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Summary:

According to a Pew Research Center report that looked at 38 newspapers, both large and small, some are seeing massive declines in digital revenue while others are seeing dramatic increases. One of the main reasons for this discrepancy, the report suggested, are cultural differences within newspapers.

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The Project for Excellence in Journalism at the Pew Research Center has come out with a substantial new report on the efforts of newspapers both large and small to grow their digital businesses, and — not surprisingly, perhaps — the results are all over the map. Although on average the news is rather bleak, with more than $7 in print revenue lost for every $1 produced by digital, some papers have managed to generate some strong growth, while others have lost revenue on their digital operations. And if there is one thing that comes through loud and clear when it comes to explaining this discrepancy, it is that culture matters more than anything.

The Pew report notes that the study involved 38 newspapers of various sizes belonging to six different chains, and was based on detailed internal data on revenue and other criteria, as well as in-depth interviews with executives and managers from more than a dozen of the papers surveyed. The research center said that, of the newspapers it looked at, seven had suffered declines in digital revenue over the previous year — in one case, a decline of more than 35 percent — while two other papers saw increases of 50 percent and 60 percent in their digital ad revenues (the newspaper that saw 60 percent growth also boosted its print ad revenue by 8 percent). As the report put it:

These variances suggest that the future of newspapers, rather than being determined entirely by sweeping trends, can be significantly affected by company culture and management — even at papers of quite different sizes.

A culture of inertia, and a lack of appetite for risk

And what is this cultural problem? According to Pew, several of the senior managers who were interviewed described a culture of “inertia” that made change difficult to achieve within the paper, and another executive said bluntly that “there’s no doubt we’re going out of business right now.” According to this executive, no one wanted to take the risk of trying to change or innovate because of a fear that they would not succeed — and then their company would fail anyway, and they would be blamed for it. “There might be a 90-percent chance you’ll accelerate the decline if you gamble and a 10-percent chance you might find the new model,” this executive said, and “no one is willing to take that chance.”

My paidContent colleague Staci Kramer is right that this particular Pew study left out some information that might be worthwhile in looking at newspapers and their revenue-generating abilities — such as any data on paywalls, which more and more papers seem to be implementing in an attempt to boost their bottom lines. But on the cultural issue, the results of the survey definitely ring true, at least based on my experiences in the newspaper business over the past couple of decades. It’s also the reason why some media veterans say they have given up on newspapers.

That sense of inertia and the fear of failure are two of the biggest stumbling blocks holding some newspaper chains back from disrupting their own businesses instead of standing by and watching while others disrupt them. This is what media consultant Anil Dash of Expert Labs and Activate Media means when he says that more media companies need to “think like startups.” Startups have no legacy business to disrupt, so they don’t have to worry about the impact on their bottom line (since most don’t have one of those either), and the best are not afraid of failure. If anything, they seek it out, so they can learn from it.

Put the digital types in charge, and start stacking those dimes

This is also why one of the single biggest efforts at disrupting the traditional newspaper business from inside has come from Journal-Register Co. under former CEO John Paton, after he took over management of the company in 2010. The previous version of the company went bankrupt and effectively ceased to exist — so Paton had a virtual blank slate when it came to trying new ideas, and likely a somewhat desperate board and investors as well. So the CEO promoted an aggressive “digital first” approach that involved outsourcing whatever possible in order to cut costs, and “stacking the digital dimes” in order to make up for print revenue losses (something Paton says is starting to pay off).

It’s no coincidence that in a number of presentations about his approach, Paton — who has since become CEO of the Media News Group newspaper chain — talks about the issues that newspapers have with their cultures, and how in his view one of the biggest changes that most traditional papers have to take is to “put the digital types in charge of everything.” This is likely not a comfortable message for many news executives to hear, but it comes closer to a solution than the road taken by many, which is to put newspaper managers in charge of digital. In a lot of cases, this is like putting the chickens in charge of managing the fox.

It’s refreshing to see some newspapers experiment with their own disruption, as the Washington Post has via projects such as its news-recommendation engine Trove and its Facebook social-reading app. The paper also just hired Rob Malda — better known as Commander Taco, the founder of pioneering online community Slashdot — as chief strategist for its internal WaPo Labs unit. But for too many newspapers, disrupting their own culture is something that just doesn’t come naturally, and that could literally mean the difference between life and death.

Post and thumbnail images courtesy of Flickr users Tony Margiocchi and Kevin Lim.

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  1. Jeff Tinsley Monday, March 5, 2012

    They all need to charge for their content and things WILL change. MediaPass.com is the answer, giving any publisher, big or small, an easy way to figure out what content is most valuable and charge for it to make 10x the revenue.

