An outspoken fan of newspapers

I love Juan Antonio Giner and his blog, What's Next: Innovations in Newspapers.

If you haven't experienced it, look at it now.

Giner likes short sentences.

Never more than one sentence to a paragraph.

Sometimes just a phrase or single word in a paragraph.

It must be how he talks, as well.

A big picture leads every post.

It's very effective.

Social networks: news organizations ignore them at their peril

PLEASE NOTE: My new blogging home is now at the Nieman Journalism Lab. I'll continue to update this site for the time being with the introductory portion of my posts, but to read the whole thing, you'll have to head over to the Nieman site!

On the heels of my post the other day on building social networks around news (in which I mentioned that more than 90 percent of newspapers still have no social networking in their business model) here’s some information from the Pew Internet and American Life Project that that makes it clear why, in largely ignoring social networking, the newspaper industry is missing the boat:

The share of adult internet users who have a profile on an online social network site has more than quadrupled in the past four years — from 8% in 2005 to 35% now, according to the Pew Internet & American Life Project’s December 2008 tracking survey.

By age group, the survey found that in 2008:

• 75% of online adults 18-24 have a profile on a social network site
• 57% of online adults 25-34 have a profile on a social network
• 30% of online adults 35-44 have one
• 19% of online 45 to 54 year olds have a profile
• 10% of online 55 to 64 year olds have a profile
• 7% of online adults 65 and older have a profile

View those levels in the context of the four-year quadrupling rate, it’s clear that in another few years, virtually everyone under 45, and perhaps a majority of those older, will be active on social networks. (It’s the newspaper readership curve, upside-down.) What will they be doing and looking for on these networks, besides banter with friends?

Well, add this forecast to Pew’s findings: “10 Ways Social Media Will Change in 2009″ at ReadWriteWeb, including...

Read the rest of this post at Nieman Journalism Lab.

Micropayments for news

PLEASE NOTE: My new blogging home is now at the Nieman Journalism Lab. I'll continue to update this site for the time being with the introductory portion of my posts, but to read the whole thing, you'll have to head over to the Nieman site!

I know. You don’t want to hear about it. Readers will not pay for news online, period. We tried that and it didn’t work. Information wants to be free. Attention, not content, is the new scarcity. Free is a business model. I’ve explained this, myself.

But the “make the reader pay” crowd just keeps sending new combatants with new fodder into the fray. The latest is Jon Austin, one of the perpetrators of The Same Rowdy Crowd, in a very long and well-informed post entitled “Fixing the Newspaper Business or ‘Do I have to Do Everything Around Here?‘” You can read it for its considerable entertainment value (and very thoughtful chain of comments), or save yourself half an hour with Paul Gillin’s summation, or Austin’s own...

Read the rest of this post at Nieman Journalism Lab.

Building networks around news

PLEASE NOTE: My new blogging home is now at the Nieman Journalism Lab. I'll continue to update this site for the time being with the introductory portion of my posts, but to read the whole thing, you'll have to head over to the Nieman site!

Even though the public’s engagement with social networks is growing strongly, news enterprises have been slow to wade into the social networking waters.

Publishers, and especially editors, still tend to see themselves as curators of content: selecting, generating, massaging and presenting material for the audience they perceive, but not really networking with that audience except in rudimentary ways like comment forums that are not enormously evolved from the old channel of writing a letter to the editor.

A Bivings Group report published in December, “The Use of the Internet by America’s Largest Newspapers” (which I’ve discussed previously) found that while the adoption of individual social media tools (social bookmarking, blogs, RSS, etc.) was pretty strong at the papers in 2008, only 10 percent, or 10 newspapers, had incorporated some form of social networking on their sites...

Read the rest of this post at the Nieman Journalism Lab.

The Times and Mr. Slim

PLEASE NOTE: My new blogging home is now at the Nieman Journalism Lab. I'll continue to update this site for the time being with the introductory portion of my posts, but to read the whole thing, you'll have to head over to the Nieman site!

The other day I received a snail mail letter from Spain bearing a 0.78 Euro stamp, signed by one Francisco Miceli, Esq., a "barrister" in Madrid. He's offering to split with me $8.8 million in cash that was stashed in a trunk by a purported relative of mine (who unfortunately died, with his whole family, in the 2004 tsunami).

A neuroeconomist recently discovered that it's the perception of relative poverty, not the actual fact of poverty, that increases the propensity of people to wager their earnings on lottery tickets and the like. So my friend Mr. Miceli must be feeling relatively poor in these economically challenging times, and is therefore willing to wager actual postage to find suckers, rather than just emailing his overtures for free.

