Browsing Tag


Outsourcing’s next wave: media

Uncategorized By July 21, 2008 Tags: , No Comments

Ever heard of companies like Mindworks Global Media, Express KCS, or Affinity Express? Well, in due course, millions of English speaking newspapers will do. Now, this concerns “only” readers of newspapers such as the San Jose Mercury News, The Miami Herald, or the Orange Country Register, to name just a few. In these newspapers, significant editorial jobs, tasks that once belonged to US newsrooms are now outsourced to a cluster of companies in India.

This is the next effect of globalization: off-shored editorial jobs. Highly specialized sweatshops, hundreds of workers on night shifts — Indian time zone — line up in the outskirts of Delhi or Mumbai. Journalists are no longer only reporting or analyzing job migration to cheaper Asia, they are now about to experience it. Take the Orange County Register for instance. Typical big regional American newspaper: strong power in its own terrotory (the greater South of Los Angeles), several Pulitzer Prizes, and recently about a hundred layoffs in its newsroom. Last month, it became the latest to offshore not only secondary jobs such as laying out ads, but also core competencies such as copyediting. It relies on Mindworks Global Media, a two-year-old company headquartered in Noida, 15 miles from New Delhi where ninety qualified Indians are performing the task (see story in Business Week ). The OC Register features the most advanced example of outsourcing jobs in the print media. Other newspapers such as the San Jose Mercury News (Silicon Valley’s daily), or the Oakland Tribune are testing the waters: they assign advertising layouts to Express KCS a two hundred people startup based in Gurgaon, India, also close to New Delhi. Express KSC provides a wide range of print related services, ranging from pre-press to magazine production or ad design work (story in the Columbia Journalism Review )

Three factors accelerate the trend. The first one is the newspaper sector’s global crisis. English speaking ones are motivated to outsource to India (or Thailand which is eyeing the pie) as much work as they reasonably can: most of the of day-to-day layout jobs will soon be gone, as well as a greater number of sub-editing, copy-proofing positions. When the cost ratio is 2:1 or even 3:1 as it is between US (or UK) and India, the incentive is impossible to resist.

Increasing skills in India and other Asian countries is the second factor. This is the payoff of global knowledge and education. The level of local universities is rising fast, so does cooperation with Western universities. And many formers students from American universities are returning to their homeland, they become clever entrepreneurs and eventually suction up jobs from abroad. Judging by the number of editorial jobs posted on MonsterIndia, this is a heavy trend.

The third factor is the cost of telecommunication that is now asymptotically driving to zero. [Don’t tell YouTube’s parent, Google…] Speaking with or sending a page layout to a sub-editor costs the same, whether the individual is on another floor in the building or in Mumbai.

This explains the sequence of events we witnessed in recent years. Intellectual (non-engineering) off-shoring has evolved from human-based data-mining, to number-crunching, to basic-design, and now to news content. Reuters (now Thomson-Reuters) was the first to jump in 2004 when its financial service opened an office in Bangalore with 340 people. They where writing about quarterly results of Western companies and compiling analyst research. Since then, this facility has grown to approximately 1,600 jobs, with 100 journalists working on U.S. stories.

Non-English papers will be shielded from this transfer. In theory this will save jobs in Germany, France, Spain or Scandinavia. But in more realistic terms, events might take a different course: unloading selected non-core jobs will help US and UK newspapers to respond more swiftly to the market’s downsizing and, we hope, to do better than just survive. —FF


The J-curve of the global print press

Uncategorized By July 7, 2008 Tags: 2 Comments

The J-curve is an economics metaphor, a way of saying things will get worse before getting better. That’s the prospect for the global print media sector.

For the American press, advertising revenue keeps dropping at a steady yearly rate of 12% to 15%. No industry can withstand a sustained double-digit decrease of its core business. It is not erosion, it is a collapse. And since advertising represents 70% to 90% of the cash-flow for US dailies, the sense of urgency is morphing into panic. Of course, some components of this decline, such as the credit crisis shock wave, are specific to the American market. But we can consider the American market as an advanced indicator for the industry. With this in mind, watching the reactions of two opposite cultures, US and France, could be enlightening.

The US industry was slow to react at first. But, now, the pace is accelerating. For the first six months of 2008, 4494 journalist positions have been lost in the United States. The latest busload was announced last week at the Los Angeles Times where 250 staff members, including 150 journalists will be soon gone (and the number of published pages will drop by 15%). No doubt the shrinkage at the LA Times will spread elsewhere.

