Hearst, MediaNews: you can invent the future in San Francisco

MEMO

TO: Steven Swartz (CEO, Hearst Newspapers) and Dean Singleton (CEO, MediaNews Group)

See that bridge? When finished in 1937, it was not an incremental step. It was a leap into the future.

Wouldn’t it be a terrific idea to search for the boldest, most imaginative solution to your problems in California?

Mr. Swartz, you’ve let it be known that Hearst will shut down the 339,000-circulation San Francisco Chronicle unless it is able to sell the paper or extract major concessions from its unions. Mr. Singleton, MediaNews owns just about every daily paper surrounding San Francisco, but revenue declines have forced you to impose mandatory furloughs on employees.

As Alan Mutter, the Newsosaur, suggests as part of a detailed analysis of the situation, and has suggested previously as well, MediaNews could be part of the solution. Antitrust issues are unlikely to get in the way of a combination of some kind. Major staff cuts are simply inevitable. But there is an opportunity to go far beyond a simple consolidation of operations.

I’ve suggested this before but, you might have missed it. So I’m going to repeat myself somewhat.

Mr. Swartz and Mr. Singleton, the real opportunity for Hearst and MediaNews in the Bay Area is to plan now for a truly transformational step toward the news enterprise of the future, rather than another incremental set of staff cuts and tonnage reductions on the path to oblivion.

It’s time to reinvent, to define a whole new way of doing business. In the Bay Area, that does mean merging the MediaNews papers and the Chronicle into one regional operation, but not stopping there.

Continue reading this post at Nieman Journalism Lab.

Will Gannett, in Detroit, go boldly where no media company has gone before?

Jim Hopkins at Gannett Blog is speculating on speculation that there will be a radical restructuring of the Detroit Free Press/Detroit News publishing operation, with an announcement possible at a rumored employee meeting slated for next Tuesday, December 16 :

The Gannett-controlled publisher of the Detroit Free Press and The Detroit News is working on something super-duper-secret called "Project Griffin." [Actually, apparently it's 'Griffon.'] It would represent an enormous gamble by Gannett and its partner, MediaNews Group, to staunch multimillion-dollar losses in a city whose economy is cratering around the auto industry crisis. Hanging in the balance are the jobs of perhaps 2,000 employees.

Yet with nothing to lose but, well, more losses, the idea is to blow up the traditional newspaper business model in an especially dramatic way. A formal announcement could come as soon as Tuesday -- if you believe the speculation.

Under the purported plan, one or both Detroit papers would end home delivery entirely, except for perhaps two or three days a week -- the more-lucrative Thursday, Friday and Sunday editions. Other days, there would be some sort of slimmed-down single-copy-only version. And everyone would be encouraged to subscribe to already-available electronic editions of the Freep and the News.

This plan is also reported at Blogging for Michigan. The Tuesday meeting is apparently confirmed in an email this morning from CEO David Hunke.

This concept resembles the frequency-reduction scenario I've explored previously, and that has also been mentioned by Alan Mutter, Tim Windsor and Steve Outing. As I commented on Gannett Blog:

Certainly a money-losing metro should be considering a conversion to digital-first publication combined with printing just 1-3 days per week (plus a commuter freebie where appropriate). This [kind of restructuring] cuts a ton of expense while potentially retaining most of the ad revenue; and more importantly, it takes the right step into the future, while continued cost-cutting within the old model is a guaranteed dead end. The Tribune bankruptcy and Rocky Mountain News closing are going to stimulate a lot more of this kind of thinking.

Moreover, publishing less than 4 days a week would free publishers from that pesky FCC cross-ownership rule.

Is the rumored plan plausible? Let's look at the situation on the ground. The Gannett Company owns the Free Press; MediaNews Group owns the Detroit News; they jointly own The Detroit News Inc. (aka Detroit Media Partnership), which is the agency that operates both papers under a Joint Operating Agreement—but Gannett owns 95 percent of the operating partnership; MediaNews has only 5 percent. So Gannett is in charge of everything except the News newsroom. (See SEC filings for the exact structure.)

MediaNews is savvy about JOAs; they've been involved in more of them than any other chain. In Denver, they ended a long-running war with E. W. Scripps by means of a JOA combining the Denver Post and the Rocky Mountain News. But that combo loses money, and Scripps has put the Rocky up for sale; the virtually certain outcome will be that the Rocky closes and MediaNews at last has uncontested dominance in the Denver newspaper market.

Gannett might wish that MediaNews would similarly fold their tent and leave Detroit, but that won't happen, because under the terms of the Detroit JOA, MediaNews is "reimbursed for its news and editorial costs associated with publishing The Detroit News," and if the JOA is profitable, it also receives a "fixed preferred distribution" set at $4 million for 2008 and 2009, and declining in later years. In other words, MediaNews is guaranteed not to lose money in Detroit. Assuming the JOA is currently in the red, they're forgoing the fixed preferred distribution, but their newsroom expenses are fully covered. (By contrast, in Denver Scripps had to fund news operations out of the meager JOA proceeds, so it was operating at a loss.)

In this situation, MediaNews has no incentive to pull out, and Gannett can not force the issue by offering a buyout without running into potential anti-trust issues. They need to maintain a two-newspaper market to avoid the regulators. But with a dismal economic scene in Detroit, with or without an auto bailout, it will be nearly impossible for the JOA to be profitable in its current configuration. No amount of cost-cutting will do the trick. The only way out is, in fact, to "blow up the organization" and launch an entirely new business model. Under the circumstances, this kind of thinking ought to help Gannett's battered stock price, which can't sink much lower, in any case. And MediaNews should be pleased to go along for the ride; since they have total downside protection, they can only win.

