McGuire on Media

Speech to American Association of Independent Newspaper Distributors

Speech to American Association of Independent Newspaper Distributors

June 28, 2007

Presented by

Tim J. McGuire

©Tim J. McGuire June, 2007

On March 18, 102 days ago, I wrote a column in the Arizona Republic arguing that the picture for newspapers was bleak, but I contended it was wrong to write the industry off as doomed.

In those 102 days a bleak report card has become cataclysmic. Rumors of one major newspaper losing from 1 million to two million a week are rampant. Indications are that top-line revenues from several big newspaper groups fell in the neighborhood of 10-20 percent in the second quarter. Layoffs are the rule not the exception. At the smart newspapers in this country everything from moving to four or five days of publication, to radically cutting news hole and to bigger layoffs are on the table. No radical idea for rethinking the business gets laughed at these days.

And yet, an editor of a significant newspaper looked me at me a few months ago and said, “I think if we can just get through this downturn, things will get better later in the year.”

No, no, no, no, no, no! This is not a cyclical thing that is going to turn around if only we mind our P’s and Q’s and pray really hard.

It is time we understand that the digital revolution so many of us pooh-poohed, denied three times, and tried to ignore, has burst forth upon us and kicked our butts. The world that Tom Friedman describes as Flat because of connectivity, networking, collaboration and search, has changed the way we interact, do business and connect with strangers.

When Google can connect advertisers to an audience only interested in their products and when Craigslist, Monster and Joe‘s Recruiting service can connect jobseekers with jobs  and car buyers with cars far more efficiently than our Sunday newspapers,  we must realize that something profound has taken place in the business we all love and cherish.

So, did I travel cross country to tell you that your goose is cooked and we might as well put dinner on? I did not.

I do think it is crucial that we stop kidding ourselves. We must stop acting as if we are going to wake up tomorrow morning and the newspaper business will have reverted to the go-go 80’s and 90’s. It ain’t going to happen.

The only way we are going to wake up to a better tomorrow is if we create that tomorrow. I ‘d like to discuss 7 realities the industry faces and discuss ways we need to react to those realities. I am not a distribution expert. I do know a few things about newspapers and I am the proud owner of a lot of strong opinions. I will speak from that perspective.

Reality number 1:  The Push-pull reality defines consumers and news providers. 

Media companies used to “push” information to consumers with morning newspaper delivery or the 6 p.m. news. We set the agenda. We decided what news was and what wasn’t news.  When Walter Cronkite sat in front of the American people his choices about news mattered deeply to Americans, but at the same time their choices were frighteningly limited.

In the same way the newspapers you deliver have always set the agenda. Literally it wasn’t news until it was in the Star Tribune in Minneapolis. 

Today’s reality is remarkably different. The Internet and 24-hour television news offer consumers the capability to “pull” news whenever they want it so the consumption of news is increasingly fragmenting. Consumers are now in control. Consumers “pull” from blogs and a dizzying array of tightly focused niche web sites Consumers get products, advertising, the ability to buy and sell products, and news content whenever they want it and in what ever form.

That is a wow! But you might ask what does it have to do with me and us?  Only everything.

Choice is the name of the new game. It is the new reality that forces you as distributors to realize that in a world where consumers can access any kind of information or ad message whenever they want it, newspaper companies who offer limited choice are facing an uphill struggle.

All of our future thinking must recognize that choice gives consumers power and control. That control has replaced the one way transmission of information that helped us develop our dominant market positions. We are not the alpha dog anymore—the consumer is.  That reality must shape your creative thinking about the future. 

Reality number 2: News online is here to stay and no, that does not mean print is dead. 

We should not need a lot of fancy empirical data to tell us that more and more consumers are getting their news online. Young people find gathering information online second nature and more and more “old dudes” find their news online these days. According to the Committee for Concerned Journalists in their 2007  State of The News media report : ‘Over all, roughly 7 in 10 Americans are now online, but there is conflicting evidence about whether that population is still growing. The online audience for news in particular has apparently flattened out, and that includes those who consume news online regularly.” However, the good news according to the report is that newspaper sites do appear to be consuming more of people’s time.

It is clear that online news and information is indeed the future, but it is naïve to think in terms of just ONE future.  Certainly gathering news online when you want it and where you want it is the future, but if you read all these newspaper gloom and doom blogs and obituaries you’d believe that sometime next Thursday everybody will migrate from print to online. That is silly and yet too many of us seem to find a perverse glee in these ridiculous predictions.

