Local, Local, Local

If there has been an mantra around the newspaper business, its that we "own" the local markets. No one has the news gathering resources that we do, and no one has the sales force that we do. Both are factual statements. And they are still true even after round after round of layoffs.

The question is: does this resource really matter?

My answer is sort of

Certainly on the sales its hard to deny the advantage. Its a huge resource that can be used to cover a great number of businesses. However, effectiveness might be another story. To me, the best sales person is 100% commission, and that commission is based upon the profitability of the deals they sign. If there are special needs or added services that have costs, they should be attributed back to sales.

Sales is rarely organized quite like this. Sales likes a certain element of security when they can get it, and particularly in a difficult industry it would be nearly impossible to sign reps on 100% commission. We've documented the obsession with revenue, so as you might imagine costs are rarely attributed back either. That hurts, but its not that bad in an environment where gross margins are huge.

The content side might be a different story. Again, its not the number of them, but how they are organized. Most newspapers have taken the approach of shutting down distant bureaus, and focusing on the local area. This is an incredible resource for reporting what happens in a particular town. It is an extension of the local, local, local mantra.

The issue is readers don't typically care only about their local area. The wall street meltdown likely has as much relevance to a person in Wichita as New York City. If your people are only in Wichita, you won't have the proper angle on the story. The correction has been to localize the story, by editing it, but this doesn't really change the perspective. It only changes the feel of the article.

What matters most to people are the things that affect them. Money, jobs, fun, sex, friends, products, safety. Crime matters if it affects someones safety, or perceived safety. Not all of these only happen locally.

Local stories are usually "smaller" stories. They almost always affect less people than a national one. If it affects less people there will be less interest.

Less interest is just fine if you are getting the right people. It's the basic principle of segmentation applied to content. I don't care if only 1000 people want to read a review of a local restaurant, just so those people like my content best and keep coming back for more.

However, here's the hard part. A newspaper has become a collection of local stories that don't generate much interest individually. The national stories have been outsourced to AP and other aggregators. The paper then builds up a collection of these stories until every segment has something of interest. On an average day, I'd be hard pressed to find a decent sized local paper in America that didn't produce a story of interest to each one of their readers. The problem is that if you bought the paper, you bought all of the stories. The fact that you only found two interesting articles is fine. Some one else found two different articles, etc...

This feeds the first problem identified in the previous post. If I only read one or two articles, I don't need to spend too much time reading. I can finish my local paper in less than 30 minutes. The stories that I don't read are wasted, but that's OK because its very likely that other groups have found something of interest.

Increasingly the stories that I find of interest are sourced from AP or other wire services. I may be particularly cosmopolitan, but this is a major problem. The true local implications are lost. In Houston, regulations that change energy policy are a huge deal. In the midwest, farming subsidies might be vital. However, the AP tends to write with the only the national perspective rather than the local one. Why you should care if you live in the midwest, but aren't a farmer is usually omitted.

In order for this endeavor to succeed, the effort has to be made to explain how the national and international affects the local. The analysis is the hard work, and its the part that is most likely to be left out. For that matter, the same could be said of the local coverage. Analysis is the key. Certainly a grisly accident can occur, and will likely get coverage, but the greater question is what can be done to prevent future occurrences. Is the situation one that has occurred in the past, or is this merely a random event highly unlikely to recur?

My proposition would be to create a team of news analysts. Their job is not to gather the facts, but to comment on why it matters. Not from a position of bias as an editoralist might, but from the perspective of data. If bias cannot be eliminated, then some potential sides should be presented. They aren't columnists, nor are they editors. Its a new role that can even comment on the wire copy.

My concern is: in many ways this is a role that bloggers have taken as they comment on the mainstream media.

Are newspapers run by a pack of wolves?

The short answer is no. Despite occasional frustration with a lack of constructive criticism, I don't actually believe that newspaper CEO's are a bad lot. Everything they are doing, and have done is completely rational. However, that's a great part of the problem.