Likewise, Mexican investor Carlos Slim Helú, having yielded the title of world's richest man recently to Warren Buffett, must be feeling the pinch of poverty, which may explain why he is taking a gamble on the New York Times Company by investing $250 million. The Times will pay him 14 percent interest for the use of his cash, and at the end of the six-year deal, Slim can exercise warrants that came with the bonds that would increase his current 6.9 percent stock ownership of the company to more than 17 percent.

Why does the world's greatest newspaper find itself paying junk-bond interest to a Mexican billionaire? Clearly, because it, like the Gannett Company, has run out of normal sources of cash, and in effect, it needs to pay off its credit card.

Read the rest of this post at the Nieman Journalism Lab.

This blog has moved to the Nieman Journalism Lab!

As of today, my new blogging home is at the Nieman Journalism Lab. There, I will continue to discuss tools, techniques, and business models that will work for journalism, and to comment on current affairs in the news business. Also joining the lab's blog staff are Tim Windsor and Mathew Ingram. Thanks for following this blog, and please redirect your bookmarks and RSS feeds to the Nieman Journalism Lab!

Gannett's goodwill glut

Apropos of some questions from a reporter for the Weekly Independent in Lafayette, Louisiana, who was working on a story about impact of cuts and furloughs on Gannett's local paper there, the Daily Advertiser, I spent some time today poking around in Gannett's SEC filings.

The questions had to do with the level of goodwill carried on Gannett's balance sheet. A story on Bloomberg had pointed out that Gannett ranks tops among S&P 500 companies whose goodwill exceeds their market value: it carries $8.48 billion in goodwill (and that's after writing off $2.49 billion of it in March), against a current market cap of $2.46 billion. So don't be surprised if the company's annual report, due at the end of February, shows it is reducing goodwill some more.

What practical effect would this have? None, as far as ongoing operations are concerned, except this: Gannett has in place $3.9 billion in untapped lines of credits, expiring in 2012, "which provide back-up for borrowing and for general corporate purposes." In better days, such lines would provide flexibility in case the firm wanted to make an acquisition and had to act quickly, but they also serve as a rainy day reserve, to tide the company through a revenue downturn.

But here's the catch, as described in the company's 2007 annual filing: "The revolving credit agreements in place at Dec. 30, 2007, contain a single restrictive provision that requires the maintenance of net worth of at least $3.5 billion. At Dec. 30, 2007, net worth was $9.0 billion." That net worth is the "stockholders' equity" on the balance sheet—the net of all assets, including goodwill, minus all liabilities. If goodwill is written down, net worth decreases. Because of the March writedown, net worth has already dropped from that 2007 year-end figure of $9.0 billion to $5.55 billion as of Sept. 28.

The goodwill valuation implicit in Gannett's stock price is about $5.4 billion, or $3.0 billion less than what's on the books. Should Gannett write off $2.1 billion or more, its net worth drops below the restrictive provision on their revolving credit, erasing its borrowing ability. Given that the SEC and auditing rules require companies to test goodwill valuations against market values, in an environment where there are virtually no buyers for newspapers anywhere, it seems likely Gannett will have to take that step.

This helps explain the drastic and urgent cuts Gannett has been imposing on its operations (and makes a dividend cut likely, as well). With no borrowing capacity, and no other reserves, the company must maintain a positive cash flow at all costs, or it will join other newspaper outfits on the penny-stock lists.

Can Gannett keep its head above water? That seems likely, as well. For the first 9 months of 2008, its revenues were down 9.2 percent versus the prior year. For the year, the downturn might be in the 10 percent ballpark. Gannett could weather a 10 percent downturn for all of 2009 with cash to spare, and wouldn't run into real trouble unless the revenue hit became 20 percent or more. This puts it in a far better position than most of the other publicly-traded newpaper firms, which would run into trouble in the 10 to 15 percent range (and some of which, like the New York Times Company, have 2009 debt refinancing to contend with, as well).

Still, look for Gannett to explore any other avenue it can to conserve cash and preserve its options, including a renegotiation of its revolving credit terms.

Another gathering at API, low key this time

I'm basing this info solely on hints in a few Tweets from participants, but it appears that "Round Two" of the American Press Institute's Summit for an Industry in Crisis is underway today. (Or perhaps it's just an interim session to plan for a full Round Two session.)

Round One, a gathering of 50 top newspaper executives, was held back in November, with considerable fanfare and zero results. It was criticized roundly for being closed-door, for bringing in just one outside expert, and more. It announced nothing other than a decision to meet again in six months, which seemed an impossibly long time to wait. A press conference was called to discuss results, then cancelled.

So for reconvening in just three months, kudos. For shutting the doors even more tightly this time, to the point of not even mentioning the meeting on the API site, well, whatever the opposite of kudos is. All I can glean from a couple of tweets by John Newby and Chuck Peters (who gained fame for liveblogging the November event) is that today's proceedings include small group discussions, and that they're more "nuts and bolts" (I like that). And by the way, that's a 100 percent increase in the count of Twitterers among the API crowd.

