Let’s look this week at the journalistic turmoil in the world’s eighth-largest economy: California, a.k.a. the Golden State (beta motto: “We get post-IPO Facebook capital gains taxes — you don’t”).

The massive changes we’re seeing in California journalism portend even faster journalistic change across the country. We Californians like to believe we’re always at the birth of the new new, from Hollywood to Silicon Valley. Certainly, that’s been true of news change — and now that change has greatly accelerated, doing spins, free falls, reversals of fortune, and lots more. It’s not really change — it’s chaos. No one can tell what the journalistic landscape of the state may look like in, say, 2014. 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.

The promise of California Watch’s model

Tuesday, we saw a new model birthed: the friendly takeover of one digital news startup by another. California Watch, the almost-three-year-old statewide-oriented model of a modern news agency, is merging with Bay Citizen, the two-plus-year-old Bay Area-oriented news startup, which has had more than its share of birthing pangs.

Both sites were born in the depth of the recession and a relatively dark period of Bay Area journalism. (See “Bay Area Online News Renaissance: 7 Pointers Forward.”) Both hired talented staffs (from voluminous applications) and won journalism awards. Yet California Watch, built on $5 million in foundation funding, developed under the wing of the Center for Investigative Reporting (itselffounded way back in 1977). It has prospered, grown, and earned quick legitimacy and even respect from the state’s major media, which run its stories. CIR, which has long focused on investigative pieces of national import, is now largely synonymous with California Watch; it’s one organization made up of 30 journalists (writers, editors, producers, data analysts, and more) and nine other staffers.

We’re seeing in the merger the greater strength of the California Watch model. Call it B2B (business-to-business), a statewide news agency re-imagined for this century. It’s a model being eyed by journalists in some of the other 49 states: Produce muscular, multimedia journalism once (with a little tailoring of stories by market) and distribute it to many news outlets, from Voice of San Diego to KABC-TV in L.A. to the San Francisco Chronicle. These news distributors pay small sums for the stories, but the money is adding up. Increase the flow of journalism, in the Bay Area specifically and California more widely, and the networking “new wire” importance of California Watch grows, especially as struggling dailies continue to cut their own content-originating staffs.

Bay Citizen foundered on leadership and strategic disagreements, on personalities, on the editorial priorities muddied by the otherwise-valuable feeding-stories-to the-regional-edition-of-The-New-York-Times program, and more. That’s all history now.

CIR/California Watch executive director Robert Rosenthal, and his former boss at the San Francisco Chronicle, Phil Bronstein — the two served as managing editor and executive editor, respectively in the last decade — now face strategic and operational decisions on how best to put together the combined nonprofit. Bronstein, who has served as president of the CIR board, now serves as the executive chair of the merged organization, in part owing to the last wishes of the Bay Citizen benefactor Warren Hellman, who died unexpectedly in December. Two long-time daily newspaper guys, now able to build a new news model outside the constraints of constant cost-cutting and legacy hand-wringing. The foundation is set, with such stories as “On Shaky Ground” (“The Newsonomics of California Watch’s Single Investigative Story,”), which won over many editor skeptics.

For the moment, the big news out of this move is this: the potential to establish a new local model of scale and capacity. California Watch/Bay Citizen will be able to move forward with an editorial staff of more than 50, providing a scale that’s been needed to fill the yawning vacuum of local and statewide coverage. National investigative nonprofits from ProPublica to the Center for Public Integrity have stepped up their work, in volume and value, as newspaper-based coverage has slipped. In America, though, it’s a local-to-statewide news — across the 3,500-mile expanse of the country — that’s been crying out for bigger, new models to build on the successes of the MinnPosts and Texas Tribunes.

MediaNews dives into Digital First

The merger isn’t the only big news news in the Bay Area; it’s just the most public.

MediaNews — the largest news publisher by circulation in the state, with more than 30 dailies and great strength in the Bay Area, north of the Bay Area, and in greater L.A. — is about to be shaken to its Dean Singleton foundation. Singleton built the company, deal by deal, and assembled a coalition of willing executives to run the businesses and newsrooms.

They clustered, they cut, and they maneuvered through bankruptcy, and now their leader has been pushed into retirement, replaced by the wild, private-equity-bankrolled revolutionaries from Digital First/Journal Register Company (JRC). CEO John Paton and company moved rapidly (especially in newspaper time) to turn the financially and editorially bankrupt JRC upside down, lopping legacy costs, shooting voluminous video, opening newsrooms, and jettisoning anything and everything that didn’t smell of local.

That’s easier done in New Haven and Macomb that it is in San Jose and L.A. Applying faster, digital-first fixes to larger newsrooms and newspaper operations offers a complexity of challenge that will makes good drama for the rest of us. Expect to see rolling retirements of the Old Guard, with Denver Post CEO Jerry Grilly already announced.

Reorganizing newspapers on paper (or computer) is one thing — the new management knows its toughest and first challenge can be summed up in one word: culture. Yes, after the newspaper industry has been half-sized, culture, good, bad, and silly, is usually the first challenge new management faces in pushing change.

As MediaNews’ California properties change, they’ll change the landscape around them. Expect differing kinds of new competition and new potentials for unorthodox partnerships. Partner up, in fact, the MediaNews turmoil with those of another high-profile experiment: Patch.

The hyperlocal shoot of AOL, it has made a big bet on California. Of its 800-plus sites, 132 are based here. Many of the sites are lively, with good features, calendars, and lots of local, if episodic, bloggers — even if the sites don’t come close to living up to Patch’s tagline: “Hi there, we’re Patch, your source for local knowledge you can’t live without.” AOL, of course, won’t release traffic data, but its latest financial report showed that its $120 million investment isn’t close to bringing in enough ad revenue. That’s confirmed by checking on the sites (national ads prevail) or attending a local Patch-sponsored community meeting, as I did last Friday. Second question from the audience: “Why don’t you have local ads?”

