Sunday, March 25, 2007

It's not raining on us – it's just raining

I wrote here the other day that, "The biggest 'destructive technology' change for newspapers is the fact that websites can be refreshed constantly while printed papers get updated once a day."

I think that's right (certainly defensible) when we're talking about delivering news to audiences. But I realized when rereading and thinking more about it that it's also a fairly narrow observation. I want to "amend and extend" my remarks, as legislators sometimes say.

Of equal magnitude for us is this: the web also wiped out our longstanding monopoly status and the exclusive advertising franchise (classifieds) that went along with it. This is huge, too – the primary reason that newspaper revenues are down and cost structures are under so much pressure. Since we won't ever enjoy that monopoly status (or pricing power) again, we have to find ways to perform more efficently to close the gap that's widening between expenses and revenues.

The most virulent (and high publicized) form of that "cost restructuring" comes in newsroom layoffs. This is what captures the attention of fellow journalists (a point worth discussing separately sometime) and also what most effects our core mission.

At McClatchy, we've mostly avoided this; there have been some voluntary buyouts, and losses from hiring freezes and attrition, but I believe newsroom populations at McClatchy have been effected less than other major newspaper companies. (Lots of news jobs have been reallocated to online efforts, too, which is essential, but that also puts pressure on traditional operations).

The pressure on expenses is far from over. Reported revenue at public companies continues to decline, and most reports from private companies are about the same (or worse). Newspapers don't have to make the same profits in the future they did in the past (and we're not), but the in a capitalist economy we do have to establish a stable path of growth.

We can, and we are.

I know it's selfish for an editorial guy to say so, but there's a lot of opportunity left for companies to cut costs without destroying newsrooms. I know layoffs in telemarketing are as painful for the individuals as those in newsrooms, but the cold fact is that they don't affect the mission in the same way. The fact that the Contra Costa Times has outsourced ad production to India doesn't speak to the newspaper's mission nearly as much as the newsroom cuts they've had there.

[I'm not suggesting newsrooms are immune to reforms and reductions; our editors know better, and are feeling the pressure every day. But know this: McClatchy understands newsrooms are at the heart of the enterprise, not an incidental "cost center."]

Newspaper companies evolved as clasically "vertically integrated" enterprises. Until very recently, we did everything, even at the smallest local papers: reporting, selling, producing, distributing. Each were creative companies and sales companies and manufacturing-distribution companies. They did their own accounting and procurement, their own IT, their own security and janitorial.

Other modern industries stopped that years ago; even behemoths like GM and Disney became "horozontially integrated" (out-souring to subsidiaries) and sectors like banking, telecommunications and information technologies became fully distributed. Where there once were integrated single entities, the companies now operated within an "ecosystem" of related, efficient separate businesses. (This same dynamic is emerging in advertising sales and news distribution, I believe; we'll explore that notion and its impact on us later).

Newspaper companies have embraced efficiencies sporadically, and some are farther along than others. Some have been relatively smart about it (though the best of us were slow), and some less so. Take that all into account: there's still a great deal of opportunity here for us, some so obvious that it qualifies as low-hanging fruit.

So don't freak out when you read about our "collapsing" revenue model. It's changing and getting smaller – but so can our costs.

We don't have infinite choice about changing. Remember, it's not raining on us; it's just raining. It's raining on Ford, and Sony and NBC. It's raining on travel agents and the guys who used to make prints out of Kodak film. Get over it.

The key test here will be how well we can stay mission-centered as we evolve. Do the changes we adopt optimize our ability to produce quality, public service journalism? Do they help us hold the government accountable, speak the truth to power, build community cohesion, give voice to the voiceless?

We will succeed or fail by those measures.


  1. Howard,

    A lot of us in the industry have been studying API's Newspaper Next program. One of the big factors in those freaking out about newspapers is the disruptive forces that have eroded us, seemingly, from every corner of our market.

    Yet, I believe newspapers are at least as disruptive as we are disrupted. As you know, we've been doing video for a lot of years. I am quite certain our local TV stations' anchors, reporters and station managers haven't needed as much bran in their diets anymore because what we do makes them crap their pants. We are their disruptive force. So are YouTube, Google Video, etc., just as CNN and other cable news shows have been for the past decade or two.

