Tag Archives: Newspapers

Sam Zell…First in Our Hearts and Last In Line for $$$

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The following article ran on April 2, 2007 in the Media Bistro under a byline by Kate.

 Sam Zell – Tribune’s New Owner

Sam Zell, the new owner of the Chicago Tribune Company, has quite a reputation as a motorcycle-riding, cowboy booted swashbucker who came up the hard way.

He’s on the Board of Directors of Equity International.

He likes to take risks, according to Forbes and he’s #52 on the Richest list.

He’s the biggest landlord in America or was, in 2004.

He’s called the “grave dancer”.

He’s “salty to the point of crass”, according to the CJR.

He owns, at least in part, two baseball teams.

So what does this mean for the LA Times? Got any predictions? Send ‘em our way.

After a short run in which he fleeced nearly everyone in sight, including the employees of the Los Angeles Times where he used their money in an ESOP to fund a major portion of his purchase – Sam has finally met his match.

Judge Kevin Carey of the U.S. Bankruptcy Court in Wilmington, Del. ruled that Sam Zell should be the very last creditor to get money in any payout from the Tribune bankruptcy proceeding. The judge found that “Mr. Zell’s investment ranked dead last in the Chapter 11 payment priority competition, ‘at the bottom of Tribune’s capital structure,’” the Wall Street Journal reports.

Ouch…but it couldn’t have happened to a more deserving guy.  We wish you well Sam.  No, actually we don’t!  Go away and don’t come back again.  You will forever be the poster child for all those who hastened the demise of U.S. newspapers.

AT&T Exits From the Yellow Pages – check it out on Yelp

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It was announced this week that AT&T has agreed to sell a majority stake in its Yellow Pages business to Cerberus Capital Management. The price was reported to be $950 million dollars, for a declining business that AT&T was happy to jettison and get on to more important areas of their business.

The deal was for primarily cash with AT&T receiving 750 million in cash, with a 200 million note on the backend. AT&T will maintain a 47% stake in the business, but Cerberus will handle all day-to-day operations. Cerberus has pulled a number of rabbits out of their hat in the past, but this one looks to be particularly difficult.

During its heyday through the 1990s the Yellow Pages franchise, which included AT&T and a number of other telephone companies, and even a number of independent publishing companies, had a wildly profitable business. Recently the business, as a print operation, has become a boat anchor.  Revenue was down 30% in just the last two years.  The goal for Cerebus is to help turn the business into a digital operation that will compete with a number of newer players including Google and Yelp.

It has been a number of years since my family has kept or used a printed Yellow Pages directory at home. Like so many our tendency today is to simply Google what we are looking for hit the return and we have our answers. If we are looking for additional information, we’ll take the time to go to yelp for additional feedback from users where have actually used the service were looking for. In Orange County, CA where I live, Yelp is helpful but certainly not the powerhouse that I found when I was working in the San Francisco Bay Area. There looking through Yelp was like reading a novel, and I discovered a number of incredible writers who took the time to elaborate on their personal experiences at the various restaurants and shops they wrote about.

AT&T will use the time and the money to help grow their electronic portion of the communications field. With their growing competition this would seem to have been a good move. Cerberus will attempt to do something I that seems impossible, but they have done the impossible before, and I’m confident they have a plan to do it again.  As a private equity firm they don’t have to meet the needs of the market and shareholders and that is critical for them to have the time and hard efforts to pull this off.

Good luck to both AT&T and Cerebus, we won’t hold our breath, but we wish you well. I wonder if Cerberus would also like to buy a few good newspapers, I know of a number that can be had for well under $950 million. In fact they might be able to purchase several former large newspaper-publishing groups for the same figure.  There is one that is headquartered in Orange County (Freedom) that I hear can be had for well less than a billion.