Look for a bold rationalization of the market that pushes the boundaries of what's permissible both under anti-trust and FCC rules. In my mind, this should include: a big shift to an online-first-and-foremost culture; a Free Press published Thursdays and Sundays; a slim, Monday-Friday Detroit News free paper; and a strong alliance between the Free Press and a leading TV broadcaster in town. Certainly this kind of scenario entails more job cuts, but it would represent a strategic restructuring that has a good chance of succeeding, not a tactical retrenchment that's just a step on the way to oblivion. We'll find out Tuesday whether David Hunke is a strategist, or a tactician.

The dominoes are falling

As mentioned here last week, it's year-end crunch time. I predicted we would see, during December and January, a rash of tactical, non-strategic moves by newspaper owners aimed at conserving cash and postponing the inevitable. It's only been four days, but so far we have the following:

• As many as 2,000 more layoffs are announced at Gannett, as chronicled by Jim Hopkins at Gannett Blog.
  
• E. W. Scripps, after informing MediaNews Group, its JOA partner in Denver that it plans to shut down the Rocky Mountain News, puts up a for-sale announcement in case there's a white knight out there somewhere. Dean Singleton, MediaNews CEO, issues a memo making it clear he believes the Rocky will be gone.
  
• McClatchy announces an auction of its flagshap paper, the Miami Herald
• Fitch Ratings tells us that newspapers in "several cities," meaning major U.S. metro areas, may simply shut down
• Martin Peers at the Wall Street Journal, agreeing with me that major change is in the offing, suggest that MediaNews, Lee and Freedom should consider merging, and that Tribune could be broken up, with California pieces going to MediaNews and Florida pieces to McClatchy—oh, but, whoops, McClatchy is selling the Herald. In any case, Peers may think that some consolidations are "logical," but combining newspaper operations yields slim pickings, usually limited to shared back-office functions. You can't combine the key functions of news gathering and advertising sales in widely separated local markets.
• UPDATE 12/07 8:57 pm: Sam Zell's Tribune hires Lazard Freres and other advisers to help stave off bankruptcy. Since most of the Tribune's newspapers are major market metros, this helps confirm my suspicion that most of the top 50 papers in the country are now in the red. Lazard is also handling the presumed liquidation of Journal Register Company.
  

Meanwhile, Dennis Kneale at CNBC predicts that in 2009: "Print media will survive. In fact the Old Media may have a surprise resurgence of sorts, as advertising price cuts bring back sponsors and once-torrid online ad sales continue to slow down."

Huh? This would be price cuts on top of a two-year sales decline of 21.3% (first nine months of 2008 versus same period in 2006, according to the NAA)? Unless Kneale is expecting boom times during 2009, it's inconceivable that rate cuts of, say, 10% would result in revenue growth for print.

The real answer for newspaper companies continues to be genuine strategic restructuring into digital enterprise models. Either they do this themselves, or the door is open for startups to do it, in large and small markets across America. (Several thousand laid-off journalists are already thinking about the latter option.)

Universalizing the copy desk

Turmoil in the generally placid waters of copyediting! Singleton lets drop that he might outsource their work to India! Weeping, wailing, gnashing of teeth! The American Copy Editors Society (ACES) responds (on front page of site, not permalinkable):

Sending copy editing overseas is a sure way to kill a paper's credibility. Maybe not immediately, and maybe not in one dramatic gesture, but every time that desk 9,000 miles away overlooks some nuance that local readers will spot, the newspaper's credibility dies a little. Oak Lawn, Oak Cliff, Oak Park, Oak Hill? What's the diff?

....And let's not even start on the tragicomic workflow disaster an overseas desk would cause. Just think of the last time you had to deal with an overseas customer service call center.

I'm sorry, but I happen to think the world’s offended copy editors are wrong for suggesting, in effect, that those dumb folks in India don’t know English well enough, and won't know their particular backyard, resulting in a ton of stupid mistakes.

The unions’ argument against Singleton (in their formal response) is plainly weak; it boils down to: There might be “errors a local person would have caught.” What else is new? There are plenty of errors already.

But beside that, if you look at the stories in any major Indian newspaper online, you won’t find scads of grammar errors, spelling errors, or stilted language. And for the most part, at the various regionalized copy desks already within MediaNews Group today, they don’t make mistakes about street names and such that are a couple of counties away, because Google has been invented (along with the telephone), to doublecheck those things. Distant copy desks can learn the local particulars pretty quickly and would obviously build themselves a reference manual as well. The California MNG papers are already doing ad production in India, apparently with no surge in errors, and the outfit Singleton probably has in mind, Mindworks, has been at this for a while very very successfully for a number of other major publications.

A better idea than all of this, however, is wiki-based journalism, which I seem to be posting about frequently (click "wikipedia" tag below this post). As part of this, stories could go online before getting excruciatingly edited, and would then go through several cycles of re-editing and annotation, Wikipedia-style, as envisioned by Japan's Information Architects. Copy editing in this model is universalized, as it is at Wikipedia.

Of course, copy editors won’t like that either, because it means that to some extent, Jane Public becomes your copy editor. But what's wrong with that? If Jane Public is already spotting mistakes (or “missed local nuances”) all over the paper today, while there are still copy editors warming American seats, why not let her just fix those mistakes, so reporters and editors can focus on chasing down the rest of the story? In fact, if enough Jacks and Janes out there can be engaged in the process of not only copy editing but researching, reporting and improving stories and news wiki topics, news content could be enormously enriched.