Only Yesterday

reporting on their own demise…

In 1981, KRON4 (of all people) ran the story embedded above.

It was about a radical new experiment.  A newspaper in San Francisco was putting its newspaper online.

As the story says, it was not going to read by a lot of people. Only 3-4,000 people in the San Francisco area even had a home computer.  500 had registered an interest in reading the paper online.

That story aired 28 years ago, which is about right for the impact of a new technology to be felt.

Had you wandered over to the SF Examiner in 1981 and told them that these new computers and their green screens would one day destroy the entire newspaper industry, they would have told you that you were out of your mind. Yet sitting there, in the newsroom, like some kind of weird virus, was indeed the engine of the destruction of an entire 350 year old industry.

Go to any television newsroom and tell them the same thing, and they will probably react the same way the folks in the Examiner newsroom would have in 1981.

It’s just not possible.

It is.

And it is going to happen.

As surely as online publishing destroyed the entire business model for newspapers, online video which is just getting started now (a bit, but not much more advanced than online text was in 1981), is going to make the entire television news business model a museum piece.

Can television news operations prepare better for what is surely coming than newspapers did?

Don’t know.

Not sure anyone can.

It just requires too much letting go what is well-known and established.

When the Titanic had only just struck the iceberg, the ship’s architect, upon examining the damage, already knew that the ship was fated to sink to the bottom of the ocean.

For those on board the still stable ship, having dinner, dancing in the ballroom, the notion that they should take to the lifeboats (or maybe start building them) would have seemed ridiculous.

Women and Children First

And we had 70% market share….

The Day of Reckoning has arrived.

Or at least it has started.

Sam Zell’s Tribune Company goes Chapter 11.

The New York Times is so close to the edge that it has to mortgage its new headquarters to raise $225 million to meet a debt note that comes due May 2009.

NBC announces yet another round of cuts, and we are still at the beginning.

Change… vast and rapid change, is coming to the media business.  Now its a matter of survival, and only those willing to make the most radical changes in cost of operation are going to survive.

And this is not limited to the newspaper business, although they are first in line because the web carried text before it carried video. About 10 years before. So what television operations are seeing happen to newspapers today is going to happen to them tomorrow.

The ability of the web to carry text for free to 2+ billion homes around the world changed the fundamentals of the newspaper business.  It no longer made any sense to gather news, print it on paper and sell it on the street corner.  As much as 85% of the costs associated with publishing a newspaper are bound up in the cost of the physical production of the paper – the presses, the ink, the trucks to move the product around and put it in your hands.

The web offered an alternative – not a parallel distribution method, but an alternative. One or the other.

And, at the same time as the web offered that alternative, it also began to eat newspaper’s advertising dollars.

In the past decade or so, newspapers globally have been in decline. This isn’t a result of the recession. This was happening in the boom decade.

Newspaper’s revenues have been eroding over time, ironically, as younger readers migrate to the web (or indeed simply started there and never left).

Newspapers have two options now: follow the model of the Christian Science Monitor and pull the plug on print entirely, or go out of business.

In a wonderful piece by Jay Yarrow, Donald Graham, Publisher of the Washington Post said, “The business model that used to work at newspapers does not work any more.”

Television news is not far behind. Not by a long shot. Just ask the people who work at NBC.  And the local stations are going to follow suit.

That does not mean that news is not a viable business. But, as Donald Graham says, it is not viable the way it has been done until now.

The answer, I think, is a radical cost cutting on the production side, commensurate with the radical cuts in revenue and income that the web has wrought.  Fortunately, technology is on the cost-cutting side.

Small cameras and laptops in the hands of well trained journalists can create a treasure trove of digital content on a daily basis from all over the world.  The technology already exists.

Not to put too fine a point on it, but for $25 million, one-tenth of the money the Times has raised by mortgaging its building to one time service the interest on their debt… for one tenth of that, NBC News could field 250 digital journalists around the world, at $100,000 each.  Those reporters, all carrying digital cameras and laptops could file daily enough material to feed all NBC operations, all web news, as well as a great deal of NYtimes.com.

The asset to protect here is the content – the journalism.  Not the building.

The place to feed here is the web.

Media companies have an opportunity, and a rapidly closing window, to re-invent themselves as digital content creators, or they can close the doors and turn out the lights.

The potential is there.

It’s in the newsroom.

