveiling a whole slate of new programming.”

Smith is known as an innovator, viewed by many of his peers as a transformer. As CEO at Atlantic Media, he assembled and led a team that built a respected and talented company, emerging out of (very) Old World magazines into a diversified B2B and B2C leader — a model operation that owner David Bradley has been selling off piece by piece for several years.

Smith moved to Bloomberg Media in 2013, and I first captured his strategic plans for growth there in 2015. The company includes the various verticals of Bloomberg.com, Bloomberg Businessweek, the recently bought-and-relaunched CityLab, and the expanding QuickTake.

All of that’s powered by what is probably the largest number of journalists working for any single company outside of Japan: 2,700 reporters, editors, and analysts working in 120 bureaus around the world. That’s scale, and it’s produced a big consumer business:

• Bloomberg Media reaches an audience of 90 million per month.
• About 30 percent of its revenue comes from outside the United States.
• Ad revenue contributes about 55 percent of that total revenue, with subscriptions and licensing adding about 20 percent a piece.

Bloomberg is one of the Digital Dozen, a term I first identified in my 2010 book Newsonomics. It’s one of the limited number of enduring, largely global news brands for which the Internet was a true opportunity for expansion, financially, editorially, and in terms of audience. It’s taken most of those news companies more than a decade to transform their businesses for digital — but they’re now seeing the fruits of that effort.

Adaptability has always been key to Smith’s strategies, and it remains so today. In this Q&A, we talk a lot about consumer reader revenue — a business line Bloomberg Media came relatively late to, in 2018

“You need to constantly evolve your business model,” he told me. “I mean, what we’ve been talking about here, basically, is taking a huge global business media company and turning it into a reader-revenue company, and turning it into a company that is playing in the global OTT, full video space. And then the third leg of the stool, is live events piece.”

(Live events are on hold, of course, and we also cover the quick move to virtual events — its challenges and longer-term opportunities.)

Bloomberg is — like the Times, the Post, the Journal, CNN, The Guardian, NPR, and others in the Digital Dozen — a case of the old and the new working here. Targeting well-heeled business news readers with high digital subscription prices…while moving aggressively to lure a younger demographic into business news video, hopefully leading them into long-term Bloomberg customers. One foot on the shakier ground of today, one looking for a step forward.

With advertising’s coronavirus recession, why lean way into a new ad-driven model with QuickTake?

“The answer is that, if there is any part of the advertising ecosystem that you actually want to be leaning into for 2020, 2021, 2022, it’s this demographic on mobile, on social, and in video,” he says. “When things come back, as they will, I think that traditional advertising will probably suffer, and you want to move your business and your model to the place on the media chessboard where the dollars are going to be going” — the TV money that will follow the audience to streaming.

Amid all the model evolution, though, Smith is perhaps stronger than ever before on one key element: It’s people who make the difference. “At the top of every one of my lists, the super ingredient is talent,” he says.

Talent, scale, superior tech, and continuous innovation are the keys to the Bloomberg Media model. In our conversation, lightly edited for clarity, we talk about selling advertising in a Google-Facebook-dominated world, remote work, virtual conferences, paywall lessons, and QuickTake’s future.

The news year so far

The subscription business

Bloombergian scale

QuickTake

Virtual events

Revenue promiscuity

“We are all going to jump ahead three years,” Mike Orren, chief product officer of The Dallas Morning News, suggested to me last week.

At least. Ask an American newspaper exec a few weeks ago what they thought 2025 would look like, and they’d tell it you it would be much more digital, far less print, and more dependent on reader revenue than advertising. Some of them would have told you they think they had a plan to get there. Others, if they were being candid, would have said they didn’t see the route yet, but they hoped to find one in time.

The COVID-19 crisis has clearly accelerated that timeline — and may have ripped it to shreds altogether, depending on how long the shutdown lasts and how deep the resulting recession gets.

Make no mistake, though: Many of the decisions being made right now and in the next few weeks will be permanent ones. No newspaper that drops print days of publication will ever add them back. Humpty Dumpty won’t put the 20th-century newspaper back together again. There can be no return to status quo ante; the ante was already vanishing.

Will these decisions “save” the local press, as we’re bombarded with stories of systemic, perhaps irreversible failure in North America, the U.K., and Europe? One way or the other, these are now existential decisions that can no longer be avoided or postponed.

Right now, publishers are combing through Friday’s federal bailout legislation, “trying to determine if they qualify, for how much and when the money might be available,” David Chavern, CEO of the News Media Alliance, told me Monday. “That is going to take at least a several more days (if not a bit longer) — and I assume that some of these publishers are holding off personnel actions until they know the answers.”

Gannett, now by far the largest local news chain, has already announced pay cuts and furloughs, in both the U.S. and U.K. But all publishers, big and small, are now considering their options. Those include layoffs, rapidly eliminating several days of print publishing, reducing their ad sales staff, and questioning their need for large central offices as remote work becomes a workable norm.

All of those ideas have been discussed for years. But now they have to make decisions they’d hoped could wait a few more. The decisions they make, and how they can act on them, will tell us a lot about how much of the local press is left — and how much isn’t — come 2021.

That’s an internal view. Of course, local newspapers operate in a broader media world — including local public media, local TV, and local startups. In some larger cities, public radio stations are taking audience (and sometimes talent) from the dailies. Local commercial TV stations are feeling advertising pain too, but they still have more capacity to sustain themselves — and grab future market share. “They’re expanding more in digital and in social,” says TV business expert Bob Papper, who tracks the industry closely. That’s true even after Michael Bloomberg’s one-man subsidy of local TV ran its course.

Then there’s the nascent independent local press, from VTDigger to Berkeleyside, Charlotte Agenda to The Colorado Sun, The Memphian to MinnPost. Many of these green shoots are finding a little more sunlight — but they’ll be the first to tell you that it’s a tough road replacing their town’s flagging ancestral dailies. Meanwhile, amidst the carnage, some schemers and dreamers are strategizing about what they see as the detritus of a daily industry, waiting to be bought out or taken off by a new generation of local news builders. They’re early in that process; that’s a story for another day.

Let’s step back for a moment and consider the larger society in which local news — and all of us — now all operate. The double whammy of virus terror and economic calamity has made real a whole host of underlying issues — from generational equity to the ragged safety net, affordable child care to cramped housing, the entire panoply of inequities baked into our society.

Perhaps this will be merely a short bout of home detention followed by a fast, v-shaped economic recovery. Maybe these issues will dissolve quickly in the public discourse. For tens of millions, though, they will remain ever-present, defining their lives and their possibilities.

How will the local press of the 2020s cover these realities of life on the ground when we return, blinking, into the sunlight? Will journalism at all levels be strong enough to contribute the deep reporting and analysis that that intelligent fixes require? Will a society shocked by American incompetence in the face of an enemy find its future aided by the press it deserves and requires? Or will a nation of emptied-out newsrooms be unable to meet the moment?

As I wrote Friday, the biggest problem in America isn’t (yet, at least) newspapers going under. It’s ghost papers, strip-mined by ownership, disguised as news sources but actually offering very little in the way of local news or community leadership. The press, whatever its form, finds itself in a classic position: Lead, follow, or get the hell out of the way.

In the shorter term, though, the set of life-or-death questions local newspaper companies face right now is fairly clear.

• Will we keep seven days of print publishing?
• What does it mean to run a mainly reader revenue-driven business?
• How do we find the right people with the right skills to run a digital business?
• How many journalists will our new business reality allow us to pay?
• Will we still expect journalists to report to a central office every day?
• What do “advertising” and “events” look like?
• Should we merge or sell?

So let’s look at each of these more deeply to see what a prematurely arriving 2025 means to readers, journalists, newspaper employees, and publishers.

Nearly every publisher has looked at this question — and nervously stepped back, ever since Advance Local stepped out way ahead of the crowd in 2012. Their compelling fear: Would ending seven-day print be a final breaking point for the habits for decades-long subscribers — the ones now paying $400 to $1,000 a year for home delivery? How many of these customers wouldn’t even transition to a lower price point for some print and more digital? How many would, like so many newspaper subscribers before them, just go away?

McClatchy provided one of the best and most watched dress rehearsals in the trade last year. Last summer, I wrote about how the company began its program of dropping print Saturdays for a single weekend edition — something the Europeans did successfully ages ago. Now McClatchy’s little experiment has become the standard across the entire 30-title chain. And its results are clear.

“The retention from digital Saturdays has been nearly total,” Sara Glines, regional publisher for McClatchy’s Carolina properties, told me Monday:

We lost less than a dozen subscribers in each market, in some markets less than a handful. Digital activation went up immediately. E-edition usage went up on Saturdays. In today’s coronavirus environment, those digital activations have gone a long way in bringing more readers to our digital platforms for breaking news and updates. Miami Herald and El Nuevo Herald were our last markets to launch digital Saturdays. Their first digital Saturday was March 21. It went just as smoothly as all other markets.

How well does McClatchy’s Saturday strategy translate to the broader industry? We know the lessons:

• Communication: Talk to readers early and often about why day-cutting is happening.
• Move relevant features and news into other products, digital or print, that make sense to readers. Reconfigure the Sunday paper into more of a week-in-review, stronger-in-features product.
• Set new pricing that customers think is fair.

But those essential-to-execute guidelines only tell us so much. Dropping Saturdays saves publishers some money — but not that much. With as much as half of their ad money evaporated by COVID-19, publishers will need bigger savings — which means cutting more days.

Readers who might easily adjust to the logic of a weekend paper might also think that saying goodbye to Monday, Tuesday, Thursday, and Saturday, all at the same time, is too much. If it’s too much for readers, and they drop their subscriptions entirely, then the local news business spirals downward even more quickly.

If it works, though, it can save a lot of money.

A huge portion of newspapers’ budgets remains tied up in manufacturing: presses, paper, ink, trucks, and all the people who handle them. (These are the often forgotten newspaper employees, the ones who realize their jobs are going away, but nonetheless like the idea of that happening in 2025 more than 2020. Let’s not forget them.)

“There are so many variables,” one veteran of the trade told me:

Most important: Do you outsource printing or not? If you do, then you can usually cut days and save money. If you own your own presses, it’s harder to manage. Pressmen don’t work just two days. What does it do to your distribution network; can they afford to operate just two days a week? Do you have an agreement to print and distribute other papers like The New York Times or USA Today?

That reckoning — to in-source or outsource — has led to much more regionalized printing, like The Columbus Dispatch being printed 175 miles away in Indianapolis. Those longer distances lead to much earlier editorial deadlines, which means missing late news or sports — often resulting in a print product that’s 36 hours behind the news we read on our smartphones. That’s part of this unending spindown of the newspaper industry.

What’s the 2025 business view here? Expect that most surviving dailies will offer as robust a Sunday print product as they can, and digital through the day, through the week. Or maybe it’s Sunday and Wednesday, for midweek print advertising, depending on individual markets. Or maybe the big Sunday paper shifts back to Friday or Saturday to capture more weekend reading and shopping. Done well, a publisher that shifts from seven days to a couple can expect to retain 75 to 90 percent of existing print advertising. But publishers have been properly wary of that ripcord now dangling in their corner office.

We’ve already seen several titles, most prominently the Tampa Bay Times, announced radical day cuts, within this crisis, and we’ll see more. The question is how many more, and how many days will they be cutting? Even in relatively prosperous California, major publishers are planning to drop Saturday print by early next year, knowledgeable sources tell me.

What does it mean to run a mainly reader-revenue-driven business?

The national news brands offer the best-practice playbooks here.

Business intelligence forms the foundation of their business, with an ever-evolving understanding of how to win — and keep — paying subscribers. That intel has then led to newsroom staffing expansion. They’re creating a virtual flywheel of more and better content and services to readers, who then pay for subscriptions and build a new — bigger — business.

For the locally oriented companies, though, that model is daunting. Do they have the will, capital, time, and talent to apply proven lessons?

How do we find the right people with the right skills to run a digital business?

Going digital (doesn’t that sound odd in 2020?) means committing to a business run by people with digital skills, and not enough publishers have truly done that. Time’s now up. As I noted in my start-of-the-decade Epiphanies piece: “The brain drain is real. What’s the biggest problem in the news business? The collapse of ad revenue? Facebook? Dis- and misinformation? Aging print subscribers? Surprisingly, over the last year numerous publishers and CEOs have confided what troubles them most: talent.” That truism makes the accelerated movement to “digital” even tougher.

How many journalists will our new business reality enable us to pay?

Some smaller chain newspapers were already down to the most skeleton of product-producing staffs, pre-COVID-19. We’ll now see tested the question of how low on staffing they can go — just to get a product out. The more important question, though, is: How many people do they need to produce something readers will pay for?

Will we still expect journalists to report to a central office every day?

Having learned that they can produce the news almost entirely remotely (other than printing and distribution), how much will news organizations want to reconfigure their workspaces to generate savings out of reduced office space?

“We’re 100 percent remote,” says Mike Klingensmith, publisher of the Star Tribune. “Nobody is in our office. I don’t know how we are doing it. Everyone may figure out we don’t need an office after all.”

About 20 percent of newspaper employees work in the physical business of print, manufacturing, and distribution. For the rest, this small unthinkable is now thinkable.

What do “advertising” and “events” look like?

Publishers have continued to make and re-make their ad priorities, staffing, and skills as The Duopoly and digital have forever changed the nature of advertising. This crisis — with some portion of that missing advertising likely never to return — will prompt more rethinking. How much inside sales versus how much outside? How much branded? How much direct versus programmatic?

The events business is also a big question mark, as Josh Benton explored last week. O’Reilly Media deciding to end its big event business was shocking. I agree with the sentiments of Rafat Ali, founder of travel B2B leader Skift: “If we ever give in to the idea that face-to-face events will be over, then we should also give up on the idea that people will travel again. We might as well give up on, well, everything.” Rafat-like, and as ever, to the point.

He expresses a global POV; let me add a local one. The future of the local press is in a deep and authentic relationship with its readers and communities. And that means people in close contact, post-coronavirus. Events of all kinds will be a major part of that future for the successful.

Will we have to merge or sell to stay in business?

The Olympics may have been pushed to 2021, but The Consolidation Games is going ahead as scheduled, virus schmirus. In fact, there’s good reason to believe this crisis is accelerating an M&A process that had already been moving fast.

Share prices for publicly traded chains have dropped dramatically, with Gannett floating just below $2 Monday. When GateHouse bought Gannett — just over four months ago! — this was the deal: “$12.06 a share in cash and stock, based on New Media’s Friday closing price, with a promise of $6.25 in cash and 0.5427 of a New Media share for each Gannett share.” From that to two bucks is quite a fall.

Depending on the duration of this crisis, Gannett’s shares are likely to rise eventually. But its big question remains the $1.8 billion in debt — at 11.5 percent interest — that it took on to make the merger work. Will Gannett be able to keep on schedule with those payments — while, you know, actually operating the company — if the ad exodus extends into summer or fall?

It’s not just future earnings that these companies need to worry about it. It’s also collecting on what’s already been sold, on ads that have already run.

“One of biggest issues is cash flow,” one news industry financial veteran told me. “What if all those SMBs [small to midsize businesses] don’t pay for January and February ads? Even if they have cash, they don’t want to cut checks. Even places like Macy’s may just not pay for January inserts.”

(Here we meet one of the great players in any crisis: attorneys. “In this whole mess, expect full employment of lawyers arguing ‘force majeure’ as a reason not to enforce contracts businesses want to get out of,'” that finance source continued. Is a pandemic an Act of God? It’s a legal “gray area.”)

These are more than abstract concerns. Metro publishers have already told me about major advertisers asking for givebacks and “accommodations.”

Some, including me and much wealthier investor Leon Cooperman, have long doubted Gannett’s ability to pay off that five-year loan while continuing to pay a hefty dividend to shareholders and keep enough people in its newsrooms with the cash flow it could expect.

This crisis only makes those doubts grow stronger.

It’s way too early to mention the “D” word — default — though it is being brought up offline.

Now consider the other drama that’s been submerged in the virus crisis. What will become of Alden Global Capital’s essential takeover of Tribune Publishing? It’s likely more “logical” — in terms of profit maximization — than it was before. Sources tell me a merger between Tribune and Alden’s MNG Enterprises is likely to be announced before the June 30 that is so pivotal in Tribune’s future.

One financial source tells me the deal will be a mix of cash and stock: “Tribune is the acquirer. That would leave them with more liquid security, a big beneficiary of all the synergies. Tribune can fit it into their balance sheet, since it has little debt, with no problem.” (At the moment, Tribune debt stands at $37.6 million.)

Tribune has already begun to look more like Alden’s MNG, notorious as the industry’s most aggressive newsroom shrinker. Tribune has been cutting costs, reducing management positions, and searching for efficiencies wherever it can find them. This current crisis only adds impetus to that work.

In that scenario, Tribune properties — in major cities like Chicago, New York, Baltimore, and Orlando — will probably begin to look more like MNG papers The Mercury News and The Denver Post. Newsrooms cut to be the bone. Disinvestment from what Alden has always seen as a largely mythical digital future.

Financially, it’s a strategy that has worked for Alden. Enough older subscribers have accepted its higher pricing, and it’s found just enough buyers of its minimal digital products to keep the profits coming.

While its numbers aren’t as good as what I reported two years ago, its top properties still throw off (or did pre-coronavirus) margins of more than 20 percent. That’s unheard of among nearly all other publishers.

So what will this crisis mean to Alden and its president and chief dealmaker, Heath Freeman? “Heath could use this to run the table,” one observer said.

It’s easy to see why and how that indeed might be possible. Look at what the chain landscape may be by summer. McClatchy, one of the now lonely “independent” chains, will emerge from bankruptcy in four to six months (unless virus-driven delays lengthen the process). At that point, controlling owner Chatham Asset Management will look at its options.

One will be merging with the new Alden+Tribune.

Another, maybe, would be turning to Gannett. That would require a larger financially rejiggering, though, with lender Apollo a key player.

Either way, given the deep declines the industry faced pre-COVID, plus the unknown toll going forward, we could well see this reality: four hedge funds and private equity firms controlling a majority of America’s daily press as 2020 rolls on into darkness.

Chatham, Apollo, Alden, and Fortress Investment Group (which holds a contract to manage Gannett through 2021) may well get to decide amongst themselves how to divvy up the properties that deliver the local news most Americans get.

That’s not the picture Seattle Times owner Frank Blethen has in mind as he has launched his “Save The Free Press Initiative” in December. But it’s a reality we may all soon face.

This extreme moment is forcing publishers’ hands. Undoubtedly, some may look back on the other side of COVID-19 and say: “That worked well. We should have done it earlier.” Others will wish they’d had more time to think about jumping.

If publishers’ can still see any water in the glass at all — it seems to be emptying day by day — they might invoke Rahm Emanuel’s timely advice about the Great Recession at the start of Barack Obama’s presidency: “You never want a serious crisis to go to waste.”

This is a crisis. This is serious. And there’s no time left to waste.

What’s black and white and now deemed “essential”?

Newspapers, of course — the communications medium that, along with its media peers, has been formally recognized as a public good by cities and states trying to determine which slices of their economies not to shut down. Factual local reporting is indeed an “essential” in an age of fear and misinformation.

That’s the sliver of silver lining in this time of unprecedented financial stress. Our work, as journalists and as institutions, is being consumed and appreciated.

“We’ve gotten all these great letters that ‘Our respect and admiration for your work has never been higher,” says Star Tribune publisher Mike Klingensmith, whose Minneapolis daily has seen big spikes in readership as well.

“Your reporting during the COVID-19 crisis has been top-drawer and inspired me, finally, to execute the much overdue annual subscription ‘donation’,” one new member wrote Colorado Sun editor Larry Ryckman this week. “Please keep up the good work and know that your reporting is incredibly valuable, not merely during this crisis.”

Colorado Public Radio also feels the love, including this heartfelt tweet:

So true. My auto-donation to @CPRNews came out of bank today & I admit I was tempted to cancel it before next month (husband lost job and our health insurance this week) but after 2-seconds I realized they’re some of my best friends right now and I’m happy to pay that bill https://t.co/AvnVUtghtQ

— KB (@kb80202) March 19, 2020

“Audience feedback and digital use has been tremendous, and the numbers are stunning,” sums up Colorado Public Radio head Stewart Vanderwilt.

A giant story like coronavirus is often when journalists feel most connected to the sense of mission that got them into this line of work. It’s the love — plus a much-appreciated viral bump in audience, subscriptions, and memberships — that is buoying otherwise overwhelmed publishers and newsrooms.

More bittersweet is how one innovative local news exec put it to me: “This may be our last chance to prove how valuable we are.”

CNN, MSNBC, The New York Times, The Washington Post, The Wall Street Journal, NPR, the AP, and more are providing the national reporting. They show us, through words and graphics and images, the scale of the tragedy and the many flaws in the federal government’s response to the crisis. But they can’t answer the fundamentally local questions urgent on minds nationwide.

How many people are sick near me? How well equipped is my hospital? Where can and can’t I go? What’s my mayor or my governor doing to help? Who can deliver what? Where can I get tested? And a hundred other perhaps life-or-death decisions as half of Americans nervously face indefinite home detention.

Many of the country’s 20,000-plus journalists have risen to the occasion, working the phones, filing remotely, and venturing out into the invisible threat to get the stories that require the sight or even touch of other humans. All while wondering: How long will I have my job?

That’s the terrible irony of this moment. The amount of time Americans spend with journalists’ work and their willingness to pay for it have both spiked, higher than at any point since Election 2016, maybe before. But the business that has supported these journalists — shakily, on wobbly wheels — now finds the near future almost impossible to navigate.

The question of the hour: How many journalists will still have jobs once the initial virus panic subsides? How much factually reported news — especially local news — will Americans be able to get in the aftermath of this siege?

The answer lies in great part on the people in those quotes above: It is readers and their willingness to support the news who increasingly distinguish the survivors from those facing the end of the road. Advertising, which has been doing a slow disappearing act since 2008, has been cut in half in the space of two weeks. It’s unlikely to come back quickly — the parts that do come back at all.

The problem is the same it’s been for years: The increases in reader revenue are outmatched by the declines in advertising. So this very welcome swell of support from audiences is being swamped by the much larger evaporation of ad revenue. News publishers nationwide are afflicted with existential gut checks — aches that get a little worse with each day’s new dot on the chart of coronavirus cases.

Let’s look first at the cliff-edge effects — which are dramatic — and then plumb the good news of reader engagement and subscription. In an upcoming piece, peering ahead five years or so, I’ll take a look at the big takeaways and likely longer-term impacts of this sudden twist of fate.

A profound advertising crisis

This event isn’t just a black swan, Nassim Nicholas Taleb’s parlance for an unexpected happening that forever alters the course of history. For dailies — in the U.S., in Canada, in the U.K., and really globally — it’s a flock of black swans.

Why? The daily newspaper industry has been on a respirator of its own for more than a decade. Ever since the Great Recession sucked 17 percent of advertising oxygen out of the system in 2008 — then another 27 percent in 2009 — it’s been climbing uphill, its gasps growing more frantic as financial operators consolidate and stripmine what was once a profoundly local industry. All together, American newspapers have lost more than 70 percent of their ad dollars since 2006.

The industry enters this turning-point event with about $1 billion remaining in total annual profits. That’s a fraction of what it was at its height, but it’s still a lot of money — which is why the financial consolidation I’ve chronicled over the last year has continued.

If the massive ad losses we’re now beginning to see remain in place for months, all of that profitability will be gone, and then some. We’ll enter a new stage of loss: The news deserts will become the norm, the oases the rarity.

How bad is it out there? The overall ad business — call it advertising, sponsorship, underwriting — is in depression.

I’ve spoken with more than a dozen well-placed executives in the industry, and the consensus is that, in April, daily publishers will lose between 30 and 50 percent of their total ad revenue. Things are unlikely to improve until we’re past mass sequestration, whenever that is.

“We’re hitting the end of March,” one highly experienced ad exec told me. “We see what’s coming. Big, big misses [of revenue expectations].”

The numbers are necessarily imprecise, and they change daily. March, ironically enough, started surprisingly strong for some publishers. Several noted stable businesses, even a little growth here and there.

Then the virus. April will start off with many fewer bookings and many more cancellations. The second quarter is one big question mark, but publishers also know what a 50 percent drop isn’t even the worst-case scenario. Retailers are closed. Car dealers aren’t selling. Few people are hiring, and who’s brave enough to venture into a new house or apartment to look around?

Then there’s preprints. These Sunday circulars and inserts have remained a robust, high-margin product for many publishers. But many of the big-box stores that paid for them are now closed, including major (if perennially dwindling) retailer Macy’s. Those that remain open, the Targets and Walgreens and grocery stores, wonder what they can advertise; supply chains for both essentials and non-essentials remains uncertain, and people aren’t doing a lot of spontaneous shopping sparked by a deal in an ad.

Is anything holding up okay? The legal ads that newspaper carry of official government actions. Obituaries (darkly enough). And, where they’re legal (and have been allowed to remain open), marijuana dispensaries. (They deliver!)

But the uncertainty is near-universal. “Even those who have something to sell are really concerned about doing it,” one revenue exec told me. “They’re unclear on how to get their message right and not seeming to profiteer.”

Seattle Times president Alan Fisco provides detail:

We have seen deep losses, not surprisingly, in travel, entertainment, restaurant, auto advertising (particularly in our smaller markets, Yakima and Walla Walla).

Our projections show April to be significantly worse than the hit we are taking in March. The annual print declines look to be double what we were experiencing prior to this.

And in spite of significant traffic increases, while we are seeing an increase in programmatic [advertising], it isn’t enough to offset our O&O [self-sold advertising] losses and some of our audience extension product losses (search and social).

(The Seattle Times’ remarkable coverage of the country’s first hotspot was highlighted here.)

Most local dailies have entered this crisis still more dependent on ad revenue than on reader revenue, even though the percentages have moved closer to parity after three years of double-digit print ad decline. They have envied The New York Times, The Wall Street Journal, and The Washington Post for having achieved business models based primarily on reader revenue.

(Ironically, coronavirus will likely push a lot of local publishers into that elite club — but through cratered ad revenue, not soaring reader revenue.)

The devastation across news media is universal but, inevitably, uneven. All local sources of news — daily newspapers, local digital, public radio stations, local TV stations — are reporting deepening losses.

It’s those most reliant on advertising that are most at risk. As reported earlier here at the Lab, it’s alternative weeklies and other free papers that look to be in the first trench. Significantly, the alt-weekly trade entered this year weaker than it’s ever been; no more than a dozen of them nationwide could be called significantly profitable, sources tell me.

“Eighty percent of our advertisers are restaurants, clubs, performance venues and all that is gone for at least two months,” one alt-weekly publisher told me Thursday, underlining how alt-weeklies’ strength — their connection to a vibrant city life — has turned against them.

Among independent digital sites, many of them members of LION Publishers and/or INN, sponsorship/advertising has indeed taken a hit. But since few depend overwhelmingly on it, the effects are worrisome more than catastrophic.

“Ironically, the nonprofits we’re hearing from with struggles right now are those that have done a lot to diversify their revenue streams,” says Sue Cross, executive director of INN, the Institute for Nonprofit News. These are news organizations that were doing a lot of events — now cancelled and with a less-certain future. Or they had big in-person spring fundraisers now forced to pivot to virtual, but that doesn’t replace substantial sponsorship revenue.

Five years ago, Ted Williams founded Charlotte Agenda, one of the liveliest and most commercially savvy sites on the emerging landscape. CA is taking some fire, but has so far it’s been manageable:

Revenues are down around 25 percent. This decrease consists of the drop-in job postings, event listings, and short-term ad deals. We’re fortunate that over 65 percent of our revenue comes from 12-month sponsorship deals across 28 big brands, most of which are negotiated in late fall.

Public radio, too, which depends more greatly on membership revenue than on advertising (or underwriting, as they call it), is also taking a hit.

“On the revenue side, we could see a negative swing of as much as $2 million in the final quarter, ending June 30,” says Vanderwilt of Colorado Public Radio, which has seen a remarkable surge of online readership and radio listenership. “Thirty to forty percent of our sponsorship is from the categories most immediately impacted by the need for social distancing and actual shutdowns. Arts, entertainment, events, restaurants, clubs — and education. Just about all have cancelled/paused their schedules.”

“We have seen some upticks in unsolicited donations coming in,” says Tim Olson, senior vice president of strategic relationships at KQED, the nation’s biggest regional station. But it too has suffered some sponsor loss and is, for now at least, forgoing another tried-and-true revenue source:

Public media stations, particularly news and information public radio stations, have almost all cancelled their on-air pledge drives in order to continue uninterrupted coverage of COVID-19. On air drives are critical drivers of new donors, and reminder to current donors, so the loss of on-air drives is likely to have an effect.

Local TV stations are also assessing what the spring will look like. Several are forecasting a 20 to 30 percent loss at this point in advertising. While they don’t have reader revenue, their ample retransmission fee contracts provide a big steady source of income.

Even with record consumption of digital news, advertising there is fetching far less than you might think. The reasons are straightforward: Many advertisers specify that they don’t want their products to appear next to a virus-related story — and that’s where most of the traffic is, of course. And with all businesses on temporary hold, demand for advertising is down.

That has led programmatic pricing, several publishers say, to be down about 30 percent. One told me it’s now dropping closer to 50 percent as society closes more doors.

In any event, all legacy local media — newspapers, TV, and public radio — are still much more reliant on their core legacy revenue than on digital dollars. So even increases in digital revenue don’t do much to counter the current big declines elsewhere.

The public’s hunger for local news is proven

That’s a lot of bleakness in advertising. But amid it all, there’s a little sunshine in digital subscriptions — the closest thing to a path forward for local newspapers.

Mike Orren, chief product officer at The Dallas Morning News, ticks off these amazing numbers: “Pageviews are up 90 percent. Users are up 70 percent. New users are up 75 percent. Sessions are up 96 percent. Sessions per user are up 14 percent. Session duration is up 9 percent.” And all that has pumped up digital subs.

Digital subscriptions are way up at the strongest local newspapers, with new weekly signups up 2× to 5× over pre-virus times. That’s thousands of much-needed new customers.

(How well are the two general-news pay leaders, The New York Times and The Washington Post, doing? They won’t say. We’ll find out the Times’ experience at its next earnings report.)

That kind of digital subscription growth is widely reported among medium-to-large local papers that do two things well: (1) fund a newsroom able to cover the local crisis in knowledgable depth; (2) have a system in place that facilitates quick and easy subscription signups.

Many newspapers fail to meet both those criteria, and they’ve seen a flatter growth ramp.

Notably, several publishers say that lots of people aren’t waiting to hit a paywall and run out of free articles for the month — they’re hitting those Subscribe buttons earlier and unprompted. They’re acting on both the value of the journalism and the community service.

One other indication of increased loyalty: fewer subscription cancellations. Churn is down. “We’re adding 50 to 70 subscribers every single day and seeing very little churn,” Tampa Bay Times editor Mark Katches told the Local News Initiative. “Churn is as common as the sunrise, but we’re experiencing the lowest churn rate this month that we’ve seen since we introduced the pay meter about a year ago. We attribute that to high interest in our coverage.”

The New York Times requires a new user’s registration in order to have free access to its coronavirus coverage. But most publishers have just opened their coverage up without any friction.

The Dallas Morning News’ strategy is somewhere nuanced and in between. It requires readers to sign up for a virus newsletter in order to get to unlimited related coverage, but it doesn’t require any more information than an email address. “It’s less friction,” Orren says. The idea has paid dividends: That newsletter now has an astounding 334,000 subscribers.

Some of more ambitious local news startups also report impressive numbers. The 18-month-old Colorado Sun is seeing a spurt.

“We have had nearly 600 new members sign up so far this month,” editor Ryckman told me Wednesday. “We signed up 330 new members in February, so we’re easily on track to double that pace by the end of the month.” The site overall has more than 8,000 paying members, with about 1,400 of those at the premium level. “Our traffic has been regularly 3× a normal day — and has been has high as 10×,” he said.

The Daily Memphian, also about 18 months old, is seeing a response both to its coverage and to appeals from its editor Eric Barnes: “Sub starts have jumped 250 percent in the last 2 weeks. And that’s even though we’ve made all our COVID stories free (and that’s 80 percent or more of what we’re doing).”

Barnes underlines the need to remind readers of the costs of journalism. “But we’ve been very intentional with calls to action in stories and newsletters, along the lines of “Our articles are free — but covering the news is not. Please subscribe.” (Memphian sports columnist Geoff Calkins wrote his own direct appeal to readers, aiming to reach a different kind of reader-relationship connection.)

LION Publishers executive director Chris Krewson reports good uptake among his more aggressive member local news orgs. “Berkeleyside has signed up 267 new members since starting a campaign around the virus a few weeks ago, and also gotten donations from existing members, for a total of $50,000 in new-member revenue. The Berkshire Eagle launched a membership campaign and already has 300 members.”

“Many members are reporting huge increases in traffic — five, even ten times their normal pageviews, and also increases in community support and donations,” says INN’s Cross. “Even very small sites are hosting Facebook groups and seeing thousands join overnight, organizing collaboratives of all media in their towns.”

Pulitzer-winning Portland alt-weekly Willamette Week launched a voluntary membership program back in September. As of week ago, it had signed up 510 members. Seven days later and more than 1,100 new members have signed up. “In addition to the much-needed cash, those [and their comments] are tonic for the soul,” publisher and editor Mark Zusman told me Thursday.

For public radio, this crisis has been more about affirming its valued place in listeners’ and readers’ lives — in greater engagement — than in signing up new members. Over the past five years, most of the top 20 public radio stations have morphed more fully into “public media,” investing heavily in digital local news. Those that did are also reaping the returns.

“As of yesterday, CPR.org had over 2 million uniques and [on its separate site] Denverite 500,000,” says CPR’s Vanderwilt. That’s double and quadruple normal traffic, respectively. “The daily Lookout newsletter subs have grown 36 percent since March 1. We have also started publishing twice a day plus news alerts. Open rate has climbed from 32 percent to 41 percent.”

The public, for now, is eating up the added frequency and opening more of those newsletters. At KQED, pageviews have doubled and time spent on pages is up by a quarter. Overall, the public’s hunger for local news at this time is proven.

At metros, daily visits on digital are up an average of 122 percent as of the third week of March. And the pace is accelerating: “a 35% increase from Week 2 to Week 3 [and] no signs of slowing down as we enter the last week of March,” according to Pete Doucette, now a managing director at FTI Consulting. Doucette played a big part in building The Boston Globe’s digital audience and subscription business. His comprehensive take on digital subscriptions, and how to maximize both volume and pricing at this critical juncture is a must-read for all in the business. (The Local News Initiative at Medill offers an excellent roundup as well. )

These trends, we must underline, are global — both the traffic gains and the revenue losses. Major German publishers like Bild and Spiegel Online “all have huge gains,” according to journalist Ulrike Langer. “But none of these publishers have been able to monetize their huge rise in traffic volume in terms of advertising. Ad volume has sharply declined and most advertisers don’t want to see their ads next to coronavirus news.” Different continent, same issue.

What’s left to be “unthinkable”?

Humans are inherently adaptable. We have the life-affirming (and seemingly planet-destroying) capability of adapting to anything. We will adapt here too, no matter the human nor economic toll. A scale of destruction that would have once been “unthinkable” becomes quite thinkable indeed — then assessable, and then actionable. Those of us who’ve tracked the shrinking of the American press should have learned that lesson already.

We all expected a recession would arrive at some point, even if we thought of it kind of distantly, and we knew it would deal a new blow to the beleaguered newspaper industry. (In fact, I see that I’ve noted that possibility here at least three dozen times over the years — including this 2011 (!) entry, The newsonomics of the next recession.”)

Now that it’s arrived on our doorstep, our language has changed. Less “decline” and “deterioration,” more “annihilation” and “extinction“.

“Extinction” certainly draws a sharp picture, and it will be literally true for some of the press. But that picture may not be the most precise. More journalists gone. More publishers gone. Local news greatly reduced.

That’s all coming. But how do we — and the publics we serve — gauge what’s left?

The cuts at alt-weeklies and city magazines became public first. The earliest reports of cuts and layoffs at daily newspapers have begun to seep out. Expect a lot more of them. “Everyone’s making contingency plans,” one industry insider says. Layoffs, furloughs, salary cuts, four-day weeks — however it’s framed, cuts to staffing are on the way.

The fact that readers’ newfound appreciation of the local press is based on the work of those reporters and those newsrooms should limit the cuts. But they often won’t. And then there are the newspapers that have already been cut so much that they barely have enough people to put out a paper everyday. (And that’s before we see much of the most direct impact coronavirus can have on a news organization: sick journalists and other staffers whose extended absence from work makes everything harder.)

One wild card: the federal bailout, which features loans that can be turned into grants if companies maintain staffing. But it remains unclear if the scale of that help — and how accessible it is to publishers — will be enough to make a big difference.

Several years ago, Penny Abernathy’s mapping of America’s “news deserts” established a universal point of reference for discussions about local news. I’ve suggested that, for all the communities down to one or zero news sources, the bigger problem is the ghost newspapers that now pervade the landscape, stripped to the skeleton.

This crisis, like the declines of the past decade, will probably be less about pure extinction and more about new apparitions. Newspapers gutted in a way previously “unthinkable.” Badly wounded (but still faintly breathing) dinosaurs, if you will.

How do we judge if a newspaper is still “alive”? By most definitions, it’s the appearance of a product, usually in print but now digital, that carries a dignified nameplate, preferably in a familiar German blackletter font.

The financial companies that have and will continue to consolidate the local press — perhaps now at an accelerated pace — know that, and they’ve build a cynical strategy atop it. Keep the nameplate and fill the space between the ads with national wire copy, stories pretending to be “local” (but really from someplace three newspapers away), self-serving columns from mayors and local corporate leaders, and lots of low-cost calendar items.

“Fake news” is a truly odious epithet. But we’re now truly into the faux news era in local news. It’s a thin patina of fraudulent localness, packaged in the wrappings of a century ago, and priced at $600, $700, or $800 a year for seniors who nostalgically (or unknowingly, through the magic of the credit card) continue to pay until the day they don’t.

If we define “life” — or non-extinction — by the mere persistence of an old nameplate, we obscure the damage being done to local communities every single day. As we begin to list out the longer-term impacts of the current catastrophe, put that one higher on the list.

All of this — this March massacre of news revenue — is prologue, of course. We just don’t yet know what it’s prologue to. The 2020 calendar has never looked longer.

As one of the most successful, optimistic, and progressive of today’s publishers told me: “If it’s a couple of months, we’ll make it through. If it’s six months, all bets are off.”

In Memphis, two newsrooms — each with about three dozen journalists — slug it out, day after day. They both know it’s possible, maybe even likely, that only one will be still standing in a few years.

What’s happening in Tennessee’s second-largest city, given our times of media high anxiety, also takes on the tone of a morality play, a quizzical dot on the landscape of ghost newspapers and deserted communities. Is Memphis an outlier, or is it a sign of what’s to come in the 2020s?

Quietly, The Daily Memphian — an ambitious local news site launched in 2018 — has shaken up the local news landscape in Tennessee’s second largest city.

“I really think that the presence of The Daily Memphian has been a good thing for the market, and it’s been a good thing for our journalists,” says Mark Russell, the executive editor of the incumbent daily newspaper, the Gannett-owned Commercial Appeal. “I think readers are benefiting from it every single day.”

The “newspaper” war even comes some good trash talk. “I think that competing with The DM has been wonderful for Memphis, wonderful for our journalists and theirs,” Russell continues. But…

“Eric Barnes, Andy Cates, and even some of their columnists have said things in the media and said things publicly that have just been, I’ll call them — call it what it is, outright lies. Because they’re describing The Commercial Appeal and our commitment to Memphis and whether we’re controlled by Nashville. And they know it’s a false narrative. And they keep repeating it. They’ve let up a little bit lately, as I’ve called them on it. But I think for almost a full year, that’s all they talked about, how the CA was ‘not committed to Memphis.'”

The Daily Memphian’s very name shows who it aims to compete with. It’s digital only, meaning of course that it publishes news around the clock. The “Daily” part? It calls out to a group of once-loyal print newspaper readers who might be willing to try out a new alternative.

The Commercial Appeal, founded in 1841, went through a decade of cuts that opened the door — and the community’s wallets — for The Daily Memphian. “We launched our online news source as a direct response to the cuts and consolidation that Gannett imposed on our local paper,” says Barnes, the Memphian’s CEO.

Across the United States, there are local newspapers in various rates of decline — some being stripped quickly for parts by hedge fund owners, some fighting fiercely against the tide through smart business strategy and commitment to their communities.

And across the United States, there are hundreds of local news news sites working to find their own niche in the news ecosystem being born.

But it’s still rare to see old and new compete at something that approximates a level playing field. The local daily, no matter how shrunken, nearly always still has a significantly larger newsroom than the biggest local digital startup. That’s one big reason the battle in Memphis is worth watching closely: If current trends continue, it’s a preview of the sort of competition we might see in lots of other American cities in the coming years.

Eric Barnes, 51, is a former president of the Tennessee Press Association who has been on both sides of the newsroom/business wall during his career. He had a hand in launching community papers in Nashville and Knoxville, led weekly papers, and ran the Nashville Ledger business-and-politics paper for 15 years before the Memphian launched.

“Before that, we did city guides and city directories and business directories and coffee table books,” he says. “Our company was based here in Memphis, but we worked around a couple hundred markets around the country. Then I was at a small business magazine up in New York and a reporter in Connecticut. I also host a show here locally on our PBS station, which I’ve done for nine years.”

While the Memphian serves a metro-sized audience, Barnes applies lessons from his experience with smaller community papers. “Being in the Press Association and getting to know a lot of community-level publishers, small-town publishers, was extremely helpful. The way in which they got hit, everybody in the industries got hit. But they often were slower to go to the web because they didn’t have the money, so they didn’t give away as much. I mean, they kept their print alive. They stayed closer to their communities. I think there are a lot of lessons.”

One lesson: “We are a paywall-driven, subscription-based news source,” says Barnes, who believes reader revenue is the absolute key to getting to break-even.

The Daily Memphian has assembled 11,600 subscribers in the 18 months since its launch in September 2018. Those subscribers initially paid $7 a month, a price now increasing. (It’s currently $10.99/month or $99/year.)

That will add up to more than $1 million in annual revenue, and it’s matched by roughly the same amount in advertising. On one hand, $2 million is a lot of revenue. On the other, the Memphian’s current budget is about $5 million.

That’s the story of this one-of-a-kind play in U.S. replacement journalism: It’s about scale. Scale of ambition. Scale of newsroom. And scale of revenue, the elusive elixir of digital news.

A controversial funding runway

The Daily Memphian has so far raised $8.2 million — $6.7 million of that before launch, the rest since. The goal is to get to break-even or better by 2023. “We’re on track,” Barnes says. “I’ve said publicly before that our goal is to get 20,000 to 25,000 people signed up by Year 5 at a [monthly] rate of around $10.”

“I get what The New York Times, Washington Post, and Wall Street Journal are doing,” says Cates, who led the Memphian’s fundraising campaign and chairs its board of directors. “We believe we are a model for how the Fourth Estate can flourish in middle America. We’re in Siberia. We don’t have national funding, Google or Facebook.”

The CEO of RVC Outdoor Destinations, Cates is a prominent civic booster who gets credit for helping bring the NBA’s Grizzlies to Memphis from Vancouver in 2001. Just as people think that metros need sports teams, they need far older civic institutions — newspapers or the digital equivalent. “For a community to be healthy, it must have a healthy newspaper,” Cates told me. “We tried to buy the CA, and thank god we failed.”

That said, The Memphian’s unorthodox and opaque fundraising strategy has been controversial among many both in the bubbling new news landscape and in Memphis. Transparency in funding has become a mantra in the nonprofit news movement, and there the Memphian is lacking.

“Give or take, the original $6.7 million was all raised anonymously, which caused some consternation with journalists and INN [Institute for Nonprofit News],” says Barnes. “I get all that. Even though I carry the CEO title, I have spent most of my life as a journalist one way or another. Locally, there were a lot of questions: Are they going to have bias? Are they going to carry an agenda?”

(At launch, Cates told Poynter that “he hopes that the [anonymity] will avoid the appearance that local high-rollers are treated with deference in Memphian stories.” Keeping the high-rollers anonymous doesn’t typically help with conflict-of-interest worries.)

Barnes says the money was all local and from “many different funders — it wasn’t one funder.” Now, he says, “I don’t ever get asked a question locally” about funders. He says he’s “felt or experienced absolutely zero donor pressure on the newsroom. The board — which is fully public — has high-level, strategic expectations of the operation, including the newsroom. But they’ve not in any way dictated stories that should — or, and this is arguably more important, should not — be written.”

Proudly paywalled

That’s not the only point of some controversy around the Memphian and money. Its paywall, powered by Piano, limits non-subscribers to three stories per month. That’s down from five at launch.

“In the middle of the summer, we started tagging roughly one story a day as subscriber-only, so you have to subscribe to read that,” says Barnes. “That’s done well for us in terms of converting and reinforcing the people that we’re a paid site.” Reducing from five to three stories a month didn’t bring “a huge impact negatively or positively. We’re not quite sure where we go from there. I mean, the business part of me would love to say it was one free or two free, but it’s a balancing act.”

Barnes says the organization plans to test Piano’s new “intelligent paywall” tech going forward. He cites both the Google News Initiative Audience Lab and the Facebook Local Subscription Accelerator as helpful. “They bring doable advice and guiding, best-practice principles. And to both their credit, they are not pushing Google or Facebook to drive traffic or subscriptions.”