Given Digital First’s open-newsroom strategy and philosophy, Patch is particularly vulnerable to the MediaNews changes. MediaNews can do what Patch is doing — and cover the news with more than single reporter/editors. Or MediaNews properties could partner with Patch.

Don’t think that Bay Area media change is restricted to text and print. KGO Radio, the market’s long-time talk leader, saw its talk line-up of multiple decades jettisoned one night in December — to public uproar, where else, but on Facebook — as it embraces the all-news (broadcast and digital) mantra and goes head-to-head with KCBS.

Public radio on the move in L.A.

Moving briefly to the south, we can see that the change is only prologue.

If Californians like to be first, they can be the first to claim one metro area with three — count ‘em, three — bankrupt daily newspapers. That would be metro Los Angeles. Both MediaNews (Los Angeles News Group, or LANG, with holdings like the Daily News, the Long Beach Press-Telegram and the Pasadena Star-News) and Freedom Communications (Orange County Register) fell into bankruptcy and emerged quickly from it, with banker and private equity owners. Then last summer, the two tried to mate, as Alden Global Capital, holding about 40 percent of each, tried to arrange an arms-length (tough to negotiate with yourself within the bounds of law) marriage and somehow failed. Tribune’s Los Angeles Times entered bankruptcy in December 2008 and has yet to emerge from equity owner/bondholder hell. Those three companies continue to gyrate in the marketplace, maneuvering within their increasingly limited options.

With L.A. Times publisher Eddy Hartenstein assuming the Tribune CEO title as well last spring, the Times has been shaking up its strategy and management, edging into its own digital-first territory. One clue: the November appointment of a quartet of new VPs tried to find new harmony in digital revenue. They include Jennifer Collins from Variety and Andrea Nunn from HBO, giving an indication the newspaper company is trying to stretch well beyond its roots. They move in as long-time Times chief revenue officer John O’Loughlin moves out, having just assumed the president’s job in a exec-suite reorg at the Houston Chronicle.

Among the Times’ many options: a flipping-the-switch bet that would have it abandon some print to cut costs and become more heavily digital faster.

Ahead of still more staff cuts, the Times lost its change-oriented editor, Russ Stanton, in December — and then saw him hired by public-media mover KPCCas VP of content. Even a few years ago, that would have seemed a bizarre career move. The editor of The Los Angeles Times goes to lead the news effort at a local public radio station?

Yet when you compare the two enterprises — today — you see one in decline and one believing in its own upside.

Yes, The Los Angeles Times still has (today) 500-plus newsroom people, and KPCC can claim fewer than 60. But as the Times cuts, though, the Southern California Public Radio (SCPR) board has given the go-ahead to double its newsroom to more than 110 by July 1, 2014, needing to raise $24 million over four years to do it. Already raised toward that goal: $8 million so far. Already hired: 20 people in the last year. For 2012 alone, the plan is to bring in at least 13 more news positions — including producers, editors, bloggers, and hosts.

Those numbers are curious ones, but still seem small. Don’t, however, under-estimate SCPR president Bill Davis. Davis is a public media exec in the mold of his mentor Bill Kling, the Minnesota Public Radio visionary entrepreneur who first outlined how public radio could become public media and move into the local news vacuum. In fact, MPR, through its joint parent American Public Media subsidiary, is a sibling to KPCC.

Davis knows how to raise money, and he sees the journalistic devastation that’s enveloped his city. Add that energy and ability to the mix and the journalistic arithmetic begins to change. Five hundred newsroom people at the L.A. Times sounds like an army. Peel off the parts of that army that are devoted to sports, entertainment, and the production of content (as opposed to the creation of it), and you may be down to a couple of hundred who report the local news.

That local news — sans entertainment and sports — is what the expanded KPCC plan aims at. So let’s say that KPCC could get to 100 (Kling’s magic number) in the next several years, as public-spirited citizens (a la Philadelphia and Chicago?) chip in to create and sustain a local news alternative. Let’s say the Times continues to reel, run aground on the shoals of legacy costs, and its newsroom, already dispirited, trims down to 150 local news creators. As Rick Santorum said not long ago in Iowa: Ballgame.

Finally, let’s head to the border. There, the San Diego Union-Tribune, worth a billion dollars a decade ago, has been sold twice in three years. This time, local developer Doug Manchester bought it and promises to turn the newspaper of record in California’s second biggest city into a booster sheet. Across town, online startup Voice of San Diego — a California Watch affiliate which just had to cut staff due to budget cuts — has recently partnered with the local NBC station for news coverage.

Mix ’em, match ’em. It’s a Mating Game that seems like it could only come out of California.

Related post: At Almost 400,000 Digital Subscribers, Inside the New York Times Pay Strategy, Year 2

Let’s elevate, for a moment.

Let’s take a NASA view of the media landscape, enjoying the clear, whole-earth picture of our struggling news planet.

The wide view would tell us that, although the U.S. often believes itself to be the straw that stirs the global drink, we make up but 5 percent of the world’s population. Our special friends in the U.K. make up only another 1 percent. While much of the world’s digital inventiveness and entrepreneurial investment is born in the U.S.A., the marketplace for digital news, media, and information products has been going increasingly global.

The global digital media revolution is transforming how, in economic terms, we now think of the business. Global growth is no longer an add-on to the usual in-country business model; it’s becoming a major driver of business — and product — planning.

