Mobile

Let’s start with this basic principle: People won’t pay you for content if you don’t ask them to. That’s an inside-the-industry joke, but one with too much reality to sustain much laughter. It took the industry a long time to start testing offers and price points, as The Wall Street Journal and Walter Hussman’s Arkansas Democrat-Gazette provided lone wolf examples.
The corollary to that principle? If you don’t start to charge consumers — Warren Buffett on newspaper pricing: “You shouldn’t be giving away a product that you’re trying to sell.” — then you can’t learn how consumers respond to pricing. Once you start pricing, you can start learning, and adjust.

Content no longer demands to be free. It wants a fee — but how much of one? Consumer pricing is not a core competence of many media companies. For decades, media pricing was on automatic. Newspapers picked a quarter or fifty cents, and then re-programmed the coinboxes. Magazines kept prices low enough to build audiences to reap substantial ad rewards. Book publishers did some minor stratification. Music companies picked a couple of price points, and let the vinyl and CDs fly. In the digital era, though, pricing is confronting — and confounding — media companies. Just what in the digital world of vanishing manufacturing costs is digital media worth? Now with those 20th-century costs — printing, manufacture, distribution, shipping — passing into the night, the question of price, and value, is making itself loudly heard.

The 100-product-a-year model is a much-needed growth model. We can see how it fits nicely with all-access subscriptions, and together we have two interconnected Lego blocks of a new sustainable news model. We have two essential parts of a crossover model (“The Newsonomics of Crossover”) that I detailed here a few weeks ago. The big, hairy challenges of accelerating print ad loss and onerous legacy costs remain, but at least we’ve got a couple of building blocks we didn’t have two years ago.

Why do it? Why trade in the sleepiness of California’s capital city (Sacramento is McClatchy’s headquarters) for the bright lights of Broadway, a long walk from AP’s NYC offices?

Number one on list may be McClatchy fatigue. Pruitt and his CFO, now-successor Pat Talamantes, have rowed the third-largest U.S. newspaper company oh-so-gingerly around the bankruptcy shoals that have grabbed more than dozen of their peers. They’ve had to make devastating cuts in staff and other expenses along with other companies, but get some points for greater efforts to keep newsroom size and spirit going in the face of that bleak reality. It’s important to note that McClatchy has found no special sauce in transforming itself for the digital age, performing on par, sometimes better, sometimes worse, than its peers. Pruitt is getting this job not on the basis on being a proven transformative player, but on being a known, highly respected news exec who understands the challenges of the times.

For now, let’s boil it down the how to 5 P’s:

People: As in customers. Few newspapers — probably a dozen or fewer in the U.S. — know their combined print and digital audiences as a single audience. It takes a lot of technology moving to get a single, whole view of a customer, matching the subscriber database with the digital registration database to get a holistic view. Without that view, it’s tough to operate a modern, somewhat digital/somewhat print business — and maximize the value of new pay propositions. The New York Times, the Star Tribune, and the Commercial Appeal are among those who do, and papers as small as The Day are getting there.
Product: This is a simple question of content. How much strong local coverage are readers missing after a half decade of staff cuts? The better a news organization covers its community, the more it can dare to charge and still get customer traction. Some papers may simply have already cut too much.
Presentation: Consumers — us — understand the all-access pitch. News (and magazine) publishers have to make it real. That means real ready-for-the-tablet (and smartphone) products, app-based and HTML5. Replica-plus products will satisfy paying readers less and less over time — and won’t compete with Flipboard-esque experiences.
Pricing: Enough said. Newspaper (and magazine) pricing has been fairly dumb over the years, a follow-the-leader, seat-of-the-pants exercise. Playing with the value equation, print and digital, requires both testing and matching of new value to new price.
Promotion: More than just marketing, the new promotion makes better psychological sense of the all-access proposition to older and newer (and younger) customers

What percent of print ad loss is made up by digital ad gain? This is the crossover metric driving much of John Paton’s Digital First Media/Journal Register Company strategy. With print advertising down now more than 50 percent in 10 years in the U.S., and even diving more quickly now in some parts of Europe, replacement ad revenue is at the top of the crossover list. In 2011, Journal Register made up about 95 percent of its print ad revenue loss. It intends to hit the crossover mark — making more in digital revenues than it is losing in print revenues — this year.

“Everyone wants us to fast-forward to the end of the movie,” Webster notes. He has a sensible point. Given how each Patch rumor — two sites consolidated here, freelance budgets cut back there — is treated as forensic evidence, Webster is in relatively hardy form. He admits that Patch, with its fast expansion, took too much of a one-size-fits-all approach to site deployment, and was too “cookie cutter.” Some of the changes in budgeting — for instance, devoting some site budgets more to marketing awareness and less to paying stringers — derive from overall understandings of the market; others attempt to learn that needs in West Des Moines are different than in West Orange.

All we can say with certainty: we’re witnessing the death and life of California news. Who will own the biggest news media? Who will manage the biggest news media? How much of a life in print will be left for newspapers as they go digital? And, of course, how many journalists will be paid to get the news to the state’s 37 million residents and to the rest of the country? Already, well over 1,000 daily newspaper journalists have lost their jobs over the past five-plus years. How many new combinations — among news entities formerly known as newspapers, broadcast, and digital news startups — will emerge and grow to scale? Those combinations are already beginning to tax legacy imaginations, and as of this week, we’ve got a new intriguing model to add to the mix.

Takeaways:

It’s 12% of the the New York Times overall circulation revenue for the year. That puts the annual circulation number in positive territory — up 3% for the year, and a lively 8% for the fourth quarter — reversing the 2010 trend.

It’s $100 million less (about 186 M for New York Times itself) than the amount of digital advertising revenue for the year. So it’s important, but the digital ad number still is more decisive in making up for the print revenue decline. Despite 10% digital ad growth for the News Media group (without About properties), the NYT property still saw a 3% decline in ad revenue for the year. One more way to look at it: the Times took in $22 million less in advertising overall in 2011, so new digital circulation revenue exceeded that decline by 4X.

It’s 1.1% of the Times’ 33 million U.S. unique visitors, once we take out international buyers. That one percent seems like a tiny number, but it’s 34% of its print circulation. Anyhow, “total unique visitors” are getting to be close to an irrelevant number. Paid readers who also consume a majority or strong plurality of page views are the customers the Times’ care about.

It’s four times ousted CEO Janet Robinson’s good-bye payout. That’s small consolidation to outraged staffers, dealing with their own 1% issue.

It’s four times the dividend family members are hoping to see reinstated. The dividend paid out $20.8 million in 2008. Even they need to be kept happy to keep the Times out of public play, there are few new dollars to assuage them.

Consider how much revenue each of Google, Apple, Facebook, and Amazon earned from outside the U.S in the first three quarters of 2011:

Google: 54 percent
Apple: 54 percent
Facebook: 38 percent
Amazon: 46 percent