Has newspaper advertising reached rock bottom? Probably not.

During the last few months, as newspaper stock prices rebounded somewhat from their lowest points, and as newspaper execs suggested, in conjunction with second quarter results, that having made all the cuts they did, they would be in good shape “once advertising rebounds,” I found myself nevertheless thinking the same thoughts as the crystal ball-gazers consulted by the New York Times who said that the bottom, for newspaper advertising revenue, had not yet been reached.

The good news is that the third quarter of 2009 won’t be quite as bad as the second: the consensus is that revenue will drop just 25 percent, compared to about 30 percent in Q2. That means that even if the fourth quarter somehow manages to be dead even with last year’s Q4, revenue for the year will be down 20.4 percent. But dead even would be a big stretch, because the first three quarters of 2009 will average about $6.7 billion, while Q4 of last year was $10.1 billion. Typically, Q4 beats the average of the first three quarters of the year by about 22 percent in good years, less in bad years. Even with the benefit of the doubt at a 20 percent differential (Q4 vs. the average of Q1-3), that puts Q4 at $8.1 billion (down 20 percent from prior year) and the full year 2009 at $28.2 billion, down 25.5 percent from last year’s $37.8 billion. (My recent guess for the year stands at $27.5 billion.) For newspapers to get to around $28 billion for the year, however, advertisers would have to invest in newspapers in Q4 with the assumption that the recession is mainly over and that consumers will be loosening purse strings significantly during the holiday shopping period.
Continue reading this post at NiemanLab.

The Times should develop paid niche channels, not broad premium content packages

Yet another stage of the New York Times’s exploration of paid content options has come to light via Gawker, which has posted the text of two potential content packages, labeled “Silver” and “Gold.” It’s clear these are hypothetical options; Gawker quotes a Times spokesperson as writing them that “It’s very early in the process. We are still in the data collection phase.”

As described in the survey, Silver would be priced at $50 a year and offer benefits called FirstLook (early access to some stories) and BackStory (extra background on some stories), as well as TimesWire (now free) and TimesMachine (an archive service now largely free). You also get some extras including bling (coffee mug, tote bag, baseball cap, or a copy of the New York Times Style Guide) and discounts on photo reproductions and other stuff from the Times store.

At the Gold level, you would pay $150 a year for all of the above plus TimesEvents (preferred access to events organized or sponsored by the Times), and TimesInsider (personal access to some Times writers). The pitch for Gold is “with NYT Gold, you won’t just read the Times, you’ll experience it.”

Silver and Gold sound like packages dreamed up by Times execs who were thinking, “how can we add a couple of layers to the free content we’re putting on the site, and make it look like something some people might pay for?”

And what they came up with was something that resembles how memberships are generally packaged at cultural non-profits like the museums, opera companies and symphony orchestras of New York City, which those Times are undoubtedly members of. As a museum member, you might get similar invitations to special events, admission to special exhibits, a chance to meet the curator, behind-the-scenes tours, discounts at the museum store, and so on.

But the Times is not a museum. It’s a business with customers. And rather than creating general access packages that are aimed at all of its customers, the Times should look at the many specific niche interests of its customers and offer packages aimed at as many of those niches as possible. Few people are willing to pay for broad news content, no matter who they get to rub shoulders with, but many people are willing to pay for content relevant to their passions. If the Times asked their customers about that, they’d find that frequent traveler might be willing to buy premium travel content; a film buff might pay for deeper movie content; an avid gardener might pay for specialized horticultural material. The Times should think about a suite of TimesChannels: TimesTravel, Times Tech, TimesGourmet, TimesDesign, TimesGarden, TimesArt, TimesFilm, TimesWeather, TimesPuzzles, TimesBooks, TimesPolitics, TimesFinance, TimesWhatever, each with much deeper content than the free website has, each priced at $50 a year, and each potentially capable of attracting an audience as large as TimesSilver or TimesGold might get.

My prior posts at NiemanLab

Could strategic bankruptcies be needed to transform newspapers?

Continuing on a theme: I’ve been discussing the apparent disconnect between the quality of a news site’s design (as perceived and rated by professionals) and how much time people spend there; as well as the kinds of things that count more than design: reader engagement, interaction, community, personality — real life behind and around the content.

