Archive for August 2009
The New York Times, Wall Street and other major financial media are reporting that Freedom Communications will file for Chapter 11 bankruptcy as early as Tuesday. Freedom owns the Orange County Register and 30 other newspapers, as well as eight television stations and several magazines.
Freedom is the latest major chain to enter reorganization as the newspaper industry struggles to deal with the double whammy of recession and secular shift away from print media.
Dave Hunke, the executive who left the wreckage of Detroit to take over at USA Today, says the Gannett flagship is “extremely bullish” on the potential of e-readers to provide new revenues to newspapers.
The comment was part of an excellent roundup on e-readers in the current MediaWeek.
As I’ve been saying for a while, e-readers like Amazon’s Kindle and competing products from Sony provide enough convenience to entice readers to pay a small monthly price to have the content delivered to a reader even if it remains on the web for free.
The math from the end-user perspective is compelling. I pay about $12 a month to have my Birmingham News thrown in my driveway. Sometimes it’s late and I don’t get it until I return home from work – a whole news cycle later. During a hard rain, the plastic bag fills up with water and I have a sack of wet pulp. But if it were available on my Kindle (it’s not), it would probably cost $5.99 a month — half the price — and the News wouldn’t have any materials or transportation costs.
It’s working already. As noted earlier, I popped for Kindle delivery of The New Yorker for $2.99 (hey, big spender!). It’s always annoyed me that my weekly New Yorker rarely showed up in my mailbox before Wednesday or Thursday. Now, it’s there waiting on me every Monday morning.
While Kindle is the reader that’s attracting all the current attention, I really don’t think it’ll dominate the newspaper or even book market. Sony’s next-generation reader — which will be available just in time for Christmas — will be cheaper and have a touch-screen. And because Sony is using the open-standards e-book format, it already has twice as many e-books available (about 800,000) as the Kindle (about 300,000).
There’s some money to be made by those who can pick the right winner in this game. Amazon has the early lead, but the current Kindles are too crude to dominate. And newspapers distributing via Kindle are complaining that Amazon doesn’t give them a big enough slice of the pie. There are still a lot of products to be announced, including one being developed by Hearst and a rumored Apple product.
One of these — I have no idea which — will be the “it” product this Christmas. But the real gift may go to the newspapers who finally have a profitable revenue stream from subscribers again.
Even as I noted the improving financial results of publicly held media companies last quarter, it was clear that the black ink was produced by cost cuts, not improved revenues.
Remember: Newspapers get money from two sources – readers and advertisers. And the advertisers are continuing to bail, with ad revenues down 29% on average through the first half of the year, according to the Newspaper Association of America.
What only time will tell is how much of that loss is due to the recession and how much is part of the permanent, secular shift to other advertising media.
In the old days of moviemaking, writers loved having a publisher shout “stop the presses” to make sure the viewer knew something big had happened.
In real newsrooms? Not so much. During my decade working for dailies, we only did it one, when Paul “Bear” Bryant died. I was working for the Birmingham News then, and Bryant was a near deity in Alabama. Publisher Victor Hanson II even went a step further. He not only stopped the presses, but he called in the trucks so they could throw out their copies and start over with the Bryant obituary. Keep in mind there were no cell phones in 1984, so the dispatchers had to call stops along the way and leave messages for the drivers. Needless to say, it was an expensive exercise.
So when Sen. Edward M. Kennedy died at 1:25 a.m., the newsroom rolled Editor Martin Baron out of bed, according to Editor & Publisher’s account. Of course, nearly all newspapers have obituaries on famous people written in advance, so all they had to do was fill in the details and start printing again.
But as electronic delivery overtakes print, one has to wonder if we’ve just about heard the last of those words.
Sony has trumped Amazon’s Kindle with an e-reader that will cost $90 less, have more than twice as many electronic books available, and include a brighter touch screen.
Where Amazon has insisted on a proprietary format for its e-books, Sony has embraced the EPUB standard and contracted with Barnes & Noble, which already has more than 800,000 e-books for sale, vs. Amazon’s 300,000. As a final kicker, the Sony — which will be available just in time for Christmas — will be able to borrow library books for 21 days. It’ll also have an expansion slot and can be read in landscape as well as portrait orientation.
The game is about to get even more interesting. Dutch manufacturer Irex’s e-reader has not been previewed for the US yet, but it will include an 8.1-inch touch screen, stylus navigation, and 3G wireless connectivity.
Newspapers have already lost much of their advertising for real estate and jobs. Now they could even lose the movie listings.
For a couple of years now, movie theater chains have been directing customers to web sites like Flixster, Fandango and Movietickets.com for show times. And now, with a majority of their customers getting their movie info from the web rather than the paper, they’re beginning to cut back or eliminate their newspaper ads.
So far, the Newspaper Association of America says it’s not a big problem, but losing the movie ads could hurt circulation as well, because local movie times are one reason some people buy the newspaper.
In an Editor & Publisher article on the trend, an official from AMC is quoted saying that “so far we’ve seen no impact on attendance” where the movie chain has cut back on newspaper advertising.
In a follow-up to his article claiming newspaper ad revenues are now at 1965 levels, Columbia Journalism Review’s Ray Chittum has pointed out what should be obvious — that print readers create a lot more revenue for the papers than online readers. How much more? That depends on how you count it.
For the most part, until news media find a way to charge for online content, the only online revenue comes from ads, which bring in an estimated $46 per reader. “Paper” readers are worth up to $940.
Chittum declines to address the cost side of the equation, because the Newspaper Association of America numbers don’t have much data on that, but we need to remember that it costs a lot more to maintain a press, buy ink and paper, pay people to run it, put it on trucks and get it thrown onto the lawn. Enough to make online more profitable? Hard to say.
Even on the surface, newspaper and magazine ad revenues are grim — down 7.9% in 2007 and 16.7% in 2008. And we’re probably looking at declines of 30% for 2009. While some of that is cyclical, much of it is permanent. Classifieds that have gone to Monster, Craigslist, Ebay and real estate sites aren’t coming back. Advertisers have formed new habits.
Columbia Journalism Review’s Ray Chittum spent some time with the Newspaper Association of America numbers I wrote about the other day and adjusted them for inflation. Once that’s taken into account, you have to go all the way back to 1965 to find a year when things were so lousy for publications. You can read Chittum’s article here.
Don’t be shocked if you see newspapers resume the depressing work of cutting heads and salaries in the next few weeks, especially as we near the end of the calendar and fiscal quarter. While some are actually printing with black ink, the recent profits are driven by cost cuts, not revenues. Even for the chains with the best earnings, revenues are continuing downward. And in that environment, the only way to keep going is to cut costs.
After lopping heads early in the year, newspapers turned to forced furloughs and pay cuts so that they can keep enough people to put out a decent product. They’re getting away with it, because reporters and editors have few options except to take their lumps. But there are signs we’ll see some more outright layoffs, as we saw yesterday, when the Register-Guard, in Eugene, Ore., cut 16 full-time staff, or 5.9 of the total, according to Editor & Publisher. (The Register-Guard cut 35 people a couple of months ago.)
Erica Smith’s Papercuts blog now counts 13,352 lost newspaper jobs since Jan. 1.
Reader’s Digest has announced plans to file for Chapter 11 bankruptcy. It’s an organized bankruptcy with the support of most of the magazine’s creditors. Within a couple of months or so, they’re expected to emerge with about 75% less debt.
Like every other publication, they’d been hammered by drops in advertising, and general-interest magazines have long struggled against niche publications.