As we look at the newsonomics of the global media imperative, let’s pick out just a few of the many diverse datapoints on which we have to draw:

• The Financial Times, probably the single best model of print-to-digital transformation success, has announced that its digital business leader, Rob Grimshaw, is leaving Number One Southwark Bridge, astride the Thames, for New York City. Grimshaw is managing director of FT.com, and his business is truly global. The company, founded in 1888, now finds 31 percent of its readers in the Americas and only 23 percent in the U.K. — with another 13 percent now in Asia. For the FT, Grimshaw’s move is logical: Go where your customers are, and to the heart of digital innovation. (Talk to Europeans in the digital business, and they’ll tell you how America-centric, and West Coast-centric, the digital business is, somewhat to their dismay.) For the FT, even with its good number of American consumers, the U.S. is “an emerging market,” a belief held by Reuters as well.
• If you were to name the FT’s most head-to-head competitor (for time, and thus indirectly for money), it would be The Wall Street Journal. The Journal’s digital audience is now 30 percent international, and just last week in launched still another international local (in native language) edition, for Germany. The Journal’s crosstown rival, The New York Times, is moving globally as well. Already 12 percent of its paying digital subscribers are international, with the Times applying its pay strategies to its European operation, the International Herald Tribune. Last year, it also launched India Ink, focused on that country’s news and culture, with an on-the-ground team there. Expect the Times to move into China this year.
• Less than a year after launching its first non-U.S. site in Canada, Huffington Post last week added an Italian site, alongside its French one. It continues negotiating with publisher partners in several other western European countries, following up on Arianna’s meet-and-greets there last fall.
• The (second) British invasion of the U.S. continues apace (“The newsonomics of the British invasion,”), as the Guardian (reinvigorated U.S.product), the Independent (using Press+ to sell access to U.S. consumers), the BBC (staffing up editorial and ad pushes) and the Daily Mail, which announced a new U.S. push last year and said last week it is now moving on to India.

This isn’t just about news media. Netflix, in yesterday’s earnings report, tells us that almost 10 percent of its streaming business is now global, almost two million of 21 million streaming subscribers. That global growth — and huge upside — is balancing Netflix’s 2011 pricing stumbles.

For an even bigger picture perspective on the global imperative, let’s look at the four digital behemoths that are reshaping everything in their paths (get out of the way, if you can, or accede to junior partner status). Consider how much revenue each of Google, Apple, Facebook, and Amazon earned from outside the U.S in the first three quarters of 2011, from my recent report for Outsell, “Getting it Right with GAFA”:

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

Yes, there’s lots of current political hullaballoo about “bringing jobs home to the U.S.,” but the truth is that much of the digital industry, as with their brethren in the Fortune 500, is now truly global. Look at those GAFA numbers and you have a harder time thinking of them as American companies, in the traditional sense of serving American customers.

Forget the 99 percent meme; think of the 95 percent (outside the U.S.) as the real opportunity for the companies formerly known as national. (And, yes, the global imperative further illustrates the difficulty that metro and community newspapers face in finding growth. Other than metro newspapers’ smartphone, tablet, and web city-guide potential for international visitors — $1.34 trillion spent by 60 million of them last year — the lure of global riches doesn’t do much to support community journalism in our far-flung land.)

It’s a stark fact for what once were nationally defined media businesses: If you don’t go global, you’re at an increasing disadvantage to your competitors — and who isn’t a competitor for audience or advertising? If you stay nationally focused, you’re trying to wring as much revenue out of a much smaller market, while competitors are building their top line and their capability to innovate with global revenues. So increasingly, I think we’ll see media companies that are either global or regional/local, with national ones more the exception than the rule. Yes, there’s a role that the English language plays here, as about a billion people worldwide may read English well enough to be eligible audience, and, that, too adds to the imperative to compete against other English-first media based in London or New York. Yet as proven with the Journal’s non-English editions, this is about more than language domination. We also see early signs of non-English products finding their way to English speakers, as Worldcrunch (“All news is global”) brings translations of top worldwide titles to the market.

There are lots of ways to play the global game. Many newspaper companies are putting out editions of their core product, aimed at in-country issues. Some are putting a new face on the same content. Then there are those truly becoming multi-national news and information companies.

You’d have to put Oslo-based Schibsted in that group. Now eighth overall by revenue in the global news industry, the company operates online classifieds businesses in 28 nations; in 20, that’s its main business. Those nations can be found on three continents and now include such populous growing markets as India, the Philippines, Indonesia, and Malaysia, as well as much of Latin America. That’s a truly global play that is supplying Schibsted with 49 percent of its profits, on just 25 percent of total revenues.

News Corp. — the leading company by news revenues worldwide — is certainly flexing its muscles, even if it contracts them for the time being in the U.K. amid scandal. Just in the last week, we saw the company’s moves in Turkey and Afghanistan, which aim to add to its presence on every continent. As a pipes (satellite and cable) and content company, the lines between the two will blur. Expect for instance, products like the innovative WSJ Live  (“The Newsonomics of WSJ Live“) to find carriage all over the world as digital distribution and monetization mature.

A lot of what we are seeing in the marketplace today is prologue. If you look at how small the non-home-market revenues are for many companies — in the low single digits — we see not global businesses, but national businesses with stronger global intentions.

It’s an emerging issue of our time and place. They know too much about us, and we know too little about what they know. We do know that what they know about us is increasingly determining what they choose to give us to read. We wonder: What are we missing? And just who is making those decisions?

Today, in 2012, those questions are more pressing in our age of news deluge. We’re confronted at every turn, at every finger gesture, with more to read or view or listen to. It’s not just the web: It’s also the smartphone and especially the tablet, birthing new aggregator products — Google Currents and Yahoo Livestand have joined Flipboard, Pulse, Zite, and AOL Editions — every month. Compare for a moment the “top stories” you get on each side-by-side, and you’ll be amazed. How did they get there? Why are they so different?

