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Summary:

If newspaper companies don’t speed up the pace of digital change in their businesses, their losses will continue to increase, says Digital First Media CEO John Paton — and paywalls are not a long-term solution.

Calling your company Digital First Media makes it fairly obvious where you think the future of the industry lies, and Digital First CEO John Paton reinforced that vision during a fire-and-brimstone presentation on the future of newspapers at the Global Editors Network conference in Paris on Friday. Some CEOs and editors may think that they can manage their way out of the current revenue bloodbath by changing their businesses incrementally, he said, but they are mistaken — and pinning their hopes on growing revenue from paywalls isn’t going to work either.

Paton, whose company is one of the largest newspaper publishers in the United States with revenues of about $1.5 billion, didn’t try to sugar-coat his view of where the problems lie or couch it in terms of broad industry shifts related to advertising revenue and so on — instead, he laid some of the blame for the industry’s woes directly at the feet of CEOs and editors (his presentation and related commentary also appears on his blog).

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Editors who are resisting change, Paton said, “are aided and abetted by lousy CEOs and news executives who refuse to take the necessary risks to build this industry’s future.”

“Why? Because the past is safe. The past is known. And while holding onto the past will surely kill our future, for many executives it is still a great way to earn a living – just as long as it lasts.”

In more concrete terms, the Digital First CEO said that while his company and others have had some success in growing their digital-advertising revenue — it was up almost 90 percent last year at Digital First, he said, compared with 2009 — the continuing free-fall in print-advertising revenue is still overwhelming any of that growth, as well as the gains from cost-cutting and other financial restructuring.

Profits will fall another 40 percent

The result, said Paton, is that if newspaper chains like his and McClatchy and Lee Enterprises continue to have the kind of “success” that they have had so far in making the digital transition, profits will decline by a further 40 percent or so over the next three years — and even that forecast assumes the decline in print advertising and other factors don’t accelerate during that period. In effect, every $1 of profit today will become 56 cents of loss in five years, if current trends continue.

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Paton’s description of the near-term future is a stark one, but it is reflected in the financial results of almost every major publisher in the country — and that includes top-tier publications such as the New York Times, where even one of the world’s most successful paywalls is barely keeping the water from coming in over the side. As I’ve argued before, newspapers are running the Red Queen’s race from Alice in Wonderland, where they have to run faster and faster just to stay in the same place.

Paywalls only buy a little time

The Digital First Media CEO, who has talked before about how media companies have to give up their role as information gatekeepers in order to broaden their reach and engage with their readers, said that subscription plans have a place in the future of media — but not paywalls, which he described as “a stack of digital pennies.” Paton said he prefers “all access” plans that bundle print with digital products, but even those are only stop-gap measures rather than a solution.

“All Access is nothing like a solution for our industry but it could buy some gas in the tank to get down the road. It is currently the rage in our industry because it doesn’t require you to think too much about the digital future you have to build – just what you might be able to charge your print customers today for it.”

Paton said he is trying at Digital First to cut costs as quickly as possible in the legacy side of the business (moves that have included the somewhat controversial bankruptcy filing of the company’s Journal Register unit, where Paton started as CEO) and to invest in new digital programs that could be the foundation of future growth — such as the chain’s Project Thunderdome, a centralized content-management project, and the use of services like NewsCred to replace older tools for publishing content.

The Digital First CEO also tried to drive home what these changes mean for the chain’s legacy print operations and those whose jobs are concentrated there. In effect, he said, editors and reporters will have to find ways to change or be left by the wayside:

Paton presentation5

To soften some of that blow, Paton also announced during his presentation that Digital First Media will be rolling out a profit-sharing plan for all employees — both union and non-union — in the coming weeks. The plan won’t be available to senior executives of the company, he said, because “they’re well paid and it’s enough already.” He also urged staffers at newspapers everywhere to “hold your editors, news executives, sales leaders and most of all your CEOs to account” and to “demand change.”

Post and thumbnail photos courtesy of Flickr user Zarko Drincic

  1. Glad to hear that someone does not see paywalls as a viable solution. But then, so what? The number of publications behind paywall grows. And the more paywalls out there, the harder and more costly for everyone to find new subscribers — but again, numbers are for economists; journalists live off buzzwords and trends.

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  2. Why in the world would anyone listen to this guy? His expertise seems to be in running media companies into bankruptcy protection. Twice in three years. It hasn’t been a year yet since the last time. http://mediadecoder.blogs.nytimes.com/2012/09/11/for-paton-bankruptcy-for-journal-register-is-embarrassing-but-necessary/

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  3. He is preparing the financial markets and the speaking circuits of another impending failure on the part of his media company and his guidance. His only glimpse at success is cheating investors out of 100′s of millions of dollars.

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  4. A lot of barking but nothing substantive here other than a CEO’s justificaition for eviscerating newsrooms.

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  5. Somewhat controversial bankruptcy? That puts it mildly, to put it mildly, in light of Paton’s boastfulness after the JR had just come out of bankruptcy. Gee, Ingram, a paywall hater, “fluffs” another paywall hater. What a shock. Man bites dog.

    Haller may be right. Digital First may be getting ready for some sort of plung.

    And, Greg’s wrong. Imagine the same argument, during hardcopy only days, against papers charging for subscriptions.

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  6. Paton — once the Pied Piper of the industry — has lost all credibility. The media listened to him for a while because he seemed to be saying the right things and they needed a story. Never one to let the facts get in the way of his dogma he was(and continues to be) completely wrong about digital subscriptions. And he had an active part in driving his “digital first” Journal Register jalopy into the ditch. The industry doesn’t need self-important, loudmouth, operational dunces such as John Paton (or Clay Sharkey, or Jeff Jarvis) for direction. The industry needs “do-ers.”

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  7. thomas smith Monday, June 24, 2013

    I think that the solution for the current print media companies is to accept the fact that their real reason for existing is to provide news, information and entertainment content. The reason that newspapers and magazines exist is that they were the most practical ways to distribute the content. Much more effecient than “town cryers” and postals.

    The best way to reach the most audience was to package a variety of content in newspapers and magazines. The content providers got into the publishing industry because they had to in order to distribute their content.

    This best way is being replaced by digital technology. Consumers bought the magazines and newspapers not because they wanted to get 100% of their content but that was the only way to get what they wanted. This is no longer true. There should be a good future for content if available to customers.

    An anology of the situation might be the grocery store and the grocery products producers.

    People go to grocery stores to buy what they want. They do so by brands, marketing effects and even personal tastes.

    The newspapers and magazines are the grocery stores. The publishers must be the product producers and they need to focus on creating compelling content that will sell in different stores.

    They should co-operate in creating content “supermarkets” where customers can go to get the content they want. And only content that they want. Just as is the case with supermarkets, the content supermarket should sell whatever they can from different sources.

    Technology exists that enables customers to select in advance the type of content they want. Even from what sources. Customers can also make the selections as they want them. As they do this the technology will take care of the billing and etc..

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