A lot of newspaper folks are telling me and others that their online audiences are increasing and that is good news.  And while you all know print circulation is declining it is a decline that does not portend immediate disaster.

Print remains an essential part of the lifestyle for many people. While newspaper readership is falling it is not declining as fast as circulation. According to the Newspaper Association of America, the average weekday readership in 2006 was 124 million, or about 57% of the adult population.7 According to the association’s study of the top 50 markets, that represents a 1.7-percentage-point drop from the previous year, and 5.2 percentage points from 2000.8

That is not reason to break out the champagne, but it is a strong indicator that the end is not near.  According to the CCJ’s report  “A similarly positive spin is that while approximately 50% of adults read a newspaper on a given day, roughly 76%, according to the Newspaper Association, read at least one issue in the course of a week.9

That is not a number that tells us that newspapers are dodo birds and online is the universal answer.  This second reality that online is here to stay and newspapers are not facing imminent death is a crucial planning point for newspaper executives.  We must plan a both/and type of future. Too many newspaper executives are acting as if Armageddon has hit and the newspaper be damned.

That is wrong.

Smart newspaper executives need to create a future which makes both online and print essential building blocks of a completely integrated information strategy.  The integration is what needs to be different. Too many companies today produce a newspaper and are rapidly trying to build their online presence.  The real winners are going to leverage website to newspaper and vice versa.

3. Reality number 3—It’s the advertising business model, stupid.  

We’ve established circulation and readership are both delining. But that’s not the story.  That’s not why The Week magazine published a full page of angst titled, “The Decline of the American Newspaper.”  It is not why The Economist avoided subtlety completely last year when its cover impolitely inquired, “Who killed the newspaper?”

The newspaper calamity in the land is not about circulation or readership.

The advertising model for newspapers that allowed us to party through the 90’s has been blown to smithereens. Just about the time the department store boom that fueled newspapers in the 70s and 80’s went awry in the early 90’s, classified started roaring in most metro markets. During the 90’s, recruitment advertising especially went through the roof.  In the last five years it has gone through the floor. Some metropolitan newspapers have lost from $75-100 million in recruitment advertising alone.

The newspaper company I worked for was warned in 1997 that classified was  going to meet the grim reaper in the form of online advertising, but many allegedly sharp newspaper moguls ignored the warning and now they act as if  the assault on their bottom lines is an incredible shock.

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.

Monster, com, Google ad sense, Craigslist and a host of other targeted, inspired ways of reaching advertisers are not going away. The big box stores are not going to suddenly embrace newspapers. Advertisers are going to grow more sophisticated in finding their target customers, not less so.  The mass power of the newspaper is not dead, but it is not going to grow.

And online is not going to solve the business model problem, One newspaper executive recently told me that an eyeball online is worth about a quarter of what it is with the newspaper.  That is, the ability to monetize online advertising significantly lags behind the newspaper.

Some newspaper companies are trying to reinvent how they sell advertising, but too many are too wedded to the concept of selling mass eyeballs to customers rather than realizing that we must deliver ready-to-buy customers to advertisers, not eyeballs. And, even worse most newspapers are increasing their commitment to selling mass advertising while decreasing their commitment to content which is most likely the key to solving the business model problem. 

4. Fourth reality– Audience matters, but audiences matter more.My former boss, Gary Pruitt the CEO of McClatchy Newspapers said something fascinating recently.  He argued that the daily newspaper in each local market is less subject to audience fragmentation than any other medium it’s competing against, because every other outlet faces more competition within their medium. He said, “more television channels, more radio stations, more Internet, more of everything else, but there is only one daily newspaper in each market for the most part.”

Then Pruitt contended newspapers are holding on to our audience better than our competitors.  He said, “Our lead over the number-two outlet in terms of share of audience is actually growing, even though our audience in print is declining. And then when you add to that the unduplicated reach of our online sites, our audience is actually growing. While ad revenue may be the best indicator of your current performance, I think the best indicator of your future performance is your audience. More people want what we produce today than wanted it yesterday. That’s not the profile of a dying industry.”

Now we have to appreciate that Pruitt is a man whose stock was at $74 dollars a share two years ago and now it’s worth $25 or so a share. So he has a lot of interest in convincing everybody newspapers are a good business.  Nonetheless, he makes an important argument about the strength of newspaper companies in their local markets.  As smart as Pruitt is though, and he is wicked smart, I think his language needs editing.

