The Newsonomics of Spring Cleaning: McT's Dissolution, NewsCorp's Infancy, Gannett's Ad ID and WaPost Network
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First published at Harvard’s Nieman Journalism Lab
The tensions of change in the news business are intense but often subterranean. One way they pop into public view is through top leadership changes, something that seems to be happening more frequently today than in the past. In the span of a few hours yesterday, we saw both Jill Abramson’s ouster at The New York Times and the resignation of Le Monde’s top editor. It wasn’t that long ago that Daily Telegraph editor Tony Gallagher was shown the door. These events are always about a mix of leadership, personality, change management, and big questions about how authentic editorial values will be maintained in an era of roiling business challenge. But despite the attention they grab, they’re only a tip of the iceberg.
As we look forward to the second half of the year, we already know some of the big stories to watch, and leadership will be key to those. How will the spun-off Tribune and Time Inc. companies do, and how will they be led? As Jeff Bezos’ ownership of The Washington Post reaches the one-year mark, will the revolutionary disruptor announce any shape-shifting moves for the Post — moves which might serve as models for his besieged new brethren? Who will buy the dozens of former MediaNews and Journal Register properties that Digital First Media will be putting on the block?
But let’s focus on the major changes we’re seeing now instead of looking ahead. It’s been a season of positioning, movements less seismic than slowly shifting. It’s a season that is seeing a lot of housecleaning and — barely noticed — the crumbling of some of the newspaper industry’s vestigial structures. Let’s start there, with one announced dissolution, and then check in on three other storylines involving many of the long-established players in the U.S. daily industry.
The wires business recedes farther into the 20th century.
Once there was a flourishing “supplemental” wires business — all those wires that complemented the Associated Press (and, long ago, United Press International). The epoch spoke to the robustness of the news business. Many newspaper companies invested in content, both using it themselves and finding buyers among their newspaper peers. It wasn’t unusual for a half a dozen wires to flow into news desks every day. Back in the ’90s, we counted how much content flowed into the St. Paul Pioneer Press each day and how much of it we used. We printed just 5 percent of what we received.
Retired Scripps Howard News Service editor Peter Copeland neatly recounts a two-decade tale of consolidation and loss.
In the 1990s, McClatchy had a news service that was mostly in the West. They didn’t want to operate it anymore, so Scripps Howard set up a deal to start a Scripps-McClatchy Western Wire run out of the Scripps Howard News Service office. When I took over SHNS, the Western Wire was not doing well, so I folded it into SHNS. In 2006, McClatchy bought Knight Ridder and the old KRT [Knight Ridder Tribune] became MCT, and McClatchy was back in the wire business. LAT-WP [Los Angeles Times-Washington Post] broke up, and LAT went to MCT. WP joined up with Bloomberg. Along the way the Cox News Service disappeared; so did the Hearst News Service, Christian Science Monitor and the Newhouse News Service. Then, SHNS sold out to MCT. Then, McClatchy sold out to Tribune. I didn’t think that Tribune would be the last one standing.
Whew.
Tribune and McClatchy announced that latest move last week, with McClatchy selling its half share.
We know that Tribune — which has long run the business side of the wire but will now take over editorial operations as well – is consolidating the wire in Chicago. Layoffs of the D.C.-based editing staff are in progress, though it’s important to point out that both McClatchy and Tribune will maintain their D.C. reporting bureaus.
We can expect that the Chicago Tribune will leverage its position as a central hub for the current Tribune chain in reorganizing what will become a Tribune wire. Tribune has already said it would meld the operation into the Tribune Content Agency. So what has been a roughly break-even venture will become part of a profit center. Expect new packaged products, something the Chicago Tribune has gained in proficiency in over the past several years.
How will the hundreds of newspaper clients of the wire react? Will the fact that it will soon be more a Tribune company than a quasi-coop (some newspapers contribute content to the wire as well as receive it) make any difference to them?