Chuck asked Twitterdom: "What is the game changer." My answer, expanded from a Tweet:

• Stop the incremental cuts. Round after round of layoffs, content cuts, newshole cuts, bureau cuts, cutting out publication one day a week, Gannett's audacious furlough program—some of these may have slight merit but in the aggregate, they're just killing the industry by slow torture.
• Instead, do something really reinventive. This may actually mean more cuts, but so be it. Decide what a successful local enterprise could look like 5 or 10 years from now, and go directly to it in one or two big steps. The model I've elaborated on often in this blog is a robust (some say "kick-ass") online-first, 24/7 web site, coupled with a printed paper published just once a week on Friday, distributed all weekend—in which you seek to preserve much of the existing print advertising. See the last part of this post for details.(Hearst's gambit in Seattle may turn out to be one of these transformative steps, and they have the opportunity to take such a step in the Bay Area as well.)
• Build social networks around news and information content. Newspapers, even the New York Times, have barely dipped one toe in the social networking waters, but they need to take the plunge. What they might do is take a look at the enterprise social sites being developed by Newsgator and others and see if they can be adapted as community social networks.

UPDATE 1/16: Many thanks to John Newby and Chuck Peters for providing further information on API Summit Round 2 in the comments to this post.

The elusive "business model"

It's all about the business model.

New York magazine has a don't miss-piece by Emily Nussbaum about the New York Times geeks—a team of 20-something experimental online coder/journalists who last year broke down a convoluted approval structure and are now collaboratively integrated into the paper's news operation, rolling out one innovation after another, dragging the rest of the news team along into the future, whether they like it or not. They've done great stuff and have great plans. Over drinks at the Algonquin, one of them gets around to the business model (italics added):

Over time, [Aron] Pilhofer adds, this is the role the Times can play: exciting online readers about the value of reportage, engaging them deeply in the Times’ specific brand of journalism—perhaps even so much that they might want to pay for it. If this comes true, it would mean this terrible year was not for nothing: that someday, this hard era would prove the turning point for the paper, the year when it didn’t go down, when it became something better. Pilhofer shrugs and puts his glass back down on the Algonquin table. “I just hope there’s a business model when we get there.”

In other words, "we don't really know if there is one, but that's not our job," and rightly so.

At the Times itself, media columnist David Carr, who is quoted in the New York story, has a column called "Let's Invent an iTunes for News," which has been much lambasted in the blogosphere (by Matthew Ingram, Jeff Jarvis and Jay Rosen, among others). Carr hopes against hope that readers can be induced to pay for news once again, but he doesn't really know what the model would be, either:

Is there a way to reverse the broad expectation that information, including content assembled and produced by professionals, should be free? If print wants to perform a cashectomy on users, it should probably look to what happened with music, an industry in which people once paid handsomely for records, then tapes, then CDs, that was overtaken by the expectation that the same product should be free.

He mentions expectations that we'll see, later this year, an iPod Touch with a 7-to-9 inch screen (we may, and we'll see upgraded Kindles and, before long the Plastic Logic reader, as well).

The device would allow scanning of pages with a flick of the finger. It sounds promising for newspapers and magazines. Now all we need is a business model to go with it.

And that business model would be? Carr doesn't tell us , the column ends there. But he's thinking that if you want to read the Times on that thing, you're going to have to pay. (Earlier in the column he expresses the hope that someone like Steve Jobs will somehow convince "the millions of interested readers who get their news every day free on newspapers sites that it’s time to pay up." A cashectomy.)

Wrong. Yes, we know that some publishers have some content that some people will pay for some of the time. (Carr mentions that he pays for the Wall Street Journal, Cook's Illustrated and Consumer Reports). But most people will never pay for any content at any time, whether or not micropayments become easier to handle. Besides that, when you put up any kind of paywall, you put a serious dent in your ability to sell advertising, because in contrast to the traditional printed newspaper (in which publishers owned the only available delivery pipeline), today's reader has free alternatives that are just a click away through whatever device they choose for browsing.

I've speculated, myself, that the news business could be enormously transformed by the advent of an "iPod for news" in the form of an e-reader that's particularly suitable for news reading, because the proliferation of such devices would broaden the consumption of digital news content away from computer screens, to anyplace where an iPod can be carried and used.

But while consumers might buy the gizmo, they won't pay for the content, so we still need a business model, no matter what. In mine, publishers dump print (except for a weekend edition), and deliver content digitally via all interfaces that come along, from desktop to Blackberry, from Kindle to iPodTouch. They layer in a robust social network for news (the Times geeks have only scratched the surface of that need with TimesPeople, but they must have more up their sleeves). They "monetize" by delivering all kinds of commercial content including much more video and new forms such as geotagged ads on mobile devices; and by moving beyond advertising into the sale of premium services (not premium content), by facilitating transactions, by leveraging their social network in ways not yet invented (but Facebook and others are trying).