The press is now in “survival mode” as an analysis puts it. Big newsrooms like the New York Times (staff of 1400) will soon be history. The market simply can no longer sustain such media battleships. That’s sad for the great trade mystique, but there no time for hand-wringing. We must instead tame and ride the shift, and save what can be saved. The US will be much faster at the restructuring game than Europe. Downsizing will be more decisive and quicker. In less than a year, we already went from a hiring freeze, to buyouts of contracts, to mass layoffs. That’s sad, brutal, unpleasant, but it will clear the way for the major shift ahead. And most American companies — as long as the financial market do not breath too much down their necks — will be left with sufficient cash to invest in new, diversified, more agile kind of media (and yes, for bulk of it, much shallower…).

In a country such as France the course of events might be different. Let’s turn, for an example, to a recent report on the evolution of the French print press. Jean-Marie Charon, a well-respected French media scholar, who also happened to be fiercely independent from the ever-present lobbies of the trade, led the working group. (Disclosure: I was a member of the group, it gathered here and there for nine months or so ; I kept quiet until we found out the report was widely circulated).

To make it short, the report’s conclusions rely on two scenarios: one soft, saying the press will somehow mutate, co-habit with on-line developments, but the basic structure will remain with some refocusing. The other scenario describes a major shift toward the digital media, with some casualites. New breeds of journalists with digital skills should emerge; they will contribute to the reinvention of journalistic “genres” suited to the Internet era. By force, today’s players will adapt or face extinction, as agile pure players will wait in ambush, ready to take over the slots left undefended. Drafted months ago, the reports conclusions appear to be strengthened by ongoing industry events.

Now, guess what is happening to this report? All the lobbies you can think of have obstructed its release. For a start, publishers were outraged. Some old trade fogies contended it was out of question to publish a scenario featuring such an industry upheaval. Bad timing, they said, as the press gathered its rags and prepared to beg the French government for another shot of taxpayer money (in France subsidies already account for 10% of the revenue for daily newspapers). Next September, President Sarkozy will hold a national conference on print-press. The shindig is loftily dubbed “Etats Généraux de la presse”, this is a shameless historical reference to the times when French kings held big public debates to address a national crisis. You see, we are right into the twenty-first century. Every old (and no so old, unfortunately) press baron is getting ready for the event, rehearsing sob stories, thinking of ways to shame a complacent government into “one last dose” of life-support funding.

That kind of French “corporate welfare” is not a stimulus for change. Neither are the unions. Technical workers and journalists are on the same page — no release of the report — but for others reasons. They refuse to even look at recommendations for drastic change of their status. Fact is, with a few exceptions, French newspapers executives and newsrooms managers are still “digital-adverse”. This is is great news for the media pure-players to emerge in the coming months, but no so great for the future of the French print media.

Not every European country suffers of such bad alignment of planets. Nordic countries have been able to reinvent themselves quite quickly thanks to four factors: the big players enjoy a controlling in their market, resulting in solid financial health, in having the means to make changes; a cultural long-term approach, also allowed by the capital structure of their media groups; an obsession with the training and the intellectual openness of their managerial elite; and strong and disciplined leadership.

Countries that yield to corporatist lobbies and rely on government charity will take much longer to adapt. For them, the bottom of the J-curve is still far, far away. –FF


Throwing a lifeline to an endangered species, print?

Uncategorized By June 16, 2008 Tags: , 1 Comment

CEO Eric Schmidt spoke in San Francisco, at an event hosted in San Francisco by Syracuse University’s Newhouse School of Public Communications. There, he addressed the collapse of advertising revenue in print media: “It’s a huge moral imperative to help here”. Schmidt didn’t provide any detail on how the search company could throw a lifeline to the newspaper industry, but he hinted that DoubleClick, the ad server firm Google acquired, could generate “significant” revenue online for newspapers. But he acknowledged that it wouldn’t be enough to restore the profit margins that newspaper publishers historically have enjoyed from print advertising. “What we don’t know and we have not yet solved, is how to come up with digital products that will monetize at the same rate as the print ones. Once we’ll have done that — and we are on it — most of the concerns will go away”.