Put it to work.

Leverage (not to use too dirty a word) off the only asset you have. Your journalism.

In a world of global free internet access, newspaper’s and television station’s only real asset goes home every night.

If they don’t come back, you have nothing.

If you equip and train them for the new digital world, you have everything.

The New Star Ledger

Star Ledger VJ Andre Malok’s tour de force.

Take a look at the quality of the reporting, the shooting, the editing.

The whole package.

The Newark Star Ledger is recreating itself as a digital content provider.

It’s the model for the newspaper of the 21st Century.

Could this be the future for newspapers across the country?

It’s a hell of a start.

Here’s the link to the paper’s part of the story. Print story by Amy Ellis Nutt.

News from Newark

A shy New Jersey chiaropractor suffers a stroke on a golf course, and his life is suddenly transformed. He can’t stop making art.

We were out in Newark this week at a mass meeting to talk about new directions for the paper. As the largest newspaper in New Jersey, and as New Jersey is the only state in the US without a major network TV news operation, we think the potenial here is limitless.

Contrary to popular rumor, the paper is not going out of business. It has shed a great deal of its costs however, and is now lean and mean and ready to embrace a new digital and video future.

The promo above is but a tease for a video/print special release this weekend.

This isn’t dodgy hand-held video. And it’s great reporting as well.

We think it’s a preview, not just for the weekend, but for the future of online journalism as well.. and newspapers.

The Repository of All Human Knowledge

what would you like to know….

OK

It’s one of those late night Science Fiction movies in which a time traveller goes into the future and discovers that the whole world has become a land in which learning and reading and knowledge are forgotten.

Then, our hero discovers a secret cult, buried far away, which has committed to memory all of human knowledge and struggles to keep the flame burning.

You have seen this plot a thousand times, in a thousand different iterations, from Matrix to The Time Machine or Fahrenheit 451.

It resonates so well with us because it is based on history experience.  During the Dark Ages, the vast reservoir of human knowledge was indeed reduced to a few monestaries across Europe where monks kept the flame of learning and reading and writing alive while the rest of the world was plunged into darkness and ignorance.

Today, these nodes of knowledge are not monestaries, but newspaper newsrooms.

There, compressed within a few thousand square feet you have the combined residual knowledge of an entire community. People who have, quite literally, spent their lives learning about and studying the arcania of the city council meetings, the local schools, the local public services, the local water works, the bond issues, even the local restaurants or high school football teams.  It’s pretty amazing when you think about it, and a resource of unimaginable value.

Unimaginable value if you know how to mine it.

Taking their knowledge and printing it on paper with ink is probably not the best way to exploit this asset in a digital age.

We are facing a curious reversal of valuations, and it is a relatively new phenomenon.

Not so long ago, the machinery to print and distribute this information was the rare and expensive part of the news business.  AJ Liebling said, “freedom of the press is guaranteed only to those who own one”.

Liebling, who wrote for The New Yorker, and who died in 1963 lived in an era in which presses were notoriously expensive.  The Sulzbergers could afford one. The rest of us could not. And this had been the case since Gutenberg first put paper to inked letters five hundred years ago.

Ironically, at the same time, information was considered to have marginal value, at best.

The basis of the newspaper’s economy was founded in the value of the presses.  Again, Leibling:

“People everywhere confuse what they read in newspapers with news.”

Now we are suddenly in an era in which anyone can publish globally any time (like this blog), for free.

The value of the press is next to nothing. But the value of the information?  Priceless. What, after all, is Google, but a residual font of information?  Information that people want.

The newspaper newsroom is a goldmine of local information, and it is information that people want and are willing to pay for.  But it has to be organized.  The way it is organized now, on paper and ink, and sold once a day on the streetcorner does not work. It is archaic in a web world.  But that does not mean that the information that is there, and the knowledge that is there has no value.

On the contrary.

It is not the staff in the newsroom that needs to be chopped away.

It is the press and the paper.

Gresham’s Law

World’s first media critic…..

Sir Thomas Gresham was an English merchant who worked for both King Edward VI and Queen Elizabeth I (1519-1579)

Gresham was also the world’s first media critic, although he didn’t know it at the time.

Gresham is best known today among Economics 101 students for what is commonly called ‘Gresham’s Law’. (Although Gresham never formally wrote anything out), as a merchant he quickly came to understand that ‘bad money drives out good’ which is the basis of ‘Gresham’s law.