Talking in terms of THE audience misses the dramatic change that has taken place.  We no longer speak to AN audience.  We speak to audiences and the sooner newspapers figure that out the better off we will be.  The push-pull reality of the web has allowed special interest communities to flourish. The future of newspapers depends on our ability to appeal to psychographic communities of interest. We cannot be all things to all people, but we have to be everything to some people.

The newspapers like the Arizona Republic and others who are developing specialty magazines are on the right track. Both online and in print newspapers must develop diverse audiences and then deliver advertising messages and products to those specific audiences.  Only a fool would advise totally abandoning the mass and Mrs. McGuire raised no fools.  But multiple products and multiple audiences are the future.

In this discussion of audiences local is important, but I am convinced that those companies who are worshiping at the altar of hyperlocal are worshipping false gods.  There is very little in our culture that indicates people are moving into tighter knit geographical units.  Instead more people are congregating around local special interests from softball to church to knitting.  Creating a plethora of audiences around special interests is crucial to the future of newspapers.

This audience discussion has everything to do with distribution. Clearly you are going to be asked to deliver more than one main sheet everyday. I think the smart companies are going to ask you to deliver a main sheet, and lots of auxiliary products aimed at specialized audiences. That’s going to require you to be audience segregators as well as audience aggregators.  You are going to have to be part of the newspaper company’s efforts to determine who wants what products and who will be willing to pay what for the right products. 

5. The fifth reality is that the key to any new business model for American newspapers is content and we’d better stop killing our golden goose.   

Everybody in the newspaper industry needs to take a deep breath and examine the realities we’ve discussed before.  Mass advertising is under assault.  The concept of newspapers as the classified marketplace for the world is bankrupt—the web wins that round. The business model of delivering masses of eyeballs to advertisers and have advertisers wish and hope that customers will respond with no measurable proof of that response is a quaint idea, but not operative in today’s highly measurable web universe.

So what element of Newspapering are we left with? Content, of course.  Content is the way we will gather audience and audiences.  Content is our value-add.  Content distinguishes newspapers from scores of other information aggregators and disseminators.

It is newspaper content that is the backbone of news on the web. It fascinates me that people so loosely and enthusiastically discuss the demise of newspapers and the rise of the web without considering that newspaper content fuels the web. Unless newspaper companies can monetize their content resource newspapers companies will dissolve and so will information on the web.

Most at risk is high value content that lubricates the civic discourse. Someone is always going to find a way to profit from Paris Hilton and Britney Spears news.  It is the Walter Reed hospital stories and the exposes of what our government does behind closed doors that is at risk.  As I like to say, great journalism is in desperate search of a business model.

The actions of newspaper executives in light of these realities are stunning, frightening and disgusting all in one package.  Rather than protecting the one asset we have left–quality content— publishers are cutting their news gathering staffs by 15 to 40 per cent and slashing news hole in dramatic ways.

I am not going to stand here and tell you that all newsroom resources have been maximized, but I will tell you it is lunacy to cut newsgathering resources rather than re-imagine and reallocate those resources to produce more and better content to hold dedicated readers and to build dynamic new audiences. And, if as I believe, content can be our one valuable asset upon which we build viable new business models, it is ridiculous to cripple our ability to produce that asset.

This dedicated reader issue is a big one.  Back in the dark ages, circa 1995 we knew about 27 percent of our readers were so dedicated to reading the newspaper they would spend well more than 30 minutes with the product. I have no idea what that numbers look like now, but I do know the desperate attempts by publishers to chase marginal readers have deeply offended those dedicated readers. 

In every market I know people express disgust with the lightweight nature of the daily newspaper they use to rely on and they inquire about the availability of the New York Times and other serious sources of information. We have messed around so much that our most cherished asset—committed readers are suddenly at dire risk.

And, we keep trying to make it worse. The other day I passed a newspaper rack with a promotional rack card that read only “Fun games and puzzles.” That may well be a fine idea for a niche product,, but I contend it is a dumb way to market a product that is still eminently valuable as a source of important valuable NEWS. 

The best content people in the next few years will figure out how to more effectively marry online and print.  As early as 2000 I talked publicly about a concept I dubbed “the Guide and Direct Model.” As I said in a 2001 speech “Out there in the wild blue yonder there is an incredible amount of information about subjects such as health, home, fashion and food. Why shouldn’t newspapers become indispensable by being the ultimate source of where you find stuff?’

The same applies to hard news.  Readers’ biggest problem these days is not a lack of information, but a lack of tools to manage that information.  Increasingly Search and a host of new sites are helping online audiences do that, but newspapers still have an opportunity to connect the online and print worlds with such a guide and direct approach. 

