Tuesday, April 10, 2007

Experts: Newspapers Won't Be as Profitable

Newspapers will never be as profitable as they once were, experts say, but can still do well
The writing on the screen


April 10, 2007

They don't feel like part of the traditional newspaper thrown on your doorstep - online chats, podcasts, video and audio feeds, plus searchable databases to aid in the hunt for a new home, used wheels or the best pizza on Long Island.

But increasingly they are important parts of the modern newspaper, an ever-evolving format for news and information that is making a not-so-subtle, sometimes wrenching, shift from ink-stained newsprint to computer screens in the Internet age.

Last week's decision by Newsday's parent, Tribune Co., to become a private enterprise, away from the financial demands of Wall Street, will provide only a little breathing room for a media company in the throes of change, experts say.

"It's too early to tell, but there's a sense that companies looking at quarterly reports are more afraid to experiment and innovate," explains Randy Bennett, vice president of audience and business development for the Newspaper Association of America, a trade group based in Arlington, Va.

In a sense, the move by Tribune to go private is a throwback to an earlier time, when newspapers were owned by families such as the Hearsts and the Pulitzers. In recent decades, most major media have been publicly traded, yielding rich profits for investors until recently, when Wall Street began punishing newspaper stocks because of declining circulation.

No longer the only 'road'

But whether they are publicly held, controlled by private owners or even operated through a nonprofit foundation, America's newspapers face unprecedented challenges for advertising dollars and the public's attention.

"Newspapers will never go back to their historical level of profitability," said Philip Meyer, a journalism professor at the University of North Carolina at Chapel Hill. Newspapers, he notes, used to have "a near-monopoly in the market, and the newspaper owner owned the road on which information flowed."

Meyer's 2004 book on the industry, "The Vanishing Newspaper," explained how perhaps the strongest mass medium the United States has ever seen for presenting vast amounts of information has steadily lost readers during the past few decades because of technological changes, particularly competition from the Internet.

Despite a host of worries, including substantial recent drops in national and classified advertising, Meyer said, "You can still make an investment case for newspapers." He said the strength of traditional newspapers to break news and "influence" society won't go away soon if their owners learn to adapt.

Meyer said that by moving steadily onto the Internet, newspapers can make a substantial dent in the costs of newsprint and transporting papers, costs that now account for as much as 17 percent of a newspaper's total expenditures. "The new model can be built on information, as the leading trustworthy provider of information," Meyer said. "But now is the time to do it."

While taking a newspaper company private might seem a good idea, it means little in the long run if no investment is made in a long-term strategic plan to improve its financial picture, said former newspaper editor Alan D. Mutter, now managing partner of Tapit Partners, a Silicon Valley investment firm specializing in new media.

Slow to adapt

Mutter, who writes a blog, or Web log, about the newspaper industry, pointed to the Philadelphia Inquirer, which went into private hands last year after the break-up of the publicly held Knight-Ridder chain, as an example of the difficulties facing newly privatized papers. Layoffs began in January, and 71 newsroom employees - about 17 percent of the editorial staff - departed. Mutter notes that, after taking on sizeable debt to fund the purchase, "There was little extra cash to put into the product."

Overall, he said, newspapers have been slow to adapt to technological change, often publishing stories based upon the "personal predilections" of editors and reporters - articles that may win journalism prizes but fall outside the interests and needs of most readers. "In a market that has changed dramatically," he said, "it's a huge problem."

Despite these challenges, Mutter said newspapers remain a "unique and powerful brand with a high degree of credibility," provided by staff who usually know more about local government, schools and social activities than any competing medium, including television, cable and radio.

Online ads surge

Bennett, the trade association executive, said newspaper companies are making substantial inroads with online advertising, which has been growing at a brisk 30 percent annual rate, though last year it still accounted for only $2.7 billion of the $49.3 billion total spent on newspaper advertising. Local retail and classified ads accounted for almost 80 percent of last year's spending on newspaper advertising, the association's records show.

Print-ad revenues have been flat or declining in the past year for "cyclical" reasons, Bennett said, reflecting the slowdown in real estate. Revenue from online ads, meanwhile, is still far short of replacing what print ads generate, he said.

