newspapers

Copyright at the era of digital journalism

Two recent experiences made me pick Copyright as this week’s topic. The first one took place ten days ago at the Monaco Media forum. Professor Lawrence Lessig delivered a compelling presentation covering the evolution of copyright. The second experience happened at a consultation on the future of the press held by the French government where I spoke to one of the working groups. More

Redefining journalism

With the violently agitated context of so many platforms and of a potentially unlimited supply of agents, how do we update the definition of journalism? Where do craft or trade begin, where do they end? Inevitably, the profession reacts by circling the wagons, hoping to hold its own against hordes of writers now fragmenting what used to be cozily monolithic, easily understood audiences.  This is the time, more than ever, to revisit notions such as news reporting and news treatment.  This rethinking can’t be centered around yesterday’s corporatism, or legal definitions.  Instead, we must look at the following three concepts:
-    ethics
-    practices
-    training
We could also mention types of journalism, nature of the players, media… But, for today’s discussion, these are just sub-chapters.
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Paid-for-free papers: the mirage of the hybrid models

In less than five years, major newspapers will be giving away more than 50% of their copies. We call this the hybrid model. It works like this: a paid-for newspaper (one posting a price on its first page) with a vast portion it circulation distributed in selected – that’s the key point — areas for free.
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I started writing this column last Monday in the Copenhagen airport while waiting for my connecting flight to Oslo. I was able to grab a copy of the International Herald Tribune for free in an airline courtesy rack.   All the while, fifty meters away, a newsstand sold the very same paper for 20 Danish Kroner, approximately €2.68 Euros or $3.60 dollars. (Just for context: the New York Times charges $2.80 a week  for weekdays home delivery in Manhattan).
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Where is the catch? Actually, the IHT does just what many other papers already do: selling papers to airlines to reach business travelers. And the higher you go in the air travel social ladder, the more free papers and magazines you get. Business hotels do the same.  But for airlines, the deals are well structured, mostly for logistics reasons: putting the right number of copies in airport gates and on-board is way more complicated than dumping stacks in a Hilton. Numbers are closely held but, usually, airlines buy newspapers for a fraction of the face prices. For the International Herald Tribune, it must be around 10% of the official price while others get around 20% of the same. But, in many cases, cross advertising deals and logistics billing end up offsetting the entire price of the paper. Then, we can safely say that any paper you find while boarding your plane is 100% free from the publisher’s perspective.
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Why are publishers paying such a high price to have paper delivered on airlines? Two reasons: reader attention and demographics. In this context, there are no official studies for daily newspapers or news magazine.  But we can derive a few trends from the in-flight magazines industry. According to a survey made in 2006 by Arbitron (PDF here), 80% of travelers have read an in-flight magazine in the past month. During each flight, the time spent reading is 31 minutes — that’s about the time spent daily by a reader of a national newspaper in Europe. Again, this is for a magazine, nice and glossy, that just happened to be “in the seat pocket in front of you”, but with a rather shallow content. For a newspaper you actually choose to pick-up at the gate, the reading time and emotional engagement is likely to be higher, especially on long-haul flights.  Now the demographics: 72% of such readers have an annual household income higher than $100,000 and 27% higher than $200,000. An attractive target indeed.
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How big is the airline free distribution? That’s a good question. Free or almost free distribution is buried deep into audit circulation data. Let’s have a look at the International Herald Tribune figures. As a Paris-based newspaper, the IHT files its circulation data to the French audit bureau of circulation (OJD) even for its global sales.

Here are the key figures (rounded) for the full year 2007:
-    Total circulation: 242,000 copies
Breakup per zone:
-    Europe: 57%
-    Asia: 38%
-    Middle east:  2.5%
-    Americas: <2%
Breakup by type of circulation
-    Individual sales: 44%
-    Third party paid circulation: 38%
-    Non paid circulation: 18%
Now, the OJD report shows that in the “Third party circulation”, airlines account for 60% and various “hosting” (than includes hotels and corporate sites) for 36%.
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Well, you get it: more than 56% of the circulation of The Herald Tribune is actually free. (That is all third party, 38% + the 18% admittedly non-paid). And if we apply the same calculation to the French press, we get, as a real free circulation:
-    17 % for Le Monde
-    27 % for Le Figaro
-    37 % for Les Échos (France’s main business daily)
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Hence the question, how to implement the idea on a much larger scale? How to reach a bigger chunk of high value audiences using the same technique?  “Than can be summed up in one idea”, says Bruno Patino, former CEO of Le Monde Interactive, who likes to pitch the concept of paid-for-free newspapers: “The audience I do want, as a publisher, gets the paper for free; the rest have to pay for it”. This principle is applied by an increasing number of newspapers such as La Repubblica in Italy, El Pais in Spain, Le Figaro in France and, of course, the Herald Tribune (eventually to be merged with the New York Times as their websites will soon be). These papers currently give away about a third of their circulation.  My prediction is this proportion will reach the 50% mark in three to five years.
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The hybrid model bumps against two limits, though. The first one is the fit of the product to the target audience(s). OK, giving away a business newspaper to a business reader on a flight between London and New York or in Sheratons makes sense.  But for most general news publications, the goal is to cultivate three types of demographics: young, women, and “urbanites” (those who live in big cities and spend well). Problem is: reaching them with mainstream newspapers doesn’t work, even (or especially) free ones.  In France or in Spain, in places such as universities where several newspapers stand side-by-side, the ones who go first are the quality free papers such as 20 minutes, Metro, or Qué, which are designed precisely for young urban people of both genders. (Having said that, it is probably somewhat worrisome that student don’t pick-up newspapers with heavy world affairs or economics coverage, but that discussion is for another day). Fact is: we know that the “one-size-fits-all” doesn’t work in the media sector — especially as audiences become increasingly segmented). At least it won’t fly without a major product adaptation and segmentation.
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The second limit is the social approach of the news business. Giving away a quality paper in affluent universities, trendy places, while, at the same time, asking a young person leaving in a below-average neighborhood to go to the newsstand and pay for the paper, is to say the least, disturbing.  Of course, there is the option of “you do it, but don’t say you do it”. This is even more cynical. Some will retort that free newspapers have been doing audience selection by optimizing their distribution maps for a long time. Right, but it was done for a much wider audience: in the greater Paris area for instance, the free quality daily 20 Minutes reaches 1.57m people, the second free Metro 1.37m,  compared to 0.8m for Le Monde, 0.5m for Le Figaro and 0.3m for the business daily Les Echos). Plus, free papers are mostly read by commuters, so their social penetration is unparalleled.
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There is no argument: newsmedia are not philanthropic institutions. But it is also undisputable they carry out a social function in their community. This function remains more important than ever as media become more interactive, more conversational. And it is part of the monetization process. By making a caricature of the audience selection process, this social function will wither away. –FF
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Making €100 per inhabitant per year