Not many local news startups use paywalls — especially nonprofit ones. But for The Memphian, it’s fundamental to its strategy, even as others advocate open access as a civic good.

“We’ve gotten some pushback from some of the other nonprofit news organizations whose mission is free and open content that should be available to everyone. I love that. I mean, I’m an NPR fan. I’m a fan of local PBS, but we just looked at it and said: We don’t want to constantly fundraise. We don’t want to be a drain on the Memphis community, the philanthropic community.”

To counterbalance the paywall, the Memphian is free when accessed in schools and libraries. Those “with limited means” can apply for financial assistance. Some of the Memphian’s journalism also leaks beyond the paywall via local TV and radio partners. “Memphis has a big poverty problem, and we want to figure out how people who can’t afford it can get it,” Barnes says.

But he’s happy to defend charging. “Let’s value the news, let’s charge a fair rate for it. Let’s say our content is worthwhile and try to undo the, what, 15-year disastrous experiment of giving away local and national news for free. People have paid for news for decades, if not ever long. So why wouldn’t we find ways to have people who can afford to pay for it?” Eventually, subscribers are projected to provide about two-thirds of the Memphian’s revenue, with sponsorship and advertising making up the rest.

Are those ad sales motivated by the Memphian’s mission? “Less than 10 percent has been people saying, ‘Hey, we just want to support you to support you.’ We try not to sell that way,” Barnes says. An advertiser’s monthly spend is often in the $500 to $1,000 range. “It’s not terribly expensive to dominate one of our sections or to dominate our business coverage. They have a very strong presence on our email editions or our business coverage or sports coverage.”

So who is in the audience that those advertisers want to reach? The site’s readers do skew a bit older; “it’s traditional newspaper readers who are desperate for a local source, a locally based news publication, paper or not, a news publication,” Barnes says, getting in a few punches at the CA.

The audience also skews toward higher education levels (almost 70 percent have a college degree) and higher income (overindexing at incomes of over $100,000).

That’s in Memphis — the second-poorest large city in America, behind only Detroit. Of the 50 largest U.S. cities, Memphis ranks No. 47 in the share of its residents with at least a bachelor’s degree. And among large U.S. cities, only Detroit and Baltimore have a higher African-American share of its population.

In none of those measures is The Daily Memphian particularly representative of its city, say some critics. At launch, it faced criticism from people like Wendi C. Thomas, a former Nieman Fellow and founder of the local news site MLK50, for having a staff that’s 80 percent white in a city that’s 63 percent black. (The Memphis metro area overall is roughly 50/50 white/black.) They point to a leadership that is overwhelmingly white, and the staff diversity count of 21 percent people of color, 40 percent female. Of its four regular columnists, all are men and three are white.

The Memphian, for its part, is stands by its own record of diversity and of reaching out more widely in its first two years of existence. Its board is majority female and 33 percent African-American. Its new audience development and digital directors are both women; the new head of advertising is African-American; the new executive editor is Latino. “Since launch we’ve gotten more — not less — diverse,” says Barnes.

Beyond that, Barnes says the Memphian has made major inroads in engagement on the news product itself with its diverse communities. “We have two dedicated reporters to north and south Memphis, historically black and under-covered areas. We have a commitment to diverse stories across all reporters and beats. And we have none of the constant crime blotter coverage with the parade of mug shots and shallow, fearful coverage — coverage that has done major damage to black communities nationally. But we do cover policing, criminal justice, justice reform, the local DA, juvenile justice center, a series on the impact of childhood trauma on the brain, and more.”

In the criticism and on the ground, we can see the contentiousness of journalism change. Some may say that it’s one thing to see on-the-surface power imbalances in a decades-old institution that is struggling to adjust to new realities, it’s another to see it in an organization that’s born fresh and new in 2018.

But these are knotty questions. How much should ambitious startups be faulted for finding the early reader revenue from the often-expected sources of more affluent consumers? Further, an important question. How soon should their overall staff makeup resemble their communities covered?

It’s true that Memphis is one of the least digitally connected cities in America. As of 2018, 48 percent of residents have no broadband connection at home — the second highest rate of large U.S. cities, again behind only Detroit.  But of course, we know that, with very few exceptions, digital-only news startups are the only ones to have a chance to find new success in the 2020s. Beyond all the other challenges of reseeding the news deserts, can we rightly expect news startups themselves to deal with broadband neglect? It’s also instructive that the Memphian has already taken early and substantial initiatives, with more planned, to get free access to communities and individuals that can afford to pay for it.

So some paint this picture: anonymous wealthy funders; leadership that doesn’t look much like its community; a digital outlet in a city with limited connectivity; a hard paywall in one of the country’s poorest cities. They say new startups, eventually replacing traditional daily newspapers, are unlikely to be oriented toward a mass audience as what came before.

But it’s far too early to draw that conclusion. The Daily Memphian may be a Rorschach test in what is such a contentious start-up news movement. Critics inside Memphis, and out, can point to numbers they don’t like. The Memphian itself can rightly claim to be doing something that I haven’t seen getting done anywhere else in the country: a high-quality, at-scale, news replacement with a real business model bent on making its way forward with earned revenue.

Much as discussion about its particulars is warranted, and gets the context it deserves, we cannot lose track of that hugely important fact.

The “newspaper” war

While not much has been reported nationally on this competition, big themes emerge for all who care about future of local news in North America and beyond.

First and foremost, The Daily Memphian aims to be a replacement news company — the primary supplier of local news and information for its area.

Metro Memphis has a population of about 1.35 million, a sprawling area that spreads into Arkansas and Mississippi. Roughly half of that population resides in Memphis proper. Unlike the vast majority of hard-working news entrepreneurs planting seedlings in growing news deserts, the Memphian’s model is built on achieving a scale that can try to match the city.

It now pays a newsroom of 34 — the same number of journalists, more or less, remaining at Gannett’s incumbent Commercial Appeal. Another 12 business-side staffers join them. In addition, the Memphian pays more than a dozen regular freelance contributors.

As of December, the newsroom is led day-to-day by Ronnie Ramos, who left a job as executive editor of Gannett’s Indianapolis Star for the Memphian. That move in and of itself tells us lots about the changing momentum in Memphis.

There’s plenty of newspaper DNA in the rest of the Memphian’s staff. (It covers sports, runs restaurant reviews, even runs obituaries — a mix of content much closer to a print daily’s than what you might find at a lot of local nonprofit news sites.) It hired “10 to 15” of its staffers from the Commercial Appeal. And that hiring changed the CA a lot as well.

“We had to go out and get new players for almost every major position,” says CA executive editor Mark Russell. “And we did that and we got better.” The newspaper’s staff is now younger, more digitally savvy, and more diverse — 33 percent people of color now versus 19 percent before the Memphian began hiring people away. (Russell is black; Barnes and Cates are white.)

Memphis’ story is a lot like that of metros from coast to coast. The circulation losses of The Commercial Appeal tell quite a story, underscoring not just a loss of readers but the widening market vacuum that The Daily Memphian is rushing into.

For the third quarter of 2019, The Commercial Appeal reported a Sunday paid circulation of 52,000 and a daily circulation of 29,000. Just three years earlier, those numbers stood at 103,300 Sunday and 67,000 daily. That’s basically half of its paid base of readers gone in three years.

On digital subscriptions, the CA’s numbers have moved in the right direction. It counts 10,063 in that category now, up from 4,045 subscribers three years ago.

The major circulation declines result from changing reader habits, to be sure, but also from Gannett’s cuts to the newsroom and its pricing-over-volume circulation strategy.

By some remembrances, the Commercial Appeal counted about 200 journalists in its newsroom 20 years ago. That’s more than five times the 37 in today’s.

The Daily Memphian’s founders say its birth grew out of the regionalization of the daily press, but the Commercial Appeal disputes the degree of that regionalization. In 2015, Gannett bought the Knoxville and Memphis dailies as part of its Journal Media Group acquisition. Gannett now owns six dailies in the state, with Nashville the largest. Over time, the Tennessee Network developed, a trend we’ve seen all over the country as regional clusters of newspapers looked for headcount reduction and efficiencies.

“You could regionalize backend design — that’s one thing, fine,” Barnes says. “Centralize your accounting. Okay, that’s fine. But you can move [only] so much decision making out of the local markets before it is [no longer] really the Memphis Commercial Appeal.”

Especially since Memphis and Nashville don’t really get along. (For evidence, see this map of NFL fan bases, which shows Memphis’ Shelby County actually has more fans who root for the Dallas Cowboys than for the Tennessee Titans over in Nashville.)

“Everywhere I’ve ever lived, Tennessee, New York, Connecticut, Washington, Oregon, Alaska — I mean, Eastern Washington hates Western Washington, right? I mean, upstate New York and downstate New York are totally different,” Barnes says. “The idea that you can do these sort of regionalized papers…I’ve never lived in a place where that would work.”

Russell’s retort: “It’s a cheap, easy comparison to make when you don’t want to talk about journalism. Let’s talk about journalism. Let’s not talk about this Nashville vs. Memphis thing. It’s kind of a familiar trope though to people here because people in Memphis and people in Nashville don’t like each other.”

Russell wrote his own column in November to respond to the “centralization” charges, “setting the record straight.”

“What I say about that is that the people in Nashville have their hands full making decisions in Nashville,” he says. “And if you think about that logically for a minute, if you’ve worked in a news organization, you know it is hard to control your own organization in your own city, much less one that’s three hours away that you don’t have familiarity with the people, the places, or the issues of the context. So that’s ludicrous on its face that someone in Nashville making decisions here.

“It’s a short trip to the editors, including me, who are in the market, who know this market, who are working hard every day to produce a good report online and in print…Tell me who in Nashville is staying up late like me, reading content and up early reading content. Tell me who in Nashville is out in the community meeting with community leaders and neighborhood leaders every day. No one. They’re not here. They’re in Nashville doing the same thing I’m doing here. And that’s the way it should be.”

Its delightful to hear a bit of trash-talking by head-to-head news competitors. Reminds me of my days in the Twin Cities 20 years ago, when our Saint Paul Pioneer Press took on the larger Star Tribune.

Even with the head-to-head competition, Russell remains evenhanded in his view of the Memphian. “I talk to readers every single day,” he says. “And what I hear from readers is that they see the Memphis being stronger than it’s ever been. And that’s primarily because we now have a competing publication, and they see that the Commercial Appeal has improved since we lost those staffers. They see it every single day. And they see the DM being a really viable, strong news store.

“So you’ve got two heavyweights going at it on important issues. Readers have found the benefits of that: We’re going to have far better coverage of primary topics like government, the environment, demographics, investigative coverage. They’re going to get better coverage overall, and they have been getting it.”

The future

How long will this head-to-head competition last?

One logical question to start with: How soon could the paid readership numbers of the Commercial Appeal and Daily Memphian converge? A legacy business still transitioning from print to digital — and now owned by a megachain with lots of new debt to pay off — is competing with a debt-free, digital-only, deep-pocketed operation bent on growth.

This is no apples-to-apples comparison; there are many moving pieces and radically different cost structures. Then again, there won’t be many more apples-to-apples comparisons in local news going forward. This isn’t the New York Post vs. the Daily News, the Chicago Tribune vs. the Sun-Times, or even the more recent Times-Picayune vs. the New Orleans Advocate — recognizable battles between distinct competitors, but also between fundamentally similar businesses. But digital subscriptions — how many people in your community can you convince to hand over their credit card for digital access to your owrk — can be a common point of comparison.

How much are Memphis news readers reading one or the other or both?

“I don’t know,” the Memphian’s Barnes says. “I know anecdotally that people tell me that they have dropped the CA. I know other people continue to do both, and they do have some good journalists over there. I mean, they have many good journalists over there. I still read them — if not every day, I read them a couple of times a week. I think that’s true of a lot of people.”

(Again with the trash talk.)

One way or the other, given the tight economics of the local news business itself, no one is under any illusion that Memphis’ contrarian news war will last for a long time. “I’m not sure it can,” the CA’s Russell says. “It’s hard to imagine any community our size supporting two full-blown, news organizations. Even when full-blown doesn’t mean what it meant back 10 years ago…it’s hard to imagine that, it really is.”

The Daily Memphian is, like many of its startup brethren, a nonprofit. But it’s a nonprofit with an for-profit attitude, acting as a business-oriented enterprise.

“We are structured as a nonprofit under Memphis Fourth Estate Inc., but we are intensely focused on building a financially sustainable model that relies not on constant fundraising, but on earned revenue through our paywall subscriptions and sponsorships,” says Barnes.

What are his reader revenue takeaways so far? “We launched on September 17, 2018. Our original projection was 4,500 paid for the first year. We hit 4,500 somewhere in October. I mean, it was under full four weeks.” By year’s end, it was close to 6,000; by its first anniversary, it was at 10,000. Churn is relatively low, at about 6 percent annually. Today the Memphian has settled into a monthly net gain of about 300 subscribers. (The site now gets about 1.5 million monthly pageviews.)

The Memphian continues to test both annual and monthly offers, but generally avoided the “$1 for 6 months!!” deep discounting some other sites have used to draw in new subscribers.

The Memphian has clearly tapped into a substantial early paying audience — a cohort of the civically connected who were more than ready for the Memphian. The big question: What do the next cohorts look like? How big will they be, and will they represent a broader slice of Memphis’ population than its well-heeled early audience?

As The Memphian eyes doubling its subscriber base, Barnes knows the strategy will likely get more nuanced. “It’s a pretty high-income, high-educated audience, so, the [price] is not an issue for them. As we get from 11,000 to 22,000, we have to be more price sensitive, I think, with people. It’ll be tricky over the next few years.”

The Daily Memphian is providing a new value proposition to its readers. But in that offer we can see how in-progress the digital experience remains — especially perhaps for older readers. Take the site’s email newsletters. “We push a ton of email,” he says. “It works really well. We get really good open rates. But what we realized with many, many readers — particularly those who are older — they really don’t understand the difference between the email and the website. So they don’t get what’s in what. They’ll tell us, ‘Well, I’m a subscriber. I get your email edition.'”

Those emails are free to all, not part of a paid subscription. “They don’t go to the homepage, they don’t go to the navigation — they just use that email. Which is in some ways great, but creates a massive amount of confusion.”

In its first year of publishing, the Memphian published almost 7,000 stories, ran thousands of staff-shot photos, added nearly 10 weekly podcast series, and held Daily Memphian events almost every week.

It’s all those stories — buttressed by irrational fervor, best-practice business models, and more — that have always made local journalism work, and will someday again.

“It wasn’t local journalism that failed, it was the business behind local journalism,” Barnes says. “It’s a simple fact that gets lost…That’s been a driving issue for us: There is a lot of traditional local stuff that didn’t need to be thrown out the window. It was just that the business model got so wonky, broken. That was really where the problem was.”

When I spoke at state newspaper conferences five or ten years ago, people would say: “It’ll come back. It’s cyclical.” No one tells me that anymore. The old business is plainly rotting away, even as I find myself still documenting the scavengers who turn detritus into gold.

The surviving — growing, even — national news business is now profoundly and proudly digital. All the wonders of the medium — extraordinary storytelling interactives and multimedia, unprecedented reader-journalist connection, infinitely searchable knowledge, manifold reader revenue — illuminate those companies’ business as much as digital disruption has darkened the wider news landscape.

What is this world we’ve created? That’s the big-picture view I’m aiming to offer here today.

Those of us who care about journalism were happy to see the 2010s go. We want a better decade ahead for a burning world, a frayed America, and a news business that many of us still believe should be at the root of solving those other crises.

I call what follows below my epiphanies — honed over time in conversations around the world, with everyone from seen-it-all execs to young reporters asking how things came to be the way they are in this business. These are principles that help me make sense of the booming, buzzing confusion that can appear to envelop us. Think of it as an update to my book Newsonomics: Twelve New Trends That Will Shape the News You Get, now a decade old.

Here I’ve distilled all my own concerns and my understandings. I’ve taken a big-picture, multiyear view, knowing that like it or not, we’re defining a new decade. You’ll see my optimism here — both as a longtime observer and as a later-stage entrepreneur trying to build out a new model for local news. (I wrote about that back in October.) I do believe that we can make the 2020s, if not quite the Soaring ’20s, something better than what we just went through. But I balance my optimism with my journalism-embued realism. In many ways, 2020 stands at the intersection of optimism and realism — a space that’s shrinking.

So much has gone off the rails in the news industry (and in the wider society) over the past decade. Amid all the fin-de-la-décennie thinking, I think Michiko Kakutani best described the country’s 10-year experience: “the indigenous American berserk,” a borrowing from Phillip Roth.

So much of what happened can be attributed to (if not too easily dismissed as) “unintended consequences.” Oops, we didn’t mean to turn over the 2016 election to Putin. Gosh, we didn’t mean to alter life on earth forever — we just really wanted that truck. We just wanted to connect up the whole world through the Internet — we didn’t mean to destroy the institutions that sort through the facts and fictions of civic life.

As billions have disappeared from the U.S. newspaper industry, the words “collateral damage” served to explain the revolution that led digital to become the leading medium for advertising. That damage is now reaching its endgame.

The Terrible Tens almost precisely match the period I’ve been writing here at Nieman Lab. In that time, I’ve written enough to fill several more books — 934,800 words before this piece. Almost a million words somehow accepted by our loyal readers, who still, remarkably, laugh and tell me: “Keep writing long.”

Let’s then start the 2020s off right. With one eye on the last decade and another on the one to come, let me put forward 20 understandings of where we are and how we build from here.

That felt like huge news — but what if it really only represents the beginning of a greater rollup? Last month, I sketched out how five of the largest chains could become two this year.

And yet there are even worse potential outcomes for those of us who care about a vibrant, independent press. What if a Sinclair, bent on regional domination and with a political agenda, were to buy a rollup, and keep rolling?

In a way, GateHouse’s builder Mike Reed has done a lot of the heavy lifting already. From a financial point of view, the CEO of New Gannett has already done a lot of rationalization. GateHouse bought up a motley collection of newspaper properties, many out of long-time family ownership, and brought some standard operating principles and efficiencies to them. We can ask whether his big gamble of borrowing $1.8 billion (at 11.5 percent interest) from Apollo Global Management will prove out over the next few years. Or we can think of that megamerger as just prologue.

After all, the same logic that drove the GateHouse/Gannett deal pervades the near-uniform thinking of executives at all of the chains. Job No. 1: Find large cost savings to maintain profitability in light of revenue declines, in the high single digits per year, that show no sign of stopping. And the easiest way to do that is merging. A merger can massively — if only once — cut out a lot of HQ and other “redundant” costs.

It buys some time. And newspaper operators are craving more time. “Ugly” is the simple description of the 2020 newspaper business offered to me by one high-ranking news executive. Revenue declines aren’t improving, so the logic remains. The only questions are: How much consolidation will there be, and how soon will it happen?

Heath Freeman, head of journalistic antihero Alden Global Capital, has already begun to answer that question. The hedge-fund barbarians aren’t just inside Tribune Publishing’s gates — they’re settled in around the corporate conference table. Alden’s cost-cutting influence drives the first drama of the year: Can Chicago Tribune employees fend off the bloodletting long enough to find a new buyer for their newspaper before it’s too late? They know that, despite a national upswell in public support for the gutted Denver Post in 2018, Alden was able to remain above the fray and stick to its oblivious-to-the-public-interest position.

Meanwhile, McClatchy is trying to thread a needle of financial reorganization. Then there’s Lee, operator of 46 largely smaller dailies. All of them are subject (and object) of the same financial logic.

While financing remains tough to get, at any price, there remains an undeniable financial propulsion to bring many more titles under fewer operations.

There’s no law preventing one company from owning half of the American daily press. And no law prevents a political player like a Sinclair — known for its noxious enforcement of company politics at its local broadcast properties — from buying or tomorrow’s MergedCo — or orchestrating the rollup itself.

After a decade where we’ve seen the rotten fruit of political fact-bending, what could be more effective than simply buying up the remaining sources of local news and shading or shilling their coverage? Purple states, beware! Further, the price would be relatively cheap: Only a couple billion dollars could buy a substantial swatch of the U.S.’s local press.

Alden is a virus in the newspaper industry.

It sometimes seems like we’ll run out of epithets — “the Thanos of the newspaper business,” “the face of bloodless strip-mining of American newspapers and their communities,” “industry vulture,” “the newspaper industry’s comic-book villain” — for Alden Global Capital. Then someone helps us out.

“Alden is a virus in the newspaper industry,” one very well-connected (and quite even-keeled) industry executive told me dispassionately. “It just destroys the story we try to tell of the great local journalism we need to preserve.”

Think about the big picture. The industry is flailing; behind closed doors, it’s throwing a Hail Mary, trying to win an antitrust exemption from Congress. It argues that in the public interest, it should be allowed to negotiate together (rather than as individual companies) with the platforms. It wants the big payoff they’ve dreamed of since the turn of the century: billions in licensing from Google, Facebook, and Co.

It pines for and makes comparison to the kinds of licensing revenue that both TV broadcasters and music publishers have been able to snag. But thus far, that’s been a heavy lift in terms of negotiation or public policy. But Alden adds more weight, letting governments or platforms say: “Wait, you want us to help them?”

Which leads to…

Can a duopoly licensing deal be the “retrans” savior of the local news business?

In 1992, local TV companies were in a bind. Cable and satellite companies had to pay the ESPNs and CNNs of the world to air their programming. But local TV stations — available for free on the public airwaves — got nothing for having their signal distributed to cable customers.

But that year, federal legislation allowed local TV stations to demand compensation from cable and satellite systems — retransmission fees. Essentially, distributors paid stations for the right to their programming, including local news — despite the fact that anyone with an antenna could get their signal for free.

What started out as a small supplemental revenue stream now amounts to about 40 percent of all local TV station revenue, according to Bob Papper, the TV industry’s keen observer and data/trend collector through his annual RTDNA survey. “Retrans money is skyrocketing, and that should continue until it levels off in 2023-24.” This year, it will likely add up to $12 billion or more.

Advertising revenue has been fairly flat for local TV companies (setting aside for a moment the two-year cycle in which election years pump them full of political cash). Digital revenue hasn’t been much better, accounting for only six or seven percent of station income, Papper says — way less than newspaper companies earn.

And yet these local TV businesses are stable, profitable, and facing nothing like what’s happened to newspaper newsrooms. Papper notes the wide variance across stations in the depth and breadth of their news products. While many still stick with the tried-and-tired formulas, his surveys of station managers list “investigative reporting” as their No. 1 priority. When it’s funded, it’s a differentiator in crowded TV markets.

It’s that retrans money that makes all the difference.

Clearly, the news industry is a major supplier of high-engagement material to the platforms — a supply that helps energizes their dominant ad businesses. While both Google and Facebook have deployed a motley fleet of news industry-supporting initiatives, they’ve steadfastly refused any large-scale “licensing” arrangements.

If there’s increased public pressures on the platforms as the society’s digital high turns part-bummer, and if the political environment were to change (a President Elizabeth Warren, for example), it’s not hard to imagine the tech giants ponying up a billion here or there for democracy-serving news, right? (Both Google and Apple count more than $100 billion in cash reserves, net of debt, with Facebook holding more than $50 billion.)

Google, when asked over the years why it doesn’t pay license fees, talks about the complexity of the news market, among other objections. Expect a new argument: You want us to pay an Alden, or a Fortress Investment Group?

The financialization of the press may indeed makes the daily newspaper “public service” argument more difficult to make. While still true — though now wildly uneven in its actual daily delivery — it might be an artifact of a bygone age. The question may turn from “Will platforms finally pay license fees?” to “Who can make a good argument that they deserve them?”

The first metric that matters is content capacity.

In our digital world, just about everything can be counted. So many numbers adding up to so few results for so many.

Look forward and we can see that content capacity is and will be among the biggest differentiators between the winners and losers of the news wars. In fact, I’d call it a gating factor. Publishers who can offer up a sufficient volume of unique, differentiated content can win, assuming they’ve figured out ways for their business to benefit from it.

People aren’t the problem, no matter what the headcount-chopping Aldens of the world have preached. People — the right journalists and the right digital-savvy business people — are the solution.

In models as diverse as The Wall Street Journal, The Washington Post, The New York Times, The Guardian, The Athletic, The Information, the Star Tribune, and The Boston Globe, we see this truism play out.

Certainly, having more skilled journalists better serves the public’s news needs. But the logic here is fundamentally a business one. In businesses increasingly dependent on reader revenue, content capacity drives the value proposition itself.

Rather than reducing headcount — and thus spinning the downward spiral more swiftly — increasing headcount can lead to a magic word: growth.

The news business will only rebound when it seeks growth.

Across America’s widening expanse of news deserts, we don’t hear many whispers of that word, growth. The conversation among owners and executives is pretty consistent: Where do we cut? How do we hold on?

That’s meant more M&A. More cutting print days. More cutting of business operations. More cutting of newsrooms. All in an effort to preserve a diminishing business — whether the underlying mission is to maintain even a semblance of a news mission or just to milk the remaining profits of an obsolescent industry.

Of course, local news publishers poke at new revenue streams to try to make up for print ad revenues that will likely drop in the high single digits for the fourth year in a row. But the digital ad wars have been lost to Google and Facebook. Marketing services, a revenue stream pursued with much optimism a few years ago, has proven to be a tough, low-margin business. Digital subscription sales are stalled around the country, not least because of all that cutting’s impact on the product. Most see no path to a real “replacement” revenue stream. (Maybe CBD-infused newsprint?)

Cutting ain’t working. Decline feeds decline.

Only an orientation toward growth — with strategies that grab the future optimistically and are funded appropriately — can awaken us from this nightmare. Replace “replacement” strategies with growth strategies and these businesses look different.

Happily, we do have growth models to look at. Take, most essentially to the current republic, our two leading “newspapers.”

Today, The New York Times pays 1,700 journalists. That’s almost twice as many as a decade ago. The Washington Post pays 850, up from 580 when Jeff Bezos bought it in 2013.

The result: More unique, high-quality content has driven both publishers to new heights of subscription success, the Times how with three times as many paying customers as it had at its print apex. Readers have rewarded the investment, and those rewards have in turn allowed further investment.

It’s a flywheel of growth — recognizable to anyone who’s ever built a business, large or small. What it requires is a long-term view and patience. And, of course, capital in some form — which shouldn’t be a problem in a rich country awash in cash. But what it also demands is a belief in the mission of the business, an in-part seemingly irrational belief that the future of the news business can, and must, be robust.

Some big numbers tell the big story.

• We may have underestimated the dominance of the New Gannett. According to Dirks, Van Essen, Murray & April, the leading newspaper broker, the new Gannett now owns:
  • 20.4 percent of all U.S. daily newspapers
  • 26.3 percent of all U.S. daily print circulation
  • 24.8 percent of all U.S. Sunday print circulation

  So in rough terms, it controls a quarter of our daily press. The chart below, produced by the brokerage, compares the megamerger to the industry’s previous big deals on the basis of percentage of newspapers owned and percentage of circulation controlled. It should send a chill down every American spine.



• There are probably fewer than 20,000 journalists working in U.S. daily newspaper newsrooms. There’s not even a semi-official tally anymore, but that’s a good extrapolation from years past, given all the cutting since. That compares to 56,900 in 1990 — when the country had 77 million fewer people than today.
• The daily press still depends on the print newspaper for 70 percent or more of its revenue. That’s after 20 years of “digital transition.”
• The daily newspaper industry today takes in more than $30 billion less per year than it did at its height.
• $1 trillion: The market value reached by Alphabet (Google) last week.

The brain drain is real.

What’s the biggest problem in the news business? The collapse of ad revenue? Facebook? Dis- and misinformation? Aging print subscribers?

Surprisingly, over the last year numerous publishers and CEOs have confided what troubles them most: talent.

It’s hard enough to take on all the issues of business and social disruption with a staff that can meet the challenge. Increasingly, though, it’s hard for news companies to attract and retain the talent they need, especially in the business, product, and technology areas that will determine their very survival.

Who wants to work in an industry on its deathbed? Especially in an already tight job market.

What do the people who could make a difference in the future of news want? Fair compensation, for sure, and local news companies often pay below-market wages, on the TV side as much as in newspapers. Perhaps more important, they want a sense of a positive future — one their bosses believe in and act on every day. That’s a commodity scarcer than money in this business.

No industry has a future without a pipeline of vital, young, diverse talent eager to shape the future. And that’s especially true in the live-or-die arts of digital business. As the just-released Reuters Institute for Journalism 2020 trends report notes, “Lack of diversity may also be a factor in bringing new talent into the industry. Publishers have very low confidence that they can attract and retain talent in technology (24%) and data science (24%) as well as product management (39%). There was more confidence in editorial areas (76%).”

At the same time, we’ll be watching the flow of experienced talent as it moves around the industry. As Atlantic Media continues to grow and morph under the Emerson Collective, a number of its top alumni are moving into new positions elsewhere. Longtime Atlantic president Bob Cohn now takes over as president of The Economist — an early digital subscription leader, the storied “newspaper” now seeks growth. Meanwhile, Kevin Delaney, co-founder of Atlantic Media’s innovative Quartz, has taken on a so-far-unannounced big project at The New York Times’ Opinion section, where the appetite for impact has grown appreciably.

Finally, as The Guardian ended the decade with happy reader revenue success, Annette Thomas becomes CEO. Thomas has earned accolades for her innovative work in science publishing. These three, plus numerous others moving into new jobs as 2020 begins, can now bring their decades of digital experience to the job of getting news right in the ’20s.

Print is a growing sore spot; expect more daycutting.

Just for a moment, forget the thinned-out newsrooms and consider a fundamental truth: The physical distribution system that long supported the daily business is falling apart.

The paperboys and papergirls of mid-20th-century America have faded into Norman Rockwell canvases. As Amazon’s distribution machine and Uber and Lyft suck up available delivery people across the country, publishers say it’s increasingly hard to find paper throwers. (And why not? Paper-throwing sounds like a sport from another age.)

Why not just throw in with the logistics geniuses of the day, and partner with them to deliver the papers? The newspaper industry has indeed had talks with Amazon, buyer of 30,000 last-mile delivery trucks over the past two years. We’ll probably see some local efforts to converge delivery. But think about who still gets that package of increasingly day-old news delivered to their doorstep? Seniors — who want the paper bright and early, complicating delivery partnerships.

Not to mention that, with print subscribers declining in the high single digits every year, deliverers now need to cover a wider geography to deliver the same number of papers — and that problem will only get worse.

To add an almost comic complication to the challenge of dead-tree delivery: California’s AB5 just went into effect. Its admirable aim is to bring fairer benefits to those in the gig economy. But its many unintended consequences are now cascading throughout the state — spelling millions more in costs to daily publishers while wreaking havoc among freelancers.

Is seven-day home delivery now a luxury good? Or just a profit-squeezing artifact? Either way, it’s become clear that publishers’ years of price increases for seven-day aren’t sustainable. One of my trusty correspondents reported this last week that he’s now paying $900 a year for the Gannett-owned Louisville Courier-Journal. There are Alden-owned papers charging more than $600 a year for ghost titles, produced by a bare handful — sometimes two — journalists.

As print subscriptions have declined, publishers have continued to price up. That’s death-spiral pricing, with a clear end in sight and boatloads of money to be made on the way out the door.

Earlier this year, I wrote about “the end of seven-day print” and how publishers have been modeling and noodling its timeline. There’s been lots of trimming around the edges, mainly at smaller papers; McClatchy’s decision to fully end Saturday print is a harbinger of what’s to come. The company planned the end of Saturdays meticulously, with a keen eye toward customer communication, and proved to both itself and the industry that it can be done.

(Let’s allow time here for a brief chuckle by European publishers who have been successfully publishing “weekend” papers for decades.)

But cutting Saturday alone doesn’t save you a lot of money. Those twin pressures — on one hand, needing ever-larger cost savings, on the other, the collapsing distribution system — mean we’ll see more ambitious and adventurous cutting in the year to come. They’ll do while swallowing the existential fear one CEO shared: “They are scared to death this will end the habit.”

How big a deal is all this — the declining mechanics of print distribution? Very big.

Consider that The New York Times — the most successfully transitioned of newspaper companies — still only earns only 43 percent of its revenue from digital. Most regional dailies still rely on print for 75 to 90 percent of their overall revenue. If the physical distribution system starts failing faster, how much of that print-based revenue — circulation and advertising — can be converted to digital?

At a national level, the direct connection between readers and journalists has never been stronger.

Listen to the commercial breaks of The New York Times’ breakaway hit The Daily. A lot of them aren’t commercial spots, but what we used to call house ads in the print business. Maggie Haberman talking about Times’ reporting in the era of press vilification; Rukmini Callimachi sharing the danger and cost of reporting from terror-stricken parts of the world.

These ads aren’t about making the newsroom feel better — they work. The Times now has more than three times the total paying customers than it did at the height of print, with 3.9 million digital news subscribers paying the Times. Why? The journalists and the journalism.

In the halcyon days of print, advertising drove 75 percent of the Times’ revenue, a number that often hit 80 percent for local dailies. Now the digital world has forced — but also enabled — the Times to forge a very direct connection between its journalists and readers. Readers understand much more clearly that they are paying for high-quality news and analysis. They value expertise and increasingly get to know these journalists individually, whether through podcasts or other digital extensions.

Journalists believe more than ever that they are working for the reader, with the Times the trustworthy intermediary. The new more direct relationship between reader and journalist fosters growth. And the same is true similarly for The Washington Post, The Athletic, and The Information, in different forms.

If the local news world had followed suit, we’d say that the age of digital disruption has been a boon for journalism overall. Clearly, it hasn’t. This lesson is a guidepost for the decade ahead.

Advertising remains a vital — but secondary — source of revenue for news publishers.

The war’s over; the platforms won. With Google and Facebook maintaining a 60 percent share of the digital ad market (and 70 percent of local digital ads), publishers no longer expect to grab a bigger slice of the pie. The drama drawing the most attention: How much will Amazon eat into The Duopoly, as Mediaocean CEO Bill Wise summed up “the five trends that threaten the Google/Facebook duopoly” at AdAge.

Contrary to some of the conventional wisdom of the moment, that doesn’t mean advertising is no longer a part of publishers’ diversified revenue streams. Yes, reader revenue is clearly the driver for successful publishers of the ’20s, but advertising — best when sold and presented in ways that don’t compete directly with the platforms — will be in the passenger seat.

The evolving formula of the early ’20s is a mix of 65 to 70 percent reader revenue, 20 to 30 percent in advertising, and then an “other” that includes things like events. While this model may be more diversified, it’s not made of discrete parts. The better publishers get at profiling their reader-revenue-paying customers, with increasingly better-used first-party data, the better they can help advertisers sell. At this point, it’s a wobbly virtuous circle of money and data, and the successful publishers will find ways to round it.

A local news-less 2030 America is a fright beyond comprehension.

The word of the moment in almost every conversation about local news is “nonprofit.” At so many conferences and un-conferences about the news emergency, the notion that there’s a commercial answer to rebuilding the local business seems almost out of bounds.

What created this anti-profit sensibility? Acknowledging the power of the duopoly, to be sure. But that’s not the only rationale. For generations, many journalists considered themselves proudly unaware or uncaring about the business. Now the ascendance of Google and Facebook has given too many permission to eschew advertising as a significant, if secondary, support of reporting.

Secondly, the industry’s Heath Freemans and Michael Ferros, among too many others, have stained a local news business that was once both proudly profitable and mission-driven. Profiteering is now associated by many with local news.

Nonprofit news, too, though requires capital — just like any kind of growing service or product. Somebody has to actually pay journalists. So those advocating nonprofit news as the new future have turned to philanthropy. They look to foundations, national and local, to finance this vision. Nationally, more than $40 million has now flowed into the American Journalism Project, headed by Elizabeth Green and John Thornton. Most of that’s come from national foundations. The AJP announced its first grants in December, a down payment on what it envisions as a fund of up to $1 billion.

Now we’ll see if AJP can significantly move the needle on what is plainly needed: replacement journalism. As it tries to catalyze a movement, it hopes to multiply the philanthropic response to the news crisis. It’s a hope we can share. AJP’s pitch is straightforward: Communities should support news the same way they support public goods like the ballet and the opera, things that in many cities plainly couldn’t sustain themselves as creatures of the market.

That’s a worthy thought, but with two big issues attached.

One: There’s not much of a tradition of such support. Newspapers made so much money for so many years that they were the ones who started foundations, not the ones asking them for money. Relatively few communities’ foundations are oriented in that direction — and foundations don’t change direction or priorities speedily.

Two: Scale. So much local news coverage has been lost that it would take substantial and ongoing philanthropy to even begin to resupply community news. There’s not a lot of evidence yet of a readiness to do that.

To be sure, hundreds of dedicated journalists have build smaller operations in cities across the country. LION Publishers and the Institute for Nonprofit News are looking for new and better ways to support and nurture them. But the old world is disappearing far faster than a new one is being created.

Ace industry researchers Elizabeth Hansen and Jesse Holcomb recently laid out their thinking, which should serve as a reality check for all who care about the next decade of local news.

Yet even with a game-changing funding renaissance in local news (which would require the significant participation of community foundations), it probably won’t be fast enough or big enough to refill the bucket as local newspaper talent and jobs continue to drain away. There may not be enough philanthropic capital, even on the sidelines, to support the scope and depth of local news-gathering that our democracy requires.

But it was the concluding paragraph of their Nieman Lab prediction that really best summed up this epiphany looking ahead to the end of this decade.

A New(s) Deal for the 21st century: If all forms of philanthropic support for local news are truly not enough, we predict that by the end of 2030, we’ll be seeing large-scale policy changes to publicly support more sources of local news. It may not seem like we’re that close on this one, but trust us, it could happen.

I know Hansen and Holcomb are trying to spark a note of optimism, but their realistic reading of the landscape should strike terror: A local news-less 2030 America is a fright beyond comprehension. Imagine this struggling country 10 years from now if the news vacuum has become the new normal and our communities are democratically impoverished.

My own view: All good journalism is good. Support it by philanthropy, advertising, events, reader revenue, or by winning lottery ticket. Given the peril, we all need to look more widely for support, not more narrowly.

The free press needs to be a better advocate of free peoples in the 21st century.

The Wall Street Journal has long proclaimed itself the paper of free people and free markets. That formulation has made a lot of sense over time in the face of state-run economies of various flavors. But it’s insufficient to meet the demands of today.

Free peoples — those able to speak, write, assemble, vote, and retain some dignity of privacy — make up an uneasy minority of the world’s population. Now the twin dangers of growing strongman despotism and tech-based surveillance societies threaten us all.

Most recently, The New York Times’ investigative report on facial recognition painted a deeply disturbing dystopian portrait. The piece came on the heels of many beginning to describe China’s “surveillance state,” an ominous system intend to enable lifelong tracking and rewarding of state-approved citizen behavior.

We’re moving from a decade of cookies gone wild to what until recently seemed to be Orwellian fiction.

Combine the tech with the spreading rash of authoritarianism afflicting the globe. From Russia to Hungary to Turkey to Brazil to the Philippines to, yes, our current White House, the 2010s produced strongmen who we thought had been relegated to the history books.

Who best to represent free people in the coverage of would-be despots and in the tech-driven threats to several centuries of hard-earned Western rights? A free and strong press.

“The struggle of man against power is the struggle of memory against forgetting,” Czech novelist Milan Kundera memorably told us in his 1980 book The Book of Laughter and Forgetting. (John Updike’s masterful review of it is here).

Memory. Our job as journalists is to remember. To connect yesterday to today to tomorrow.

Like the climate crisis, the threat of a surveillance society registers only haphazardly among the American populace, even as California’s government and others begin to take it on.

We’ve seen the beginnings of a backlash against tech run amok, with Facebook’s role in the 2016 election a seeming turning point. But here we are again, as Emily Bell points out, going into another election with the same issues — and huge questions that go well beyond the social behemoth.

If news companies are, at their base, advocates for the public good, news companies must lead in securing a free society in the face of technological adventurism. Media needs to get beyond its self-interest — ah, first-party data! — and focus on the bigger picture.

Who better to take that stand than those who’ve long advocated free peoples and free thinking? Who better to do that — and perhaps be rewarded for it in reader support — than mission-oriented news media?

The press’ business revival is part and parcel of its advocacy for the people it serves.

Australia is burning, and Murdoch’s newsprint provided the kindling.

For years, Australian press watchers have pointed to the dangerous slanting of environmental news by much of the nation’s press. A majority of that press is controlled by Rupert Murdoch’s empire. And those papers, joined too often by other media, have long skewed the facts of climate change. The result is a society ill-prepared for the nightmare that’s befallen it.

While this month has seen more complaints about Murdoch publications’ coverage, they’re in line with what that coverage has looked like for years. Now even scion James Murdoch has spoken out, as have some of Murdoch’s employees, seeing the heartbreaking, country-changing toll the fires have taken on Australia.

History will record Rupert Murdoch’s three-continent toll on Western civilization. The Foxification of U.S. news, Brexit support, and Australia’s inferno serve as only three of the major impacts Murdoch’s press power has had around the world. It is a press power weaponized and then turned on the very societies it is supposed to serve.

And don’t let the whirl of events let you forget the odious phone hacking scandal. “The BBC reported last year that the Murdoch titles had paid out an astonishing £400m in damages and calculated that the total bill for the two companies could eventually reach £1bn,” former Guardian editor Alan Rusbridger reminded us this week in discussing the British press’ tawdry history with the royals.

Disney, for one, has recognized the toxicity of Murdoch’s remaining brand. Fox Corporation now owns the Fox broadcast network, Fox News, and 28 local Fox television stations, among other media assets. But “Fox” is no longer part of Twentieth Century Fox, the storied studio, and related assets that Disney bought from Murdoch last year. Now it’s only out of sync when it comes to time: 20th Century Studios. (Nieman Lab’s Joshua Benton offered up a wonderful history of the Fox brand in the U.S., beginning with a third of a Brooklyn nickleodeon 115 years ago, on Twitter.)

The Murdoch empire has generated plenty of good entertainment outside of its own brands — witness the Emmy-winning “Succession” and last month’s Bombshell. But we haven’t yet come to grips with how his publications’ fact-slanting has literally changed the faces of free societies.

Expertise rises to the top.

The end of the print era is killing off the generalist. Every daily newsroom has its legend of the reporter who could cover anything. Wake him up from a drunken stupor, point him (almost always him) out the door, and you’d get your story.

Great stories there sometimes were, but the legend exceeded the truth: Too much news reporting was a mile wide and an inch deep.

Flash forward to today: Ruthless digital disruption — of both reading and advertising — means that inch-deep stories have less and less value. (Remember back at the start of the last decade, the content farms — Demand Media, Contently, Associated Content — that were going to revolutionize journalism?)

If commodity journalism and sheer volume are out, one the most refreshing trends into the 2020s is single-subject journalism. It needs a better name, but the results have been profound. In topic after topic, the focus on expertise — in reporting, writing and increasingly presentation and storytelling — have produced their own revolution.

In health, we see Kaiser Health News excelling and expanding. In education, Chalkbeat (with its new five-year plan) and the Hechinger Report drill into the real issues of the field. They’re now being joined by the university/college-focused OpenCampus.org, seeking to bring the same level of experienced, knowledgeable journalism to the often-cloistered academy.

The Marshall Project squarely meets the many mushrooming questions around criminal justice in our society. InsideClimate News is growing to try to meet the interest, and panic, around a warming earth. More-than-single-subject-oriented ProPublica’s investigations, often done with partners, have done what great work is supposed to do: set and reset agendas. There are many more, including at the regional and state level, led by The Texas Tribune and CALmatters.

All together, they may add up to fewer than a thousand journalists at this point. But their impact is great, and I believe it will become greater as awareness and distribution increase.

As Google and Facebook have won the ad wars, pageview-thirsty commodity journalism has largely (and thankfully) met its demise. Now we’ll see how much the market — not just those foundations — will support real expertise in reporting.

Free media has better tech skills than state media.

While Iran’s state media was spending days denying any possibility its military had shot down the Ukranian airliner, The New York Times found the likely truth early on. It assembled its own small group of experts. It used the best tech available. And it could report (under an increasingly common four-person byline) that an Iranian missile had in fact likely done the deed.

It wasn’t about suspicions, guesses, or bombast. It was about finding a truth in plain sight — given the human and technological resources to do it.

At first, Iranians believed their own media, as NPR’s Mary Louise Kelly reported from Tehran, that the downing was U.S. propaganda. But then, amazingly and overnight, Iranian citizens responded to the American-driven truth. They piled into the streets, seeing the mistake and its coverup for what it was: another sign that their government, without its own checks and balances, couldn’t be trusted.

Watch what privately owned newspapers do.

By necessity, we pay a lot of attention to the industry’s M&A mating games. These largely involve the dwindling number of publicly owned newspaper companies, which struggle both with operating realities and the need to convince shareholders to hang on through short-term earnings and dividends. They’re the biggest players, the most riddled by financialization, and the ones who have to report numbers publicly.

But given today’s realities, the stock market really isn’t the place for newspaper companies to be. Only long-term, strategic, capital-backed, and for the most part private or family-controlled businesses can make it successfully to 2030.

In the middle part of the 2010s, those papers got more focus. John Henry with The Boston Globe. The Taylor family with the Star Tribune. Frank Blethen, fighting the long fight in Seattle. And then they were joined by Patrick Soon-Shiong with the L.A. Times and San Diego Union-Tribune.

For the most part, we don’t hear much news out of these enterprises. They don’t have to report to markets quarterly, and they’ve taken more of a no-drama-Obama approach to the tough business. They are also, not incidentally, the leaders in digital subscription among local dailies. They remain important to watch.

