The Journal Register Company – the Company I took over in February of this year – could be the poster child for what ails the US newspaper industry.
The company counts its products in the hundreds.
Its employees in the thousands.
Its audience in the millions.
Its revenue in the hundreds of millions.
And, it is now profitable. With better margins than an average Dow Jones listed company.
It has titles pre-dating the American Revolution and can stretch its lineage back to at least one predecessor title co-founded by Benjamin Franklin.
Another title was around to publish George Washington’s obit.
It even has one press – not in use I hasten to point out – that a local historian is researching as a possible Franklin press – again, that Ben Franklin.
And in its core mission is enshrined in our nation’s Constitution.
And none of the above will save it or other companies like it – unless it and our industry profoundly change how we do business.
At JRC we have some thoughts on how we can do that. How we can channel the necessary energy to change and lead the way to a new sustainable business model.
Let me just say upfront, that in any presentation the presenter always makes it sound like everything went smoothly and everything runs like a Swiss watch. That wasn’t and isn’t the case here.
The examples I will speak about are not ones without flaws. All of this is a work in progress.
This is also not a story of creating a better video player, news widget or Killer App.
Others have more and do better but it is a story of how you can change newspaper companies to survive the inevitable shrinking of print revenue dollars and position them to grow as news companies.
To date, ours is a story of blocking and tackling to buy the time and resources to make the more profound changes still needed.
My presentation to you today is really in three parts:
Why we have to change.
How we have changed.
And, perhaps of more interest to some, the results we have had to date.
Okay. Let’s start with the why.
If you haven’t seen this quote already or read Clay Shirky’s essay, then, brother, let me tell you, you are not paying enough attention.
Its key message is clear:
You don’t transform from broken.
You don’t tinker or tweak
You start again – anew. And as early evidence has shown at Journal Register Company you can build a new and better house from the foundations of the old. And quite frankly how, if we can make the needed changes, we will have a sustainable competitive advantage against most start-up competitors.
What is painfully obvious to the outside world apparently is blind to many on the inside of our industry.
I don’t know why but the number of editors, publishers, ad directors and circ directors who don’t get this is still very high.
They act as if the last two decades are a phase. Well, that’s some phase.
Newspaper advertising is now at 1985 levels –before inflation adjustment. For many of you in this room that is before you even started in newspapers.
In that 25-year period the average growth was 2.7% per year.
Take out the high-low and it is still low single digit growth.
And those were the good old days.
From our industry’s advertising peak in 2005 until now it is half of what it was.
And at the avg growth rate of 2.7% it will take about another quarter of a century to get back to where it was – in 1985. But that isn’t going to happen.
Because not only is newspaper advertising shrinking,
So is mainstream advertising shrinking as a total percentage of the marketing pie.
From interactive to what Wall Street ridiculously still calls alternative media – the growth will no longer be in traditional media in the longer term.
Yes, there will a cyclical return (the industry is already experiencing it)
But not a long-term sustained return to where we or traditional media were just a few years ago.
And the results of this dramatic downturn are now well known. Some of the largest and most storied titles in the United States are either in bankruptcy, heading into it or just coming out of it.
But what has been the real game changer is NOW that More folks get their news from the Internet than Newspapers.
And that means there is now an even bigger Audience for our core product – news – than ever before. And in the crowded marketplace that is the Web it is the deep trust the Audience has for Print that is leading us and them online.
This is particularly true in local news. Our total online audience for all our properties is now bigger than our print audience.
In short, we are already a Digital company – with small sales in the area of growth and a burdensome cost structure on the declining business – Print.
But there is hope.
And it is just where you might expect it – in our core business of news and on the backs of our reputation – The brands themselves.
The Web is a crowded place for news. Compelling journalism is key to standing out and it is the power of our brands – our reputation – that can spotlight for our audience where they should look for journalism they can trust.
Vint Cerf – called by some the Father of the Internet – and Google’s Chief Evangelist is very direct about this:
“People’s trust in journalism has always been about branding.