Against all odds: In theory, there was no way for Frettabladid (the free Icelandic newspaper) to make its business model work. When its publisher (a local media group) launched the paper in 2001 it settled for two things that are the opposite of the conventional wisdom of the free press business: home delivery and copies shipped by plane to their destination. These choices where dictated by peculiar local conditions. The 300,000 Icelanders are mostly concentrated around the capital Reykjavik and a couple of significant cities are several hundreds kilometers away, with unpredictable road conditions. On the top of this, almost everyone is commuting by car. Early on, the managers decided their product has to be as good as the paid one — and better than pre-existing free dailies. “We stuck to the basics, said its editor in chief Jon Kaldal at last week Free Press Congress in Madrid. It’s about journalism, and scooping the competition.” Which the paper did.
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Now, the key figures:
-    103,000 copies of Frettabladid are distributed every day (weekend included), which is more than one third of Iceland’s population
-    the bulk of it is delivered in 82,000 homes, i.e. 87% of the 94,000 homes in Iceland
-    10,000 copies are distributed in what is called “neighborhood boxes”
-    11,000 copies in shops and gas station
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Advertisers understood quickly the potential of such penetration rate. From 24 pages in 2001,  Frettabadid has now 64 pages (half of it is editorial). Most of the ads (65%) are general brand type, 20% are classifieds and 15% are real estate and jobs.  “Our classifieds pages are more read than our sport pages”, jokes Jon Kaldal. With a 60% market share for print advertising, Frettabladid’s position seems robust.
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Or is it, really?
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In 2007, Frettabladid pulled-out a revenue of €30m — that is a hefty €100 for every man, women and babies leaving in Iceland — the country enjoys the sixth GDP per capita among the OECD members. (As a comparison — for what it worth — a dominant free newspaper such as 20 Minutos in Spain gets about one euro per citizen). In terms of profit, even though the owner of Frettabladid doesn’t breakup financial results, the 2007 margin was about 11%.  Was. Enter the financial crisis. Iceland, with a highly leveraged financial system, is hard hit.  Just to get an idea: the total assets of the banking sector have grown from 96% of the gross domestic product in 2000 to eight times Iceland’s GDP at the end of 2006. And the largest local bank is seven times more likely to default than the typical European bank. Predictably, the impact has been dramatic for Frettabladid: 50% of its ad revenue has evaporated since the beginning of the year. This year, the paper’s P&L will bleed red ink.
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The looming recession is likely to jolt all kinds of medias, whether they are free or paid for. In the United States, predictions for the fourth quarter are gloomy. TNS is forecasting the weakest holiday season in 17 years as all sectors cut ad spending According to Ad Week, money spent by Procter & Gamble, the nation’s top buyer, was down 8% to $1.6 billion; AT&T is down 16%; Time Warner, down 9%; Johnson & Johnson, down 12%; Walt Disney, down 9%  and Kraft Foods down 7%. And remember, contrary to the Euro zone, the US is not (yet) in recession.
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Media resilience will vary. The global downturn is likely supplemented by a flight to the performance-based advertising model. More than ever, brands will seek to maximize the bang for their rarefied buck. Media that will be good at measuring yields will do better than “shot in the dark” kind of. In that context, Google will suffer less thanks to its affordable text-based, traceable ad system. At the other end of the spectrum, TV is more likely to plunge. As for the print, paid-for newspapers are not good at measuring ad performances. In surveys, they tend to inflate their audience by multiplying the number of readers per copy. (In France for instance, there had been so much tweaking and twisting of audience measurement that absolutely no one gives any credit to the most recent official figures.  This, according to ad execs, will push down the prices even further).  Overall, a decline of 15% to 20% in ad revenue is not unlikely for 2008.
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The free press is in a peculiar situation. As Pr. Piett Bakker (by far the best specialist of the trade, see his blog here)  recalled at the Madrid conference, several markets (Italy, Spain, France) are already saturated with sometimes four or more titles in a single city. “A recipe for disaster” he said.  (He mentioned that, for the first time, the circulation of free papers is actually declining in Europe).
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Undoubtedly, the upcoming recession will accelerate the necessary consolidation of the sector (in other words, the weakest both economically and editorially will fold, some will merge, etc). Having said this, I tend to believe the free press has two assets that could attenuate the effect of a recession — only for the best of them. One is (again) the ad performance: much better that in the paid press (each time I’ve seen an advertiser doing a test based of performance, it scored high). The second asset being the distribution/logistic system. It not always known, but in many instances, free newspapers are much better at targeting and tracking audiences that the paid ones (which have a sick 30% rate of unsold papers every day). This has a tremendous value in itself and advertisers will certainly bet on it.  Having said this, I won’t follow the PressGazette website when it states that “Free papers defy downturn”.  OK, some British free papers such as City AM (in my view one of the best of its league) or TheLondonPaper are still in expansion mode (the former is launching new cities, and the latter enjoys record ad revenue), but 70% of the free titles are still not making profits, and will face hard times, as everyone else will.

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The Inimitable Gallic Way

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In France, press barons and the government are loading the guns for an upcoming offensive against the free press. On October 2nd, president Nicolas Sarkozy launched a national conference on print press. This event is called “Les Etats généraux de la presse écrite” (an historical reference to the times when French kings held public debates to address a national crisis).  The overall purpose is to rework a set of laws and directives issued in the aftermath of WWII. At the time, industrial resources (printing presses, newsprint) were scarce and the government had to step in order to guarantee an equal access to all publishers. What should have been a temporary stimulus plan became a sixty plus year-old de facto system.  Distribution was guaranteed for any publication (French kiosks are swarmed by mediocre unprofitable, short-lived publications) and above all, a closed-shop system has been granted to the main union, the Syndicat du Livre. Indisputably a generous social grant for its membership: in a French printing plant, the median salary for an unionized worker is  €46,000 € a year against €33,600 for a journalist (who is going to work twice as much). To make things worse, staffs are about twice what’s needed to operate a printing press. Altogether, French newspapers suffer from the most expensive production system in the world. The last decade of decline in the French newspaper sector has not seen any major evolution.  In return for the status quo, the main union has become quite cozy with the heads of media groups. Instead being agents of change, media moguls have secured long tenure in exchange for slow motion reforms. Now that the crisis has unfolded, everybody is turning to a government, which spend roughly one billion euro a year (10% of the industry’s revenue) in various aids.  And in the starring role, president Nicolas Sarkozy himself, with his usual demagogue posture.
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In his introductory speech, Sarkozy a set the stage against the free press (which, in passing, is also “free” of any subsidy): “It’s insane to believe that advertising revenue will one day pay for all information: free, is an abstraction, a figment of the imagination. It is the death of the paid press”. As a matter of fact, what is not an abstract view is Sarkozy’s carelessness with the topic. Had his staff done a fraction of the homework required for the subject, this is what they would have found:

-    Many of the best and most respected newspapers in the world such as the New York Times or the Times of India get most of their money  from advertising (respectively 80%and 90%).

-    The reunion of whiners invited last week at the Elysée Palace is giving away an increasing number of free copies. A rate of 30% of free distribution is not uncommon even for the national press.

-    The very same people are conspicuously sneaking a peek at a “hybrid model”, mixing the paid and the free, as do La Republicca in Italy or El Pais in Spain. (In Paris, if you happen to have lunch in the business district, chances are great you’ll have your free copy of Le Figaro).

-    A market without free papers doesn’t necessarily mean a healthy paid press sector. Take Germany for instance who forcefully rejected free newspapers: the average circulation of dailies and weeklies newspapers decreased from 31.4 million in 1997 to 26 million in 2007, a 17% decline. Furthermore, unlike countries that have significant readers (i.e. young) of free papers, young German readership is simply non existent.