Just as importantly, consider two newspaper chains that keep their heads down: Hearst and Advance. In the early 2010s, Advance made lots of news by cutting print days at its papers in New Orleans, Portland, Cleveland, and elsewhere. It will likely soon get a fresher look: Long-time Advance Local CEO Randy Siegel announced last week that he’s stepping down. No successor has yet been named.

Hearst also remains intriguing. A very private company — and one now that now generates less than 10 percent of its revenue from newspapers — its very name bespeaks a long commitment. But the top two executives of what now is a profoundly diversified media company both grew outside of the news trade. Will it stand pat in its markets? Will it look for acquisitions? (The old GateHouse was its nemesis outbidding Hearst for the Austin and Palm Beach papers in 2018, but the Gannett deal should keep it out of the buying game for a while.) With antitrust enforcement apparently on the wane, will it try to build a cluster in the Bay Area around its San Francisco Chronicle? Or complete a Texas big-city triangle by adding The Dallas Morning News to its Houston Chronicle and San Antonio Express-News?

Bankruptcy is nothing new in the newspaper industry.

McClatchy’s pension-led financial crisis in November surprised many. The words “potential bankruptcy” tend to focus the mind.

But consider this: By one close observer’s account, more than 20 daily newspaper companies have visited the bankruptcy courts since the Great Recession a decade ago.

Ironically, two of the ones that emerged became acquisitive consolidators. Today’s MNG Enterprises, driven by Alden’s in-court and out-of-court strategy, in fact declared bankruptcy twice in its various corporate iterations. GateHouse, re-birthed by Fortress Investment Group in 2013, was able to restructure debt totalling $1.4 billion — double what McClatchy now owes — and has gone to become the biggest newspaper company in the land, even able to buy the better-known Gannett name in the process.

So if McClatchy does indeed go into a pre-pack bankruptcy, the news won’t be that filing. It’ll be what the company does — as a business and journalistically — afterward.

We have to find a way to keep trillion-dollar stories in the public eye.

Through a year full of remarkable stories, perhaps the most remarkable was one that’s gotten little continuing attention.

In December, The Washington Post published “At War With The Truth.” It took the paper three years to pry loose the trove of documents through Freedom of Information requests. It is remarkable reporting, and one that put a price tag on our ignorance.

Here’s the lede: “A confidential trove of government documents obtained by The Washington Post reveals that senior U.S. officials failed to tell the truth about the war in Afghanistan throughout the 18-year campaign, making rosy pronouncements they knew to be false and hiding unmistakable evidence the war had become unwinnable.”

The eerie parallels to the Pentagon Papers — a previous generation’s documentation of enormous waste, financial and human — were obvious. And yet it seems to have caused only small ripples in public discourse.

Politicians drive the daily news cycle, wielding wedge attacks on those — disabled, immigrant, poor — already falling through the now-purposely cut safety net. They say they do this in the name of saving taxpayer dollars. And yet this literal waste of $1 trillion pops in and out of the news in a politician’s second. This isn’t a question of politics; it’s a question of the public purse, and performing that watchdog role is our birthright as journalists.

As we reform and rebuild the journalism of the 2020s, we need to use the digital and moral tools of the day to hold power accountable and keep big stories alive over time. So far, we’ve barely touched the surface in connecting the latest happening to its deep historical context, making readers realize how a story connects to a larger issue or narrative, in ways both intuitive and knowledge-building.

I have confidence we’ll figure out how to do that in the 2020s.

“Mediatech” may be the new “convergence.”

There’s a new word taking hold out there: “mediatech”.

That’s how German behemoth Axel Springer is rebranding itself. CEO Mathias Dopfner and his team have rigorously pursued a transition away from print for more than a decade. “Mediatech” tells us both what they’ve learned and where they are going. In August, Dopfner’s new partner KKR bought out a minority interest in the company, taking it private and preparing it to be a bigger player this decade.

Springer, like its sometime partner Schibsted, will be one the big survivors in the brutal media game. Both have learned that modern journalism is now driven by both journalists and by technology. It’s the melding of the two — in audience definition, targeting, and service, and in product creation and delivery — that will determine the winners ahead.

Springer’s question for the ’20s: How much will the company keep investing in journalism itself, as it also pursues other digital business byways? Dopfner laid out the strategy, in friendly but direct sparring with Mark Zuckerberg, here.

Ah, life remains better in Perugia!

Travel coincidentally brought me to the doorstep of the most you-gotta-go-there journalism conference a couple of years ago. The name says most of it: the Perugia International Journalism Festival. Not a conference, or even an un- one, but a festival, inviting, of course, allusions to Nero fiddling. The truffled pasta and the views can’t be beat. The Sagrantino was magnificent.

The conference’s agenda and its exhibitor halls said it all. Walk into the main hall and Google and Facebook offered dueling expanses, with many enthusiastic company-clad representatives touting their latest and greatest. And half the agenda seemed to be, in apparently unintentional self-parody, sessions on how to work with…Facebook and Google. It’s the very best setting for platformitis.

In the time since, we’ve seen an even greater proliferation of news-aiding initiatives out of both companies. The new Reuters Institute study corroborates my own reporting, among publishers, of how that work is going and how it’s seen:

Google’s higher score [in the Institute’s own surveying] reflects the large number of publishers in our survey who are current or past recipients of Google’s innovation funds (DNI or GNI), and who collaborate with the company on various news-related products. Facebook’s lower score may reflect historic distrust from publishers after a series of changes of product strategy which left some publishers financially exposed.

The overall sense from our survey, however, is that publishers do not want hand-outs from platforms but would prefer a level playing field where they can compete fairly and get proper compensation for the value their content brings.

Short of that business-changing historic payout — see above — it’s unlikely that platform aid to publishers will itself significantly alter any of the trendlines in place.

There’s no natural ceiling to digital subscriptions.

Imagine if Reed Hastings has gone with advice of management consultants in the early 2000s, who might have “sized” the market for “on-demand” video and likely found it negligible. Netflix, nurtured on red envelopes, instead created a whole new category of customer demand — and willingness to pay.

As the company has grown, analysts have consistently undershot its growth potential, in the U.S. and globally. The company that was once asked “Will people really subscribe to on-demand movies?” reported on Tuesday that it now counts 167.1 million subscribers, and added 8.8 million in Q4 2019.

Upstart Disney (two words that don’t seem to pair) has already had its Disney+ app downloaded 40 million times. Hulu, Amazon Prime, HBO Max, Apple TV+, CBS All Access, Peacock, and more are all opening wallets.

What’s instructive to the future of the news business here? There’s no natural ceiling to digital subscription, though media reporters love to ask me that question. Create a value proposition that works and consumers will pay. Obviously, national and global scale — what the Internet provides — are hugely helpful. It is though the product proposition that drives payment.

For a moment, consider all the digital subscription success stories in news: The New York Times, the Financial Times, The Wall Street Journal, The Washington Post, The New Yorker, The Athletic, The Boston Globe, the Star Tribune, and more. What if this is just prologue? Could better products — with more and more useful content, priced, sliced, and diced smartly — reproduce some of the scale success of streaming?

In a word, yes. And that’s our best hope for the decade ahead. Into the 2020s, bravely!

Everyone in the subscription business decries friction, putting too many steps between the would-be buyer and the buy itself. Enter your credit card number; type in your address; pick a username and password; sorry, your password must have at least 3 uppercase characters, 2 lowercase characters, a number greater than 6, and any two of %, &, and #. Too many words, pages, clicks.

Some of that is hard to avoid. But as news consumers, we run into stupid friction all the time. You follow a link to a news site you’ve already subscribed to, but up pops a login screen. “Ugh, don’t you know me by now?” we scream, silently or otherwise.

Confronting (and shaping) all that that friction is one part of The New York Times’ plan for world digital news subscription domination. Times CEO Mark Thompson described that part of the Times’ strategy to me in an interview after the company reported its third-quarter financials last week.

The Times has decided to force non-subscribers to register in order to sample even a couple articles. But the move has an impact on subscribers, too — they’re often logged in on some devices or within some apps but not in others, making them appear anonymous. It’s “confusing to consumers and confusing to us. Someone who is a very loyal, 10-year subscriber turns into an anonymous user.”

What does the Times gain? Better information about potential subscribers, yes, but also better knowledge of subscribers’ activity across devices, unlocking more accurate personalization. That deepens the relationship while providing value in both directions.

That new emphasis on registration serves an overarching goal: Thompson’s goal to hit 10 million subscribers by 2025, which I’ve covered since he outlined it three years ago.

The Times is now more than 40 percent of the way there, amazingly to many, and Thompson says they’re on track to reach or exceed it in five years. When he offered the 10 million number to financial analysts, the Times had 1.6 million digital subscriptions to its news and niche products. 10 million seemed like an outsized stretch. Today, it has nearly 5 million. Here are the key numbers:

4.9 million. That’s the total number of New York Times subscribers overall, between print and digital. That’s already three times its peak in the good old days of print.

4.1 million. That’s roughly how many paying news customers the Times has across digital (3,197,000 subscriptions) and print (869,599 average Sunday circulation).

856,000. That’s the number of subscribers to its non-news products, Crosswords and Cooking.

10 million. That remains the Times’ goal for 2025 for digital subscribers. Its growth curve, says CEO Mark Thompson, will get it there in time.

500,000: That’s the number of Times subscribers outside the United States. They may pay less for their subscriptions than do U.S. customers, but their importance to the Times is increasing. Today, they make up 16 percent of all Times subscribers; by 2025, the Times forecasts that 20 percent of them — or 2 million in total — will.

Thompson and I discussed those numbers, as well as why and how the Times has changed its paywalls — and will soon be charging its most loyal readers more. Along the way, Churchill, Netflix, and the 1960s rock-pop duo Zager and Evans each enter the conversation, which is edited for length and clarity.

Why now? Why do that now? We just published interviews with [Financial Times CEO] John Ridding and Tsuneo Kita, the chairman of Nikkei. John talked about going narrower and narrower and narrower to drive value, decrease churn, and increase pricing over time. This is a whole value journey, right?

After months of work, I’m happy to begin introducing the new company that I’m heading, named Lookout. It’s a wide-reaching new model for local news; we’ll launch next year.

After 15 years providing analysis of the global news industry, the last 10 of them here, I felt compelled to meld together the best of what I’ve seen and heard — the best of the best practices of the trade — in a way we haven’t seen yet. It’s my opportunity, and my calling at this moment, to take the lessons I’ve learned from many of you who lead and work in the news industry and combine them anew. It’s recombinant news DNA for the 2020s.

As John Davidow, managing director for digital at Boston’s WBUR, recently put it after reviewing Lookout’s plans: “It’s like you got in the cafeteria line, but only took the good stuff.”

We are building a city-embracing mobile experience, delivering knowledgeable topical reporting paired with national content partnerships. We’ll meet our audience where they are, via audio, newsletters, and mobile. We’ll connect journalists and readers in multiple ways. Our reader revenue strategy allows for growing customization. In short, Lookout aims to become a true platform, bringing a national standard of digital execution to local news.

Overall, we believe the successful local news outlets of the 2020s will be the ones that authentically embed themselves into the life of the communities they serve. That’s got to be done both digitally and in the real physical world — you know, those humans around you — so the experience is really shared. And those two worlds have to be connected, through news, city guides, community groups, commerce, reader-driven story creation, and more. Facebook, for all that it does, is just an early way-station on the road to authentic community-driven social activity.

The decade now coming to a close has taught us well that the global internet economy values scale. With Lookout, we believe we can prove out a new truism The internet, locally, can uniquely generate and support new valuable individual, group, and advertiser relationships.

So why am I trying to create a new model and company? I could have just written a book about my ideas — Newsonomics 2020, 10 years after my book Newsonomics: Twelve New Trends That Will Shape The News You Get was published (and excerpted here at Nieman Lab). But the limits of writing and the need for doing have become all too apparent.

I’ve exhorted, cajoled, beseeched, pleaded, and lectured at times, preaching the best practices that I’ve found from the smallest of startups to the global news giants. But the diminishment of local news continues to speed up, the incumbents hobbled by legacy structures. And most of the efforts to fill the yawning local gap — powered by talented and caring journalists — are simply below the scale necessary to replace what’s been lost. One key to Lookout’s model is sufficient editorial and business resources to both make and fulfill a promise to readers in the marketplace.

Nieman Lab director Joshua Benton tells me I’ve written 419 pieces here since 2010. And I’m getting uncomfortably close to a million words here — 903,547 of them before today. I do write long, though usually backed up by ample reporting. Here I ask your indulgence for me to explain a bit about Lookout — based not on reporting, but on months of work.

Digital economics, local focus, necessary scale

“You have to do this,” Walker Lundy, the editor I worked for in the 1990s at the St. Paul Pioneer Press, told me over lunch this summer. Walker usually advises his friends to take early retirement, so I was surprised by the statement. I’ve taken on this mission spurred in part by my unusual constellation of work experience. Lookout will be my fifth career in journalism. At the tender age of 25, I became editor and then publisher of an alternative weekly in Eugene, Oregon. Through city magazine work, years with Knight Ridder newspapers in print and digital, and then as a media analyst, I’ve been able to learn so much from so many news organizations.

Lookout is still a work in progress, and I’ll tell you more as we move toward announcing a launch city, date, and who else is involved. We may well chronicle what we’re doing and learning here at Nieman Lab along the way. In short, though, we intend to offer a local news vision for the 2020s. We want to be part of changing the conversation about what’s possible — and what’s necessary — in the reinvention and revival of new local news institutions.

Lookout recognizes how we consume news today — on demand, at home, at work, in the car, on our phones, in audio, text, and video. Many of us believe that local is as meaningful now as in the heyday of print — but that how we write, present, and deliver local news and information requires a blank-slate start. This isn’t a matter of replicating newspapers digitally.

In fact, we should be able to do more and better local journalism now than we ever have. Consider that a digital-only operation like Lookout will be able to devote about 70 percent of its resources to content creation. The print-based daily model — with presses, newsprint, trucks, big office buildings, and more to pay for — can only afford 12 to 20 percent on content. The digital economics can work if we smartly and appropriately apply the lessons of successful national/global media companies to local ones.

Without the burden of legacy costs and public-company pressures, Lookout can harness the attractive math of digital-only business and the increasingly powerful but inexpensive technologies of our time. Earning our way forward is fundamental to the model.

We believe that new news institutions must stand on their own, earning and growing their own reader and local advertiser revenue. We don’t believe that many local news institutions — as compared to national, state, or regional ones — can do the scale of high-quality work required if they are dependent on ongoing philanthropy.

As a for-profit, public-benefit corporation, Lookout will act with the scale and scope necessary to make readers and sponsors a proposition worth paying for. Our public-benefit structure codifies the centrality of our community service mission. Our for-profit structure allows us to endorse candidates, access capital, and become part of local business communities.

We’re truly digital native, respecting our readers’ intelligence and time to earn a primary place on their home screens. Civic engagement — and betterment — is built into our very fabric. We believe the phone should become a primary tool of democracy, and democracy-building, into what history may someday tell us were the Soaring ’20s.

Everyday democracy

Soaring? That might be hard to believe now, in the final coughs of this exhausted decade, but the means of renewal are in front of us.

I’m not usually at the front of the line in citing popes. However, as Pope Francis described Europe’s malaise in 2014, we suffer from a “weariness” to solve problems. Can citizens, in the midst of messy democracy, find common ground to solve their own problems? Some believe that the wave of nationalism and polarization we see across the world’s democracies is a permanent feature of our societies.

There is plenty reason for pessimism. Our ability to tackle the issues of climate change, affordable housing, education equity, and food security, among many others, seems limited. And yet we’ve never had more knowledge and technologies to address them. What we need to do is activate the democracy, and in that, a vibrant, involved, fair, nonpartisan local “press” is essential.

That need is global. I’ve been fortunate enough to work on the problems of media on four continents. The trajectory of digital disruption differs from place to place, but the loss of local journalism — and its resulting effect on self-governance — is universal.

Back in the 1990s, I invited a young NYU professor named Jay Rosen to Saint Paul. We then practiced, in partnership with Jay, “public journalism.” A substantial part of the newsroom had its doubts, but a crew of dozen or so Pioneer Press staffers seized an opportunity: Do great in-depth series journalism on key topics (crime and safety, intergenerational relations, and more), and then hold public forums to involve the now-better-informed citizenry in seeking solutions.

That’s solutions journalism as we’ve come to know it, done in fits and starts across the country. It’s not new, but like the Internet of yore, it’s very unevenly distributed. What Lookout will ask: How do we build everyday democracy into the very fabric of an everyday news source that readers will check into frequently?

Will it work? Certainly, I’ve run across a lot of skeptics. “Nobody cares much about local news anymore.” “There’s simply no business model for local news.” “Why do you think you can make this work when nobody has?” Indeed, the muscle memory of robust local news is atrophying.

Can it be revived? Yes, if you give it a chance — and enough runway to prove the skeptics wrong.

“It’s amazing how people come up to me on the street, and say: ‘You’re publishing stories about things I never knew about,” Eric Barnes, CEO of the year-old Daily Memphian, told me last week.

We’re appreciative of having the support of the Knight Foundation, Google’s GNI Innovation Challenge, and supportive individuals both national and local as we continue to develop our model and build that runway. In the end, it’s a model, made of digital clay. We intend to get more of it right than wrong.

As we do, we’ll figure out where Lookout, goes from there. How might we expand? Where? How quickly? All that is to be determined. The first job is proving out the ambitious model. Lookout Local, the formal name of the public benefit company, will do what it can to enlarge the notion of what is practical in providing robust modern local news.

Talent + technology

One great lesson of our time: Great companies require talent plus technology.

We’ve seen a remarkable brain drain in the news industry, as digital disruption depleted its workforce, its sense of purpose, and its attractiveness to both journalists and business-side professionals. Talent — hiring it at livable, professional rates — will be one key to Lookout. We must find a way to create a new pipeline of agile, diverse, digital-native journalists serving local communities from coast to coast.

How that talent uses technology will distinguish our successes. There is no question that the 2020s will be a time of unprecedented mixing and matching for humans and tech. It must be talent, with clear journalistic and community purpose, that applies the best tools of the day.

We know what doesn’t work. In this age of fast-expanding news deserts and ghost newspapers, we’re — amazingly — moving back to pre-press times when people largely got their news by word of mouth. And the town criers have a lot of problems telling fact from rumor.

David Rousseau, who heads the impressive and fast-growing Kaiser Health News, offered the phrase “misery index” when we discussed how to parse the worse and worst instances of local news. We agreed that while we could spend time writing that algorithm — deciding what and how we should measure — it’s much better to simply reduce the misery. Rousseau, among many others in the industry, has helped me sculpt Lookout this year, and I thank you all.

The extent of that misery is mind-bending, of course, but sometimes it takes a single phrase to stop us. Retired Guardian editor Alan Rusbridger summed it up most jaw-droppingly: “We are, for the first time in modern history, facing the prospect of how modern societies would exist without reliable news.” We must face down that prospect.

So that’s a preview. You’ll hear more as we can report it, here at the Lab and elsewhere. While I’ll be devoting most of my time to Lookout, I will continue to write on other topics. Both Josh and I are keenly mindful of potential conflicts, so we’ll clearly remind readers about Lookout with disclosure whenever relevant. Certainly, there may also be topics that become off-limits, and we’ll take the high road on those.

Early in my current career as an analyst, Michael Wolff, now famous for his Trump work, acidly defined my role in the news industry. “You’re the necrologist for the news business,” he told me, speaking of the ancients who read the scroll of the dead. Or, in more familiar news terms, a writer of obits.

Like much of what Wolff opines, it had the aroma of truth. He had a point, but I hope I’ve performed other duties as well. As I look to the 2020s, I come not to bury journalism but to praise what it can — and must — do for all of us.

Both companies, the country’s No. 1 and No. 2 newspaper publishers, say it’s full speed ahead. Independent financial analysts tell me that their data-driven analysis shows a 90-percent-plus chance the merger completes. The deal has already gotten the blessing of the Department of Justice’s antitrust division; that approval flashes a very green light to all the other newspaper chains eyeing various mergers and recombinations.

So by New Year’s Day 2020, all the companies’ news products across 265 markets will move under one giant umbrella. Never before in U.S. history have we seen a single company own and manage so much of the American newspaper business — about one of every six dailies. (Both companies are declining comment on the merger’s details at this juncture.)

In other words, it’s been a boffo opening season of The Consolidation Games, the newspaper-industry drama that’s played out in corporate offices, bank meeting rooms, and the stock market since the beginning of 2019 — and which is certain to be picked up for a second series in 2020.

Readers, advertisers, and journalists will feel the reverberations of the Gannett–GateHouse merger for years to come:

• Expect aggressive early moves to begin achieving the $300 million in cost-cutting synergies the dealmakers have claimed to justify the deal.
• More than 10 percent of the chains’ combined workforce — about 25,000 in the United States — will likely get the dreaded call from HR that their services will no longer be needed. How big a cut will that be? If the headcount reduction reaches 3,000 — which would be 12 percent of the workforce — that’s the equivalent of McClatchy’s entire employee count. And McClatchy will be the second-largest newspaper chain in America after this merger is complete.

  New Gannett CEO Mike Reed has emphasized that the coming cuts will come almost entirely outside the newsrooms. Business-side functions — from advertising to production to finance to circulation — will take the brunt of the cuts. Most of the headcount cuts will come in the merged company’s first year, but some will bleed into Year 2.

• Fundamental to those cuts is the adoption of single, uniform systems across the enterprise. Think back to the year-plus of pain that one paper, the Los Angeles Times, went through to untangle itself from Tribune/Tronc’s centralized tech platforms. Now think of how time- and money-consuming it will be to do that across those 265 markets, and you get a sense of the multiyear synergy headache upcoming.

  Gannett and GateHouse each have largely centralized their newsroom tech stacks, with each relying largely on a singular content management system. Those will merge onto one CMS. Merging the companies’ much-touted digital marketing services businesses shouldn’t be particularly difficult, several sources tell me.

  But in most other business functions, a truly motley array of systems still abound. Worse yet, few are cloud-based and run centrally, meaning that even papers using the same software for the same functions are often using different locally installed versions of it.

The calendar ahead

The date to circle on your Consolidation Games calendar is November 14. That’s the day both Gannett and GateHouse shareholders are scheduled to vote on the deal.

GateHouse’s NEWM stock got clobbered soon after the merger announcement, GateHouse down 33 percent over the next three trading sessions. It’s recovered some, but it’s still down 32 percent from the start of 2019. No one is wowed by this deal. It is a marriage of the possible, two partners without many other prospects. Given the ongoing pace of deterioration in newspapers’ operating numbers, that’s the best face even the dealmakers can put on it.

That’s also the pitch to shareholders: You’ll make more money with New Gannett than with either the old Gannett and old GateHouse. Or to put it in the financial speak of the roadshows conducted by the principals to reassure anxious investors: “Nobody has a better path to create value.” That’s shareholder value, of course.

These are two struggling companies seeking short-term salvation — enough oxygen to get a few more years down the road. Taking a $300 million whack at all the “redundancies” in day-to-day operation seems a better choice than going it alone. Sure, it’ll cost $100 million or so to cut all those jobs and rationalize all that tech — most of it in severance. But that’s far preferable, both Gannett and GateHouse believe, than a thousand smaller cuts, atop the thousands both have already made.

Will shareholders buy that argument? The share prices say yes. While there have been several shareholder lawsuits, they look like the sort of attorney-cash-ins common in these kinds of mergers. Experienced financial observers tell me they shouldn’t hold up the deal.

Both Gannett and GateHouse shareholders will get the usual independent advice. Most likely before Halloween, the two major shareholder advisory companies will weigh in with their recommendations on how shareholders should look at the transaction.

ISS and Glass Lewis are now assessing the deal, though they haven’t yet approached the principals with questions. Their recommendations can be somewhat unpredictable; recall the odd call in May to put one of Alden Global Capital’s slate on the Gannett board, a bizarre ISS recommendation during Alden’s failed acquisition try. But both are likely to see the deal logic and say, at some length and in finance-speak, “Uh…okay.”

The companies can close the transaction within just a few days of shareholder approval. Expect that to happen in November, just before or after Thanksgiving.

That’s also when we’ll see the shape of the New Gannett’s new exec team. We know that Paul Bascobert, announced as CEO by (Old) Gannett at the time of the merger announcement has been touring the company’s offices. He touts the value of the deal and the company to come, while of course spending lots of time reassuring workers who see the ax hanging overhead. At the same time, Bascobert is doing his own assessment. Together with Reed, Bascobert’s first order of business will be a profound reorganization of the company.

A new slimmer structure — much more GateHouse-thin than Gannett-like — is on the way. Streamlining is the name of the game. Heads will roll, though a few of the highly placed Gannett ones will be attached smartly to golden parachutes. Gannett CFO Alison Engel will join Bascobert’s operating team, but the guessing game is on at both companies as to which other execs will ascend — and which won’t. The biggest question: the fate of current GateHouse (operating) CEO Kirk Davis, Mike Reed’s long-time business partner in building the company.

The new company’s priorities

All eyes will be on the New Gannett, but it’s tough to say what anyone will actually see.

CEO Mike Reed says he intends to maintain the cohort of journalists now working in both companies. Still, expect some cuts, likely small, in areas like statehouse coverage or regional/statewide sports, due to new regional clustering caused when nearby papers become New Gannett siblings. We can watch whether the company reinvests such resources in the enterprise/investigative teams both companies have built and publicly promoted.

But will there be any new investment? In the product? In the newsrooms? That’s one of the big questions here. The marketplace has not rewarded either company’s products; revenues keep sliding, and subscriptions — print or digital — haven’t nearly filled the gap caused by the great print ad decline.

But the financials in this deal cry out: Repay the debt first.

As I’ve reported, Apollo Global Management may have been the only financier ready to put in the $1.8 billion it took to put this deal together. And in doing so, Apollo was able to demand an 11.5 percent interest rate — an indication of both the risk in the deal and the cold shoulder other financiers gave it.

The impact: On Day 1, the New Gannett will have a mountain of debt to pay off. And the language of the loan allow it to repay it faster than its five-year term without penalty. The faster New Gannett pays off the debt, the less interest it pays, just like any working stiff with a credit card bill. The incentives to make debt payments Priority 1 are clear.

But! Also consider that New Gannett is also promising its shareholders lots of earnings. In its filed financials, the company has painted a rather rosy picture of how it will improve those earnings — despite continuing deep ad decline and the threat of a recession that would likely further pressure revenue.

After they feed debt repayment and earnings, Reed and Bascobert will get to decide where to invest in their new company. How much will they have to work with?

The magic words here are “excess cash flow” — that’s the money the new company will have after it meets its basic obligations. If Reed’s projections will bear out, then perhaps substantial investments can be made. The history of the last few years, though, says there are significant odds against the company having enough cash to transform the business for the next decade — even if there is a strategic vision in place for how to spend it.

Mix-and-match

So where does this outsized deal leave the prospects for others mergers and acquisitions?

Everyone I’ve spoken with close to that question say to expect very little to happen between now and the end of the year.

Looking into 2020, it’s noteworthy how relatively quickly this megamerger got the DOJ green light. The department’s antitrusters could have decried the big regional domination the New Gannett will have in states like Ohio and Florida. (Both pretty important places politically.) But they didn’t.

These same regulators had objected to what was then Tronc’s attempts to buy, separately, the Orange County Register in 2016 and the Chicago Sun-Times in 2017. In each case, DOJ didn’t want one company to own two big properties in a single market (alongside Tronc’s L.A. Times and Chicago Tribune).

In Gannett–GateHouse, there is no single city that hosts papers from each company. (There aren’t that many two-paper markets left, after all.) The clusters this merger will create are more regional. So the DOJ’s Tronc-era standard didn’t apply.

(In Florida, New Gannett will own dailies in Jacksonville, West Palm Beach, Sarasota, St. Augustine, Naples, Brevard County, Fort Myers, Pensacola, Tallahassee, Gainesville, Lakeland, Daytona Beach, Ocala, Winter Haven, Panama City, the Treasure Coast, the Space Coast, and more. In Ohio, it will own Columbus, Cincinnati, Akron, Canton, and more — three of the state’s four largest papers by weekday circulation.)

The pitch to regulators by Gannett and GateHouse attorneys came down to one word: “duopoly.” As in the Duopoly, Google and Facebook, which dominate digital advertising at a scale multiples beyond what even the most mega- of newspaper megamergers could dream of. They made the case that newspapers really can’t control ad pricing in any market, even if they owned clusters of papers adjacent to each other.

It appears DOJ bought that argument. If so, as the next waves of M&A conversations roll forth, would-be buyers and sellers believe they can remove the DOJ review concern (triggered by the Hart Scott Rodino Act) from the table.

(Of course, the DOJ isn’t exactly the same animal today as it was in previous administrations. Makan Delrahim is a former Trump White House deputy counsel who was confirmed as head of the antitrust division in September 2017. In an interview with The New York Times, he “emphasized that antitrust is intended to support free markets and that the government should intervene only when necessary. A monopoly is perfectly legal until it abuses its monopoly power, he said.”)

But it’ll take more than regulatory openness to get more mergers moving quickly. Every other newspaper company sees the same kind of cost-cutting synergies Gannett and GateHouse do. But they also learned a harder lesson from their tie-up: Deal financing, when it’s even possible, is really expensive. Apollo’s 11.5 percent rate is three or more points higher than the refinanced debt other companies such as McClatchy have negotiated recently. With tight cash flow and even tighter cash flow projections, every extra point of interest has a real impact — mostly in accelerated cutting of jobs, including in newsrooms.

Right when Gannett and GateHouse shareholders are voting next month, each of the publicly owned newspaper companies will be reporting its 3rd-quarter financials. There’s little evidence any of those will meaningfully revise the narrative of unending decline. When talk turns to M&A in 2020, the warts of all prospective mates will be front of mind.

So expect that McClatchy and Tribune (which last tried to pair off in December) will dance anew. Lee Enterprises — recently challenged by activist hedge fund Cannell Capital, now the company’s largest shareholder — wants to rationalize its debt; it may welcome a partner. And then there’s always MNG Enterprises — the former Digital First Media and MediaNews Group, controlled by Alden Global Capital, run by Heath Freeman. Like the Joker, it can appear when least expected.

It’s Freeman who Mike Reed can thank for putting Old Gannett into play by pursuing it back in January. As Gannett’s board and leadership anxiously searched for an anybody-but-Heath alternative, GateHouse arrived at their doorstep bearing with flowers of friendship. It took most of the year to conquer the largest newspaper company in America — but what Freeman started, Reed is finishing.

Freeman, of course, probably still found a way to make money along the way. As of June 30, Alden owned 3.7 percent of Gannett. The best guess, say number crunchers, is that Alden made or could make (its current Gannett holdings aren’t yet public) at least a dollar a share. So figure that the Alden will take in somewhere around $4 million to 8 million on the deal — without all the hassle of buying Gannett or figuring out a future for it.

You know that each cup of coffee you sell costs the customer $2 or $3. The company makes that amount minus the cost of the coffee grounds and the cup, with some fixed overhead costs. If you sell more cups of coffee, or get customers to buy more expensive drinks, the company makes more money — and with even basic arithmetic skills, you can probably estimate in your head about how much more. If you waste supplies or work a slow shift, the company makes less money. Simple.

I’ve thought about this in recent years because I’ve spent a lot of time sitting in coffee shops crunching data about business models for digital news. A collection of benchmarks and best practices from that work was published in the digital pay-meter playbook, released last month in a partnership between The Lenfest Institute and Harvard’s Shorenstein Center.

Through the course of that reporting, it struck me that baristas — and most employees in other industries — have a better understanding of their roles in their organization’s overall business than journalists do.

Most journalists know only a few things about the companies they work for: They know the news industry, especially the local news business, is struggling. They may generally know that if their articles attract more pageviews, the company makes more money from advertising— though they likely have little sense of how much. And in the last year or two, they’ve probably heard an announcement or two from an eager executive about the company’s new, or newly emphasized, digital subscription or membership initiative.

What they don’t know are the answers to some important questions, like: How much revenue does a typical article I write generate from advertising? What if it goes viral? Is it better for my article to get lots of pageviews or for it to attract digital subscribers? How do those two goals relate? After all, the coverage that generates the most clicks may by completely different from the stories that attract subscribers.

Indeed, when trying to get basic metrics from publishers about the value of a subscriber, the marginal impact of a pageview on advertising revenue, and other key metrics, I found that many publishers either didn’t have clear answers or that the information was siloed — with the advertising people looking at the ad metrics, the subscription people looking at subscription metrics, and journalists looking at outdated metrics such as how often their articles made the front page of the newspaper. Nobody was looking at these metrics together to get a clear view of the business as a whole.

It’s time for the news industry to have a clear grasp on the unit economics of journalism content. And while we don’t yet have all of the answers, some of the research and metrics we’ve gathered to date can point us in the right direction.

Unit economics for news: Some key metrics

There are a number of different metrics that can help journalists and news organizations understand their businesses better — but to start, publishers can go a long way by starting with just two key data points.

Customer lifetime value (CLV)

The metric publishers should know is customer lifetime value, a common metric in subscription businesses that looks at the average revenue generated by one new subscriber over the lifetime of the subscription.

There are many ways to calculate CLV, but in the simplest terms, it can be calculated by multiplying the average monthly revenue per subscriber by the expected lifetime of the digital subscription, meaning how long the average user will remain subscribed before they cancel. For a subscription business that averages $10/month per user and retains its subscribers for 20 months on average, the CLV would be $200. Every new subscription sold will generate, on average, $200 in new revenue.

The average revenue per subscriber can be calculated by dividing total monthly subscription revenue by total subscribers over a 6- or 12-month period. The average lifetime of a subscription can be calculated in a number of ways — some publishers have sophisticated retention curve models — but one simple and easy calculation that works for most purposes is:

1 ÷ monthly churn rate

This tells you the average number of months a subscription will last. Publishers who run paid advertising campaigns to acquire new subscribers may also choose to subtract the average cost per new acquisition — which is

total paid marketing spend per month ÷ total new subscribers generated per month

— from their CLV.

Our benchmarks show that a publisher performing in the 80th percentile — the typical range for a daily newspaper putting at least some effort into digital subscription sales — has a CLV of $217 for a digital subscriber. For publishers putting more focus on digital subscriptions the numbers can be substantially higher — often in the $300–$350 range.

Most publishers have some calculation of CLV used by their finance or consumer marketing departments — and if they don’t, they should. But beyond a relatively small team managing digital subscriptions, most people at a typical media company don’t know this number.

Digital ad revenue per 1,000 impressions (RPM)

The second metric publishers can look at to understand the unit economics of their digital business is digital ad revenue per 1,000 impressions, also called RPM. In its simplest form, RPM is calculated by dividing digital ad revenue by total pageviews and multiplying that number times 1,000. Put simply, it tells a publisher how much ad revenue they generate for every 1,000 pageviews they serve.

However, while every publisher should know their overall RPM number, it can also be a bit misleading because not every pageview generates the same amount of ad revenue. Most publishers do not sell out all of their available inventory with high-rate, directly sold advertisements. Instead, at the margins, their pageviews are primarily monetized by programmatic ads that can yield relatively little revenue per pageview. If a publisher increases their pageviews marginally above their usual baseline, their increase in ad revenue primarily comes from this category of lower-yield advertisement.

For day-to-day editorial decisions, then, what may matter more is marginal RPM: the ad revenue generated from the next 1,000 pageviews a publisher might generate. For most publishers, this means RPM for programmatic advertising only.

It’s also best to look at this metric, if possible, for content pages only. Ads sold on the home page or section front pages are still relevant to the business, but are not relevant to the impact one article or another might have on the business.

Though we weren’t able to gather a full benchmark for this metric from hundreds of publications, my informal survey of publishers suggests that most publishers are monetizing their pageviews in the range of $20–$25 per thousand pageviews overall and in the range of $6–$10 at the margins, primarily from programmatic advertising. As with CLV, in many organizations, knowledge of this metric is largely siloed within the digital advertising department.

Case study: 1 digital subscriber or 48,000 pageviews?

By knowing just these two basic metrics, publishers (and journalists) can learn quite a bit about the unit economics of their business and the value of their day-to-day work.

As a case study, consider this metro daily newspaper — we’ll call it Newspaper A — that was kind enough to share these two metrics and some basic traffic data with me.

Newspaper A has a customer lifetime value of $345, a bit higher than the norm. Based on its calculations, the average new digital subscription sold will be worth about that much over the course of the subscription. (If this seems high, it’s because the publisher in question has a higher-than-average subscription price and very good retention metrics.)

Newspaper A also generates $21.44 in total advertising per 1,000 pageviews, or $7.16 per 1,000 pageviews from programmatic advertising only. Its sell-through rates for non-programmatic ads are well below 100 percent of impressions, meaning that the programmatic number is a good proxy for total revenue from the next 1,000 pageviews they generate.

From just these few facts, we can learn a lot about the unit economics of Newspaper A’s journalism.

For example, we can tell that an article that attracts one new digital subscriber will, on average, generate as much revenue for the company as an article that generates 16,000 pageviews monetized through direct-sold advertising, or an article that generates 48,000 new pageviews monetized through programmatic advertising.

We reached that figure by taking the $345 CLV dividing it by the $21.44 and $7.16 figures in digital ad revenue per 1,000 pageviews and then multiplying each 1,000.

$345 ÷ $21.44 × 1,000 = 16,090

$345 ÷ $7.16, × 1,000 = 48,184

As a journalist or editor, knowing this fact alone could shift your perspective about what kind of coverage to focus on.

Looking at data for all articles published by Newspaper A in a particular week, the average article generated about 4,250 pageviews in the month after it was published. Using the CLV and marginal ad revenue metrics, we can therefore say that the average article generates $30.43 in programmatic ad revenue for the company.

Put another way, an article that attracts one new subscriber generates the same revenue as about 10 average-performing articles.

In contrast, the top-performing article from that time period attracted about 128,000 pageviews, or $916.48, equivalent to the revenue generated by about 2.6 subscribers.

Newspaper A cautioned that its CLV metric may be a bit inflated because its subscription system does not make it easy to gather reliable data. If we assume the more typical CLV benchmark of $217, the numbers tell a similar — if less extreme — story:

• One new subscriber would be worth the same as ad revenue from 30,000 pageviews monetized through programmatic ads.
• Ad revenue from one new subscriber would be worth the same as programmatic ad revenue from seven average-performing articles.
• The top-performing article would be worth about 4.2 subscribers worth of programmatic ad revenue.

Revenue metrics and the newsroom

What would happen if news organizations shared and socialized this kind of information across their entire company — and, in particular, within the newsroom?

While no organization I know of has fully shared this information, my prediction is that it would help journalists do their jobs better. In today’s metrics-driven environment, the metrics actually available to journalists are primarily measures of total reach: ranked lists of articles by pageviews and in some cases more detailed data related to time spent on a page or other engagement metrics.

Even if they aren’t doing it intentionally, it would be natural for reporters and editors to respond to their successes and failures on these metrics and to adjust how they produce stories. Articles with sensational clickbait headlines get more pageviews; people producing headlines see that, and respond in kind. Stories that mention particular celebrities or politicians attract more clicks, so of course journalists are tempted to shoehorn those characters into otherwise unrelated stories. Stories covering a national or international issue generate a lot of broad interest in national media, so of course local journalists are tempted to rehash those same stories — even when there’s nothing new to add.

But we know that the coverage that attracts and retains subscribers is often different from the reporting that generates the most pageviews. Sometimes a niche topic — such as coverage of a high school sports team or highly local issue like weather — will be the sole reason for subscribing for a subset of users. More generally, users who subscribe tend to prefer reporting that is distinctive, local, and relevant to their daily lives over stories that are sensational or a rewrite of news they’ve seen elsewhere.

If newsrooms could view successful coverage not just as content that generates clicks, but also as journalism that delivers value to subscribers, it stands to reason that they would respond to those cues in the decisions they make day-to-day. (Indeed, clarifying and measuring success across the entire company is the only way I’ve seen businesses transform in the way that many news organizations must in order to survive.)

So how can publishers do this? While no publisher I know would say they’ve fully figured it out, many have experimented with versions of this approach. Here are four simple starting points based on what we’ve seen work across the industry:

• Socialize key “unit economics” metrics. Start with the basics: For most publishers, there’s no reason that everyone in the company shouldn’t understand and know key metrics such as CLV and marginal ad revenue.
• Basic daily reporting. This is similarly straightforward, but many publishers don’t do it: Everyone in the newsroom should know daily — or at worst, weekly — how many digital subscriptions were sold and from which sections of the site. One publisher who shared its report with me sends out a daily email to the newsroom that recaps the site’s traffic from the previous day. The report shows the number of new subscriptions per section, lists every URL that led to a new subscription, and highlights the authors of those articles.
• Subscriber content-consumption reporting. If a publisher has the ability to segment subscriber traffic from non-subscriber traffic, they should provide this data to the newsroom as well. Knowing that subscribers are engaging more deeply with article X while non-subscribers are clicking on article Y can tell us a lot. I know from publishers who have tried this, for example, that the content viewed by subscribers correlates at least loosely with the coverage that generates new subscriptions. One publisher implemented a simple version of this using Parsely: On their typical article traffic report, they added a section that shows what the top story read by subscribers was the day before.
• Subscription influence reporting. Some publishers have experimented with a “subscription influence” ranking chart meant to mimic the look and feel of the typical “most viewed” rankings that journalists see. This ranks a particular week’s articles by what percentage of new subscribers viewed that article on their path to subscribing or immediately after subscribing. One publisher with this kind of dashboard segmented the data to show, for each article, show how many subscriptions the article influenced at all (meaning the user viewed the article in the 30 days before subscribing), how many subscriptions it “highly influenced” (meaning the user viewed the article within 7 days of subscribing) and how many it “directly influenced” (meaning the user viewed the article in the same session as or directly after subscribing). This is better than simply looking at the last article a user viewed before subscribing, which seems not to be a very good predictor of anything in and of itself.

These four steps just scratch the surface of what is possible with this shift in thinking. Hopefully, as data becomes more easily available and publishers become increasingly focused on digital revenue, these kinds of developments will make their way into many news organizations.

Looking beyond content

Beyond understanding the relative value of different content produced by the newsroom, having a firm grasp on these kinds of metrics can also have broader implications for how publishers look at their business models.

For example, publishers can use these metrics day-to-day as they make decisions about meter limits and other access rules. If a publication lowers its meter limit from 5 free articles per month to three, it should ask not only how many pageviews it might lose, but also what those pageviews are worth — and how many new subscriptions the change would need to generate to constitute a net positive.

More broadly, understanding these metrics can help publishers understand how they should be allocating their resources. In a recent survey for the Reuters Institute’s Journalism, Media and Technology Trends and Predictions 2019 report, three quarters of news publishers surveyed said they devoted less than 25 percent of their company’s resources to growing their subscription products, and almost 4 in 10 said the percentage of their resources devoted to subscriptions was in the single digits. If publishers were more focused on metrics like CLV, they might be inclined to shift that balance so that — at the very least — subscriptions and advertising were treated as equal goals.

It’s reminiscent of an earlier brand of warfare. Newspaper chains — all cutting desperately, each facing a shortening deadline to make a “digital transition” — line up their dealmaking armies, swords sharpened if not yet crossed.

Gannett, having rejected the hostile takeover bid of Alden Global Capital, has decided to hire Goldman Sachs to advise it on the next rounds of dealmaking, I’ve learned. Goldman participated in Thursday’s Gannett/Alden meeting, alongside Greenhill, its ongoing deal-advising firm.

As that meeting happened, Alden, with its banker Moelis, filed an alternative slate of directors for election at Gannett’s upcoming annual meeting. That action, though, is just another uncertain indicator of whether it’s Alden’s true intent to acquire Gannett, a number of insiders have told me.

As Bloomberg’s Brooke Sutherland summed up well in her lede on Alden’s slate: “The more MNG Enterprises tries to prove it’s serious about buying Gannett Co., the less credible it looks.” (MNG, née MediaNews Group, is the name Alden uses for its newspaper holdings, conglomerated after two bankruptcies.) Remember, Alden’s initial move against Gannett said both that it wanted to buy the company and that Gannett should begin “a review of strategic alternatives to maximize shareholder value.” That’s a baffling combination — do they want to buy the thing or not? Then Alden failed to show Gannett enough financial wherewithal to actually fund an acquisition. Then, after just one rebuff, it filed the alternative slate. Of course, the deadlines of the corporate calendar drove the board filing — but still, it all looks maladroit, clumsily rapacious for the cutthroat Alden.

On the sidelines, Tribune Publishing — an active would-be seller for most of the last year — is waving its shiny, largely debt-free balance sheet Gannett’s way. It’s now advised both by Lazard and Methuselah Advisors LLC.

Curiously, in this small media banker world, switcheroo is fair game: Two years ago, Methusaleh was advising Gannett as it company fended off a hostile bid from Michael Ferro’s Tronc — the company now known (again) as Tribune. And who was representing Tronc then? Goldman. Importantly, all these parties know one another — and the innards of these companies — well.

While a Gannett/Tribune merger looks like one of the likeliest Alden alternatives, Goldman will look broadly at the industry landscape and where Gannett best fits in it — whether as a seller, a merger, or a buyer.

As these three companies line up, a fourth — McClatchy — is looking for its own place on the shrinking battlefield, as I detailed as February began.

