McGuire on Media

“Watching the big whales flounder, while the little newspaper fish thrive.”

“Watching the big whales flounder, while the little newspaper fish thrive.” 

Speech to the Arizona Newspaper Association Delivered by Tim J. McGuire, Sept. 22, 2007 

Coming up with titles for speeches 8 months ahead of time is very dangerous business. This one seemed clever and cutting edge when I came up with it, but it feels more than a little shop-worn and way too bloomin’ negative now that September has arrived.

 

By now you are at least as sick of this “death of the newspaper” garbage as I am. Focusing on our own deaths or the death of our industry is not the ticket to enjoying the living part.  My closest friend, Gregory Favre, the former editor of the Sacramento Bee and a Distinguished Fellow at the Poynter Institute once said, memorably, in his 1995 ASNE presidential speech, “We have to love newspapers to life.”

 

I like that and I think it’s a heckuva lot more productive philosophy than Chicken Little’s “the sky is falling! The sky is falling!”  In my own ASNE Presidential address in 2002, I decried all the negative thinking in the business and cried out, again rather memorably for some of my peers, that there should be “No more ruing!”

 

I am afraid I was rather roundly ignored because in the last five years there has been a bucket load of ruing. It’s not that there is no justification for ruing, or worry, or even prayer!

 

Let’s agree on a couple of basic facts and explain that rather odd title of this speech at the same time.

 

First fact: Big metro newspapers ARE in deep stuff. I won’t bore you with all the numbers, but ad revenues for the core newspaper are declining in most places, circulation revenue and numbers are down and your friends think you are in an industry that’s going to put you in the poorhouse by next Thursday.

 

Second fact: Small newspapers are, for the most part, healthier, but nobody is issuing any guarantees that relative prosperity has to continue.

 

Let’s go just a little bit deeper.

 

Big metro newspapers are in deep stuff for three fundamental reasons; their drug addiction, their loss of pricing power and their belief for the last 10 years or so that they could cut their way to prosperity.

 

For me, the image of metro newspapers hopelessly addicted to the drug of classified advertising is perfect.  Through the 90’s the tremendous growth of job recruitment advertising revenue fueled the go-go revenue and profit growth at a lot of metro newspapers. A lot of ad executives did a lot of things right, but for a long time we tried to convince ourselves we were geniuses. Truth be told it was the drugs talking. I remember the paper I was at literally could not, and did not, take all the recruitment advertising we were offered. My memory is fading but I think in 1998 we had close to three times the volume of job recruitment advertising we had in 1991. The raw numbers would stagger you.

 

A logical question would be did we invest that incredible profit into research and development? We did not.  Or, you might ask did we keep price increases modest to encourage a long-time commitment from our advertisers? We did not.

 

I faintly remember some years of 8-10 percent increases and in some categories I think we occasionally got 13-15 per cent increases in a year. There’s no word yet on whether any of us involved in charging said increases will go to hell! 

 

Why in the name of the Lost Dutchman’s Mine did we charge those exorbitant rates?

 

Because we could.  That’s the second reason metro newspapers are in deep stuff. They had incredible pricing power and they’ve lost it. You can argue that loss was justified, but it is terribly clear it’s been lost. In Phil Meyer’s Vanishing Newspaper he talks about this phenomenon as, “newspapers owning the toll gate.”  Metro newspapers have totally lost the toll gate AND our pricing power and now metro newspapers are being told to take a hike by smart advertisers.

 

The bitter confluence of the loss of the classified and job recruitment drug, the failure to invest in research, development and innovation and the relatively abrupt loss of pricing power put metro newspapers in a real jam. After years of convincing Wall Street that revenues and profits would grow steadily and predictably it was clear top-line revenue was in trouble. So the only way to keep profits marching upward was to cut costs. 

 

At first the cost cutting was smart.  Metro newspapers had gotten more than a bit fat and lazy and a good hard look at operations was overdue and necessary.  Gradually, though, a line was crossed. Newspaper publishers and CEOs came to believe that incremental quality increases were not resulting in accompanying incremental circulation increases. Once that mindset cemented itself in the minds of increasingly desperate executives the cost-cutting became epidemic and irrational.

John Morton’s “Eating the Seed Corn” piece is a seminal commentary on the newspaper industry.  Written in 1995, it was the first clarion call that investment in the future might be a better strategy to consider.

In his 1995 article Morton reiterated the short-sighted cost-cutting moves of newspapers and wrote: “The worst thing any business can do when faced with so many negative trends is to cut back on the quality of product and level of service. But that is precisely what many newspapers today are doing.”

