Bankruptcies: What kind of changes will they force on newspapers?

Four major newspaper firms have now declared bankruptcy. The rest of the industry is on the ropes — sources of credit or equity funding have virtually dried up; there is basically no market into which to sell publishing assets to raise cash; the ability to maintain quality and to innovate is seriously hampered by continual cost-cutting necessary to maintain positive cash flow and meet debt service obligations. Many individual newspapers, especially in metropolitan areas, are reportedly operating in the red. Further bankruptcy filings seem inevitable.

We’ve seen this before in other legacy industries, most notably U.S. railroads. In 1920, trains carried a total of 1.2 billion passengers, the peak year for rail travel in this country. Despite a few upticks during the late 1930s and World War II, it was all downhill after that as personal automobiles, buses and airplanes siphoned off traffic, and as government policy failed to encourage rail travel as it did in Europe. For five decades, railroad companies struggled against the tide but failed to adapt. By 1970, much of the industry was bankrupt. Today, the government-owned Amtrak system carries a grand total of 29 million passengers a year, about 2.4 percent of the 1920 level.

The discerning reader will notice some parallels with long-term trends in the daily newspaper industry:

Continue reading at Nieman Journalism Lab.

More on an online-only Seattle P-I

I speculated the other day that an interested purchaser of Hearst's for-sale Seattle Post-Intelligencer could ignite an interesting battle by taking it online only and competing head-on with the P-I's current JOA partner, the Seattle Times—or that the Hearst Corporation, itself, could do so.

Support for this notion comes from Bill Richards at Crosscut, an online news enterprise covering Seattle and the Northwest, in a story entitled "Hearst may be remaking, not eliminating, The P-I." His analysis goes: (a) There won't be a buyer, because there were no takers in 2004 when Hearst issued an offering, so there won't be any now; (b) as I suggested also, the $14 million in reported 2008 losses are not sufficient reason for Hearst to kill it off—the corporation has plenty of cash and can take the hit, and in recent years they've spent a lot in the Seattle market to preserve their options; (c) "Hearst has given up on making newspapers profitable"; but (d) here's their "emerging strategy:"

Hearst dumps its print paper, in part because much of The P-I’s classifieds have migrated online, but forges a bunch of alliances with Web-based classified outfits so they can be integrated into a new e-paper and recapture some of that lost revenue.
An online P-I might make money for Hearst. Here’s where we veer off into speculation — but backed by some interesting data. Loyal Crosscut readers will recall we ran a projection a little over a year ago showing how an electronic paper might already be profitable. We created an imaginary paper, the Bugle-Interrogator, that was just about the P-I’s size (100,000 daily circulation) and using industry data we calculated killing the B-I’s print paper would save more than half its annual expenses. We also figured online ad revenue would arc upwards without a print option for advertisers, making an online B-I profitable.

Richards also mentions that Lincoln Millstein, Hearst's senior VP for digital media, was on the scene when Hearst Newspapers President Steve Swartz announced the 60-day sell, fix or close plan. Add to this Hearst's strategic investment in E-Ink, the outfit that invented and supplies e-paper screen technology for the Kindle and other e-readers, and the fact that (quoting Richards) "Swartz, who has a reputation as a corporate hard-charger, promised '100 Days of Change' for the Hearst’s newspaper division when he became its president last month"—and you can begin to imagine a plausible scenario in with Hearst makes Seattle a laboratory for trying out not only an online-only news "paper," but other more sophisticated strategies for digital delivery of news as well.

An imperfect solution in Detroit

The announcements now being made in Detroit appear to confirm the earlier rumors:

Changes due to occur in first quarter 2009 include:

• Expanding digital information channels that provide news and information to a variety of audiences when, where and how they want it.

• Limiting newspaper home delivery to Thursdays, Fridays and Sundays while selling printed copies at newsstand seven days a week.

• Providing subscribers daily access to electronic editions, exact copies of each day's printed newspapers.

It's not the best solution, I think. While managers told an employee meeting there would be tens of millions of dollars in savings (stemming from about 200 job cuts, newsprint savings and distribution savings), it keeps in place two separate press runs on most days while failing to differentiate the two papers more clearly. And implementation will be a nightmare, I'm afraid.

The plan looks like a compromise between the status quo and a real rationalization of the market, which had been my suggestion last week. I put forward a Thursday-Friday-Sunday Free Press coupled with a Monday-Friday News distributed free. Advantages: fewer press runs, two distinct missions and markets, greater circulation during the week, and easier to implement.