What that means (as a grad in good standing of Econ 101, is that in any system that has two currencies, the debased (or more worthless)) currency will drive out the more valuable currency. People prefer to keep the currency they perceive as more valuable and hence will more quickly trade the currency they view as worth less, relatively.

The most recent example of this, at least when it comes to money, is our own dollar.

Until 1934, a US dollar was worth 1.5048 grams of gold, and could freely be exchanged for that at any time.  Pretty remarkable when you think about it.  Dollars and gold and gold coins were freely exchanged and really interchangeable.  When they said ‘sound as a dollar’, it meant something.  (The UK Pound, interestingly, is called a pound because 1£ once was equally exchangeable for a pound of silver. That’s why it was called Pound Sterling.. and still is).

In any event, in 1934, Franklin Roosevelt, by executive order declared that the dollar henceforth would be redeemable for .850 grams of gold, effectively debasing the dollar in half (or almost so) immediately. The reaction? Gold disapperaed from common exchange almost immediately. People naturally began to horde gold and trade more paper dollars.  This created an independent market for the value of gold, and by 1971, one dollar was worth, effectively 1/35th of an ounce of gold. In 1971, Nixon disconnected the dollar from exchangeability at all, and henceforth the dollar was backed only by ‘faith in the US Government’. Gold itself was traded entirely independently from paper money.  When was the last time you bought something for a piece of gold? Or a gold coin?

Now, all this is very interesting, but what does this have to do with media?

A lot, really.

Our currency, so to speak today, is information. More than coins, if you think about it.

With the rise of the Interent, we have entered a world of “two currencies”, just like Gresham’s world.  I have printed newspapers but I also have online newspapers.  Two currencies, representing exactly the same thing.

In our own “Gresham’s Law”, the more dynamic currency drives out the less dynamic one. Hence, people are more likely to ‘trade’ online news than paper news.  It’s more easily acquired and it’s more flexible – it is more responsive, it changes faster.  This does not mean it is ‘better’. In some ways, it is debased… perceived as cheaper, hence more rapidly traded.  One is more likely to post an online article than clip and mail the very same article from the NY Times.   There is a difference. And in this difference, the more dynamic media drive out the less dynamic.

When all media on the web are compared, the same rule holds true – The more dynamic drives out the less dynamic.

Take two real estate web sites:  One has video, the other is only text, yet they are selling the very same house. Which garners more success?  Two dating sites: One is text only, the other has video. Which garners more dates?

Now take two news sites.  News is in many ways a commodity.  One news site has video, the other text and photos. Which garners more hits. Which is more ‘popular’, hence higher ad rates, hence it survives?

In England, Henry VIII and his son, Edward had progressively debased English coins by decreasing the silver content and adding brass.  England was deeply in debt.  Gresham urged Elizabeth to restore the value of the English money by pouring gold back into the coins, making them  more attractive to traders. This she did, at great cost, but in doing so, restored the solvency of the English economy and wiped out the debt.

Gresham’s discovery was not really all that new. Aristophanes made the point in The Frogs in 405 BC.

The course our city runs is the same towards men and money.

She has true and worthy sons.

She has fine new gold and ancient silver,

coins untouched with alloys, gold or silver,

each well minted, tested each and ringing clear.

Yet we never use them!

Others pass from hand to hand,

sorry brass just struck last week and branded with a wretched brand.

So with men we know for upright, blameless lives and noble names.

These we spurn for men of brass….

Out of Detroit

Motown news

When it comes to cutting edge trends, we generally say that California leads and the nation follows.

When it comes to contracting industries, maybe that accolade should go to Detroit.

This week, as automakers made their case for a $25 billion bail-out, one could not help but think that this was but a harbinger of what is going to face every other industry in the very near future.

Newspapers and now local TV are also facing the same kind of financial downturn and pressure, so it might be reasonable to look to Detroit to try and unwind the Media Mess, and therein perhaps, lies an answer or two.

In 1982, there were two newspapers in Detroit.  The Gannett owned Detroit Free Press and the Knight Ridder owned Detroit News.

One was a morning paper, the other and afternoon. One was a broadsheet, the other a tabloid.

Yet both were in trouble.

Detroit, it seemed, could only support one paper.