The move tells us a lot about newspapers and content. The supplemental wires have remained largely print-oriented, and as newspapers have finally gone more local in print and cut newsprint overall, there’s less space for wire copy. In addition, relatively few newspapers have made effective use of this niche-y content — the McClatchy Tribune wire has distinguished itself with strong features across a variety of topics — in their digital products, one of the failures of imagination evidenced over the years. Now new syndicators like NewsCred bring new models “The Newsonomics of Recycling Journalism” of audience-targeting content licensing to the marketplace. Twitter becomes a news wire of a kind. The traditional wires fade into the history books, with only those re-tooling, including Tribune and AP, prospering.
Gannett is now an advertising company.
Last June, when the largest U.S. newspaper publisher bought Belo TV stations, I said that Gannett had become a TV company. Now, with the latest likely move —buying Cars.com outright from its newspaper partners — we’ll have to adjust that description (“The Newsonomics of selling Cars.com”).
The best new description may be this:Gannett is an advertising company. Of course, it’s always been a major ad seller, but as its newspaper ad revenue has cratered along with the rest of the industry’s — down more 50 percent over the last seven years — the company has looked for new ways to generate replacement profit.
Adding the Belo TV stations to longstanding Gannett Broadcasting made it one of the top four broadcast players in the country. Just yesterday, it bought six more Texas stations to add to its standing. The logic: Broadcast may be maturing, but it’s not gasping for its breath like newspapers are.
The Belo deal meant that Gannett would plan to see two-thirds of its operating income come from broadcast, a dramatic turnaround once for what was once the plumpest of cash newspaper cows.
That broadcast money is mostly advertising, bolstered by a healthy stream of retransmission fees paid by cable and satellite companies — though those fees are increasingly under legal and competitive pressure.
Now if it completes the Cars.com deal, it will add as much as $350 million in additional advertising revenue to its mix. (Expect Gannett to partner with private equity to buy Cars.com, which may complicate the revenue accounting.)
Add it up, and we get to the ad company definition. We can figure that at least 75 percent of Gannett’s revenues will be ad dependent. While that’s better than being an ad-dependent newspaper company, such a reliance could be problematic. Digital disruption is slowly eroding the broadcast ad business. While Cars.com has an enviable No. 2 position in its sector, its new competition will come from all sides, known and unknown. The question for Gannett’s shareholders, and employees: Has the company charted a strategically defensible future, or just bought a few years of time?
As Gannett finalizes its Cars.com buy, exiting the business ownership will be McClatchy, along with Tribune, A.H. Belo, and Graham Holdings. All those companies exited Apartments.com earlier in the year, selling to private equity. Group the three transactions — Cars.com, Apartments.com, and the McT wire dissolution — and we see the partnership culture of an earlier generation fading fast.
New national news networks are forming.
Look back in time 20 years and you’ll find plenty of ideas for creating a reader-accessible site for most newspaper-produced content: a portal for all the news from the country’s 1,350 or so dailies. Start with New Century Network, one such mid-’90s effort that hardly left the gate. Knight Ridder’s Real Cities was a pretender as well. At various times, Yahoo News has aggregated lots of newspaper content.
Still, in 2014, there’s no simple-to-use, single place to go for to tap into newspaper content overall. This year, we see new stirrings.
Expect to see the next upgrade of the Associated Press’ AP Mobile app soon. Since its launch in 2008, it’s been an intriguing product, embracing that broad expansive network notion. AP identified the green fields of mobile early and convinced hundreds of newspapers to contribute to the mobile-only product. AP Mobile gets impressive traffic, but mainly to its own national and global content; local content drives less than 20 percent of its traffic. The key going forward will be the user experience: How do you present many firehoses of reader-relevant national and local daily content in a way that makes sense, especially on a tiny smartphone screen?
