Many journalists can't provide the value-added journalism that is needed today

Journalists pretend they spend their time investigating the intricacies of international affairs, covering the inner workings of the economic system, and exposing abuses of political and economic power. Although many aspire to do so (and occasionally do with great effect), the reality is far from the imagined sense of self.

Most journalists spend the majority of their time reporting what a mayor said in a prepared statement, writing stories about how parents can save money for university tuition, covering the release of the latest versions of popular electronic devices, or finding out if a sports figure’s injury will affect performance in the next match.

Most cover news in a fairly formulaic way, reformatting information released by others: the agenda for the next town council meeting, the half dozen most interesting items from the daily police reports, what performances will take place this weekend, and the quarterly financial results of a local employer. These standard stories are merely aggregations of information supplied by others.

At one time these standard stories served useful purposes because newspapers were the primary information hubs of the community. Today such routine information has little economic value because the original providers are now directly feeding that information to the interested public through their own websites, blogs, and Twitter feeds. Additionally, specialist topic digital operators are now aggregating and organizing that information for easy accessibility.

Town councils place their agendas and voting reports on their own websites, many police and fire departments operate continuously updated blogs and twitter feeds that provide basic emergency reports and what is being entered in their blotters and logs, performance centers and concert promoters offer websites and digital notifications of upcoming activities and events, and companies and business information media offer direct distribution of financial reports and news releases to the public. All of these are stripping the value from newspaper redistribution of those kinds of information and making people less willing to pay for provision of that news.

To survive, news organizations need to move away from information that is readily available elsewhere; they need to use journalists’ time to seek out the kinds of information less available and to spend time writing stories that put events into context, explain how and why they happened, and prepare the public for future developments.  These value-added journalism approaches are critical to the economic future of news organizations and journalists themselves.

Unfortunately, many journalists do not evidence the skills, critical analytical capacity, or inclination to carry out value-added journalism. News organizations have to start asking themselves whether it is because are hiring the wrong journalists or whether their company practices are inhibiting journalists’ abilities to do so.

Changing frequency of newspaper publication is not a sign of the apocalypse

The number of newspapers that have reduced their publication frequency in response to market changes and economic conditions continues to rise.

This year the Times-Herald in Newnan, Georgia shifted from 7 days a week to 5 days per week. The New Orleans Times-Picayune moved to 3-day per week schedule, as has The Patriot-News in Harrisburg, Pa., and many papers in the Advance Publications group.

In doing so, the papers are bolstering their digital publications and producing in physical form only on days that most interest retail advertisers. From the financial standpoint, these moves make a great deal of sense.

Reactions to the changes have ranged from disbelief to resignation in the journalism community. Many have bemoaned the loss of dailies and argued non-dailies cannot possibly serve their communities as well. That argument is problematic, of course, because there have typically been 3-4 times more weeklies than dailies in the U.S. and many have done far better jobs covering towns and neighbourhoods than dailies.

The assumption that 7-day per week publication is, and has been, the norm is another example of ahistorical and baseless views spread about the industry these days. In 1950 less than one-third of newspapers (549 papers) published a Sunday edition and the number with Sunday editions peaked at 917 in 2000, being published by just two-thirds of all papers. Saturday editions were not the norm until well after mid-twentieth century. The appearance of high frequency daily publication was fueled by the demands of advertisers.

If one considers the definitions of daily publication one finds that it is nowhere near 7 days per week. The internationally accepted definition of a daily newspaper is a paper published only 4 days per week.

This is not to say that the industry is without problems. The changes in publication frequency do reveal how the inordinate dependence on advertising revenue has shaped the industry and how wealth continues to be stripped from newspapers.

The changing frequency should be seen as part of the evolutionary shift toward digital only publication--a shift that is occurring at a varying pace in different types of papers and markets. But it does not mean that journalism in print, in print and digital combinations, and in digital-only forms cannot serve community needs.

Canadian Media Merger Creates High Market Power and Runs Against Concentration Trends Elsewhere

The proposed merger between Bell Canada Enterprises and Astral Media will shortly be considered by the Canadian Radio and Television Council (CTRC). The merged company will own 70 television and cable channels, more than 100 radio stations, and some of the country’s most popular websites.