In those halcyon days long gone, it was thought that it was unhealthy for a city like Detroit to only have one newspaper (today, we are facing the very real prospect of no-newspaper cities).

In any event, to cut operating costs and stave off a perceived journalism disaster, the papers filed for something called a JOA, or Joint Operating Agreement. The papers would henceforth share the same printing plant, the same back office to do the books, and perhaps even the same newsroom.  Economies of scale

Such a sharing arrangement (assuming the principals didn’t inadvertently kill each other), would have been a clear violation of anti-trust laws, and so they needed clearance for the Dept of Justice.

Hence, a JOA.

Today, as newspapers move to the web and video, and TV stations do the same, they are finding themselves increasingly on each other’s turf – in terms of viewers/readers, content and advertisers.  In many cases, there simply is not enough advertiser dollars or viewer/readers to go around. Something has to go.

If we wan to preserve the diversity of opinion that multiple media outlets offer (and that is a debate for another day), perhaps what is needed her is a kind of Media JOA.

Most local TV stations start their news day by reading the local paper. That’s where they get the bulk, if not all, of their stories. When the local paper goes, the local TV news will not be far behind. Mostly because their best source of information has suddenly vanished.

What is killing local TV news (and networks, but more slowly) is its massive overhead. The enormous staffing required (or so it seems) to put the product on the air. (Not to mention building, studios, trucks, tower…)

Why not create then, a kind of media JOA.  A sharing of resources with two distinct and different outlets.

First, as newspapers begin to send their reporters out on the street with video cameras, the local news should use that video for their TV news shows.  Makes sense, no? Why repeat the same act over and over. Cut the costs and share the revenue as well as the content.

Second, share the newsroom. Run the local newscast from the newspaper’s newsroom. Looks like ‘real news’ without having to build a set. Hey, it IS real news. What do you know.

Share advertisers.  Bundle the ads for the paper and the on air play (and the web) all at the same time. One buy helps all, and by the way, you only need one ad sales staff, not two.

Getter a smaller piece of a shrinking pie than no pie at all.

A Silver Lining

cotton…..

Sometimes, in the destruction of one industry lies the seeds of another one.

But it is not easy to see.

In 1852, the discovery of domestic sources of oil spelled the death knell of the whaling business.  In New Bedford, the Dubai of the 19th Century, the foundation of their entire economy was headed for the graveyard.  The ‘captains’ of the oil business were unemployed, their markets destroyed, their ships, representing massive investment, sat idle.

It was the end.  Or seemingly.

One of those Captains,  a man named Hathaway, saw something else.

He used the ships that used to chase whales to the furthest reaches of the Arctic and the Pacific instead to head south to Georgia and Mississippi, where they picked up…. cotton.

He rounded up investors in Massachusettes, and even though their businesses were terribly depressed, got enough capital to open a small mill to turn the cotton bolls into cloth.

He built the first of what would become a massive explosions of mills in New England, kicking off a whole new industry and a whole new economy. Whaling might be dead, but between the ships, the shipping expertise and the hard-working people of New England, an entire new industry would be built – textiles.

Hathaway soon partnered with another novice miller in Massachusettes named Berkshire and together they founded Berkshire-Hathaway, a textile firm that would flourish until the 1950s, when the arrival of Air Conditioning made it more economical to build and run mills in the south, where the cotton came from (but that is for another day).

The Berkshire Hathaway company was one of the first acquisitions made by Warren Buffett. Today, his entire empire lives under this name, and a single share of Berkshire-Hathaway, if you could even get one would cost you $101,000.00, as of this morning.

Now, what does this have to do with newspapers and video?

Like the whale captains of the 19th century, newspaper owners find themselves under attack from a new technology, in this case the web.

Their once great printing presses threaten to become museum pieces, much as the whaling ships that sit in Mystic Seaport in Connecticut.

But like the Hathaways, the newspapers have a very valuable asset that they now must reconfigure to work for them in a different way.

That asset is their people.

Newspaper newsrooms are filled with people with 15, 20, 30 or more years of experience doing one thing: learning about their communities.  And this is a resource that people will pay for – just not on paper so much any more.

As the economy tightens, the natural inclination amongst newsrooms under financial pressure is to pare back their staffs.

In doing this, you are undercutting the one resource that you have that is unique and of value.

What you have to do, as Captain Hathaway learned a long time ago, is to reassign your most valuable asset to serve what the market is demanding.