  2. dan oblinger Monday, March 5, 2012

    Good Article. I would agree that a strategy to consider for an individual new outlet would be to “put the digital folks in charge.” This could maximize the chances that that organization is among the few winners in the post print world. Still it should be recognized that this strategy cannot save the vast majority of news outlets, it will just shift who the winners are. At the root of the problem is that the digital world is much much smaller than the physical print world. Zero costs for extending your geographic reach means that ‘winner’ news outlets can service much wider much more sparsely populated readership than they ever could with physical media. The result is that number of isolated markets is reduced, so the number of winners is reduced. The results we see today are exactly what we would expect. A minority of winners, and an every growing fraction of organizations that cannot compete with those winners. Copying the culture of the winners over to the losers cannot fix this. The absolute number of winners that the new world can support is simply smaller.

    1. That’s a good point, Dan — the days of being able to dominate a specific geographical niche for news are definitely over. Thanks for the comment.

  3. Michael Taylor Tuesday, March 6, 2012

    What is missing from the Pew analysis is the lack of focus and training of the sales force. While most paitiently waited for their core print sales force to begin selling digital at acceptable levels, the more aggressive newspapers began a digital only sales force, but limited them to selling to non-customers (while other digital companies took on that role and won more share of wallet). The hands off mentality of selling print with digital also created sales channel conflict when a digital rep was winning dimes to exisiting customers when the print rep was lsoing dollars on the same customer. Often times we see digital reps pulled off of their efforts in order to meet print budget objectives, showing the fear of losing print dollars to digital dollars and the split personalities of newspaper management who want digital but are afraid to pursue it effectively. While changing management at the top with digital experts, real progress will only be made if a change occurs at the sales level so that a dedicated strategy and consistent execution are put into place. Too many digital strategists and product managers have been hired at newspapers only to be frustrated by the lack of desire and confidence of the sales force to execute a new strategy and support products not tied to the core print product.

  4. Mike Donatello Tuesday, March 6, 2012

    The “culture of inertia” that you reference was first identified explicitly by NAA and Medill back in, what, 2002 or so? Should it really take a decade or more to shift gears if doing so (rather than simply making noise) is what a publisher wants to do? Sorry, but I don’t buy it.

    1. I agree, Mike — the writing has been on the wall for some time, although many seem determined to ignore it.

  5. WaPo is doing some interesting things but last i checked, their Q4 digital ad revenue was down like 20%, their 30 year old (read digital type) CRO just left the company, and their Managing Editor (digital type) just decamped for WSJ. sounds like it isn’t moving the needle for them.

  6. Good article, but the pattern of holding up Paton and Journal Register Co. as the great heroes of the newspaper industry is becoming quite tiresome. I have nothing against Paton and JRC and I’m interested to see where they take things, but after reading several pieces by you about Paton and JRC, it’s unclear to me what Paton has been able to achieve, other than making some interesting comments.

  7. This was a really insightful read. As someone who worked in newspapers and has the “inside” first hand, I don’t think that this concern with disrupting business to try something new is exclusive to the introduction of digital. It has always seemed to me that newspaper culture has always been afraid of any type of risk whatsoever, whether digital or otherwise. Conversely, I don’t think the general answer is to put “all digital types in charge” because being a “digital type” is not necessarily indicative of being a risk taker. Having worked with “digital types” who are not acclimated to or interested in the newspaper as a product and therefore have no interest in understanding and/or appreciation for the “culture” of that industry, could be just as detrimental. Plus, I have also experienced that being a “digital type” is not necessarily indicative of being a risk taker.

    As a “digital type” myself, what is needed, bottom line, is a combination of people who are not afraid of risk AND a culture that will not immediately punish someone for taking risk, thereby encouraging beneficial change.

  8. Mike Corones Tuesday, March 6, 2012

    The three examples you cite at The Washington Post run in parallel to their newsroom and greater business philosophy, which are still embarrassingly, obstinately print-centric.

  9. cameronchurch Wednesday, March 7, 2012

    Great post – and timely as well. At today’s FT Digital Media conference (http://www.ftconferences.com/digitalmedia) the future of news print publishers was discussed at panel of 3 executive (CEO of FT, Chairman of Independent Print and VP of Business Dev Huffingpost).

    You and Staci are very right to point out that more analysis of paywalls is needed as the CEO of FT claimed that this year (a first in the paper’s history) content revenues will surpass ad revenues. It still isn’t a statement that the company is profitable and growing BUT the inflection point is a real fundamental milestone in the evolution of text based news reporting. If the FT can sustain and continue to grow on content revenues alone then they will thrive in this new world order.

    As Evgeny Lebedev put it – print can’t delivery what today’s news consumer needs. It’s a quickening pace where you either adapt or die – the proverbial asteroid has struck print-land and the dinosaurs are about to become extinct.

  10. Scott Rodgers Wednesday, March 7, 2012

    I couldn’t agree more with this article. For those in local traditional media, this is arguably the most important article you can read this month. Culture is king. Culture determines who’s on the team, the focus of the company, ideas, execution, results, who you perceive to be your competition and partner, perceived risks, business models, perceived opportunities, the pace, etc.

    Charles Darwin: “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”

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