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.

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.

Noonan v. Staples: "The most dangerous libel decision in decades"

A long-established principle of libel law — truth is an absolute defense — has been called into question by a decision handed down last week by a federal appeals court in Boston. The court ruled in the case of Noonan v. Staples that truth published with “actual malice” gleaned from the context of the statement can give rise to a libel lawsuit. The case threatens to muzzle both news and entertainment media, and could be particularly dangerous to independent bloggers and small startup news organizations — neither of which is likely to have the legal resources a traditional established news organization has to battle libel suits.

The case rose not from anything published in news media, but from a mass e-mail sent by Staples to about 1500 employees informing them, within the context of a reminder about policy compliance, that Alan S. Noonan, a Staples manager, had been fired for violating the office-supplies firm’s travel and expense policy. The memo read:

It is with sincere regret that I must inform you of the termination of Alan Noonan’s employment with Staples. A thorough investigation determined that Alan was not in compliance with our [travel and expenses] policies. As always, our policies are consistently applied to everyone and compliance is mandatory on everyone’s part. It is incumbent on all managers to understand Staples['s] policies and to consistently communicate, educate and monitor compliance every single day. Compliance with company policies is not subject to personal discretion and is not optional. In addition to ensuring compliance, the approver’s responsibility to monitor and question is a critical factor in effective management of this and all policies.

During the investigation, Noonan had admitted “pre-populating” his reports with generously estimated expenses, claiming that he had intended to adjust the figures to actual later on; but the investigation determined that he failed to do so.

In reversing the district court decision, as well as its own earlier affirmation of summary judgment for Staples, the court ruled in Noonan’s favor, relying on a 1902 Massachusetts law that provided truth is a defense against libel unless the plaintiff can show “actual malice” on the part of the defendant in publishing the statement. The final outcome of the case could have chilling implications for journalism.

Continue reading this post at Nieman Journalism Lab.

Twitter: can chaos be a business model?

Lev Grossman, explaining in Time why “Facebook is for Old Fogies,” writes: “We don’t understand Twitter. Literally. It makes no sense to us.”

It makes about $35 million worth of sense to Benchmark Capital and Institutional Venture Partners, who led the latest round of funding for the microblogging platform. If co-founder Biz Stone can be taken at his word, Twitter wasn’t even looking for another infusion, but, well, opportunity knocked. And in today’s climate I don’t imagine it took long to accept the cash.

Twitter does make sense to me. Literally. And I’m an old fogie. Months ago I quoted a New York Times Magazine article, Clive Thompson’s “Brave New World of Digital Intimacy,” in which he described a stream of Twitter and Facebook updates as creating a new sense he called “ambient awareness”:

Each little update — each individual bit of social information — is insignificant on its own, even supremely mundane. But taken together, over time, the little snippets coalesce into a surprisingly sophisticated portrait of your friends’ and family members’ lives, like thousands of dots making a pointillist painting…. The ambient information becomes like “a type of E.S.P.” … an invisible dimension floating over everyday life…

That is well and good, and I get it, I use it, and I have Tweevangelized, but along with foginess comes diminished tolerance for chaos. And it’s not hard to find younger Twitterers who agree that it’s chaotic. In fact, for me Facebook’s apps and content structure work well to create that ambient awareness, but on Twitter, as your follower/following count rises, that pointillist painting starts to resemble a Jackson Pollock. For users, that may be the main issue; for the company, the questions becomes how to pull revenue out of chaos.

Tom Smith on SocialMediaToday stuck his neck out and listed “The 12 Major Problems with Twitter and the Stephen Fry Backlash,” the gist of which is that most of what you think you’re doing on Twitter is illusion and a waste of time. Smith say’s you’re just deceiving yourself if you think you have an audience, have something interesting to say, or are connected. He’s also frustrated with functionality, including the tools built around Twitter that are “a pile of poo that regularly breaks.” Moreover, says Smith, Stephen Fry doesn’t give good tweet. From the considerable amount of frivolous tweeting by some, Smith generalizes that all of it is worthless, illusory, flawed, boring, and trivial: “Nobody is listening, even fewer people care.”

Enough. Twitter is working for a lot of people, so let’s look at the other side of the coin, or Twelve Good Things about Twitter, and Never Mind Stephen Fry:...

Continue reading this post at Nieman Journalism Lab.

Pension funding gap looms as another newspaper problem

Get ready for something else to hit the fan: underfunded pension plans at newspaper companies. In general, this won’t have an immediate impact on cash flow, but it’s another looming liability for publishers, meaning their bankers won’t be buying them lunch, or writing loans for them, anytime soon.

Pension plan funding hasn’t been an issue for most companies in the last couple of decades, because most of the time the plan investments have done so well that required company contributions to pension plans have had little impact on cash flow. But pension plan funding becomes an issue particularly when (a) the market value of plan investments take a dive, as has happened during 2008, and (b) the size of the company shrinks, creating a situation similar to the Social Security problem: a shrinking pool of workers supporting a large pool of retirees. Newspaper publishers have both of those problems.

We’re talking here about defined-benefit plans — old fashioned pensions — not 401(k) defined-contribution plans. In a defined-benefit plan, employers fund an investment pool designed to pay benefits to retirees in proportion to their earnings and years of service. In theory, they make contributions every year to keep the value of the pool equal to the actuarially-determined present value of the benefit liabilities. In practice, permissible funding delays and market fluctuations can create underfunding situations. Many companies have frozen their defined-benefit plans, but even such plans can become underfunded in market declines. Typically, companies are required to make up underfunding caused by market declines over a seven-year period (so the market, itself, might help the fund catch up); underfunding due to other causes, like plan changes, must be remedied on a shorter timeline.