In the end, it's still about capturing a slice of the advertising pie, which, as I've detailed before, is going to remain at around 2 percent of GDP as it has for 80 years or more, simply because our competitive economic model can't do without it. With the partial exception of non-profits such as public radio and TV, every major new content delivery method in 400 years (newspapers, magazines, radio, TV) has been financed by commercial content. (The subscription and single-copy revenue of newspapers and magazines is not relevant here, it's simply an offset for printing, distribution and circulation overhead expenses.) The online news organizations that newspapers morph into (or those that supplant them if they fail) need to find their share of that 2 percent pie. That's why it's important not only for newsrooms to become online-first, but for the advertising sales department to follow suit. Right now.

I do hope that Aron Pilhofer and his fellow Times Geeks (if they don't get to stodgy hanging around the Algonquin), let their thoughts wander away from news toward revenue generation now and then. It sounds like they could come up with some nifty ideas on the commercial content side of the equation, as well. Meanwhile, when the nation's press barons assemble for Round Two of their API Summit for an Industry in Crisis, perhaps the smartest thing they could do is to create a national newspaper geek squad focused on innovation in commercial content. It's the only way out of the swamp, fellows.

PM UPDATE: I can across this post at MediaBistro, quoting Aron Pilhofer, which sheds a tad more light on the Times's intentions with regard to real social networking: "The goal is to 'make the NYT programmable.'" Pilhofer is also on the team looking for a Knight News Challenge grant to create DocumentCloud.

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.

GlobalPost launches

Check out GlobalPost, which is now live. The launch was announced to happen Monday. It's Sunday in New England, but it's Monday in Eastern Europe and points east, so they haven't jumped the gun.

There's a lot to like.

Piet Bakker monitors the world's free papers

This is Piet Bakker, skating on a canal in the Netherlands.

What with global warming, skating on "natural ice" is not possible very often in the Netherlands, but for a change, right now every puddle, pond and canal is frozen, and the Dutch have been "on skates en masse." One long distance-skating race was held for the first time in twelve years, and dozens of other races and tours (scroll down to map) drew such crowds that there were enormous traffic jams. The whole country was kind of a Woodstock on ice this weekend. (Full disclosure: I'm Dutch but for some reason never learned to skate.)

Anyway, that's why Bakker is not blogging for a couple of days, but normally, he can be found at Newspaper Innovation, where he keeps tabs on the world's free newspapers. Bakker is professor of Cross Media Content at the School of Journalism and Communication at the Hogeschool in Utrecht, the Netherland. (The blog is in English.)

As Bakker has reported, the free newspaper business has not been smooth skating lately. Free circulation in Europe has actually declined in 2008, as 11 titles and 37 editions closed down. The details of most free paper launches, closes and other transitions get chronicled almost obsessively in Bakker's blog, and lately closings have dominated his reports. The blog also features links to the newsletter "Free Daily Newspapers", a set of interactive maps, and a free dailies resource page.

All in all, it's well worth adding Newspaper Innovation to your blog subscription feed to keep track of the free newspaper field and to catch Bakker's insights.

An opportunity in Seattle?

What's interesting about Hearst's announcement today that it plans (in the immortal words of Jack Welch) to fix (by going all-digital), sell or close the Seattle Post-Intelligencer is that the paper lost "only" $14 million last year as the junior partner in the Seattle JOA. Given Hearst's considerable and profitable assets elsewhere, that doesn't seem like enough to throw in the towel just like that, although chances are that 2009's results will be somewhat worse. Clearly Hearst has determined that there's no hope in sight for positive cash flow in the current set-up.

Chances are seriously against the likelihood of finding a buyer willing to take on an entity that loses money, and where the owner really has no control over revenue generation or operations. It's the same as the Denver situation, where the Rocky Mountain News is likely to disappear shortly for lack of a purchaser. Outside observers agree there's virtually no chance someone will want to buy the P-I "as is."

But Hearst has left open the possibility of moving to a digital-only version of the P-I. As reported in the P-I (italics added): “Steve Swartz, president of Hearst Newspaper Division, told the newsroom that Hearst Corp. is starting a 60-day process to find a buyer. If a buyer is not found, Swartz said, Hearst will pursue other options. The options include moving to a digital-only operation with a greatly reduced staff, or completely shutting down operations. In no case will Hearst continue to publish the P-I in printed form, Swartz said.”

Just how a digital-only option would work within a JOA is unclear, because the JOA is predicated on two printed products capable of publishing print advertising sold by the lead partner, and presumably doesn't define how profits or losses are shared if one partner goes digital-only.

