(Subscriber Report) The Future of Newspapers and New Business Models for Growth - By Jack Myers

The intensive debate about the future of newspapers and print media is focused almost exclusively on news reporting and journalism. My focus is on commerce and the primary importance of establishing local newspaper sites, first and foremost, as the primary source for their communities' commerce needs and interests. The ongoing debates often miss the key point that consumers once relied on newspapers as their exclusive source for information on everythinglocal for sale: to find houses, cars, jobs, restaurants, events, entertainment, products and services. As much as business concerns and issues may appear to be at the forefront in the corner offices at most major newspaper companies, it is the editorial product that management perceives as the core deliverable to consumers. Ads are the "fill" packaged to fit into and around the editorial content. But it should not be lost on the newspaper industry that those papers that continue to do well – pennysavers and local weeklies – design their content with advertising at the forefront and editorial content packaged around it. The debate today should revolve around the shifting relationship between editorial and advertising – and where the industry's priorities should be.

In today's full report available to subscribers, I share my recommendations for rebuilding the newspaper business and why I believe many newspaper and magazine publishers should be replaced in their jobs. I share an innovative new model for incorporating advertising into Kindle content and smart phone applications. I suggest that universities develop a new business curriculum focused on newspaper and media management, and argue for refocusing the fundamental discussions taking place in the corporate offices of leading newspaper and magazine publishers. I also include a new recommendation for generating $100 million in incremental subscription revenues for The Wall Street Journal.

If newspapers re-engineer their business models as I outline in this week's report, they will have an opportunity to regain their economic footing, enabling them to once again invest in journalism that is unfettered by economic concerns. In the long run, foundations are also likely to step up to underwrite journalistic enterprise. National news and investigative units will be underwritten by multiple newspaper organizations. Once local newspaper sites re-establish themselves as the primary source for their communities' commerce needs and interests, their news reporting and journalistic components will once again be allowed to thrive.

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Job #1 for the newspaper community should be to reach out to universities and underwrite the creation of new graduate and undergraduate level course that explore business models and organizational structures that assure the continued viability of the newspaper and media business, and to assure not only that jobs will continue to be available for graduates but that graduates will continue to be interested in newspaper jobs.

Throughout the second half of the 20th century, universities became important centers for journalism education. Syracuse University's Newhouse School, Columbia University, Ball State, Maryland, UNC, Indiana, Northwestern, UC-Berkeley, UNC, Missouri, University of Florida, and many other universities built expansive departments to advance journalistic learning, all with a curriculum that was pretty much exclusively dedicated to editorial and production. Thebusiness of media remained, for most universities, an afterthought relegated to a course or two. Advertising curricula also focused on the creative processes, ethics and role of advertising in American life, with little if any emphasis on business models, return-on-investment metrics, or organizational roles. This reality remains the case, with few university programs today addressing the destructive forces that are at large in the media world.

One of the most critical of these destructive forces is the deterioration of subscription revenue models, which is being addressed by myriad proposed solutions such as the Journalism Online venture formed by L. Gordon Crovetz and Steven Brill. Alternative revenue models being explored and debated include different systems of metering, micro-payments, subscriptions, etc. Paywalls, in my opinion, can only work if the content is exclusive, compelling and truly valuable. I believe the Wall Street Journal would find it easier to make $100 million selling 100 $1 million "Bloomberg-like" corporate subscriptions to Wall Street firms for special content and investigative insights than they would selling 667,000 $150 subscriptions. For the average local newspaper, paywalls will be counter-productive in the long term, causing further deterioration of their local brand and relevance. Unless a media company has content that customers truly value as differentiated and economically worthwhile, they will seek it elsewhere for free. The Washington Postcould reasonably extract thousands, if not hundreds of thousands of dollars each from Washington lobbyists and power brokers as well as corporations and foreign governments if they provided true insider insights and knowledge as their core subscriber business. It is unlikely that The New York Timeshas an endemic constituency that offers it a comparable opportunity and it is questionable if The Grey Ladycan sustain a viable pay-per-read model.