Was it some checkbox I checked (or didn’t?!) at sign-in? Using Facebook to sign in seemed so easy, but how is that affecting what I get? Are all those Twitterees I followed determining my story selection? (Or maybe that’s why I’m getting so many Chinese and German stories?) Did I tell the Times to give the sports section such low priority? The questions are endless, a ball of twine we’ve spun in declaring some preferences in our profiles over the years, wound ever wider by the intended or (or un-) social curation of Facebook and Twitter, and multiplied by the unseen but all-knowing algorithms that think they know what we really want to read, more than we do. (What if they are right? Hold that thought.)

The “theys” here aren’t just the digital behemoths. Everyone in the media business — think Netflix and The New York Times as much as Pandora and People — wants to do this simple thing better: serve their customers more of what they are likely to consume so that they’ll consume more — perhaps buying digital subscriptions, services, or goods and providing very targetable eyes for advertisers. It’s not a bad goal in and of itself, but sometimes it feels like it is being done to us, rather than for us.

Our concern, and even paranoia, is growing. Take Eli Pariser’s well-viewed (500,000 times, just on YouTube) May 2011 TED presentation on “filter bubbles,” which preceded his June-published book of the same name. In the talk, Pariser talks about the fickle faces of Facebook and Google, making “invisible algorithmic editing of the web” an issue. He tells the story of how a good progressive like himself, a founder of MoveOn.org, likes to keep in touch with conservative voices and included a number in his early Facebook pages.

He then describes how Facebook, as it watched his actual reading patterns — he tended to read his progressive friends more than his conservative ones — began surfacing the conservative posts less and less over time, leaving his main choices (others, of course, are buried deeper down in his datastream, but not easily surfaced on that all-important first screen of his consciousness) those of like-minded people. Over time, he lost the diversity he’d sought.

Citing the 57 unseen filters Google uses to personalize its results for us, Pariser notes that it’s a personalization that doesn’t even seem personalized, or easily comparable: “You can’t see how different your search results are than your friends…We’re seeing a passing of the torch from human gatekeepers to algorithmic ones.”

Pariser’s worries have been echoed by a motley crew we can call algorithmic and social skeptics. Slowly, Fear of Facebook has joined vague grumbles about Google and ruminations about Amazon’s all-knowing recommendations. Ping, we’ve got a new digital problem on our bands. Big Data — now well-advertised in every airport and every business magazine as the new business problem of the digital age to pay someone to solve — has gotten very personal. We are more than the sum of our data, we shout. And why does everyone else know more more about me that I do?

The That’s My Datamine Era has arrived.

So we see Personal.com, a capitalist solution to the uber-capitalist usage of our data. I’ve been waiting for a Personal.com (and the similar Singly.com) to come along. What’s more American than having the marketplace harness the havoc that the marketplace hath wrought? So Personal comes along with the bold-but-simple notion that we should individually decide who should see our own data, own preferences, and our own clickstreams — and be paid for the privilege of granting access (with Personal taking 10 percent of whatever bounty we take in from licensing our stuff).

It’s a big, and sensible, idea in and of itself. Skeptics believe the horse has left the barn, saying that so much data about us is already freely available out there to ad marketers as to make such personal databanks obsolete before they are born. They may be forgetting the power of politics. While the FCC, FTC, and others have flailed at the supposed excesses of digital behemoths, they’ve never figured out how to rein in those excesses. Granting consumers some rights over their own data — a Consumer Data Bill of Rights — would be a populist political issue, for either Republicans or Democrats or both. But, I digress.

I think there’s a way for us to reclaim our reading choices, and I’ll call it the News Dial-o-Matic, achievable with today’s technology.

While Personal.com gives us 121 “gem” lockers — from “Address” to “Women’s Shoes”, with data lockers for golf scores, beer lists, books, house sitters, and lock combinations along the way, we want to focus on news. News, after all, is the currency of democracy. What we read, what she reads, what they read, what I read all matter. We know we have more choice than any generation in history. In this age of plenty, how do we harness it for our own good?

Let’s make it easy, and let’s use technology to solve the problem technology has created. Let’s think of three simple news reading controls that could right the balance of choice, the social whirl and technology. We can even imagine them as three dials, nicely circular ones, that we can adjust with a flick of the finger or of the mouse, changing them at our whim, or time of day.

The three dials control the three converging factors that we’d like to to determine our news diet.

Dial #1: My Sources

This is the traditional title-by-title source list, deciding which titles from global news media to local blogs I want in my news flow.

Dial #2: My Networks

Social curation is one of the coolest ideas to come along. Why should I have to rely only on myself to find what I like (within or in addition to My Sources) when lots of people like me are seeking similar content? My Facebook friends, though, will give me a very different take than those I follow on Twitter. My Gmail contact list would provide another view entirely. In fact, as Google Circles has philosophized, “You share different things with different people. But sharing the right stuff with the right people shouldn’t be a hassle.” The My Networks dial lets me tune my reading of different topics by different social groups. In addition, today’s announced NewsRight — the AP News Registry spin-off intended to market actionable intelligence about news reading in the U.S. — could even play a role here. (More on NewsRight: “Nine Questions for the Cusp of 2012“)

Dial #3: The Borg

The all-knowing, ever-smarter algorithm isn’t going away — and we don’t want it to. We just want to control it — dial it down sometimes. I like thinking of it in sci-fi terms, and The Borg from “Star Trek” well illustrates its potential maniacal drive. (I love the Wikipedia Borg definition: “The Borg manifest as cybernetically-enhanced humanoid drones of multiple species, organized as an interconnected collective, the decisions of which are made by a hive mind, linked by subspace radio frequencies. The Borg inhabit a vast region of space in the Delta Quadrant of the galaxy, possessing millions of vessels and having conquered thousands of systems. They operate solely toward the fulfilling of one purpose: to “add the biological and technological distinctiveness of other species to [their] own” in pursuit of their view of perfection“.) The Borg knows more about our habits than we’d like and we can use it well, but let’s have us be the ones doing the dialing up and down.