“It could be weeks — it should be weeks,” one of the participants told me at the end of last week. “These parties know a lot about each other already.” But all the same questions about valuation (how can you best forecast these companies’ earning power over the next few years?) and financing remain. (How much is it back to the drawing board? “A lot has changed in a year,” another insider said. “In some ways, we have to start all over.”) So any timelines remain TBD.

None of these companies comment on the action, of course, beyond issuing standard-letter comments on each other’s action, as last week when Gannett decried Alden’s board slate and formally rejected its $12-a-share January offer.

Each company has a lot on its plate right now. Bad budget projections for the rest of the year have made this the season for workforce cuts, with McClatchy’s, Gannett’s, and GateHouse’s all making the news. These companies are also preparing to release their full-year 2018 numbers, scheduled over the next several weeks, which will all be down. The biggest investor questions will revolve around forecast earnings for 2019.

While none of these chains has reported yet, The New York Times Co. did last week — further demonstrating how much it has separated itself from its former print brethren. With remarkable numbers, the Times showed new strength that propelled its share price beyond $30 in more than a decade. Remarkably, in doing so, it grew revenues 6.2 percent year over year — a number few other newspaper companies could even realistically daydream about. Digital advertising climbed 11.3 percent for the year, with print advertising down only 5.3 percent.

The Q4 numbers, which included the usual end-of-year holiday bump, were even better, up 23 percent year over year. In Q4 2017, the Times pulled in 17 percent more money from print advertising than from digital. In Q4 2018, the ratio was reversed: It generated 17 percent more money from digital advertising than from print.

Those numbers — oh, and its 3.4 million paid digital subscribers (and 4.3 million overall, including print) — are something whatever execs are left at Gannett, Tribune, McClatchy, and Alden can only marvel at.

We could construct quite a chart of the divergent trajectories of the Times against the chains, individually or collectively. But you hear almost no one in those chains talking about why The New York Times (or the Financial Times, or The Washington Post, or The New Yorker) has been so successful, and what their own companies might apply accordingly. Fundamentals like:

• an increasing volume of high-quality, knowledgeable reporting and writing
• data-driven marketing systems that accurately assess readers’ likelihood to subscribe, and then use that knowledge to convert more of them into subscribers
• advertising innovation that competes well into the Google/Facebook-dominated digital ad world and recognizes that advertising continues to be a prime driver of journalism company revenues, if now a secondary one
• respect for the consumer that seeks to exchange a constantly improving product for earned payment

There are plenty of other lessons to apply, but I’ll stop there for now.

Instead, in this M&A quagmire I’ve called the 2019 Consolidation Games, we get charts like this:

This chart, offered up by Alden Global Capital as it presses Gannett to accept its buyout offer, says so much in so few words.

First, let’s just take note of the enormous violence being done to the art of data visualization here — the non-zero baseline, 11.8 and 11.6 percent being the same height, but 13.4 percent being higher than 13.9 percent. The graphics people at their newspapers would do better. Here’s a more accurate portrayal of their numbers:

Alden points to its MNG EBITDA, or earnings before interest, taxes, depreciation and amortization. “Ours keep going up,” it essentially says, “while yours at Gannett decline. Prima facie evidence that we can manage decline better than you can.”

The numbers tell us much more.

Some history: After I reported on Alden’s outsized profits here in May 2018, the company complained that the numbers were wrong — “we don’t know where they came from,” “they do not reflect the true cash flow of these businesses,” “those aren’t the real numbers” — and that actually Alden’s profit margin was nothing special.

Some quotes from a June staff meeting at The Denver Post with Joe Fuchs, the board chair of Alden’s Digital First Media (emphases mine):

We don’t produce the kind of profit margin that some of the competitors do, but we are in there to be sort of be in the midrange of what I would call profitability…

So, what is an appropriate profitability? You know, that’s a real tough question to ask. I’d say, I said to you before, we compare our numbers with everybody and then some private companies when we can. And we’re sort of in the middle.

…trust me, we do not want [the Post] to fail, we want it to be vibrant we want it to be a force in the community and yes, we want it to be profitable in the range that is sort of the norm within the industry. Nobody’s driving it to be the most profitable.

Now, instead of saying it’s only a middle-of-the-pack profit maker, Alden has reversed course and points with pride to its top-of-the-industry profiteering.

Further, Alden does manage to show that while both companies have cut and cut — with staffing at some Gannett newspapers no better than the more publicly maligned Alden-owned ones — Alden’s success in squeezing accounts better for itself. Why invest in what it sees as Gannett’s digital marketing businesses of dubious profit potential when you can line your pockets more thickly?

So where do we think the action goes next?

By all accounts, Gannett — with lame-duck CEO Bob Dickey retiring and board chair John Jeffry Louis shouldering the burden of leadership — prepares to do battle with Alden. Between now and its annual meeting (expected this spring, though the date is as yet unannounced), Gannett wants to make sure it can defeat Alden’s board slate, and that its directors can maintain control of the company’s fate. That’s job one for Goldman. The fact that Alden baldly put up a group of its own insiders — including Joe Fuchs and former DFM CEO Steve Rossi — helps Gannett’s argument that the slate is simply meant to deliver Gannett to Alden, and not “pursue Gannett’s best interests.”

This morning, Gannett increased its aggressive response to Alden’s offer, on numerous grounds, including these gems:

At least three of MNG’s candidates may be legally incapable of serving on the Gannett board under applicable antitrust laws, given their roles with MNG, which is a competitor of Gannett. Several other elements of MNG’s notice to Gannett raise additional concerns regarding the credibility of its proposal, including nominating 78-year-old Mr. Fuchs, who exceeds Gannett’s mandatory retirement age applicable to all directors, and MNG’s statement that it reserves the right to substitute director nominees in direct contravention to Gannett’s bylaws.

But it still has to prepare the defense.

The question then: Hamstrung by that defense and less-than-robust leadership, will it have enough bandwidth to seriously enter new talks with Tribune Publishing and its new CEO Tim Knight? Knight, with the backing of his board, his advisors, and 25 percent owner Patrick Soon-Shiong, would like to put together a Tribune–Gannett merger. And, we can expect, he’d like to become CEO of the combined company, which would by far be the largest newspaper chain in the country. (If Alden managed to snatch the CEO-less Gannett, who might lead that combined company? Two sources this weekend suggested that same Steve Rossi, who retired as Digital First Media’s last CEO in 2017.)

The path is there. Combine the companies, claim $100 to $150 million in synergies over two to three years, and make the case that it’s in the best interest of shareholders, employees, and readers. And proclaim that it’s a better deal for shareholders than Alden’s offer.

Gannett and Tribune negotiated last year, but talks fell apart on valuation issues (how much of the merged company each side would get) and on whether ex-Tronc chairman Michael Ferro would get a board seat.

That was 2018. Sources say Ferro, who still heads a group that owns 25 percent of Tribune, has now dropped his demand for a board seat. His hand-picked CEO Justin Dearborn is gone, dispatched last month as damaged goods in order for Tribune to finally get a deal done.

One would-be dealmaker offered this arithmetic. Combine the cash flows of Gannett (around $300 million), Tribune (around $100 million) and merger synergies (let’s say $100 million), and that can support the financing — in addition to stock swaps — needed to get a deal done.

The companies have each done their analyses on how a merger might work — even though the industry’s worsening state, updated revenue forecasts, Tribune’s plummeting share price, and the threat of recession will all force revisions. February and maybe March should be about these companies and their advisors working on those two issues: valuation and financing.

What’s a split of the new company acceptable to both parties? Could the deal be done as a stock swap, or it would necessitate new financing? If so, at what cost?

That’s the money side. But there’s also that other element in any negotiation: time. It’s fleeting, faster than all the print ad dollars exiting newspapers. Will Gannett be able to deeply engage with Tribune at the same time it battles Alden?

Can it afford to spend that time? Can it afford not to?

So go the fortunes of four of the six largest U.S. daily newspaper companies. The journalists’ Twitter is alight with Game of Thrones metaphors, but I think that’s misplaced. The action seems more Bravo-esque, The Desperate Housewives of Main Street, perhaps. Or, more prosaically, as one newspaper company exec told me Wednesday, “The pressure for consolidating is only intensifying.”

Those aren’t the only digital media soaps in action. Consider the draconian, get-ahead-of-the-recession first-of-the-year layoffs at both BuzzFeed and Verizon, and Friday at Vice. Take that as one end-of-the-decade sign that the VC-driven, digital media hockey stick of near-infinite growth is badly bent, if not broken. Infinity, it turns out, isn’t infinite. Then, there’s Conde Nast’s suddenly getting paywall religion, announcing it will — after years of dithering — paywall them all, in some fashion. “I’m not sure what they are doing,” one magazine industry pro told me this week. “They’ll lose 90 percent of their traffic.” And so, as Condé has dispatched CEO Bob Sauerberg on the heels of a $120 million annual loss, there’s more potential M&A.

Is it all connected? And how much does it matter?

There’s Jill Lepore’s “Does journalism have a future?” Or Farhad Manjoo’s “Why the latest layoffs are devastating to democracy.” Jeff Israely’s “2009: The internet is killing (print) journalism. 2019: The internet is killing (internet) journalism.”. Or AP’s: “Loss of newspapers contributes to political polarization.”

CNN blared: “Media industry loses about 1,000 jobs as layoffs hit news organizations”.

And The Newseum, the temple of what-journalism-once-was, looks as if it could be sold off for parts.

All in two weeks.

Yes, it all matters, and it’s all connected.

The state of consolidation games

As January plummeted to a close, attended by those thousand or more journalism layoffs, where do we stand with all the huffing and puffing around newspaper company M&A? (The companies declined comment on their potential buying or selling strategies for this piece.)

At this writing, Gannett, having taken several weeks, will soon formally tell Alden Global Management a polite no to its “offer” to buy the company for about $1.5 billion on January 14. Though the Gannett board, which met Thursday, is suspicious that Alden doesn’t have the financing available to complete such a buy — and Alden, sources say, didn’t respond to its request to show Gannett its money — its public suiting has awoken Gannett anew. And that may have been its game plan all along, in making its “offer.” On Friday the Wall Street Journal reported that Alden’s DFM has hired a financial advisor to press its buying case. (See my best reporting-informed speculation, below.)

So what do we do know about Gannett today?

Expect the company to soon complete its process of hiring a banker to work alongside its long-time advisor Green Hill. That banker will help Gannett assess its market position. Another way to put it: America’s largest regional daily newspaper chain, the globe’s second largest given its ownership of UK’s Newsquest, is in play.

“Ask the banker” will tackle these questions: Should Gannett sell itself — and at what value and price? Should it buy? If so, what? The company experienced corporate indigestion in swallowing whole the Journal Media group in 2016. Then, it kneecapped itself in making a hostile effort to buy out Michael Ferro’s then-new trophy Tribune Publishing/Tronc, later that year. It was enough to make Gannett publicly swear off buying more newspapers — even as its merger negotiations with then-Tronc (now Tribune Publishing again) continued.

Instead, CEO Bob Dickey, who’s headed into retirement this spring and was told to focus more on “digital” by his board, re-targeted his efforts in buying digital media. In fact, it was Dickey’s buy of digital marketing companies that gave Alden a talking point, as it stalked Gannett.

Meanwhile, Gannett continues to reel internally. In January it laid off dozens of people. It’s cutting back on its heavily promoted program of placing USA Today national news inserts in many of its 109 dailies, multiple sources told me. Those inserts have largely been standalone sections; now they’ll become more integrated with local newspaper sections. That saves on newsprint cost, which ran as high as $20 million annually when the sections were introduced five years ago. One potential result: less space for local news. And, of course, fewer journalists to fill the pages anyhow.

“I am getting the feeling that Gannett, especially with the January cuts, has moved a lot closer to DFM news staffing than is generally recognized,” one veteran news manager told me. “I see the El Paso Times [with a metro population of 844,000] shows 13 people on its news staff. The editor there retired some months back…One person told me their goal is not more than one senior editor per state…This all just makes me wonder if Alden really knows what has been cut in recent years. They wouldn’t have had the detailed financials, given that it’s a hostile offer.”

As the company looks for anywhere to trim, like all public companies, it eyes the calendar. In February, Gannett, Tribune, McClatchy, Lee and the other public companies will have to report their fourth-quarter, 2018 and full-year financials. They will be ugly. The question: How ugly?

Gannett has already announced cutbacks — but it won’t be alone as companies trim ahead of the earnings reports to show their commitment to shareholder value.

Fast-declining revenues are a certainty. But how did these declines impact earnings, and what do the CEOs forecast for 2019? As wheeling and dealing among newspaper chains continues, the price of assets — the valuing of merging, acquiring or selling — gets adjusted. The weaker the results, the more vulnerable the company. The more vulnerable the company, the lower a potential sales price or valuation in a merger.

There’s also financing to worry about. Financing is tighter now than it was in mid-2018, though it has eased some from December. That isn’t only the case for the ailing newspaper trade (see Tuesday’s news that Gamestop’s buyers couldn’t get financing to complete an acquisition). But it is truer of newspaper companies, given how tough it is to forecast going-forward earnings in an industry declining so rapidly. Any of these potential deals faces tough financing standards. “Lenders now want to see any deal include some deleveraging,” said one financial observer. “If it doesn’t, it won’t fly.”

How long will the consolidation games go on?

There’s lots of action ahead. For its entire history, the U.S. daily newspaper industry has been a fragmented one. In the beginning, local printers became publishers.  Most were one-offs, single proprietors. In the seventies, eighties, and nineties, chains — Gannett, Tribune, Knight Ridder, Advance, Hearst, MediaNews, Lee, and more — grew. But they were still outnumbered by the number of family-owned concerns across America. Importantly, no single company dominated the landscape.

Today, Gatehouse (under New Media Investment Group) leads the pack with about 155 dailies. Amid all the would-be M&A hysteria, Gatehouse CEO Mike Reed has stuck to his knitting and his strategy of buying up remaining family-owned, smaller circulation titles, some in small chains, as well as individual properties. It is an approach characterized by greater precision and less rancor — and the need to incrementally grow topline revenues by acquisition. Although the company performs at the top end of regional chains, it still is losing about five percent of its same-store revenues year over year.

Just this week Gatehouse bought long-time independent Schurz Communications for $30 million, adding 10 dailies and 10 weeklies to its total. Reed’s value-oriented buying — backed by ready, lower-cost financing through Gatehouse’s operator, Fortress Investor Group — has been steady. It will likely continue to buy, as it can more easily raise money where others can’t.

All totaled, three companies — Gannett, Gatehouse, and Digital First Media — now control about a quarter of the remaining daily titles. That’s a significant concentration, historically. But in an industry where expense reduction is the prime strategy, much more consolidation is likely on the way. Little regulation prevents it, and the financials all favor it.

There remain some newspaper chain CEOs who still see a straight line between maintaining, if not growing, their title’s journalism capacity and the product quality, mainly digital, to deliver. They are a minority, unfortunately. For one, fewer and fewer would-be buys — at the prices the market still demands as of this moment — appear palatable.

“Yes, we could buy select properties, but the multiple would have to be low enough, considering the reinvestment needed to maintain EBITDA through recession,” said one of the savviest, speaking of the Tribune titles. “And we just can’t justify the reinvestment necessary in these papers to get them through the recession.”

Q: How much does the fear of recession drive M&A thinking?

A: A fair amount.

The next recession may not happen anytime soon, but in the words of economist Sam Khater, there’s a “mental recession.” Corporate chiefs, in newspapers and in other industries, now largely assume one. For many thriving industries, that just means a re-calibration. For a newspaper industry in such a distressed state, this driver carries more weight. Buying any newspaper property may require more reinvestment and for a longer period if both revenues and profits take a further hit in a 2019-2022 recession.

The fear of recession is one of at least two drivers connecting those dots from Gannett/DFM to Buzzfeed/Verizon and Conde Nast. Everyone in the media business believes it is going to get worse — before maybe getting better.

Q: What is the other common thread?

A: Google, Facebook, and increasingly Amazon dominate digital advertising and will likely will take more and more share, especially into a recession. The most recent estimate is that they control 61.9 percent of the digital ad market, worth $111 billion. (For every one percent, you could pay the salaries of over 10,000 journalists, but I digress.) (Digital disruption has wounded every legacy news and information industry in the Western world and now it’s turned on the digital news disrupters as well.

Q: What does Heath Freeman, Alden’s president and Digital First Media magnate, really want? Is Alden a buyer, or a seller, or a lemon-squeezer?

A: There’s a one-word answer: Money. To his credit, in the stories often told by his former management, Heath and DFM are really straight shooters. They’re just greedy in the “Wall Street” sense, although today’s newspaper industry is rapidly redefining the possibilities of looting sinking ships.

Four possible rationales have emerged for Alden’s bid for Gannett:

1) Alden looks at Gannett and truly sees lots of fat, despite all the skinnying Gannett management has done for good part of the decade. That’s why Alden’s bid freaked out so many Gannett employees: It could get worse.

2) Alden wants to juice Gannett’s share price so that its 7.5 percent stake, bought at about $9.68 a share, will increase. Alden cashes in and makes more money without actually having to strip any more parts from any new newspaper company. Alden’s $12 offer shot Gannett’s share price up from the $9 range, and it still rests at about $11. On paper, then, Alden’s got about $11 million.

3) Alden actually wants Gannett to buy it, as rumored recently. Would Heath Freeman sell anything? Yes — back to the single motivating principle, profit maximization. Is it likely that Gannett, which is stumbling its way into the new wilderness with a lame duck CEO, wants to buy DFM properties? No, and remember that CEO’s opinion above about how much any buyer would have to put into distressed properties. DFM properties are among the most distressed.

4) Alden wants to put Gannett into play. If someone else buys it, sending up the stock price, Alden wins. If Gannett is put into play along with Tribune, and with McClatchy eagerly seeking a deal, then maybe DFM could offload some or all of its properties as part of somebody’s roll-up strategy.

If you had to bet (don’t), you’d pick the fourth one. Alden does not appear to have the financing to make a $1.5 billion hostile takeover of Gannett possible, though its hiring of a financial advisor may tell us it’s more serious than some suspect. SEC law complicates the second option. The third one seems unlikely. Why not just cause more chaos in the flagging distressed industry and see what new hand Heath Freeman may have to play?

Q: Why is February 7 important?

A: That’s the date by which Alden would have to file an alternative slate of directors for a contested election at Gannett’s spring annual meeting. The maneuver would show Alden is serious. (Bonus points to readers who recall that Gannett CEO Bob Dickey fatally wounded his own hostile takeover of Tribune two years ago by missing the deadline to file an alternative slate in a Tribune board election.)

Q: What’s with these change-of-control clauses? Haven’t they played a major role in Tronc/Tribune Publishing’s directing of millions to a few top execs while whittling down their newsrooms?

A: Yes. Those with lots of experience in C-suite thinking say that “change of control” clauses actually carried some logic. The idea: Investors don’t want top management to reject a lucrative buy-the-company offer just to save their own jobs and incomes. Pay them well in the case of sale, and you’ve removed that disincentive.

In normal times in normal industries, that might make sense. In the newspaper industry of this wretched decade, it’s just been one more perverse incentive. As Howard Schultz gooped his intentions to run for president, journalists noted that he makes 1,049 times as much as the median Starbucks employee. I haven’t run the numbers in the newspaper industry, but it’s a number worth researching. These jobs should be well recompensed, but along the way some companies lost their ethical center.

Q: So what’s going to happen in February, or March?

A: The consolidation games push everyone into the pool.

Gannett will “assess its future.” That probably means rejecting Alden for now. Its likely next move will be to pick up the talks with Tribune that it abandoned in 2018. Now that Ferro lieutenant Justin Dearborn has been dispatched (deemed more likely to mess up a Tribune sale than help lead it), and Ferro himself has told people he would give up his long-time demand of a board seat, a deal is more likely. It would involve a stock swap, with the valuation of who gets what chunk of mergeco still the contentious issue. And who would lead? New Tribune CEO Tim Knight is the last man standing in those two companies right now, but is he “digital enough” for Gannett’s board?

Tribune badly wants to sell, but hasn’t closed the deal. It rejected a $16.50/share offer from McClatchy in December, and now trades at around $12. Suitors have included Will Wyatt’s Donerail Group and Jeremy Halbreich’s AIM Media. But in the wake of rejecting McClatchy, it couldn’t move on either of those deals. Price and financing are issues. It will likely turn to Gannett again. Importantly, Patrick Soon-Shiong, who owns 25 percent of Tribune, recently gave the Tribune board the ability to make its selling decision, giving up blocking rights. He wants out, and knows removing more obstacles to sale may finally seal some deal.

McClatchy was sorely disappointed that it failed to win Tribune. It would been more icing on CEO Craig Forman’s “deleveraging” cake, as he has pushed out the company’s big debt off into the 2020s. With Dearborn out, Soon-Shiong standing down, and Ferro’s interest maybe waning, could the deal be revived?

Or could Gannett solve its current identity problem by buying McClatchy? That would give Gannett an even bigger national footprint. But McClatchy’s $745 million debt (well down from what it borrowed to buy Knight Ridder 13 years ago) is a sticking point.

Still, financial analysts tell me that either the Gannett/Tribune deal or Tribune/McClatchy deal could result in $100 million or more of “synergies” — those cost savings that drive all of this action.

Finally, consider a few other players. Lee, a big chain of small dailies, could find a new partner. Gatehouse and Hearst will hang around the periphery, glad to pick up selected titles that may fall out of any big deals — if they can pencil them out to their satisfaction.

Worldcrunch, we might say, is everything and nothing like Skift. Not yet quite a mid-sized business, we are continuing our pivot from that initial news syndication model to a mixed approach that includes digital editorial services for clients, distribution, and a recent focus on photojournalism. We follow our passions, but we’re as pragmatic as Skift, and have finally (and proudly!) gotten our balance sheets to break even. But while both enterprises aim for a global audience and opt for depth and quality over chasing clicks, Skift has a more direct path to reach its market for one big reason: It’s B2B and topic specific. We are (shhhh) generalists.

Here’s Ali last week: “Media is a simple business: You pick a sector, cover the shit out of it, get an audience, you either sell them, which is advertising, or you sell to them, which is subscriptions or paid services, that’s it. There’s no other way to do media.”

No other way? That’s probably a bit of that swagger — and it’s clear he’s speaking about for-profit endeavors. Still, his words hold extra weight in the midst of the recoiling of some of digital media’s top general news operations. So we’ll ask again: Is there really no sustainable form for digital news other than B2B vertical media?

As a Paris-based but anglophone publisher, our business has grown by a kind of reverse engineering of the B2B model. We work across a range of topics, capitalizing on our English-first edge on the French (and European) market for both our paid services and modest worldwide audience. We’ve also tapped into partnerships and foundation support, while pursuing at least two distinct revenue opportunities linked to photography. Sure, forging ahead without a specialization makes both our services and audience more diffuse. It requires us to seek ways to segment our coverage and audiences, while retaining the ongoing objective to make it function as a coherent whole.

But beyond product and model lie the twin questions of a media venture: pace and scale. The digital startup gospel often includes the pursuit of venture capital and/or a commitment to either make it big or fail as fast as possible. And this brings us back to the big industry news from last week. Rafat Ali has long extolled the virtues of keeping outside investment as limited as possible, warning about the downsides of the chase-the-eyeballs, venture-backed digital outlets that we’ve seen play out over the past 18 months, culminating with the recent avalanche of layoffs.

Don’t blame investors for investing, that is their job. The *only* job founders have, meanwhile, is to build a sustainable, long term business. “High growth at all costs” is NOT a necessary condition to it, merely a causation founders build themselves in their minds.

— Rafat Ali, Media Operator (@rafat) November 17, 2017

We made sure to never take millions from Disney or Murdoch. (Okay, so they never offered!) Still, it does feel like a better place to be right now for the founders to have ultimate control. You’ll often hear the term “runway” to talk about the time needed to build momentum to allow a business to finally…take off. Internet founders know that the lenghth of runway is calculated by a rather simple formula: cash × control, where a higher rate of self-generated cash increases the rate of control.

Watching the bad news of BuzzFeed and HuffPost layoffs spread on Twitter brought many of us with roots in the legacy media back to similar moments in the past (and present). Bitterness. Loss. Bewilderment. A smidge of self-righteousness, as we wonder about the state of our democracy when straight-shooting professionals who simply want to cover their beats, expose injustice, and publish quizzes are suddenly cut loose.

For old and new reasons, these are all questions worth asking — and anyone tossed into joblessness deserves basic empathy. Still, those pursuing a career in news are now almost required to also ask questions about the business side of the equation, and think hard about where our place can be in this industry that, yes, is consolidating, but also changing every day.

One of the mantras accompanying this round of layoffs is to blame it all on the “duopoly” of Google and Facebook for gobbling up all the ad revenue. No one can deny that something is fundamentally broken in the model for digital news — and much more of what is happening online. But breaking up the duopoly wouldn’t solve the deeper questions about how to make money delivering information when it’s available instantly, anywhere, and theoretically at zero cost. In 2009, it was: The internet is killing (print) journalism. In 2019, it’s: The internet is killing (internet) journalism. The truth is that journalism isn’t about to die — but neither is the internet. More than the next big thing, we should all be looking for a longer runway.

Could the moves presage the major rollup that’s been increasingly talked about in America’s now-in-play, ever-struggling daily newspaper industry? Does the move tell us anything about the likelihood of Alden Global Capital successfully winning Gannett?

What will Tribune, Gannett, Digital First Media, and McClatchy — four of the major U.S. daily chains, all involved in this possible buying, selling, and mating — look like when the newsprint M&A dust settles?

The suddenness of Dearborn’s removal suggests that bigger moves are imminent.

One theory: Tribune — in play itself but left without a good buyer — seizes the moment made present by Alden’s Sunday night bid for Gannett. As Gannett itself scrambles to fend off Alden (expect a meeting between the two companies by the end of the month), both Tribune and Gannett see the same opportunity: A Gannett/Tribune merger.

Gannett now sees a Tribune merger as probably its best move, if Alden’s charge is a serious one. Tribune investors — led by former chairman Michael Ferro, whose group controls a quarter of the company’s shares — want to sell. Though Tribune rejected McClatchy’s mid-December offer of $16.50 per share, Alden’s blitz has altered the board game.

With Ferro nemesis Bob Dickey retiring, in part due to Ferro’s victory in defeating Dickey’s 2016 hostile bid for the company, Ferro could gain the merger he sought and crow about a victory. At the same time, he could exit Tribune and satisfy his own Chicago-based investors in the company. It’s no secret that it’s been Ferro — not Dearborn — who was seen as an impediment to a Tribune sale. Now, though, Ferro may have softened his stance.

In fact, to get such a deal done, sources say Ferro would be willing to drop his previous demand for a board seat on the merged Gannett-Tribune. (Ferro’s poor reputation has only gotten worse.) Or, if the Gannett deal is a bridge too far, Tribune could act on the offers made by the two companies (Donerail Group and AIM Group) that came in behind McClatchy in the fall selling sweepstakes.

With Tim Knight ascending to the CEO position, and the likely elimination of three high-priced executives earning more than a million dollars annually in salary, Tribune cuts expenses. Further, it may be able to charge the share-based compensation — totaling $10 million or more — now. That’s the clearing, or financial clean-up.

Both moves would help in its calculation of going-forward EBITDA (earnings before interest, depreciation, taxes and amortization), which often stands as the key number in calculating a sales price. The fewer the going-forward expense obligations, the higher the EBITDA, on paper at least. Buyers then pay a multiple of EBITDA; Alden’s offer stands at about 4.7x EBITDA. Raise the EBITDA by a million dollars, and a selling company could see a return of about $5 million. Raise it by $10 million and it could yield — depending on the negotiating skills and leverage of the buyer — as much as $50 million.

As the news sprinted across the web that Ferro’s long-time right hand man Justin Dearborn was gone overnight, people puzzled. With his quarter-share of the company, Ferro has long controlled the company, its board and management.

Why would Tribune dispatch Ferro’s right-hand man, Dearborn, and two Ferro hires — Ross Levinsohn, the former Yahoo head whose brief stint as publisher of the Los Angeles Times was ended by sexual harassment charges, and Mickie Rosen — so apparently unceremoniously?

The “clearing the decks” metaphor offered by one financial analyst is one good theory. The fact that David Dreier, the former GOP congressman whom Ferro put on the board in 2016, becomes chairman buttresses the case. It seems more likely that this apparent coup has Ferro’s hand on it than that he and his people are the victims of it.

While Dearborn, Levinsohn, and Rosen are now all immediately unemployed, they stand to reap millions of dollars in stock and other compensation, promised to them in agreements Ferro provided over his tenure as Tribune/Tronc chairman.

Upon sale of the company, Tronc/Tribune packages provide millions of dollars in payout. Even as they exit the employ of the company, their stock grant redemption should hold, say sources.

In March 2018, Dearborn’s compensation agreement was updated. He received “an annual base salary of $600,000 and…an annual cash bonus, with a target of 100 percent of base salary.”

The most current Tribune SEC filing totals Dearborn’s compensation, including stock awards, at as much as $4,397,500 in 2017 and $8,123,914 in 2016.

While Dearborn served almost three years in the job as CEO, both Levinsohn and Rosen’s values to the company are much less apparent.

Levinsohn joined Tronc as publisher of the Los Angeles Times in August 2016. He hired Lewis D’Vorkin as editor-in-chief, and D’Vorkin lasted four months in the job, upended by staff mutiny. Levinsohn himself was there for less than six months, as sexual harassment allegations resulted in a suspension. An internal Tronc inquiry cleared Levinsohn and he moved on to become CEO of Tronc’s L.A.-based digital play, Tribune Interactive.

Both he and Rosen, whom he had hired as LA Times president, have since quietly headed that effort, amid many staff complaints that they were being paid to do little.

As I wrote from SEC filings in August 2017, Levinsohn’s package was huge: An employment term of three years, through August 2020. One million dollars a year in salary, $600,000 per year and an additional $100,000 per quarter. A cash bonus of up to 166.66 percent of his base salary. Stock share — exercisable on a vesting schedule of three years, in three equal installments over the term of his agreement — worth about $8.5 million at [then] current Tronc share pricing. Levinsohn would also receive 400,000 shares, plus 200,000 more in the form of stock options. The most current Tribune SEC filing totals Levinsohn’s compensation, including stock awards, at as much as $7,036,000 in 2017.

It’s unclear from this reading how and when exercisable those grants may be, but financial observers doubt that the let-go executives will forego that compensation. Further, a “change of control” at Tribune — meaning a sale — is the likely accelerant to these riches. That, as I’ve pointed out over the years, encourages executives to manage to a sale, rather than to better civic and reader service.

Such numbers will only further grill Tronc/Tribune’s many critics, who have accused the company of self-dealing and profiteering. “Tribune is still making money,” one observer told me. “They are taking the cash they earn in January, February and March and giving it Dearborn, Levinsohn and Rosen.”

Meanwhile, cuts to newsroom budgets have resulted in weakened Tribune products and dozens, if not hundreds, of additional job losses.

Tribune intrigue now joins Gannett intrigue, with January only halfway over.

We know the Gannett/Alden set-to should move well into February. Gannett’s been scrambling all week, getting its defensive ducks in a row. But Gannett is known as a “shareholder-friendly company,” meaning its defenses against unwanted suitors are weak.

Alden could take its case case to those shareholders by putting up an alternative slate of board directors. The deadline to file that slate is mid-February, a few months before the vote. (It was, curiously, Gannett’s failure to file an alternative slate on time in its Tronc takeover attempt of 2016 that fatally retarded its efforts.)

Expect a first meeting between Gannett and Alden by about month’s end. In the interim, Alden may be asked to demonstrate how it would finance a $1.4 billion cash acquisition. Speculation is growing that Alden only wants to shove Gannett into play, not actually buy it.

Public filings show that Alden paid an average of $9.69 a share for its 8.5 million Gannett shares. If it fetched $12 a share — bought by someone other than Alden at the price Alden offered this week — that would net the hedge fund $19.7 million in profit. After peaking at $11.95, a nickel under Alden’s bid, on Monday, the share price has drifted downward, but still surpasses the pre-bid pricing.

Inside Gannett, there’s great nervousness.

The company is trying to send out reassuring messages to its workforce. (Long-time industry watchers will note the irony here since Gannett’s own expansion led to worries, some well-justified, of the Gannettization of the papers it acquired. That was then, this is now, and as I noted two years ago, “Your Gannettenfreude will only take you so far.”)

Gannett employees’ woes are exacerbated by the knowledge that layoffs will follow a buyout offer. Even as Alden makes its laughable case that it can better manage Gannett, the company looks publicly weak as it cuts more staff and heads toward a full-year financial report in February that won’t be positive.

Further, there’s the little problem at the top. CEO Bob Dickey announced his May retirement in December. Company executives say uncertain leadership over the next few months is only a continuation of something that was a problem for more than a year.

“Bob was just checked out,” explains one associate. “He has spent a lot of time at his home in Bend [in Central Oregon, a long journey each way to and from Gannett’s suburban Virginia headquarters].”

“There’s no doubt he’s working when he is there, but he just has too little contact with top company execs,” added another.

Execs point to Dickey’s failed bid for Tronc as the beginning of the end of his tenure, which began when Gannett divided its valuable TV properties into TEGNA in 2015.

Dickey, too, was well-compensated as his company’s operating performance declined and it cut many journalists. His 2017 compensation was estimated at $8.7 million, following $6.9 million in 2016. In retirement, he will likely reap millions more.

At Tribune, Tim Knight moves into the CEO position. Long considered a “good operator” in newspaper publishing parlance, Knight kept his head down through the twists and turns of the Michael Ferro era at Tribune.

Within the industry, Knight has been considered the adult in the often fractious Tronc room. He’s the exec with decades of newspaper executive experience, leaving the Tribune Company after 13 years and then joining Ferro for four years beginning in 2011 as Ferro operated the Chicago Sun-Times. After a brief stint as publisher of Advance’s Cleveland Plain Dealer, Ferro hired him back at Tronc in March 2017. When Ferro left his formal position as chair of Tronc last March, Knight’s responsibilities continued to grow.

Yet, interestingly, as one source put it Thursday, “he’s not a deal guy.”

Knight’s tenure could be very short, depending on whether Tribune sells and to whom. But it’s also possible that he could become CEO of a Gannett-Tribune mergeco, the chieftain of the nation’s largest newspaper company.

On Monday, I noted the dearth of CEO newspaper leadership, as Digital First Media operates without one and Dickey heads to retirement and Justin Dearborn looked like a short-timer. Dearborn’s overnight disappearance surprises even me.

Now, Tim Knight (who was unavailable to comment Thursday night, as were other players in this story) joins the CEO group. He may have a parachute amounting to more than $4 million in potential compensation, but he’s in for turbulent skies and an uncertain landing.

Photo of Tribune Tower by Bernt Rostad used under a Creative Commons license.

Alden apparently told reporters it had been in recent contact with Gannett about the offer. But later on Sunday night, Gannett’s USA Today told a different tale, with a company source saying “there has been no communication regarding a proposal to the company.” But this morning, an updated version of the story acknowledged Gannett had “officially received an unsolicited proposal to acquire the company.”

This may be the first newspaper mergers-and-acquisitions story of 2019, but it definitely won’t be the last. Consolidation (and the cost-cutting that comes with it) remains the dominant strategy in the daily newspaper industry. If revenue continues to drop at or even near double-digit levels, the consensus thinking is that radically reducing expenses through consolidation is about as good a card as anyone has to play. Eliminate or reduce corporate staffs, centralize everything that can be centralized, and maybe in some cases continue to make small investments in newer revenue streams.

Just a month ago, McClatchy was close to finalizing its own big consolidation by buying Tribune Publishing. But it got left at the altar when the Tribune board rejected its bid. Remember both those names as we consider the cascading effects of this Alden bid — the end result of which might be a new Gannett/Tribune combo.

Digital First Media has just under 50 dailies and about 100 total titles in its portfolio. Gannett counts 109 “local media organizations.”

Alden’s DFM, of course, stands at one extreme of the industry, unusually naked in its strategy of extraction, investing as little as possible in the business as it harvests some of the highest profits in the industry. (Documentary film producers are now hard at work on telling the tale of the daily newspaper apocalypse through publishing’s bête noire.) Alden took a severe media beating last spring as it whacked one-third of The Denver Post’s newsroom, but Alden president Heath Freeman continues to see financial opportunity in what may be the final years of print.

As I reported less than a month ago:

Alden president Heath Freeman has recently noted some interest in buying other chains. His rationale is quite understandable: He’s optimized his cost-cutting enough to keep profits flowing smoothly, pushing only a tenth of his subscribers a year to cancel. He believes he could “optimize” other chains and, to their dying moments, extract higher returns.

The only surprises, then, are the speed with which Alden has struck — and its intended target. With a current market value of $1.1 billion and annual revenues that run to a little more than $3 billion, Gannett has long sat atop the newspaper industry, largest in the country and second worldwide (to News Corp), given its ownership of the U.K.’s Newsquest. (Gannett is the largest chain in terms of paid circulation, but The New York Times Co. has passed Gannett in market cap — fitting, given the extent to which the sweet spot in the newspaper business has shifted from local papers to a few national giants.)

So how will this bid play out?

Gannett is scrambling to respond. This morning, it issued a statement:

Consistent with its fiduciary duties and in consultation with its financial and legal advisors, the Gannett board of directors will carefully review the proposal received to determine the course of action that it believes is in the best interest of the company and Gannett shareholders.

Given the 23 percent premium on offer, Gannett can’t just say it doesn’t want to sell to someone like Alden. As a single-class public company, it’s duty-bound to maximize shareholder value. Expect it to hire an investment banker to “explore the company’s options.”

(One quick numbers clarification: In its press release, Alden refers to its cash premium as 41 percent instead of 23 percent. That’s because they’re citing the price Gannett stock closed at on December 31, $8.53, instead of the price it closed at Friday, $9.75. And in early trading this morning, Gannett stock was going for around $11.50, as traders bid it up closer to Alden’s $12.00 offer.)

What all this means is Gannett, like it or not, is in play. Even two years ago, that statement might have been dropped jaws — Gannett was clear it wanted to be the consolidator, not the consolidatee. But no longer: In an industry of unending downturn — and in a world flirting with a who-knows-how-deep recession to come — all bets on the conventional wisdom of newspaper ownership are off. Anyone with the appetite and dollars to buy can, whether it’s a Patrick Soon-Shiong or an Alden Global Capital.

The decline of Gannett

How did Gannett get to this point?

It was long prized by Wall Street as the daily newspaper company with the best capital structure and most consistent financial performance. It led of the last wave of consolidation in the industry, pre-web, buying up dozens of family-owned newspapers around the country. (Investors liked that — journalists, not so much.)

But Gannett, like its peers, began to show its cracks over the past decade. It announced one new transformation initiative after another — in newsrooms, in ad sales, and more lately in digital subscription sales — but Gannett has never been able to turn the digital corner.

Its digital businesses now contribute 37 percent of total revenues — more than most of its peers. But the company was still down around 7 percent in overall revenue through the first three quarters of 2018. Gannett’s print ad revenue was down about 17 percent over that span. Amid it all, Gannett’s journalists, even as their ranks have thinned, have won plaudits from readers (and peers) for reinvigorated national/local investigative projects.

Anyone searching for a turning point in the company’s fortunes should look at CEO Bob Dickey’s attempted hostile takeover of Tribune Publishing in 2016. (It was Tribune Publishing before it was Tronc before it was Tribune Publishing again.) In resisting Dickey’s bid, Tribune’s then-chairman Michael Ferro vowed privately and publicly to wreak vengeance on his unwanted suitor. Ferro — who still heads up a group that owns 25 percent of Tribune and essentially directs it to this day — is no doubt enjoying today’s news.

Gannett’s bid to buy Tribune started disastrously when it missed a deadline to file its own board slate at an annual election and then petered out as now-L.A. Times owner Patrick Soon-Shiong invested with Ferro, helping thwart the takeover.

Gannett’s share price tumbled and has never really recovered. Neither did Bob Dickey’s standing; it’s no accident that Alden’s bid comes barely a month after Dickey announced his retirement, which is set for May.

Who will replace Dickey? A national search is now just taking shape. The company looked at its thin executive bench — cleared by years of executive re-organizations and poor succession planning — and decided that it has no successor inside the company. Just this last week, Sharon Rowlands, who had headed up the company’s business leadership and was passed over for the job, departed to become CEO of web.com, a digital marketing company.

Alden’s Freeman apparently celebrated the holidays by assessing this particular moment of Gannett weakness — a lame-duck CEO preparing to announce another quarter of trouble. And so he struck.

The game ahead

Sunday’s announcement has sent people running newspaper companies (or just eyeing them) to their chessboards, I found calling around last night. (Given the timing of the Alden bid, no company spokespeople were available to comment for this column. It doesn’t talk to reporters much, anyway.)

Think of it as a game of two-and-a-half dimensional chess — something’s missing, but we may not be sure what.

Start with the Alden bid itself. The offer’s in cash — a rather pricey pile of it, at more than $1.35 billion. Does Alden have that money available today? If not, can it get it? Financial insiders note recent volatility in credit availability and say that some deals planned for December have been slowed as a result. Overall, 2019 projections show credit nervousness.

Consequently, Gannett may first simply ask Alden to show its wherewithal. Alden has quietly built up a 7.5 percent stake in Gannett already; as one keen observer of the industry told me Sunday evening: “Do you think they’re really trying to buy the company or just pumping up the value of their equity stake?” (Just from this morning’s bump in Gannett’s share price, that 7.5 percent is about $16 million more valuable today than it was yesterday.)

Alden has let it be known that it plans to be an activist investor. Its offer letter sent this morning notes that its existing stake makes it Gannett’s “largest active stockholder.” And it spared few feelings in describing how it sees Gannett’s current management and strategy:

Because we know how to consolidate and operate successful newspaper businesses over the long term, we have approached members of your Board and management on multiple occasions about a potential strategic combination. Despite our overtures, Gannett has not meaningfully engaged with us.

Gannett has lost 41% of its value since its debut as a public company two and a half years ago, significantly underperforming its peer group and indices. During this period, Gannett suffered from a series of value-destroying decisions made by an unfocused leadership team — overpaying for a string of non-core aspirational digital deals and pursuing an ill-fated hostile for Tribune Publishing, all while Gannett’s core revenue, EBITDA, margins and Free Cash Flow continue to decline. With Gannett’s CEO departing by May and its key digital executive leaving later this month, there’s now an even greater leadership void. Frankly, the team leading Gannett has not demonstrated that it’s capable of effectively running this enterprise as a public company. Gannett shareholders cannot sit by and watch further value erode while the Board casts about for a strategy and a leader, especially when there is an opportunity to maximize value right now. We believe Gannett shareholders deserve better.

Accordingly, MNG proposes to purchase Gannett for $12.00 per share, representing a substantial cash premium, and requests the Board immediately take the following actions to maximize value for stockholders:

• Enter into discussions with MNG about a strategic combination;
• Hire an investment bank to conduct a review of strategic alternatives, including a potential sale of the Company;
• Commit to a moratorium on digital acquisitions; and
• Commit to a feasible, strategic and financial path forward before hiring a new CEO.

(Emphasis very much theirs.)

If that “moratorium on digital acquisitions” doesn’t make it clear enough, the letter also says Gannett has lost its way by focusing too much on all this newfangled digital stuff:

We believe that Gannett’s newspaper business could be improved and made more profitable by optimizing the Company’s cost structure and showing discipline in capital allocation with a goal of optimizing EBITDA and Free Cash Flow per share every year. However, instead of focusing on its core newspaper business and acting as the industry consolidator pitched to investors at the time of the spin-off, the Company has spent approximately $350mm on digital acquisitions since 2015…

Despite the Company’s poor stock and operating performance since the spin-off, the Company seems to be doubling down on its current strategy. As we have heard from senior leadership, and as reported in the news media, the Board appears to be looking for a new CEO with a digital rather than newspaper background.

(Another bit from the letter: “When other people won’t step up, we do. We save newspapers and position them for a strong and profitable future so they can weather the secular decline.” It certainly is…interesting to see a hedge fund best known for laying off journalists positioning itself as a bold guardian of grand newspaper tradition. As one recent study put it: “At a time when other major newspaper chains were struggling to maintain single-digit operating margins, executives at Digital First had posted an operating margin of 17 percent, apparently by cutting newsroom staffing by as much as twice the industry average.” DFM has also closed or consolidated 21 newspapers since 2014.)

A different combination?

Last month, I predicted: “A Gannett/Tribune combo may re-appear in 2019…Gannett could buy Tribune — or vice versa.” That possibility — which I believed was warming on the back of a stove — will now likely move to a front burner.

A Gannett–Tribune merger could blunt an aggressive Alden bid. Both companies’ balance sheets are in better-than-average shape, and we’d hear a ton about the synergies of such a consolidation. But pricing and cash could still be formidable issues. Tribune rejected McClatchy’s $16.50 bid just a month ago — and then saw its share price plummet as low as $10.82, before rebounding with the rest of the market to $13.36 on Friday. (It’s down to about $12.80 in trading this morning.) It was Michael Ferro who refused the deal.

Sources tell me he’d likely be more amenable to a Gannett deal today — a victory in that two-year-old battle. The immediate question: How much cash and stock would it take to bring the companies together? Could a stock-only deal pull it off? And, importantly: Can Gannett make the case to its shareholders — especially those who bought speculatively and could sue — that a Tribune merger, creating a huge daily newspaper company by historical standards, is a better deal than that pile of cash from Alden?

Then there’s McClatchy. As I’ve noted, in his two-year-stint as CEO, Craig Forman has focused on getting McClatchy’s house in order. He’s negotiating a deal to push back the company’s debt, and he saw the Tribune acquisition as another way to buy time for a digital transformation of the company. After being rejected in December, what cards can he play now? He’ll be looking for new ways to insert McClatchy into the 2019 Consolidation Games.