As content distributed across multiple platforms becomes the norm, all media companies must focus on understanding consumer needs and economic value points. The Amazon Kindle has become my favorite medium for accessing print content. I actually pay for Kindle subscriptions to The Huffington Post, PaidContent, ValleyWag and other blogs that are free online. I also subscribe to The New York Times, having cancelled my home delivery of the print version. I believe there is a compatible opportunity to include advertising in Kindle versions of magazines and newspapers that would be acceptable to both Amazon and publishers. (This applies to all eReaders.) In my Kindle download of The New Yorkermagazine, for example, cartoons are packaged together in a separate dedicated section and indexed by cartoonist. Why not create a separate dedicated "Advertising" section as part of the Times and The New Yorker downloads and provide an index by advertiser category, i.e. Fashion, Automotive, Cosmetics, Entertainment, etc? Only select display advertisers who purchase ads of a certain size would be included.

After all, newspaper advertising is valuable content to many, many readers and to exclude this content is contradictory to the fundamental value newspapers and magazines have always offered their readers. If newspaper and magazine publishers do not believe this (and most recent decisions suggest they do not), and if they do not become vocal advocates for incorporating full display advertising in new and creative ways into online, eReader and smart phone apps, they shouldn't be in their jobs.As technology permits, advertisers will be encouraged to add coupons (especially when they can be directly scanned at check out counters), incentives, special offers, unique creativity and other components that will attract consumers. The total advertising business model – including the agency business -- will be elevated when advertising becomes optional and requires proactive consumer involvement. I'm willing to wager that advertising could become one of the most popular content sections of the online, mobile and eReader versions of many newspapers and targeted magazines. Publishers must inherently believe this and build their business models and organizational structures accordingly. If they do not, I believe they should be replaced by executives who do.

If advertising cannot support a free online distribution model, then in the long term I'm convinced the economics of most local newspapers just won't work. Consumers are becoming progressively more sophisticated in seeking and finding free resources that meet their information needs. Traditional news content has become overly commoditized and when editorial content is put it behind a paywall, online competitors will emerge and offer comparable content for free. Home and newsstand distribution will eventually be almost totally disintermediated by online, mobile and e-reader availability, and trying to impose traditional home and newsstand pay-for-content economics to a tech-enabled society is just not a sustainable model.

If a local paper invests in highly valuable journalistic capabilities and believes it is appropriate to limit access to that content, then they will need to offer true differentiation and generate sufficient subscription revenues to be profitable without dependence on advertising. I'm also willing to bet readers would pay more online for access to daily comic strips and "Dear Abby" advice than they would for local news, sports, entertainment and other information. After all, think back to when you were a kid and you picked up the daily paper. If you're like me, you opened it from the back and read the comics first, sports or Dear Ann/Dear Abby next, and then progressed forward to the front page. That's why the auto ads were in the back of the paper. Department store and supermarket ads were stand alone destinations, and coupon drop-ins remain the most widely read section of Sunday papers. Yet comics, coupons and advertising are an afterthought at best in online, mobile and eReader newspaper versions.

I believe it is completely appropriate for newspapers to assure that editorial environments are advertiser friendly. Advertising and commerce empowers and underwrites the very existence and survival of editorial content. A recalibration of the business based on that hierarchical reality is fundamental to the industry's survival. The real key for newspapers is to monetize their brand by rebuilding relationships with local businesses through technology-based enhanced commerce offerings. I'm an advisor to Live Technology, which has developed an automated solution for local newspapers that enables them to provide consumers with easy online access to all local retail and commercial resources and offers simple online access and tools for advertisers to create and place their messages across all local media channels simply and cost-effectively through the newspaper's commerce website. Live Technology's service enables local papers to become the central hub for retailers' total local advertising needs and rebuilds newspapers' consumer value by enabling them to recapture dominance in local classified advertising. A few newspaper groups are currently exploring this model with Live Technology.

All newspapers that have a loyal, core audience and a strong and relevant brand identity still have the opportunity to regain market influence, dominance and a valid long-term business model. The solution is not to generate pennies, nickels and dimes from readers; it is to serve consumers and advertisers by developing and implementing creative new advertising and organizational models. Once local newspaper sites re-establish themselves as the primary source for their communities' commerce needs and interests, their news reporting and journalistic leadership will once again be allowed to thrive.