Let’s read between the lines: Schmidt is very concerned Google appears to be the main cause of the upheaval in the advertising sector. Google cuts off most of the lucrative links in food chain and it has no rivals for targeted advertising. To deal with such negatives, Schmidt’s idea appears to be to apply Google’s knowledge and power to funnel ad money into newspapers. But like everyone else, Schmidt also worries about the huge ad revenue gap between a print media consumer and a digital one. (To make matters worse, the gap is widening as the inventory of web pages available for ads grows faster that the number of page viewes by the users.)

In this talk, Eric Schmidt addressed other issues: – the monetization of unprofitable Google properties such as Google Maps, YouTube – the delicate situation of being a member of Apple’s board of directors and developing the competing mobile platform Android — he hinted that the two firms where far from being absolute rivals in this field – the next two big things for Google: language translation, geopositionning and related applications – his biggest worry for Google: the scalability of its culture as the company expands. This 56 minutes video of this Q&A session is definitively worth the click.


Steve Ballmer sees the end of media paper within 10 years

Uncategorized By June 9, 2008 Tags: , No Comments

Asked about his outlook for the future of media by the Washington Post, Microsoft CEO Steve Ballmer answered this: “In the next 10 years, the whole world of media, communications and advertising are going to be turned upside down — my opinion. Here are the premises I have. Number one, there will be no media consumption left in 10 years that is not delivered over an IP network. There will be no newspapers, no magazines that are delivered in paper form. Everything gets delivered in an electronic form.”

Well, this take is actually pretty reassuring considering the litany of things where Microsoft was dead wrong. Bill Gates was right in two instances (big ones for sure): Windows and Office. On all the rest, it essentially missed the boat: most of the Internet positions — both PC and mobile based — were left to other players. And today, what remains of Microsoft domination is seriously challenged by “cloud” hosted applications. Guess who has the biggest chances to be gone within ten years? By the way, hearing the cling-clung noise of forks and knifes, this semi-amateurish video of Ballmer was taken by a Washington Post staffer. Actually, 185 of them have been trained to use the medium, as explains Chet Rhodes, Assistant Managing Editor for News Video at the Post on


Times of India: let’s grow the market together

Uncategorized By June 2, 2008 Tags: , 3 Comments

Talk with India media executives is always instructive and fascinating. Few weeks ago at the INMA Congress in Beverly Hills, I sat down with Bhaskar Das executive president of the Times of India in charge of marketing.

The Times of India is the largest English language newspaper in the world: 4m copies for 16 editions. Revenue of Times Group is about $1bn, 85% from print, mostly the TOI. The company is extremely profitable with a net margin above 30%. The Times of India serves a huge market: 1.2 billion people, approximately 220m literate in Hindi, and only 28m English readers. Of the latter fast growing segment, the TOI manages to capture 4m readers. Combined with the vitality of the Indian economy (around 8% GDP growth), the Times Group is adding a nice 25% to its core business each year. Times Group is also the publishers of the main business broadsheet, the Economic Times.

Unsurprisingly, advertising provides most of the revenue. In fact, the price of the Times of India is set just above the value of scrap paper, it ranges from 1 to 3 rupees (1.2 to 4 cents). Therefore, increasing the revenue by raising street price doesn’t make sense. Instead, the real upside lies in expanding the pool of advertisers. A few years ago, the executives of the family-controlled TOI came up with an original idea: “the private treaties”.

The principle is simple and clear: the TOI spots good and growing businesses, and delivers the following pitch: “You need to grow your business, to impose your brand, to expand your reach. Here we are, the Times Group, with our huge newspaper, TV and radio stations, internet sites, outdoors display. Here is the deal: we take a 1% to 15% equity stake in your company, in exchange, we sign an advertising deal at a discounted rate, and you have access to our media system”. As we say in French, it is “fromage et dessert” for Bennett Coleman & Company Ltd, the family owned mothership of the Times Group. Not only it increases its advertising revenue with a predictable stream of money (competitors of enrolled advertisers are also prompt to react), but also it is building quite a portfolio of roughly 200 small to medium size companies. The amount invested and the current values are not exactly known. The Indian business paper Mint (a JV with the Wall Street Journal) is estimating the value of BCCL’s private treaties assets to about $1bn for an initial investment of about $300m. That would make the Times of India one of the largest private investor of the country. As if this was not enough, Times Group announced this Saturday the acquisition of Virgin Radio UK for GBP 53m. In a way, the revenge of the former colony.