And Morton had not seen a thing. By 2007 eating the seed corn had become an ugly gluttony. With little regard for the long-term health of the franchise or much obvious sense of public obligation, too many big newspapers have cut staffs, news hole and ambition with a mean-spirited short sightedness that has been staggering.

 

Let’s revisit my second fact: Small newspapers are, for the most part, healthier, but nobody is issuing any guarantees that relative prosperity will continue.

 

Two of the most authoritative pieces on the success of small newspapers have been a March 8 piece in the Washington Post and a January article in the Fed Gazette, a web publication of the Federal Reserve Bank in Minneapolis. The profit margins at Lee Newspapers, which is dominated by smaller newspapers, had been doing well and both of these articles leveraged off that Lee success.

 

Alas, things in the newspaper business are changing at light speed. Good news can go to bad news in a heartbeat.  This week a key stock analyst changed his buy recommendation on Lee from “buy” to “neutral.” Lee reported on Monday that its online ad revenue surged 48 percent to $5.2 million in August. That was the good news.  Circulation revenue dipped 2.2 percent for the month after falling 3.3 percent in July.  Last Monday shares of Lee Enterprises dropped 93 cents, or 5.8 percent, to $15.25 in midday trading. The stock hit a fresh low of $14.82 earlier in the session. It previously traded in a range of $15.33 to $35.65. The term “Fresh stock lows” are as common in newspapers these days as ink smudges.

 

So it is clear, that while small newspapers are doing better than metro newspapers, all is not delightful.  While metro circulation declined 2.9 per cent last audit small newspapers declined 2.1 per cent.  Again, better than the big whales, but not much to celebrate. 

 

It is obvious the big whales and the little fish all have enemies in the sea. From online media sources to the loss of exclusive ownership of the advertising tollgate to the radical change in the way advertisers want to reach customers and WHICH customer, the future of the newspaper ocean carries great threats. Let’s blend the lessons from the metro newspapers struggle with the lessons of successful small newspapers and develop a set of lessons we might all study to keep newspapers in a solid place when they are succeeding and how we refurbish the struggling ones.

 

I think there are these five:

 

1. Know and Love your community

One of my favorite speeches of all time was delivered in 2001 by an old friend of mine named Mike Jacobs.  Mike has spent most of his career at the Grand Forks Herald and in 1998 his newspaper won the Pulitzer Prize for public service for the paper’s heroic coverage of a horrible 1997 flood and subsequent fires that destroyed the newspaper building.  Mike gave a speech to the small newspapers at ASNE in 2001 and he told that group that his paper has learned four lessons from the flood: Know Your community; Love your community. Never hold the news and Do the Best with what you’ve got.

 

That wisdom is precious.  Mike did not say patronize your community. He did not say “protect” your community from bad news. He did not say serve your community at the expense of the truth. The only way to earn the community’s trust is with your integrity.  If the community thinks you are in the bag for the community swells your credibility is finished, kaput.

 

 Mike said know your community. Know its strengths and know its warts. He said love your community. You love your kids and yet you do not let them run roughshod nor do you let them destroy themselves.  But you do let them live.  You do not interfere unless you have to.  You respect them, you love them.

 

Mike’s example of never holding the news was that when Joan Kroc, the McDonald’s hamburger mistress, gave the community 50 million dollars the newspaper revealed that news even when Kroc and the city fathers and mothers objected. Mike used the objections as an opportunity to educate the community.  He told the community. “ We are a newspaper. What we do for the community is we print the news.”

 

We should all live by Mike’s words. We print the news. That often requires community courage, but that’s why God gave YOU the printing press.

 

Mike’s final admonition is so important in these hard times. Do the best with what you’ve got.  Don’t stand around and dream about what you’d do with a hundred more people.  Don’t bellyache about your bad cards.  Be creative and be aggressive with what you’ve got.

 

2. Make money the old-fashioned way—responsibly.

 The industry has to start thinking differently about the business model. As I said in a speech this summer: “The frightening thing is that to this moment many newspaper executives act as if the traditional newspaper model of gathering audience and selling the eyeballs of that audience to advertisers is the long-term salvation of the industry.  That is nothing less than nuts.”

 

Smaller newspapers have longer to survive on that model than big newspapers, but the power of the web to use keywords and charge per targeted click could be devastating. Add to that the concept my friend Tom Mohr calls “intention.” That is when you Google Ireland bed and breakfasts and in response  to your “intention” scores of ads for Irish B and B’s will pop onto your screen.  You’ve got to admit that makes our practice of tossing ads into the air and hoping and praying readers will read them almost a quaint concept. 