Lets take a step back and look at the industry 20-30 years ago. The year is 1985, and things are fantastic for newspapers. They have been able to raise rates on advertising year after year, and they still are the gold standard for journalism. Why?

To use Porter, they have a near perfect situation of the five forces. There is a very big barrier to entry, as both printing presses and the journalists to create news are very expensive. They have immense supplier power over their advertisers, who have very few outlets to reach as many people. They have very limited rivalry, as even in competitive markets published rates are just that, published. They have created local monopolies or duopolies and are generating fantastic returns. They only have a minor substitution effect from the emergence of cable and the existence of TV.

Newspaper publishers were always pretty big deals in town, but now they were becoming amazingly more wealthy as well. Struggling with where to spend their windfalls, they bought up lesser newspapers. Some they shuttered, while others kept publishing. Other companies bought related, but somewhat different endeavors, TV stations, educational publishing, real estate. Many went public, while creating a protected class of shares for themselves so they could rarely, if ever, be ousted from the companies they helm.

Monopolies rarely try to improve themselves, as there is little to no incentive. Profits are more or less assured, and the best way to improve them is to cut costs. Prices can continue to rise until the point of marginal returns is reached. Revenue maximization becomes the focus, and costs are viewed as almost unrelated.

Let's fast forward to the current day. Most, if not all, of the leadership has grown up with the notion that revenue maximization is the mantra. The secondary goal is to reduce costs wherever possible. The strategy is simple: sell more, spend less. If you listen to conference calls, the constant word that will be used as a measure of success is revenue growth.

Simply stated, management is continuing to use many of the same metrics even after the world has changed. The dashboard hasn't changed even though the car has. They didn't need things like ROI, NPV or any other fancy acronym. After using metrics that worked and frankly drove great triumphs in years past makes it that much more difficult to change for the future.

The hardest part of making this change is realizing that the newspaper isn't a monopoly anymore. However, in most cases there is only one newspaper in any particular town so its very difficult to believe that statement. It isn't a monopoly because the market isn't about a printed product, it is about access by advertisers to an engaged and interested audience. It is about attention, permission and value.

The greatest measure of the difficulty of the newspaper media is measured with the rarest commodity of all: time. No matter how rich a person is, there are only 24 hours in a day. The latest data from VSS showed that people are now spending more time on the internet than reading a newspaper. Time with the medium is the most important metric, simply because it is a measure of engagment. Reach is not enough. You can say hi to 1000 people walking down the street, it doesn't mean even a single one will remember you.

Why?

Its pretty easy to note that the last thing the newspaper industry needs is yet another naysayer. I don't wish to be one, but its also very clear that the industry is in serious trouble. My purpose here goes beyond standard observations about the prevalence of the Internet, the emergence of craigslist and the tactical problems they face and dive into the deeper reasons for the issues and offer some constructive solutions.

Two famous quotes sum up why I want to use this forum. I'm mad as hell and I'm not going to take it any more. And. The World won't Listen.

More on those two quotes.

The first is pretty apparent. I do believe in the power of the medium, and deeply want to see it continue. My frustration at watching the dinosaurs attempt to dance has finally reached the breaking point.

The depth of the second would only be apparent to an insider, so I'll explain. Most local media companies are run by patriarchs with little real oversight. The CEO's usually have a protected class of shares that give them complete control of the business, and most are the second or third generation to have owned the company/newspaper. They too believe in the power of the medium, but they are also more or less immune to criticism. In fact, they tend to reward sycophancy over critical thought. They only want to hear the good news. Certainly the new owners such as Zell and Tierney are trying to change this culture, but their entire organizations are full of yes people that are used to complete deference to their leadership. The first step in any twelve step program is acknowledging the problem.

I do work for a major local media company. I'd love to see my company be the one that figures out the answer to the problem, but I no longer care if they are the one. I just want to see one company make the right decisions, because I know the rest of the industry will quickly imitate.

Please feel free to comment on any ideas presented here. I also may be reached at shortbusinc@gmail.com for personal comments.