-    Again, according to Piet Bakker, publishers of paid papers in fact control 55% of the worldwide circulation of the free press.
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And if any doubt remains about the anti-free press bias of this consultation, the chairman of this workshop is no one else than the fiercest opponent of the free newspapers concept. Bruno Frappat is the chairman of Bayard Presse group and the former publisher of La Croix, an excellent general news daily that enjoys both the highest level of public subsidies of any French paper (quite a competitive field in itself) and the oldest readership (above 65). Welcome to the new world.  –FF

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The economics of moving from print to online:
lose one hundred, get back eight

Let’s kill a myth. The dream of a compact newsroom, able to output a high-intensity general news website doesn’t fly. Numbers simply don’t add up. And here is why.
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First, the cost structure of a daily. In a typical operation, the biggest costs are industrial ones: around 25%-35% for paper and printing; another 30%-40% for distribution; around 18-25% for editorial; the remaining 10-15% are for administrative and marketing expenditures. It varies from country to country but we can safely assert most of the costs — at least 60% — are industrial in nature. Evidently, that part disappears when going online.
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Now let’s compare three numbers:
a) the cost of an online newspaper,
b) the audience needed to absorb costs
c) the audience of the biggest website
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Journalists make up most of the costs of a pure digital newsroom. As an example, assume the “loaded” (salary, benefits, expenses, overhead) cost of one journalist is about 60,000 € per year.  If the objective is to provide a general news site, the starting point for a comparison is the print press. As an high end instance, a newsroom such as the New York Times’ still counts 1400 journalists, paper and digital operations included (they tend to merge).  The Los Angeles Times now has 720 after the deep cuts demanded by its new owner (10 years ago, the headcount was 1300).  The Washington Post has a staff of 600.
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These are extremes. As a credible metric, we can take a big national European newspaper with an editorial staff of 400 to 500 people. For today’s demonstration, we’ll assume many people are involved in print-related production such as sub-editing, graphics, layout, etc. Plus, we all now those newspapers newsrooms are not exactly hallmarks of productivity. In short, I am certain we can produce good quality general news coverage with one hundred full-time equivalent dedicated journalists. (For their opposite reasons, editors and bean-counters are going to yell at me, that’s a good sign). I’m including writers, reporters, editors, photo and graphics editors, part-time specialized free-lance and front page editors.  Annual personnel costs: €6m. To this, let’s add an arbitrary $1m for technical and infrastructure costs, €2m for marketing and another €1m for administrative costs and misc. Total: €10m per year.
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Question: how many unique visitors do you need to cover €830,000 every month? Well, based on an analysis of some news websites (plus couple of business plan on my hard disk), the average revenue par unique visitors per month appears to range from  €0,10 to €0,25 (let’s forget the euro/dollar conversion for a moment, and assume both currencies have the same purchasing power in their respective countries). Let’s be conservative and stick with the lower number. No need for a calculator, then:  Translated into Unique Visitors per Month, a €830,000 monthly burn rate requires a hefty 8.3 million UV per month to break-even (and I’m not even talking of remunerate the cost of capital, paying back the shareholders, and forget about arousing analysts).
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Now  let’s turn to the table below; it shows recent traffic data (as much as we can reasonably get some — see Monday Note #51 for comments on this issue).
I’ve excluded websites tied to a major newspaper.
- The Huffington Post:  4m UV (Nielsen) 6mUV (claimed)
- Slate.com:   <3 mUV
- Tech Crunch:  3.2 mUV (claimed)
- The Drudge Report:  3 mUV (Nielsen)
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Now, big newspapers with great brands (Nielsen figures):
- New York Times online:  21 mUV
- USA Today :  11 mUV
- WashingtonPost.com:  9 mUV
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And in France:
- LeFigaro.fr:   4.2 mUV
- LeMonde.fr:  3.5mUV
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You get the picture: We are not here, yet.
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In the world’s biggest market (the US), if the goal is the online equivalent of a daily newspaper, no independent, pure player, general news website is able to achieve even half of the break-even revenue required to just stay afloat. Only big news brands, powered by (still) immense newsrooms are able to pull in decent audiences (remember, we are talking of audience goals able to support a newsroom set at a fifth of big newspaper’s).
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Let’s now compare the revenue per Unique user on a annual basis –  i.e. between €1,2 and €3 — and the revenue of big, quality free newspapers such as 20 Minutos in Spain and 20 Minutes in France. (I gave up doing a comparison model with the paid press, too many variables, too different models). Both are n°1 in their market with more than 2.5m readers per day. Their revenue comes only from ad pages, there is no distortion coming from the copy-sale revenue.  20 Minutos made €46.8m in 2007 and the French 20 minutes €45m. It means that each reader brings more than €18 per year. Compare this to € 1,2 per year per UV for online sites above.  By switching online for general news, we are trading euros (or dollars) for cents, literally.
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Still, this is no reason to hang on to an inexorably shrinking print media. Yes, there are ways to slow down, not reverse, the decline of newspapers: combining online and offline operations, adjusting  variables such as distribution (volume, distribution, timing), pricing to audience expectations and structure, etc. But the future lies in drawing the picture of a news organization compatible with the new economics describe above.
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Therefore, what does a sustainable online news organization look like? One thing is sure already: news is no longer able to sustain itself. The game becomes finding “alternate subsidy” streams. In the old newspaper model, Sports section advertisers subsidized the political columnist, or the classified pages paid for our guy on the ground in Iraq. Now, Sports coverage has migrated to a sports-site (and even disseminated on sub-specialized outlets), and classifieds moved to a vast array of highly profitable sites. Politics content finds refuge on the Huffington Post or on Slate. (And the guy in Iraq can only be afforded by big news organization). In passing, this dissemination is a response to the question of separate sites/brands for specific target groups: the answers seems to be yes — as long as we can: a) take advantage of specialization to charge higher CPT and b) build a network of sites arranged to benefit from massive economies of scale (back-offices, tech, sales, administration).
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This is similar to the transformation forced onto the music industry: it had to find other sources of revenue to compensate for the erosion of its core product.  Media have to find other income streams derived from their core competencies. The tech niche for instance, thanks to its peculiar DNA, is doing well. On the US market, many sites enjoy high CPT, a reasonable independence vis-à-vis their subjects, and are good at finding other sources of income: TechCrunch for instance is making more money from its yearly conferences than from its page views, although the scale remains small.
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My guess is corporate money will inevitably percolate into news economics through service contracts, requests for expertise, corporate communication assignments. The boundaries between sectors will blur. It already happened in the universities where contract-based private grants co-exist with fundamental research — and to some extent subsidizes it. The same mechanism will occur in the news business. We might not like it, but we better get used to it. Within ten years from now we’ll see respected online news organizations drawing half of the revenue form business-to-business type of activities. The tricky challenge will be erecting unbreakable Chinese wall between activities. Something similar to what Wall Street firms do: investment banking are separated from trading activities, they are not to talk to each other. This will require strong enforcement of corporate governance aimed at the protection of editorial independence.  It also implies decisive mindset changes in union and corporatist circles.  (In France, newspapers will be extinct long before such an evolution.)
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Another question comes up: How will hybrid news organizations stand up to pressure from financial markets? Analysts don’t like subsidized business units, even if the overall profitability is in acceptable range. Sooner or later, they come back with a vengeance, beat the stock price down until the business jettisons the unprofitable units.
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Take the Washington Post Company ($4bn in revenue in 2007, $477m in operating profits). The flagship products, the main brands are its publications : the Post itself and Newsweek. But its Kaplan Inc. unit, an education services company for students and professionals acquired 15 years ago is the big cash-cow: in 2007, it accounted for 49% of revenue (annual growth of 21%) and in 2008, it will surpass all other business units combined (publishing, TV, broadcasting).  The newspaper operation accounts for less than a quarter of the total revenue but, even if it remains marginally profitable, it is ailing. Two figures summarize the problem: in 2007, the Washington Post lost $77m in print ad revenue and got for a slim increase of $6m in online advertising. That’s a 100:8 ratio! Fortunately for the group, most its shares (60%) are controlled by insiders. But Wall Street punished the stock, it dropped by 30% in a year. Even though the group presents itself as “a diversified education and media company” (in that order), analysts sees “media” as a red flag.
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This leads to the final question: is the publicly traded form compatible with the massive shifts we are facing in the media business? As Alan Mutter reported on his blog early September, McClatchy group (stock: -78% in a year) might go private. So could do Gannett, Lee Enterprises and the New York Times Co, wrote Mutter in July. Some of these media groups combined a collapsing stock price with a heavy debt burden. Even when news media groups are not in such dire state, they all realize the label “media” (or worse “newspapers”) is stamped on their brand.  As a result, they will be punished by the stock markets — that is quite an incentive to consider a privatization. –FF
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From superblog to “Internet newspaper”, the lessons of the Huffington Post