It is the new preference for how News is now created and consumed – The New News Ecology – where we find the core of our new business model and a new role for Print. And our new focus on where we must allocate resources.
News now breaks Digitally both in its’ origin and creation by the Audience using Social Media and spreads virally. To be in the News business now means you must run your business as Digital First. And that means Print Last.
Print Last because that is how this new world works.
Print is a SLOW medium and digital is FAST.
Atoms will never beat bits.
You must change the focus and priority of what you do –
If you want to survive
And you have to allocate the resources – with the right people in charge – to get this done.
And decide what you will no longer do – our core competencies are content and sales – we should and are getting others to do everything else.
Each platform has its own advantages.
Pushing print onto digital only makes for a lousy experience.
Print makes for lousy video, etc
Each platform has an audience
Even without research you could successfully bet that the brides who would like the content from our Connecticut Bride magazine would rather get that info digitally while the mothers might favor the actual magazine
And each platform has a certain speed – Fast or Slow
And always, it comes down to the journalism.
Lousy journalism on multiple platforms is just lousy journalism in multiple ways.
Trust me when I say, I do realize that many of you listening to me now are wondering what I am going on about:
- Of course Print is dying and Digital is growing
- Of course there is a new News Ecology
But, of course, many in our industry still do not get it. If they did you would be seeing wholesale changes in newspaper business models. A complete overhaul of their business models but you are not.
And the reasons you are not 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.
And then there is the ever-defeatist Dollars to Dimes argument.
Look, if Adobe and other companies can figure out how to make a living when the market has driven them to give away for free their core products, then we can figure out how to make a living by piling the Dimes into Dollars.
If Print dollars are becoming Digital Dimes, then we better start chasing the Dimes. And we better do it cost effectively.
So, what must we do?
Be Digital First and Print Last.
Stop focusing on the Print. It is in any newspaper’s DNA. It is not like you are going to forget to put out the newspaper.
Focus on the future and the future is not Print.
Leverage the power of the Print audience to build the new platforms of choice.
And create a new business model that allocates resources solely on the new News Ecology.
You have to slay the production god and the legacy costs that go with that old model.
Two-thirds of a newspaper’s costs are infrastructure – stuff you don’t want to do – and NOT in what you do want to do such as create compelling content and effective sales.
Harness both the Cloud and the Crowd to drive down those costs.
Newspaper companies in the US have seen valuation multiples drop from 11x EBITDA to 4x – presuming you could find someone to buy one. Firms like Schibsted who have made this transformation have double digit valuation multiples. And that means they have the financial firepower to invest in the future.
You must create an investment worthy business plan that changes current valuation metrics. A plan that:
- Stabilizes and grows Print EBITDA
- Targets 25% of EBITDA from Digital within 3 to 4 years
- And targets 50% of EBITDA from Digital within 5 years
At Journal Register Company 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
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.
There are now companies who do most of this much better than any newspaper company does no matter what their head of pre-press or production says.
Because those ARE the core competencies of the outsource companies.
Moving forward our formula looks like this.
And that formula only works if we allocate resources as per the New News Ecology and we harness Crowd and Cloud to assist in information creation and drive down Legacy Media costs.
To date, and certainly this is true of Journal Register Company in the past, the industry has only focused on cost reductions.
But it is a focus that says do more of the same with less which results in the same done worse.
And it is prolonging the death of a broken business model rather than adapting to the realities of the present.
Our Digital First strategy is centered on the Cost Effective Creation of Content and Sales and Not the Legacy Modes of Production.
We can’t afford to allocate the new resources without reducing the old.
Because adding a new person or expense for every function is just putting more water into a sinking boat.
You have to multi-task.
You have to train your people to do so.
And if they can’t learn you have to let them go and get those who can.
There is going to be a lot of blood on the floor when this process is completed.
