For Newspapers, the Future Is Now: Digital Must Be First

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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.

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Post and thumbnail photos courtesy of Flickr user Izzard

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