To grab more of the hard-to-reach younger-than-35 audience, Bennett said, newspapers are investing in numerous online ventures. As an example, he pointed to newspaper companies joining with Internet search engines such as Yahoo in an effort to maximize advertising potential.

Hearst, MediaNews and other companies representing a total of 150 newspapers recently announced a deal with Yahoo for online classified advertising, aimed initially at job recruitment. "In an age of many media platforms, newspapers have to think of what is the right way to reach a certain audience," Bennett said.

More modest margins

Even veteran industry observers like Meyer said they've changed their expectations for newspapers. No longer will publishers enjoy 20 percent to 40 percent profits. Today, large urban newspapers often produce profit margins in the teens - considered very good for most industries - though Wall Street investors have not been satisfied.

Meyer said newspapers will have to learn anew how to compete, as they did after World War II amid growth in television, FM radio and direct-mail advertising.

Meyer said he's surprised what the advent of Internet competition has meant for his own life. Rather than buy a newspaper ad to rent a property he owns, Meyer said, he used craigslist, a mostly free online service that has sapped considerable paid classified advertising from newspapers in recent years.

"I felt so guilty," he said, "but it was faster and cheaper."

Increase in newspaper ad spending from 2003 to 2006:





Amount spent last year:


$46.6 billion


$2.7 billion

Copyright 2007 Newsday Inc.

Martha Stewart Targets Russia's Middle Class for Magazines, TV

Martha Stewart Targets Russia's Middle Class for Magazines, TV
By James Brooke

April 10 (Bloomberg) -- Martha Stewart, the self-styled American authority on taste, plans to bring her books, magazines and television shows to Russia, tapping into an expanding middle class as incomes surge in the former Soviet republic.

``It's a very, very opportune time,'' Stewart, the founder of Martha Stewart Living Omnimedia Inc., said in an interview today in Moscow during a week-long Russian visit.

Translated into Russian, Stewart's publications about cooking, entertaining and gardening may be on sale at kiosks in Moscow by next spring. She'll start with Martha Stewart Living, Everyday Food and Blueprint, a new magazine aimed at women aged 25 to 45. The media rollout will be followed home furnishings including sheets and towels, possibly through an alliance with a local retailer, she said.

Stewart arrives in Russia as income from the country's oil exports filters down to consumers. Retail sales rose 14 percent in February from a year earlier, while construction surged 24 percent in the last quarter of 2006.

``There is a middle class that is rapidly emerging,'' said Kim S. Iskyan, co-head of research at Uralsib Capital in Moscow.

Russians' disposable income has increased about fivefold in the last five years, bringing about 20 percent of the country's 141 million people into the middle class, he said.

``Everywhere you look, someone's fixing up their apartment,'' he said. ``And as soon as people have the discretionary income to upgrade their immediate surroundings, you can bet they are going to throw out the hand-me-down china.''

Stewart said she's noticed a gap between U.S. perceptions of Russia and the reality.

`Wild West'

``The new Russia -- people are just imagining it's the Wild West, a bunch of cowboys making lots of money, oligarchs just running around like crazy,'' she said. ``But in fact Moscow is a very sophisticated city.''

Stewart's mission will be to reverse setbacks in taste imposed by seven decades of Soviet rule, she said.

``All the things that happened during that time were very bad for the middle classes, for good taste,'' said Stewart, recalling her studies of Russian history as a student at Barnard College. ``Now people are scrambling to learn, scrambling to develop a lifestyle they can call their own. And I think that is all very exciting.''

To contact the reporter on this story: James Brooke in Moscow at jbrooke2@bloomberg.net .

Journalism Education Stuck in Same Oldthink Mode as Big Media

Journalism Education Stuck in Same Oldthink Mode as Big Media
by Mark GlaseR

When I visited the campus of Ball State University recently, I was struck by the number of innovative programs the school had carried out, from a live interactive TV local broadcast to its converged newsroom. Ball State is also home to the well endowed Center for Media Design , which conducted one of the most comprehensive (and expensive) usage studies, the Middletown Media Studies , in which researchers literally watched and recorded their subjects’ media usage during all their waking hours. And the Ball State campus itself is aggressively wired with WiFi Internet access, and is filled with gleaming buildings and high-tech trappings.