The combined company will serve nearly one-third of the national TV audience, more than 40 percent of the national cable TV audience, and about 30 percent of the nationwide radio audience. In addition the merger will increase Bell’s vertical integration and its power over distribution systems used by competitors. This later factor is particularly important because Canada lacks much of the regulatory control seen in Europe and the US over business practices of distribution systems that are also used by competing firms.

The merger will benefit the two companies by giving them more market power and permitting efficiencies at the corporate and divisional levels. It is also likely to produce efficiencies at the operational level by using more common content, something that is especially likely in its radio operations.

Investors will see benefit in the future. Share prices often go up before mergers as speculators jump into the market and then sell before the merger is completed, but prices typically decline after mergers when the realities of the costs of integration reduce short- to mid-term performance.  It will take some time before the benefits of the consolidation reach investors as dividends and heightened share value.

The downside of the merger will be borne by consumers and advertisers because the combination will create more market power to push up prices and reduce incentives for better service and quality. Competitors will also face a stronger company that controls the distribution infrastructures for their products and this should lead to higher prices. Additionally, one can expect social harm because the merger reduces plurality of those selecting content and the original content made available—particularly in radio—will probably be diminished.

How the CTRC will respond is unknown.  However, Canada has traditionally permitted far greater media concentration than other countries arguing that it helps strengthen Canadian ownership. It has permitted media concentration levels 2-3 times higher than those found in US and Europe and has one of the most concentrated media markets in the world.

Most other countries have been using broadcasting law and competition law in recent decades to reduce concentration in content provision and those policies have been quite successful. Why not Canada?

Canadian policy has been hampered by its nationalistic rhetoric, a significant degree of regulatory capture, and also because there are inconsistencies among broadcasting and competition policies  that allow regulators to downplay public and consumer interests.  The CRTC deals with station ownership, for example, but has set a market cap of 45% on total national television audience—about twice that in most countries. The Competition Bureau can review media mergers, but has tended to be concerned only about effects on advertising prices. Existing policies do not effectively address cross media ownership effects.

Ironically, the public service broadcaster (Canadian Broadcasting Corp) was heavily criticized when it served about 40 percent of the television audience. Commercial firms were particularly vocal arguing that having such a large firm distorted the market and their complaints led Parliament to reduce support for the CBC and over time its audience has been cut in half.

It will be interesting to see whether CRTC is willing to take a broader view and is willing to stand up to the interests of Bell and Astral when it considers this massive merger.

Contemporary Trends Change Magazine and Newspaper Printing Markets

The markets of magazine and newspaper printing firms are undergoing significant changes, reflecting on-going transformations in the customers they serve.

Some of the changes have been under way for 2 decades with traditional printing companies morphing into printing service companies offering more profitable value-added services and products.  These included high-end specialized printing capabilities and services, database printing, and wide-ranging distribution services. At the same time, the increasing number of magazine titles, accompanied by lower average press runs, pushed the companies toward higher efficiency and acquisition of presses and systems designed for lower press runs.

In this environment, many printers could not effectively compete and consolidation began creating large regional players in the industry.

Shorter-term trends have also played havoc with the printing industry by killing off some magazine and newspaper titles, lowering the average number of pages printed because of advertising reductions, and by decreasing demand for catalog printing by mail order companies.

These changes created excess capacity and financial problems for many printers, opening the way for private equity firms to purchase trouble companies, restructure their operations, and consolidate the industry even further. Walstead Investments, for example, bought the St. Ives Group, Southern Print and Wyndeham in the UK to do just that.

About the only bright spot for the printing industry has been that many newspapers have now decided to outsource printing—increasing the number of customers in that segment for the short term, at least. Even some large newspapers that had given up commercial printing decades ago have changed the size capacity and flexibility of their presses to gain more production options and they are now offering printing services to other publishers and advertising service firms.

The consolidation has allowed big players to grow bigger. Donnelley has expanded by acquiring firms across North America.  Quad/Graphics has moved into Europe and Latin America. The German publisher Guner & Jahr acquired Brown Printing in the US and Prisma Presse in France.

The current economy is limiting the ability of these firms to push up prices, but one can expect that to occur when better times return and capacity utilization increases.

NBC's Olympic Coverage Shows Audience Expectations Aren't in Its Cross Media Strategy

NBC’s Olympic coverage in the U.S. reveals the conflict media companies face as they try to simultaneously manage traditional media delivery and digital distribution.