What’s so special about the Huffington Post? How come that what started as a political blog three years ago now epitomizes the “superblogs” threat to mainstream media? And, perhaps more important, what causes a blog to mutate into something now perceived as a mainstream media — and do the economics work?
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From a content perspective, the “HuffPo” is far from mind-blowing. Basically, it is third party content mixed with opinionated blogs.  The whole thing, thanks to Arianna Huffington’s address book, is topped up with high-profile bylines. The founder of the Huffington Post is a well-connected woman, prolific commenter (first on the right, then left-leaning after a divorce from a Republican congressman). She ably enrolled intellectuals and entertainment stars into a flashy blog system positioning itself as a counterpoint to the Drudge Report and others conservatives blogs. When compared to traditional online media, the packaging is aggressive: splashy headlines, an ever-changing home page.  Internet recipes for success have been well internalized. No Pulitzer Prize material, though, even if the HuffPo lands scoops here and there. By journalistic standards, pure players news sites such as Slate or Salon are much more diversified and thorough.
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But, in these days of heated politics, The Huffington Post is THE thing to click on. This fall, it has raised another $5m for an unspecified share of the company from Softbank Capital and others.  The raise boosted its valuation to an estimated $40m-$60m. Not bad for a blog, even a big one (the total raised now tops $10m). In terms of popularity, Technorati puts the HuffPo on top of its list, ahead of the galaxy of tech sites such as TechCrunch, Gizmodo or ArsTechnica.
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Let’s look at the empirical strategy evolved by the Huffington Post. In May 2005, the site wants to drill into the political niche.  To do this, it relies on Arianna’s network as well as her ubiquitous media presence made even more notable by her thick Greek accent. It worked fine. In 2006, she’s on the list of Time Magazine’s most influential people (the kind of thing that helps one’s business). That’s lesson #1: if you want your little venture to rise from the blog-swamp, have a prominent and credible figure appearing on other medias.
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In the meantime, the HuffPo acts pro. It hires good editors, ones able to organize the prattlers and stimulate the hungriest crew members to unearth exclusive stories. That’s lesson #2: editing is key. Too many blogs crumble under uninteresting user generated crap (a.k.a. LGC, Loser Generated Content). Comments are fine – if and only if they add something both piquant and relevant. Therefore, old media know-how is precious. Earlier this year, in the New Yorker,

the Huffington Post is depicted as a new kind of competition to established media.  In the piece, the author exposes the HuffPo relationship to the press, and the way Arianna takes advantage of the dead-tree blues:
“The Huffington Post made a gesture in the direction of original reporting and professionalism last year when it hired Thomas Edsall, a forty-year veteran of the Washington Post and other papers, as its political editor. At the time he was approached by the Huffington Post, Edsall said, he felt that the Post had become “increasingly driven by fear—the fear of declining readership, the fear of losing advertisers, the fear of diminishing revenues, the fear of being swamped by the Internet, the fear of irrelevance. Fear drove the paper, from top to bottom, to corrupt the entire news operation.” Joining the Huffington Post, Edsall said, was akin to “getting out of jail,” and he has written, ever since, with a sense of liberation. But such examples are rare.”
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At this stage, in its well-crafted buzz, the Huffington Post distillates its new status: it is no longer a blog, but an “Internet newspaper” – a reference knowingly targeted at a slow-moving advertising market. It has extended its editorial footprint in new territories: business, media, entertainment, lifestyle. According to its management, politics account now for the half of its content (but much more when it comes to its audience). Enter the economics attached to the evolved status:  the key difference between the  HuffPo and the rest of the blogosphere is on the business side. And this is perhaps the main component of its transformation into a true mainstream media. Here are some key figures:
-    Staff: about 45 (a significant, large number)
-    Annual costs of operation: about $4-5m (the HuffPo doesn’t publish figures)
-    Break-even is “expected this year” (I love this type of statement, one of the most common lies in the business world, right there with “the check is in the mail”)
-    Money raised: $10m, mostly from Softbank
-    Valuation: between $40m to $50m, if the blogosphere is to be believed
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Of course, audience is the main ingredient in assessing the value of a site. Welcome to the wonderful world of Internet economics. Ten years after Google’s birth, medias on the Internet are still unable to agree on reliable metrics to measure visits to any given site. In the print media, a comparable example would be the Wall Street Journal claiming sales of two million copies a day while audience boutiques would peg it a million or so. Guess which dataset advertisers would use to adjust the price they’d be willing to pay?  This is exactly what is happening on the Internet. As far as the Huffington Post is concerned, its internal measure gives 8m unique visitors (UV) a month. But Nielsen Net Ratings grants it only about 4m UVs. For the HuffPo and most websites, true audience measurement is a guessing game.  The numbers depend upon whom you pick between Nielsen, Alexa, Quantcast, Compete, even if you use only one of these tools for all your measurements, you’ll end up nowhere since some sites are better tracked by one or the other.
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The situation is somewhat paradoxical (to put it gently): websites are born with ways to count visitors. Hits on servers, logs, compiled by traffic analysis tools give a detailed view of the audience: how many people are visiting the site, what they look at, for how long, where do they come from, and so on. Compared to the print press, which laboriously counts its sales and rely on quarterly polls for readers’ profiles, it is a dream come true: instantaneous, accurate, and crunchable to the extreme. Whoever has spent half an hour tinkering with Google Analytics will agree: such tools are a fantastic way to stay in tune with your audience. But it was too good to be true. A conjunction of conservative laziness in the media buying agencies and powerful lobbying by Nielsen (they already measure television audiences) settled the issue: The ad market would superbly ignore the tools embedded in websites.
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Instead, the market would go for a truly mediocre measurement system based on Nielsen’s evaluative panels of Internet users (it is called “user centric”, as opposed to the “site centric” for the computerized tools). Just to get an idea: its French panel has 6000 users (they get special tracking software), for a market of about 35m users.  This explains why, for the Huffington Post like others, audience is imprecise by a ±50% margin of error — at least. Of course, the ad market turns around and invokes this very uncertainty to put further downward pressure on prices. This explains why an Internet user yields only one-fifth or one-tenth of the revenue generated by his paper counterpart, even though the Internet audience structure is much better known and is tracked in real time. It remains quite a mystery to me why publishers have not lobbied harder for an audited site-centric measurement.
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Let’s get it straight: as long as we can’t rely on a unique, credible Internet audience measurement, websites economics will be wobbly and prices won’t reflect the true value of audiences. That situation makes assessing the current status and the  future of superblogs (more than 1m UV a month) a difficult task. And forget about valuations: whether it is based on (often negative) EBIT or revenue, the “multiple” for any transaction will continue to lack any solid basis in fact.
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What’s ahead for the Huffington Post? It could break-even this year, thanks to the election. Afterwards, two factors will influence its future. The first one will be its editors’ ability to keep the politically addicted coming back to the site. Sounds trivial but it’s a matter of resources, i.e. number of reporters the HuffPo will be able to line up. Consider this: during the Democratic convention in Denver, more than 500 bloggers were accredited. On the top tier, the Huffington Post had 20 people, Talking Points Memo (a remarkable superblog to follow the campaign) had 9, Salon.com 9 also and Slate 7. Apart from this, Politico,
which was also producing a newspaper, had 40 people under the Big Tent. This shows two things: first, it takes a fairly big staff to cover big events (nothing new, I agree). Two, — and more worrisome from a business perspective — the blogosphere is heavily fragmented.  At the Democratic Party convention, the n°1 superblog had only 1/25th of all registered bloggers.
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For the future of the Huffington Post, the second critical element lies in its ability to capitalize on its diversification. For now, most of its traffic goes to the political content. Channeling audience to other parts of the site won’t be easy.  It is one thing to rise above the crowd in a specific, news intensive domain such as politics; it is another story to do achieve the same rise when covering a much wider array of topics.  Many more competitors, and stronger ones, could lead to a dangerous cost escalation.
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Jumping from a nice, enjoyable niche business to a mainstream one inevitably collides with economics. Just one final data point to assess the situation: the Huffington Post requires an annual revenue of $4m to $7m to break-even, right? Now this: just to maintain its Bagdhad bureau, the New York Times will spend more than $3m in 2008. Comments and content aggregation is inexpensive, but news remains a very, very cash-intensive business.  –FF
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By the numbers. And what do they mean for our industry

