The past can’t buy the future for newspapers, says Digital First CEO John Paton

Newspaper boat floating

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:

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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

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