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Summary:

As newspapers struggle to stay afloat and remake themselves for a web-based world, many debate how much emphasis they should put on digital vs. their traditional print operations. John Paton, CEO of the Journal Register group of newspapers, says the time for debate is over.

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As newspapers everywhere struggle to stay afloat and remake themselves for a web-based world, many continue to debate how much emphasis they should put on digital vs. their traditional print operations. John Paton, CEO of the Journal Register group of newspapers, says the time for debate is over. Newspapers need to be digital first in everything they do, he says, and more than that, they need to take the same approach to their businesses that many web-based startups have, and that means being transparent, crowdsourced, collaborative and flat. There’s no question; it’s an inspiring message, but will anyone listen?

In a speech he delivered Thursday at the Transformation of News Summit in Cambridge, Mass. (put on by the International Newsmedia Marketing Association or INMA), Paton said that the Journal Register — which he took over in February — has been living and breathing these principles for the past year, and they’ve paid off in terms of both revenue growth and profits for the company, which was effectively bankrupt last year. Paton says the Journal Register’s profit margins will be about 15 percent this year.

In effect, Paton says, the Journal Register — which publishes about 170 daily and weekly papers in Pennsylvania, Michigan, Connecticut, New York and New Jersey — is already a digital-first company whether it wants to be or not, because its total online audience is bigger than its print audience. “We are already a Digital company,” he said in his presentation, “with small sales in the area of growth and a burdensome cost structure on the declining business – Print.” The newspaper CEO said the company has dealt with that cost structure problem by outsourcing everything it can to others who can do it cheaper or better.

We are getting out of anything that does not fall into our core competencies of content creation and the selling of our audience to advertisers. Get rid of the bricks and iron [and] focus on core competencies — meaning, get rid of those things that don’t add value to the business. Reduce it or stop it. Outsource it or sell it.

What’s most interesting about the Journal Register’s approach is it doesn’t rely on putting up paywalls, the way that media mogul Rupert Murdoch has done at his newspapers in Britain — which led to a decline in online readership of more than 90 percent — and the way some other media outlets such as the New York Times are planning. Instead, Paton is focused on expanding the relationship his newspapers have with both readers and advertisers in their local communities, and taking that online. He says it’s working even better than expected.

Digital ad growth is 2 times better than the industry. More importantly the company’s digital revenue has grown from negligible to 11 % of ad revenue in November – in less than a year. The company will write about 1,000 digital ad orders this month and has expanded its revenue streams from about 13 basic revenue streams to about 60. And all of that with less costs.

In addition to the advertising growth, Paton says his papers are reaching out to the communities they serve, to make them part of what he calls the “new news ecosystem.” For one paper, the Register Citizen in Connecticut, that means creating a new community newsroom, which the newspaper is moving into later this month — the new offices have no walls, Paton says, and feature “a newsroom café with free public Wi-Fi, a community media lab and a community journalism school.”

The Journal Register CEO has also been taking the same approach to his own company: Earlier this year, Paton launched a project called ideaLab, in which employees from across the company were chosen from an open application process that generated almost 200 comments on Paton’s blog (his post about the lab is here). Armed with their choice of mobile phone, a netbook and iPad, members of the ideaLab get 10 hours of paid time per week to experiment and innovate — and only one rule, Paton said: There are no rules, and no sacred cows. Paton also had strong words in his presentation about why most newspapers aren’t changing:

The reasons… are simple: Fear, lack of knowledge and an aging managerial cadre that is cynically calculating how much they DON’T have to change before they get across the early retirement goal line. Look at the grey heads in any newspaper and you will see what I am talking about.

The solution, according to Paton?

Stop listening to newspaper people. We have had nearly 15 years to figure out the Web and as an industry we newspaper people are no good at it. No good at it at all. Want to get good at it? Then stop listening to the newspaper people and start listening to the rest of the world. And, I would point out, as we have done at JRC – put the Digital people in charge – of everything.

Whether anyone decides to take the Journal Register Co. CEO’s advice, it seems clear that the approach is working for Paton’s chain; he says in the year to date, the company outperformed the newspaper industry, with ad revenue growth three times better than the industry average, and classified ad performance that was six times better. Since costs have shrunk, profit margins have actually increased. On top of that kind of financial performance, it’s refreshing to see a newspaper publisher not just talk about going “digital first” but actually put his money where his mouth is. If you care about the future of newspapers and media, it’s well worth reading the entire presentation.

Related GigaOM Pro content (sub req’d):

Post and thumbnail photos courtesy of Flickr user Izzard

  1. All this is just adorable. Paton can yap all he wants. The bottom line remains that JRC papers suck and its newspapers get their asses kicked in any market they face competition. That’s because it pays crap to newbies. The legacy of JRC is Bob Jelenic destroying many fine community papers. Paton is playing with the rotting remains of once great newspapers. He can delude himself all he wants.

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    1. Thanks for the comment, Fred. I used to watch Saturday Night Live too :-) In any case, I don’t think John Paton would disagree that the Journal Register has not done very well in the past — but I think his ideas for remaking the company are better than just about anything else I have seen a newspaper chain attempt.