Here's the intriguing possibility: someone steps forward to buy the P-I, transforms it into an all-digital enterprise, and goes it alone, pulling out of the JOA. This sets up a full-scale, head-to-head, old-fashioned newspaper war between a printed newspaper and an online news venture, which could be most interesting. The other half of the existing JOA, the Seattle Times, is on the ropes itself, trying to sell its print assets in Maine to stay afloat, so it is unlikely to be able to outbid any potential buyer of the P-I, whether or not it has a right of first refusal under the JOA agreement.

So, how about it, Microsoft millionaires? For a few million bucks, you can pick up what's left of the P-I, become a digital press baron, and find out whether, in one of America's most digital towns, a digital news business can prevail over an analog paper. And, if nobody steps forward, how about it, Hearst? Couldn't this be a great laboratory for testing whether online-only can prevail over print?

Will there be journalism after newspapers?

At MediaPost, Dave Morgan has posted his "Last Column on the Newspaper Industry." (Check out the long comment thread there, also.) After explaining that "I no longer believe that the industry is very relevant to the future and things digital," Morgan makes an interesting point that should be considered by anyone whose motivation in wishing to save the newspaper industry relates to the preservation of "quality journalism:"

[T]he notion that the purity of newspaper journalism is the cornerstone upon which today's great metropolitan newspapers were built is revisionist history. Most of today's great newspapers were built through achieving dominant distribution in their markets, not through delivering better journalism. Most U.S. cities used to have two or more competitive newspapers. The eventual winner was almost always the one that won on the battle on distribution or advertising, almost never on journalism. Great journalism came later. For example, the Philadelphia Inquirer didn't become a Pulitzer Prize-winning machine until after it put the Philadelphia Bulletin out of business (and we won't even get into the role that some believe that organized crime may have played in that victory). Only after that the Bulletin was gone did the Inquirer have the ability to invest outsize, monopolistic profit margins into great journalism, which is exactly what it did. The same holds true for many of what we see today as great, "journalistic," metropolitan newspapers. Pulitzers don't make great newspapers. Local distribution monopolies make great newspapers.

And a local distribution monopoly, or even some degree of dominance, is not possible in a digital world, since barriers to entry are negligible, compared to the sunk investment costs in newspaper buildings, presses, distribution channels and even retail shelf space.

But dropping most barriers to entry also creates huge opportunities for more and better in-depth journalism as readers increasingly turn to the web for news content.

Today, would the New York Times print and distribute the full text of the Pentagon Papers? Of course not, they'd put it all online at much less expense. But the Times and other newspapers still regularly devote multiple pages to long investigative work, often by teams of reporters. It's admirable, but it burns money needlessly. I would guess that at most 10 or 20 percent of readers get all the way through that kind of material. In fact, the average readership of any article in the paper is probably less than 20 percent. In other words, distribution of quality journalism on newsprint entails a waste factor of at least 80 percent. Since the ballpark cost of newsprint and ink on a single page of the New York Times is more than $3,000, that wasted expense is $2,400 or more per page. Publish the same investigative effort online, and not only is there no waste, but the team can freely post all their background material and all the photography, video and audio that it might want to share with an unlimited reader/viewership.

That audience is real. I linked yesterday to John Parker's piece on the growth of mass intelligence, which maintains that the appetite for intellectually challenging cultural content is growing, not shrinking. While he focuses more on the arts than on news, certainly good journalism appeals to the same consumers that visit museums, go to the opera, listen to NPR, and so on.

But art, music, dance and even public media are subsidized heavily by philanthropy. So is it necessary for good journalism to pursue a non-profit model, even when we get rid of unnecessary costs like that $2,400-per-page waste at the Times? The folks at MinnPost, Saint Louis Beacon, Voice of SanDiego would say so, as would John Thornton at Insomniactive. On the other hand, reports David Westphal at OJR, Charles Sennott and Philip Balboni considered going non-profit with their global journalism startup GlobalPost (which launches Monday), but decided that they could make money doing this.

As part of their model, they see individual journalists as entrepreneurs, which makes sense. It puts them in the same class as other providers of intellectual fodder: artists, musicians, authors—some succeed through commercial channels, some succeed through philanthropic subsidies, but none are supported by monopolistic distributors of advertising.

How to save the Times, continued

For those interested in the continuing reactions to Michael "The Times as we know it will no longer exist" Hirschorn's piece in the Atlantic, discussed here yesterday, there has been considerable buzz, including these:

Citing flaws in Hirschorn's arithmetic, Rick Edmonds at Poynter reassures: "It all may come to pass within a decade or sooner. Not, however, at The New York Times in May. " He says that the Times can easily deal with the $400 million credit line it needs to pay off in May (while having $46 million in the bank recently) by, in effect, kiting credit cards—using untapped portions of its lines of credit to pay off the balance due.