This is the Fall season of business plans for the coming year. The numbers will mean pain for the media industry. Below is a set of facts and figures to keep in mind when considering newspapers, advertising, search, mass collaboration… and coffee.
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The newspaper industry’s overall condition
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80% gone: Within the last 12 months, the market value of newspapers groups such as Gannett and McClatchy went down by 80% or so. The New York Times lost 70% of its market cap during the same period, closing Friday at $13, lowest in ten years.  Monthly figures are not encouraging either: the New York Times Co.’s revenue (including the International Herald Tribune and the Boston Globe) dropped by 10% from a year earlier. Advertising sales are down by 16% and circulation revenue slipped by 0.5%. Classified (jobs, cars, real-estate) are down 30%.  For Gannett and McClatchy, ad revenue losses are accelerating, approaching the -20% zone for the past twelve months basis. Even News Corp has seen its value erased by 40% since Rupert Murdoch bought the Wall Street Journal. (Alan Mutter is tracking those numbers in his blog)
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What it means: two things. More newsrooms layoffs, more consolidations.  For the latter, consolidations, the weightiest — and yet quite unlikely – would be the acquisition of the New York Times by Murdoch. As reported by Michael Wolff in Vanity Fair’s latest issue, Murdoch keeps crunching numbers in contemplation of such a move. (One of the assumptions is merging the back-office operations of the Times and the Wall Street Journal). Europe won’t be spared by massive restructurings, not only slashing the editorial meat (the easy way), but also by repositioning newspapers and changing revenue models.
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IPhone & mobile browsing
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$1million a day. That’s the gross revenue for iPhone applications sold through the AppStore. Apple reported 60 million downloads of applications for the iPhone, just one month after the opening of the AppStore (source: Wall Street Journal, Aug. 11). Apple is getting “only” 30% of this revenue. Still, this market, potentially $1bn a year, didn’t exist three months ago.
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+58%. IPhone browsing has increased by 58% from July to August as reported by Market Share (the 3G version was launched July 11).
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What it means: the mobile Internet is finally gaining traction. By the end of the year, several competitors (Nokia, RIM-Blackberry, Android) will join the fray with powerful and user-friendly browsers. We foresee another steep increase in mobile browsing after the holiday season. 2009 could be “the” year for mobile browsing.
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140 million users of mobile social networks by 2013. According to ABI Research, the next big thing is mobile access to social rings such as Facebook or MySpace. ABI might be right judging by the number of people who got the Facebook app on their iPhone.  The exact number isn’t known but this app received the highest number of reviews of all iPhone apps, more than 2030 reviews, compared to a couple of hundreds for the next one down the list.
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What it means: even though social networking has yet to become a channel for news delivery, it is the medium of choice to reach young people. Facebook, MySpace and others are used by:  85% of online and mobile active users from the “Generation Y” (born after 1979);  71% by Gen X (born  between1965-19789); and 59% by Baby-boomers (born between 1946-1964). (Sources: Pew Research and eMarketer)
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Advertising
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24.4 million downloads of the ad-blocking plug-in for Firefox, a 10 times increase in one year. It is by far the most popular add-on this browser. This yields only 5,4 million daily users but their number is growing fast and a rate of half million download per day can’t be ignored. (Source: Mozilla.org)
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What it means: sites should think twice before before inundating their home page with invasive and poorly executed advertising. Those are incentives to use to ad-blocking software.
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42% of all online ad spending goes to search ads, and the proportion is growing. According to this eMarketer 2008 estimate, display ads spending will remain flat. (In fact, the percentage share will decline, since the overall online ad market is still growing at a healthy 20% in the US).
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What it means: keep that in mind if you are in business plan or website redesign mode (make room for Google Ads rather than for big banners).
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Search and News
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83% of people reading news on the internet use search engines to find stories of interest, even though they land, most of the times (51%), on a news brand they know (small consolation). The proportion was 70% in 2004, it is reaching a new plateau. But the intensity of search engines use is still growing: in 2004, 19% admitted using a SE three times a week; this proportion is now 31%.
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What it means: search engine optimization is definitely a “must” investment. No doubt. A good SEO person in an e-newsroom quickly pays for his salary.  As far as Search Engine Marketing (keywords acquisition) is concerned, this is a different story. Some news sites (such as Le Figaro in France) are racking up great ranking thanks to a massive investment in keywords. Viewed from an Excel perspective, it does work — in the short run. But there is still no model showing how a site that relies heavily on keywords purchases actually keeps its audience. It’s dope, you’re high for a short time.
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700 to 1000 Google computers are used to execute a single search (when you hit the enter key). In a split second (113 million results for ‘léonard’ in 17 hundreds of a second), a Google-brewed software called Map Reduce slices up your request, distributes it among its million servers and sends back results. Google invests about $2bn a year in datacenters.  For this, the company buys up land across the world on one condition: as traffic grows, it must accommodate a new building within six months.