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  2. Newspapers need to invest in “we” media – inviting the community into the conversation on platforms that evolve beyond the historical arrogance of “we talk, you listen” media. At Freedom Communications, we’ve taken a subject that garnered about 15,000 page views a month in Colorado(outdoor recreation) and turned it into a 1100-member-and-growing COMMUNITY site (outtherecolorado.com) that garners over half a million page views in the winter months and a million/month in the summer, and runs about 6:1 community submissions about news in outdoors/parks/hiking/etc. in relation to the amount of news we produce in our newsroom.

    We need to do this in key topic areas for our region, all the while continuing to grow our value proposition as the news leader by thinking mobile, tablet, digital first.

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  3. [...] Paton, CEO of the Journal Register group of newspapers, expounds what he believes to be the new principles for successful, journalistic enterprises: Newspapers need [...]

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  4. [...] quote leapt out at me from a GigaOm post by Mathew Ingram last week: Stop listening to newspaper people. We have had nearly 15 years to [...]

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  5. [...] Matthew Ingram’s article for http://www.gigaom.com, CEO of the Journal Register John Paton’s strong opinions on this issue [...]

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  6. [...] The future of media might be finally arriving. Rupert Murdoch’s iPad-only pub, The Daily, is about to launch; Nick Denton wants to merge the best of TV, magazines and online in Gawker’s new template; and Journal Register CEO John Patton recently told attendees at an International Newsmedia Marketing Association event that even newspapers need to be digital first. [...]

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  7. Where to begin?

    Paton claims that measured against an industry average, his chain is doing very well. He does not say – and the reporter does not ask – where this industry average number comes from. Nor does anyone say what the chain’s performance was against this industry average prior to Paton taking over.

    More puzzling is the complete absence of any circulation numbers. Paton carefully avoids mentioning whether circulation has gone up, down or remained the same since his takeover. And although these numbers are central to the story as well as being fairly easy to get, the reporter is equally oblivious.

    We are told the chain has turned a 15 percent profit under the new regime. Paton points to this as proof that his “innovations” are working and the reporter accepts this without question. However, from what little I can learn from this story as well as reading the full text of Paton’s remarks, the company’s situation seems a bit more precarious. I believe Paton arrived at about the time the company emerged from bankruptcy. Presumably the chain shed debt during bankruptcy. Then Paton by his own account cut costs by outsourcing anything he could. In the short term such cost cutting is bound to result in some sort of profit. But if circulation is falling and web site revenues are anemic, the long term outlook is not good.

    Of course, one could argue that I am assuming declining circulation and poor revenue growth. That is absolutely true. But since the story addresses neither issue, what is a reader to do.

    I am also left scratching my head about these claims of innovation. Cost cutting is innovative? Since when?

    Also left unexplained is what exactly Paton’s digital strategy is. What we see throughout the industry is that web sites generate a huge amount of traffic but relatively little in the way of advertising revenues. This is hardly surprising since readers are not fools. If they can get for free on the Internet the news that newspapers charge for at the newsstand, they will. And as long as newspapers are competing for advertising dollars with millions of other web sites, what they can charge for advertising will be less than the print product. (Even in the newspaper industry the laws of supply and demand still rule.)

    Has Paton found an answer to that problem? He does not say and the reporter does not ask. All we know is that Paton is giving his employees time to come up with new ideas. That’s nice but what have they come up with? Paton, as usual, does not say and the reporter, as usual, does not ask. Sigh.

    Which leads to one final observation. Paton touts his attempts to motivate his employees through profit sharing and paid time to innovate. That all sounds very encouraging. But in the next breath he says, “Stop listening to newspaper people. We have had nearly 15 years to figure out the Web and as an industry we newspaper people are no good at it. No good at it at all. Want to get good at it? Then stop listening to the newspaper people and start listening to the rest of the world.”

    So let me understand this. The head of a newspaper company just told everybody that works for him that they are idiots. Did I miss something here?

    And what does our intrepid reporter think of all this? “..it’s refreshing to see a newspaper publisher not just talk about going “digital first” but actually put his money where his mouth is.”

    Yeah, right.

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  8. Excellent comment, Elliot. I fail to see how a click-crazed media product that focuses on delivering content on a shoestring benefits anybody. Those Paton types sound like those Snapple-slurping dot-com geniuses of the late 90s. They grab at every idea they hear and get all overstimulated and ADHD with their strategies. Yes, the newspaper industry is in real trouble, but do we really want to live in a society where the only people questioning the powerful are second-string freelancers and Twitterzens with no institutional power behind them?

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  9. [...] Paton, an executive with experience in Hispanic media. He’s not an outsider, but he’s preaching a very different gospel that includes a clear vision for a web-based future for news. Elsewhere, Tribune, still dealing [...]

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  10. [...] conversations here. If you are in any way connected to the newspaper publishing industry or, as Mathew Ingram wrote, “if you care about the future of newspapers and media”, read Paton’s presentation.  The [...]

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