Realistically, the banks are likely to frown on that notion, and are undoubtedly pressuring the company to come up with cash in other ways, such as selling their stake in the Red Sox and doing a sale-leaseback on its spiffy new building. Failing those tactics, as Edmonds says, lenders will be willing to renegotiate terms, but that comes at a price—in fees, in future interest rates, and in future financial flexibility.

And at Venturebeat, Chris Morrison has a long reaction of a different kind, entitled "If the New York Times dies, does the news die?" exploring how long-form analytical and investigative journalism can be paid for in an online-only news environment. He debunks some of the usual answers, and suggests (in line with a news industry disaggregation model others have proposed):

[W]hat healthy news organizations should really be offering this new breed of capable writers [self-supporting reporters and bloggers] is a sort of insurance against unsuccessful articles consisting of an up-front payment for any piece of writing. The rest of the writer’s income should come from performance earnouts — another formula that is yet to be mastered. Keeping it to those basics would be a radical change from the wage-based compensation model of print, along with its sprawling hierarchy of editors and publishers, costly offices, expense reports and support staff. When that world meets the internet’s stripped-down operating model, there may well be money for good journalism again.

Morrison points out that contrary to pessimistic perceptions that the audience is "dumbing-down," demand for top-quality content is actually growing. He cites an analysis called "The Age of Mass Intelligence" by John Parker, which is worth a read.

Supporting good journalism in that fashion is an excellent idea (even if the formula is "yet to be mastered" or even invented), and it's totally consistent with my view, detailed yesterday, that the Times, the San Francisco Chronicle, and by implication every struggling metro market paper should abandon incremental change and get on with reinvention. It would be short-sighted for the Times to simply reshuffle its debt structure without exploring a bold, transformational, reinventive step, like melding its seven printed editions into one great weekend "guide to everything" package, along with continued reinvention and improvement of its already great online operation.

Reinvent, for the end is near!

I'm preaching again from my "online first, print once or twice a week" soapbox. It's the right solution for news markets both large and small, but punditry seems to be focusing on the less plausible outcomes: preservation, somehow, of the traditional model, or the elimination of print altogether.

At the traditional end is Alan Mutter, the Newsosaur, dissecting the situation in San Francisco and speculating on options. He notes that the facts on the ground are: Hearst has spent $1 billion, cumulatively, buying and running the Chronicle; the MediaNews-owned network of papers in surrounding communities exceeds the Chron's circulation 2-to-1; and the two companies are already interdependent in a number of ways. So while a local gadfly might throw a monkeywrench in the form of some legal challenges, Mutter's crystal ball says:

With the outlook for the newspaper business now worse than ever, a more radical solution than nipping and tucking the Chronicle to profitability would seem to be in order. And it probably is this:

Folding the Chronicle into the network of MediaNews Group papers that completely surround it – a network, significantly, that Hearst itself played a major role in building.

In that event, the Chronicle’s now-independent news, ad sales, production, distribution and administrative staffs would be merged into a single entity managed by MediaNews. Deep staff cuts likely would result in every department, not the least of which would be the already decimated newsroom.

But then what? Continue to print and distribute all those papers seven days a week? How is this not just more nipping and tucking? MediaNews has been consolidating the operations of its Bay Area regional cluster, step by step, for nearly 20 years, and yet its own difficulties continue. If it assimilated the Chronicle, the elimination of the remaining competition might create a configuration that would stem the flow of red ink for a few years, but it would not be a new business model reflecting the needed bold reinvention of the industry. Rather, it would be an extension of strategies that have failed in the Bay Area and elsewhere.

Meanwhile, across the continent, everyone seems to know what to do with the New York Times, except Arthur Sulzberger. Following up on Marc Andreessen's widely-quoted October pronouncement that "you have to shut off the print edition, right now," Michael Hirschorn speculates in the Atlantic that the demise of print may be more sudden and more imminent than the standard scenario of a gradual lights-out. He notes the New York Times Company's perilous cash position and its upcoming $400 million refinancing need, and predicts:

At some point soon—sooner than most of us think—the print edition, and with it The Times as we know it, will no longer exist....Most likely, the interim step for The Times and other newspapers will be to move to digital-only distribution (perhaps preserving the more profitable Sunday editions).

That parenthetical "perhaps", however, is huge. It's not a step toward oblivion, it's the way out of the swamp. It represents the strategic reinvention that's urgently necessary right across the newspaper industry. Virtually every newspaper in America is publishing money-losing editions several days a week. There's no way to know for sure, but it's probable that Sunday is the only day the Times is profitable. And that the same is true in the Bay Area at the Chronicle and the MediaNews cluster.