Finally we have the private equity players, like Will Wyatt’s Donerail Group, which made its own bid for Tribune, or Apollo Global Management, which has been sniffing around the ragged edges of the newspaper business for years. (In fact, it came close to buying most of Digital First back in 2014.) At a time of anything-is-possible chain consolidation, might these companies assess and bid?

If you want to fully understand the dismal state of the industry, consider that Craig Forman is likely to be the only CEO among all these big companies who’ll still be in place by midyear. As noted, Dickey is retiring at Gannett. With Tribune Publishing likely to be sold sooner rather than later, Ferro acolyte and CEO Justin Dearborn has told associates he’ll hit the door at the same time.

Then there’s Digital First. It doesn’t even have a chief executive officer. When DFM CEO Steve Rossi retired in fall 2017, the company opted not to replace him. Its chief operating officer, Guy Gilmore, now runs the company from that position. One more way Alden has shown its commitment to cutting costs and reducing headcount, I suppose. And a trivia question: Where did Gilmore spend 20 years working early in his career? Gannett.

No, really. Okay, if that concept’s beyond your immediate comprehension, let’s make the question a bit more concrete: Imagine what’ll happen to the news business in a world in which Donald Trump is no longer president.

Yes, the Trump Bump in digital subscriptions is long gone, replaced by a steadier, lower-key growth rate for The New York Times, The Washington Post, and others. But traffic continues to go through the roof, alongside the nation’s temper. No one has ever seen news days, or news weeks, like this. Like all things, it’s unlikely to last.

So the business question: If you ran a news company and could anticipate this future non-Trump time — one in which national attention isn’t riveted to every god-forbid smartphone notification — how might you prepare?

You might pay more and more attention to the non-national news interests of your readers, like focusing on their lives well beyond the politics of the day.

That’s the place that The New York Times’ new Wirecutter Money fits. Wirecutter Money is in a slow rollout, having begun populating its pages midsummer, says Mat Yurow, director of Wirecutter Money.

But even at this stage, we can see the insurance policy that CEO Mark Thompson’s strategy investments are now buying. That strategy has propelled to Times to consistent year-over-year revenue growth — despite the great print ad downturn afflicting publishers.

By itself, Wirecutter Money is small. A half-dozen new Times staffers: an editor, an engineer, two writers, a product designer, and a compliance manager. (Wirecutter overall employs nearly 125.)

It’s Wirecutter’s newest sharp edge. The Times bought the site, then focused mainly on electronics and some on home goods through its Sweethome companion site, in 2016 and has been quietly expanding its range and number of products offered since then.

One reason Wirecutter Money is important to note: “It is the first time that we have made a really strong, big investment in coverage of non-products,” says Yurow. It’s all about services, and in services, there’s a lot of money.

Add to that the Times’ Smarter Living expansion. Smarter Living, in its own series of lifestyle sitelets, newsletters, and guides, aims at the Times’ reader’s whole life, restyling the old features of yesteryear into timely guides — on tipping Uber drivers, maintaining digital security, or eating like a local abroad.

That reader is well off: In digital, their median household income is $95,000; in print, $189,000.) It’s a readership high in opinion leaders, power elitists, influentials, affluents, and most importantly, spenders.

Wirecutter stands parallel to the core business. David Perpich, who used to head up product strategy for the mothership, took over leadership of it in January 2017. It both stands apart from the Times — most of its traffic still comes via search — and carefully integrates with the Times when news and consumer content converge.

It’s 25- to 34-year-olds who make up Wirecutter’s largest customer segment. Wirecutter Money stretches into other parts of their lives, as it firmly focuses on the financial lives of millennials.

“The goal of that is really to try to empower young adults to navigate major financial milestones, and we’re calling those financial firsts — those really sticky subjects that every young person is going to have to navigate at some point in time as they work their way up to financial independence,” says Yurow.

“We’re really thinking about how to help this group of individuals who feel a tremendous amount of financial anxiety or anxiety around their personal finances. We want to give them a trustworthy resource that they can go to and really navigate these major milestones in their lives as they graduate from college, or as they take on student loans, buy a home, as they get married.” That’s a life-cycle-driven, “lifetime value” strategy.

Yurow, who had served as Wirecutter’s head of strategy before taking on the Money launch, says the Times learned from watching its readers. “We had noticed there was an interest in this type of coverage. Smarter Living has pushed a lot of momentum forward in having really honest and open conversations about managing money and the impact that it has on our lives. It felt really aligned to the interest and the brand and the authority and the trust that Wirecutter brings to the table for The New York Times, and so it really was this perfect combination of data and sheer passion.”

If the Times’ news coverage raises its readers’ blood pressure, consider these consumer forays a mild anti-anxiety OTC medication.

“Many of the Wirecutter staff is of this generation that’s felt these anxieties. And we felt like entering now at a time when student loan and credit card debt are an all-time high, when our youngest generations are feeling scared and confused and resentful about how the financial world works, that this was the perfect time for Wirecutter Money.”

In early September, Wirecutter Money published “The Best Cash-Back Credit Cards.” It is the kind of piece you might see on its personal-finance competitors, like Mint, Credit Karma, Nerd Wallet, Bankrate, or The Points Guy.

While search (and links from the Times itself) will drive traffic, Yurow hopes to make the site into a destination of its own.

“I’m hoping that we can build this landing page into a little bit more of a static experience, so that when you know that you’re about to approach one of these major financial milestones, you know where to go and where to find the information that you’re looking for and that you’ve got a sense of completion.” Wirecutter Money offers a mix of original content and pieces taken from the Times’ archive.

Perpich makes the point the Times learned from its new product development successes and failures: “One of the lessons that the Times’ learned and I certainly learned with NYT Now, was that we tried to solve product market fit and monetization at the same time,” Perpich says. “When what we should have said is: Let’s figure out product markets with a sense of what kind of scale we need to get to. And thankfully, that was the pivot we made with Cooking. We actually originally were going to launch with a paywall and we said, ‘Let’s hold back.’ The most important thing is that we create something that people love, and then we can get to a scale that would be meaningful enough to make the investment you need to be able to do monetization right.”

That means Money will be testing lots of guides and product recommendations well into next year to see what works. Though affiliate revenue will drive its business, it isn’t yet working that stream yet, and says it won’t until the business is more fully developed.

Wirecutter Money feels a lot like Wirecutter overall, but Perpich makes the point that it’s enough of a departure from the company’s roots to need special guidance.

“The reason that we set this up as a discrete team is just it’s been honestly my experience creating new things — realizing that you need real energy and time and dedication to be able to do it. It’s in a space that’s not like all the others. It’s not recommending a router — it’s a much more complicated thing.” The sort of information a reader needs depends on a wider set of circumstances — age, career, debt load, current financial position. “So, everything from the tech that you need to build, to the regulations you need to be aware of, to thinking about how you take that same Wirecutter kind of ethos but deal with a very different kind of situation and context” — those differences led Perpich to think the Times should “put a team of people against it and give them space.”

Where does money fit into Mark Thompson’s niche strategy?

Back to that seemingly distant question: What if national political times, at some point, take a deep breath? Where would these products place the Times against its competition, and most specifically against Competitor No. 1, The Washington Post? The Post has not yet put the same gears in motion as the Times, but should be having the same conversations. (And one imagines a Jeff Bezos-owned company would start any affiliate/commerce-driven endeavor with an edge in market intelligence.)

The Times set its non-news plan into motion years ago. Over the years, CEO Thompson has green-lit a number of projects, while flashing red at a few others that didn’t pan out.

Most notably, the Times — almost alone among its peers — has built two significant non-news subscription products. Together, the Crossword and Cooking products now total about half a million discrete subscriptions. Overall, they make up 17 percent of the Times’ total digital subscriptions (though, as lower-priced products, they only contribute about 5 percent of digital subscription revenue).

Though the dollars are still smallish — a $20 million-plus annual run rate — the non-news products are growing at an annual rate above 60 percent, both in subscription number and revenue.

Of strategic significance: Like international digital subscription sales, which now make up about 13 percent of the total, they represent a diversification beyond the U.S. news market.

By late 2018, Thompson had hoped to have a fourth, if not fifth, digital subscription product in the market. Watching — which early on saw emerging new reader needs in the age of Netflix and Amazon nirvana — never figured out a subscriber proposition, though it continues to drive traffic for the Times. Health, too, has long been under consideration.

Next up on the paid front: parenting. The Times indicated in the spring that it would launch a subscription parenting product; this week, the company told me it’s on track for a prototype release later this year.

Double diversification

Consider Wirecutter a double diversification strategy. Diversification of reader interest and diversification of revenue stream.

Subscribers don’t directly drive their revenue; Amazon does, as the fulfillment partner that drives most of the site’s revenue. The affiliate revenue shares Wirecutter earns off of reader purchases — clearly explained on the site — drive its revenue, which has surpassed $20 million. That’s up 50 percent since the acquisition, Perpich says.

There is one news company that has practiced a similar approach for most of this decade. That’s Schibsted, the Oslo-based international innovation leader. Years ago, Schibsted began investing a range of consumer-facing businesses, from insurance to personal finance to price comparison to wine buying. Today, Schibsted Growth drives a good share of the company’s revenue and building profit. (We have long covered Schibsted’s serial innovations here at the Lab.) Schibsted still stands as a global leader in business model innovation — finding new ways to pay for news.

Forget news, though, for a moment, and think about a greater lesson in these initiatives: the bid to regain habit. Habit droves newspaper readership (and broadcast news consumption) for decades, until it was decimated by digital, with only the news check-in smartphone habit for national news now reviving it a bit.

For the Times, it’s about acting judiciously when it comes to its trusted relationships with readers (as Gizmodo Media Group did with its ecommerce leadership) and with rebuilding the habit, a revival of another old concept: service journalism, something the better dailies practiced well in their heyday. (Indeed, it was the Times in the 1970s under Abe Rosenthal that led the way in boosting service journalism and “softer” feature sections to both broaden readership and satisfy advertisers.)

These products — from Crosswords and Cooking to Smarter Living and the Wirecutters — provide new on-ramps to habit formation. “Smarter Living is giving you advice on how to live a better life,” Perpich says. “And Wirecutter’s helping you get the gear you need to do it.” In those two sentences, we see a new frontier of 2020s business models for the news companies that may thrive.

Could California become a new epicenter of the American local newspaper business?

Could Patrick Soon-Shiong have found a bigger lab to test his theories of AI-enhanced journalism?

As we learned over the weekend, the newspaper chain Tronc may be entertaining multiple suitors — or might just be trying to juice a lukewarm market. As the Chicago Tribune revealed late Friday, McClatchy had emerged as an unlikely dark horse in the bidding. That emergence opens up an array of fascinating scenarios for the fast-paced consolidation of daily newspapering amid its continued business downturn.

With the help of a number of confidential sources in and around the potential transactions, let’s explore them. (McClatchy, Tronc, and the Los Angeles Times each declined comment for this story.)

First, consider Patrick Soon-Shiong, the billionaire and new Los Angeles Times owner. Owner of one-quarter of Tronc, he was always going to be a key player in its future, as I recently reported, and his holding has emerged in a new context.

His ownership share remains critical to the question of who will win Tronc. Why? If a company wants to buy Tronc and Soon-Shiong wants to be bought out as part of a deal, that would cost the buyer more than an additional $150 million. If he’s willing to stay in a deal with new Tronc ownership, a buyer would have less to come up with in cash or financing.

So the first question: Who would Patrick Soon-Shiong like to control Tronc? Whose ownership could best aid his desire to make the Los Angeles Times a major player, both in the news industry and as a wider force in politics and policy? Who could give him a bigger network to deploy the artificial intelligence-inflected technologies he hopes to build?

Alternative investment firm Donerail had become a frontrunner for Tronc just weeks ago. But Soon-Shiong’s desire to be part of that Donerail deal hasn’t been clear; he and his associates have been dating other parties.

Further, Donerail’s strategy for Tronc may be running into a roadblock. Donerail’s Will Wyatt has built a career on buying in cheap and selling more dearly, and that was his plan with Tronc — buy the whole company and sell of its constituent newspapers one by one. But he may be having problems doing so with Tronc’s 10 properties. While he’d buy at a 5× or so multiple price, he’s been shopping them to would-be individual buyers for as much as 7× — and finding resistance at that price. Without enough downstream buyers lined up, Wyatt’s ability to pull off the Tronc buy, with required financing, is diminished.

That’s what creates an opening — and makes the conversations and budding partnership of Soon-Shiong and McClatchy CEO Craig Forman so intriguing.

If McClatchy — still a major owner of significant newspaper properties, 30 in total, including the Miami Herald, Kansas City Star, and Charlotte Observer — could in effect merge with Tronc’s 10 properties, all of sudden there’d another heavyweight newspaper chain on the scene. Such a company could claim at least 11 of the country’s 50 top markets. Add in a close alliance with Soon-Shiong’s newly independent Los Angeles Times and San Diego Union-Tribune, and the new McClatchy would find itself fighting for standing with Gannett.

Gannett — long seen as the leader, in revenue and in number of properties — has seen its place in the local news business damaged after its own failed 2016 pursuit of Tronc. Lately, GateHouse, whose consolidation mojo has astounded its peers has challenged Gannett’s primacy. A bigger McClatchy would be a contender as well.

McClatchy as a consolidator?

By the numbers, the two companies match up well in some ways. Tronc second-quarter total revenues equaled $253 million; McClatchy’s $204 million. McClatchy’s EBITDA of $30 million outpaced Tronc’s of $22 million.

But, hold on, you say — is that the same McClatchy that just announced a 3.5 percent staff cut across the company — and the two-week furloughing of senior staff, part of a deep and wide cost-cutting?

Is that the same McClatchy that just announced it had lost a full quarter of its print ad revenue year over year, for the second quarter?

Indeed it is. None of these print ad numbers — nor, to be honest, the print circulation numbers — look good.

CEOs like Forman tell investors to look away from them and focus on the numbers reflecting the digital transition underway. “By most key measures, many of which we are sharing publicly today, the second quarter of 2018 marked a sequential acceleration of that digital transformation, both in terms of digital-only advertising and subscription growth,” Forman told analysts on the company’s second-quarter call on July 27.

“Compared to the second quarter of 2017, our total digital advertising revenues were up 8 percent, while our digital-only advertising revenues grew more than 20 percent. Indeed, in May and June, we reached another milestone. Our digital-only advertising revenues exceeded our print newspaper advertising revenues.”

Is Forman right? Is that transition really on a successful enough path? That’s an unanswerable question, but there’s one commodity as important as the money here: time.

Perhaps Forman’s biggest accomplishment in his 19-month tenure as CEO has been re-engineering McClatchy’s still-massive debt — a hangover from its 2006 acquisition of Knight Ridder Newspapers at a pre-collapse price tag. That debt, which still stands at almost $800 million — down from its height of $2 billion — now hangs a bit less precipitously over McClatchy. Earlier this year, Forman pushed off a substantial amount of debt from 2022 to 2026. That reduced more immediate pressures — and made a McClatchy/Tronc merger thinkable.

Look, for a moment, beyond that debt. Several confidential sources tell me that the key to the merger is deleverage. Combine Tronc’s nearly debt-free balance sheet with McClatchy’s recently improved one, and the new McClatchy would presumably carry less leverage than the old one.

One big driver of such a deal would be cost reductions. Financial observers point to an annual savings that could be as high as $50 million per year. That’s a combination of three things. First, two corporate overhead costs would become one — not an insignificant number, considering these are both publicly traded companies with significant legal reporting responsibilities. Second, in all the areas of company consolidation — from finance to production to human resources and more — single company ownership would reduce costs. Third, geographic clustering — led by a McClatchy Miami Herald/Tronc Ft. Lauderdale Sun-Sentinel combination, but also found in some Mid-Atlantic properties and Pennsylvania as well — would save some expense.

In addition — and this is key — McClatchy is a longtime newspaper operator. Longtime as in founded in 1857. Two-year-old Tronc has behaved like a two-year-old, a whirlwind of deal-making and deal-making speculation. It’s shown far more inclination for deals than for improving its operating performance, though newspaper veteran Tim Knight has provided the most sustained recent efforts in that direction.

Importantly, McClatchy is still controlled by the McClatchy family, thanks to a New York Times-like two-class share structure. Given its public ownership and its still-heavy debt, the company has less room to maneuver — to rebuild and to hasten its digital transition — than it would like. But the ownership’s sense of community mission is materially different from what you see in Tronc, GateHouse, Digital First Media, and others.

Against that background: Enter Patrick Soon-Shiong.

Soon-Shiong, with both his 25 percent stake in Tronc and plenty of available cash for added investment, could prove a useful partner if McClatchy and Tronc were to merge.

How might such a deal work? Would Soon-Shiong just throw his Tronc stake into a merged company, maintaining a (smaller) share? Could he sweeten the pie with a greater investment, making a McClatchy buy easier by requiring less new debt? Is it even possible that Soon-Shiong could make a greater investment in an expanded McClatchy, strengthening it into the digital future? While sources confirm the talks, the extent of a McClatchy/Soon-Shiong possible partnership is known only to a few.

How likely is such a deal? Talks are moving, and while they are reportedly in “early stages,” they could move quickly. It’s also unclear where Tronc and Donerail stand with their possible deal.

Among many points of negotiation, of course, will be price.

I’ve documented former Tronc chairman Michael Ferro’s self-dealing at length, the latest instance of which accelerated his “consulting” deal with Tronc. In addition, there’s the up to $23.5 million in golden parachutes that company executives have packed for themselves in the event of “change of control.”

Critics of such corporate governance abound — but few may know that they include Patrick Soon-Shiong himself, aggrieved by the use of the company’s finances as a piggybank for the few.

So as any new deal may be negotiated, expect those millions to be scrutinized as overall price is negotiated.

California dreaming?

There’s lots to interest us about a McClatchy/Tronc tie-up: further national consolidation, a potential renewal of news mission, and of course the personalities at play.

One other potential impact: What such an alliance would mean to California journalism? It’s a topic I’ve visited several times, as characters including Sam Zell, Aaron Kushner, Jack Griffin, and Digital First Media’s leaders have impacted the state’s news business.

The country’s most populous state — having recently reasserted itself (surpassing the U.K.) as the globe’s fifth-largest economy and leader of both the anti-global warming and anti-Trump resistance — could suddenly move into a position of industry leadership.

Twenty years ago, many of us expected that California would be a key leader in digital news. An early leader in Internet publishing via Knight Ridder Digital (at which I worked), Knight Ridder’s leadership quickly faded away after that 2006 sale to McClatchy. Would-be hotbeds of new digital news from Yahoo to Salon lost their luster. In truth, California’s newspaper industry hasn’t seen a true digital news leader. A few dozen blocks in south of Midtown New York host much of the elite of the country’s digital news industry.

Consider what a McClatchy/Soon-Shiong alliance could mean to the state claiming an eighth of the country’s population.

Five major newspapers would now stretch from San Diego to Sacramento. McClatchy’s three Bees — in Sacramento, Modesto, and Fresno, all aligned in the populous central valleys of the state — would find themselves aligned with Southern California’s two biggest dailies, the Times and the Union-Tribune.

Such a “chain” could offer much in the way of journalistic sharing and additional cost efficiencies. The dream — had by many and hatched successfully by none — of “California-wide” news digital news products would inevitably get a new life at some point.

Inevitably, as digital disruption of newspapers takes it further toll, California’s largest news publisher would likely turn its eyes to the state’s most affluent — and underserved — market: Silicon Valley. As Alden Global Capital’s Digital First Media works its cash-funneling, product decline-managing strategy on three major news properties in the Bay Area, McClatchy/Soon-Shiong could wait to pounce, moving in to buy at some point. With Hearst only controlling San Francisco’s Chronicle, the McClatchy/Soon-Shiong partnership would look goldenly dominant in California.

What kind of journalism and of digital journalism innovation could we expect from such a new player? That’s a big unknown.

McClatchy has that sense of mission; you can see it in its still-surviving impactful Washington bureau, as noted last week. (In fact, it’s worth noting that the L.A. Times’ Washington bureau — which Soon-Shiong demanded be included in his Times buy — has also survived widespread bureau closures, and in fact is adding three new positions.)

And yet McClatchy is still a company stuck cutting and reskilling, with insiders saying that issues of cultural change and the lack of requisite skills still bedevil efforts to more quickly grab hold of a digital future.

Would a Tronc merger and Soon-Shiong provide new wherewithal — and time — to put that the right level of modern resources in place to grab that future?

Technology scheming

As new L.A. Times editor Norm Pearlstine announced 24 newsroom job openings, the twitterati joked that no one has seen such hiring at a newspaper since 1998. (Well, except at Jeff Bezos’ Washington Post.)

That package of jobs may be just be Soon-Shiong’s opening salvo, as he begins to answer the question of whether he wants to be the newspaper industry’s West Coast Bezos. (We already know he is considering ditching the Washington Post’s Arc platform in favor of building his own.)

It’s technology that drives Soon-Shiong’s passion. At the same time, it has been the difficult Tronc transition agreement, including technology, that has made his near-term operation of the Times more difficult. So why not buy into Tronc — with more control — and provide the Soon-Shiong expansive tech strategies ample room to be deployed? It’s easy to say why that would — in the abstract — be more attractive than seeing the Tronc properties sold to Donerail, and parceled out. And, in the process, he may well find a more sympatico journalism partner in McClatchy.

Have no doubt: Patrick Soon-Shiong intends to be a player in the remaking of local news. That understanding — as much as the welter of deal points complicating any final disappearance of the Tronc brand into the history books — will drive this particular drama to conclusion.

On Wednesday, the International Trade Commission —like numerous judicial or regulatory bodies before it in the Trump era — reversed the tariffs that the Commerce Department had placed on Canadian newsprint.

The unanimous 5-0 decision surprised many, even though the ill-considered tariffs were silly, ignoring the actual way the newsprint trade has long been structured. The whole effort symbolized the times: a private equity company, recently buying into an established industry, looking for a quick buck, and using the politicized trade environment to do it. Even as the tariffs go away, it’s essential to understand that they represent only a small part of the problem that daily newspaper publishers now face. Though that black swan of tariff doom has flown away — an appeal of the decision by NORPAC, which brought the case, is possible, but seems unlikely — other troublesome threats remain aloft.

First, even in terms of the price of newsprint, the elimination of the tariffs provides only partial immediate relief.

Significantly, the recent rise in newsprint pricing of about 30 percent has been driven only partly by the tariffs. In fact, one CEO of a substantial chain told me this week that only a third of the pricing increase could be directly linked to the tariffs. Two-thirds of it, he said, was the “premium pricing” most of the newsprint producers added on to the tariffs. Why? Because they could, tucking in the price increases along with real tariff-induced pass-along pricing. Publishers and newsprint producers long have played a cat-and-mouse game on pricing, with increases, rollbacks, feints, and the like.

Will the as-much-as-two-thirds increase stick or go away? While the Tom-and-Jerry game is nothing new, the terrain on which it now plays out has been transformed. Publishers use maybe a third of the newsprint they used in the year 2000, according to industry analysts. That means the mills themselves, as suppliers to a receding industry, have consolidated. There are fewer owners, fewer mills, and less supply. Consequently, publishers who might have tried to play three suppliers off against each other in days gone by no longer can.

The bigger picture: As the daily printed newspaper era fades rapidly into history, everything about it is getting tougher.

If the tariffs, and related higher pricing, had stuck, publishers were looking at a 10 percent reduction in EBITDA. That was going to be a big hit, and it had already spurred a spate of staff, section, and day cutbacks (as chronicled here). From Tampa, Florida, to Salisbury, North Carolina, to Natchez, Michigan, to Grand Junction, Colorado,, the list was growing.

Now, as the News Media Alliance, which built a coalition of hundreds of organizations to oppose the tariffs, put it on Wednesday: “The tariffs have disrupted the newsprint market, increasing newsprint costs by nearly 30 percent and forcing many newspapers to reduce their print distribution and cut staff. We hope today’s reversal of these newsprint tariffs will restore stability to the market and that publishers will see a full and quick recovery.”

Were it so.

In truth, the print newspaper industry is plummeting southward at a faster and faster rate. Consider, in aggregate and individually, the financial results of the just-reported second-quarter, and see that the tariff relief just removes one boot from the neck of an industry writhing in pain.

These four charts on Q2 overall revenues from four top publicly traded daily newspaper companies display starkly how poorly all the chains are doing in the strongest economy in a decade. For each, I’ve pulled out “same store” revenues, meaning that the impact of acquisitions made or properties sold over the last year are excluded. Not all companies report all the numbers, even in these basic categories. So omissions are noted. Further, what each company includes in each of these categories may differ, usually slightly. Overall, though, these apples-to-apples comparisons are directionally accurate.

Most of the chains find themselves slipping farther and farther from revenue growth. This headline number tells you that digital initiatives simply are not making up for overall print revenue losses.

It’s been about 10 years since these companies grew overall revenue quarter over quarter.

Next, consider their print ad decline.

This is the number that is causing the big overall revenue decline. Print advertising is disappearing rapidly, with huge percentage losses on a base number that has decreased by some 60 percent in 10 years.

Now look at their circulation revenue decline:

Long ago, newspaper companies hoped that digital ad revenues would make up for print ad losses, a phenomenon that never occurred consistently. Over the past couple of years — owing to The New York Times’ innovation in digital subscription and reader revenue — circulation revenue gains were supposed to make up for ad (mainly print ad) losses.

Between 2015 and 2017, a number of daily newspaper chains were able to report positive circulation revenue quarter over quarter. The combination of higher print pricing and the growing digital subscriptions produced that positive number. But now they have hit a wall and gone negative. Volume loss in print circulation is accelerating; digital subscription momentum has been hard to maintain.

One current phenomenon: As publishers cut back on newsprint, cutting sections and pages, they worsened their value proposition with their best and most loyal, high-paying customers: their print subscribers. Even subscribers who were loyal for decades are cancelling.

Make no mistake: All these publishers are growing digital revenues. I can’t break out good comparative numbers because publishers report those revenues in non-standard buckets, making easy comparison impossible. But digital revenues are less and less able to make up for lost print revenues, both ad and subscription.

McClatchy’s Craig Forman sums up the journey against time he and his fellow CEOs are on. The big idea is to reduce the percentage of revenue dependent on the slowly dying revenue stream of print advertising, the slowly dying revenue stream.

Forman said on McClatchy’s earnings call, “Revenues exclusive of print newspaper advertising accounted for 80.4 percent of total revenues in the second quarter of 2018, an increase from 74.7 percent in the second quarter of 2017.”

That number is moving in the right direction at McClatchy and elsewhere, but the dependence on print revenues — both print ads and, less so, print subscribers — clouds the 2020s future.

And so we have expense cuts, which will only deepen in 2019. Newspaper companies have been cutting expenses literally for a decade, and it’s not clear how much more there is to cut.

The digital cognoscenti long ago figured out that consumers of “digital” services paid not in dollars but in attention. We laughed about the monetizing of eyeballs. We joked about the devilish bargain we’d made with “the platforms,” even as some conjectured that those platforms might become so big and powerful that few publishers or brands would maintain their own big expensive sites and apps.

But now, as we see hatred and division multiply across North America and Europe, instigated by malicious use of the technology that was supposed to make us freer and better, we’re paying a different kind of attention. Late, but better than never.

We, as consumers of news and information, have become increasingly uncomfortable with the unasked-for attention as every twitch and touch of our screens is captured. It was one thing to feel increasingly unsettled about how platforms gathered up our individual actions for ad targeting and commercial gain. It’s another to see that attention manipulated to damage our democracies themselves.

It is a supreme irony of the last week that both Facebook and Twitter, among the companies that have caused discomfort, now find themselves subject to so much unwanted attention.

Two fronts now combine to place the very foundations of these companies in question.

The first front, of course, is political. If Facebook in particular has figured out how to place the right ads somewhere within our vision field, its foes have learned how to master the political monetization of Facebook.

Second, investors are recalibrating these companies’ growth stories. In the belief that their growth has slowed, stopped, or been reversed, they whacked Facebook with its biggest one-day value hit of $120 billion on Thursday. On Friday, Twitter announced its own user declines.

The reasons most cited: Although Facebook set new revenue records, it looks as if it may have hit a wall on audience growth. Twitter’s “clean-up” affirmed long-held suspicions that bots have supplied a good share of digital media’s astounding growth story.

Why has the usage of social media taken a hit? What caused it? Putin? Trump? Prump? Or sheer disgust among so many people at the State of Things?

While there’s something to be said for plain old social fatigue, there’s no doubt that Facebook’s role in the Russian assault on our democracy played a part. People are rethinking the role of this company and their interaction with it. Sometimes it feels like the end of an era, but it’s uncertain what’s to come.

For investors, this is a reckoning long in the making. Nothing grows exponentially forever. As social media matures, we wondering if multitasking has maxed out, if there aren’t enough eyeballs to supply many more minutes of “usage.” The usage slowdown was inevitable; the rules of business apply to digital companies as well as legacy ones.

Twenty years isn’t a long time for a society to wrestle with a major transformation in how it learns, communicates, and shares.  But now we’re assessing how much damage — some of it permanent, some likely temporary — can be done to who we are as a people, as communities, and as a wider democracy. As we shine new light on social media, we must remember how we got to this point.

Let’s return to the spring of 2016. Facebook had plainly seen and knew how evildoers were setting out to misinform the fall electorate. It had hired a team of contractors with journalistic training to select some headlines for its “trending topics” module. But that program didn’t touch the news being spread in News Feed, and anyway, Facebook hadn’t terminated it in August 2016, facing pressure from Republicans. The humans’ work would now be done by algorithms. In terminating any sort of vetting team, Facebook CEO Mark Zuckerberg caved.

An unrelenting stream of apologia, new fixes, and ongoing charm offensives have so far none nothing but twist the social network into a suddenly less valuable corporate pretzel. As America reels, it’s left to Britain’s parliament and its “plucky little panel” to find and publish “the truth about fake news, Facebook and Brexit.

As that new 89-page report provides depth of evidence, Facebook’s response is, in part, hiring. Even as newspaper companies hurtle toward oblivion — the halving of the New York Daily News newsroom and the newsprint tariffs just our latest examples — leaving no more than 25,000 journalists working coast to coast at America’s 1,350 dailies, Facebook is hiring thousands of checkers. That’s right: There maybe almost as many people checking stuff at Facebook as there are professional journalists creating daily newspaper content across the United States.

Twitter, too, has endured similar spasms of “defining news” and of being more and less aggressive in its vetting.

Could these companies redefine their missions, and stick to them? Of course, they’ve redefined and redefined, and their high-minded market positions of serving all — Facebook says its “mission is to give people the power to build community and bring the world closer together” and Twitter says its mission is “to give everyone the power to create and share ideas and information instantly, without barriers” — has made that real mission-staking impossible. Why? Remember “too big to fail?” Social media has become too big to trust, maybe despite its better intentions.

The public is figuring this out. Edelman Trust Barometer research shows Americans’ trust of journalists has increased five percent year over year, while its trust in platforms declined two percent.

News companies tend not to have the problem of being too big to be trusted. They produce a viewable, finite number of stories a day, subject to review, and correction. All legitimate news companies pledge fairness and accuracy — and then make decision after decision after decision based on their journalistic judgments and values. Such longstanding tradition is what separates news companies from platforms, and now the world proves it again each day.

Facebook and Twitter mine infinity. It’s easier to cherry-pick a single tweet or post or find some kind of Twitter “bias” than it is to see the totality of what Facebook and Twitter present. It’s impossible to transparently review infinity.

At its root, much of this chaos revolves around the notion of news sources. Facebook, in particular, has long purposely blurred that definition. From the point that it moved on from being simply about social sharing to being about news providing, it invited its current misfortune into its own house. When it launched its News Feed in 2006, it started pretending to be a news company, but one without experience, judgment, or backbone. It’s one thing to allow unfettered free social speech; another to pretend to be a source of news as fact.

By valuing bigness and growth above all of the other values that Facebook professes and kind of believes in, it made a deal with the devil of bigness, and now pays the toll.

Congress’s 1998 Digital Millennium Copyright Act looks like a creature from the previous millennium. What now? We are, as individuals and as massive companies, left to our own decision-making. That starts with better paying attention, to both what’s being done to us and what we’re doing.

“If you’re not outraged, you’re not paying attention,” a popular 2017 protest banner read across the country’s demonstrations. We can also consider the words of 20th-century Spanish philosopher — and scion of a newspaper family — José Ortega y Gasset: “Tell me to what you pay attention and I will tell you who you are.”

Welcome to the odd world of newspaper economics. The question of who owns daily newspapers, especially chains, has moved to the forefront this year, as Alden Global Capital’s grip on The Denver Post has caused an unprecedented uproar.

Change, of course, is nothing new to Tronc. Born under some astrological sign of chaos two years ago, a morphed iteration of Tribune Publishing, the company is now looking at what would be its most significant changes yet — which could come as soon as in the next several weeks.

In that time period, we’ll likely see Patrick Soon-Shiong, the one-time Tronc vice chairman, finally close on his nearly $600 million buy of the Los Angeles Times and San Diego Union-Tribune. Expect that news — if all continues to go smoothly — on a pre-market-open Monday soon. It’s been technology transition issues that have held up the closing, and they’re now almost resolved.

While some have wondered if that deal would ever close — we’re now about two months past its first target date — not much attention has been focused on Tronc’s other big ongoing deal: the sale of Michael Ferro’s controlling stake in the company. Ferro’s Merrick Media had announced a deal to sell that stake on April 13. Purchase agreements, filed with the Securities and Exchange Commission, had set May 15 as the “end date” for the transaction.

In Tronc World, though, few things go as planned, on schedule, or as announced.

Though there’s been no public filing to mark an extension of that end date, sources indicate that the dealmaking time had been extended to May 30. With that date now passed and no announcement yet made, that deal could be done — or gone — in a Chicago minute. We should know sooner than later.

All of the parties to these transactions have declined comment.

Then there’s the buying. While Tronc bought BestReviews.com in February and lost a bid for the Palm Beach Post, it’s been actively assessing other digital and newspaper properties.

On Tuesday, it landed a new paper. It won’t come close to replacing the 50 percent of all revenue that its soon-to-be-gone California properties contributed, but Tronc’s $34 million purchase of the Virginian-Pilot in Norfolk indicates that the company is a buyer as well as a seller.

Those marketplace moves mark the external activities of Tronc. Internally, the company has moved into the post-Ferro era. Me-tooed in March by a Fortune article, Ferro has formally stepped away from the company. Meanwhile, Tronc CEO Justin Dearborn and CFO Terry Jimenez have recently had their contracts extended for three years — with well-tailored parachutes in case of “change of control” included, details below.

So in the short term, Tronc is both a buyer and a seller. How about the longer term? That’s more of a crapshoot. While Tronc has hired no banker to shop its new sleeker corporate portfolio, “bankers are eagerly shopping the company to possible buyers,” one financial insider tells me. The expectation: Tronc, as a whole or in pieces, will be sold sooner or later.

Why? Close company observers point to its unusual attractiveness. Once Tronc closes on the California sale to Soon-Shiong, it may have the prettiest balance sheet of any American newspaper chain. Much of Soon-Shiong’s cash will be used to pay down Tronc debt, which currently stands at $353 million. That clean balance sheet could mean that Tronc could become, say two confidential sources, an attractive takeover target itself — though others discount the idea.

A buyer — perhaps a private equity buyer — could buy the low-debt company and load it up with new debt. Tronc, which still produces somewhere in the neighborhood of $100 million in annual EBIDTA, would offer a new opportunity for leverage.

Others in the industry pooh-pooh the idea, wondering who, exactly, might want to buy Tronc, even with that attractive balance sheet. One big counterpoint to anyone eyeing such a buy: the shape of the business day-to-day. Though Tronc’s last reported quarterly financials are opaquely reported — and the company has so far refused to clarify them — they point to an apparent 9 percent revenue decline in the Q1 of 2018 compared to a year earlier. That’s on par with both Gannett and McClatchy — but it’s still treacherous territory, given the ongoing downward trajectory of print advertising.

Of course, Tronc being Tronc, there’s a twist on the cash. Michael Ferro — gone, but not completely gone — has advocated for a $2-a-share cash dividend to shareholders out of the Soon-Shiong proceeds. That would provide his group a windfall of about $17.5 million. (Ironically, Soon-Shiong would receive a nice check too, since he remains a Tronc shareholder.) Such a move, of course, would reduce Tronc’s cash holdings by about $70 million.

Finally, Tronc could become more of an operating company, making more newspaper or digital media site purchases.

Meanwhile, in Los Angeles…

That’s really a dizzying set of possibilities for the future for a company that has turned so much conventional corporate newspaper industry wisdom — or least standard practice — on its head.

Whatever strategic path Tronc goes down, the most important impacts will be on its remaining nine newspaper companies — their staffs and readers.

Things are about to change at the L.A. Times. How and how much, though, remains an open question.

Soon-Shiong has worked the L.A. waterfront, talking to industry leaders in sessions at his home and elsewhere. All come away impressed with his intellect and graciousness — the latter especially compared to Ferro. His passion also shines through. “This is his legacy and his pride,” one person who had participated in the meetings told me, and it’s a sentiment I’ve heard echoed by several others.

They also note the curiousness of the conversations’ give and take. In at least some of the conversations, participants note that Soon-Shiong gives more than he takes — even though he’s a novice in this industry, having made his fortune as a med-tech entrepreneur.

Those skilled in Tronc trivia will recall that when Michael Ferro brought Soon-Shiong’s $70.5 million investment into Tronc in 2016, the announcement highlighted Soon-Shiong’s tech. His Nant Technologies tools — largely given the application of medtech-based artificial intelligence innovation — were supposed to help Tronc disrupt the too-often-innovation-averse newspaper industry. In fact, we were told, they would help Tribune Publishing become Tronckified.

They didn’t; Tronc’s transformational efforts sputtered, and it’s highly likely Soon-Shiong’s thinking never got a real test. Formally, a final reckoning as to the value of those Nant tools, related to their patents, was made in the purchase agreement filed by Merrick Media and Soon-Shiong.

Soon-Shiong’s quest for tech-led news publishing innovation seems at the forefront of his plans. He has told some that he’d like to create something “better than CNN.”

Which raises at least one big question for Soon-Shiong, post-closing: Who will he pick to lead the Times’ newsroom?

Everyone in the industry agrees the Times offers a unique opportunity at this moment. Despite all its travails, much chronicled here at the Lab, it’s not hard to see the great potential of the next Los Angeles Times. It still has the largest newsroom and highest circulation in the West, and even in this tough business environment, it oozes with possibility. Many observers have focused on who the paper’s next editor-in-chief will be. While that’s a fascinating question, it’s not the first one that one of Soon-Shiong’s new advisors is focusing on.

Longtime Wall Street Journal, Bloomberg, and Time Inc. executive Norm Pearlstine is working with Soon-Shiong first on the broad outlines of an editorial, audience, and market plan, sources tell me. The Times could be everything from an L.A.-centric media company to one serving California’s 40 million residents more generally — or the entire, progressive West Coast. It could reclaim the idea of becoming the paper — or digital news organization — of record for the enormous economic engine that is the Pacific Rim. None of these are new ideas — each has been espoused and tested, to at least some degree, over the past couple of decades — but now they move to the top of the new owner’s list. He’s got the financial capacity to provide the kind of “runway” Jeff Bezos has given The Washington Post. (Forbes estimates his net worth at over $7 billion.)

How will he choose to spend it? Expect Soon-Shiong and Pearlstine to try to answer that broad question, and then see how a new top editor could best align within it. It’s a bit of a chicken-and-egg situation, but clearly lots of time is being spent on the vision.

The delayed closing of the Times’ transaction has extended the long period of uncertainty experienced by the newly unionized Times newsroom. The accumulated turmoil has taken its toll. The Washington Post recently plucked highly regarded politics editor Cathy Decker, the latest in a series of talent raids by the Post and The New York Times. Whoever the new editor ends up being, she or he will face unusual pressures — both above and below — on the organizational chart.

Interestingly, Soon-Shiong has shown less interest in hiring a strong publisher to the lead. The suspicion: He may want to act — in name, in fact, or in part — as his own publisher, making comparatively unilateral decisions, like his already-announced one to move the company to the less-than-wilds of El Segundo.

What would that mean for the Times and its strategic direction? At this point, it’s a big unknown. Chris Argentieri, hired by one-time publisher Austin Beutner, has served as SVP/general manager. Argentieri, who is generally well regarded and has kept a low profile through the Times’ many recent melodramas, has participated in Soon-Shiong’s top-level meetings. In the new order, he could remain in place as Soon-Shiong’s inside business operator. (Beutner, who had brought his own L.A.-centric innovation to the company in his brief tenure, has moved on from what earlier had been the possibility of being part of Soon-Shiong’s Times. The L.A. Unified School District recently named the retired private equity executive as its superintendent.)

As the Times waits in wonder, the Chicago Tribune’s newsroom — and those at Tronc’s other’s eight other titles — have their own questions about the future. Will the apparent Sargent McCormick-led buyout of Ferro’s Merrick Media shares go through? That question sets up its own round of additional queries. Among them:

• Say the McCormick Media bid closes. Then the big question is: Does buying Ferro’s share confer on the buyers the same control of the company that Ferro achieved? How will the McCormick Media group work with Tronc’s other major individual shareholder…Patrick Soon-Shiong? Yes, even with the Times in his pocket, Soon-Shiong still retains his major stake in Tronc. Would he want — at this point — to make a bigger newspaper play? Or would he want to sell and get out of Tronc? How well would the two owners get along? Who would control Tronc’s new board?

  That’s one corporate question. The other: Who will run the company? As I’ve reported, John Lynch — one of the three named buyer principals in the filed agreement — has told associates that he would. Would the new company be run by McCormick — a man profoundly committed to his family’s International Harvester legacy, but of unclear conviction about newspapers — or by Lynch? Or might CEO Justin Dearborn stay in place?

  (Much was made on April 18 of a “McCormick” once again owning the Chicago Tribune. In curious timing, the would-be new Tronc owner formally filed with the SEC his own name change. “Effective June 11, 2018, Mr. McCormick-Collier is changing his name to Sargent M. McCormick.” McCormick declined comment on the change or the reasons for it, and on any other matters to do with the transaction.)

• Say the McCormick buy fades away. Rumor in Chicago is that the group led by McCormick hadn’t been able to raise the $208.6 million needed to complete the deal, and it’s continued to make the rounds in Chicago to find it.

  Merrick Media would then seek another buyer. It’s clear that Ferro’s partners in Merrick want out, especially after the sexual harassment charges against him surfaced. While they’d likely have to accept less than the $23 per share the McCormick group has offered — Tronc shares currently trade in the mid-$16 range — they’ll look for another buyer.

And in Tronc newsrooms across the country…

Put it all together and it’s a new world of uncertainty for a company whose short life has been defined by it. Meanwhile, Tronc’s newsroom transformation efforts appear to be in full swing.

Many of its cost-cutting, concentrate-resources-on-local-reporting tactics borrow from those used at other chains. For instance, the company has modernized its job classifications to reflect a digital-first reorg. It has reduced what had been as many as 194 print-legacy job classifications to just 9. Chicago has become the design hub for all Tronc titles, though copyediting continues to be done locally.

Somewhat quietly, Tronc’s (and what was once Tribune’s) Washington bureau is also facing profound change. Soon-Shiong had made a point of wanting a strong D.C. bureau, and he’s getting it: Tronc’s bureau will become the L.A. Times’ bureau when that deal is done. Apparently, only the Chicago Tribune among the other Tronc papers will maintain a small D.C. presence. In the new emerging Tronc world order, its New York Daily News becomes the company’s hub for national breaking news.

All of this transition coincides with other massive shifts. Tronc’s three biggest papers (including the L.A. Times) will have moved to The Washington Post’s Arc platform by midyear. Tronc intends to move the rest by the end of 2018.

And next week, the Chicago Tribune’s staff will move out of its Tribune Tower home — just another marker of the triumph of real estate value over downtown media branding, a precursor of that Times move out of downtown L.A.

And if all that weren’t enough, the forever-non-union Chicago Tribune has now accepted the inevitability of Guild representation, and the Guild aims to repeat its L.A. and Chicago triumphs in other Tronc cities.

Money is, of course, is tight all over. But somehow, there’s always room for more Tronc executive compensation.

This month, news outlets drew new attention to Michael Ferro’s $15 million-over-three-years consulting contract. Some reported that the payments — with the second and third due in January of the next two years — would be accelerated. In fact, the change appears to be more of an accounting matter than an actual change in payout schedule. But given that Tronc refuses to explain the change, suspicion of Ferro’s self-dealing has only grown further.

Even more notable: In early April, Tronc extended the contract of CFO Terry Jimenez for three years, after doing the same for CEO Justin Dearborn two months earlier. Both received raises. In that April 6 SEC filing, the company also offered an updated “Estimated Payments Upon Termination or Change in Control at Year End Table.” That table (page 42) itemizes what five top Tronc execs will get if the company is sold or otherwise experiences a “change of control”. The potential total: $23.5 million, a combination of “severance” and accelerated contractually owned compensation. Ross Levinsohn, who served briefly as L.A. Times publisher and remains a Tronc executive, would get $10.4 million by himself; Dearborn and Jimenez would get $4.8 million and $2.8 million, respectively.

It’s more than ironic. For a handful of people, a “change of control” would mean new riches. For most other Tronc employees, it would only mean, at best, uncertainty about — and at worst, loss of — their jobs.