In a comment on the second post, Phil Buckley, whose commentary I had quoted and linked to, asked: “If you were starting a news organization today, where would put your initial efforts?”

I like this, because it’s the key question that all news organizations should be asking themselves. If tackled correctly, it can be a transformative question, a way to self-disrupt the organization, a way to get through the wormhole of reinvention that newspapers are facing, and come out on the other side with a workable business model.

And indeed, forward-thinking news organizations are asking it. But in some news organizations (like Phil, I try to call them that instead of newspapers), the process of dealing with this question leads to an uncomfortable realization: the business model for news in the future is so radically different from today’s legacy newspaper business that there is no way to get from here to there without “a major restructuring event,” which is a euphemism for bankruptcy.

In other words, the viable business model they can glimpse — consisting, perhaps, of a weekend-only or twice-weekly printed byproduct of an online-first publishing operation — represents such a downsizing of the enterprise that it can’t possibly carry the company’s legacy debt load, so the only way to make the transition is first file Chapter 11.

Continue reading this post at Nieman Journalism Lab.

What counts more than design in attracting an online news audience?

As I laid out on Wednesday, there seems to be no discernible correlation between the overall quality of a web site and how much time readers spend there.

In the heydays of printed newspapers, we had some similar anomalies: newspapers with terrible designs (as judged by the designer elite) would have market penetrations equally strong as those following the latest design trends and gimmicks.

So what keeps eyeballs on sites, once they’ve landed there? Here are some recent views of interest:

Phil at 1918.com has a nice post building on Dave Brubeck’s breakout “Take Five”, raking over the coals the lackluster site of the News & Observer (once an internet pioneer), and agreeing with my conclusion that it’s not really about design:

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:...

Read the rest of this post at 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.

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.

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.

Nuts and bolts: How newspapers can optimize use of social media

In my previous post (Tipping point: Online news overtakes print), I posed this question: How can newspapers raise the level of their online presence from being a simple, one-way content delivery medium, and have their sites become full-fledged "means of collaboration, creation and curation" (Jeff Jarvis's characterization of the internet)?

In other words, how can newspapers (after making sure they've built a truly online-first newsroom) leverage the social networking power of the internet? And why is that important?

Well, how are they doing, first of all? Last week I discussed the Bivings group report called "The Use of the Internet by America's Largest Newspapers." This graph summarizes what Bivings found about the use of social media by America's top 100 newspapers:


(Click graph for expanded view.)

Looks good, doesn't it? The trends are heading for 100 percent adoption of RSS, video, blogs, commenting and bookmarking. Terrific.

But the big problem, noted by Bivings themselves in their final conclusions, is that "the sites are being improved incrementally on the margins. Newspapers are focused on improving what they already have, when reinvention may be what is necessary in order for the industry to come out of the current crisis on the other side."

I agree. These various social media techniques are being applied experimentally and randomly. With a few possible exceptions, they are not applied as part of a unified concept that's clear to the site visitor. Installing a collection of social media tools on a site does not create a community. It does not leverage the power of a social network. It does not encourage or enable readers to "collaborate, create and curate." Some of the obvious ways newspapers could enables readers to do that, such as local news wikis, are non-existent. And tools like tags, RSS and bookmarking are not very useful in the absence of a community sharing content.

Why is it important for newspapers to get into social networking? Basically, because of Metcalfe's Law, which says that the value of a network is proportional to the square of the number of nodes, or users, on it. (See also.) A news site that just delivers news to readers, uni-directionally, is not a network. Once you do build a network with good interactivity, the amount of traffic on it grows exponentially, much faster than the number of users does. To readers, the value of this lies in the connections made, the content shared, the community created. To the owner of the network, in turn, it will leverage much greater revenue potential.

Newspapers have always had a social product—they rely on readers and retailers to participate and interact via press releases, letters, display and classified ads, pass-alongs of the physical paper, crosswords, generation of buzz and gossip, purchases made, you name it. This interactivity historically has made newspapers builders of actual communities (and a lot of fun to work for until not long ago)—but newspapers have been very slow, and well behind other industries, in building online communities through social networking, as distinct from simply employing various individual social media. This failure also threatens to leave newspapers truly left behind when the web progresses from to social-networking "Web 2.0" stage into the "Semantic Web" or "Web 3.0," which will add a further dimension of networks among facts, ideas and concepts.