Either scenario would, by design, push more readers to electronic editions. Given the findings of a just-released Gannett poll tracking consumer news preferences, that's a good strategy, although it will get fierce resistance from many, particularly older readers. The graph posted by Paul Gillin from this poll shows that a year from now, the Internet will surpass local newspapers as a daily news source. (And local newspapers have been behind local TV news for a long time.) Better for newspapers to go with that trend, by adopting online-first strategies, than to continue trying to fight it. That seems to be the plan in Detroit, whatever the imperfections of the print distribution scheme.

Thanksgiving week Odds and Ends

Since it's Thanksgiving week in the U. S., a slow week for news about newspapers, I've got some odds and ends, most of them from across the pond:

Who's on Twitter? Following up on my prior musings about Twitter, here's a list of U.K. journalists using the service, courtesy of Stephen Davies of PRBlogger.com. A compilation of U.S. journo-Twitterers might be a useful tool, as well. Or at least a list of links to lists. I've only come across the Twitter directory of the enlightened newsroom of the Cedar Rapids Gazette. (Which covers local Twitter developments, as well.)
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Who's next to make the leap? The estimable U.K. columnist and blogger Roy Greenslade suggests in his Guardian column today that The Independent should exit the world of print and go 100 percent digital. The paper losing its owners about £12 million a year, sells only about 200,000 papers a day, but has more than 8 million website unique visitors a month. Their predicament sounds similar to that of the Christian Science Monitor, which last month announced its plans to go all-digital. From the column:

I imagine the O'Reillys both wondering - and not for the first time - if this media commentator has lost his marbles. But I sincerely believe their ailing newsprint paper is in danger of attracting so few readers in the coming year that the balance of those sums is likely to change for the worse. So they need to plan now for an online future and to reap the rewards of being the first major paper in the world to boldly go where no man has gone before.

That Star Trek reference could not be more apt because they are in a position to explore the final newspaper frontier, the one highlighted to an extent by none other than Rupert Murdoch in his speeches in Australia last week. [Subject of a prior post of mine.] Though he was stressing that newspapers do have a future (though I tend to think he means his own newspapers rather than other people's) he also made it clear that news brands are the future.

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A new addition to my blogroll: Utrecht (Netherlands) journalism prof Piet Bakker blogs daily at Newspaper Innovation on the subject of free newspapers around the world. The news about free print is mixed: some are shutting down (The Virginian-Pilot's Link, Czechia's 24 Hodin, the Mitteland edition of News in Switzerland), but elsewhere there are new launches (ADN in Columbia). Readership of free papers is up in the U.K, but down in Spain. In the Netherlands, some free papers are crossing the line by selling their editorial space. A free paper might be an option for some U.S. papers looking restructure themselves into online-print hybrids, so keep an eye on Bakker's blog.

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North of the border: Insights from Jonathan Kay at the National Post, urging like most of us journo-pundits that radical change is needed, on "islands of profitability" that might survive the current challenges to print journalism. His life raft is aiming for:

(1) Business-oriented media that cater to older, more affluent readers of the type who can justify the expense of long-form news consumption (in both time and money) as a work activity. Successful media in this mould will look more like the Wall Street Journal than the New York Times, more like The Financial Times than the Daily Telegraph....

(2) Premium publications that cater to the ideologically involved and intellectually upscale — i.e. the sort of well-educated, well-heeled reader who prefers to spend his scarce free time in the world of ideas. These people do have a sense of community — but it is a sense of community rooted in their political attitudes, foreign-policy interests, cultural beliefs, charitable causes and consumer interests, not their geography....-

(3) The hyperlocal. People love local news — which is why even really bad local newspapers manage to remain profitable. Simply put, people want to find out where the big potholes are, who got drunk and wrapped their car around a phone pole last night, what happened at yesterday's school-board meeting and — most of all — how the local hockey team is doing.

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I agree: Amy Gahran urges reporters to link to sources. This seems obvious if you're writing a blog, but not to newspaper reporters and publishers, which is just another indication that they are still overwhelmingly print-centered.

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Make a different wish: If you're looking for a Kindle under your holiday tree, forget it. Dan Frommer reports Amazon is sold out. Order now and you'll have one in late February, maybe. That means it might be a Kindle 2. (Previously on News After Newspapers) Amazon still won't say how many units they've sold (nor will book publishers, but one mentions a "triple digit" jump in e-book sales , but my educated guess is, More Than You Think. Among the best-sellers on Kindle, as ranked among e-books: The New York Times (number 28), The Wall Street Journal (number 36), and the Washington Post (number 158). [ADDENDUM: Just after posting this, I found via Paul Biba's TeleRead the Nieman Journalism Lab post with good evidence (a Times internal memo) that the New York Times now has 10,000 Kindle subscribers. That's about 1 percent of their entire circulation. Good news, along with the Times's rapid acquisition of a slew of Facebook friends, also mentioned in the memo.]

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Happy Thanksgiving to all!