What it means: theses numbers are just a glimpse at Google’s unparalleled power. The latest iteration of Google’s drive for more power is the new browser Chrome (see Jean-Louis’ column below). But it is not the last. Google wants to index the world, from 32 million books listed in libraries worldwide to your voice-print if you call its phone directory, or street views (readable text included) of your town. Now, Google must be taken into consideration while planning for any information system.
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Long tail true stories
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90% of Netflix’s catalog (the American DVD rental store) is rented at least once a month. And nearly two-thirds of the movies are rented thanks to a recommendation generated by the site itself.
MSNBC uses a cookie to keep track of the 16 articles recently read and uses automated text analysis to predict what news story you’ll want to read. (Source: Super crunchers by Ian Ayres)
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What it means: social recommendation engines and collaborative filtering works. They help revive inventories, movies or news stories. OK, this bruises the charming notion of serendipity. But keep this in mind: a ten-year old newspaper publishing an average of 50 stories a day built a stock of 150.000 articles to dig in.  Next, consider that online papers have between 3 to 5 pages views per visits.  An optimized delivery system for related stories makes a huge difference in revenue.
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10 million subscribers for Safaricom, a Kenyan mobile phone operator. Interestingly, when Vodafone bought a stake in this company back in 2000, the first version of the business plan bet on 400,000 users max. It got 25 times more. Among things other than good service and good pricing, Safaricom encouraged new uses such as transferring money. Working with Barclays, Standard Chartered and Oracle, Safaricom created M-Pesa a mobile phone cash-transfer system, now a quasi-bank. Safaricom is a profitable $1bn company (read its CFO interview in Kenya business daily).
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What it means: new (big) businesses can emerge  from unexpected applications based on existing platforms.
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Wiki dynamics
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1.7 minutes. This is the time it takes to see an obscenity removed by the editors of Wikipedia, according to the MIT. Nature magazine took a sample of 42 scientific entries and found 3 inaccuracies in Encyclopedia Britannica and 4 in Wikipedia. One big difference: on Wiki the new, corrected edition, is just minutes away. (Source: Wikinomics,  by Don Tapscott and Anthony D. Williams).
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What it means: the idea of full-of-crap wiki systems is dead. Fact is: due to its contributive structure, Wikipedia is a fairly accurate tool. On a purely statistical basis, editors and publishers should not be afraid of setting up Wiki-information systems for news-related topics. Today’s reluctance lies in our culture, not in the cost column: Wikipedia has only five full time employees.
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Water consumption
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840 liters of water to produce this article. That’s about the eco-footprint of the six cups of coffee I drank writing this note. Each 125ml cup required 140 liters of water to grow and process the beans. Stunning, isn’t it? And that’s nothing compared to 16.000 liters (yep, sixteen tons of water) to produce one single kilogram of beef. By comparison, the computer industry is downright frugal with only 32 liters to produce a 2gr microchip. How does it relate to the news business. Uh, it doesn’t. (Source:waterfooprint.org). –FF
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Inventing the DIS, take II

A quick summary of the key ideas behind the Daily Information System (DIS) before discussing reactions to last week’s essay:
1) The newspaper as we know it is dead.
2) It survives as one of three information prongs, mobile, Internet and, yes, paper.
3) Off with taboos and sacred cows: periodicity, price and production.
See Monday Note #47 for details


A brilliant individual (name withheld to protect the witness) with broad experience in journalism, business and the Internet offered the most interesting feedback.
We share a passionate interest in our times. We ask ourselves: How do we invest the next ten or twenty years of our professional lives in the most rewarding ways? On the DIS, his first question focused on the French media landscape: Which newspaper would I transform into a DIS? A quick scan of the current media properties followed. Libération and Le Monde are just coming out of painful restructuring episodes, with substantial staff buyouts. For Le Monde, assets sales give it temporary oxygen. But for both of them, the tank empties within two years at most. Above all, we agreed, their bosses are way too Internet-averse and too self-absorbed to morph into agents of change. And, as the final touch to the picture, their boards of are in morose capitulation mode. Le Figaro? To sum up: the publisher is 68 (following a twenty years sentence as the exec VP of the biggest European TV network, TF1), the owner is 83 and immensely wealthy (the heir of Dassault aircraft maker dynasty).
— Transform,
I retorted? Hell no. Forget the fact there is no patient anyone could operate on. Think of the time and money required for such a fundamental turnaround. I don’t want to transform, I want to build !
— Well then, forget it, said my interlocutor. You’ll have an easier time finding €30m to acquire and (try to) transform a property into a DIS, than getting €20m to build one from scratch. That’s the way things work around here. We managed to agree on one thought: For the French press, the situation has not gotten dire enough to trigger the clarion call to radical change. We’re not yet at the bottom of the J-Curve (see Monday Note #43). Minds and guts remain tuned to quick fixes, socially and politically more manageable — today.


In France, what I call the “Miranda boards” make things worse.
They’re like the suspect pinned down on the hood of a police car who hears the zealous officer read him his Miranda rights: French board members “have the right to remain silent“. The Miranda board is merely a rubber-stamp chamber, structured for the ultimate form of French coziness: populated by friends, members of trusted networks, Grandes Écoles or freemasonry. In France, the independent board member is an alien notion. There is no shortage of excellent candidates, of course. But, here, the real function of boards is the preservation of the status quo, not evolution (or revolution). Looking at the boards of major newspapers in France there is no risk of unseemly disturbance. Most are in capitulate to the inevitable mode.


By contrast, the board of the Washington Post Company is a wholly different entity.
It includes prominent people such as iconic investor Warren Buffet, Internet mogul Barry Diller, Columbia University Chairman Lee Bollinger or Xerox CEO Anne Mulcahy. A potent mixture of intellectual firepower and business acumen. And the person reporting to this assembly is of an equal caliber. Yes, Katharine Weymouth, 42, is a member of the Graham family that developed the Post; but she stands as the opposite of nepotism “à la Française” (being in a sunny mood, I’ll skip the list of French media properties in the hands of incompetent offspring). As recounted in this great profile in Condé Nast’s Portfolio, Ms. Weymouth served in all sorts of positions inside the Washington Post galaxy, from in-house counsel to head of advertising (staff: 450!). She knows the drill. And she’s up for change: “… It’s going to be cutting costs and developing new products and trying new things—throwing a little more spaghetti against the wall. Some will stick and some won’t. I don’t think there’s a magic bullet that is going to turn our industry around”.


Since boards aren’t likely to push for anything but timid adjustments, who will be the true agents of change? Chances are markets and readers will. Let’s look at recent data.
To protect what’s left of our trade and to have any hope of building something sustainable, we have to fight on three fronts:
- First, the audience’s money in absolute terms, i.e. how much can we extract from the reader — directly or indirectly, newsstand price and/or advertising revenue per reader.
- Second, still the audience’s money but in relative terms this time, i.e. our percent share of disposable income versus other items such as entertainment.
- And third, we also compete for the audience’s time. How much of it do we have versus other pursuits such as TV.


A large part of the audience historically faithful to news is now beginning to evaporate.
The Pew Research Center surveys news consumption habits in the United States. Recent findings point to a disturbing trend: the shrinking readership of print is far from being compensated by audience gains for online information. In the last two years, the number of people claiming to have “red a newspaper yesterday” dropped from 40% in 2006 to 34% in 2008 (and from 34% to 27% if we specify “print only”). In the meantime the “Web only” readers have doubled indeed, but from a mere 2% in 2006 to 4% in 2008.