But if done right you will have a business model that:
- Increases the quality and quantity of original content on the platforms of the consumers’ choice
- Expands Audience
- Expands Revenue Opportunities
- Lowers Costs
- And Increases Profits
Investment and Culture change are by far our biggest challenges in the near term.
You must supply the tools.
We are overhauling the Company’s I.T. systems.
We are increasing training.
We are supplying the tools.
We bought every reporter – and now some ad salespeople as well –a Flip video cam.
They paid for themselves in about a month and we have gone from about a 100,000 video streams a month to about 2 million.
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.
Find new voices and let them push you around.
We have established an Advisory Board to do just that.
Jarvis, Rosen, Bell and Morgan push us hard on our thinking and we are the better for it.
Our Community Media Labs in each of our 18 dailies have helped turn our Audience, who became our competitors, into our colleagues. And the communities we serve are the better for that.
If you are going to channel change – and particularly change as profoundly needed in our industry – you are going to have to reward those who taking the journey with you – The Employees.
At JRC we have instituted a Profit Sharing Plan.
If the Company Wins, the Employees Win. We all Win.
If you are going to channel change you need to tell people where you are going and why.
You can’t over communicate and nobody does it well.
As CEO, I blog to my employees and the public. I ask for their help and they oblige.
I also regularly email my 3,106 employees and they me.
And the most common complaint is – lack of communication.
You just have to keep working at it knowing that it, like the website or the newspaper, is a job that is never done.
And in a world where the Competition and the Audience know so much more than we do – we have to Experiment.
While we encourage all of our employees to do that, we actually pay some of them to do just that – experiment.
We call it our ideaLab.
The ideaLab is a select employee group – we asked them to apply online via my blog (and they did in the hundreds) – who are paid to experiment.
We supply them the tools (Droids, Smartphones, iPhones, iPads, Netbooks, etc); the time (25% off with pay) plus some extra pay as an incentive.
There are no rules.
They have come up with Customer Relationship Management Tools; Ad Tracking and Publishing systems all using free web-based tools.
Others have developed training programs for fellow employees to help them navigate this transformation.
Others are concentrating on journalism itself.
One group in PA, are trying to meet a challenge set by Jay Rosen on his blog PressThink. Jay challenged news organizations to consider the “100% solution”. That means you cover everything that happens on a particular subject in a particular area.
Our guys are trying to do that with high school sports.
Using the crowd, Twitter, Smartphones plus Google Docs to manage it all, they are attempting to create real-time game coverage of high school sports via Twitter. That’s every game in real time.
You can’t do this alone.
The new eco system for news is too big
And no one has the resources anymore to cover it
You have to partner
If you don’t –
In your communities you will be out of the loop and out of business
Jeff Jarvis – the author of What Would Google Do, and the Buzzmachine.com blog
- and now a member of Journal Register Company’s Advisory Board
… Coined the term the New Link Economy
And has said it best:
“Do what you do best and link to rest.
At JRC we have established ever greater relationships with bloggers through our community media labs. And while the focus is content we are also working on expanding our sales relationships by increasing audience and revenue opportunities. And partnering with Growthspur to monetize those opportunities for us and the bloggers.
No partnership works if it is one-sided.
If you want to harness the power of bloggers then you have to help them make a living.
This is citizen Skip Harrison of Trenton New Jersey and who has an all-abiding interest in the New Jersey educational system
He is part of the Community Media Lab at our paper The Trentonian
We are training interested citizens to be journalists
None of this is a substitute for journalism
It is only part of that eco-system that is out there and you have to link to it if you want to be part of the conversation in your communities.
Our commitment to culture change, harnessing both Cloud and Crowd and to experimenting with new ways of doing things is best represented by the
The Journal Register Company’s Ben Franklin Project
On July 4th We Declared Our Independence
We will no longer be dependent upon out-of-date thinking
And we will no longer be dependent on costly systems that are outdated before they are even successfully installed.
On July 4th
Across all of our 18 dailies, we:
- Produced: Web & Print Products
Using Only Free Web-Based Tools
We are changing our culture at JRC.
