Knowledge Bridge

//Kevin Anderson /February 15 / 2013

Making money with digital: Four lessons in success

Last year, the Pew Center’s Project for Excellence in Journalism released a report based on data from 40 newspapers owned by 13 different companies in the US, and it contained the sobering statistic that for every new dollar earned in digital revenue, newspapers were losing $7 from the print business. However, in that group of newspapers, they did find a handful of newspapers that had reinvented themselves and were turning their businesses around, and they’ve released a new report looking closely at successful revenue strategies at four newspapers in the US.

The report looks at a range of smaller, local publishers rather than the big national and international news brands. The smallest newspaper, the Columbia Daily Herald in the south central US state of Tennessee, has a circulation of 12,744, and the largest of the media groups was The Deseret News, with a circulation of 91,628, in the western state of Utah.

While the transition to digital media can seem like an unending stream of grim headlines, it’s good to see forward-looking industry leaders starting to develop new business models to support journalism. There is no one-size-fits-all solution, but we’re seeing these leaders create unique models to meet the challenges and take advantage of their specific audiences and markets.

Diverse strategies for diverse audiences and markets

Before digital, the model for a successful media business was relatively similar. For print, it was a mix of subscription revenue plus various types of advertising including display and classifieds. About the only difference in the model between markets was the mix of subscription and advertising income. The US market was heavily reliant on advertising. Digital advertising has grown rapidly in the US, but US newspapers have been unable to grow their percentage of digital advertising. It is one of the reasons that the newspaper business has suffered so greatly, especially after the financial crisis caused a near collapse in print advertising.

Successful business models are emerging, but they are specific to their particular environment. There is no one-size-fits-all model but rather a number of strategies that reflect the diversity of audiences and markets for these newspapers. Here are some of the strategies.

Develop niche content – Just as the business model was much the same before digital, the content model was also broadly similar, and apart from language, this model was more or less the same around the world. That model is also changing. The report found that success with digital content often involves developing niche, specialist content beyond the broad categories of business, sports and lifestyle that have been traditional non-news content for news organisations.

The small Daily Herald has “rolled out more than a half dozen new revenue ideas in 2012 alone, some in print, but most in digital,” the report said. One of these strategies was developing a monthly health magazine and a “men’s lifestyle magazine”. They have done this despite having a small staff, and the health magazine has been “very profitable”, according to the publisher at the newspaper.

The Deseret News is based in Salt Lake City. The city is the capital of the Mormon religion in the United States, and the Deseret News has always served that community. However, CEO Clark Gilbert, a former Harvard Business School professor, said:

in a world of the web when you are a click away from something better, you have to be differentiated…You can’t do everything. So I am getting out of anything I’m not the best at.

Clark re-positioned the paper to serve the Mormon community. To do that, one of the six core content areas they focus on is faith and family. He said:

We want to own faith and the family the way the Washington Post owns politics.

He sees an opportunity to serve the Mormon community not just in Salt Lake City but nationally. He launched a national Sunday edition, which has helped increase Sunday circulation 90 percent. They also launched a text and video syndication strategy that Clark says “will perhaps be our most compelling form of long-term reach”.

Multi-platform sustainability – As we’ve said, multi-platform sustainability – developing content and revenue strategies that embrace both traditional and digital platforms – will be one of the major themes for the Knowledge Bridge this year, and The Deseret News is pursuing this model successfully. Their revenue mix includes 40 percent from television, 35 percent from print and 25 percent from digital. The Deseret News CEO makes one of the best arguments for a multi-platform strategy that I’ve heard.

In Gilbert’s theory of media evolution, the Deseret News print product is the crocodile, a prehistoric creature that survives today, albeit as a smaller animal. He believes the News, which has already shrunk significantly, is not doomed to extinction if properly managed. Deseret Digital Media is the mammal, the new life form designed to dominate the future. Armed with graphics, charts and a whiteboard that looks like it belongs in an advanced physics class, Gilbert speaks with the zeal of the cultural transition evangelist he has become. He argues that the path ahead does not involve merging the crocodile and mammal cultures, but maintaining them separately.

The results of this strategy are tangible. Digital media revenue has grown on average 44 percent over the last three years and will make up 50 percent of group revenue by 2016, according to Gilbert.

Manage print and digital separately – This was a key lesson not just at The Deseret News but other successful papers in the report as well. The smaller papers did not manage their print and digital businesses separately, but Gilbert believes that this is key to transforming the business. His two-step transformation strategy includes both repositioning the existing business but also in creating “a separate, disruptive business to develop the innovations that will become the source of future growth”.

Gilbert not only believes that it is important to manage print and digital separately, he also believes that to manage digital, it is important to bring in people from outside the newspaper industry. Gilbert himself is an industry outsider, and he hired people from digital companies such as Yahoo! and e-commerce site Overstock.com.

Create a “digital agency” – Two of the four examples in the report created an entirely new business, a digital agency that sold digital services to advertisers and others in their communities. The Columbia Herald in Tennessee and the Santa Rosa Press Democrat in California have both pursued this strategy. In Columbia, the agency builds websites for merchants and provides social media training. Santa Rosa, being a larger paper, has a fuller range of services, offering not only web development but also e-mail marketing, video production and search-engine optimisation services. As of January 2013, the Media Lab in Santa Rosa was providing a quarter of all digital revenue, and revenue at the agency is projected to grow 60 percent this year.

Operate a culture of nimble risk-taking – All of the leaders of these papers showed not only vision but were able to inspire necessary cultural changes in their staff. Dave Neill, the publisher of the Naples Daily News in Florida, said:

We are afraid. We need to be fearless.

Even the small Columbia Herald was able to foster and develop new products and revenue initiatives. The report said, “they see the ability to continually produce new projects as integral to the organizational DNA and central to the paper’s ability to survive at a time of harsh economic conditions.”

Print is not dead – Print has suffered decline but, as Gilbert puts it, while the business is smaller, it isn’t dead. It just needs to be managed well. In some of the markets, print remains strong, and the successful strategy involved protecting the print business. The newspaper in Naples is in a relatively wealthy retirement community in Florida. Older Americans still read newspapers so it wouldn’t make sense to pursue some of the digital strategies that the other newspapers are using.

Leadership – What comes through loud and clear throughout the report is that to develop these strategies, it took a clear vision and strong, inspirational leadership.

the leaders at these papers are risk-takers who concluded that the biggest risk was not rethinking their business models.

The change necessary is not trivial, and the report said that it took perseverance to get the buy-in necessary.

Indeed, 10 of the 13 newspaper executives interviewed for Pew Research’s March 2012 report [the original 40-newspaper report] identified internal tensions between the legacy and digital cultures as the biggest challenge to business success.

However, getting people to accept change is easier when you can point to success, and this report delivers that. Once you’re armed with some successful strategies, then it is down to execution, and as Gilbert says that strategy is only ever 49 percent of the solution. He added, ” For us to get where we want to go will require execution at the highest levels.”

Article by Kevin Anderson