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Can Technology Save Newspapers?

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March 03, 2009

Can Technology Save Newspapers?



By Michael Dinan
TMCnet Editor

Here’s something you never want to hear from the president of your company: “Each of our management teams is at work to complete a fundamental restructuring so we can turn our full attention to product innovation and revenue growth.”

 
Yet that’s just what Steven R. Swartz, president of Hearst Newspapers and senior vice president of Hearst Corporation, told workers at a pair of struggling Connecticut dailies that his company owns and operates – the Greenwich Time and The Advocate of Stamford.
 
In a group e-mail that was sent to employees Feb. 26 and obtained by TMCnet (printed in full below), Swartz said the papers must begin charging for access to online content in some way, and that it may look to Amazon’s new version of an e-book tablet – the Kindle 2 – to do that.
 
“We believe we must begin to provide greater differentiation between the content of our free Web sites and the content of our paid product, be that paid product read in print, on a digital device like Amazon’s Kindle, or online,” said Swartz, pictured right.
 
The Kindle 2 – a wireless device that can hold 1,500 books from an available library of more than 230,000 books, as well as several newspapers – is emerging as a divisive technology in the world of writers and publishers.
 
As TMCnet reported this week, bending to authors’ worries that its ability to “read” books aloud would cut into audiobook sales, the world’s largest online retailer announced that it’s modifying the Kindle 2, pictured left.
 
Officials at Seattle-based  Amazon say rightsholders now can decide on a title-by-title basis whether to enabled so-called “text-to-speech” functions for the Kindle 2.
 
“We have already begun to work on the technical changes required to give authors and publishers that choice,” Amazon says. “With this new level of control, publishers and authors will be able to decide for themselves whether it is in their commercial interests to leave text-to-speech enabled. We believe many will decide that it is.”
 
We’ll see.
 
What’s clear now is that the Authors Guild appears to be getting its way.
 
As TMCnet reported, the century-old, Manhattan-based organization advised writers to examine and negotiate their e-book rights closely upon the Kindle 2’s release.
 
Yet the device also is emerging as a technology that could help newspapers reclaim a portion of the advertising revenue they’ve lost to the Internet – long a near-exclusive source of income for the industry.
 
Here’s a snapshot of an ad on Amazon that promises to “deliver” newspapers wirelessly to a Kindle device for a fee:
 
 
To be sure, newspapers are teetering financially. The Rocky Mountain News in Denver published its last edition last week, and the Philadelphia Inquirer filed for bankruptcy. The San Francisco Chronicle is facing extinction. Last year, the Tribune Co, publisher of The Chicago Tribune, Los Angeles Times and The Baltimore Sun, filed for bankruptcy, as did The Minneapolis Tribune, and the New York Times Co has suspended its dividend to cope with the recession.
 
Already, we’ve seen several newspapers and wire services try to leverage technology to turn profit margins around.
 
Recently, TMCnet talked to Associated Press General Manager for Mobile and Emerging Products Jeffrey Litvack about a new effort – the “Mobile News Network – that brings local, national, international, business, entertainment, sports and other news from more than 1,000 participating media organizations, supplemented by AP text, photos and videos.
 
Released by the AP’s so-called “digital cooperative” – an effort designed to bring AP members’ information to new digital outlets, the network is touted by AP officials as a way for local news organizations to increase revenue by introducing interactive content to younger viewers, building brands and offering news around-the-clock.
 
As TMCnet has reported, the mobile Web – widely considered the platform of future telecommunications – is drawing more and more news organizations that long have struggled in an Internet-advertising era to post profit margins of years ago.
 
The AP's effort followed a similar try from Cox (News - Alert) Newspapers Inc., which launched 19 Web sites for newspapers it owns and operates across a wide swath of the United States, including Texas, Ohio and Florida.
 
Still, the industry continues to falter – to the laments of journalists who claim that the loss of newspapers hurts the communities they serve. Newspapers keep public officials accountable, inform constituents and spotlight the goings-on of towns and cities, advocates say.
 
In addressing Hearst employees at The Advocate and Greenwich Time, Swartz refers to a campaign called “100 Days of Change,” which apparently is underway. TMCnet has learned that, for some, the 100 days will be up this Friday, March 6, when the two dailies see sweeping staff cuts.
 
“Our goal is to emerge from the ‘100 Days’ with a cost structure we can build our future on and a business model that seeks, by 2011, to get more than 50 percent of our revenue from circulation revenue and digital advertising sales – two areas of our business that we know we can grow and grow consistently as this recession subsides,” Swartz says.
 
“I know these are difficult times for those in businesses like ours that are buffeted by so many forces,” he continues. “Yet I know that we have the wherewithal to emerge from this recession with a changed business, yes, but one that is back on a path of growth. Thank you again for your commitment to see us through this journey.”
 
Full text of Swartz’s e-mail:
 
"Dear Colleague:
 
We are at the halfway point in our “100 Days of Change” program and I want to share with you the progress that we’ve made on ideas that fundamentally change the way we do business. Many of you have taken the time to write to me or to the various task force leaders with your thoughts and suggestions, and I’m extremely pleased by the level of energy and cooperation I’ve seen across our newspaper company.
 