Pension funds are usually invested in a conservative mix of stocks and bonds. So, although the Dow Jones Industrials were off 38 percent for the year, a decently-balanced fund should be down just 20 percent or so. The basic rule is that plans with insufficient assets need to make up the difference over seven years; a gap at the end of 2008 needs to be funded starting in 2010. That doesn’t seem too onerous, but when the plan’s benefit obligation is measured in billions, a small shortfall has a real impact on cash flow. And if the next seven years turn out to be like the 1930s, the market might not help much.

Not all the year-end 2008 figures are available (or I haven’t tracked them down yet), but let’s look at some of the pension issues we know something about:...

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A café-shaped conversation

Photo credit: WhatCouldPossiblyGoWrong (CreativeCommons license)

A great conversation has been going on at my previous post, with participants including:

• A musician/entrepreneur who runs a hyperlocal social network in Fort Dodge, Iowa
• A mountaineer/futurist who speaks and consults globally on new media matters
• A newspaper editor in Waco, Texas
• The president and publisher of "the most widely-read magazine in America" (a 32-million circulation newspaper supplement), based in New York City
• The CEO of a Alabama newspaper holding company operating in 150 communities
• An arts reporter/blogger in East Bay, California
• A New York print evangelist/entrepreneur/educator
• A Rhode Island consultant specializing in brands, organizational communications and enterprise technology design
• Plus, yours truly, tucked away in snowy Vermont, and some of his fellow Nieman bloggers located at Harvard and Johns Hopkins

It was as if we all bumped into each other at a sidewalk café and started knocking around the problems of printed newspapers and journalism on the internet. It took a somewhat provocative post on my part to kick off the discussion, but then, that's what we do every day in newspaper editorials and in our letters columns to get some buzz going. We got past any animosity, pulled our tables and chairs closer together, and while in the end we "agreed to disagree," we ascended to some deep thinking about the nature of media and the utility of social networking to news enterprises. Given some of the players involved, it's even possible that some of the ideas thrown out could have some actual effects in the marketplace.

Only of few of us have ever previously met in person or by phone or email, but there were were, having what Chris Brogan, writing about social media, has called a café-shaped conversation...

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NewspaperProject: A wobbly kickoff

It’s all the fault of us bloggers on “websites that feature negative, gloom-and-doom stories about newspapers.” So, “a group of newspaper executives” has launched NewspaperProject.org, which “will be devoted to insightful articles, commentary and research that provide a more balanced perspective on what newspaper companies can do to survive and thrive in the years ahead.” The “group” also produced print ads and website banners designed for a one-day deployment on Monday, making the point that more people read newspapers than watched the Superbowl.

A “more balanced perspective” presumably means: news and commentary with the optimistic view that the existing newspaper business model has got a future. So the site offers headlines like: “NYT executive editor on why newspapers will survive,” “Time to stand up for newspapers,” “Time for Newspaper Folks to Fight Back,” “The Catalog Factor: Why investors should buy newspaper stocks,” and, believe it or not, David Carr’s “Let’s Invent an i-Tunes for News.” (Yes, that one.) We won’t read about the next newspaper bankruptcy at NewspaperProject.

One of the newspaper industry’s long-standing problems is that it consistently does a terrible job promoting itself. Or rather, it has inconsistently done a terrible job — most of the time it has done no industry-wide promotion at all, and when it has (there have been two or three industry-wide campaigns organized by the NAA in the last decade), it has been done poorly and without followthrough. So far, this is no exception. Let us count the ways this is not the “Got Milk” of daily newspapers:

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Could shrinking the post office help save newspapers?

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!

Surprisingly, there have been no blogospherical reactions (nor any big ripples elsewhere) to the Postmaster General's ruminations last week before Congress, in which he hinted that perhaps mail delivery would need to be curtailed to five days a week. His thought is not to drop Saturday, but to eliminate a lighter day, like Tuesday, in order to help the Postal Service deal with a growing annual deficit that's projected to hit $6 billion in the current fiscal year.

The travails of the post office are being blamed in part on reductions in the volume of periodicals (newspapers and magazines) being mailed. Of more relevance here, any cut in postal frequency would have an impact on newspapers that are mailed, especially those that enjoy day-of-publication delivery. This includes many weeklies that rely almost exclusively on postal distribution. Among dailies, few rely heavily on the mail, but nearly all morning papers have some same-day postal delivery arrangements to reach customers in areas their own carriers don't (or won't) travel to. The Wall Street Journal once mailed most of their subscriber copies. It now has alternate arrangements (many via local newspaper carriers) in most areas, but still mails some copies. And of course the Christian Science Monitor is mostly mailed, but is going digital-only soon.

First of all, the plan's chances of getting a Congressional OK to cut delivery frequency may be slim to none (although if a forum at SiLive.com is any indication, customers wouldn't have a big problem with it: "Good, bills will come 5 days a week instead of six").

But just as newspapers should be totally reinventing their business (as I've been espousing) rather than cutting here and trimming there until there's nothing left to reinvent, so should the Postal Service be reinventing itself in a fundamental way, rather than changing incrementally. (If Jeff Jarvis can talk about What Google Would Do if it ran an car company, then I can talk about a Googly reinvention of the Post Office.)...

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