]]> https://www.niemanlab.org/2018/05/newsonomics-troncs-selling-and-buying-and-just-generally-shapeshifting/feed/ 0 https://www.niemanlab.org/2018/04/newsonomics-the-denver-posts-protest-should-launch-a-new-era-of-calling-b-s/ https://www.niemanlab.org/2018/04/newsonomics-the-denver-posts-protest-should-launch-a-new-era-of-calling-b-s/#respond Mon, 09 Apr 2018 13:31:12 +0000 http://www.niemanlab.org/?p=156936 What are we to make of The Denver Post’s “extraordinary display of defiance”? As the paper’s editorial board, led by Chuck Plunkett, fired a fusillade of public protest on Sunday — publishing six pages decrying the paper’s owner, to the social congratulations of the news world — we may have reached a new point in local American journalism’s descent into oblivion.

Despite almost a decade of newsroom cuts, which have left no more 25,000 journalists in the more than 1,300 dailies across the country, journalists have been remarkably accepting of their buyouts and layoffs. We haven’t seen the kinds of mass strikes or work actions that have happened from time to time in Europe. We’ve seen instead an acquiescence to what’s been seen as the inevitable toll of digital disruption. Sadness, rather than spirited action, has marked the trade. That’s understandable, in part: No one wants to risk the lifeline of a paycheck for what may be futile protest. Only when the Niemöllerian logic kicks in do we see such stands as the Post’s.

By standing up for themselves and the value of their work, the Post’s journalists stand up for their community. “The Post has been an integral part of progress in Colorado,” recently resigned editor Greg Moore wrote in one of the Post’s audacious pieces. “It helped the community heal after fires, floods, and unspeakable gun violence. It explained how we were changing politically and demographically, and it exposed corruption and malfeasance. It has provided a window and a mirror to help us become a better community.” And by standing up for their community, they stand up for themselves. This is the relationship that must be renewed. The loss here isn’t in mere journalism jobs; it’s in community knowledge and self-government.

Even as we speculate as to where such protest may go, it’s one that must be put within its time. We journalists swim in the river of our time, even as we try to describe it from the shore.

The Post protest against its owner Digital First Media — and ultimately the hedge fund Alden Global Capital, which controls DFM — came the same week that we recognized the 50th anniversary of Martin Luther King’s assassination. 1968 turned out to be a major inflection point in American culture. Now — in a time of red state teachers madly striking, of fast-food workers demanding $15 an hour, of #MeToo and #BlackLivesMatter activists refusing to go away — it looks like our time could represent a cultural turn of its own.

According to a new Washington Post–Kaiser Family Foundation poll, some one-fifth of Americans found themselves on the streets protesting in the past year — a truly astounding number.

But it’s the Parkland students who may best symbolize whatever is changing. Amid the fiery, from-the-heart words that have transfixed a country, three continue to stand out for me. I first heard them in an NPR report from the students rallying at Florida’s state capitol, soon after the massacre at their school. “The people in the government who were voted into power are lying to us. And us kids seem to be the only ones who notice and are prepared to call B.S.,” student Emma Gonzalez said.

“Companies, trying to make caricatures of the teenagers nowadays, saying that all we are are self-involved and trend-obsessed and they hush us into submissions when our message doesn’t reach the ears of the nation: We are prepared to call B.S.

“They say guns are just tools, like knives, and are as dangerous as cars: We call B.S.

“They say that tougher gun laws do not prevent gun violence: We call B.S.”

Calling B.S. resonated with me, as it would with any journalist. That’s what the press is supposed to do: tell it like it is. We take on the virus of every age, particularly virulent in this one: hypocrisy.

And as the local press has declined so greatly in confidence and in number — down to that 25,000 from a high of 56,900 in 1990 — the local press’ B.S. detectors are stuck in low gear. But in The Denver Post’s awakening, we see the press finally calling B.S. on the B.S. that’s been right under its nose for so long. Is the local press woke?

Maybe it took the bare-knuckled capitalism-without-conscience behavior of Alden Global Capital’s Heath Freeman to push journalists to this point.

While we can fete the courage act in Denver, the actions demands the question: What now?

Will Freeman pull a Ferro?

Just a couple of months ago, Tronc impresario Michael Ferro traded his once-flagship L.A. Times for a half-billion dollars — in part acceding to the pressure of the Times’ union organizing success. That opposition meant it would be too difficult to execute his strategies.

Might Freeman, too, decide he’s had enough — and made enough? Alden’s 50.1 percent ownership of Digital First Media has allowed him to maximize profits, minimize investment in the future, and according to recent court documents, divert millions of newspaper profits into other (losing) ventures. Freeman has seen the declining newspaper industry as just another distressed business to be milked until its supply literally dries up.

Certainly, the ever-increasing pillorying he’s received (The Washington Post, American Prospect, DFM Workers, and numerous Newsonomics pieces as far back as 2015) would cause many a corporate leader to think twice. Maybe a business reputation wounded by that minority shareholder suit that exposes Alden’s diverting of funds would prompt other pause. Perhaps the questioning of Freeman’s recent gift to Duke’s Center for Jewish Life would raise the question in his mind of the conflict between community values and heedless personal enrichment?

Yet the word “vulture” — the investor epithet frequently applied to Alden, including in Nieman Lab director Joshua Benton’s February Boston Globe op-ed and featured in Sunday’s takedown (“Editorial: As vultures circle, The Denver Post must be saved“) — has seemed acceptable to Freeman so far.

Though it would seem easy enough for Freeman to unload The Denver Post amid the outcry — taking a good price for it and moving on — such calculations in the post-recession financialized newspaper industry are more complex. It’s not just a matter of what the Post is worth, using standard simple multiple-of-profits calculation. First, the Post’s pension obligations are substantial; Alden would want to unload those, while buyers won’t want to take them on. Second, the Post is a significant contributor to Digital First Media’s corporate overhead. Someone has to pay for the corporate leadership, and a not-inconsiderate share of it — maybe 30 percent or more of the allocated expense — gets dispatched from the Post to cover them, sources tell me. Sell off papers piecemeal and Alden’s overall profits decline.

What a buyer would face

“The smart money is that in a few years The Denver Post will be rotting bones,” wrote the editorial board in calling for new owners. And that raises the big question: Who might buy it if it is put up for sale? It’s one thing to run the scoundrels out of the newspaper industry, a special kind of American business to which they should never have gained entry. It’s another thing to do better with new owners.

As usual, the newspaper game of Billionaire Bingo comes into play. Patrick Soon-Shiong takes possession of the L.A. Times and San Diego Union-Tribune soon, and we await his moves. We’ve got a wide range of bingo experience in the last few years, from Jeff Bezos’ wondrous re-ascendance of the Washington Post to John Henry’s ongoing transformation travails with The Boston Globe to Alice Rogoff’s failed Alaska turnaround. Colorado billionaire Philip Anschutz, owner of the down-the-state Colorado Springs Gazette, waits in the wings, his desire to buy the Post well on the public record. To be a buyer, though, he needs a seller.

Others who have bought DFM papers over the last several years each tell a familiar story: They’ve bought assets that have to be disentangled from the chain’s largely aging centralized technologies. That takes time — at the Berkshire Eagle, at the Salt Lake Tribune and at the New Haven Register — and it takes capital, patience, and a long-term strategy. But it is doable, contrary to such misunderstandings of the newspaper industry, as expressed in the New York Times story on the Post’s protest. “Hoping to avoid the slow trudge to irrelevance or bankruptcy, the Denver paper took the stuff of newsroom conversation and made it public in dramatic fashion,” said the Times. In fact, Alden is nowhere near bankruptcy, reaping big profits, and its increased irrelevance is self-inflicted by its greedy owners. The debate here — and elsewhere — isn’t cut or go bankrupt. The debate is whether to invest or disinvest.

Will Freeman decide, given the combination of worsening newspaper revenues and public pressure, to liquidate his holdings overall?

Three years ago, Apollo Global Capital — with its own plans to more rapidly transform the print business to digital — almost bought DFM, but that deal foundered at its end over price. Since then, Heath Freeman’s strategy has crystal-clear, say those who broker newspaper deals. Bring Freeman a deal that pays him about 4.5× to 5× annual EBITDA and he’ll usually entertain it. That math, in general terms — corporate overhead and pension issues aside — tells Freeman he’ll make as much money selling as he would in continuing to run (and cut) his current holdings. Of course, that compares a current sum of money, in an offer, to a projected future revenue stream, and newspaper’s deepening print ad woes may have altered Freeman’s calculations.

Then there’s the looming question that’s tough to confront publicly: If a paper like the Post has been cut back so much — from more than 300 in the newsroom to fewer than 75, with a product, print and mobile, much behind the times — can it still be revived? While peer metros — think the Star Tribune and The Dallas Morning News as the exemplars — execute a print-to-digital transition strategy on the foundation of still-robust newsrooms — can those that have been cut to the bone be revived?

It’s an ugly question but a real one. Subscription revenue, especially digital subscription revenue — one of the many areas DFM has underfunded — is the make-or-break linchpin of future success. But DFM papers, given their high pricing and ever-weakening products, have lost a higher percentage of subscribers than its peers. It will take a mighty, long-term effort to get them back.

So what could happen next?

The Post tells us layoffs begin today. The news world will be watching for what, if any, action is taken against the Post’s editorial board for its gutsy stand. Other DFM journalists await those signals before deciding on their own actions. But beyond watching and publicizing, what can be done?

Consider the Post’s readers — and best advertisers — on full notice. Sunday’s section and the coverage of it ensure that. Subscribers could be organized to cancel, or provisionally cancel, their subscriptions — a dicey game perhaps, but one to which Freeman would have to pay attention. In fact, the more I look at Alden’s strategy, the more the cynicism behind it shows through. It knows it can continue to cut and cut journalists — and raise subscription prices — and still take in enough money to keep profits flowing. Why? Two words: lag time. Enough subscribers of two, three, and four decades still want the paper, and even in DFM cities, they’ve continued to pay up. Alden works that lag time, squeezing every last cent out of every last year. Somehow disrupt the lag time, and profits plummet.

Then there is the advertiser question. As the Parkland protests have shown us, ad boycotts can be effective. This too is a tough question, but would prominent Post advertisers be willing to weigh in on the kind of product they will support going forward?

Today, attention focused on Denver. But recent Alden-ordered cuts in the Bay Area, in Los Angeles, and in Saint Paul all have taken similar tolls. In total, DFM still runs 97 daily and weekly titles across the country. “Denver is getting hard hit, but some of the small papers actually are in more dire situations, when they only have a couple reporters or so,” one knowledgeable DFM observer told me.

After this big splash, how much will this sense of truth-telling rebellion grow? And similarly, will it give more backbone to the beleaguered Sinclair local TV station journalists, who have seen their own reputations besmirched as they are ordered to mouth corporate propaganda?

There is more at stake here than 30 jobs cut at Colorado’s largest daily. It’s the soul of the trade that’s seen new light shone upon it.

Is Alden an extreme case of vulture ownership? Sure, but Alden’s approach is only the steepest spiral downward, and only the most egregious approach to the business. Consider Michael Ferro’s cozy self-dealing over his two-year tenure at Tronc. Consider the endless corporate-ordered newsroom reorgs that have just shuffled fewer deck chairs year over year. Consider the many strategies based more on cost-cutting than on investment. All of these strategies have led us to the current local news tragedy. In the Denver Post protest, do we see the opening curtain after intermission, or a move to the final act?

Photo showing the 142 members of The Denver Post’s newsroom staff in 2013 — with the blacked-out marking those now gone — via The Denver Post.
]]> https://www.niemanlab.org/2018/04/newsonomics-the-denver-posts-protest-should-launch-a-new-era-of-calling-b-s/feed/ 0 https://www.niemanlab.org/2018/04/emily-bell-thinks-public-service-media-today-has-its-most-important-role-to-play-since-world-war-ii/ https://www.niemanlab.org/2018/04/emily-bell-thinks-public-service-media-today-has-its-most-important-role-to-play-since-world-war-ii/#respond Mon, 02 Apr 2018 12:30:02 +0000 http://www.niemanlab.org/?p=156697 The ability of the media to secure democracy is being challenged by great disruptions: ad funding doesn’t work that well anymore and large, non-transparent platforms are increasingly central in our information flow. Emily Bell, director of the Tow Center for Digital Journalism at Columbia, thinks public service media may be about to play its most important role since World War II.

Facebook and Google have taken over not only an increasing share of the attention, but also much of the ad market. This has taken away another large chunk of the revenue that supports journalism, following classified ads in the unbundling of the business model that once made newspapers a thriving business.

The rise of subscription models and paywalls has begun to inject fresh money in some media houses, but those who aren’t subscribing to journalistic media could be left worse off. It’s no longer a matter of picking up a single newspaper copy at a newsstand; a paywalled news industry limits information to those able to make a long-term financial commitment, one that usually involves disclosing your personal data. And that personal data has become a commodity, being used to target everything from advertising to political manipulation.

At this year’s SXSW conference, I met Bell, who before founding the Tow Center, worked for many years as an award-winning journalist, digital pioneer, and later digital editor of The Guardian. She worries that we’re entering a period where the messages we receive are individually adapted, and we no longer have access to the same information.

“In a way, that’s what we think we’ve seen in the 2016 election cycle: Certain people getting certain messages, others getting different ones, and not really knowing where it’s coming from, who’s deploying it, and with no kind of transparency,” she said. “We are being made to feel a particular way by the media we’re consuming, and it is not an organic, cultural phenomenon, but a highly manipulated political phenomenon. Unless you can have free high-quality news, you don’t have an antidote; you really don’t have an antidote.”

More of our conversation, edited slightly for length and clarity, is below.

Anders Hofseth: What happens in a society where media doesn’t work?
Emily Bell: You can just run down the Committee to Protect Journalists’ list of countries where press freedom is at its worst. Places like China, Russia, Turkey…You might have a functional economy, but you don’t have citizens who are engaged in proper self-governance.

I think we assumed that it’s not going to happen to us, and that may be why we’ve been fairly poor stewards of the media ecosystems. We’re at a point now where there’s an enormous amount of disruption to the economics of media. You need a durable, predictable model which continues to deliver that fundamental mission, and it’s become very hard for commercial companies to do that.

One of the things I found hardest as a digital editor to figure out was: Which thing is the change? What’s the body of water that’s moving, and what’s the foam on top of the wave? If you’re on top of the wave, it will be very distracting and make the wave seem bigger than it was. But really, it’s the moving water you have to pay attention to.

The thing that I completely got wrong is that I did think advertising would be much more durable. I don’t think anybody really anticipated the scale or pace at which the ad market would change under Facebook.

Hofseth: Is there no “rebundling” of media for more-or-less useable general journalism?
Bell: No, I don’t think so. I’ve been to a number of countries in the past year, including Norway, Switzerland, South Korea. Every single market seems to be experiencing exactly the same trauma, which is: “You’re not big enough on the Web, you’re just not big enough.” Scale has broken the business model and it isn’t going to come back.

News is hard, it’s not cheap to produce, and it needs to be consistent. And you need certain things for long-horizon stories, teams of people — maybe sometimes even generations of people — to understand them and keep following them. That sustainability has always come out of a mix of the public and the private.

When you think about the institutions that contain that, maybe it’s perfectly sensible when people say post-war profitability in news was a blip. It didn’t make money beforehand and hasn’t made money for a few years. Maybe we had fifty years of it just throwing out cash. Now that’s coming to an end, and we can’t expect those functions to really be profitable.

Hofseth: Maybe because there was a time when news was “good enough” as entertainment for the price…and now you have something which is more interesting.
Bell: I have so many great things on my phone that I would rather be doing than looking at the news.
Hofseth: The two of us would maybe use news as entertainment anyway, because we are sick people.
Bell: Yes, we are entertained — we are sick people who are entertained mainly by the news which makes us very sick! But we are also…
Hofseth: We are marginal.
Bell: Yeah. We are not representative of the general public.
Hofseth: How do you see the role of public service in this?
Bell: Everyone in public service journalism comes to work every day with a mission to inform the citizens of their country, and to try and reach everybody. Even people who can’t pay, even people who don’t necessarily think they need the news, or people who are left out of decision-making because they don’t fit the socio-demographic profile that means they would normally be included.

To me, right now, there is almost nothing more important than having robust public service media available to citizens.

I think public service broadcasters can do anything because they have longevity and security of funding. But they’re not always as imaginative as we need them to be at this particular time.

Existing political systems and public service broadcasters need to be free to imagine the kinds of information ecosystems that they’d want at the nation/state level and then real freedom to experiment with and find new paths to deliver that.

And also to think about themselves oriented in a world where it could well be that large-scale technology platforms — designed, built, operated in America — will be taking over much of what your information ecosystem looks like over the next decade.

Hofseth: Do you think there is a viable long-term financial model for commercial media?
Bell: I think there’s a very viable long-term financial model for commercial media. But I don’t necessarily think that applies directly to journalism.

If you are creating viral native advertising, you might have a future. If you are doing scripted shows or certain types of high-quality video material, you definitely have a commercial future. I mean, look at all the money that’s coming through platforms at the moment to commission scripted shows.

Actually, I think you do see certain general journalism outlets being more sustainable now through reader revenues, and I think that that’s definitely a model for some of them.

We don’t know much about payment mechanisms yet, how they will develop, and what people will pay for. So I don’t think that there is a viable advertising-supported model for free journalism — there just isn’t. It’s not going to happen.

And if it still should happen, it’s not going to happen for some years. Many of the digitally-born sites living within the social ecosystem, they’ve had a terrible time. Much worse than almost anybody else, including legacy media.

Hofseth: Do you think there is a long-term viable model for any kind of general news media that would be read by the broader public?
Bell: Well, it’s always traditionally been supported by advertising. The advertising has gone to Google and Facebook so, unless they want to make it, then, no.

Or — again — this is where public media has a big role. Traditionally, the impact of public media has been much more around who does it reach, what parts of the population are reading it, or viewing it, or listening to it. What are they getting from it? There’s a huge mission for those companies to reach those sections of society with accurate facts that people can make sensible decisions on.

Google and Facebook have hoovered up everything. The ad departments just didn’t see it coming. We missed that trend much more profoundly than we did the editorial trends which we’ve beaten ourselves up about — Oh, we’re not digitizing quickly enough.

What I have not changed my mind about is something which I was really concerned about at The Guardian — which former editor-in-chief Alan Rusbridger was also champion of and I think Kath Viner is now a real champion of — is we have to make high-quality news available to everybody. As long as The Guardian can afford to put its best journalism in a place where you don’t have to transact for it, and the more we can persuade people to generate revenue which enables us to do that, the better it is. I just think that that is a huge challenge now.

At the moment, I think public service media has got the most important role to play that it’s had at any point since the end of the second World War.

In America, we’re not quite so alert to the facts of the big wars in Europe. The First World War really caused the formation of the BBC. You were in an incredibly insecure period of global politics that was threatening and dangerous and appalling for most people.

Hofseth: Some commercial companies say that the public service organizations should stick to their original platforms and leave the written Internet to the commercial side of the business.
Bell: First of all, public service media has to really understand why public service media is different from commercial media. In Britain with the BBC, there were times when it really didn’t practice its public service mission in everything it did, it looked much more like an aggressive commercial company.

If you are a public service media company, you really need to be welded to your mission and understand what that means.

But at the same time, I think the commercial companies, who are interested in servicing their shareholders, aren’t necessarily the right people to decide what the correct format for a communications ecosystem that benefits all people is. In fact, they might be the worst people to decide that.

And you have to be very careful. I’m well aware of the arguments that people like Rupert Murdoch and the Daily Mail constructed in the U.K. to undercut the BBC.

Now, that doesn’t mean the BBC should never be reformed. But it should be reformed in a way which is efficient for the population, not in a way that benefits commercial media ahead of public service media.

To say that they should just stick to their traditional platform seems to be willfully ignorant of what’s actually happening in the political ecosystem, when everybody deserves access to high-quality information, and I don’t see commercial media necessarily delivering that consistently enough.

Public service media is there for such an important and vital function, and, if it’s doing its job properly, it’s indispensable.

Hofseth: Why do you think some media companies try to limit the public service?
Bell: Because I think they probably have a misconception that, if you get rid of public service…In the U.K., about a third of all revenues in the media went through the BBC. It’s probably even more now because the advertising market has collapsed.

We used to study this a lot at The Guardian — whether or not the BBC’s website was disadvantaging the web presence of The Guardian. And the truth of it is, actually, that if you have a healthy and thriving mixed media economy, it tends to benefit everybody. A combination of regulation and strong public media is probably why television news in the U.K. is significantly better than television news in the U.S. Generally speaking, a strong and good public service broadcaster with high standards would drag up the standard of the rest of the media.

Anders Hofseth is the acting editor of NRKbeta. This interview was originally published in Norwegian at NRKbeta.

Photo of Emily Bell by Anders Hofseth used under a Creative Commons license.
]]> https://www.niemanlab.org/2018/04/emily-bell-thinks-public-service-media-today-has-its-most-important-role-to-play-since-world-war-ii/feed/ 0 https://www.niemanlab.org/2018/02/newsonomics-11-questions-the-news-business-is-trying-to-answer-in-2018/ https://www.niemanlab.org/2018/02/newsonomics-11-questions-the-news-business-is-trying-to-answer-in-2018/#respond Thu, 15 Feb 2018 15:15:14 +0000 http://www.niemanlab.org/?p=154673 No, the saga of the Los Angeles Times isn’t the only story in the newspaper world. It’s just that in its breathtaking oddness, it consumed the beginning of our year. Let’s begin with one question about the future of the Times, but then move on to other early-in-the-year questions that may tell us lots more about the business-of-news year ahead.

What’s at the top of PSS’s to-do list?

It’s been a week of almost eerie quiet in L.A., as the reality of new owner Patrick Soon-Shiong sinks in. The Guild’s elected its local leadership and the L.A. Times newsroom sees that it barely dodged the bullet of major Tronc reorganization.

Tronc announced Tuesday that it would concentrate all page makeup and design in Chicago, following the centralization models now becoming standard among chains, with GateHouse the national leader in that movement. That will be mean the elimination of more local jobs.

In addition, as reported by Chicago media critic Robert Feder, Tronc’s Tim Knight emphasized a salary review: “Over the next six weeks, while positions are being determined in line with our plan, we expect each local newsroom to review base compensation; where appropriate each newsroom will make pay increases reflecting either change in responsibility and/or adjusting to market.”

Why might that review be happening now? Count two big reasons: the reorganization and coming job cuts — and the unprecedentedly successful unionization of the L.A. Times in January. Tronc’s message to anyone thinking of leading a unionization charge at its other papers: “All pay changes for staffers not governed by collective bargaining will go into effect on April 1.”

While journalists in Baltimore, Chicago, Hartford, New York, and Orlando await the changes, in L.A., sources report “a palpable optimism.” And esteemed former Times publisher Tom Johnson weighed in with his hope on Facebook. (“My sense is that far better days may be ahead. I so hope so.”)

Who can blame them, after 20 years of Chicago-based rule and a decade of mismanagement and wavering strategies?

But no one has any idea what the new owner of the Times will do — most likely including the owner himself.

The brilliant biotech billionaire is but a novice in publishing. Consequently, who he hires to lead the business and the newsroom will tell us much about how much of that optimism may be maintained. Feelers to potential new editors have begun, as trusted Soon-Shiong advisers begin to explore the field, sources tell me.

In one sense, the Times can take a deep breath. Soon-Shiong’s deal with Tronc includes 18 months of shared transition services, I’m told. That would include the continuation of the Arc platform, licensed from The Washington Post. The paper launched it in late January.

If Shiong isn’t obsessed with quarterly financial returns, he can continue to reassure Times employees of a considered — and funded — transformation ahead. Will he offer the same kind of “runway” to the Times that Jeff Bezos offered his wary Washington Post troops five years ago? His initial letter set a good tone, but when will he pay an in-person visit?

Will he offer further reassuring steps, like embracing the paper’s Washington bureau? That team now looks like it could become part of the new Times, when it and its sibling the San Diego Union-Tribune, formally split from Tronc in either late March or early April.

Times seller Michael Ferro had been actively planning to close that bureau. Tronc had been in talks with both Axios and another significant D.C. news player, wanting to syndicate content and cut costs. That Axios/Tronc deal is no longer in the works, and it’s unlikely Ferro will find a high-profile partner.

It’s Ferro’s follow-on steps after the sale that Soon-Shiong may want to watch closely.

For instance, Tronc still owns, we believe, LA.com. And Ferro has recently talked about providing his newly rehabilitated Tribune Interactive CEO Ross Levinsohn with “hundreds” of content creators to make his new, if still hazy, syndication play real.

Could Ferro become a competitor to the L.A. Times?

Takeaway: It’s almost time to place your bets in the game of Billionaire Bingo, a diversion I first mentioned five years ago. Will L.A. get a Bezos, Taylor, or Henry, or an Adelson? Or some other new breed entirely?

Is it just the L.A. Times that’s in journalistic turmoil, or is it all of California?

While the Times hogged all the attention, the state’s other big publisher — Digital First Media — should be getting more national attention. Alden Global Capital, DFM’s owner, continues to cut to a number, a profit number, which it’s been able to maintain even as the newspaper business absorbed a brutal 2017.

In southern California, its eleven titles (including some meaningful and once-proud local papers like the Long Beach Press-Telegram and the Orange County Register) now will pay about 250 journalists, down from about 380 only last year.

In the Bay Area, the once nationally prominent Mercury News is — almost unbelievably — down to 41 in the newsroom. Another 65 are counted as “East Bay” employees, given DFM’s super-clustering of newsrooms. That means its Bay Area News Group has concentrated editing and design in one location, and lots of regional reporting is “shared.”

The net result: “That leaves BANG with no K-12 reporter, no higher education reporter, no health reporter, and no one covering Santa Clara County government. It also significantly limits coverage at San Jose’s City Hall and entirely eliminates coverage in some of the region’s smaller neighboring cities, including Sunnyvale, Cupertino, Campbell and San Jose’s Rose Garden, Almaden, Cambrian and Willow Glen neighborhoods.” You know, Cupertino, an incorporated city of 58,000, hometown of a little concern called Apple.

Takeaway: The Times drama has provided good copy, but the destruction of the Mercury News deserves a moment of attention, if not a moment of silence. The L.A. Times newsroom still houses more than 400 journalists — about 10 times the Merc, amazingly. As recently as 10 years ago, it was the Merc that paid about 400, while the Times, at its height, paid 1,100.

Not that long ago, the San Jose paper proclaimed itself “The Newspaper of Silicon Valley.” Silicon Valley has done quite well, becoming the global economic engine and driving great regional affluence. But the economically fecund region has become — in less than a decade — a news desert.

Is it California, or is it the whole West Coast?

Advance Publications’ Oregonian, the largest daily in Oregon, just reduced its staff by 11, bringing it to 80. “It’s with a very heavy heart that I bring you this news,” said Oregonian editor Mark Katches. “Today, the positions of 11 of our colleagues in the newsroom are being eliminated.” These cuts follow ones in 2015 and in 2013, when The Oregonian flipped its switch on less-than-daily full edition print publishing.

Katches, who served as a top editor for the nationally respected, Bay Area-based Center for Investigative Reporting before taking the Oregonian job in 2014, has managed to preserve a watchdog role for the paper, amid the cuts. Seven journalists make up the investigative team; three data visualization specialists support those projects. Projects include ones focusing on eldercare abuse and bad policing.

Two hours south of Portland, Oregon’s largest family-owned daily recently gave up the fight for independence. The Baker family, owners of the well-regarded-over-the-years Eugene Register-Guard, succumbed to a GateHouse offer. The family bought the paper — still a 46,000-circulation daily — in 1927, and I had the misfortune to compete against it when I launched a local alternative weekly in 1975. Its once-dominant local impact has dwindled along with its staff, but its passing marks another turning point for West Coast journalism.

Takeaway: National media still focuses on the big, odd stories like the L.A. Times, but the desolation of the local press continues to worsen across the country each month.

Kudos to ProPublica. I interviewed ProPublica president Dick Tofel in Miami at last week’s Digital Content Next conference, and he noted both ProPublica’s total of 85 national staffers and the 14 it employs at its recently launched Illinois state project. Most tellingly: the title of its just-published annual report: 2017: The Next Frontier Is Local.

Are those vultures circling Boston?

Casual observers tell me it looks to them like Alden, DFM’s owner, is tiring of the business, as it cuts deeply in California and sees seasoned executives like Denver Post publisher Mac Tully and editor Greg Moore leave, fed up.

Au contraire! On Wednesday, DFM more than doubled GateHouse’s offer for the bankrupt Boston Herald, bidding $11.9 million for the property. Sources say the sum surprised GateHouse, which hadn’t even expected DFM to enter the bidding. Second, it believes DFM is overpaying, having far outbid both GateHouse and Revolution Capital Group, the third bidder.

But DFM’s math is different. The company may spend $12 million — a bankruptcy court needs to certify the decision on Friday — but “then again, when they chop half the staff later this year that ought to make some money,” says one source deeply familiar with DFM’s strategies.

Additionally, while DFM has sold several properties in recent years — including the New Haven Register, Salt Lake Tribune, and Berkshire Eagle — it continues to work the market. “DFM has been bidding for everything, from Pueblo to Boston, from Austin to West Palm,” says the insider. “Can DFM suck three years out of everything it can buy? Of course,” he concludes.

Dan Kennedy, deeply knowledgeable on the Northeast news landscape, nails the likely result of the DFM win.

Takeaway: This is vulture capitalism, pure and simple — the textbook practice of buying distressed and dying assets, squeezing them, believing that remaining “meat on the bone” will pay off. The result, often, is bankruptcy and closure. That’s the Alden long-term milking “strategy”: After extracting years of high profits, turn out the lights, or sell the remnants to whoever may want them.

Is The Washington Post really profitable?

Post publisher Fred Ryan laughed Wednesday when I pointed out the considerable skepticism I’ve heard since the Post announced its second year of profit success — with precious little other data — last month. He points to both its digital subscription growth and greater ad selling engagement as the key reasons. While Ryan won’t divulge numbers, the contours of the Post’s march toward profitability can be estimated.

The Post has reached the 1 million digital subscription mark, and that generates about $100 million a year in revenue, almost all of it new in the last several years. You can do the math: about $100 per digital subscriber per year, achieved even with Kindle, Apple News, and Prime discounting and over-the-digital transom subs for the full-price payers. (By comparison, The New York Times, with twice the number of digital news subscribers, averages $125 per sub.)

Then there’s the Post’s more than tripling of digital audience in four years. That hasn’t quite led to a tripling of programmatic ad revenue, but it’s more than doubled — add another $100 million or so a year.

Takeaway: Jeff Bezos’ annual investment in tech and newsroom staff — now up to about 775 — has meant an investment of about $40 million a year. Yet, the reinvestment seems to be paying off. Just Tuesday, the Post announced an expansion of its international news efforts — new bureaus, new staff. That’s a part — a long-term part — of the Post’s tilt toward digital subscription emphasis, ready to harvest payers from the audience it’s quickly grown.

As with The New York Times, and with players as diverse as Business Insider, HuffPost, and BuzzFeed, it’s global that aims to provide small but growing streams of new readers and new payers. Top of the list for both the Post and Times: Canada. It’s well educated, (mostly) English-speaking — and suffering from sprawling news deserts coast to coast, as its major chain Postmedia (the DFM of Canada) continues to retrench.

Is The New York Times a radio station?

The Times and American Public Media announced Tuesday that the paper’s podcast The Daily will now be a broadcast radio show too. The news further certifies The Daily as a phenomenon. Host Michael Barbaro and his expanding stellar crew just celebrated their one-year anniversary, with the Times announcing huge audience numbers.
Now, American Public Media and the Times can pair Marketplace with The Daily in a one-hour, five-day-a-week syndication package.

Expect that many stations in the top 25 markets will carry the new joint hour. The Times gets big branding benefit, of course, but also compensation in the form of some combination of licensing fees and/or advertising extensions.

Takeaway: The podcast revolution has stunned us in its intensity, claiming hours per month of media time, and redefining audio and radio. It may seem confusing to see a podcast morphing into a broadcast radio program. But others have pioneered that shift — especially, recently, NPR.

You may have heard the more recent crossovers. They include Planet Money, How I Built This, Hidden Brain, and It’s Been A Minute with Sam Sanders. NPR launched each as podcasts and transformed them into radio shows for weekend programming — often replacing dear, departed shows like Car Talk.

Critically, podcasts have literally broken the public radio clock. That clock — invisible to us as listeners — has long been as confining as limited number of newspaper or magazine pages or a 30-minute TV newscast. Podcasts, of course, know no such limits. As low-cost, testable concepts of topic and of talent, they’ve introduced many new voices and faces in the world of news and newsiness.

Finally, it’s a case of innovation supporting innovation. “It’s Been a Minute is an interesting case study as it piloted on [the NPR mobile app] NPR One, where we got tons of data and feedback that helped us perfect the concept,” NPR’s Isabel Lara tells me. “Then it became a podcast in June 2017 and ultimately a radio show in October of 2017.” It’s now on 155 stations.

How do you find scale after leaving The New York Times and NPR?

Kinsey Wilson’s found a way: Today, he becomes president of WordPress.com, which now powers more than 29 million websites, even if it sometimes doesn’t get the attention of the bigger platforms.

Fifteen years after its founding, the big question is where does WordPress go now? (Beyond launching a new, truly multimedia interface this summer.)

Founder Matt Mullenweg believes he’s found the right partner to chart that path. “He’s one of the few people on the planet who has built a CMS,” he told me Tuesday. “Many cite him as one of the best people they’ve ever worked for.”

It’s that combo of strategic publishing chops and the ability to create productive teams that has propelled Wilson through careers at USA Today, NPR, and The New York Times.

Wilson talks about the challenge ahead in both big and small terms — about maintaining the open web in a time when massive platforms seemed to have absorbed all the air, for instance.

It’s no surprise that he is also intrigued by the potential of WordPress to help solve the problems of growing news deserts. “WordPress powers a lot of local news sites and it creates an opening to address a crisis that is frankly a pretty alarming one in journalism,” he told me.

As he begins work next month, Wilson will start his WordPress tenure the same way all WordPressers — there are 680 of them — do. He’ll do customer service as a “happiness engineer.” Call in with an issue and you’ll have a 1-in-200 chance of getting the former top NPR and New York Times exec on the line.

Takeaway: Hundreds and thousands of journalists have reorganized themselves, as buyouts and layoffs have decimated daily ranks. I’ve been struck by the lack of powerful yet simple-to-use platforms to support them and their work. Perhaps a changemaker like Wilson can help solve that problem and harness the tools of the time in the nick of time.

What was that thing called digital display?

We’ve talked about it here at the Lab for years: Google and Facebook have eaten almost all worldwide digital ad growth. They’ve left maybe 10 percent of that growth — table scraps — for news and all other ad-supported media. That’s not news, but the reckoning it has prompted is. Finally, publishers are now acknowledging that the first big digital revenue stream — digital display — is going, going gone, just like the print business that’s ebbing away even more quickly.

The Reuters Institute’s recent survey of publishers — mainly in Europe, but with some U.S. representation — emphasizes that point, below.



Fully 62 percent now say “it will become less important over time.” Just 16 percent (and who are they, exactly?) say more important.

Takeaway: Commercial revenue isn’t going away, but digital display — optimized by Google and Facebook — is for news publishers. That’s why the smartest publishers have profoundly move their commercial staffs to the pursuits of branded content, marketing services, video, audio and events — all areas outside the direct line of The Duopoly death ray.

Was poking fun at the Post’s slogan shortsighted?

Yes, it is a dark time. How Democracies Die is getting its just due, including this worthy Fresh Air interview and a recent Fareed Zakaria tout. In the book, historians Steven Levitsky and Daniel Ziblatt give us the long view from Mussolini to Hitler to Hugo Chavez to Recep Tayyip Erdoğan, telling us how elected leaders who may squeak into office can quickly consolidate power. Among the many parallels they note: attacks on news media.

Takeaway: I was among those who poked a little fun at The Washington Post when it unfurled its “Democracy Dies in Darkness” slogan a year ago. (Slate greeted the news with “15 Metal Albums Whose Titles Are Less Dark Than The Washington Post’s New Motto.”) And yet it seems more realistic as we absorb the shocks of the year that was.

What should I do with the Times?

For a moment, I thought I’d somehow bought the L.A. Times. As I talked with Frank Sesno on CNN’s Reliable Sources Sunday, the chyron below popped on the monitor.



Alas, it will soon be Dr. Patrick Soon-Shiong’s challenge, not mine.

Takeaway: Fake news is everywhere.

As Year One of this presidency turns to Year Two, should we keep this thought top of mind?

Where would the state of our republic be absent The New York Times’ and The Washington Post’s incisive reporting? Together, the two employ only about 2,000 journalists, with far fewer than that assigned to national politics and policy, but the impact of these two great journalistic institutions — institutions willing to stand up to state power — has been proven anew.

Takeaway: Don’t dither about which you should subscribe to. Subscribe to both.

Photo by Art Crimes used under a Creative Commons license.
]]> https://www.niemanlab.org/2018/02/newsonomics-11-questions-the-news-business-is-trying-to-answer-in-2018/feed/ 0 https://www.niemanlab.org/2018/01/newsonomics-can-cross-subsidy-and-nursing-homes-help-revive-the-singapore-press/ https://www.niemanlab.org/2018/01/newsonomics-can-cross-subsidy-and-nursing-homes-help-revive-the-singapore-press/#respond Tue, 09 Jan 2018 16:01:40 +0000 http://www.niemanlab.org/?p=153156 SINGAPORE — Even virtual monopolies get the blues.

Singapore Press Holdings — publisher of its flagship Straits Times — is confronting the worldwide downturn in newspaper business fortunes. The large daily (383,000 daily circulation, print and digital) and its well-regarded parent SPH saw some tough numbers last year: down 16.9 percent in ad revenue, 13 percent in overall revenue and five percent in circulation revenue for the fiscal year ending September 2017. Profits suffered as well, down 33 percent. And SPH, which still employs 1,200 journalists across its array of 11 newspapers in four languages, magazines, and radio stations, announced significant job cuts in October, with 230 positions cut. The globally oriented company now plans to fund an overseas correspondent staff of 40.

None of those results is news to North American or European publishers, who have suffered similarly. Print business woes are universal across the developed world. What’s intriguing about SPH is its evolving set of strategies to forge a more robust future. How far will it extend itself in its new nursing home business? Can luxe retail malls continue to fund journalism? Might a plan for a state-of-the-global art city delivery service help revive readership?

Everyone who’s learned about the more than half-century-old Singapore experiment knows the city-state is a special case. It’s essentially a one-party state run by highly competent central planners. For a place that wasn’t much more than a fishing backwater at the dawn of the 20th century, English-speaking Singapore now ranks as the fourth wealthiest country on the planet. Its 1.6 million expats drive much of the regional economy, enjoying a relatively un-congested, well-working cosmopolitan center, even if they’ll tell you the state’s closed-circuit-TV-everywhere approach to security and societal control can be a bit unnerving. Meanwhile, Singapore’s four million multi-lingual citizens and permanent residents enjoy a level of housing, health, and education security that’s the envy of many around the world. All in a city-state that ranks third in population density (behind Macau and Monaco) globally.

SPH may be that virtual monopoly, but it’s a publicly listed company, and as such, it still has to make its numbers work. Part of its current challenge: the onrushing businesses of Google and Facebook. “It’s a rapid rise in the last 12, 18 months,” says deputy CEO Anthony Tan.

Adds Alan Soon, a veteran digital executive in Asia for Yahoo and other companies: “Singapore typically trails the U.S. by about two to three years when it comes to trends” Singapore-based Soon, who recently opened up Splice Newsroom “to deliver business intelligence on the media industry in Asia,” confirms that the hot breath of Google and Facebook has been more greatly felt in Asia more widely and more recently, though he notes that each media market experiences it differently. “In other parts, like Indonesia, that impact could take five years-plus to play out.” But the impact of the duopolistic ad dominance is truly becoming global.

Soon assesses SPH, which has seen its share price drop by a quarter over the past year, candidly. “SPH’s revenue and monopoly are the envy of the region. You’d expect a company with an annual operating revenue of S$1 billion (FY 2017) to be more aggressive in building out digital products and serving a distinct audience. SPH is hemmed in on two sides. First, it has a credibility problem. The government’s control of editorial policy and coverage means the organization will continue to be viewed as mouthpiece for propaganda. Second, the company faces the same disruption to its business as other media companies with digital. Newspaper circulation is down as people spend more time on digital platforms.”

I talked with Anthony Tan at his SPH office just after Christmas and got a wide view of the company’s thinking, plans, and bets big and small. Among them, a new business news radio station (Money FM 89.3, launching Jan. 29), participation in a project to assess newspaper delivery in the age of Amazon (which offers two-hour delivery in Singapore) logistics, and major investment in nursing homes and malls. The key word here: cross-subsidy.

That’s the building of ancillary businesses to support the basic craft of news. That’s a theme familiar to two European media contrarians, Schibsted and Axel Springer, both of which have built large non-news publishing businesses to help their news businesses in the long arc of business transformation.

Forty-four-year-old Tan, a savvy watcher of global news industry trends, moved into the company’s deputy CEO position 18 months ago, after joining the company as executive vice-president in 2015. Like many SPH executives, his experience included high-level governmental positions (deputy secretary in the health ministry, director in the manpower ministry) as well as ones in the private businesses of retail malls and the health industry — both of which have proved handy in his new role. His role has continued to grow and in 2017, he was given responsibility for all of the company’s publishing businesses, separated by language into the English/Malay/Tamil Media Group and the Chinese Media Group.

Tan has a big turnaround job in front of him. While “media” drives three-quarters of the company’s revenues, it now contributes only 35 percent of the company’s profits. Though it is making significant cross-subsidy moves, the company is playing catchup. That’s where the new businesses — headed by the acquisition of higher-end nursing home supplier Orange Valley Healthcare last April — will play a big role.

Here’s my interview with Tan on SPH’s road ahead, edited for length and clarity.

Doctor: It’s a good investment. I got a chance to visit the Schibsted last year. Fascinating company, and Norway of course is a small country, about the size of Singapore. More and more of their profit is coming from the other businesses as they’re trying to transition the news business. Is that a similar philosophy? Nobody likes to use the word subsidize, but are you able to take profits here and invest them?
Tan: Precisely. We call it a cross-subsidy. It’s a good, defensible argument because it was the original profits that allowed us to foray into these other businesses.
Doctor: That’s true. You can justify it that way.
Tan: It’s a matter of perspective. I think the important thing to tell our colleagues is that we have not lost the focus — and to tell the market [investors, who have knocked 25 percent off of SPH’s market value over the last year]. The market doesn’t always listen, but the market is irrational sometimes. I think it’s important that colleagues in the newsrooms understand that we need the ability to continue making investments, even in bad times, and to keep a reasonable workforce for journalism really stems from the ability for us to have economic success that is more resilient.
Doctor: That makes sense, and yet all businesses have their cycles. In the U.S., malls are hollowing out.
Tan: In Singapore, we are a bit more fortunate. In Asia, I think we are a bit more fortunate, and maybe it’s the profile of malls that we have. They are doing very well, and they have recurring characteristics to return money like a utility. Best of all, it’s not regulated, and that allows us to take the profit that we make from those to come and cross-subsidize or prop up some of our stable of titles, which is growing. We serve every official language of Singapore, so even the Tamil paper, which serves the Indian population, has a very small print run. That costs money to operate.
Doctor: That’s why you also bought into nursing homes last year?
Tan: Then you ask, why nursing homes, right? After a while we also realized, in looking at the U.S. and many of the developed countries and their malls, property is also now subject to fluctuations. So we really needed to think of analogy of a stool. A three-legged stool is inherently more stable than a two-legged stool.
Doctor: And you have an aging population.
Tan: We wanted to find another league of business that was also resilient to cycles. The best deal is a sunrise instead of a sunset industry. We wanted to go into health care. There were no big players, mainly mom-and-pop operators.
Doctor: Is this at the high end?
Tan: The latest center that we are opening, we also tried to aim for the more affluent, middle, middle-upper income people. We also take in today a mix of people who are subsidized by the government. We take in Medicare, Medicaid-type patients, but we also take in private patients.
Doctor: Well, you have really good social welfare programs here. You accept a mix of private and government.
Tan: The main differentiator is air conditioning, believe it or not. In health care in Singapore, the subsidized patients don’t get air conditioning. It’s a differentiator.
Doctor: People would wonder, given the nature of how the government works, and the relationship of government and press — if SPH is getting into the nursing home business, is that a decision that’s an SPH board decision, and then you basically say, “We have this capital, we’re investing it?”
Tan: Yeah.
Doctor: At the top you said, “We don’t believe in protectionism.” You’re talking about outside, but also in terms of competition. If you’re going to be in the nursing home business, do you have any specific advantage?
Tan: No. I just have to compete.

The only regulated business that we are in is the newspaper business, because there’s a newspaper and printing act that regulate that business. It’s a purely commercial decision, no protectionism. I face competition every day from many other upstart, including foreigners who may want to come in. If they’re given a license by the health authority to run a nursing facility, then I will have to compete.

Doctor: Yeah. Do you deal with all those businesses? Your title is deputy CEO?
Tan: Yeah. I deal with the media business; that’s my bread and butter, including radio, and all the factors of production associated with it. Then I take care of the health care business, primarily.