Gary Pruitt and the Future of Newspapers and Journalism

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Gary Pruitt, new head of Associated PressIt was announced yesterday that Gary Pruitt will be leaving the leadership of McClatchy, the 3rd largest newspaper chain in the U.S.  Gary, just 54, was the leader of the charge of newspaper conglomeration in the early part of the 21st century.  Timing is everything, and Gary’s was not good on that call.  Now it seems that he will be making a better call by becoming the chief executive of The Associated Press.  This is a plum job in journalism and Gary has made his way to the top of the pile of what is now print journalism.

I’d like to give Gary a new nickname – Prescient Pruitt, for knowing when it is time to leave.  The definition of the word  prescience [ˈprɛsɪəns] n – knowledge of events before they take place; foreknowledge [from Latin praescīre to foreknow, from prae before + scīre to know].  I think that says it all in the face of the current state of the newspaper business in 2012.

Not to say that Gary can take all the blame, there is enough of that to go around for all who failed to see the train coming down the track, but he was the big gun with the big check book who bought everything in sight, just before the bottom fell out.  With so many papers have been sold for high multiples, the debt they took on has helped to sink nearly all of them.  This in the face of a natural decline of the media in the face of the digital onslaught they were about to face.

I wish Gary well in his new role, I had a number of professional dealings with McClatchy when they were my client in the 90’s, and they were a class act.  From everything I have heard of Gary, he is as well.  Now he will have to help journalism from this new position at A.P. providing content (not news) that will flow through the presses and the digital screens of readers to keep real journalism alive.

There is much more to say about the state of newspapers and marketing – once they were a singular entity, but now more loosely linked – and where the state of media is going.  Newspaper revenues have declined to 1984 levels in 2012 – I know Gary did not see that coming – and digital revenues are screaming upward.  Can newspapers maintain their position of strength?

A similar issue faces the U.S. Postal Service – after great periods of growth for decades their volumes have declined, and they face major cutbacks and reorganization to remain viable and cost effective for mailers and mail recipients.  Both media are linked together in their future.  What do they need to do to survive, and the bigger question is – can they survive.  More TK!

A Generational View of Social Media

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Having two sons who are digital natives who live and work in the digital and social world has helped me to bridge the gap in media worlds.  As someone who now works as a consultant in helping my legacy media peers understand the transition – this cartoon helps say it all.  For my sweetie on our 39th Anniversary – yousay it all for me!

Non Sequitor for February 24, 2012

The Future of Newspapers Now in the Hands of The Washington Post?

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Over the weekend Jeremy Peters wrote an article on The Washington Post for The New York Times.  This was a great read, and documents just how difficult the transition is into the digital age of publishing is for newspapers.  This is a must read for anyone following the challenging rebirth of newspapers in this new digital era.

The Leader of the Charge Marcus Brauchli,

The transition has not been easy, but the future looks relatively bright, at least for The Post, in the manner, the methods, and the resources they committed to in leading this critical process. It has not been without bumps, glitches, and lots of hurt feelings, bruised egos, and red ink.

The news business is changing and there is increasing pressure on the publishers, editors, writers, and even the advertising staff. Nearly every newspaper is facing a similar challenge. What is different at The Post is that they have had deep financial resources to help in the transition. Unfortunately, even at The Washington Post for well can run dry.

The cash cow that is helped to finance this transition is their Kaplan division.  Long a financial success and a reader in the for-profit education field, they are now feeling the same financial pressures that the rest of the field has felt in the current economic downturn.  The former cash cow is now just a sick puppy.

Mr. Brauchli has stated “that he refuses to be a prisoner of the past” that may sound a little arrogant to many in the newspaper field, but his actions show that he is living his feelings. In a recent social setting, Mr. Brauchli brought in many of the distinguished writers on the staff of The Post to review the transition and how they could use that to their benefit in the coverage of the 2012 elections.  As the newspaper of record for Washington D.C., The Washington Post is expected to feed it’s pampered local audience of key national influentials the best coverage possible.