Even worse, ten years ago, a quarter of the population below 25 admitted not getting any news at all. Today, this proportion rose to a third of this same segment! The last Pew survey is not exactly swelling with optimism (read the full report here)


At least, the Pew survey confirms the need for diversifying the number of news sources.
Especially since “checking the news” as opposed to abiding by the traditional “news appointment” becomes a dominant trend. Hence the rise of the smartphone. Give someone a Blackberry or an iPhone, you just made a news addict: 37% of smartphone owners check the news several times a day; that number is only 4% for regular mobile phone owners. This holds promise for the future of the DIS: today, smartphones penetrate only 15% of the American population (vs. 83% for all cellphones), and the success of the iPhone indisputably shows that the quality of the interface is a boost for online consultation (Google said there are 50 times more mobile searches coming from the iPhone than from any other mobile handset). The affordable smartphone is a recent phenomenon and cell phones are renewed roughly every eighteen months. (Sooner if we believe Steve Jobs.) As a result, we can safely forecast a steep rise for wireless online news.

For the print media, the crisis is a historic one, it calls for radical measures.
Today’s symptoms do not reveal yet another economic cycle, down today, back upwards tomorrow. No, we are inside a structural, irreversible change. And the numbers will get worse.
I had many conversations this past week about the DIS. The objective hurdles are many. But everyone agreed: subjective factors are the ones that matter the most, determination and leadership at every level. Resolve is required to strive in a context that, up until now, rewarded fiddling with a known formula rather than taking the risk of a truly different, radically, new at the root one. Easier said than done, I know, but that is how political or economical empires have been won or lost. –FF

DIS: a view from the Valley

Modest and proud of it, that’s us. Our perch at a center of innovation gives us the “right” to opine about almost anything, from biotech to movies, Net politics, wireless carriers and operating systems. So, why not mull over the future of newspapers?


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et’s deal quickly with the formula: I agree with Frédéric’s prescription for the DIS. As described in last week’s Monday Note, new newspaper, laptop, smartphone, each medium, each prong of the integrated DIS has its features, its “rules of the genre”, its specific use and business model. Business model is a little abstract for me, let’s say money pump, the pockets we pick, advertisers, readers, and how.


Case closed, it’s a mere matter of implementation, right?
In the Valley, “a mere matter of implementation” is a code phrase, a tongue-in-cheek way to say we think we know the What but not the How. As in: to lose weight, all you need to do is eat les and exercise more – for ever. With the DIS, I see the question morphing into Who will do it? Fresh new money for an ab ovo entrant, an existing newspaper empire such as the New York Times or Rupert’s, or an existing enterprise outside of the newspaper world, Google, Tata or the Quandt family (they control BMW), for examples, realistic or not.


Let’s pause for a detour in the past: Exxon Information Systems.
In the seventies, the Big Oil company chartered the hypnotists at the Boston Consulting Group with designing a diversification strategy. Oil is running out, the OPEC is out of control, Exxon needs an alternative future. Information is the oil of the 21st century, chanted the Boston marabouts. (The Robber Baron from Redmond hadn’t emerged yet, but the BCG sees into the future.) So, Exxon started collecting little or no so little information systems companies, ranging from Intecom to Qwix, Qwip, Vydec and Zilog. The kommentariat bought it, Fortune Magazine sagely praised the diversification, the cover of Business Week asked: Exxon’s Next Pray, IBM or Xerox?

It all ended up in a $4 billion dollars hole. I know: I, too, bought the story and briefly ran their French subsidiary. And less than six months into the job decided I needed out. Right idea, wrong culture. We forgot Culture Eats Strategy For Breakfast. This was evident at Exxon, a well-managed company with no cultural clue (and no clue about lacking a clue) about the alien ways of computer people and technology.


Back to the DIS, fear someone with the right idea, armed with the right strategy but clueless about the people and the technology.
In the Valley, experienced, successful executives and entrepreneurs open a winery or buy a restaurant. You see, we know restaurants, we’re wine connoisseurs, we’ve been to the best ones around the world, we’ve swilled the grandest vintages. Wags call these pursuits buying oneself a phallic extender – these deluded individuals are all male, women are more sensible. These guys truly know how to be diners and wine tasters, but they know worse than nothing about the tough, thankless restaurateur trade or the bottomless vintner métier.

We need not look further than my country of birth to see other examples of Gallic phallic pride, of talented industrialists buying themselves an “organe de presse”. The malady is widespread and tells us big enterprises with big wallets probably won’t succeed in bringing a DIS to the world, try as they might.


In the Valley, we have this known, sunny view of entrepreneurs.
As a result, we could be tempted to think a totally fresh start will do it for the DIS. An experienced team of media and technology entrepreneurs with gobs of patient money from the likes of Kleiner Perkins, Sequoia or NEA, to names the firms ready to place big bets.


There is a small problem with the big idea: the business model doesn’t work like a venture investment, the rewards are too small for the risk.
As previous Monday Notes have pointed out, advertising revenue sharply declines when moving from paper to the Web. And there is Google whose riches come from pimping, sorry, selling advertising on, other media, not from being itself a new medium. So, we’re left with existing media groups. One gives us hope: Rupert Murdoch’s News Corp. He’s not exactly a kid fresh out of college who doesn’t know the word impossible. In an apparent paradox, his age, 77, is an advantage. He is, so to speak, not afraid to die, he’s repeatedly succeeded against the advice of the wise. Murdoch managed to take over choice properties such as the Times of London and, damned the Cassandras, improved them. Too early to say for the WSJ and no such luck for MySpace yet. The latter could be a case of cultural deafness. Still, my hope lies with a media group finding the will or the enlightened dictator to “cannibalize” its existing business rather than silently capitulating to its fate. This excludes most publicly traded groups, Wall Street hates cannibalism. As a result, the first step in the conversion to the DIS is a leverage buyout, the group becomes private so the surgery takes place behind the curtain. –JLG

What a modern newspaper will look like.
Inventing the DIS.

A few years ago, someone involved in the rescue of the French newspaper Libération asked me what would I do to save the paper. The question meant a lot to me. I had spent a total of twelve years at “Libé”, many of those when the paper was at its best (I even enrolled Jean-Louis Gassée as a columnist at the time).

This is what I told the owner’s representative:
- One: Dump the idea of a daily paper. Too expensive. Too much competition with the Internet. Distribution in France is hopelessly costly and unreliable.
- Two: Equally allocate journalistic resources to two products, a website and a weekly paper. The website (and its mobile version) covers daily news. The weekly is a light and focused Friday magazine: a small number of well adjusted, value-added stories (investigative pieces, in-depth news analysis, great profiles), great photographs (Libération was once renowned for its piercing, memorable pictures).
- Three: Dump your current printing contract; is only produces a paper where the news stick to the reader’s fingers. Pick a modern printing plant, one able to make a 60 pages magazine, tabloid-sized, with a look and feel comparable to classy British Sunday magazines.
- Four: Restructure the newsroom. Not a little, drastically. Keep the well-known bylines (I meant, those who work), keep the editors who will preserve the standard for the news gathering process. Flatten the organization (French papers, like American ones, have about ten layers of management in the newsroom). Don’t do a buyout like you did already four times (in each instance, the best people took it, it was an IQ test). Inject new blood, there is plenty of young talent out there. Outsource whatever doesn’t make the paper’s style and substance.
- Five: Build on your brand. It is a terrific, undervalued asset, your poor management has downgraded it to charity business (I was even more diplomatic, but that was the idea).

Needless to say, Libération chose a different path. Mostly flattering the oldest segment of their shrinking readership and therefore, sliding slowly on the tedious slope of a complacent irrelevancy. In marketing theory, this is known as “following your demography to the grave”.

Was a turnaround of such magnitude feasible? Perhaps not. Too much financial and human pain. Maybe the very fabric of the paper would have been lost in the process. Maybe. But I’ll always think this paper, which used to be the most brilliant of its time, missed an opportunity to regain its avant-garde status.