Of monopoly, culture, and boundaries

Doctor: So if the government is not an investor in SPH, how do you describe your relationship in terms of what you decide to publish in terms of this?
Tan: We get asked these questions either by the Americans or the Chinese — both different sides of the question.
Doctor: The perception is you’re free to publish, but you kind of know where the boundaries are. What do you think? Is that fair or not?
Tan: I think “culture” is an easy cop-out — a simple explanation of what is essentially a complicated world. I would also say that if you look at — I hate to characterize it as Asian culture, but the other bit is really that every newspaper will always have a positioning.
Doctor: Absolutely.
Tan: In any society.
Doctor: It needs to. If it doesn’t have a position, it doesn’t have a soul, right?
Tan: It just happens that in the publications that we have, and of course the flagships, the positioning sits where people also extrapolate and say that, well, there might be boundaries. It’s indeed true that there will be always be boundaries, but I don’t think it inhibits us on a day-to-day basis. I get asked very strange questions as well by countries of lesser democratic natures that come to me and says, “What time do you send your articles for review by authorities?” I say never, and they don’t believe me. I don’t get calls, I don’t do anything. I may get shot — not by the authorities, but by other people who are criticizing articles. Every newspaper has to have a stand. That’s the editor’s relationship with me; I have to also respect it.
Doctor: Who do the editor reports to?
Tan: Administratively, they report to me. I own the licenses; I apply for all of the licenses.
Doctor: If a Singaporean wanted to start another print newspaper, they apply for a license?
Tan: Yes.
Doctor: Is that hard to get?
Tan: Well, I mean…
Doctor: Has anybody done it?
Tan: Yeah. The national broadcaster used to publish a newspaper called Today. Now it’s only online-only.
Doctor: But nobody’s done it?
Tan: No, nobody’s done it. A lot of people recently have gone online. Some have succeeded, some have failed. Then, one of our ex-colleagues did the middle ground, which was exclusively digital, online. Had a fledgling operation; well, maybe a dozen or so. But that wrapped up late last year. She couldn’t make the economics work.
Doctor: Well, the economics would be even harder.
Tan: Right. There’s one that has survived these few years, Mothership. Mothership was some investors, well-intentioned Singaporeans of different persuasions in the arts business space, who put together this group. They are doing, I think, reasonably well. Some of the colleagues from our newsrooms have joined them, and it looks like they are doing okay.

Investing in AI, apps, and maybe a revolutionary city delivery logistics system

Doctor: Where else are you investing? What kinds of things are you investing in directly?
Tan: Artificial intelligence. The traditional areas — say, for example, data analytics, artificial intelligence, better app technology to serve apps better. Web technology. I mean, I got a lot of grief after coming into the job: “Your app doesn’t work very well. Your app is not fast enough.” App versus web, mobile web. We have to keep up with the technology.
Doctor: It takes a lot of investment, yeah.
Tan: Right. Every time Google decides on something new or Facebook deprioritizes you in the News Feed, what it deems news, then you have a challenge. So keeping a good relationship even with what you think is an enemy. Being a frenemy, I think, is better than being an enemy.

Beyond digital — maybe it’s this economy and the demographics of the country — I still have a very loyal print readership. It will go on for a while, because we have one of the world’s longest life expectancies. [Singapore residents live, on average 85 years, right behind Monaco and Japan.]

My biggest challenge is that I need the paperboy for the future. I’m running out of paperboys in Singapore. People would rather be an Uber driver. Uber driver, Amazon parcel delivery guy, rather than a newspaper man.

Doctor: So you have to pay more.
Tan: I have to pay more. The converse side of looking at it as an opportunity is that, if I don’t pay more, can I make it a full-time job? I’m quite happy to accept jobs from Amazon.
Doctor: It’s really becoming part of the modern logistics economy. Are you doing that?
Tan: We had started doing some experiments. First with some retailers that are outsourced a small bit, just for us to try our logistics business. The other thing that we have tried also recently is to try to bundle it. We also have a little convenience store business that I don’t know whether you know of. We have about 70 outlets in Singapore. Why? Newsstands.

The traditional newsstands where going the way of the dodo — the individual mom-and-pop operated ones. So we needed something. The individual 7-Elevens were charging a hell of a lot for us to shop newspapers there. They wouldn’t keep selling those papers. So we’ve also we started bundling and said: Can I deliver a loaf of bread or some eggs with your newspaper? We don’t have to do it every day, but if you subscribe to our newspapers in certain delivery zones, we can do it maybe two times a week, three times a week, depending on your preference.

Doctor: You’re delivering convenience items?
Tan: Yeah, eggs.
Doctor: So if I’m at my condo, SPH delivers to me?
Tan: We actually don’t have a delivery company. We work with what we call a freelance agency. We have the app, and we are beta testing that app. We even started selling newspapers.
Doctor: The idea there is to offset the cost of newspaper delivery by delivering other stuff. Do you think you could grow a lot, or do you know yet?
Tan: I don’t think that it will grow a lot, but it will help complement the business. We are a high-rise city, and many people are going to be over 65. They’re going to have bad knees, even though they’ll have lift stops on every floor. Every morning they would need someone to deliver a newspaper to them, and in addition to that, maybe a loaf of bread every other two days. A dozen eggs.
Doctor: Have you talked to Amazon about any kind of partnership?
Tan: Amazon is quite interesting in Singapore, because as far as I understand their model, they outsource it to many of these logistics providers. We are thinking about whether or not that’s something that we should go into a bit more seriously. We’ve got a network, we’ve got people.

We’ve made a small investment in an e-commerce site in Singapore called Q10, which is Korean in origin. They’re the No. 1 site on merchandising value. They are a bit like Amazon, but they don’t hold their own inventory — just like Amazon actually. They have their own logistics company, so whether we would make a further investment, whether we would work with them — it’s early days.

Doctor: You’ve got all the elements here. You have a high-rise city; you have, probably, the best central planning in the world that I’ve seen. From a planning point of view, it makes overall sense to make as efficient a system as you can, also to reduce pollution and congestion. I’m wondering if there is a model there of how you encourage companies that are in the delivery business, how you incentivize them to work together. Does that make sense?
Tan: Yes. There is an ongoing effort. There might be a sort of network of federated lockers that are delivery-service agnostic.
Doctor: In each neighborhood. Or in a building — it could be in a high rise.
Tan: Anywhere. They are a bit like Amazon’s lockers, but not exclusive to Amazon. Amazon can use it, UPS can use, or whoever.
Doctor: Is that a live experiment?
Tan: No. There is a plan to launch a tender and see whether or not there will be commercial interest to operate.
Doctor: It would a for-profit system of federated lockers, and then they would negotiate with each of the delivery agencies?
Tan: Then the delivery agencies are a question, because the point is how many last-mile logistic providers can Singapore support?

The core business

Doctor: How dependent are you still on advertising in your core business?
Tan: About 70 percent. We’ve always been like that; it was a bit of an aberration. Plus our newspaper has always been very cheap — our newspapers are dirt cheap, compared to anywhere else in the world.
Doctor: Is it profitable every day?
Tan: Yes, it is.
Doctor: Even Monday, Tuesday?
Tan: Yes. I will keep print going for as long as I can because it’s still a profitable business.
Doctor: How much are you charging now for a seven-day print subscription?
Tan: Seven-day print? Depending. The face value price will be $24.90 plus a three-dollar delivery fee, generally. For four weeks.
Doctor: You get digital access included?
Tan: We used to have bundling. We first bundled in the early days of digital. Now you have different packages, depending on what you want, digital PDF or digital access.
Doctor: You do have a unique opportunity here. You have high rises, you have a long-lived population, and you’ve got nursing homes. That’s a good strategy.
Tan: The first thing I did when we bought the nursing home was to bring in the newspapers. I made sure that the newspapers were available to the elderly. The elderly have the most time to read newspapers.
Doctor: Are you selling them, or are you giving them?
Tan: No, no. Giving them.
Doctor: Can you include it as part of the fee, and have the fee pay part of it? That wouldn’t work?
Tan: They would riot in Singapore. But it’s okay. It’s a bit of community service.
Doctor: I see that you are offering a text-to-audio product. Is it much used?
Tan: Yeah. Especially in the vernacular papers. In the Chinese newspapers, especially. From two sides. One is the illiterate elderly, who still want to read it. And the young, who are literate, but the parents force them, because they have to learn their mother tongue, Chinese, but it can be very difficult.
Doctor: Is that your own technology, or is that partnered?
Tan: No, we took the technology and formatted to our use. I don’t think many people have used this technology, text-to-speech. I can’t say that we are the first.

My kid’s latest craze is to play with the Google Assistant. We’ve been thinking about it, and working on how to deliver news in podcasts. The news will be read to me — that might be the future. I mean, just as the U.S. has got with Amazon with Echo and Google Assistant, China has also seen a rise in some of these.

We are technology takers in some way, and I think we need to invest more in keeping a bit ahead of the curve where technology advances are. In the past one or two years, I’ve been reminding colleagues that we are not a newspaper company — we are a media company. The frame of change of mind is very important.

Photo of Singapore’s Marina Bay by See-Ming Lee used under a Creative Commons license.
]]> https://www.niemanlab.org/2018/01/newsonomics-can-cross-subsidy-and-nursing-homes-help-revive-the-singapore-press/feed/ 0 https://www.niemanlab.org/2017/12/mirror-mirror-on-the-wall/ https://www.niemanlab.org/2017/12/mirror-mirror-on-the-wall/#respond Wed, 20 Dec 2017 03:21:08 +0000 http://www.niemanlab.org/?p=152603 In 2018, digital news companies will get bought and sold, big-name brands will miss their ambitious growth goals, while plenty of newsrooms will keep pirouetting amid more jobs cut. And many news executives, mostly white men, will keep getting hired in big jobs.

In much of the journalism we will read about these inevitable changes in 2018, much like we read in 2017, most media writers will express surprise, shock, exuberance, and angst, with criticism of owners, executives, platforms, investors, and business models.

In other words, the 2018 media coverage will read like déjà vu all over again.

So here are some suggestions — to ourselves as fans and well-wishers of our industry — on how what we might want to better cover what are likely to be some key topics of discussion within our industry in 2018.

As a reporter, editor, and now the steward and custodian of a wide range of journalism as well as journalists’ jobs at the Fusion Media Group, I am both guilty as charged, and the occasional beneficiary of how we mostly cover our industry. Being critical of how we do what we do isn’t about being negative or being down on this half-full digital sustainability glass — it is about acknowledging being critical is key to getting better. And we all need to do better, if for no other reason than for the sake of not surprising our readers in 2018, all over again.

Our Talmudic path to profitability

If that red-hot media company you are profiling is a public company that has to report its results to the SEC, or you happen to have their actual audited P&L in front of you, don’t simply quote media CEOs or investors saying they are “profitable” this year or will “break even” within a couple of quarters. Unless, that is, you are a believer in Enron-accounting.

Profits as defined by private businesses, or those owned by private equity, assorted billionaires and media executives, or by larger companies — even when they are public — is an utterly meaningless word, because there is no single accepted definition of that kind of profitability. Eventually some of us will have to be genuinely profitable — or we won’t be around, but for now, it will be a Talmudic roadmap with lots of twists and turns before getting to our respective destinations at different speeds.

So start by asking a lot more specific questions, along with wanting supporting data, with “we don’t disclose numbers” being your first clue to not waste your readers’ time in simply repeating profitability claims. At least, not without clearly telling us these are unverifiable claims with the media executives having refused to offer supporting evidence.

And the next time you are being told about yet another round of fundraising, whatever the increased on-paper valuation the company now claims, ask yourself, before you hype that news:

Why is putting additional money into a business that is clearly spending more than it is making, a sign of success? It’s called “burn” rate for a reason.

Matters of size

Start by telling your readers that you are writing about an industry that mostly relies on terribly inadequate third-parties for almost all its audience data.

The biggest data providers, be it Nielsen (which recently fessed up to failing to capture live streaming audiences) or comScore (with small, problematic sample sizes, especially for non-U.S. audiences) or Quantcast (why would you rely on what is primarily an advertising data company for newsroom insights?) or Google Analytics (your reader data is courtesy Google, really?) often leave gaping holes in fully understanding how a media company is faring. And journalists simply citing these slivers of data will only allow media executives to easily talk their way out of any publicly available bad news data trends. (Notice how these same companies never complain about that very dataset when everything is not pointing south?)

To be sure, all media companies are stuck with using these third parties because we never bothered to invest a lot in data capabilities, but also because the ad industry has to rely on some public common-denominator data it can (barely, it turns out) trust. But we can at least be a bit more skeptical on behalf of our readers in citing these numbers.

As for surveys and data from the likes of Chartbeat, Parse.ly, and myriad others who make a good living off newsroom dashboards and analytics, please caveat our temptation to use and extrapolate from their data in drawing those sweeping conclusions about the state of a company or the industry. That’s because, by nature, these are self-serving surveys for the narrow data-business models of these companies vying for more media clients, by claiming to have new-new ways to help clients monetize their audience data.

When is the last time we actually asked a media company to talk about what percentage of their monthly unique visitors or visits come from social media platforms? The answer to that might tell how “not in control” any one of us is, of our own business model.

E-commerce

Yep, everyone is talking it up and planning to sell truck-loads of stuff to their audiences. So here are basic questions we might consider asking the next time some media company talks up its big push into e-commerce.

For starters, what exactly do we mean by e-commerce? Is it starting an affiliate business with links to Amazon and Jet and eBay? If so, there’s absolutely nothing unique or new about it, so what is different about this particular e-commerce push? Is the company getting into handling actual products, by itself? If so, ask a lot of questions about inventory management, returns policy, write-off risks, merchandizing expertise (very little exists in most media companies, by the way), relevant new staffing needs, and why, when Amazon is crushing every retailer out there, this media company thinks it can make a typically low-margin, inventory-centric business work.

Oh, they are outsourcing all of that to third parties, are they? Guess what — those slim product-commerce margins just got even thinner. Also feel free to dig deep into the connection between how they are mapping their journalism — presumably the reason why they have audiences — to specific products. If you hear they plan to sell a lot of candles on a listicles site, pause and ask yourself if that makes any sense for a millennial to buy from that news brand. Sticking big “Buy” buttons on every page is not a strategy — actually it might just take away a potential guaranteed revenue spot (even if very low programmatic dollars) away for that media company.

Ask what is the conversion rate assumption on their e-commerce business. See if they can easily define “conversion.” And then, if you hear anything more than, say, 4 percent conversion, ask a lot more questions about why that number will be higher for them, than what is the industry average at media companies that have been doing it for a few years.

The subscriptions syndrome

Repeat after me: Not all subscribers are equal.

A lot of media companies have gained a lot of paying subscribers this past year, and the headline numbers are indeed impressive. For starters, the next time a media company gives you a quarterly update on subscribers, please separate print and digital subscribers. Then start asking some hard questions about where the subscriptions are coming from (near-free offers for a bunch of months via Amazon Prime, for example), and what the average revenue per new subscriber, is at that company.

No media company will volunteer to tell you the cost of acquiring subscribers (it’s a lot of upfront investment, by the way), so at least ask for that, since new subscribers are not profitable unless they keep renewing their subscription for a few years. Which also means that we all need to come up to speed on questions about lifetime value, yields, and retention rates. And don’t forget to ask how much of reader revenue came from increasing rates during the period, since rising rates often can work against subscriber retention, usually a year down the line.

We read a lot about the great subscription upside of the “Trump Bump” in 2017. Now is the time to start asking about churn, please. Because pouring more into leaking buckets won’t solve the existential business model challenges of any media company, however wishful our politics might want that to be.

On being a member

As reader revenue becomes more front and center, there is going to be a lot of talk about memberships. Many public broadcasting outlets have been at it for a while now. Many other media companies are just starting out so there will be a lot of executives spinning up tales about this.

For starters, separate one-time donations and pleas for contributions, however well meaning they might sound, from memberships. A free tote bag for getting your credit card dinged each year doesn’t automatically a member make. It is welcome charitable behavior and often works well when a larger notion of public good is in the mix.

Brands such as The Wall Street Journal, with its WSJ+ membership model, have natural advantages because they can leverage parent News Corp’s expanded network, be it offering HarperCollins hardcover books or access to National Geographic explorer events. Throw in in-person invites to Journal journalism events or newsroom tours, which create scarcity out of things that really aren’t, and you have the makings of truly unique membership perks. This means the annual conversation around renewing my Journal subscription is no longer about just paying for journalism but a bundle of unique offerings, available only to WSJ+ members, which just happens to also include free access to the Journal.

So if memberships are to really work and scale for all of us, they would need to create what is essentially a value exchange beyond paying for journalism (let’s just stick to calling that model as subscriptions, shall we) while creating a sense of community — of belonging — to a unique group of readers for that news brand, with certain real or perceived benefits otherwise not available to non-members.

Remember, there doesn’t always need to be an exchange of money — a consumer’s email or willingness to watch a video in return for, say, free access to a premium article can be part of a media brand’s membership offer, if a media company thinks that data or action is valuable and can be monetized. So try to have an open mind in 2018 about membership experiments at media companies, but make sure to treat them as experiments and not as some amazing new business models. As in, don’t hype memberships as the new salvation for anything yet. Like we did with digital subscriptions.

The downside of creating membership offers? We really need robust customer service, especially if these members are paying a lot of money for services. Can any of us remember the last media company that had anything other than terrible call centers, mostly useless help desks, and zero customer-service orientation?

The #melcos at the gate

Like it or not, we are going to hear a lot about the telecom+media companies in 2018, between Verizon, Comcast, and AT&T buying up a slew of digital brands.

We will, naturally, be very tempted to focus primarily on cost cutting, mocking new brand names (Oath!) or have our editor friends there tell us how clueless telecom overlords are causing chaos for all those creative newsroom geniuses trying to keep journalism pure and safe. Sure, we can get these easy hits in but, perhaps, we can start talking about the inexorable rise of these melcos, especially with a totally laissez faire FCC aiding and abetting that process, and how that opens up a whole new battlefront for all digital media companies.

If they can get their internal act together, the Verizons of our world can potentially add large, scaled media brands, such as Yahoo and HuffPost, with must-see live sports and entertainment deals as part of our phone and Internet bundles. And just like that, media companies will find themselves with battles on two fronts — ongoing frenemies such as Facebook, Amazon, and Netflix on one hand, and equally powerful melcos on the other.

While we remain obsessed with our individual paywalls, imagine a friction-free offering from a Verizon or AT&T that promises a great media bundle led by their own brands for, say, $1 being automatically added to our monthly phone/internet bill. The potential for this transparent payment for media model to upend the whole payments paradigm of our world is a looming issue, one that is worth keeping a very close eye on.

Diversification or death

A big story for 2018 will be about how every media company executive will start talking about how they are going to diversify their revenues, away from advertising.

How about if we start by talking about what revenue streams are logically feasible for a media company? By my count, these are about a dozen, for starters: 1) display advertising; 2) programmatic revenue across content formats; 3) own video; 4) native/branded/custom studios; 5) subscriptions; 6) e-commerce, whether affiliate, product, or services; 7) P&L-based events; 8) memberships; 9) television shows, if TV is not your core media proposition; 10) creating shows/movies for third-parties such as Netflix and Amazon; 11) syndication/licensing; 12) international.

So when you start evaluating success or potential of digital news brands, drill down on what is already happening at that media company today versus mere ambition and hype. Don’t forget that in every single one of these categories, there is already competition inherent to that particular business model, so our universe of potential rivals gets larger and more varied with every new revenue stream. And don’t forget to ask what additional resources the media company will need — and at what cost — to build new internal capacity in any of these new revenue areas.

Try not to get seduced, for example, with events as a growth business for a media company. It might be a fat-margin business with one-off events, but is deceptively non-scalable and highly bespoke, even for repeat events of the same genre. Which is why the likes of Fortune and The Wall Street Journal have, typically, mostly stuck to less than a handful of marquee events over the many years they’ve been at this.

Musical chairs

As with 2017, there will be plenty of digital media veterans playing musical chairs with big jobs, especially white men who have had a headstart in the world of digital media, for a host of reasons that go well beyond their seemingly amazing competence at failing up.

So the next time a cool media company names a new CEO, COO, or editorial director, how about not falling in love with their past, especially the fumes of supposed brilliance some two jobs ago, and, instead, asking afresh how well did they allegedly do in those jobs?

This is not easy to write the day someone leaves a job, for all the HR confidentiality — plus NDAs, a buyout package at risk, ONA-speaking-circuit friendship, or just happened to “leak a lot of stuff to you as a source” reasons — but there are no excuses not to revisit that past performance when that same executive surfaces, out of hibernation, in a big role at a well funded company.

More importantly — and never more so in 2018 — always try to write about new executive hires in the relative context of our industry’s diversity rhetoric. Start by looking at the mastheads of the Top 10 brands — especially in print, but also at the big digital media companies. End 2017 by noting the number of women and people of color in that group. And keep that list handy all year, when these companies add and subtract, so you can easily tell your readers what is truly happening on that front.

And have some historical context. Many of these newsrooms, especially newspapers, have very recently doubled and tripled the number of people who used to be on the masthead. It might be a sign of how critical many new functions are, but is also a very sly way to window-dress, especially when it comes to saying “we have some women on there now.”

The world is flat, again

Can you recall any American digital news brand that has actually built a sizable brand loyalty outside the U.S. that is also coupled with a real business, and then managed to sustain it beyond the launch hype? Keep thinking.

And keep that in mind as you listen to what will be a lot of press-release-led international expansion talk in 2018, about either “going it alone” or in big partnerships, especially in large English-language markets.

The allure of a global footprint is intoxicating because of a simple fallacy: Media executives look at the large, growing audiences that currently come from another country to our U.S. offering, and start doing the easy math of turning them into a business.

Take India, with its hundreds of millions of English-speaking/reading targets. The Journal (India RealTime) and the Times (India Ink) painfully fell for it and then pulled out, just as a horde of digital brands rushed into India in small and big ways. The reality of India is that it is still a terribly immature digital advertising market, in terms of yields, and simultaneously dominated by powerful and not entirely ethical media houses with deep pockets and decades of quid-pro-quo business relationships.

Meanwhile, your hard-earned 5-10 million monthly unique visitors from India, in addition to not being unique at all to a local advertiser —t hey can all be reached in larger numbers via homegrown brands too — have no intention of paying any time soon for your journalism either, in what is historically a very price-conscious culture, underpinned by shameless copying and non-attribution of original reporting or writing by many local newsrooms.

That doesn’t mean there’s no opportunity for some of these 2018 hopefuls. Despite entrenched Indian newspaper and television brands, there isn’t really a digital news/entertainment brand that has become dominant in India yet, given the terrible UX/UI and the stepchild treatment that digital gets within mainstream brands, seemingly large audiences notwithstanding. But to really win in India, it will take a multiyear standalone venture with very deep pockets, and a willingness to sink tens of millions to create the go-to digital media brand for Indians in India.

Many Western media companies fell — and will continue to fall — for the seductive appeal of partnering with India’s dominant media giant as a way to win-win. In theory, at least, this also helps navigate India’s very opaque and byzantine foreign media ownership regulations that can put standalone digital ventures at regulatory and legal risks. But doing so is akin to leasing a tour boat from the company that owns the Bermuda Triangle. Practice Caveat Emptor journalism.

An epidemic of fake news (solution) bubbles

This year has been a lovefest for the scores of new, for-profit, non-profit, and no-hope-ever-for-profits ventures that have been announced to tackle fake news and misinformation. And deservedly so, given what an insidious year 2017 has been for the spread of misinformation in its many variations.

As we go into 2018, it might be time to slow-clap. For starters, many of these efforts are seeded by the usually well meaning but guilt-coopting money from many of the very platforms that actively contributed to making misinformation go viral. Not all of the money comes directly, either, but frequently routed through well regarded journalism schools and their Twitter-savvy professors, giving it the veneer of academic and media-pundit credibility. There is absolutely nothing wrong in taking this money — after all, these platforms made their money off the efforts of our journalism. But let us make it a habit of disclosing funding when fawning over these efforts, especially when routed through academic initiatives.

It might also be helpful to start painting the full picture of the many blindfolds feeling up this misinformation elephant, so to speak, in the U.S. and outside. A bit like those Luma industry ecosystem charts that are scarily captivating to look at, even as that voice inside your head is screaming “this won’t end well” for most companies on there.

A vast majority of these startups are building tools and services that mostly seem to shift the onus on to audiences, rather than push news providers to apply, learn from, and embed the solutions. It might be worth asking why asking readers to do the heavy lifting makes a lot of sense in a world where we get our news and information from myriad sources at high velocity, and how these multiple technological solutions are really going to work. And how can we better connect this patchwork of well-meaning efforts into a more effective solution for our readers?

Yes, misinformation is a “wicked” problem. And wicked problems by definition won’t lend themselves to easy solutions. But why do we let the likes of Facebook, which seems to solve all its own business model problems, throw up its hands, sprinkle some funding dollars our way, and tell us to solve the problem for them? If you broke it, you ought to fix it too. And pay for all of it.

Better call success

Lasting success in the digital news business is as rakishly elusive to most of us, as it is to the Saul Goodman redux on the eponymous AMC series on American television. Given all the challenges we have talked about in measuring success accurately, here is a relatively straightforward way to try and hold up a mirror.

Start by asking — when a startup is unveiled, when an acquisition is announced, when a round of funding is disclosed, when a top executive is named — what is the ambition here? This is when we media executives are at our most giddy, chatty selves — plus chances are we have fed you that “launch exclusive” and so you get a lot of quality time with us before anyone else does. Be appropriately thankful for the scoop, but definitely get the rhetoric on the record, be it the “we want to be the new Bloomberg” or “The Economist-killer” or the “quasi-CNBC for millennials” or the answer to the “media is broken — and too often a scam” problem.

Now ask these same executives to define — in their own terms — what success looks like a year, 18 months, two years out. Try to get some numbers now — around potential audience reach, growth expectations, staff size — but push back against them setting the bar too low on measurable metrics, out of the gate. Write the launch story and then file it away with an automatic reminder on your calendar. Go on to other stories.

Six months to a year later, you will have a lot of fun revisiting with these executives. And it will tell your readers a lot about the hype-versus-reality of our business. The good news is you don’t even have to be the one who got that launch scoop. A regular romp through the news archives, particularly press releases from these companies, should help you give your readers a lot of “let’s really talk about success” business of media stories, whether a company wants to talk to you or not.

A “pivot” is just one letter added to a four-letter word.

Raju Narisetti is CEO of Gizmodo Media Group.

]]> https://www.niemanlab.org/2017/12/mirror-mirror-on-the-wall/feed/ 0 https://www.niemanlab.org/2017/12/newsonomics-15-terms-that-summed-up-2017-in-news-and-news-coverage/ https://www.niemanlab.org/2017/12/newsonomics-15-terms-that-summed-up-2017-in-news-and-news-coverage/#respond Fri, 15 Dec 2017 16:19:23 +0000 http://www.niemanlab.org/?p=152159 This is the year America wishes it could take a shower long enough to wash away the scum of daily mud-slinging. Remember 2016? Last year, it seemed as if Tronc was the most memorable word of the news year, a new media name seemingly invented as self-parody. In 2017, the memorable words tumble onto the page. Let’s briefly catalog those that have pushed their way into our lexicon.

Duopoly: Google and Facebook dominate the field of digital advertising — which is now the largest category of ad spending, surpassing TV in North America and the U.K. Google and Facebook have been taking almost 90 percent of all the digital ad growth in the market in the U.S. The remaining 10 percent or so is supposed to help support news media, as well as all other businesses dependent on advertising.

The immense damage done to news media by the duopoly is only collateral damage, but it’s immense damage nonetheless. It doesn’t matter if you are smartly diabolical in your intent, or a useful idiot, or even out to make a better world.

Consumer revenue: Inflated by the Trump bump, consumer (read: reader) revenue came out of the shadows in 2017.

Readers now supply The New York Times Times with 62 cents of every dollar it earns. Print advertising has become only the fourth-largest category of Times revenue. Subscription surges have been seen everywhere from the Times and Washington Post to The Atlantic, The New Yorker, Minnpost, and the big regional local-news-supplying public radio stations.

As the meltdown in digital news media (see below) has surfaced, reader revenue and reader-related revenue (from events, e-commerce, and more) becomes utterly necessary. News organizations like CNN, Business Insider, and The Athletic reflect that reality in their decisions to ask readers for direct payment.

Roll-up: This was the year that long-time family newspaper companies said “uncle.” Gatehouse bought the Morris and Calkins companies, among other smaller companies, bringing its total of dailies to more than 140 — or more than a tenth of the remaining daily newspaper industry. In fact, Gatehouse, Gannett, and Digital First Media now own a quarter of those 1,350 or so dailies. In magazines, the Big Four is shrinking to the Big Three as Meredith swallows the larger Time Inc.

With digital disruption a primary force, the quest for scale reigns in almost all media enterprise. Fewer companies are deciding what we will — or won’t — get. And it’s worth noting that even the acquirers — Gatehouse and Meredith, for instance — are running negative in the year-over-year revenues in their core print businesses. Roll-up is more an exercise in profit-squeezing and cost-cutting than it is a strategy to build bigger, better products for customers.

Second paper: Just this week, Gatehouse scooped up the remains of the bankrupt Boston Herald for a scant $5 million. That once-independent voice will form part of Gatehouse’s megacluster business strategy and likely be reduced as a second daily Boston voice.

In the last year, a civic group of investors saved, for now, The Chicago Sun-Times as an independent voice. In the Twin Cities, we have to wonder how long owner Digital First Media will keep the Saint Paul Pioneer Press (one of my alma maters) alive; it’s already seen its staff sliced by more three-quarters to 50.

With formerly monopoly dailies seeking survival, it’s no surprise that “second papers” are becoming a vestige of another time. But it’s worth marking.

Viscera: This headline made my insides hurt: “LA Weekly staff ‘eviscerated’ by layoffs, says editor.”

2017 was a year of reckoning for some of the alternative weeklies. The Village Voice stopped print. The Houston Press abruptly closed. And, yes, L.A. Weekly’s staff was eviscerated, amid the fast pruning of much secondary print media in greater L.A.

Daily newspaper layoffs and buyouts have become almost too numerous and routine to report on. (Besides, how many people are actually following the demise of the local press?)

I regularly get emails from distraught staffers. Last week brought one saying another 10 journalists had been laid off at The Denver Post, bringing the staff to 90 at the single remaining daily in the country’s 19th-largest metro area. ASNE no longer conducts an annual census of jobs lost, but I’d guess there are no more than 24,000 daily journalists working their beats at print dailies — a cut of 33,000 since 1990, when the country had 80 million fewer people (and we thought we had resolved forever the Russian threat, as the Berlin and other Cold War walls crumbled).

It’s hard to say who’s essential to the newspaper enterprises these days. Alden Global Capital (well-described in “How many Palm Beach mansions does a Wall Street tycoon need?”) has made cutting an art form. It has laid off numerous editors and publishers, as well as hundreds of reporters, but this year, it outdid itself: As CEO Steve Rossi retired, it declined to fill his position, opting for a (presumably lower-priced) COO “reporting to the board.”

Cross-ownership: Nothing’s surprising about the Federal Communications Commission’s repeal of decades-long regulations except its alacrity. Deregulation advocates — led by both newspaper industry and TV industry trade groups — have advocated for the dropping of rules against media ownership concentration. Even they, though, have been surprised by FCC chair Ajit Pai’s supposed casting-off of media ownership shackles — with net neutrality overthrow just one more major “side” issue for publishers.

The media cross-ownership rules — which have prevented dailies from owning major local TV stations, and vice versa — pose the biggest question. In a world of already advanced roll-up on the TV side as well as in newspapers, who will actually merge local properties, and how quickly? We see right-leaning interests lining up, but precious few individuals or groups that appear to have the wider public, and democratic, interest in mind and heart.

2018 is the year to watch as strategists assess “value” and “combination” anew. The “new convergence” — a smart combination of local text and video, TV and print — is certainly possible, but unproven. As likely: a disharmonic convergence against the public interest.

CasualFans: That’s a Tony Haile construct, one known among the news industry’s growing roster of audience development executives. In September, I asked, “Is that all there is to reader payment?” Would more than two or three percent of digital audiences ever pay for news content?

Haile, the founder of industry standard Chartbeat and now entrepreneur behind Scroll, aims at the next 10 percent, a group he identifies as “casualfans.” “It’s taken from cable TV bundling language where Superfans and Casualfans are pretty common usage,” he said.

As advertising craters, we’ll be looking to Scroll, LaterPay, and Jim McKelvey’s Invisibly to see if there’s a new cohort of people who will pay for news.

I’ve long liked Voice of San Diego’s construct. The intent of its membership program is to moving The Informed (all its readers) to The Involved (those who receive email newsletters, comment on the site, or attend events) to The Invested (those who buy memberships).

Listen: Kicking off with The New York Times’ The Daily, it was a big year for the newsy podcast. We’ll see what the regionals, including Gannett and McClatchy, produce from their own fledgling investments in audio.

Useful idiots: We weren’t so sophisticated in years past in cataloging our types of idiots. Yet this term — used by the Russians well back into Soviet times — is a phenomenon unexpectedly reborn in 2017. We don’t yet know how many of these useful idiots —
people who blunder into furthering foreign aims through their own stupidity, avarice, or gullibility — Robert Mueller’s team will identify, beyond the Flynns, Manaforts and Papadopouloses.

As Facebook, Google, and Twitter executives got hauled before Congress, they had to acknowledge their own complicity with the Russians, however clumsy and unintentional. Said Sheryl Sandberg: “It’s not just that we apologize. We’re angry, we’re upset. But what we really owe the American people is determination” to do a better job of preventing foreign meddling.

While these executives have been off doing other things — digital world domination for the most part — nefarious evildoers (to borrow a term from another era) eagerly exploited the systems they had built.

Fake: Now an epithet that Trump tosses at news he doesn’t like, “fake” is related to the odious “alternative facts” (though that now seems so early 2017). We can add alt, or alternative, to the list of spoiled language: Once signifying pleasant choice or another view, it’s become a battleground word, its usage more ascendant among neo-Nazis than the old “alternative press.”

Our “fake!” affliction doesn’t just hurt Americans. As the Times recently pointed out, “Meet the strongmen who’ve started blaming ‘fake news’ Too.” Such linguistic nonsense has real-world impact, not just on our discourse but on lives of those opposing authoritarianism around the world. In Myanmar, the government called its genocide against the Rohingya “fake news.”

Trust: The antidote, right? We can take some solace in the assertive, aggressive reporting led by The New York Times, The Washington Post, and CNN. While many trust movements, commercial and nonprofit, have taken flight, it is the big, old brands whose names themselves stand for trustworthiness among tens of millions of readers.

It seems like an eon ago that Times executive editor Dean Baquet talked to me about using the word “lie” in print, but it was only October 2016. As USA Today pointed out in its statement of horror: “Trump apparently is going for some sort of record for lying while in office. As of mid-November, he had made 1,628 misleading or false statements in 298 days in office. That’s 5.5 false claims per day, according to a count kept by The Washington Post’s fact-checkers.”

Another word: “Mistake.” As Carl Bernstein observed last week on CNN’s Reliable Sources, “Journalists make mistakes.” But serial mistakes by CNN, ABC, MSNBC, and CBS, well-cataloged by The Intercept’s Glenn Greenwald, provide fuel to the arsonists who would just as soon set fire to the news media as we know it.

Meltdown: Talking Points Memo publisher and editor Josh Marshall made his point in mid-November: “There’s a digital media crash. But no one will say it.” He called attention to the suffering businesses of digital ad–dependent “startup” news media. In the age of duopoly, there simply aren’t enough digital ad dollars to support what’s been built.

Advertisers are shifting their strategies as well. Take this week’s news about giant Unilever: It’s cutting its digital ad spend by about 30 percent as it better figures out its return ad investment. Reliance on digital advertising alone won’t work.

Arc: Throughout this turbulent year, The Washington Post has moved forward with the licensing of its next-generation content management system/digital platform. The Boston Globe and Tronc’s chain of properties will deploy Arc in 2018. We’ll see how much difference it can make in helping these publishers more effectively grasp new digital opportunity. With no real competitors, it could become an industry standard.

Truth. At year’s end, we may not realize quite how much we’ve been battered by nonstop news cycles, stalked by push notifications. It can be hard to stop and absorb a particularly insightful piece of writing or reporting before something else replaces it in our consciousness.

Still, Slate’s legal correspondent Dahlia Lithwick’s piece from earlier this month has stuck with me. Asking “Is it too late for Robert Mueller to save us?” she wrote:

In weeks like this one, when it seems the Mueller investigation is quite literally the only authority and sanity we can look to, it’s hard to tell whether the net losses outweigh the wins, or whether the massive national game of deconstruction and deflection and deception is even the littlest bit disrupted by news that the special counsel is closing in on a legal conclusion. Maybe it’s really too late in the slide toward authoritarianism for any major legal outcome to change the game. We crave nonpartisan and serious authority figures like Mueller because we believe they can guide us through. But having seen this White House shatter norms around the free press, civility, international diplomacy, and truth-telling, it almost defies belief that the line in the sand, the stopping point, is Mueller…

At this moment when all options remain open, we should accept the possibility that Mueller may come to represent the highest and most binding expression of law and order in America. We also must acknowledge the reality that the highest and most binding expression of law and order in America might not matter enough, to enough people, to bring the Trump train to a stop.

Lithwick correctly identifies the weakness of so many checks and balances we thought were in place. Yet she underplays the role of the national news media. Our top journalists, with brave and smart leadership, have managed to stay focused on the stories of the year, and their work still drives much of the national conversation.

We don’t know which way these teeter-totters between the rule of law and those who would trample over it will go. Which way will the American seesaw move? How strong, and smart, will its news media be in applying fair and accurate pressure?

Photo of vertical stack of newspapers by J E Smith used under a Creative Commons license.

]]> https://www.niemanlab.org/2017/12/newsonomics-15-terms-that-summed-up-2017-in-news-and-news-coverage/feed/ 0 https://www.niemanlab.org/2017/12/is-the-digital-content-bubble-about-to-burst-for-some-of-the-publishers-chasing-the-broadest-scale-maybe/ https://www.niemanlab.org/2017/12/is-the-digital-content-bubble-about-to-burst-for-some-of-the-publishers-chasing-the-broadest-scale-maybe/#comments Wed, 06 Dec 2017 00:01:25 +0000 http://www.niemanlab.org/?p=151396 Recent bad news for a number of digital-born news outlets (including BuzzFeed, HuffPost, Mashable, and Vice) is a symptom not only of the intense competition for attention and advertising online, but also of a digital content bubble where most news providers continue to operate at a loss — losses that cannot be sustained indefinitely.

So far, the largest digital-born publishers have been sustained by investors, some of whom may be losing their patience. Legacy media outlets have used their offline revenues to bankroll investments in online operations that are still often not profitable on their own. Smaller digital-born operations have started out with money from their founders or philanthropic backers, but many are struggling to break even.

More than 20 years into the rise of digital media, it seems clear that the content bubble will eventually burst unless more robust business models are found. Investors’ high hopes and dwindling legacy revenues won’t sustain digital news forever.

People continue to spend more of their time with digital media. Advertisers continue to spend more of their money on digital advertising. And yet most news sites continue to struggle to find a sustainable digital business model.

In a new Reuters Institute report, Tom Nicholls, Nabeelah Shabbir, and I analysed seven prominent internationally-oriented, digital-born news publishers, including both long-established players like HuffPost, newer entrants like Quartz, and recently launched European enterprises like Brut. We show how many of these, often on the basis of venture capital funding or other deep-pocketed backers (sometimes including investment from established media or telecom conglomerates), have pursued an expansive global strategy oriented towards securing audience growth first, expecting to generate profits later from advertising.

In their near-complete reliance on advertising, the largest and most expansionist digital-born news outlets face specific questions that set them apart from legacy media like newspapers as well as a growing number of domestic digital-born news media, all of whom are increasingly turning to pay models and membership schemes.

By 2017, we have found in other research that 66 percent of a sample of major European newspapers operate pay models, and prominent digital-born news publishers across the continent (including De Correspondent, El Diario, and the pioneering Mediapart) operate paid or membership models. Broadcasters generally don’t (though CNN plans to introducing digital subscriptions), but they benefit from still significant offline revenues and can treat online as a loss-leading brand extension.

Most of the digital-born news publishers who have sought international expansion have neither subscribers, members, nor offline revenues to sustain their operations. They rely on digital advertising. As Jean-Christophe Potocki, general manager at HuffPost France told us: “If we don’t fight this battle, given our model, we’re dead. Diversification is to provide extra, but our model is advertising and we need to fight it directly.”

Not all of these outlets will win this fight and be able to sustain itself on advertising alone (just as not every newspaper or niche news site will make pay models work). The challenges they face are clear, and include:

• low average revenues per user, especially with the move from desktop to mobile accelerating;
• the rise of programmatic advertising, widely seen as depressing CPMs for display advertising;
• the competition from large technology companies, most significantly Google and Facebook, that attract a large share of online advertising;
• the use of ad-blockers as users are frustrated by intrusive ads and long load times.

The most successful internationally oriented digital-born news publishers have used a combination of on-site and off-site distribution, aggressive search engine optimization, and social media promotion — coupled with content that is free at the point of consumption — to build large audiences across multiple countries, generally on the basis of a much leaner organization than most legacy outlets and a much more aggressive willingness to experiment with and use new tools and technologies. Brut, for example, has exploded on to the scene to become one of the highest social reach brands in France in less than a year. HuffPost operates in many countries and has an online audience reach that rivals much larger and more established brands like CNN and BBC — but on a much smaller cost base.

But many expansionist digital-born publishers are struggling to effectively monetize audiences that are sometimes a mile wide and an inch deep. What could be the first step to building a more engaged audience abroad looks to critics like “dumb reach”.

So far, many internationally oriented digital-born publishers remain in investment and growth mode, and have not been consistently profitable. In some cases, investors and owners seem to be losing patience and are pushing for cost cutting as a way of turning a profit. Venture capitalists and other backers are not interested in vanity metrics, but in a return on their investment. Can digital-born news media deliver?

The challenge of building a profitable business around free, advertising-supported digital news has been particularly clearly illustrated by the recent challenges faced by the brands who have most aggressively chased large audiences across many countries and most platforms. But while the challenge is particularly pronounced for those who have neither paying users or offline revenues to rely on, it’s not unique to them. The Guardian, the Mail Online, and other newspaper websites face the same pressures on their advertising revenues. Some legacy publishers acknowledge that their digital operations are still not profitable, and many domestic digital-born news media too continue to struggle with sustainability.

Given that people do not seem willing to spend all that much time (about 8 minute per day in the U.S.) or money (8 percent of online news users in the U.S. say they have an ongoing subscription) on digital news — and given that news media compete head-to-head with large technology companies for both attention and advertising — should we expect to see the digital content bubble burst after 20 years of investment in which only a few have seen a sustainable robust return? Or is this just a shakeout, where the most vulnerable brands implode and others emerge stronger?

Where internationally oriented digital-born news publishers seem most exposed in this crunch is in their reliance on digital advertising and in terms of the platform risk that comes with how they have built their wide reach through search and, especially, social.

Where they seem strongest is when they face those challenges with a leaner organization and a clearer strategic focus and editorial identity than many legacy media, and when they make more effective use of technology, both in terms of platforms like search and social and in terms of in-house tools for automating and enabling work.

Some of them will be lean enough to keep costs low, clearly enough defined to find a niche in a crowded market, and focused enough to make their editorial, distribution, and business strategies work (almost certainly relying on more than just advertising). Some of them won’t. And if they aren’t, then, as Jean-Christophe Potocki pointed out, they’ll be dead.

Rasmus Kleis Nielsen is director of research at the Reuters Institute for the Study of Journalism. You can find their complete report here.

Photo of popping bubble by Joshua Rothhaas used under a Creative Commons license.
]]> https://www.niemanlab.org/2017/12/is-the-digital-content-bubble-about-to-burst-for-some-of-the-publishers-chasing-the-broadest-scale-maybe/feed/ 1 https://www.niemanlab.org/2017/11/newsonomics-a-call-to-arms-and-wallets-in-the-new-era-of-deregulation-and-bigger-media/ https://www.niemanlab.org/2017/11/newsonomics-a-call-to-arms-and-wallets-in-the-new-era-of-deregulation-and-bigger-media/#comments Thu, 16 Nov 2017 16:00:11 +0000 http://www.niemanlab.org/?p=150398 Quibble, if you will, about the level of degeneracy now afoot in the heart of the Old and New Confederacy, as the Roy Moore saga provides yet more sick drama in the country.

That’s a sideshow. What’s quickly appearing on the main stage — if it’s still behind the curtain for now — is the beginning of a likely massive movement in news media ownership. You think you’ve seen a politicization of the press? The 2016 election may serve as just its preamble.

We’re on the brink — witness several actions this week alone — of a small number of right-leaning companies rapidly buying up, or buying into, the assets of journalism companies. In so doing, the alt-right “fake news” assault may move into a much more insidious phase, as long-trusted brands could take their marching orders from those who believe “fact” is fungible, in service of their political and business goals.

“Media madness,” former Federal Communications Commission member Michael Copps called it Wednesday, as 15 Democratic senators called for a new federal investigation of the FCC’s rush to deregulate broadcast media in America.

Their immediate target: Today’s FCC meeting, as current FCC chairman Ajit Pai speeds up his blitzkrieg assault on the decades-old regulatory rules aimed at maintaining a diverse, many-voiced, widely owned free press. Soon to be repealed: several regulations that have prohibited domination of broadcast news media by a few companies and one that has long forbid the joint ownership of a major newspaper and a major TV broadcaster in the same market. [Update: On Thursday afternoon, the FCC indeed voted to repeal the regulations preventing broadcasters from owning newspapers in the same market.]