 

All those threats and advertising alternatives mean our pricing power is definitely declining. As Phil Meyer said in his fine book, The Vanishing Newspaper,

newspapers once controlled the tollgate and at metro newspapers that’s no longer true.  Some of you may think you still own the tollgate in your town, but I submit those days are about to end for you too. 

 

If you are in the enviable position of still being able to get price increases I think you need to learn an important lesson about responsibility from the big newspapers who have found hard times before you, be modest in your price increase demands.  Develop new businesses and new revenue streams.  Do not hammer your current customers with obscene price increases.

 

Another important consideration in making money responsibly is to commit your newspaper to the advertiser’s success.  Do not sell products you know won’t work for the advertiser.  That sale may help you make this month’s number, but it may drive the customer away from newspaper advertising if he doesn’t get the results he desires.  Put your advertisers in positions that will guarantee the advertiser’s success. Help her come to believe in the power of newspapers so she acts as a strong salesperson for you..

 

One more aspect of making money responsibly: Don’t get greedy.  Keep profits reasonable.  A key reason for the downfall of metro newspapers is the drive for 30 and 33 percent margins.  That leads to unwise cost cuts, absurd pricing strategies and a cruel failure to treat employees as genuine assets.  I call responsible profits, proper treatment of employees and a commitment to the public interest ethical stewardship. We should all be ethical stewards of our properties.

 

3. I think the third key lesson for all newspapers to thrive in the coming years is to focus on adding value.

I will tell you I have a favorite new blogger—ME! I hope you will Google McGuire on Media and become regular readers of that new blog.  I am going to take a risk here that most of you have not been reading that blog and I am going to lift quite freely from my Sept 7 entry in which I discussed this concept of added value.

Tom Friedman’s important book The World is Flat is crucial to any understanding of the business and future of journalism.  He says the key for American business in this new digital world is to figure out how to add value to every part of every process and product.

It should be obvious to all of us that the news has been commoditized 24/7 on television and the internet. News folks have to figure out how to ADD value and CAPTURE value. 

Web reporting is putting renewed emphasis on immediacy and speedy “sense-making.”  In any intelligent conversation with news executives there is usually quick agreement that the days of who, what, where, why and how as the main function of news organizations is gone.  Right?

I challenge you to pull out the daily newspaper of your choice right now and start thumbing through it. Or, pay careful attention to tonight’s local TV news broadcast. I am going to go out on a very solid limb  and tell you that if you thumb through that newspaper page by page and think “Value-add’ as you read each story you are going to be massively disappointed.  After the front page in the two big regional newspapers I read regularly, I see almost no real “value-added’ stories until I get to the Sports section. 

Outside of sports, I page through the A and B sections of the newspaper only to be routinely confronted by mattter-of-fact Associated Press stories that do not go one step beyond what I read on the web in the 6-18 hours prior to publication.

The most basic tenet of the newspaper business since I started writing sports for the Mt. Pleasant Daily Times News in 1967 is to tell people “stuff”they don’t know. Today, our readers inherently know a lot more “stuff’” courtesy of the web and cable television news. That does not get us off the hook.  We still have to tell readers “stuff” they don’t know even if that is a heckuva lot harder than it ever has been. 

Our work has to make readers and viewers “smarter.”  They have to come away from encounters with our products feeling as if they have made exciting news discoveries. ESPN does it on SportsCenter.  Even if you don’t like the opinions expressed on Keith Olbermann’s Countdown you have to admit he adds value to commoditized news.  He makes it fun, interesting and he uncovers tidbits I do not find in my morning newspaper.  That’s adding value.

If newspapers are going to be vital to readers each story printed in the paper needs to go beyond the bare bones of an AP presentation. Every story needs to provide context, every story needs to tell readers where they can find more sources of information and every story needs to explore background and future implications. 

If, as an editor, you can look at your newspaper and say,  “I saw this on the web in the last 15 hours in the same form I see it in my newspaper,” you have failed your readers.  You must edify, you must explain. You must add value. 

 

4. Disruption is afoot and you’d better start innovating.

 

Let’s start with the basics: Online news and advertising is your friend, not your enemy. But online and the web are only the tip, an eensy weensy part of the future disruption we all face from the digital age. If you don’t believe disruption is the appropriate word to describe what we face I urge you to read books like The Search by John Battelle, The Long Tail by Chris Anderson and Friedman’s The World is Flat.  It will become obvious to you that down is up and the control over media you once had is lost forever.  The power is now in the hands of the consumer.