Three simple round dials. They could harness the power of our minds, our relationships, and our technologies. They could utilize the smarts of human gatekeepers and of algorithmic ones. And they would return power to where it belongs, to us.

Where are the dials? Who powers them? Facebook, the new home page of our time, would love to, but so would Google, Amazon, and Apple, among a legion of others. Personal.com would love to be that center, as it would any major news site (The New York Times, Zite-powered CNN, Yahoo News). We’ll leave that question to the marketplace.

Lastly, what are the newsonomics of the News Dial-o-Matic? As we perfect what we want to read, the data capturing it becomes even more valuable to anyone wanting to sell us stuff. Whether that gets monetized by us directly (through the emerging Personals of the world), or a mix of publishers, aggregators, or ad networks would be a next battleground. And then: What about the fourth wheel, as we dial up and down what we’re in the marketplace to buy right now? Wouldn’t that be worth a tidy sum?

There’s an algorithm out there, we can be sure. It’s got all the components of business success for news-creating companies, each value carefully computed and relational to the others. Yet, approaching 2012, the algorithm hasn’t been found. We have but shreds of numbers, beacons of numerals that portend models, but can’t prove them out.

2011 has been a remarkable year. We can point to three major phenomena that profoundly changed the news landscape this year. Each offers up its own half-formed metrics for that magic formula in process, and each has dramatically changed the possibilities of news, each largely positive:

• The transcendant transformative age of the tablet: The first real replacement device for print swept aside doubters, netbooks, and much conventional wisdom before its second birthday. More than one in 10 American adults owns one, with that number likely to more than double in the next two years. Those owners are readers, spending lots of time with news, single brands, and longer stories.  (“The Newsonomics of the Missing Link“)
• The dawn of digital circulation: Forget “paid content.” Forget “paywalls.” It’s the back-to-the future age of circulation: paying for news and magazines that we depend on, no matter how they are delivered to us. All-Access reinforces our relationship with news and magazine brands we like; ubiquitous access (print, online, tablet, smartphone, soon connected TV) allows us to justify paying for convenience as much as the content itself. Publishers are still experimenting with how to get the paid proposition right, but those that do now have a potent second digital revenue source — and that’s a business advantage digital-only competitors lack.
• Social curation joins editorial curation: We knew that Facebook, in particular, and “social” more generally — including Twitter, LinkedIn, most-emailed lists and our own individual sharings — were changing how we all decided what to read. Now, though, social curation is being built into the best publishing models. Why should each of our own personal quests be a virgin start-from-scratch idea when many consumers/searchers/researchers/shoppers (some of them people like us) have tread there before? So social intelligence, gleaned from mountains of data, is becoming a required part of the companies’ product development and consumer experience. Facebook is in the catbird’s seat as that world develops.

Those three game-changing phenomena offer major drivers of change — but not models. For publishers, the near-term is just getting harder and harder; witness Media General’s major cuts of this week in Tampa (16 percent workforce reduction) and elsewhere. Major cuts are happening this month and into January, as publishers gird for another 5-12 percent decline in ad revenues. Continuing profitability can only be achieved by cutting.

Publishers, publicly or not, are embracing the Digital First mantra of John Paton and Clark Gilbert, the industry’s dynamic duo, who put on another show at BIA/Kelsey this week. Everyone’s into the deconstruction/reconstruction of their companies; some are faster, more adroit, and more public about it.

As that reconstruction moves forward, the new magic formula may seem simple: reconfigure costs and revenues. Yet, working the in-between — most publishers still depend on print for 80 percent of their revenues — is hardly formulaic. Building the new cost structure and the new revenue structure, in tandem, with changing audiences and advertising spending habits, is the fixing-the-moving-car-at-65 MPH scenario publishers face.

With that speeding car in mind, let’s look at some of the numbers that will go into that magic formula, when it’s finally perfected. Mix, match, blend, and extrapolate:

5-15 percent: That’s the percentage of many news sites monthly unique visitors that drive half or more of their pageviews. That’s a jaw-dropping number, and one that news companies are just beginning to acknowledge — privately. Why be quiet about it? Look at the annual reports and quarterly financial disclosures of the public companies; they trumpet uniques and pageviews. Yet in the age of news ubiquity, we’ve reached near-infinity in pageviews and of ad inventory. Is there much meaning left to one random web visitor hitting one random web page, courtesy of Google or Facebook, some time in any given month? Not much. Yet, that’s what most people still point to publicly. Privately, the question is the 5-15 percent. These are your customers. How much will they pay for access? How much more valuable are they to targeting advertisers, given you know much more about their reading and shopping habits? The metric needed: How much does a core customer yield annually, and in a lifetime? Then: How do I most efficiently find and convert more of them?

35 percent: That’s the percentage of print readers who will transition to tablet-only by 2014, believes one prominent news company, which is using that forecast in its business planning. High? Low? What’s your number?

$544 a year: That’s a Newspaper Association of America number (from 2009) for the revenue value per unit of Sunday circulation. What will a tablet customer be worth, combining subscriber and ad value? Get that answer right and you can try to accelerate, or slow down, your readers’ embrace of the tablet.

10-20 percent: That’s how much of national news company traffic now comes from mobile; Facebook already says that 35 percent of its use comes from mobile. Yet, in the U.S., only three percent of digital revenue comes from mobile. That’s a huge gap — the audience is way ahead of the money — and it will be closed over the next several years. In fact, in the age of expected anywhere access, “mobile” will disappear as a category. Big issues for publishers: dividing what kinds of revenues can be wrung from tablet (now lumped into “mobile”) and from the brain extensions in our pockets and pocketbooks, the smartphone.