While Pai and his confederates pose superficially plausible arguments about how digital media has changed everything, their goals are more prosaic. Sinclair Broadcasting figures to become the first big winner of the new era. Although it’s opposed by a good mix of critics — from the stalwart Free Press group to Newsmax’s Chris Ruddy to Glenn Beck to the Dish Network, Public Knowledge, and Common Cause — Sinclair stands a good chance of soon becoming the largest regional broadcaster. How big? If it is allowed to complete its acquisition of Tribune Media (which some will recall cashed out a good chunk of the newspaper industry–built digital classifieds business and then most of the real estate and buildings associated with the former Tribune, now Tronc, newspapers), Sinclair will own 233 TV stations across the country, including the 42 gained in the Tribune sale. That’s a reach into 72 percent of U.S. households. Before the in-progress de-regulation, companies were capped at 39 percent.

Look no further than the coverage of the Roy Moore story to get a glimpse of the future in detail. In “How Sinclair compromised the news on an Alabama station it owns to support Roy Moore,” Baltimore Sun media critic David Zurawik traced the chain of slanted reporting. It began with Sinclair-owned WBMA, which reported that all its sources (from three interviews) believed the good judge and not The Washington Post.

Then Breitbart picked up that report, giving its journalism even wider distribution and its own brand of certification. It’s hard to quickly assess how WBMA and other Sinclair owned stations have covered the Moore story. What we do know is that Sinclair, privately owned and led by chairman David D. Smith and CEO Christopher Ripley, makes no secret of its alt-right enthusiasms. It has mandated nationally produced must-carry editorials, some of them so fact-challenged as to provide ample satiric fodder for John Oliver. 6,356,541 people, as of this writing, had watched that 20-minute Oliver segment, but it’s unclear how much of a difference that makes. (On the other hand, let’s recognize the dogged work of Advance Publications’ Al.com tracking the real story of Roy Moore’s behavior in Gadsden in the 1970s and eighties.)

Sinclair’s approval appears to be in the final stages, though it’s unclear how the heightening opposition will affect that. It may be the first of ever-bigger deals done for political as well as business reasons. As former FCC commissioner Copps told Deadline.com Wednesday, “[It’s] the nadir of the FCC’s credibility as a protector of the public interest. We shouldn’t just be focused on one merger. There are going to be a lot more after that. It’s a flashing green light, greener than any before it.”

While broadcast takes center ring here, pay attention to the rest of the circus.

On Wednesday, the aspirational media mogul Koch Brothers blazed their way back into media ownership consciousness. As The New York Times reported, the brothers are backing a bid to buy Time Inc. With an injection of $500 million, magazine publisher Meredith looks as if it will finally be able to close its pursuit of Time Inc., perhaps putting that company out of its two-decades-old transition woes. The Kochs came close to beating Michael Ferro to the Tribune Publishing punch three years ago; only odd circumstance and pressure on one of Tribune’s then-major owners, Oaktree Capital Management, and on its co-chairman Bruce Karsh, prevented that deal.

In 2013, the Kochs came close to owning The Los Angeles Times, Chicago Tribune, Hartford Courant, Florida’s Sun Sentinel and Orlando Sentinel and Baltimore Sun. (Presumably, if they had made the acquisition, David Zurawik wouldn’t be writing his critical columns for the Sun, and then often taking his viewpoint to Brian Stelter’s Sunday morning Reliable Sources.)

As the Times’ Dealbook put it, “It is not clear how much influence — if any — the Kochs would have on a Meredith-owned Time Inc. if the deal were to go through.” The Kochs have never been shy about mixing business and politics, and they’ll be — with long-standing publisher Meredith a curious intermediary — close to such titles as Time Magazine, Fortune and Money.

How might they use that influence? How might Sinclair double down on its own advocacy after it wins the approvals it needs? Who else may come along — with enough money to freely mix business and politics? Inevitably, Rupert Murdoch’s name reappears. Just a week after it was reported that his 21st Century Fox was in talks to sell substantial film and TV cable assets to Disney, his name has popped up again as a would-be buyer.

Could it have been the never-say-die 86-year-old news magnate of our time who whispered AT&T sweet nothings in President Trump’s ear, moving him to both tweet concern about media consolidation and to see his recent pick for Department of Justice Antitrust chief reverse himself and object to AT&T’s buy of Time Warner, including, most significantly to our points, CNN? Yet it’s also been reported that Murdoch has been a would-be buyerof CNN? The regulatory apparatus, or the dismantling of one, only serves as another means to a business end for Murdoch. Yes, imagine it: Some kind of Fox/CNN tie-up of money, distribution and, of course, working the political angles of the day.

Who may be a first mover if Ajit Pai is successful in letting big broadcasters buy up as many of the country’s TV stations as they want and add big metro newspapers to their consolidated operations? Rupert Murdoch would have to be high on that list. And again, the L.A. Times, the center of so much intrigue throughout its ownership-challenged decade, plays a part. In 2012, Murdoch, too, wanted to buy the L.A. Times. But he was stymied by the cross-ownership rules that meant he’d had to sell highly profitable L.A. stations in order to buy the Times. Now, if the FCC changes stick, Murdoch may be a key player in the broadcast/press roll-up.

This brings up the inevitable question: where are the other names? Wasn’t George Soros supposed to be the master of progressive conspiracies? We’ve seen people like Jeff Bezos (Washington Post), John Henry (Boston), Glen Taylor (Minneapolis) and the Huntsmans (Salt Lake), among others, step forward and return degrees of reinvestment and stability to important metro dailies. Now, when it looks as if many more assets can be bought — and combined, with TV broadcast assets looking richer in a print-decimated world — who else will step forward?

It will take confidence, courage, and money, to confront the new reality. Free Press and others are likely to contest FCC changes in the courts, but that may only be a delaying action. It’s best, perhaps, to contest this war of free press in the marketplace as well. This week, I raised the question of who might buy CNN if the global TV news giant (and leader of the digital news audience pack) comes up for sale. Though, AT&TT CEO Randall Stephenson has proclaimed his willingness to litigate DOJ’s objection to the breadth of his Time Warner buy, time — and offers — may persuade him to sell off CNN.

The gravity of such a sale is clear. I’d argue that CNN has served as a fact-seeking bulwark against the alt-right, in the company of the Times and Post in aggressively covering and uncovering truths and lies. Imagine if it morphed into something else. (In fact, AT&T’s own standing has quickly morphed, given the crazy times: It has moved from being a perhaps poor steward of CNN to a politically aggrieved party in the mess. On Monday, L.A. Times columnist Michael Hiltzik laid out concerns about the AT&T/Time Warner deal.

On Tuesday, Axios’ Jim VandeHei linked the rise of Newt Gingrich’s weaponized politics to John McCain’s pick of Sarah Palin as VP to the “algorithm-ized rage” of Facebook. “Fox News, created in 1996, televised and monetized this hard-edged combat politics. This created the template for MSNBC to do the same on the left, giving both sides a place to fuel and fund rage 24/7. CNN soon went all politics, all day, making governance a show in need of drama,” he wrote. The Fox point is a good one, but underestimates Fox’s — and Murdoch’s influence — on our current politics.

Before Fox — the Americanized version of downmarket British tabloids that blur fact and fictions — such “journalism” was reserved for a place at the supermarket checkout. Most people knew that the category of Enquirers and Stars were not to be taken seriously. Fox News changed that by looking like TV news, its production values and Roger Ailes’ wiles revolutionizing reality. In 2017, we’re up to competing realities. What about 2027?

In the Trump administration’s ongoing teardown of regulation — from health to environment to education — incalculable damage grows. Its media deregulation could have a great deal of impact. I’ve written, here at the Lab, about the likely impacts of news deserts on the 2016 election. As we approach 2018, that desertification only grows. Print advertising losses of 15 percent or more will mean hundreds of fewer journalists working next year. The FCC’s cry for digital freedom is likely a smokescreen. The likely convergence in the TV/local newspaper property combos to come will likely be convergences of costs and less reporting. Cost savings are a top priority for companies eyeing such consolidations. But this deregulation could put more money into the pockets of those who already have a lot of it.

Last week, when I spoke with New York Times CEO Mark Thompson, he recalled his awakening to the value of journalism in a democratic society:

My story of becoming a journalist — I was born in 1957, so at the age of 14 or 15, I was completely engrossed by American politics and Watergate. In England, by the way, where I couldn’t see any American newspapers. But hearing at one or two removes about the work being done by The New York Times and The Washington Post in uncovering Pentagon Papers, Watergate, and so forth. It’s a matter of honest astonishment that 45 years, 46 years later, it’s the same brands.

It is an astonishment. About 2,000 journalists, in total, power those two institutions. Although their work this year will prove historic, it’s not enough. We need journalists working freely in the pursuit of fact all over the country, in whatever “print” and “TV” become.

Photo of a net neutrality mug by CDEL Family used under a Creative Commons license.
]]> https://www.niemanlab.org/2017/11/newsonomics-a-call-to-arms-and-wallets-in-the-new-era-of-deregulation-and-bigger-media/feed/ 1 https://www.niemanlab.org/2017/10/newsonomics-can-startup-invisibly-be-the-new-revenue-stream-publishers-dream-of/ https://www.niemanlab.org/2017/10/newsonomics-can-startup-invisibly-be-the-new-revenue-stream-publishers-dream-of/#comments Wed, 25 Oct 2017 15:35:29 +0000 http://www.niemanlab.org/?p=149435 Oh no, can it be another news micropayments play?

With the seemingly sudden sense that there have got to be ways other than a full-bore subscription for readers to help pay the freighted costs of producing news, 2018 will bring multiple bold new efforts to revive the news business.

Now you can add a new venture, Invisibly, to that list. But its ambitions are far bigger than just micropayments — or just the news business.

Jim McKelvey, the cofounder of Square, spearheads and funds Invisibly. He’s spent almost a year and a half talking to media brands big and small, entertainment and news. And he’s talking about a venture he says could generate a billion dollars a month in new revenue largely for those companies. Already, I’m told, “hundreds” of titles, including newspapers, magazines, and other media, have signed up to test Invisibly, which joins joins Scroll, LaterPay, and Blendle in offering newer payment models for content.

While Invisibly’s website launched a month ago, it has been the news industry’s best-kept secret, morphing over time from “The McKelvey Project” or just “McKelvey” in publisher shorthand. Despite a well-received presentation at the SNPA/Inland conference in September and innumerable talks between Invisibly staff (now numbering 15) and media executives, public word of Invisibly hadn’t leaked.

The company still won’t speak publicly, but in more than a dozen interviews, I’ve been able to piece together some visibility into this innovative model.

Yes, Invisibly is a micropayments company in some ways, but it believes that a newer kind of advertising engagement will generate most of its revenue. McKelvey — who along with cofounding the mold-breaking mobile payment company is also board member of the Federal Reserve Bank of St. Louis — makes a pitch that is more complex and more cerebral.

He’s talked about “building a new business-model stack” for media industries. That’s makes supreme sense to those in the tech industry and remains a bit of a head-scratcher to many of those in traditional publishing.

In fact, in Invisibly’s stealth launch — with a product that will begin testing soon into the new year — we can see a clash of civilizations. There are the old newspaper and magazine companies, long grasping onto a binary subscribe/don’t subscribe model, even in the decade-long shift to digital paywalls. Then, there’s Silicon Valley’s blow-it-up, rethink-it-from-the-bottom-up approach to business disruption and business building.

McKelvey, 52, has found what all technology companies have found in pitching the press and wider media: It’s agonizingly slow going, no matter how good a deal you may be offering. This super-confident Renaissance man can seem like a character out of HBO’s “Silicon Valley” to publishers, talking about his self-made net worth, his boundary-breaking background, and his mode of travel (“private jet” and “self-driving car” come up, publishers say). He’s a self-made man in a hurry to develop Big Ideas. In taking on the media business conundrum in the digital age, he’s acting on his LinkedIn tagline: “I enjoy solving problems in almost any area.”

With Invisibly, his focus has turned to creating a new way forward for high-quality news and entertainment. In presentations, he can decry the world of mediocre content — news and entertainment — that shows signs of winning against higher-quality, more expensive-to-produce content. The solution, he believes, is finally finding new ways to support high-quality digital content creation.

As he presents what can seem like a blizzard of ideas, he has managed to impress executives enough to get some signed up for a test.

One such publisher spoke for several others with whom I talked — almost all of whom wanted to remain anonymous — with this assessment of the project: “Honestly, I’m not that invested in knowledge about what he’s doing. I’ve seen the pitch and most everyone says the same thing: ‘He’s a bit arrogant. He’s been very successful.’ It costs nothing to say ‘sure, go ahead,’ and if it works, we’ll most likely be in.'”

In his relentlessness — and, importantly, in his ideas — McKelvey has managed to convince dozens of top-drawer names to test Invisibly. Those names, according to company communications, include: McClatchy, Gatehouse, The Dallas Morning News, Hearst Newspapers, The Atlantic, The Motley Fool, and Warner Brothers.

How would Invisibly work?

So what is this “new business model stack”?

To put it simply, Invisibly attempts to move publishers beyond that subscribe/don’t subscribe model. As with the concepts of Scroll and LaterPay, Invisibly acts on this principle: Something like 2 percent of a digital audience will buy an all-access subscription, but there’s another group will pay for high-quality content in other ways. The trick in reaching them: offer more choices.

So Invisibly will offer essentially two kinds of choices to non-subscribing visitors to paywalled sites.

If a publisher wants to offer access beyond its set number of free stories a month (one of the most common metered models), it can offer payment per article, day passes, or week passes.

Or the publisher can pop up an Invisibly-served video ad. Watch the ad or answer a few questions, and you get access to the site for a set amount of time. How much? That’s TBD.

In both cases, a user’s current status is tracked through an invisible digital wallet that records how much she’s spent on content and how many ad engagements she’s had. Here’s how the company describes it:

A digital wallet will accompany visitors as they navigate content across the internet. As the visitor happens upon participating sites, the digital wallet will invisibly keep a ledger of earnings from brand engagements and expenditures from content. At the optimal time, the system will prompt visitors to sign up and improve their experience, by giving them a choice of watching or avoiding ads. If a visitor wants to avoid ads, they can add payment (i.e. a credit card) that can process all of their content and subscription purchases in one bill.



A specific revenue promise is a big part of why early testers have signed up. Invisibly promises, by contract, that those who have already signed up will keep all the micropayment and ad revenue, in perpetuity. Some time before launch, Invisibly will begin to take its own revenue share (“over 20%”) for companies that aren’t launch partners. That ability to keep revenue — and the ability to opt out of Invisibly some time before launch without apparent penalty — has built Invisibly’s list of partners.



Invisibly brags on its site that it has “verbal commitments from US digital content publishers representing 73% of the industry and we are actively transitioning these to signed contracts.”

While micropayments will be a key feature of the Invisibility partnership for news publishers with paywalls, that may end up being a small part of the initiative. Consider that much of the news web is still free, from CNN and NPR to BuzzFeed, Vox, Vice, and thousands of other sites. In fact, while preserving higher quality news sources is a key McKelvey goal, it’s the big entertainment companies, like a Disney or a Warner, that would be much bigger parts of the Invisibly network. In that regard, Invisibly could mount an alternative to paying Netflix, Hulu, or Amazon for some video content.

For those seeking new ways to satisfy advertisers, McKelvey says he’s figured out a new way to do that.

In a video on his site, he makes his pitch: “The advertiser experience in our system is going to be unlike anything you’ve seen before…The ad load is going to decrease by orders of magnitude, replaced with fewer, better engagements…Instead of interrupting users, you can engage them…For 20 years, the world has treated online advertising like it was print or television. But the web is a two-way medium, so let your customers talk back. Let them engage. But you can only do this with their permission. Which is what we’re going to get you. Once you have someone agreeing to engage with your brand, you can truly communicate your message. And it’s a lot more fun.”

Fun, and lucrative. Publishers could receive ad rates an “order of magnitude — three to four-figure CPMs” — greater than current, run-of-the-mill advertising, goes the pitch.

McKelvey eschews the world of interrupting bothersome ads — the same bugaboo recognized by Tony Haile’s Scroll, though addressed quite differently. McKelvey intends to make a new kind of peace between advertisers and consumers.

In this worldview, it’s not advertising per se that’s the problem — it’s the way digital advertising has worked. McKelvey has enlisted WPP, the multinational ad giant, as a partner as Invisibly starts up. In addition, its website includes such “supporters” as the Omnicon Group, Coca-Cola, Pepsi, and Procter & Gamble.

Can he offer a kind of advertising that consumers will more willingly engage in — watching a video, answering a few questions, identifying their buying wants — rather than being blitzed with intrusive pitches for things they aren’t remotely interested in?

It’s not just the ad presentation that Invisibly hopes will distinguish it. McKelvey tells publishers that part of his secret sauce lies in harnessing the power of ad tech. His pledge to media companies: I’ll make it work for you.

Invisibly says it uses the ad-targeting intelligence of the web to help media better target consumers. In presentations, McKelvey has acknowledged that such targeting can seem “creepy,” but explains it’s already the world that we — consumers and media executives — live in. Better to apply that intelligence to supporting high-quality content than not.

Consequently, Invisibly wants to use such targeting to perfect both advertising offers and micropayment offers, based on its knowledge of individual, browser-driven behavior. If consumers find themselves in the market for a new truck, or for more information about family health, Invisibly would, in theory, would take that knowledge and offer them a more relevant digital experience.

That approach isn’t a new one. In fact, as I’ve covered the serial reader revenue innovations of the Financial Times, McKelvey’s model sounds a lot like that of the FT. “Propensity modeling” is the term for it — understanding the likelihood of how a consumer is likely to respond, or not, to a subscription offer. Or to a newsletter offer, or to the opportunity to answer a Google Survey question. It’s a value exchange: money or attention paid in exchange for content.

In one grand way, then, it seems like Invisibly is taking the FT’s long-developed strategy and trying to apply it widescreen on the web. The promised land: divining enough of user identity, via ad tagging, to tell the publisher enough about the non-paying visitor (which, for most, is nearly all of them) so that Invisibly can serve the right offer (micropayment, subscription, newsletter, ad) in real time to each individual browser-known user.

While media companies are willing to test, how much will they trust in this would-be ubiquitous system? They like the idea of potential new revenues, but have some fundamental questions.

If they believe that reader revenue really has become the lifeline of the serious news business, then does offering would-be payers preroll ads get in the way of that path forward? Faced with a choice of paying something — an article fee, a timed pass, or a subscription — or simply watching an ad, will the great majority of would-be payers simply opt to watch? That’s one concern I’ve heard. Says one publisher who has declined the deal: “In short, our impression was that this is basically an ad network dressed up as a savior for news sites.”

Further, McKelvey’s reliance on user behavior signals a question about the other big digital currency: data. While each media partner would presumably have access to all its own related data, Invisibly would be building one of the biggest human-behavior data banks extant if it achieves its ambitions to sign up thousands of well-trafficked sites. What value might that provide, and to whom when?

And no matter how good these ideas are, how will they translate with actual publisher implementations? McKelvey and his team will undoubtedly try to make the publisher implementation as easy as possible, but what new kinds of frictions, new interruptions in reading, might follow as Invisibly actually gets put on sites?

What will the readers think?

Then, there’s the big — and at this point unanswerable — question of consumer acceptance and adoption.

A reader/consumer’s “wallet” will fill up silently in the background — invisibly, you might say — depending how much value his attention to commerce is affording advertisers. Consumers won’t see these wallets, or how much content these value holders will offer them. Why? In showing actual value gained, consumers will try to “game” the system.

If, though, there’s enough currency in those wallets, presto, magico, they’re granted additional access to content without paying for it in cash. At first hearing, that seems like a semi-transparent transaction — will users be okay with that?

And how much do readers really want to actively engage with ads, anyway? McKelvey would probably be the first to tell you that’s unpredictable. That’s why I understand Invisibly could continue its testing of consumer behavior for as long as a year.

Certainly, readers might respond better to better ads, but the practicality of that targeting raises dozens of questions about execution — and consumer adoption. Will the ads, questions, or micropayment asks that Invisibly will pop up seem logical to consumers? Or will they seem like new frictions in the process of consuming news or entertainment?

Consumers won’t have to sign up for or sign into Invisibly, as they’ll have to do with Scroll. That’s where the invisibility of Invisibly derives. Background targeting — that mastery of ad tech to benefit media companies — identifies them. The system “fingerprints unique individuals, irrespective of properties. Each user carries enriched 1st party data based on consumption, context, behavior and user profile,” says Invisibly’s site. “Creepy,” or just the way we are now?

If consumers do sign up with Invisibly — and they’ll be offered the chance to sign up through small linked Invisibly logos on media sites — that signup will provide Invisibly more targeting knowledge. And that would increase the value of that signup to advertisers, and thus cash to content producers.

The company itself

So where does Invisibly the company fit in here?

McKelvey has painted it as a self-funded, mission-driven company, one aimed at recovering lost value for media brands in the age of digital platform disruption and distortion.

It’s a for-profit company, 51 percent owned by a trust, and that trust is controlled by McKelvey. It’s a setup intended to keep the company independent, he’s told media executives. It couldn’t, he says, under that structure be subject to takeover (presumably hostile) from a Murdoch, Zuckerberg, McAdam, or Page.

Jim McKelvey’s company is something of a black box to media executives. But they’re intrigued.

“To be honest, we do not know enough about the tech integration to know how it will work. At this time, we are signed up for the test and will participate,” Grant Moise, The Dallas Morning News’ general manager, told me. He added:

What I can share with you is what I like about Jim McKelvey’s approach. He is being bold enough to know that the digital display advertising model is broken. CPMs are eroding due to the multiple challenges associated with digital display advertising at its core (viewability, bot fraud, etc.). The approach of devising a new model where the publisher, the advertiser, and the consumer all benefit from a strong user experience is sorely missing in the digital age.

While most publishers (including us) have shifted from a digital advertising focus to a digital subscription focus, I am glad to see that someone is trying to challenge the thinking that these have to be mutually exclusive.

]]> https://www.niemanlab.org/2017/10/newsonomics-can-startup-invisibly-be-the-new-revenue-stream-publishers-dream-of/feed/ 1 https://www.niemanlab.org/2017/10/newsonomics-the-dailys-michael-barbaro-on-becoming-a-personality-learning-to-focus-and-maggie-habermans-singing/ https://www.niemanlab.org/2017/10/newsonomics-the-dailys-michael-barbaro-on-becoming-a-personality-learning-to-focus-and-maggie-habermans-singing/#respond Tue, 17 Oct 2017 16:53:10 +0000 http://www.niemanlab.org/?p=149080 He doesn’t listen to many podcasts, and he doesn’t even own an Amazon Echo or Google Home, but Michael Barbaro has become one of this year’s breakout audio stars. Barbaro began hosting The New York Times’ The Daily at its February launch, and the show’s five-day-a-week window into the news has added a brighter, warmer coat of color to the Gray Lady — and attracted a huge and growing audience. In the process, The Daily has turned the 38-year-old reporter into something he hadn’t planned to become: a personality.

Is he comfortable with that new cloak?

“I don’t know that I’ll ever be comfortable being a personality, because it never occurred to me that the way that I talk and the way that I respond to people, or how I listen, would become something that people would focus on,” Barbaro, the show’s host and managing editor, told me. “It’s been really intriguing to watch people seize on just the way that I am, and in some ways I can’t help being, and decide that they like it, or they don’t like it, or something in between.”

Barbaro is self-effacing about his newfound career and fame, but it’s clear to the millions who have downloaded The Daily that Barbaro has it — a mix of voice, authenticity, knowledge, and likability that no algorithm could produce.

I asked Times executive editor Dean Baquet what most surprised him about The Daily’s success. “I’m most surprised, frankly, that the Times found a voice so easily. Michael was a great political reporter, one of the best. But who knew he could create such a persona that feels so much like the Times?” Baquet credits both Sam Dolnick and Kinsey Wilson, who championed the big audio push when he served as the paper’s chief digital executive, with the achievement.

As the audience for the show reaches new heights — it had 3.8 million unique listeners in August, the Times says — the paper is plotting how to bottle this accidental alchemy. Consider it an admixture of the best of both public radio and the Times itself, operating in a way the storied institution rarely can — as a startup.

“Barbaro’s been here for a long time,” said Dolnick, the assistant masthead editor responsible for the newsroom’s audio initiative. “I think more than anything it’s that nobody here had a legacy in public radio. We didn’t have old habits to unlearn.”

Dolnick says the Times’ transition from print to digital “has been this long process where we had to figure out how to navigate a new world. How to bring a print habit into the digital world — how to leave some behind and bring some along. It’s hard. We’re doing it, but it’s hard. Then you see some of these new digital players come in, and they were just off to the races because they were just able to start without any of the legacy of print.

“Now for once, we get to do that in audio.”

In August of last year, the Times’ fledgling audio team created the twice-weekly, election-oriented The Run-Up.

“That was our early testing ground,” says Samantha Henig, the Times’ editorial director for audio. “Just the fact that we kind of turned that around in a matter of weeks, and decided to just jump in as soon as [executive producer] Lisa [Tobin] started, and to launch something and learn. That gave us confidence to launch a daily show earlier than we maybe otherwise would have.

“Of course, finding Michael, finding what a natural talent he was, and that sort of special sauce that’s his chemistry with his colleagues — people talking like reporters instead of talking like radio personalities.”

Barbaro serves, in effect, as the voice of the Times’ readers — more curious about the why and how than the what and when, seeking the deeper story behind the headline. Barbaro maintains both his and the Times’ journalistic cred, but shortens the distance between it and us. He’s managed to reveal a new kind of Times in ways that have surprised not just him, but hundreds in the Times newsroom as well.

That’s the other big thing about The Daily. This is a New York Times program, and that has made all the difference. The Daily debuted in an already crowded market for newsy podcasts. Sensing the exploding podcast audiences and the video-like ad rates they can fetch, who hasn’t launched a podcast lately?

The Daily, though, builds on a unique foundation: the 1,300-strong Times newsroom. Times readers — including its subscribers, now numbering about 2 million digital and 1 million print — have long depended on the Times’ journalists’ knowledge and expertise. That’s never been more true than in these oddest of American political times. But The Daily applies a layer of nuance atop the words, the photos, and the infographics.

How much do Times journalists have to watch what they say on the show, especially in the context of the paper’s new social media guidelines? (More than a hundred Times journalists have found their way into the recording studio so far.) That will be an ongoing question, but remember: The Daily is a highly edited show, not a live one.

Habit is the key word here, one that’s connected to reminders to subscribe to the Times and to a 30-second midroll ad. While the name The Daily appears prosaic, it’s entirely right: Subscribers who pay the Times hundreds of dollars a year do so in strong part out of the habits they’ve built. The Daily then reinforces that habit, the digital audio equivalent of — what did they call those things they threw on our driveways every day? Ah, newspapers.

“This is the birth of a franchise for us that can live on and on in many different mediums for a long time,” says Dolnick.

The Times now employs 16 full-time staffers in audio, with more positions — including in digital engineering development — to be added into next year.

“I think the next generation of readers, their first touchstone, their most meaningful touchstone with The Times, will be The Daily,” Dolnick says. “That’s a big deal that didn’t exist just a year ago. We’re already reaching a huge number of people. They’re younger, they’re mobile.”

Already being planned: expanding The Daily to a sixth day each week, and This American Life-like extensions of the program.

The audio team, headed by Henig (as the editorial director responsible for “threading together” the Times’ audio’s audience, product, and business) and Tobin (as the executive producer responsible for the show’s production) have formed a partnership that marries public radio knowledge and production chops with Times newsroom intelligence.

“Everyone, all of the producers on the team who are used to working with kind of traditional radio hosts, are so struck by how Michael — because he is a reporter, and because he doesn’t come from radio — he doesn’t actually know what it means to be a host,” Henig says. “He doesn’t fall into some of the traps of a traditional host.”

He still does his own booking of guests on the show, for instance — a job typically left to producers in radio. “I don’t think he realizes that that’s very unusual for a host, because as a reporter, you do your own booking,” Henig says. “You call your sources, and you figure out when you’re gonna talk to them. In the case of The Daily, these are his colleagues, and so he wants to be the one to send an email asking people to talk, and he wants to be the one to send a thank-you note the next morning to say that it was great.”

I spoke with Barbaro about the joys and challenges of doing something wholly new. Here’s our conversation, edited lightly for clarity.

Doctor: I talked to Dean [Baquet] about it at one point — it was a revelation to some in the business to put in big letters “what we don’t know.” Though it makes a lot of sense. And now we see it regularly on big gnarly stories.
Barbaro: What we know and what we don’t know.
Doctor: Yeah. Let me just ask you a couple other quick questions. When you did the white nationalist interview, and the guy talked about the cosmopolitan white nationalists. And you paused, and you said with a hint of surprised humor, “A cosmopolitan white nationalist?” There are a lot of times in broadcast interviews in which listeners too have been stopped by a phrase and say: Holy shit. What did he say? And you don’t just let it go.
Barbaro: And I think that’s my job, right? I have an editor named Carolyn Ryan, who was my print editor throughout the campaign and a mentor of mine on many different beats, who often talked to me about panel discussions they would do. She liked to say that your job, when you have a group of listeners in front of you and you’ve got a guest, is to never forget that you’re the advocate for that audience. That your job is not to win over the guest, although that’s nice when it happens. And it’s not to seduce and to cozy up to the person you have on the phone. You exist as an advocate for the listener.
Doctor: Lastly, are you a podcast listener? And are there any interviewers that you think of now, that you liked over the years, or you think of now? And I’m thinking of people like Terry Gross, Ira Glass, Alec Baldwin. These kinds of people that we all have in our heads. Do you look up to any of them?
Barbaro: I have to be honest with you: I am teased a bunch on this team by producers for not listening to enough podcasts, and for coming into this industry a little cold. And that is a fair tease. I mean, the reality is that I was not a frequent listener to podcasts before I became a host of one. And I think that liberated me in some ways from a lot of assumptions or traditions of the medium. And it’s either responsible for what listeners do like or don’t like about the way I host.

I grew up much more watching television interview shows. Whether that was Charlie Rose or Larry King, I don’t know that there’s any kind of a straight line from watching those people to how I was. I think my form of hosting and listening, is the one I practiced as a print reporter for 15 years. I mean, the same mode of listening. It’s just there’s a microphone in front of me and an audience listening.

It’s funny. I don’t listen to a ton of podcasts. I did start to listen to Here’s the Thing about a year before The Run-Up. And I do have to say that I love how much of himself he introduced into those episodes. I mean, take the interview he did with Rosie O’Donnell, or somebody else who grew up on Long Island like him, and how much he wanted to talk about his childhood.

Now, this is a different show, The Daily. And so, it’s not about me. But I value a host who understands that his or her own experience is the eyeballs of a listener. And I think that’s an interesting example. I think the comparisons to Alec Baldwin end there.

Screenshot taken from election night at the Times.
]]> https://www.niemanlab.org/2017/10/newsonomics-the-dailys-michael-barbaro-on-becoming-a-personality-learning-to-focus-and-maggie-habermans-singing/feed/ 0 https://www.niemanlab.org/2017/09/newsonomics-our-peggy-lee-moment-is-that-all-there-is-to-reader-revenue/ https://www.niemanlab.org/2017/09/newsonomics-our-peggy-lee-moment-is-that-all-there-is-to-reader-revenue/#comments Tue, 26 Sep 2017 18:27:08 +0000 http://www.niemanlab.org/?p=148224 It’s an age of ready-to-binge whodunits, exported from the Nordic cold onto our heat-seeking laptops and living room screens. So will anyone take up this mystery: Who killed the news subscriber?

As print subscriptions have plummeted, digital subscriptions have slowly emerged. It’s really a six-year-old phenomenon, as daily publishers followed The New York Times’ 2011 lead with paywalls, and digital subscriptions are still, at best, a work in progress.

Today, they offer a tale of two worlds. The national/globals — The New York Times, The Wall Street Journal, The Washington Post, and the Financial Times — build their new and increasingly digital businesses on digital subscriptions, greatly aided this year by the Trump bump. But regional dailies, both in North America and in Europe, continue to struggle with them.

One ratio highlights the gap. While The New York Times today has twice as many digital-only subscribers as Sunday print subscribers (and three times as many as daily print), most newspapers’ subscriber totals still tilt heavily to slowly dying print. In fact, 90-plus percent of all subscriptions to regional dailies remain to print products, less than 10 percent to digital.

That disparity explains the economic divide we see between the still-transforming-but-smiling national-global press and the local newspapers worrying about their very existence after absorbing double-digit decline after decline in revenue. Reader revenue is working to transform the big press, but largely leaving the local press behind.

All publishers see the similar math. At most, 1 or 2 percent of those mammoth monthly-unique audience numbers they report will actually pay for a digital subscription. (Yes, the actual number of humans is probably a little more than twice as high, in the 3 to 4 percent range, since so many readers use two or more devices — desktop and mobile, for instance — to access news sites. For consistency, though, we’ll go with those numbers of 1 to 2 percent.)

Those numbers are still okay if you’re The New York Times with a U.S. monthly audience of 97 million, according to comScore data for August, or The Washington Post with 92 million. If, though, you’re The Baltimore Sun, The Sacramento Bee, or the Arizona Republic — with audiences one-fifth to one-twentieth that size — the math’s a lot harder.

That’s why we see that huge disparity in digital subscriber counts. The Times has surpassed 2 million paid digital subscribers, while the Post is now over 1 million.

Meanwhile, among the regionals, the Los Angeles Times now ranks first, as I reported Friday, with 105,000. Then, The Boston Globe follows with 90,000, while the Chicago Tribune and Star Tribune can count about 50,000. That’s the high end; for most of the local press, the numbers are far, far lower. Which leads to this question: If daily newspapers can’t successfully compete with Google and Facebook for ad dollars and reader revenue is stalled, what’s their future?

When they look at that anemic digital subscriber growth, they ask the old Peggy Lee question: Is that all there is?

While we can hear strains of that heartbreaking song, we can also hear a new background hum. It’s the hum of new reader revenue strategies.

Today, a few eager entrepreneurs are readying launches. Some of the activity has been fairly public, but there’s lots more going on behind the scenes. Let’s preview what’s coming.

The new entrants

Among those new players, consider Tony Haile. The Chartbeat founder is making a simple proposition with his new startup Scroll: Give me $5 a month and I’ll turn off all the ads on a lot of premium news sites.

Haile believes that that pitch (and that price point) he can tap a market far larger than that 1 or 2 percent. He’s planning for growth up to 2 million users. Haile describes his model, and the thinking under it, in an extended Q&A here.

Scroll will launch in beta early next year. Its value proposition might be easily understood by readers, or it may stumble. Haile emphatically notes that he’s not offering “all-access” to top news sites. In fact, whatever paywall limits those sites put on visitors — now often down to 2 to 5 free articles per month — stay in place.

Rather, when Scroll customers reach these “premium” sites, their pages will be ad-free. The sites will recognize Scroll customers and remove ads from the pages they visit, whether that’s a couple or an infinite number in the case of say a free site like HuffPost or CNN.

What do publishers get for giving up ad dollars on those pages? They share in a revenue share pool. Of each $5 monthly payment, Haile says $3.50 will go into the pool. Publishers will divvy up the money based on the amount of time spent on their content by Scroll subscribers.

Haile believes he’s cracked an old nut of cross-title sales, and I hear a fair amount of preliminary enthusiasm for Scroll. Last week, Haile told me he is adding one contracted publisher per week. The names in his pipeline aren’t yet public, but they’re impressive. So is the money — admittedly small bets — that is funding him: News Corp, The New York Times, and European powerhouse Axel Springer have led the $3 million funding. Joining them are Founder Collective, SoftTech, and O’Reilly AlphaTech Ventures.

While Haile’s basic rev-share promise appears to be its major value proposition for publishers, I believe it may end up being as compelling as an on-ramp to subscription sales. There should be no better would-be convert to a $200 a year annual digital subscription than someone already paying something for news.

Speaking of on-ramps, consider LaterPay. The German-founded venture recently exxpanded in the U.S. LaterPay acts on the premise that readers need to sample news content.

Like Scroll, and unlike Blendle — which many in the industry compare it to — LaterPay enables publishers to offer a new paid alternative on their own sites. It doesn’t require learning a new app to use or a new discovery pattern to access news content.

Its premise seems simple enough. Publishers decide how to price individual articles — often in the 39-cent range — allowing readers a cheap taste of premium news content. Then, it doesn’t charge their credit card until they’ve consumed 10 articles. (Hence, LaterPay.) It’s a gimmick — a psychological scheme to break through a barrier to customer payment. Readers can also buy time-based passes, for a week or a month.

That’s a potential small revenue stream for publishers, and it offers — like Scroll — the promise of on-boarding new potential full-freight subscribers.

LaterPay founder and CEO Cosmin Ene has thoroughly thought through the minefield of reader payment.

For those who like to pitch an “iTunes for news” metaphor, he says, “most ones who talk the talk, don’t walk the walk. Walking the walk requires you to unbundle content and sell it in individual pieces, as well as in re-bundled form and in subscription form. After all, iTunes didn’t become known for selling the entire album, but rather for unbundling it and offering your favorite songs piece by piece. iTunes was the first truly user-centric model of the digital economy. By unbundling music, iTunes created a huge consumer appetite and created confidence in subscription models. Without unbundling, we wouldn’t have Spotify and Netflix today.”

Rather than that binary world of pay/don’t pay, Ene, like Haile, indeed believes that’s not all there is: “Walking the walk would require a diversified approach to monetizing content, allowing individual sales and time-based models and not just trying to push towards subscriptions only. There is a whole universe living between ads and subscriptions.”

Ah, that great potential in-between. CEO Cosmin Ene makes a great case for his product, and he’s now out pitching it to U.S. publishers.

He can point to some success in Germany, with a regional daily and with Der Spiegel, the highly respected German weekly. In a limited test, Spiegel both sold an increasing number of articles and grew revenue via LaterPay. But Spiegel doesn’t have a digital paywall, enmeshed in its own strategic complexity, so its test doesn’t tell us everything.

And what of Blendle? With much fanfare (and financial backing from The New York Times and Axel Springer), Blendle announced in December 2015 that it would attempt to transplant its model from the Netherlands to the U.S. That expansion has remained in beta, with the company now pivoting to a Blendle Premium in the Netherlands. “We are indeed still working on achieving product market fit,” CEO Alexander Klöpping told me last week. Klöpping also convinced Nikkei, parent of the Financial Times, to invest new money in the company this spring.

Blendle’s attractive interface won plaudits — and it’s seemed to work in its native country with relatively few major news sources, though with some hiccups — but the U.S. has proved tougher to figure out. Blendle has offered a pay-per-article approach and built its initial plans around being another node of news discovery.

The big point that Haile and Ene, among others in the would-be pay trades, point to: Will consumers want to go to a new branded site to get the branded news they expect from well-known providers?

That’s just the top of the entrepreneurs aiming to create new markets of paying but less than super-fan subscribers. Expect more ferment in this field in the year to come.

Facebook subscriptions

Then there’s Facebook, the platform that’s eaten the world, and made it part of many a news industry — and national political — conversation.

No one’s got any doubt that people read a lot of news on Facebook. Publishers, though, remain deeply uncertain about how that reading does — or could — translate to new reader revenue. Over the past year, buffeted by the political winds of fake news, Facebook has worked more earnestly with publishers on “partnership.”

This week, as it prepares to add a subscription feature to Instant Articles, it’s meeting more headwinds from publishers than it expected. While it originally had touted a subscription feature as aimed at aiding the deeply struggling local/regional press, Facebook instead turned to national players. They’re hesitating to join, and that could end up torpedoing the profile, and P.R. benefit, of the initiative.

Yet, Facebook will get some traction — and testing. For Tronc, the third biggest U.S. daily publishers, it’s a third leg in a partnership.

“We were happy with the speed and the consumer experience,” Mark Campbell, Tronc’s senior vice president of consumer revenue, told me last week. “We’re happy with the ad revenue. And so, the third leg of the stool needs to be solved if we are to continue with Instant Articles and expand it to other properties. We’ve been testing Instant Articles in San Diego since April. And on those first two dimensions of ad revenue and consumer experience we’ve been very happy. We just need to shore up our subscription-driving ability, because we can’t enable a free experience ad infinitum.”

Tronc will deploy the next test at the Los Angeles Times and The Baltimore Sun.

Money is one thing; consumer data is another. While Facebook has shown movement on that question, publishers much want a sharing of article consumption habit. Many readers actively consume news on both publishers’ sites and Facebook. How, publishers ask, can they see these customers’ behavior across platforms?

Niches

When I’ve explored potential “Paywalls 2.0” approaches in the past — another spin on getting beyond the 2 percent number — I focused on The New York Times’ digital niche tests.

That testing has been slower than the Times has liked — and it’s being rejiggered again, as the Times completes both top executive and mid-management shuffles.

Of all the forays it has it tried — the late NYT Now and NYT Opinion most prominently — it’s simple old crosswords that have found small traction. The Times now takes in about $3 million a quarter on crossword subscriptions, of which it can count 300,000 subscribers. That’s nice change, and proves out a niche point, but again, is that all there is?

At mid-year, the Times converted its highly useful and attractive free Cooking app to paid, but only for non-subscribers, at a rate of $5 for four weeks. It’s too early to know how successful Cooking may be in finding significant new revenue. In the wings are its tame-the-Platinum-Age-of-TV app Watching and something in health — if it can figure out what enough people will pay for.

Then there’s the launch of The Athletic — perhaps the dear departed National (what Grantland called “The Greatest Paper That Ever Died“) for the digital age.

We’ll plumb into it more deeply soon, but The Athletic smartly follows readers’ passion. Will enough find reason to subscribe among the welter of free sports news and information? Consider that voice and expertise — two factors that have proven out another Netherlands original, De Correspondent — may make the critical difference here. We can hope so, and will be watching.

Are they dreaming?

It’s easy to look that reader revenue landscape and say: No more than a tiny group of people will pay for news. But that sounds like an echo of “Nobody will pay for news,” and today that seems so 2009ish.

Who would have believed The New York Times’ digital numbers — and revolution? I doubt that even the Times executives who put it into place could expect the success they’ve found long after the initial McKinsey estimates.

Similarly, who would have believed that Netflix would evolve from a DVD sender to a global entertainment machine counting more than 100 million worldwide subscribers. Or that Amazon, Hulu, Spotify, and Pandora, among others, would get millions to pay for digital media.

In fact, we in and around the news industry know nothing (or close to it) about where this is all headed — or where it’s been. Consider that in the 1950s — the height of Miss Lee’s fame — household penetration of newspaper sales was more than 100 percent. That’s right — the average household took more than one paper, given the thriving popularity (and great editorial spirit) of afternoon papers arriving for the dinner hour, long after their staider morning competition had hit the doorstep.

More than one paying news subscription per household? That seems as unbelievable as the nadir of news subscription we now encounter. We’re clearly at a low point, with print circulation cratered and digital circ disappointing for the country’s 1,350 dailies. So, maybe there’s a new in-between — somewhere between that apex of “The Life Of Riley” 1955 and “Game of Thrones” 2017.

What’s the holdup?

Here’s the fascinating question: Why is seemingly so hard to get people to pay for news? It’s a tougher question that might first appear.

In the spate of answers offered up by those entrepreneurs and others in the news business, we see how many points of buying inflection — and what we might call dis-inflection — there are. Let’s briefly catalog them, some for future exploration:

• Pricing: Who’s right here? The Times with its couple-of-hundred dollar model, a model borrowed from print? Or Jeff Bezos, with the pricing philosophy he long ago espoused in Sun Valley to those who would become his newspaper-owning peers: Get ’em in the tent cheap, for less than a hundred bucks a year, and extract more value down the line? Or is it the under-$10-a-month crowd, Scroll included, who are borrowing from entertainment models?
• Sampling: The FT, the father of the metered movement, has come to believe that “trialing” is better than metering. The idea: Readers need at least 30 days to thoroughly sample a new paid product.
• Experience: Could it be that the news websites, so desperate for revenue to keep the doors open, have made the ad-interrupting experience so nasty that paying consumers avert their eyes and close their wallets?
• Ad-free: Eliminating ads — the core of Scroll’s pitch — may make sense. But, clearly, on such successful subscription sites as the Times, Journal and FT, readers don’t mind a tasteful ad presence much.
• Proximity: That’s the Facebook pitch. Fish where the fish are biting.
• Friction: There are simply too many steps to saying yes — especially on mobile. And lots of other frictions, too: UI, UX, and more.
• Currency: Civil is coming on as a blockchained, Ethereum-based news foray, while Hubii has already become the first Ethereum-based content company
• Content: Let’s not forget the basics. If a publisher can’t offer sufficient unduplicated, high-enough-quality content, nobody’s going to pay for it for very long. For regional papers that have halved their staffs (and their community knowledge), that’s a huge issue. And few talk about it.

That’s an impressive list. And within it, we see two things. First, how much we don’t yet know about the selling and buying of news products. And second, all the potential in the work being done to get better answers to those questions.

Starved for real consumer affection, news companies can only put another Peggy Lee standard, written by the Gershwins, on their playlists: “Somebody Loves Me.”

Somebody loves me, I wonder who
I wonder who she can be
Somebody needs me, I wish that I knew…

Somebody loves me, I just wonder who
Or maybe, maybe, maybe it’s you.

Image from cover of Peggy Lee’s 1969 album Is That All There Is?.
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