    Now, thanks to our Web sites and (still) well-staffed newsrooms, we can provide more and better breaking news than they can. We have disrupted their ability to beat us to the punch. We are giving readers fewer reasons to tune in to the local news at 6 and 11.

    Here in little old Tri-Cities, our news-gathering staff (newsroom and interactive) far exceeds all other media in our market combined. This means we are in the best position to deliver the goods to our audience. And we do just that on a daily basis.

    I get really tired of the obituaries being written about the newspaper industry. I really get tired of it being written by the newspaper industry. Sure, our year-over-year gains aren't as big as they once were. But our profit margins are the envy of nearly all other legal industries.

    A little revolution now and then is good. We're in the vortex of the news revolution, and nobody else is better positioned to take advantage.

  2. Anonymous11:52 AM

    One of the lessons for the early on was our advantage in reaching the at-work audience.

    For years, we saw it and did nothing about it.

    Or, we saw it, and said, well how do we reach a bigger audience at night and weekends? We daypart!


    The correct answer was more and better and faster news during those peak hours. That would have been more disruptive to TV even without video.

    In Ventura, we started doing more frequent updates during the day, but not because I thought of it in the terms outlined above. I was just thinking: Blogs are successful through frequent updates; we should do that, too.

    It's only been within the last year that frequent daily updates have been widely adopted by the industry, and we still have a long way to go in many cases.

  3. ability to produce quality, public service journalism? Do they help us hold the government accountable, speak the truth to power, build community cohesion, give voice to the voiceless?"

    On what stone tablet is this carved?

    Newspapers "already tried that."

    Maybe part of evolving is to give up those roles.

    The biggest majority of newspapers don't do a very good job of what you describe already.

    Therefore nobody in the community would notice if it stopped.

    95% of whats published in newspapers has absolutely nothing to do with what you describe as our mission.

    So why worry about it? Who cares?

  4. If you've described your own newspaper, Mark, I feel sorry for you.

    You haven't described ours.


  5. Well I guess I was put in my place!
    I guess you aren't willing to question every part of our business.
    Keep those walls high around the newsroom - you need them.
    Sorry I bothered you.

  6. Mark: For what it's worth I can think of a few significant examples of journalism in the public interest...

    The N&O political team worked their butts off to pursue whispers of influence peddling by North Carolina's house speaker. It wasn't overnight, but dogged investigation resulted in several guilty pleas. At least three corrupt officials are heading to prison as a result. The legislature is repealing laws put in place to benefit doctors who bribed the speaker.

    As far as giving voice to the voiceless, this past Sunday, the N&O looked at compensation awarded for financial guardianship.

    Are these specific to online? No, but the stories aren't exclusive to print either.

    I'm a McClatchy employee and I believe work like this is a big reason why we will continue to be in business.

  7. base10: and yet N&O circulation fell by 10,000 daily in two years.

    I submit that if those vast resources used to investigate the house speaker would have been invested in reporting on stuff people cared about, your circulation might be flat - even up a little.
    We'll never know, but again, my original point was: newspapers have to question every single aspect of their business from the reader's persective.

  8. Mark: Is that because they stopped reading the N&O altogether or they felt gave them a good (enough) experience?

    I agree that news organizations need to question how they're going to remain relevant. I'll agree we need to de-ghettoizing community news and "minor" things like where potholes are and who's going to fix them. That's happening online.

    But, speaking strictly as an online guy (SW developer), I don't see circulation falling as failure. What i do care about is if these stories are reaching readers and if they're motivated by them.

    Sure, it might be Joe Browser, but if it's the FBI or the legislature and it effects change, that's still a win. A big, big win.

    Having worked alongside, tangentially and, sometimes, in opposition to newsroom wishes w/ respect to web site operation or software development, I can say it's exciting when instead of insisting things are fine because the circulation's still where it was, the ad revenue is where it was, full speed ahead, the newsrooms are trying new things.

    Destruction yields creativity.

  9. Anonymous10:32 AM

    Hard not to feel like it's raining on us in Minneapolis.