One billion: That’s one estimate of how many smartphones will be shipped worldwide in 2016. It’s a continuing curve upward from the almost half-billion shipped this year. U.S. smartphone penetration is about a third of cellphone owners; so there is lots of headroom for growth. (Singapore’s the first to cross the 50 percent threshold.) Big challenge for news and magazine companies: coming to terms with how to make money on that little screen: advertising, sponsorship, All-Access subs, and more.

63 million: That’s the number of smart TVs that will be shipped in 2011, up from 43.6 million in 2010. 2016 forecast: 153 million. Smart TV is just the next screen, joining the tablet and the smartphone, providing us ubiquity. When WSJ Live (“The Newsonomics of WSJ Live“) — the company’s model-breaking tablet product launched this fall — it included launch partners Samsung and Vizio, leading smart TV makers. This is the beginning of the next wave.

$2.75: That’s the average ad CPM, or cost-per-thousand rate gotten, at one top 15 news sites. Average rates have been going down and are likely to continue doing so. High-targeted and high-branded (combine the two, and you’ve got the best of both worlds) audiences continue to outpace average sites and average inventory. It’s less and less good to be average.

22 percent: That’s the third-quarter increase in U.S. digital ad revenue. Digital ad growth accelerates as print declines more rapidly; in the U.S., it is now surpassing newspapers to become second only to TV. Worldwide, expect the industry to hit $80 billion this year. Within that ad spend, publishers have access to less than half: Paid search continues to be about half the market, with publishers getting only a tiny slice of it. Display/banner ads — publishers’ strongest suit — account for 23 percent of the total. Video is growing 42 percent a year. Performance-based business models (as opposed to selling impressions) now command 64 percent of the market. (Most data from IAB.) So, in all the areas of growth, news and magazine publishers are weakest. Despite uneven digital ad results reported by newspaper and magazine companies, it’s not that the money isn’t there — they just haven’t transitioned their businesses enough to compete for it.

$13 billion: That’s the amount of retail ad revenue the newspaper industry in the U.S. took in for all of 2010, and it’s down this year. Retail makes up roughly half of all newspaper companies’ ad revenue. In a new, circle-the-wagons attempt to hold on to it, ShopCo, a consortium of eight of the large newspaper companies, is building out a new local shopping portal. FindnSave, tested first by McClatchy, should be up in 250 larger markets by the middle of next year. Will it be good enough and big enough, to satisfy both consumers and merchants? (“The Newsonomics of Google’s retail push“)

25 percent: So if a reader drops print and embraces the tablet, and digital access overall, how much savings can a news company achieve? It no longer has to print and deliver a paper, but it still has the costs of maintaining a staff, maintaining distribution, and maintaining a plant. So maybe it costs 25 percent less to fulfill that customer’s access? In this long interim with hybrid digital and print reading, how much of their production costs can companies cut out? The long-term question: At what point can the news industry make a major shift, as most reading becomes digital and a minority of it in print?

56.7 percent: That’s the percentage of downloaders of the Guardian’s new Facebook app who are under 24, with 16.7 percent 17 or younger. For a news industry decrying the lack of young readers and focused on aging baby boomers as the core audience, the Guardian’s early experience is phenomenal. It’s well and good to sell All-Access to long-time print readers; it’s essential to bring in new ones, and Facebook looks like a great bet.

7: Daily means seven days a week for newspapers, right? MediaNews is dropping Monday printing at some Northern California papers. Michigan remains the epicenter of the non-daily daily. Following the 2009 cuts in metro Detroit, Advance is now going digital-first with smaller papers there, with several becoming three- and four-day print “dailies.” The idea: keep 85 percent of print ad money and radically reduce print costs. Publishers take a very deep breath and hope they aren’t cutting the print cord too soon. Expect to see more of such day cuts in 2012 and beyond. It’s a hybrid strategy, and as we see its impacts — on print ad revenue and on digital reader and ad transition — we’ll have new numbers to plug into the model.

> 1 percent: Google now makes 54 percent of its revenue outside the U.S., as does Apple. Such international orientation is a major differentiator in the economy of the day, and not in the publishing and digital industries. Even The New York Times, with impressive global reach, gets only a percent or two of its revenue internationally. In the last year, we’ve seen The Independent (through Press+) selling U.S. access, PBS launching a British channel, and the Guardian relaunching an American foray. Digital media knows no national bounds, but monetizing outside home countries has been difficult. Breaking through this barrier could create significant upside for top publishers.

It looked like just more head-butting among the mammoths of our time: Google will match up with Amazon, said the Wall Street Journal last week: “The Web-search giant is in talks with major retailers and shippers about creating a service that would let consumers shop for goods online and receive their orders within a day for a low fee.”

Most of the stories played on that Goliath vs. Goliath theme, and of course that’s an increasingly familiar one as the businesses of Google, Amazon, Facebook, and Apple overlap, intersect, and collide. Who is a bookseller? Well, Amazon, and Apple, and Google, kind of. Who is selling and renting media — well, who isn’t or preparing to do so? Who is in the hardware biz — all except Facebook? Who’s reaching for the digital ad riches, now generating $80 billion worldwide; Google, the king, and Facebook, the fast-threatening prince.

Yes, the Google/Amazon match-up over delivering goods is a good and real storyline. As big brains butt, it could be thunderous and landscape-changing. That landscape includes the news business, and you can almost feel the rumbles underfoot just with the word of Google’s move.

Let’s look at the newsonomics of Google’s would-be one-day-shipping program — let’s call it Google Tomorrow™© — and its wider impacts and strategic rationale. First, we’re talking about a lot of potential money. U.S. retail e-commerce is forecast to hit almost $200 billion this year, with the global total adding up to $700 billion. So there are many companies trying to get in the middle of it.