Like most of my generation, I don’t see life without newspapers. Well, without something that fulfills the theoretical functions of a newspaper (which, in turn, open the door to other forms of news products).

Two things strike me though.

The first is the cliff-like drop in newspaper advertising revenue. (Read this stunning account in last week’s NY Times). Speaking of The New York Times, its debt is approaching “junk” status.

The second is the number of news junkies (look around you, not at me) who give up physical newspapers without any visible withdrawal symptom. They simply replace one interface with many: web, mobile internet, RSS feeds, a good laser printer to enjoy long articles in bed or at breakfast.

This leads me to wonder: knowing what we know today — shifting advertising market, readership changing habits, modern production settings — what would a modern newspaper designed from scratch look like?

The DIS (Daily Information System) core features:

1. No more one-media setup. Today’s stand-alone daily is on deathwatch. As DIS component, it has a future. Let’s face it: pure news, breaking news, developing stories now belong to the electronic medium. Radio, mobile Internet, website: when speed is key, the paper is dead. Therefore, a DIS must allocate resources flexibly between electronic and paper versions. The survival of the paper is not conceivable otherwise.

2. No more 365 print runs a year. The paper must not be printed every single day of the year. Readers don’t need it; the advertising market no longer supports daily printing. Relevancy and value-added are the only allowable motives for a newspaper, not day-to-day obligation, a stricture of the pre-Internet era. But now, as long as a media enjoys a comparable audience for its electronic and print product, a newspaper can afford (enjoy is a better word, as in financial health) a dotted publication pace. A sustainable model assumes publishing three or four times a week.

Wait, it makes more sense than what we see when only looking through today’s lens: since breaking news and updates are on the web & mobile, the paper is devoted to in-depth journalism (news analysis, reporting, investigative pieces, profiles). Frankly, as long as hard news is available elsewhere and controlled by the same editorial team, who cares if an analysis of Vladimir Putin’s strategy in Georgia has to wait a couple of days? (Actually, more thinking and editing time will make it better). There, relevancy majestically trumps immediacy. Majestically? Think of the regard in which the NYT’s editorials and columns are held.

From a cost perspective, this model makes a huge difference: no more dual labor shifts, better profitability of the ad space (less discount for slow circulation days).

3. The price equation: paid or free? I lean towards the free model. Here is why.

- First, most newspapers are already free — almost. From the Times of India to the Washington Post. Advertising makes the bulk of their revenue. The reader paying to support his paper? This is mostly an illusion (France is an exception, its press is expensive, elitist… and dying).

- Second, like it or not, the Generation X sees can’t see information in any way no other than free.
Three, a sophisticated free newspaper can have a distribution system as targeted and precise as a paid one. Today’s techniques for spotting audience groups are unprecedentedly refined, much more efficient than dumping a stack of papers before a newsstand at 5:30am. By factoring socio-demographics, hourly habits, even newscycle and weather conditions, distribution can be laser sharp.

Readers like free papers. Research shows they find the concept friendly, generous, practical. Many free papers launched as a defensive move by their publishers turn out to be embarrassing successes.

There is an alternative to the free model: a very low price; it yields a better measure of readership and discourages people to discard the paper after 30 seconds of scanning. (For the best free newspapers, the proportion of premature evaluation readers turned out to be small).

4. A more sophisticated sales model. Airlines hate empty seats, look at what they do: dynamic pricing, rates change every minute, yes, a deal will disappear before your very eyes, if computer’s instant load forecast says so. Contrast this with newspapers: the advertiser is asked to pay the same rate per square centimeter every single day of the year (plus or minus 20% with good negotiation skills). Weirdly enough, dynamic pricing has percolated into broadcast media, but not into the print press, why is that? The size of the inventory — i.e. number of slots — does not explain everything. The roots of the problem lie in the advertising food chain, in its creaky conservatism. It starts with the sales manager. There, the preferred staff performance metric is the number of appointments the salesperson manages to stuff in a week (bear with me: it’s pathetic). Then, we move to the media buying agency’s struggling contortions to justify its presumed competency.
For the business plan of a modern DIS, my first move would be hiring a quant PhD. I’d task the brainiac on a tri-media (paper-mobile-web) dynamic pricing model.

5. The product interface and production. Low quality newsprint on a broadsheet is like vinyl records for the music industry. Time to switch to iPods, folks. Contemporary recipes are: small format, no more than forty pages, paper that doesn’t bleed ink, pages glued or stapled, good quality printing to justify premium pricing to advertisers. Indisputably, it works, cf. the tremendous success of the French 20 Minutes (2.5m readers). And layout must be as modular as a Lego game.

This also means the end of cathedral-like, union-controlled printing plants. Small printing presses, able to do profitable runs of few thousand copies are key. And no more printing ownership anymore. That’s passé. Now is the time for well-designed contracts that reflect the new medium’s flexibility.

Modern printers can also economically handle upstream distribution tasks such as preparing bar-coded bundles of papers at the end of the printing chain to make the truck distribution process more efficient (unthinkable in France or the United States due to union obstruction, of course).

6. Staff structure. Keep the org chart as flat as possible. A newspaper must be run by no more than five top editors, plus a few section heads. That’s it. Three or four levels of management maximum, not ten or twelve. The complexity (hence the cost) of a newsroom tends to grow with the square of its staff size.

Outsource non-core competencies. Including journalistic ones. By core competencies, I mean what really defines the identity, the orientation of a newspaper: national coverage, foreign affairs, economy, and culture. Conversely, sports, consumerism, science, style, travel can be outsourced to specialized entities, on a contractual or on-demand basis. Less people in the core newsroom means a smaller chain of command and therefore a much healthier metabolism. No place to hide, bosses included.

Outsourcing includes the recourse to outside experts. Experience shows that many stories would be vastly improved with input from technical experts (legal or economic areas come to mind). A respectable paper maintains a network of experts and scholars, real ones, not quote machines.

Oh, by the way, to the best of my knowledge, an engineer at Apple is not especially encouraged to work on the side for Cisco or Google. Therefore I don’t think a journalist should be allowed to moonlight for other media outlets. It’s fine to have some star-writers who are going to enhance the visibility of a title by writing best sellers or hosting TV shows. But, frankly, how many fall into that category? Two percent? Truth is: the Woodward type is a scarce commodity (and still: according to his contract with the Washington Post, he can work on any subject, as long as he gives first dibs for his scoops to his paper). Therefore, salaries must be adjusted accordingly (kill the idea of low-cost journalism, would you trust a low-cost neurosurgeon?).

7. The test and learn approach. An virtue of an Internet venture lies in its ability to morph and adapt in response to change, whether it is market conditions, unexpected competition, or simply intuition. By comparison, the concept of “release” (v.1.0, 1.1, etc.) is totally alien to newspaper culture. There, because of layers of managements and fiefdom mentality, committee is required to make the simplest change in a layout or to launch a new heading. Like any product, a newspaper needs constant adjustments. The ability to test and adjust is not a byproduct of Internet technology, it is a core feature.

In my view, the DIS is not an option, it’s not even “innovation”, as in something that’s nice to have, that you can get on your own time. How many of today’s newspapers will survive by merely tweaking their ways, their culture? Will they march to the grave with their aging readership? They should look at how many Grey Panthers are using laptops now and weep. In other words, how many titles will get to the newspaper graveyard leaving their readers to really new newspapers? –FF