 

Smart new devices and limitless choice have erased our power as arbiters of what people read and see.  If you decide your community should not know about the shenanigans of the mayor, it really doesn’t matter.  Some smart-alec is going to have pictures and complete descriptions of those shenanigans on You Tube or My Space by 2 this afternoon. The consumer is the producer and unless you start playing on a whole different playing field you are going to be an observer—an observer with no credibility.

 

Let me say a few quick things about innovation.

 

Innovation is big, bold and a little nuts. Starting an online website and putting video on it is not innovation.  Kicking the stuffing out of old boundaries, now that’s innovation.

 

Innovation is not safe. Innovation calls for risk. Look at the innovators of the last several years. Google, eBay, Auto Trader del.icio.us, Pay-Pal, Craigslist, Monster and thousand of others. Those innovators did not introduce incremental change, their changes were giant leaps forward.

 

Look at that list again.  Any body missing?  You don’t see a newspaper on it. Newspapers have shown themselves incapable of innovation for a couple of reasons: they are risk averse and want to keep the business they have even if it’s not going to grow or perhaps wither away; When revenues were pouring in, the industry decided to take 30 percent profits rather than invest in research and development. I have said before “ the paltry amount of dollars spent on genuine innovation and risk may turn out to be the greatest scandal when the decline of newspapers is chronicled by historians.” 

 

One last comment about innovation.  It ain’t coming from anybody in this room.  The chances of one of us here at the Scottsdale Chaparral  going out of here an inventing a Google or even a viable innovation for newspapers is the same chance as  all of us flying out of here on brooms. –None.  So where is that innovation going to come from? Young people who, if we are smart, work for us.  We don’t get the digital age and they do. And, that’s why its stupid, yes stupid for you to try to make every decision in your shop and act as if all wisdom resides in your office.  It does not.  If you want to foster true innovation in your organization involve your staff. Show them you trust them and build an environment which allows them to innovate.

 

5. Straighten up those shoulders, smile and get the bear before the bear gets you.

 

Practically every McGuire list and speech ends with a message about attitude and this one is no different.

 

“The newspaper business sucks, I don’t see how newspapers can survive five years. The business model for newspapers has been destroyed. Damn young people don’t appreciate the importance of a newspaper. These employees these days are driving my business right into the ground. I’ve got to find a way out of this business fast.”

 

I’ve got a hundred dollar bill in my pocket that ways at least one person in this room has uttered every one of those statements in the last several months.

 

What good did it do?  What good did it do for the employees who heard you say those things? Was a single problem solved by any one of those statements?

 

Can you name a single military general or a single great sports coach who enjoyed a famous stirring victory by saying, “men, I know we’re going to get our butts kicked to kingdom come today. Go out there and try to survive.”?

 

I don’t believe you have.

 

We do face difficult times. The newspaper business is undergoing rapid and dramatic change, and that means only the most optimistic, the most energized and the most joyful are going to win.

 

And don’t think you can order good morale.  You are the leader. You set the tone.  Your people watch your every move. They see how you carry your shoulders. They see your smiles, your confidence, your despair.  They even know what suit you wear on happy days and the one you wear on sad days, even if you don’t realize there’s a pattern.

 

If you expect to survive the tough times in the newspaper business you’ve got to first decide that you cannot only survive, but you can triumph.

 

Once you’ve decided on triumph, you have to communicate that winning attitude to everyone around you, every single day. You have to show your people the public trust of newspapers is worth saving. You have to show your people you believe in their ability to carve out a viable future for newspapers and all the newspaper’s related products.

 

My friend, Gregory Favre had it right.  “We have to love newspapers back to Life.”

2 Comments

  1. Chris Ison
    Posted September 25, 2007 at 1:49 pm | Permalink

    Not only do editors need to love their newspapers back to life, but I think you’re also saying they need to love their staffs back to life. Nothing helps a newspaper thrive like a hot, breaking news story that gets the community talking. And that requires an energized newsroom. That means editors need to leave the woe-is-us attitude in their little offices, get into the newsroom and talk journalism. As for staffers knowing what suits the editors wear, Tim, I only remember your tie with the cocktail glasses on it. And it was just ugly.

  2. SJL
    Posted September 25, 2007 at 1:56 pm | Permalink

    Excellent post, very insightful. I’ll definitely be subscribing to your RSS feed.
    It is in my humble opinion that news organizations are in a very unique and powerful position to leverage the communication tools available today. With so many possibilities for the utilization and implementation of these new technologies I find it extremely difficult to have a negative outlook on the future of the news industry.
    SJL