One inescapable conclusion of our study is that our cost base is significantly out of line with the revenue available in our business today. It is equally inescapable that during good times our industry developed business practices that were at best inefficient. For example, all newspapers look pretty much alike, and yet they are not similar enough to allow for efficient production or common content sharing. This must and will change.
 
Another example is that while we have a tremendous opportunity to continue growing our advertising business with small customers, we cannot afford to do so by calling on every advertiser in person every other week and then having a team of artists build and rebuild their ads. We must and will learn to use outbound telemarketing and self-service ad platforms more effectively. I’m confident we can move to rationalize our costs without impairing our ability to give our readers and advertisers the best news and information products in our markets. Even with the cost reductions we are making we have far more resources devoted to reporting local news and information than any other local media outlet. Thus, each of our management teams is at work to complete a fundamental restructuring so we can turn our full attention to product innovation and revenue growth.
 
Next, we have a revenue and business model problem as opposed to an audience problem. Yes, it is true that fewer people read a newspaper on any given day today than they did in the past, but with the proliferation of media options, consumption of individual media types isn’t what it once was and probably never will be again. Our audience is still the largest of any local news and information media outlet. And when combined with newspapers’ Internet audience, our audience has actually been growing in recent years while our revenue has been declining. So it is our business model that must change in several ways.
 
We believe we must begin to provide greater differentiation between the content of our free Web sites and the content of our paid product, be that paid product read in print, on a digital device like Amazon’s Kindle, or online. This doesn’t mean we wall off our Web sites behind a paid barrier. Our sites must continue to be the superior and dominant free Web sites in their markets. This means they must offer the best in breaking news, staff and reader blogs, community databases and photo galleries. In fact, we need to expand the number of reporters, editors and photographers who are running a truly great blog, creating a rich dialogue of opinion and data sharing. We must do a far better job of reaching out to prominent citizens in our communities, those who already have a blog and those who don’t, and providing them a prominent platform to state their views. We must develop a rich network of correspondents to help us grow the deepest hyper-local community microsites in our markets. We must do a better job of linking to other great sources of content in our communities. And we must put staff resources behind building those channels of interest that have the greatest potential: those built around pro sports teams, moms and high school sports, to name a few. Exactly how much paid content to hold back from our free sites will be a judgment call made daily by our management, whose mission should be to run the best free Web sites in our markets without compromising our ability to get a fair price from consumers for the expensive, unique reporting and writing that we produce each day.
 
We must continue to ask readers to pay more for their subscriptions. Our print subscribers don’t pay us enough today that we can say they are actually paying for content. Rather, we only ask readers to pay for a portion of the cost of printing the paper on newsprint and delivering it to the reader’s doorstep. We must gradually, but persistently, change this practice. We ask our readers to pay for their subscriptions on the Kindle today, and we must begin doing the same thing on the iPhone (News - Alert) and other advanced smart phones and reading devices that allow us to create a user experience worth paying for. We also need to make our paid product available through the Internet for those who prefer to read it that way. And we must innovate to constantly enhance the reading and advertising experience on these platforms.
 
Our sales forces must make a transformation similar in scope to the one that IBM (News - Alert) underwent in the 90s when it went from a mainframe selling culture to a strategy of being true IT consultants to their clients, even selling them non-IBM products when warranted. In our case, we must fully make the leap from simply selling pages to selling audiences, and in doing so be able to sell packages of products, some of which won’t be our own. The best of our Hearst Newspapers colleagues are already doing this, combining our offerings with those of Yahoo!, Google (News - Alert), MSN, AOL, Ask.com Yahoo! HotJobs and Zillow and networks of local Web sites that we have assembled. All of these products are in our portfolio today. Our advertising task force has created a three-month course of transformational instruction built around a massive sales contest that each of your markets either has launched or is launching. I’m confident that most of our reps will emerge from this process set on a path to become topflight, consultative sellers of audience.
 
One final overarching thought emerges from our look at advertising sales: we must use third-party printers in all of our markets in order to significantly add more color to our products, not so much for our readers’ needs, but to be more competitive in the battle for advertising dollars in a high-definition world.
 
Finally, while our savviest advertising customers know that our products still work well for them, as do our most passionate readers, we have done a poor job of telling our story. This becomes even more important as we change our business model. Our communications task force has developed a wonderful new campaign that begins to put us back where we should be—on the offensive about the vital role we play in the politics, social lives and commerce of our communities. We’ll have samples of the campaign available next week on 100DaysofChange.com <http://www.100daysofchange.com/> .
 
Please discuss these ideas with your colleagues, your managers, our customers and our readers, and let us know what you think. Our goal is to emerge from the “100 Days” with a cost structure we can build our future on and a business model that seeks, by 2011, to get more than 50 percent of our revenue from circulation revenue and digital advertising sales—two areas of our business that we know we can grow and grow consistently as this recession subsides.
 
I know these are difficult times for those in businesses like ours that are buffeted by so many forces. Yet I know that we have the wherewithal to emerge from this recession with a changed business, yes, but one that is back on a path of growth. Thank you again for your commitment to see us through this journey.
 
Best regards,
 
Steve"
 

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Michael Dinan is a contributing editor for TMCnet, covering news in the IP communications, call center and customer relationship management industries. To read more of Michael's articles, please visit his columnist page.

Edited by Michael Dinan





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