So, what should a truly socially-networked news site look like? Let's look at a few sites to collect the ingredients:

Here's a New York Times movie review. On or via this single page, I can: (a) read the review, within which I can (b) follow a slew of hyperlinks to related other NYTimes.com pages. I can participate myself by (c) rating the movie, and (d) writing a review (or reading reviews by other readers). I can also (e) watch a clip, (f) find a full listing of credits, (g) find theatre and showtime listings, and in some cases (h) buy tickets via MovieTickets.com. So far, so good—lots of interactivity, including at least some with other readers.

Moreover, in a 5-month old Times project still in beta, I can register to become a "TimesPerson" on the "TimesPeople" social network, through which I can share and recommend Times content, RSS feeds and the like with "followers," and I can "follow" the recommendations of others. It sounds like a social network, but it's really just social bookmarking. Meanwhile, the Times has run a brief campaign on Facebook that has resulted in nearly 200,000 "fans" signing on to its Facebook presence—but on its Facebook page, the Times so far doesn't offer TimesPeople functionality, or much of anything else to draw its fans deeper into its content, or into a real network. All in all, despite the enormous depth and scope of its content, despite almost weekly announcements of site enhancements, the Times seems to be, in Bivings' words, timidly experimenting "incrementally on the edges," not jumping into the deep end of social networking, not fully embracing Web 2.0.

Another approach, in a much smaller market: the Cedar Rapids (Iowa) Gazette, which flew below Bivings' radar with print circulation of 61,000 weekdays, 75,000 Sundays (ABC audit), logging 3.48 million pageviews from about 132,000 unique visitors monthly (via Compete.com).

The Gazette has plenty of social media features, plus a semi-wiki in its Data Central section, interactive maps, and about three dozen staff blogs, on some of which you can follow the Gazette's evolving philosophy on web publishing and networking. One of those is the blog of CEO Chuck Peters: C3: Complete Community Connection, in which he publicly talks to his staff and the community about his vision for a community networked by the Gazette's news enterprises:

We have acknowledged that we need a new model, mindset, tasks and organization to move from the franchise megaphones of newspaper and television to an interconnected ecosystem of local information, available on all platforms, created “with and by” the communities we serve. We know that we have to separate content creation from product creation. We know that we need to develop a network of people creating blogs and wikis on key topics and communities. We know that we need to develop a common technical framework for that creation of content. Commercial content likewise must created in a more atomized and fluid way.

Entrepreneurial journalists will lead the way. Without them, we have nothing to offer. We need to create the systems to support them. In order to do so, we need to focus not only on the tasks at hand, but why we do them, in order to have the energy and patience to persevere through this great change.

Now, let's jump to Bakersfield, California, home of the independently-owned Bakersfield Californian, circulation 132,000 weekdays and 156,000 Sundays, and logging 2.05 million page views from 158,000 unique visitors monthly (Bakersfield.com only, via Compete.com.)

Note that relative to its print circulation level, the Californian lags the Cedar Rapids Gazette, perhaps an indication of the value of the Gazette's slicker, more up-to-date site design. Indeed,
Bakersfield.com won't win design prizes. But it has a real social network. Its members aren't "CalifornianPeople," they're just people.

Simply by registering on the Californian's site, here's what the paper's 20,000-odd actively registered "people" can do:

• Post a detailed profile with photos, interests, links, friend thumbnails, a guestbook, and their choice of various apps
  
• Start a blog—the site boasts an astounding 2,000 active bloggers
• Comment on stories and blogs
• Post reviews of restaurants
• Report by posting stories, listing events, posting photos and video.
  
• Participate in forums
• Share social milestones
  
• Find and connect with "friends", including via a cloud of interest tags
  
• Post comments on guestbooks of friends

Jeepers. Looks like a real social network. Not only that, but various components including blog updates, reader-submitted photos and videos, and reader reports are posted on the site's home page, while "today's paper" is an inside page. And check out the company's youth-oriented network site—it's called Bakotopia, which functions also as a classified platform to stave off Craigslist—and its suburban citizen-journalism platform called Northwest Voice. The company has nine sites in all. And it looks like it's "monetizing" nicely, with both local display and contextual advertising all over the place.* It's not even terribly new—most of this has been in place since 2006.