The idea of website-facilitated buying — and shipping — from fairly local retailers isn’t a new one by a longshot. Storerunner plied this territory, too early, a decade ago. Webvan, the best funded of the grocery deliverers went from brilliance to punchline in about 30 seconds. Shoprunner is currently out there, pitching the same idea as Google Tomorrow. Newspaper companies have been more steadfast, more the tortoise in the race for perfection of our emerging online/offline commercial world.

Companies like the Gannett-owned ShopLocal and independent Travidia, with its FindnSave product used by McClatchy and other news chains, have been building the know-the-local-retail-inventory, compare-prices-and-buy terrain for years. Unlike what Google may do, they don’t deliver one-click buying and delivery. They offer product selection, availability and then click off to retailer’s own sites for buying and shipping or store pickup. The idea seems like a great one, a merger of the best of online and offline, yet it’s been slow to grow. Every time I’ve checked out the sites, I’ve found the promise smart, but the inventories too uneven or the hierarchy of results skewed to preferred shops — not mypreferences. Consumers have clearly opted for Amazon over these kinds of sites.

The impact on the ShopLocals and FindnSaves is not what should concern newspapers, though. The big issue: retail advertising.

While the web has greatly damaged newspapers’ classifieds and national ad businesses, retail has been a relatively stronger area. Worth about $13 billion last year — or half of daily newspapers’ ad revenue — it’s a lifeline at this point in the tough print-to-digital transition. Retail is being challenged on several fronts, with the Sunday preprint business a big concern. In fact, both Google and newspapers are pursuing e-circulars to counter the inevitable print downturn in that area.

Wait a minute, you may say — that $13 billion is advertising money and Google, like Amazon, wants to make money facilitating actual commerce. But the division between advertising and selling is an old one, fast blurring. Think about where we’ve come from the era of impression-based (newspaper, TV, radio, magazine) ads into the era of pay-per-click, pay-per-lead, pay-per-acquisition, and more.

Retailers don’t want to advertise; they want to sell stuff.

Give them new routes to sell stuff, and deliver it more cheaply than they could before, and they’ll migrate their ad/marketing/lead generation dollars. So if Google can really make it easier to personalize, routinize and make more efficient the selling process, it will place itself between the seller and the buyer. As it does that, it replaces the newspaper as middleman, further reducing much of the revenue that is keeping newsrooms staffed, even if many of them are now half-staffed at best.

Is the replacement of newspaper as advertising-oriented middleman inevitable? Probably, but over a longer term. Since the dawn of the web, people have been chasing the perfection of commerce, and it’s been a tough slog with far more losers than winners. Amazon, of course, is the big winner, but with relatively small profits, a paltry $63 million in the last quarter on sales of $10.8 billion. While Amazon is perfecting commerce, it’s got a long way ago. Since it was born in 1994, four years before Google, it has built a one-of-a-kind business on customer obsession and brilliant analytics. Its recommendations engine is ready for the web hall of fame, and its latest foray with Prime membership (“The newsonomics of Amazon’s prime moves“) shows it knows how to build on its foundation.

Google lacks some of Amazon’s core strengths. It’s a mix-and-match technology company, famously trying lots of things and at times more quickly abandoninglosers. In commerce, Google is moving forward with a spate of moves. Google OnePass is a restyled content buying system, with some prominent publishers signing on. Add in Google Latitude, Google Local, Google Local Shopping, Google Shopper, Google Tags, and Google Places, all relating to local commerce.Google Offers is gaining steam and is working with publishers on syndicating local daily deals.

There’s an irony to such publisher partnerships, of course. On the one hand, Google is a “partner,” magnifying publisher businesses through its ad and search products. On the other, initiatives such as Google Tomorrow are a potential dagger to newspapers’ jugular. That’s the way of the web world. For Google, or Amazon, or Apple, or Facebook, any new initiative it takes on has its own internal logic. Should another industry — say newspapers — be wounded in the process, it’s just collateral damage. Given the size of these digital behemoths, as they decimate legacy industries, you can almost hear them say, “Sorry, did I sideswipe you? I didn’t feel anything.”

If everyone is a frenemy these days, and Google is taking on Amazon, media companies have to ask: Who is the frenemy of my frenemy?

One last point to ponder about Google Tomorrow. Consider it, in part, adefensive move.

If, in fact, selling and advertising are blurring, Google has to move more in the selling direction. Right now, it’s an ad company, pure and simple. About 97 percent of its revenue comes from advertising (and you thought newspapers relied too much on that revenue source). It has brilliantly moved to expand its digital ad dominance (now taking in about 40 percent of the dollars in the U.S.) by merging its paid search foundation with big acquisitions in display advertising and mobile. Just last week, the feds let it buy AdMeld, an ad optimizer — and Google’s 57th acquisition so far this year. Now, the Doubleclick ad management system offers a singular approach, incorporating in one place display, search and mobile, to the delight — and terror — of publishers and others in and around the ad industry.

The dominance is a sight to behold. Yet as digital innovation continues to disrupt everything in its path, the ad business is vulnerable, with companies, led by Amazon trying to eliminate the cost and friction of finding buyers. So let’s look at the Google Tomorrow battle plan as one aimed at Amazon surely, but with ammo that may hit newspapers as well — and one that may allow Google to find that big, elusive second revenue stream.

Membership ain’t what it used to be.

Two years ago, I signed up for Amazon’s Prime program. $79 a year for unlimited two-day shipping. It was a tailor-made program for someone like me who bought everything from printer paper to lawnmowers online. (Really — a nifty all-electric model, delivered to within three feet of my door, requiring just two bolts to be attached before it was ready to roll.)

Some financial analysts decried the program, limiting themselves, as they often do, to the math. And the math said Prime could be a losing proposition, with customers costing Amazon more in shipping costs than the $79 they paid. It was short-sighted. Amazon CEO Jeff Bezos was, and is, all about building market share.