The company is getting it right with the traditional broadcasts, garnering excellent audiences and more than $1 billion in advertising—a figure that surprised even its most optimistic executives and may allow the broadcaster to break even on the games which have traditionally been a loss leader for the company.

The company is also giving audiences more coverage than every before by streaming additional content on cable channels and digital live streams. These are provided on platforms that consumers have come to expect will give them the power to choose when, where, and on what device they will be viewed.  

In order to support its traditional, advertising supported services, however, NBC has used tape delays on the broadcast services and has excluded many sports or blacked them outs on live streams—angering millions of consumers and setting off one of the greatest storms of criticism in the history of social media.

In trying to put its feet in both distribution markets, NBC is forcing the digital community to live by broadcast rules and in doing so has disrespected the audience and norms of cable and online platforms. The result has been widespread audience frustration and anger.

The only thing keeping audiences from going elsewhere are the exclusive national rights and the fact that most users don't have enough technical skills or inclination to bypass the ISP-based protections against streaming material from other countries. 

Hopefully, NBC will learn from the experience and get the formula better for the 2016 Olympics.

The Daily’s rocky performance shows legacy brands create digital advantages

The News Corp’s launch of the tablet newspaper The Daily in February 2011 was heralded as the future of news and revealing opportunities for major new entrants in the news market. After a year and a half of operation, the digital newspaper has lost more than $30 million, managed to gain only 100,000 subscribers—not a trivial amount but low for a global player, and has just announced that it is cutting 1/3 of its editorial staff and ending original production of sports news and commentary.

Journalistically The Daily is not a bad news product and its app is facile and effective. So why hasn’t it been more successful? The fundamental problem is that the digital-only paper has been overshadowed by the success of legacy print newspaper brands in the market for digitally delivered news.

The Daily has never been so brilliantly written and edited that it could gain the significant attention and acclaim needed to overcome the brand advantages of legacy news providers. Major newspaper—such as The New York Times, The Guardian, and The Financial Times—have used the strengths of their reputations and brands to make the largest inroads in digital subscriptions. Concurrently, larger

local and regional players have also been grabbing paid digital customers in their markets and providing additional competition to the digital startup.

The Daily has also had to compete with widespread availability of free digital news from news providers such as BBC.com, CNN.com and aggregators such as Yahoo! and Google. These have all been successful in attracting consumers who are less attached to print news providers and paid services.

Those who predict the demise of legacy newspaper companies often forget the critical importance of the credibility and trust those companies have with news consumers and many assume that print organizations cannot transform themselves into digital players that may become so successful they may one day drop their print editions. 

Brands are important for habitual news consumers and they tend to be highly loyal consumers of specific news brands. The Daily has been unsuccessful in breaking that loyalty, but more successful in creating relationships with persons who have not been strongly bonded to legacy brands. It remains to be seen whether News Corp. will be willing to maintain a relatively small news digital brand among its holdings, even if it manages to move The Daily into operating profitability.

Facebook's business problems are symptomatic of many large digital firms

Facebook is wrestling with a business challenge more traditionally found in legacy media: how do you translate consumers that don’t think they have a commercial relationship with you into relationships that that other firms will pay for?

Despite 955 million active users and increasing revenues, the company has lost a third of its share value since its IPO in the spring.  The exuberance that surrounded its IPO and overpriced its shares has worn off and investors are realizing that being big isn’t enough to ensure business success. Its latest earnings reports show the firm lost money, $157 million, in the second quarter on income of $1.18 billion.

Facebook’s challenges are symptomatic of a long line of “successful” digital firms that are experiencing monetization problems, including Yahoo, You Tube, AOL, and Twitter. Despite large numbers of users globally, they still lack effective business models to generate revenue levels congruous with their size. They may provide great communication functions for users, but they are not transforming very well from innovative users of technologies to highly profitable commercial enterprises.

Part of their challenge is that they have to focus so much effort on non-paying customers and those customers think of the services as personal communications—making them resistant to many efforts to monetize them. This problem has long plagued traditional media, but they are conceived as mass rather than personal media and have been around so long that many people are now used to a certain level of commercial exploitation. They also have a proven track record of return on advertisers’ investments that digital media have not yet been able to deliver for many types of advertisers.

Large digital players will continue to evolve and can be expected to improve their financial performance over time, but it will take a good deal of innovative thinking about the business rather than about the technologies and social value of their services.