Wanna just duplicate what they're doing in Bakersfield? You can—they're offering the whole platform as "reskinnable and redeployable"at Bakomatic. So far as I can tell, though, only the Arizona Republic and the Idaho State Journal have done so.

As I said, what the Californian's doing is not pretty (which may be why their approach has not been influential), but it's real social networking. It's gutsy, and it's working. (Although it may be somewhat frozen in time. Oddly, for example, the Californian's presence on Facebook is minimal.)
But now imagine what would happen if the Times expanded TimesPeople into a real social network: register once and you can blog, comment, bookmark, connect, post reports, events, pictures and video, and all the rest. Imagine, further, if newspapers decided to abandon their walled-garden approaches, and started connecting their individual networks, allowing TimesPeople to befriend CalifornianPeople and WaPoPeople. And FacebookPeople. Imagine expanding this concept to include a rewards system for users based on Charlene Li's "personal CPM" concept. Imagine if newspapers did all this transparently, operating in a public fishbowl like Chuck Peters and his staff, letting the public talk back to them about what they like and don't like.

Unfortunately, there's not much momentum in this direction. And at most of the "other 1300" newspapers, with circulations under 95,000, not examined by Bivings, social networking is as distant as a manned Mars mission. I promised a few posts ago to explore that territory, but my initial forays have been discouraging. For example, I visited the site of the nearby (to me) Northampton, (Mass.) Gazette, which I've always regarded as a fine newspaper, only to discover that (a) to comment on a story, I need to register (fair enough, I thought), but, to register, I need to be a print subscriber. Not only that, some of the news content is totally off limits except to registered subscribers. Newsstand buyers and casual site visitors: chopped liver—you can't read the good stuff on the site, and you can't comment, except with a special online-only subscription. So, I was off to a discouraging start on that quest, but I'll keep looking.
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*It should be noted, however, that the Californian has not been immune to the recession, having announced 25 layoffs this month. There have been none at Cedar Rapids, as far as I can tell. The Times has made cuts in its newsroom and other departments.

Who Will NOT Pay for The News

Now that the press barons have returned home after circling the deck chairs in Reston, excuse me, "developing a shared vision for going forward," we'll be anxiously awaiting the results. Meanwhile, I recommend a look at the available video output from another comfortable confab, the Monaco Media Forum, held last week. There's half a weekend's worth of viewing there, so I haven't yet digested it, but expect to comment on it Monday.

Alan Mutter has a roundup today of third-quarter financial results from the publicly-traded newspaper firms. Most of those that have not plunged in the red on an operating-profit basis are seeing 40 to 90 percent declines. Elsewhere, an analysis of the New York Times Company's QIII results looks pretty scary, if you know what a quick ratio is. (Their currently liabilities are more than double their current assets, which is something that would put any normal company into bank covenant default and make it very difficult to refinance debt.)

So, the question of the moment is certainly: Who Will Pay For The News. Those with a vested interest in the topic may want to maker their calendars for O'Reilly Tools of Change for Publishing Conference, February 9-11, 2009 in New York. Although it's a book industry gathering, it looks like newsies might learn something as well. Jeff Jarvis will be there, as a keynote speaker, no less. (What would a conference be without him?)

Meanwhile, a substantial piece of thinking to chew on (yes, I know it's ancient, but I'm just catching up with it): "Free! Why $0.00 Is the Future of Business,"a piece in Wired by Chris Anderson (see also his related Long Tail blog post). If you haven't previously encountered it, it's long but worth adding to your weekend reading, and it has new relevance during the current crises in newspapers and elsewhere. Samples:

The rise of "freeconomics" is being driven by the underlying technologies that power the Web. Just as Moore's law dictates that a unit of processing power halves in price every 18 months, the price of bandwidth and storage is dropping even faster. Which is to say, the trend lines that determine the cost of doing business online all point the same way: to zero....

This difference between cheap and free is what venture capitalist Josh Kopelman calls the "penny gap." People think demand is elastic and that volume falls in a straight line as price rises, but the truth is that zero is one market and any other price is another. In many cases, that's the difference between a great market and none at all....

