Dear Colleague:
We are at the halfway point in our “100 Days of Change” program and I want to share with you the progress that we’ve made on ideas that fundamentally change the way we do business. Many of you have taken the time to write to me or to the various task force leaders with your thoughts and suggestions, and I’m extremely pleased by the level of energy and cooperation I’ve seen across our newspaper company.
One inescapable conclusion of our study is that our cost base is significantly out of line with the revenue available in our business today. It is equally inescapable that
during good times our industry developed business practices that were at best inefficient. For example, all newspapers look pretty much alike, and yet they are not similar enough to allow for efficient production or common content sharing. This must and will change. Another example is that while we have a tremendous opportunity to continue growing our advertising business with small customers, we cannot afford to do so by calling on every advertiser in person every other week and then having a team of artists build and rebuild their ads. We must and will learn to use outbound telemarketing and self-service ad platforms more effectively. I’m confident we can move to rationalize our costs without impairing our ability to give our readers and advertisers the best news and information products in our markets. Even with the cost reductions we are making we have far more resources devoted to reporting local news and information than any other local media outlet. Thus, each of our management teams is at work to complete a fundamental restructuring so we can turn our full attention to product innovation and revenue growth.
Next, we have a revenue and business model problem as opposed to an audience problem. Yes, it is true that fewer people read a newspaper on any given day today than they did in the past, but with the proliferation of media options, consumption of individual media types isn’t what it once was and probably never will be again. Our audience is still the largest of any local news and information media outlet. And when combined with newspapers’ Internet audience, our audience has actually been growing in recent years while our revenue has been declining. So it is our business model that must change in several ways.We believe we must begin to provide greater differentiation between the content of our free Web sites and the content of our paid product, be that paid product read in print, on a digital device like Amazon’s Kindle, or online. This doesn’t mean we wall
off our Web sites behind a paid barrier. Our sites must continue to be the superior and dominant free Web sites in their markets. This means they must offer the best in breaking news, staff and reader blogs, community databases and photo galleries. In fact, we need to expand the number of reporters, editors and photographers who are running a truly great blog, creating a rich dialogue of opinion and data sharing. We must do a far better job of reaching out to prominent citizens in our communities, those who already have a blog and those who don’t, and providing them a prominent platform to state their views. We must develop a rich network of correspondents to help us grow the deepest hyper-local community microsites in our markets. We must do a better job of linking to other great sources of content in our communities. And we must put staff resources behind building those channels of interest that have the greatest potential: those built around pro sports teams, moms and high school sports, to name a few.Exactly how much paid content to hold back from our free sites will be a judgment call made daily by our management, whose mission should be to run the best free Web sites in our markets without compromising our ability to get a fair price from consumers for the expensive, unique reporting and writing that we produce each day.
We must continue to ask readers to pay more for their subscriptions. Our print subscribers don’t pay us enough today that we can say they are actually paying for content. Rather, we only ask readers to pay for a portion of the cost of printing the paper on newsprint and delivering it to the reader’s doorstep. We must gradually, but persistently, change this practice. We ask our readers to pay for their subscriptions on the Kindle today, and we must begin doing the same thing on the iPhone and other advanced smart phones and reading devices that allow us to create a user experience worth paying for. We also need to make our paid product available through the Internet for those who prefer to read it that way. And we must innovate to constantly enhance the reading and advertising experience on these platforms.
Our sales forces must make a transformation similar in scope to the one that IBM underwent in the 90s when it went from a mainframe selling culture to a strategy of being true IT consultants to their clients, even selling them non-IBM products when warranted. In our case, we must fully make the leap from simply selling pages to selling audiences, and in doing so be able to sell packages of products, some of which won’t be our own. The best of our Hearst Newspapers colleagues are already doing this, combining our offerings with those of Yahoo!, Google, MSN, AOL, Ask.com Yahoo! HotJobs and Zillow and networks of local Web sites that we have assembled. All of these products are in our portfolio today. Our advertising task force has created a three-month course of transformational instruction built around a massive sales contest that each of your markets either has launched or is launching. I’m confident that most of our reps will emerge from this process set on a path to become topflight, consultative sellers of audience.
One final $overarching thought emerges from our look at advertising sales: we must use third-party printers in all of our markets in order to significantly add more color to our products, not so much for our readers’ needs, but to be more competitive in the battle for advertising dollars in a high-definition world.
Finally, while our savviest advertising customers know that our products still work well for them, as do our most passionate readers, we have done a poor job of telling our story. This becomes even more important as we change our business model. Our
communications task force has developed a wonderful new campaign that begins to put us back where we should be—on the offensive about the vital role we play in the politics, social lives and commerce of our communities. We’ll have samples of the campaign available next week on 100DaysofChange.com.
Please discuss these ideas with your colleagues, your managers, our customers and our readers, and let us know what you think. Our goal is to emerge from the “100
Days” with a cost structure we can build our future on and a business model that seeks, by 2011, to get more than 50 percent of our revenue from circulation revenue and digital advertising sales—two areas of our business that we know we can grow and grow consistently as this recession subsides.I know these are difficult times for those in businesses like ours that are buffeted by
so many forces. Yet I know that we have the wherewithal to emerge from this recession with a changed business, yes, but one that is back on a path of growth. Thank you again for your commitment to see us through this journey.
Best regards,
Steve
Hearst may be the first big newspaper company that "gets" what's going on with their business, and is actually doing something about it. Kudos.
Although I've been promoting various ways to increase digital revenue here, I admit that the pay wall may ultimately be the way to go.
I imagine this will lead to a wave of more pay walls. And why not? What is there to lose? The small and stagnant internet ad revenue? I agree that this may be too late... the dam may have already burst. But better late than never. And the implementation of ideas previously articultated on this blog and others (outsourcing printing, blog networks, sales/marketing revamp, etc.) is certainly a step in the right direction. Looking forward to seeing if it produces results.
Here's a letter I wrote to Romenesko two years ago.
Poynter Forums
View Forum Post
Topic: Letters Sent to Romenesko
Date/Time: 3/16/2007 4:47:31 PM
Title: Lazarus is right
Posted By:
Jim Romenesko
From SCOTT B: I just wanted to say "amen" to David Lazarus' column regarding pay-to-play. I'm a recent college grad working in TV news, and I've been saying for months that the newspaper circulation drain is directly related to those same newspapers giving away their product on the 'net. Of course, my peers think I'm crazy for saying that a local newspaper should charge money for their web site. But as long as news organizations cannot monetize their content on the web as they can in print, people my age are going to find it increasingly difficult to find a good job in this business.
Okay, but let's play devil's advocate for a second. Let's suppose local advertising agencies will become more successful at getting more local advertisers onto the internet... and national advertisers figure out how to make their online ads more effective. Internet advertising rates continue their rapid climb, print rates continue to decline. If more than 50% of a news organization's revenue comes from its web site, will the business side get more involved in story selection? After all, internet revenue is directly connected to the amount of views an article gets. Are newspapers then going to devote more resources into seeking out the human interest and celebrity-driven stories that consistently make it on the "most popular" lists?
I don't think any scenario here is healthy for journalism or our society.