Washington Post staff has brought in a number of key tools and techniques to bridge the existing print world with the new digital audience.  This includes locating the print reporters alongside the newer staff, which includes a large contingent of what we now call bloggers.   This is not unlike what you will find at many other large metropolitan newspapers, however one unique factor is that many of these “bloggers” have had some significant success including Ezra Klein a young, California bred, blogger who has had significant success as a political wonk.

I’ve followed Ezra for the last couple of years that have taken great pride in the success since he is a hometown boy from here in Southern California. In fact he attended the same high school as both of my sons. I can’t imagine a better example of what we will be seeing in the next generation of reporters and writers at all of our newspapers.

My pride in the local boy making good aside, along with Ezra there legions of new writers who a publishing content all day long for the electronic versions of The Post.  They are learning minute by minute how to provide just the right content for their audience.  Metrics are viewed by Mr. Baruchli and key editors, and delivered in a continuous stream to their readers and viewers.  This stream of data influences what is being covered and written about throughout the day.  This is also happening at a number of other newspapers around the U.S. and the world.

 

What’s different at The Washington Post is that they are under incredible scrutiny since they are covering the most expensive election cycle in the world.  They have resources not currently available to other chains, under even greater financial pressure.  A lot is at stake here, this includes for The Post, for the American public, and for journalism.  They have a chance to get it right for print journalism, digital journalism, and for the future of journalism.  Lets hope that they get it right.  Our future and the future of the news industry is at stake.

 

 

Another Newspaper Chain takes on water

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Another one bites the dust!  Lee Enterprises, publisher of 48 daily newspapers, filed for Chapter 11  bankruptcy protection to refinance almost $1 billion in debt.  This will not be the last bankruptcy filing for the newspaper field, perhaps the last for 2011, and that’s a good thing.

The plan is for the company to repay its creditors in full, but will require the extension of key payments of maturing debt due in April into 2015-2017, though at higher interest rates.

The newspaper business is not the high margin field it used to be.  Coupled with the debt incurred after a major raft of acquisitions and consolidations over the past several years, the field is awash in red ink.  In the case of Lee it was their acquisition of the Pulitzer chain back in 2005.

Recently, Warren Buffett bought The Omaha World Herald, it’s other newspapers in what is likely a ‘sugar daddy’ deal.  By that I mean it was for personal reasons, not just as an investment.  Nice to have a lot of disposable billions like Warren has, and that is what the newspaper business needs.  Deep pockets, and the desire to make a difference with a big voice in the local community.  This was really how the newspaper business got started, and going back to our roots could be what we really need at this time in our history.

Last Chance for Newsprint and Local News

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It was fun to work in the newspapers world…a long time ago.  Times have changed, and things aren’t just the same.  Circulation is down, ad revenues are down, and most of my friends who are still in the business aren’t having much fun.  It is with this in mind that I came across a recent article that gives me a little hope that someone might have an answer that could work.

David Carter wrote a timely article in the New York Times on John Paton, the new leader of MediaNews Group, the second-largest newspaper chain by circulation in the country.  Formerly lead by Dean Singleton who fashioned MediaNews into the giant that it is today.  Long known as a very costly effective (cheap) operator who bought distressed papers Dean was dethroned by the board, and the the note holders (banks) who had backed his grand plan.  I never competed with Media News, my newspaper days ended before they hit the stage, but many of my former associates have gone onto careers their.  Some are still breathing, others not so much.

Mr Carr does a terrific job in profiling John Paton, and the challenges MediaNews, and every other newspaper faces in today’s digital world.  The biggest challenge is that the new owners of many of these papers are now banks and hedge funds, and they are not patient people.  Talk about your perfect storm – declining circulation, decreased advertising revenues, and the banks want more now!

Newspapers in the U.S. hit their peak in the 90’s and carried the good feelings and profits into the 00’s.  The results and profits, and the chance for market dominance lead to a major buying spree by a number of chains who managed to hit the jackpot.  They won on “Black”, but soon the real number came up and it was “Red.”  Mid way through the 00’s they could see that everything was melting down.  The Knight-Ridder chain had been gobbled up, and the remains were hitting the skids in terms of circulation and advertising dollars.