But the problem, particularly with Ball State’s journalism and communications study programs, is that the school’s philosophy remains mired in a legacy media mindset. You can learn about advertising or PR or newspapers or broadcast or magazines. And the goal of those programs is to get placed into positions as they have been defined for decades: the big PR agency, The New York Times, ABC News, Newsweek.

I went to speak in front of a class of students learning about advertising sales. I was happy to hear some of them were working on a project related to ads on cell phones. I was horrified to hear that there was no class related to online advertising. None, nada, zip. That’s unbelievable, when you look at the growth of online advertising — up about 34% in 2006 alone — compared to the stagnation of legacy media’s ad business. How can students be prepared to go into media ad sales without knowing about the online realm? My only advice to students was to learn it on their own, check out the blogs and websites dedicated to the topic and soak up what they could.

I don’t think for a minute that this is a problem only at Ball State. Almost every interaction I’ve had with journalism schools and their faculty reaffirms that these institutions have a long way to go before they can evolve from the oldthink mindset. There might be pockets of resistance or some innovative projects here and there, but overall the focus of students is to follow in the same footsteps as their professors: Start your career at a podunk daily newspaper and work your way up to the big metro papers, and end up in academia.

Nowhere do students get the inkling that the metro paper might not exist by the time they get there — at least in its current ink-stained format. Nowhere do they learn the ins and outs of being a freelancer, even though they are living in a free agent nation, almost assured of being downsized out of a job at some point. Nowhere do they learn what it takes to moderate an online community, to do outreach into a community and work with citizen journalists and bloggers. The blog, in academia, is looked at by faculty as something to disdain, a lazy way out of doing real journalism; and by students, it is looked at as a leisure time activity, pointless and fun.

From what I learned from Ball State’s administration, there are three groups of professors: those that understand the shift that is happening and are happy to figure it out; those that refuse to change their curriculum that has been set in stone for years; and those that are on the fence. The hope of administration is that the oldthink types can be moved along the path to retirement, while the middle group can be convinced to join the vanguard.

Meanwhile, the students present an interesting conundrum. I figured that they would be chomping at the bit to work in new media, as they are the digital generation born with a laptop and cell phone in their hands. David Studinski, a Ball State senior who is editor of the student newspaper, explained to me over lunch why students were as slow to embrace change as their professors.

“They use the technology all the time, they all have cell phones and they text message,” he said. “But they don’t take it seriously as a work thing. They think of blogging as gossip and MySpace is for fun with their friends. They don’t think they could work in that type of environment as a journalist.”

So what is a university to do? It could start a program for students to learn networked journalism or online journalism. Or it could start to require all journalism students to learn the basics of multimedia production and storytelling, online moderation of communities, and the skill of writing for the web and on blogs. Newspaper students would learn about making — and being on camera for — online video reports. Magazine students would learn the basics of doing an audio podcast. Broadcast students would learn how to write for the web. And advertising students would learn about behavioral and interstitial advertising online.

Freelance writer Greg Lindsay gave an amazing virtual commencement speech to 2005 j-school graduates on mediabistro, noting the same problem with academia. His main point:

You thought you were buying [with your tuition] a set of skills, credentials, and quality time with the placement office. And you did. But your professors also sold you a mindset, a worldview, an ideology — one in which newspapers are God’s work, bloggers are pagans, and your career trajectory is a long, steep, but ultimately meritocratic climb to a heavenly desk at The New York Times or ‘60 Minutes.’ Accepting any of this as gospel truth will almost certainly cause permanent damage to your budding careers…

Is there a way to fix this? Maybe, if your professors are willing to admit that they’re evangelizing as well as teaching, and that where they see a decline and fall going on in the media landscape, you might just find opportunities helping tear it down. But who wants to say that?

Who, indeed? What’s your experience in academia? Are administrations ready to shift their teaching along with the times? Are students still focused on legacy media and what will it take to change their mindset? Share your thoughts in the comments below. I would love to be proven wrong with examples of widespread change.