Consider, also, the new Washington Post network plan. The idea: Allow newspaper partners to show Washington Post content to their own subscribers. Certainly, it’s small today, and nothing like an all-inclusive network; a half-dozen newspapers — The Dallas Morning News, the Honolulu Star-Advertiser, The Toledo Blade, the Minneapolis Star Tribune, the Pittsburgh Post-Gazette, and the Milwaukee Journal Sentinel — have signed on. The business deal: Affiliates offer up otherwise paywalled Post access (without additional cost), increasing their own reader value propositions. The Post gains more ad inventory. No money changes hands.
Post president Steve Hills tells me that the program will expand rapidly, intending to serve “multiple millions” of the roughly 30 million U.S. newspaper subscriber population. Although Hills says there are no plans to create a single authenticated user experience, we can see how the Post network could grow into such a product – and do so within paid digital circulation strategies. If we expect new Post owner Jeff Bezos to break some traditional business molds at some point, wouldn’t such a networked approach be a logical one? The potential of an integrated iTunes for News experience may be in the back of the Bezos brain.
Then, there’s the newly launched Dutch Blendle model. It’s innovative, and it pushes into the one area that the Netherlands dailies would allow for aggregation: pay per article. Blendle is aiming at other markets, though don’t expect it to land on American shores soon.
The obstacles to creating a state-of-the-art network experience are formidable. How do you avoid cannibalizing reader revenue in an age of individual paywalls? How do you share new revenue, and how do you give readers what they really want? They may be insurmountable. Further, the growth of compelling news content well beyond newspapers is so great that it’s possible a newspaper-only product no longer makes sense. Still, expect the dream to be pursued.
The new News Corp’s colicky infancy
Last week’s News Corp’s financials told us the company hasn’t yet figured out its post-spin-out way forward. The big number: Down 9 percent in its news and information segments, with both ad revenue and reader revenue down. Even with some allowance for currency impacts, the results lag its peers.
While the problems of News Corp can be found on three continents (Australia, U.K., and U.S.), it’s the American face-off with The New York Times that must grate Rupert the most. So far, the Thompson vs. Thomson face-off I described as both companies hired new CEOs has gone in favor of BBC transplant, NYT CEO Mark Thompson. Compare The New York Times’ recent growth (“New numbers from the New York Times”), in both ad and reader revenue, to News Corp and you see one company in modest turnaround, the other still looking for it.
There are a couple of reasons to believe this battle is still in the very early stages.
As it released its problematic numbers, News Corp announced the expected appointment of Will Lewis as CEO of Dow Jones, removing his “interim” title. The early reports on Lewis’s DJ/Wall Street Journal are good ones. The damage done (“The Newsonomics of Momentum in the WSJ/NYT Battle“) by Lewis’ predecessor as CEO, Lex Fenwick, though, will take at least a few quarters to repair, even as the wider competitive marketplace around Dow Jones moves on rapidly. Lewis’ listening tour is now over, and the painful reconstruction of the company’s Factiva/B2B business has begun.
How painful? News Corp CEO Robert Thomson described the B2B do-over this way on the financials call: “At Dow Jones, where we had obvious difficulties with our business-to-business offering, the team has started to stabilize the institutional revenue and refined our product and pitch.” That’s painfully honest, with a tad of spin. Product and pitch cover the whole business.
Meanwhile, Lewis must get the consumer side of Dow Jones — largely the Journal — reenergized as well, just as energetic turnaround tests are in midstream at News Corp properties in Sydney and London.
The current shakiness of the company is buoyed by two hard realities: Rupert Murdoch and money. Just this year, Rupert bulled through his family succession plan and this week moved forward with a long-planned effort to create a consolidated Europe-dominating Sky TV company through his other company, 21st Century Fox. The man lies in wait for opportunities, showing the doughtiness of a man a third his age. Then, there’s the cash. News Corp’s the best-funded news company on the planet, and that can make the recent Dow Jones chaos and current financial woes mere speed bumps on the long Murdochian road ahead.