MediaNews was one of the big buyers, along with a number of hedge funds, like those who purchased Freedom Communications (The OC Register).  The family sold out after a small group wanted to cash out.  The early sellers from the family still have a lot of cash to count, those who stayed and took stock with the new buyers, are looking very sad, and their purses are bare.

What happened?  Demographics and Digital.  The world for newspapers will never be the same.

Demographics changed and the those in the post Boomer groups never became the consistent readers and consumers of daily newspapers.  They never picked up the newspaper reading habit of their parents.  Those of us in the newspaper world at the time thought that this would change as they got older and took their real place in the world…but it didn’t happen.

Digital also happened, and this meant that there was a whole new alternate universe of communication going on.  News could be had, without having to get ink on your hands.  It was on your computer screen, and it cost you nothing.  Hey, you could also text your buddies at the same time if you found something worth sharing, something you couldn’t do with newsprint.

There are other trends that have played into this transition, but this is a post, not a term paper.

The Digital Challenge that the newspapers were faced with was that digital revenues could never replace those of the print world.  Why?  This happened because the newspaper charged extraordinarily high rates – because they could.  They were the dominant media, and generally had a monopoly like position in their markets.  Rates went up every year, and advertisers really had few options.

When digital came along there were real options, and most were free.  In order to compete the newspapers had to offer similar services for free.  Newspapers are only now attempting to offer real paid services, and showing the discipline to effect a transition.  Even I now pay for a number of services I used to get for free.  I also used to get 2 daily newspapers, but now only one, and that only for the 4-day weekend special rate.

So the real challenge for newspapers is that they used to make money hand over fist and were the only game in town.  Now they have to compete for a slice of the pie, and that hurts.  Many are trying to lead the transition, and perhaps John Paton can make it work for MediaNews….and for his role in Digital First.

In my next post we’ll talk about how Digital First, under John Paton’s leadership is trying to change all of the previous concepts about how newspapers can continue in the digital world…and actually make money.

Digital Media on the Move…Newspapers in Retrograde

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This is a very tough environment for newspapers, and one that does not look to be brightening any time soon.  A lingering recession level of spending and generational and lifestyle changing trends point to a dismal future for any newspapers looking for a resurgence to past days of glory.

Not only is the economy one of the toughest environments that any of us has lived through, it has also drained advertising dollars from established print media and shifted it into digital media.  Talk about taking a barrage of blows to the head and body, this is today’s environment

With that as a backdrop for today’s comments we also have self inflicted news that tells us that ‘they can’t really be serious can they?’ It was reported that Gannett’s CEO of the last six years, Craig A. Dubow, received a parting gift of  – $37M in bonus and retirement benefits.  During his period of leadership the company’s stock declined from a high of $75 a share to just$10. Unfortunately, there are a number of other CEOs who have gotten similar treatment after miserable leadership terms.  Theirs has been the one bright story of the last decade for newspapers.

Aside from the economy the trend to digital news has also accelerated the down trend for newspapers.Now they are banking on some new trends to help rescue them, before the companies run out of money to help cover their severance as they head off to happier pastures.

The iPad has helped drive this new shift, and now the Newstand app recently added to iOS5 on Apple mobile applications appears to be working as well.  The new native app works especially well for magazines, and The Daily, the first iPad only news product from Murdoch Inc.  Conde Nast is reporting a 268% increase in digital subscriptions since Newstand was announced. Still a bit of a stretch a newspapers work through their own versions of apps for both phones as well as tablets.  In some cases they are developing their own tablets in conjunction with manufacturers.