In Detroit, JOA partners Gannett and MediaNews, faced with the same situation, came to the brink of deciding to kill off all their money-losing editions and to henceforth print only on Sunday and maybe one or two other days. But, fatally hesitant to kill off their seven-day franchise forever, they plan instead to retain a single-copy-only edition four days a week. Nipping and tucking. My guess is that within a year, that edition will be history.

The opportunity for Hearst and MediaNews in the Bay Area, and for the New York Times, 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. 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.

The merged entity should cut print back to one big, highly profitable weekend (not Sunday) package (distributed everywhere starting Friday afternoon). The same approach at the Times.

The Weekend Times, and the Weekend Chronicle (or pick a neutral title, like Bay Observer), would be bigger, better, more thoroughly read and more valuable to advertisers than the current versions. They should drop all breaking news and focus on analysis and features. Their biggest value to readers would be as a guide to all other media.

Newspapers, especially on Sunday, have always served this "media guide" function, but haven't constructed themselves around it. Guide functionality is currently manifested in Sunday paper TV listings and reviews, book sections, movie sections, travel sections, arts sections, food and wine, fashion, real estate, home style or "living" (think of all of these—travel, arts, cuisine, fashion and design—as entertainment media) and the like. (For some strange reason, few papers have done much to become guides to the internet, but that should be added to the mix.)

And yet this whole package is sold as a "news" paper, in a package wrapped with a breaking news section. This may have made sense until a decade ago, but it doesn't any more. And unless it's changed, the danger is that Sunday editions will start losing money also, eliminating any hope of returning to profitability.

Let's do this:

Take the camouflage off the Sunday package: Lose the hard news wrap.

Build up the "guide to all media" functionality—that's the part subscribers are paying for, because they want and need it. Keep arts, travel, books, movies and all the rest. Add technology, internet and even magazine coverage. Include some geographically zoned sections if ad demand warrants it. Build other weekly, monthly or seasonal niche publications using the enterprise's wealth of content.

Shift publication to the start of the weekend—Friday afternoon—to maximize the value to readers as well as newsstand shelf life. Drop all other daily editions. Concentrate sales on moving the bulk of the week's advertisers into this edition—there's still plenty of advertising that wants and needs to be in print, and this will make the weekend edition hugely profitable.

Devote 20 to 30 percent of staff resources to the weekend product and turn everyone else into online reporters. With the right structure, the site can be at breakeven now, and start making money as the economy picks itself back up. (As it will.)

Attract social networks around content areas. This is critical—in a sense, newspapers have always served as community social network hubs; they need to do so online.

Get the online sector ready for a big jump in mobile e-readership as new devices and apps catch on.

Differentiate the online site from the weekend print brand; they're two different animals from now on.

Return to profitability.

Can news sites get their slice of the advertising pie?

Recent findings by Pew and Gallup indicate that, generally speaking, U.S. consumers now prefer news delivered via the internet over news printed in newspapers. This redoubles the need for a viable business model in which online news content is supported by adequate advertising revenue.

Unfortunately, as pointed out by John Thornton at Insomniactive, only a fraction of the ad revenue formerly aimed at those print-oriented eyeballs has followed their attention over to the web. By Thornton's educated guestimations, online news via newspaper sites is garnering only about 4 percent as much revenue as newspapers still manage to sell into their printed products.

Can this problem be overcome? Can newspapers crank up the sales pressure and find more revenue for their electronic offerings?

One way of looking at this says no: Historically, printed newspapers were monopolistic enterprises, their positions protected by very high barriers to entry which gave their owners the market power to set prices high enough to cover the cost of a liberally staffed newsroom and still reap princely profits (such as those that built and furnished Hearst's San Simeon). This monopolistic privilege has only gradually eroded over the last 50 years as television, and then the web, claimed their slices of the pie, as illustrated by this graph showing the share of various media of total U. S. ad spending since 1948 (click for clearer enlarged view, see November 30 post for more info).



But clearly, no newspaper, or other news content provider, has much pricing power in the online world. Does that mean there's simply no chance that online advertising on newspaper sites can grow enough to make them viable?

One observer at Seeking Alpha, Alex Rampell, seems to think not, in a piece entitled "The End of Brand Advertising." Basically, Rampell's thesis is that brands are waking up and realizing they've historically been getting bilked, that " there is at best a tenuous link between consumption of their goods and consumption of the free content they are sponsoring." And that, having figured this out, they'll shut the spigot. This explains, according to Rampell, why CPMs on MySpace run 25 cents per 1,000 while Time Magazine, in good times, got $25 per 1,000.

The problem with this view is that while advertisers will, of course, always drive the best bargain they can, brand and image advertising has always been about achieving a degree of monopolistic market power. There may be a tenuous link between the advertised goods and the content sponsored by ads, but there has always been a clear relationship between the volume of advertising behind a product, and its consumption or popularity (as convincingly demonstrated in recent months by the Obama campaign's unprecedented promotional spending). Leading brands have almost always maintained their positions by brand and image advertising, not by informational advertising providing objective product specifications.