As a consumer and a media analyst, I understood immediately what Bezos was up to: make it easy for me to buy, save me some money on shipping, deliver my stuff quickly (whether I needed quickly or not) — and I’d buy more stuff from Amazon. It’s worked.

As Amazon expands Prime, and rolls out Kindle Fire, it’s time we looked at the Prime moves as a quasi-subscription product, something news and magazine companies know a lot about it. Let’s take a quick look at the relative newsonomics of what Amazon is up to, and how it compares to the business publishers know well.

For Amazon, giving me “free” shipping for a capped annual price is certainly about volume of sales. Estimates are that Prime members — about 10 million in total — up about 40 percent of Amazon’s U.S. sales, each member buying around $1,500 worth of stuff a year.

These are core customers, the same sort of core customers that is driving digital subscription sales for newspapers and magazines. We were either already core when we saw the Prime offer or became core because of it. Simply, Prime is all about relationship. In fact, “free two-day shipping” turned out to be — was it Bezos’ plan from the beginning, or a happy stumble? — a backdoor to relationship building.

Bezos took a retail business without much loyalty and is turning it into a loyalty business.

Then, in February, Amazon extended Prime benefits to free instant streaming of videos, as its on-demand service (13,000 movies so far) got off the ground. Then, two weeks ago, it announced a “free” book lending service (5,000 books so far) for Prime members. These are just fledgling steps in turning Prime customers into media-swilling Amazon members. It’s an old-fashioned, co-op-like membership meme, offered from one of the world’s great progenitors of digital age capitalism. (Here’s a good Prime primer by Brad Tuttle at Time’s Moneyland, and here’s a good rundown on the business end from the Journal’s Stu Woo.)

Consider these numbers offered up by Piper Jaffray analyst Gene Munster in the Journal story:

• Amazon currently incurs about $90 a year in cost for each Prime customer, losing $11 annually per subscriber, off its $79 single price point. (The more you buy, the more you save!)
• Of the $90, $55 is due to shipping costs and $35 is driven by acquiring digital video content. Now, related book-lending services costs will be added, driving up the loss for this leader.

So investors were a tad concerned recently when this trajectory of cost reduced Amazon’s overall operating margin shrank to 0.7 percent in the third quarter from 3.5 percent a year earlier.

Munster smartly juxtaposes the increased loyalty and sales volume against that loss — or against that investment.

Now let’s turn the news and magazine industry, and ask a few questions:

• What’s the difference between a shipping fee and a subscription? They seem quite different historically, but Amazon is building a bridge between the two.
• What’s the difference between a buyer and a reader? Shopping and reading always coexisted in newspapers and magazines; Amazon just offers a new twist here, starting with buying and then moving to reading.
• What’s the difference between a newspaper subscription and a membership that gets you “free” media? Amazon pushes us back into the mindset that soft goods — digital books, digital music, digital movies — are worth less than hard stuff that it ships us, the office supplies and lawnmowers. That’s a bit depressing. Wouldn’t it be a wonderful world in which the soft stuff that provides enjoyment, entertainment and learning were more the real value, and garden and office tools the freebies?

In the world as it is, though, news and entertainment media are countering with the All-Access value model. Take all our content — and be excited about all the ways we now bring it to you. Netflix, Comcast, HBO, The New York Times, and the Wall Street Journal are selling convenience, immediate gratification, and mobility — all great if often short-sighted American virtues. “Sell the sizzle, not the steak” is as good a Mad Men tenet of faith as any.

“Smart is the new sexy,” the Newspaper Association of America’s most recent effort to reassert the value of news media, probably misses the sizzle we’re seeing offered by others. Everyone knows it’s easier to buy a smart pair of eyeglasses to achieve the sexy look than read a paper (or site) every day.

A few more things for news and magazine media to think about here:

• Newspapers have been rightly concerned about losing a direct customer relationship as digital subscribers become Apple or Amazon customers rather their own. The Prime move sheds new light on this question: If the world’s premier online seller becomes a media hub, the question of who owns the customer gets even bigger. It’s a growing Goliath vs. a shrinking David here; Amazon just will continue to add more and more media (and other goods and services) to its Prime membership base.
• Amazon’s 10 million Prime members compares well against individual media. Among U.S. newspapers, the Wall Street Journal leads with about million sales. AARP puts its magazine number at 22 million — a number boosted by a model framed around membership — while Meredith’s Better Home and Gardens comes in at 7 million. Maybe more apt “media” comparisons may be Netflix at 22 million or ATT Wireless’ more than 100 million. The key questions here: What is membership, what is subscription and what is media?
• This is about much more than a $79 offer; it’s about deep and building customer knowledge. Amazon’s “Recommendations” have long been talked about, but its mastery of customer analytics is the big story here. That’s what any competitor to Amazon must contend with. It’s noteworthy that companies as small as The Day in Connecticut  (“The Newsonomics of 100% Reach“) and as global as the Financial Times (“The Newsonomics of the FT as an Internet Retailer“) ) are taking similar analytics-driven approaches to their businesses. If you are in the media business and behind on the analytics curve, Prime is a new caution in how your franchise could crumble in the age of Big, Actionable Data.
• So what are news and magazine companies’ propositions here? Is All-Access to the news or magazine titles just a foundation? If Amazon, a former hard book seller, can reinvent itself as a media company, which media might become wider media centers, essentially re-selling the movies, music and books streamed by others (including Amazon)? If this is about customer relationship, it’s probably either an upward or downward spiral. Keep the customers you have by offering them more, or risk losing those primary relationships to others (Kindle Newsstand, Apple Newsstand, plus, plus, plus). That’s a sobering, but likely, scenario.