A recent Pew study as noted in a recent Newsosaur article on tablet owners shows that only 14% had subscribed to a paid news app.  Also that only 21% say they would be willing to subscribe if the price was below $5 per month.  83% also said that being free or low cost was a major factor in their decision about what to download.  One good factor for digital users and providers of digital content, including our major ’newspapers’  shows that 43% of respondents said they now spend more time consuming news than before they bought their tablets.

I’ll take that as good news, and it certainly mirrors my own habits.  I’ve been excited to see just how much content I can get for free, but have also found that there is some content I am now willing to pay for, I’ve moved across the aisle and am a willing participant of paid digital content.

The other good piece of news about the ’43 percenters’ is that they too will make the change since their really won’t be as much available on the free channels in the future…unless you go ‘full social’ and get all of your news from your ‘friends.’  I’m not ready to do that yet…and doubt I ever will.  You would know what I mean if you could see some of them.

Pew study as noted in a recent Newsosaur article on a recent Pew study that only 14% had subscribed to a paid news app,  Only 21% say they would be willing to subscribe if the price was below $5 per month.  83% said that being free or low cost was a major factor in their decision about what to download.  43% of respondents said they now spend more time consuming news than before they bought their tablets.

Helping to drive the trend to digital deliver of news is  the development and testing going on for a wide array of tablets being developed directly for major newspapers, including the Tribune group and the Philadelphia newspapers.  No final details have emerged, but it appears that they will be available for subscribers.

It was reported, perhaps by union insiders, that in the recent negotiations for a new contract for the paper’s print unions that they were offered a shorter 3 year contract, and that they were lead to believe that the paper had plans to stop printing by that time.

Now we can see what the future really looks like.  As a former newspaper ‘insider’ I know what it costs to print and deliver the papers daily, and a digital only world would be a less costly one for sure.  Too bad digital ad rates are lower that print ones, but that too could change when print fades away.

Another accelerator in our switch to digital comes from Amazon.  With it’s very small price tag the Amazon Fire which is to be shipped on November 15th could have a great impact on the digital distribution of print and magazines along with a host of other digital media including video and audio.  I know that my son has one ordered for his wife and/or his one-year old daughter, and I will order one for my wife as well if they check out as OK.  If not, then they both will have to settle for an iPad.  Life is tough that way.

Like the Los Angeles Newsgroup here in So Cal, Cox Media has adopted a similar shared editorial program.  This means that the editorial and news staffs are shared, reducing costs for the newspapers. In Los Angeles this appeared to be a big deal with a broad range of papers with distinct markets sharing news staffs.  In the case of Cox it will mean the sharing of staffs from Florida, Atlanta and Texas.  We’ve come to accept the downgrading of the news content on a local basis, since most of the papers involved were 2nd tier any way, but I don’t know that Atlanta and Austin will accept it without a lot of belly aching.  I don’t know about Atlanta, but I bet some larger than life Texas oilman would consider starting his own newspaper in Austin if they felt slighted.  Texas takes this stuff seriously…just like their BBQ.

Back to Southern California!  The So Cal newspaper marketplace continues to stumble forward with few positive signs of positive growth.  The biggest question mark concerns the Orange County Register which is still up for sale.  Some past bidding pitted the Los Angles Times vs the Los Angeles Newsgroup in a potential bidding war…but no winners emerged with both large newspaper groups mired in their own financial problems.

I don’t see any big hitters with deep pockets willing to step forward and take over The Register here.  Texas still has oil, but our key drivers in OC have been homebuilders…and they can’t even afford to take over each other for now.  Who knows what the future will bring, but nothing big on the horizon now for our local media.  We shall slog on with the media who ‘brung us here for now!’

Tipping Point No. 2 for Newspapers

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In July I commented on the report that the Philadelphia newspapers, jointly operating, are planning to introduce tablets for subscribers in the very near future.  This was the first major metro paper to announce, and now the monster Tribune group from Chicago and Los Angeles announced that they too are planning to introduce tablets for subscribers.  Tipping point #2 has been achieved.

