Law 12 – Mind the Gaps

Hearst’s strategy here is one to watch. There are good reasons (more on that below) why daily newspapers have opted to go for door number one and get more money from long-time subscribers while making new subs a largely second priority. But they know that’s a two- to three-year strategy. As 10,000 baby boomers turn 65 every single day through 2031, the older-reader market inevitably winnows and must be refreshed with new, paying customers. For daily newspapers, getting younger (yes, younger means under 55) readers to pay is mostly phase two.

So let’s see what Hearst learning, as it leads both newspaper companies in that quest and its fellow magazine chains as well.

There’s a lot to like about the demographics of the digital audience. According to the company’s data, the readers are 10-20 percent more affluent, 10 years younger, and more educated. Wilkes acknowledges that those good demographics may be skewed by early tablet demographics themselves, but they are directionally vital.

No longer is Gannett a newspaper company with broadcast and digital assets. It can now be thought of as a broadcast company with major newspaper and digital assets.

Critics can say what they want about the diminishment about the L.A. Times. Its news presence and ability to set agendas, through its reporting and opinion pages, is certainly reduced, but it’s still got the only megaphone of its kind in town. As Gabriel Kahn, a University of Southern California journalism professor and WSJ alum pointed out to me this week, even newsletters that aggregate local news — from such sources as the L.A. Business Journal and KPCC’s Maven’s Morning Coffee, rely heavily on the Times for their citations. Consider that an indication that the next generation of rip ‘n read — dailies’ long-standing complain against local radio news stations — uses the same raw resource as the first one, the daily newspaper’s vast newsroom.

What lesson we’re seeing reinforced: No matter how much anyone may pre-bury the legacy daily, some people understand the huge and remaining value of media today. So maybe a different question needs to be asked. Not the almost trite one — “When will dailies disappear?” — but a new one: “Who will own and steer these old titles into the heart of the 21st Century?”

The new board’s mandate, of course, is to maximize its take on the sale. Tribune newspaper profits run at the roughly $200 million level, maybe a third of which comes out of L.A. So, take the market multiple of 3 or 4 times that number as a price — or $600 million-plus — for the eight papers, even though underfunded newspaper pensions put a drag on that number. Then, if the inflamed passions, stoked by the Koch bid, produce a higher selling price, so much the better.

The board clearly is aiming for a single deal. One deal reduces transaction costs and deal risk, and speeds closing. So who’s likeliest to play in a single auction for the eight Tribune papers, which also include two non-metros in Newport News, Va., and Allentown, Penn.?

The likeliest four: the Brothers Koch, Rupert Murdoch, the B group from L.A. (Eli Broad, Ron Burkle, and Austin Beutner, a well-connected trio of moneyed liberal lineage), and Aaron Kushner’s 2100 Trust.

For the Kochs, the purchase would be a seem to be an extension of their political wars by other means. Of course they protest that notion, and the only track record we have to go on is their profound influence on conservative activist American politics over the last several years.

Murdoch’s L.A. TV licenses come up in 2014, so the cross-ownership issue is immediate and real, and with the FCC in appointment limbo, he’ll not get the waiver relief his lobbyists had hoped to win by now. Flip a coin and I say Rupert goes with his gut and bids.

If he indeed goes for the Times (and other titles, if necessary), consider that Murdoch couldn’t ask for a better competitor than the Koch Brothers. No one’s out in the streets protesting a Murdoch takeover of the L.A. Times or Chicago Tribune. Even Koch opponents whisper that Murdoch would be better — the gray, if not white, knight, to the black hats of the Kochs. It’s a new parsing in the post-Sam Zell era: How do you judge potential ownership these days, except on a relative basis?

Digital advertising is all about technology in 2013, and you’ll see lots of talk of the ad-tech stack, and who owns it. Google, of course, owns much of it, through its successive AdWords/Doubleclick/AdMob and more creations, acquisitions and integrations. Its stack is so efficient that many publishers feel compelled to use it, though they are wary of getting their businesses tied ever more directly to Google — or the Google “Death Star,” as some critics call it.

For most publishers, Google is the classic frenemy. They work with it when they think the advantages outweigh the hazards, even as top publishers build their own programs. In fact, expect to soon see U.S. news publishers transition their Newspaper Consortium partnership with Yahoo into something intended to be broader, something that allows publishers to opt into and out of the ad programs of multiple portals — not just Yahoo — harnessing the ad tech of the day.

Six-month-old Smart Match is one of the FT’s latest innovations to stay “premium.” In brief, the content of an advertisement is matched, dynamically, to that of an article. The technology: semantic targeting of both article content and the FT’s current “ad library” for the best matches on the fly, as compared to standard keyword targeting.