A Week of Classified Musical Chairs
Important Details: You need a scorecard, an Excel spreadsheet, and a sheath of 10-Ks to keep track of the recent maneuvering in the newspaper industry. Blame (or credit) the moves on the falling dominoes out of the Knight Ridder demise. That sale and subsequent divestment of 12 of the KR papers by McClatchy has prompted a new flurry of talks among the major newspaper players and the main channel distributors, Google, Yahoo!, and MSN (GYM). And the KR fallout has also meant a splintering, maybe a maturing, of the online recruitment business. When things are sorted out, we’ll see a number of new alignments, ones that seemed unlikely as recently as a year ago.
Dean Singleton, a new leader in the industry, may be instrumental in the pushes. He was just elected chairman of board of The Associated Press. That board includes CEOs from most of the top newspaper companies in the industry, so his election is noteworthy. Mr. Singleton, once a low-cost operator who many in the industry looked down on, has arrived. His MediaNews company is now the fourth-largest news publisher in the nation, pending resolution of legal wrangles in the Bay Area, where he’s about to take title to the San Jose Mercury News and Contra Costa Times. Singleton has won second looks and some admiring glances for his treatment of acquired properties in Denver (Post) and Detroit (News). He’s arriving at the top of his game at a perilous time for newspapers, as flat-lining revenues and diminishing profits have caused major soul-searching.
Singleton’s attitude is refreshing in this hand-wringing era: roll up your sleeves, boys, and do better deals.
You can see his influence, for instance, in the talks going on with Yahoo! Within the last two months, we understand, representatives from at least six of the major news companies – MediaNews, Hearst, Scripps, Advance, McClatchy, and Belo – met with Yahoo! for most of the day. Yahoo! paraded in representatives from a number of its key Search, Sales, Local, and News groups, talking partnership. Those discussions are continuing, with the news companies actively talking with each other about the framework that will revise a decade of half-moves and inadequate results. Talks are also underway with Google and MSN.
The No. 1 goal: get better distribution of classifieds, particularly in the lucrative recruitment, real estate, and auto lines. The next goal: right-size the relationship around search-aggregator display and monetization of newspaper headlines, briefs, and full stories. The GYM companies have made a not-so-minor fortune off the aggregation and display of costly-to-produce newspaper headlines and briefs. Sure, when readers click off those sites, the news sites may get the benefit of a click or two, but so far the disproportionate financial rewards have accrued to GYM. The newspapers want a percentage of revenue from all pages that their content is getting monetized on.
Part of the group-of-six talks with Yahoo! involves Yahoo! HotJobs, the No. 3 player in the online recruitment field. Long the No. 2 player, newspaper-owned CareerBuilder has just moved into the lead in revenue, traffic, and listings, over former lead dog Monster Worldwide. HotJobs wants more listings; the newspaper industry wants more distribution, especially companies that aren’t CareerBuilder owners or affiliates. Local sites affiliated with national ones drive more traffic and derive more revenue.
CareerBuilder, for its part, is sorting out its ownership and go-forward plan. It has long been owned in thirds by the three largest companies: Gannett, Knight Ridder, and Tribune. McClatchy, in buying Knight Ridder, didn’t automatically get KR’s third. Gannett and Tribune have a right to buy out that interest, and those negotiations have been ongoing since McClatchy closed on the KR sale. CareerBuilder has grown into a greater asset in and of itself, and Gannett and Tribune would like to maximize it while maintaining the right kind of relationship with McClatchy. So insiders peg this likely result: the original owners will increase their stakes, but give McClatchy a good percentage, say 20 percent, to stay in with its 32 papers. (Further tip-off to that eventuality: In CareerBuilder’s release on its revenue lead, it noted Gannett, Tribune, and McClatchy as CareerBuilder owners in its boilerplate at the bottom of the announcement, though nothing has been publicly acknowledged to that effect.) Indeed, at least two others newspaper companies may take minor stakes as well, as they bring their papers in. Which companies? Well, the two may be among the six talking with Yahoo! and Google.
If that’s not confusing enough, take a look at Wednesday’s news that the two Philadelphia dailies, both KR orphans, had signed an affiliate agreement with the news industry’s arch nemesis, Monster.
What’s going on here in all the jockeying? First off, it was inevitable. When you pulled the KR rug out, the furniture had to reassemble itself and each company has its own designs. But look more closely and you see companies coming to grips with a new reality: this isn’t the age of content (king, prince….pawn?); it’s the age of distribution. Making deals with those who have the audience is key to the sellers of advertising and creators of news, if they are to transition to the digital age.
In Outsell’s Opinion: Newspapers are increasingly getting it, when it comes to distribution. Too long, they lived in a wishful world, wanting to be the center of the new medium and believing that day might still come soon. Now they’ve come to grips with who has the audience. Outsell believes the key is the collective approach that a group of the major companies is taking. Whether they drive a collective deal or merely the framework for a more equitable one, collective negotiation will get them farther than one-off deals have. The news companies should play with their whole decks – the power of their advertising relationships and their news and information prowess – even though this is complex. If they can do that, they can come to an historic re-jiggering of the economic model that has left them almost out in the digital cold. Equity in online classified companies is desirable, especially, given their growth against steady-state print revenues. But a reckoning of distribution – with or without equity – is hugely needed. Distribute recruitment ads on CareerBuilder, Monster, and Yahoo! HotJobs if possible; after all, that’s what the new wave of classified aggregators like Oodle are trying to do. Newspaper content must be where its readers are, under-girded by deals that are fair and sustainable for the industry.