For those of us who currently receive 90% of their news via computers and tablets this seems logical and destiny for print and especially, newspapers.  Why?  I think there are a number of reasons why this will happen.  Among them are:

 Newspapers are no longer monopolies in their markets – Once upon a time newspapers owned the world.  They were 10 feet tall, and everyone opened their doors to them.  They were the only game in town for local, and even national advertisers.  That started to decline in the 80’s and was in full flight in the mid 90’s.  There is all sorts of new ways of reaching customers today, and the newspaper is just one of them.  That is hard to swallow for newspaper folk.

Costs of acquiring new subscribers – The cost of acquiring new subscribers has always been high, and has gotten higher.  With starts and stops for vacations among other factors, subscriber turnover can easily be 100% per year, in some cases higher.  Loyalty has declined to lows never thought possible.

Their audience is dying – The age of subscribers has gone up over the years as fewer younger subscribers have replaced those reported in the obituaries.  Younger readers aren’t appearing to replace them – the digital age belongs to the young.

 Costs of print and distribution – Manufacturing and distribution costs are continuing to increase.  With declining circulation in most urban areas it is very costly to print and deliver this product on a daily basis- and still make money.

News is NOW – not tomorrow morning – All of the other factors are critical, but perhaps the single most important factor to the sustainability of printed newspaper is that news is NOW.  With most of us carrying robust phones that are our tether to the world.  This includes the news.  I read my news on my Android phone, and on my iPad.  I still read my LA Times on the weekends.  I like the content, and if for no other reason, it is a habit.  The older I’ve gotten the harder it is to break habits.  I will always read a printed paper some of the time, but I will read digital news several times a day.

I salute the Tribune group for their pioneering efforts.  I truly think they are in the right, if not just the inevitable path for newspapers.  Take the digital subscription money and run!

The Philly Tipping Point for Newspapers

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Printing Presses for Profits or Boat Anchors?

In a switch from talking about direct mail, there is breaking ‘news’ in the print and newspaper arena that deserves prompt attention.  Yesterday it was announced that the Philadelphia Media Group that owns the joint venture papers Philadelphia Inquirer and the Philadelphia Daily News are planning to launch low-priced Android tablets for subscribers later this year.  This is a real tipping point for newspapers.

In the article “Reinventing the Newspaper” in the recent edition of The Economist they lay out the challenges for newspapers, and how we got there.  We have been following the path of the existing print journalism model, mostly advertising based, suffer through years of revenue decline and shrinking pages counts.  The model sprang forth in 1833 with the launch of the Sun in NYC as a mass audience newspaper with a small price of one penny.  Within two years circulation of the Sun eclipsed the existing papers Courier and Enquirer on a 3-1 ratio.  The path was set.

Newspapers have been the dominant player in print advertising until just recently.  I worked in the field for more years than I want to admit, and I know first hand how hard it is for change to come to the newspaper field.  Ad revenues have declined significantly since 2000 down 36% according to Alan Mutter in his Reflections of a Newsosaur – required reading for those of us lamenting the decline of the field.  In his July 5 post “Why Newspapers Can’t Stop the Presses” he gets to the heart of the revenue issue.  Digital advertising in newspapers is generally an extension of the print advertising buy.  Very little is digital alone, and the fear is that with no print buy, there would be no real digital revenue.  As a percentage, digital growth as been dramatic – in real dollars, not so much.  Not enough to support current newspaper staffing models.  Drop print and die is the reality.

This is where the Philadelphia model could have a real impact on the overall newspaper model.  If they can grow their subscriber base and attract new subscribers, especially younger subscribers which are a very small niche market at current, they could have found the golden path to the future.  By offering readers with subscriptions they might have found the answer.  As I stated earlier, this could be the ‘tipping point’ which could signal the direction they need to go – to stop printing.  Print and distribution is very expensive on a daily basis, with electronic delivery the savings would be huge, and could be the savior they need to find to stay relevant.