6. The sixth reality is that we must worship at the altar of creativity, innovation and risk and great leadership is required to make that happen. 

Let’s face it, newspapers have not been the bastion of innovation. When revenues were pouring in, the industry decided to take 30 percent profits rather than invest in research and development.  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. 

Second-guessing aside, it has been Google, eBay, Auto Trader del.icio.us, Pay-Pal, Craislist, Monster and thousand of others who have transformed the media world with innovation, not newspapers.  And in the area of distribution, Fed Ex, UPS and even Wal-Mart have revolutionized delivery systems and not newspaper companies. That has to change.

The “fast follower” philosophy of newspaper companies is not going to cut it in today’s breath-taking fast-paced innovative environment. Newspaper companies must get comfortable with disruption and create genuine differentiation and new capabilities.

That kind of environment is not going to come from backbiting and competition. Editors don’t have all the answers and neither do circulators. Genuine collaboration and freewheeling “what-if” thinking without walls or artificial obstacles must start characterizing problem-solving companies.

And, most importantly, publishers and CEOs don’t have all the answers either, but I must admit I worry that is going to come as a profound shock to some of them

The most disgusting thing I see in newspaper leadership these days is the failure to listen to smart department heads and knowledgeable employees.  Perhaps, it is the state of siege that has gripped the industry, but newspaper leaders seem to be bigger bullies than ever before.  Great innovation does not come from the offices of top executives. It comes from an inspired workforce led by leaders willing to listen.

 Publishers CEOs and top editors have to stop dictating and start listening.

Leaders have to stop scaring their workforces and start inspiring. Right now executive behavior is far more likely to prompt people to fold up their tents than it is to create a innovation. If we are going to create new business models, effective technologies that work for consumers and genuinely transform the media landscape, leaders have to lose the idea that all the solutions are in their briefcases and nurture, excite and listen. 

7. The seventh and final reality is going to make more than a few of you squirm. An industry in crises takes a huge psychic human toll on long-time practitioners and you need to either leave or take personal responsibility for your own success.  

This is not an insignificant issue nor is it empty cheerleading. I am no less than stunned at the sense of beleagueredness I am finding in the newspaper business. Most people with any leadership roles are desperately looking for ways out.  And, the problematic part of that is most are taking on the role of victim. Everybody seems to want to blame computers, stupid publishers, their staffs, the damned economy or their small bedroom when they were little. 

I have told this story for many years. I have a delightful Down Syndrome son named Jason. He’s 28 now,  but he’s often 28 and 4 at the same time. About six years ago he lost control of the door on my new car and it gently bumped into the car next to us. I said, “Jason, you need to be more careful. You can’t bump my car door into the other cars.” Jason said, “The wind caught it.” I said, “Jason, the wind didn’t catch that door.” He said, “Oh yeah, it was my arm. Bad arm.” I said, “Jason, it was not the wind and it wasn’t your arm. It was you. You bumped that door into the other car. You’re a big boy now and you have to take personal responsibility. Adults have to take responsibility for their actions.” Jason looked at me straight on and said, “Did you read that in a book?

I really didn’t read it in a book. I know it intuitively. Good people and good leaders will take personal responsibility. You have to believe you are the person who can make exciting things happen. You have to be the catalyst.

The only way to thrive in this radically different world is to take personal responsibility for your success and your company’s success. You need to be confident in your own gifts at the same time you appreciate the gifts of others.  You need to straighten up those shoulders and smile—show the world you are one of the positive ones.  Show that you know how to thrive in a chaotic world. You also need to be one of those people biased toward action.  Don’t wait for the problem or solution to come to you.  Meet it head on.

Make sure you invest in other people.  Convince every person you encounter they are the most important person you are dealing with. Make them feel better for dealing with you.  And most importantly stand for something and be straight about it.  Do not deceive.

If you can’t be a source of positive energy in your media workplace get out. There is no shame in ceding the future to the young and engaged.  But, if you stay you must commit to being part of the solution and not a part of the problem.

I began this presentation by citing a column I wrote March 18 about the state of the newspapers business.  This is the way I concluded that column “Newspaper journalism fails too frequently in its ethical quest, but an America without solid newspapers protecting and leading civil discourse is an America that would make the framers of our Constitution despair….If you are a discerning reader who recognizes the role journalism plays in fortifying our democracy, the raging discussion about the future of newspapers matters to you.”

Newspapers are a basic bulwark of our society. Our ability to understand, accept and conquer the tough realities facing our business could well mean the difference between a well-informed, vigorous marketplace of ideas and a world in which Britney and Paris win.