Historically, for at least 80 years, total U. S. advertising expenditures have been nearly constant at about 2 percent of GDP. Economic slowdowns push that ratio a little lower, expansions push it up, but with very few exceptions the range has been between 1.8 and 2.3 percent, despite all the changes over time in media technology and the consumer's preferred media mix. If there were, overall, no more than a "tenuous link" between advertising and sales, marketers would have discovered that, and adjusted their spending, a long time ago. But the fact is that the link is robust, not tenuous, and 2 percent is still the norm—it was 2.025% in 2007; 2008 will probably come in a tad lower.

[a.m. addendum:] The point is, the advertising pie, relative to GDP, won't shrink significantly, or permanently, because marketers seeking market share continue to have very strong incentives to advertise, but the media to which ad dollars are allocated do shift over time, as the graph shows.

The problem for web sites, including news sites, is that the web is not yet a great place for brand and image ads, relative to the attractive environments of ads on big-screen TVs, billboards and slick magazine pages. Like newsprint, the computer screen is still fairly low res, as amply demonstrated in any YouTube video, so the web has been more suited (as newspapers always have been) for informational advertising rather than brand and image promotion. It is part of the genius of Google that their model has never featured any brand or image advertising at all.

So the challenge, to newspaper web sites and news site startups, is to move beyond Thornton's 4 percent level by ramping up online versions of the informational advertising that sustained printed newspapers, as well as finding ways to host brand and image ads that were never native to newsprint. And to do this in the context of the new wisdom that is writing off the utility of traditional website banner and button advertising and trumpeting video ads as well as the new world of social network advertising.

Insomniactive: another smart blog

Last week/year I endorsed Gina Chen's almost brand-new blog, Save the Media; the next thing I knew, it was recommended by Tim Windsor and then by Jeff Jarvis. (And Gina went on to put up three more very smart, don't miss posts— 1 2 3 — while most of the rest of us continued to protract our holidays as long as possible.)

So let me suggest another addition to your RSS reader: John Thornton's blog, Insomniactive. John is a veteran venture capitalist in Austin, Texas, whose thoughts have been turning more and more in the direction of journalism, new media, and business models for news. He has been involved in a few media-related startups like Vignette and Ignite.

Insomniactive is written with flair and offers an informed perspective on the media business from someone not directly involved in the field, and supplies, as a bonus, interesting views on a wide range of other economic and political matters.

Recent Insomniactive posts of particular interest in to the journoblogger audience:

Sam Zell, the f-word, and Microeconomics 101: "Barriers to entry such as printing presses and and distribution networks–not rock star journalism– made newspapers obscenely profitable for decades. Public service journalism was the tail, not the dog. And unfortunately, this particular pooch is now too old, tired, and sick to do much wagging."

If I were the God of Newspapers, on why Peter Osnos is wrong to suggest that the New York Times Company divest itself of the the Boston Globe: "My inner Newspaper God suggests just the opposite: Let the Times Co. continue to run the slimmed down Globe and the local dailies with their eye 100% on the bottom line, as should be in the case when you’ve taken on these pesky critters called 'shareholders.' Don’t sell the Globe; sell the Times. Sell it for something like $1b to a group of shareholders to run it literally as a public trust." (And another post on the same subject reacting to Henry Blodgett's view that the Times needs to shed 40 percent of its newsroom cost.)

See you in the Pink Sheets: "No doubt, 2008 was annus horribilis, [like] none ever experienced before in the newspaper industry. But with the exception of a couple dozen properties, 2009 may well be annus ultimus–the year that the newspaper industry as we currently [recognize] it ceases to exist, much as 2008 was the year Wall Street became no more."

So, what's the solution? Thornton is hinting at the non-profit option in this intro to a manifesto: "While we’re very interested in business and very interested in journalism, we have concluded that serious journalism is a lousy business and that business principles are lousy for serious journalism. Clergymen are fond of saying that when you mix politics and religion you get politics. The mix of serious journalism and business is even worse: it yields businesses that aren’t worth investing in."

When "Good News" Could Hardly be Worse, on the vaunted new primacy of online news reading over newspapers discovered in recent polls: "You see, the online news outlets of the future are shaping up to be–and it grieves me to say this–a bunch of grubby, cruddy, marginally profitable little businesses. Entry costs are essentially zero, technology and inventory abundance is shifting power to the advertiser at lightning speed, and there’s less than no correlation between quality journalism and quality of earnings."

Finally (and most recently): What a Novel Concept, building on Jay Rosen's advice to "cut to a sustainable level and build from there."

And, yes, John Thornton likes News after Newspapers, as well. I'd be endorsing Insomniactive even if he didn't. Welcome to the conversation, John.