The huge psychological gap between "almost zero" and "zero" is why micropayments failed. It's why Google doesn't show up on your credit card. It's why modern Web companies don't charge their users anything. And it's why Yahoo gives away disk drive space. The question of infinite storage was not if but when. The winners made their stuff free first.

Traditionalists wring their hands about the "vaporization of value" and "demonetization" of entire industries. The success of craigslist's free listings, for instance, has hurt the newspaper classified ad business. But that lost newspaper revenue is certainly not ending up in the craigslist coffers. In 2006, the site earned an estimated $40 million from the few things it charges for. That's about 12 percent of the $326 million by which classified ad revenue declined that year....

Thanks to Google, we now have a handy way to convert from reputation (PageRank) to attention (traffic) to money (ads). Anything you can consistently convert to cash is a form of currency itself, and Google plays the role of central banker for these new economies.

There is, presumably, a limited supply of reputation and attention in the world at any point in time. These are the new scarcities — and the world of free exists mostly to acquire these valuable assets for the sake of a business model to be identified later. Free shifts the economy from a focus on only that which can be quantified in dollars and cents to a more realistic accounting of all the things we truly value today.

Barons of the press, repeat that: Reputation and attention are the new scarcities. Again: reputation and attention are the new scarcities. (Keep repeating. Monetization will follow.)

Andreessen speaks

Imagine newspapers have never been invented. Here's the synopsis of a business plan for your consideration:
(a) head for Canada,
(b) cut down trees,
(c) feed said trees into one end of gigantic machine,
(d) take pulp paper from other end of machine,
(e) truck said paper to place of publication,
(f) feed paper into one end of another gigantic machine, which prints words and pictures on it,
(g) load printed paper into more trucks,
(h) deliver newspapers to front porches (behind screen door!), driveways and plastic tubes on metal posts beside roads in every godforsaken nook and cranny near said place of publication.

Likelihood of angel funding? Not too high. Likelihood that enterprises actually engaged in this crazy business today figure out that continuing this routine much longer is folly? About the same, apparently.

Marc Andreessen, well-known entrepreneur of the digital world, suggests in a Portfolio interview, responding to the question, "If you were running the New York Times, what would you do?":

Shut off the print edition right now. You’ve got to play offense. You’ve got to do what Intel did in ’85 when it was getting killed by the Japanese in memory chips, which was its dominant business. And it famously killed the business—shut it off and focused on its much smaller business, microprocessors, because that was going to be the market of the future. And the minute Intel got out of playing defense and into playing offense, its future was secure. The newspaper companies have to do exactly the same thing.

The financial markets have discounted forward to the terminal conclusion for newspapers, which is basically bankruptcy. So at this point, if you’re one of these major newspapers and you shut off the printing press, your stock price would probably go up, despite the fact that you would lose 90 percent of your revenue. Then you play offense. And guess what? You’re an internet company.

Now, realistically, he would not shut the printed Times down overnight. The important point here is that newspapers are not playing offense (although the Times comes pretty close), and they're not internet companies.

To be an internet business, a digital business, the a newspaper would have to decide, irrevocably, that it will now be focused totally on publishing online content and creating online communities, 24/7. No U.S. newspaper organization, including the Times, has truly done this—they continue to be organized around that evening deadline for the print product, and everything else is secondary. And their reporters and salespeople continue to carry business cards with the prominent name and logo of the printed paper, not that of their web site.

Importantly, getting out of the daily distribution of "ink on dead trees" does not preclude sweeping some of that digital content into print from time to time. The Christian Science Monitor will stop its daily paper, but will maintain a weekly magazine. Politico publishes a weekly newspaper circulated on Capitol Hill. Wisconsin's Capital Times eliminated its daily edition, but still publishes twice-weekly niche tabloids. The Onion is driven by its web business, but has a print edition with a circulation of 690,000.

Andreessen’s solution is radical, and he probably knows it’s not going to happen, not right now. But the Times and all other daily newspapers could, and should, consider the radical-enough solution of going digital by dropping everything except a profitable, ad- and feature-laden Sunday package (and probably switching that to Saturday publication). Cutting out six mostly break-even distribution days a week would be a lot smarter than cutting out 40 percent of their news staffs. (And, as Mark Potts suggests, and I agree, "Newspapers haven't even scratched the surface on potential online advertising revenue, and that's partly because they're still focused on print.")