With lousy I.T, and tools this project is happening.
We have built sales support systems using an iPhone and free Google tools.
We have successfully printed pages on a press using only free web tools.
The next time some rep comes to your shop brandishing a $20M system – tell the price just went down. Way down.
Our Capital Expenditures have been reduced by half. Half.
But more importantly –
We have harnessed the power of our employees
And are starting to create a culture where they are empowered to experiment
We share all of the information and tools publicly.
Go the Ben Franklin site and you will even find a link to our Ben Franklin In A Box kit.
Click on it -
And try your own experiment.
And share the results.
The new tools are also helping improve our journalism.
In Torrington, CT at our daily, the Register Citizen, our young publisher there, Matt DeRienzo deputized his entire community to Fact Check all of his products online and in print.
By putting a Fact Check box online he issued an invitation to every reader, source and community member to hold them accountable and engage in correcting, improving or expanding the story.
Matt’s innovative approach to our Digital First model has created an online audience 6.5x greater than his print audience and he has taken what was a money-losing operation into a profitable one. He has outsourced all non-core activities and is concentrating on creating content and driving sales.
Matt is also doing what all good business people do – he has his division acting the way it wants to be.
It wants to be Digital First. And it is.
It wants to harness the Crowd. And it is.
It wants to deepen the connection to the Community and it is about to.
This morning I am pleased to announce to you that later this month the Register Citizen will move out of its 110-year-old fortress and launch a bold new experiment in including the community.
The Register Citizen’s new offices will be without walls and invite the community in.
It will feature a newsroom café with free public wifi, a community media lab, a community journalism school and the Register Citizen will open up its archives of 120 years of local history to the community.
Matt and his team are literally bringing the Outside In.
So, how are we doing after 10 months of this new strategy?
Journalism is also a business and P&L’s are our report cards. If we want to good, we first have to do well.
As of Q3, year to date, the Journal Register Company is handily outpacing the industry as compared to figures provided by the Newspaper Association of America.
JRC’s ad performance has been 3 times better than the industry.
Its’ Classified ad performance is 6 times better than the industry. Auto and Employment ads are ahead of last year.
Its’ Retail ad performance is 2 times better than the industry.
And more than 1/3rd of all properties are ahead of last year.
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.
With each passing day, that revenue is also less tied to the Print buys. More than 60% of digital revenue this month is NOT tied to Print Sales.
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.
We are chasing the dimes. Cost effectively.
The Company’s expenses are down and its profits are up.
Our Company which was bankrupt in 2009 is projected to have a profit margin of 15% this year – more in the divisions – and projecting a higher margin and more profits next year.
Digital Revenue and our Digital First strategy are the key reasons for the improvements.
Perhaps a better marker of our success – certainly for the long-term health of the company – is that we now have a revitalized company whose employees are focused on the future.
Now the real challenge is upon us.
Newspapers and other Legacy Media companies are figuring out new and sustainable business models. They are becoming more nimble and they are harnessing their current economic might to fund their future using those new business plans.
Not all will make it but many, if not most, will.
The real challenge now, if you care about journalism, is to deeply understand the new mediums as well as we understand the old.
Just about everything we are doing at JRC – and just about what every newspaper or legacy media company is doing – is focused on getting ON the Web.
Very little is being done to position legacy media companies to be OF the Web.
We are still limited, on the newspaper side, of thinking of the Web as a pipe and confusing it with the Internet.
Clearly, this is so much more than a distribution platform.
We are still learning how to deal with a medium that is more than uni-directional and thrives on collaboration more than it does on competition.
I for one look forward to the learning.
I am proud to say that the Journal Register Company is now a company that is trying to learn. Trying hard and getting some things right.
This is a change powered by its employees
Again, no Killer Apps or best of breed anything.
Just a disciplined approach.
It isn’t without flaws and it isn’t unaffected by the economy but it is a better built foundation from which to grow.