It wants information.

Thar She Blows…..

Today’s killer is tomorrow’s endangered species…

The flight from Los Angeles to Brussels is endless, so it gave me plenty of time to read Snowball,Warren Buffett and the Business of Life by Alice Schroeder.

The book is much more than just the life of Buffett (which is plenty in and of itself), it is also filled with fascinating asides.

One that really grabbed my attention was the history of Berkshire Hathaway, a New England  firm that Buffett bought in the early 60s, and whose name became the foundation of Buffett’s empire (though hardly its product).  Berkshire Hathaway was a textile mill in an era when textile manufacturing was headed south (literally), abandoning Massachusettes for Georgia and South Carolina, where the cotton was closer and labor was a whole lot less expensive.

The company was based in New Bedford, Mass, which I had no idea had once been North America’s richest city.  (Schroeder footnotes extensively, so I assume it’s all true).  The wealth of New Bedford had been based on whaling, which was, quite literally, the oil business of the 18th and 19th Century.  Whale oil was used to light the lamps that the Founding Fathers of this country wrote the Constitution by, and much beyond.  It was the primary source of illumination after dark.

As the market for whale oil expanded, the number of whales nearby began to drop.  Ships out of New Bedford had to go further and further – to the Arctic, to the Pacific, to find their prey.  And so the ships got bigger and better and faster. And New Bedford grew richer and richer.  Think of it as Dallas or Dubai.

Then, in 1859, oil was found under the ground in Titusville, Pennsylvania.  And a whole lot of other places after that.

It turned out to be a whole lot cheaper to drill in Titusville than it was to take a ship to the Arctic to achieve the same end – keep the lamps burning at night.

So the basis of the economy of New Bedford collapsed – and so did its ranking as the Richest City in North America.

This might be the end of the story. Yet another example of ‘creative-destruction’ of new technologies. But there is a coda here (actually a coda to a coda), which is what makes the books so interesting.

As the whaling ships grew faster and stronger, it became obvious that they could be used for more than just collecting whale oil.  So in 1888, Horatio Hathaway organized a group of investors to pursue what they saw as ‘the next business trend’, and began using the ships to drive the textile trade.

This was not the original ‘core business’ of New Bedford, but textiles soon came to replace whaling as the foundation of New England’s economy.

Now, what does this have to do with video and the web?

First, new technologies, like drilling for oil (and as we’ll see later, air conditioning), can evaporate what seems like a stable business overnight.  But if you are smart, and look carefully, the seeds of not only survival but success can be buried in your dying business.  You just have to be able to separate yourself from what you perceive to have been the ‘core business’.

Take Newspapers.

A business in serious trouble because of the ‘discovery’ of the web. Like the oil field of Titusville, a cheap, seemingly inexhaustable source of distribution to replace the costly paper, ink and daily trips to the Arctic.

But like the whalers with their ships, the newspapers also own a resource of enormous value: a machine to gather and produce local information.  Probably its final destination is no longer paper and ink; it might not even be ‘news’, but the value of the machine should not be lost… rather repurposed.

Darwinian Journalism

An evolving medium

In the Autumn of 1836, The Beagle, a British ship on a 4-year voyage around the world dropped anchor in the Galapagos Islands, off Ecuador.  The ship would stay for a month.

Aboard was a young naturalist, Charles Darwin.

What Darwin found on The Galapagos would forever change the world.  And it began with finches.

Darwin noted that the finches of The Galapagos seemed to change from island to island. Some had longer beaks, some had curved beaks.  The changes reflected the plant and insect species on the island that the finches fed upon.  The finches seemed to have adapted, changed themselves, to survive, as the environment changed.

Initially, Darwin thought he had simply discovered varieties within the same species. It was not until The Beagle returned to England and Darwin sent his finches to John Gould, a taxidermist for the Zoological Society, that the import of his discovery became known to him.  Gould told Darwin that they were not varieties of the same species, they were entirely different species.  The import of the discovery was such that it was printed as front page news in The Times of London.

Darwin would go on to publish, first a 30-page manuscript in 1842, and ultimately his book, The Origin of Species, but not until 1858.

Now, what does this have to do with media and journalism?

Journalism, like the finches, is, I think, a living thing.

Prior to Darwin, the world had been viewed as steady-state. That is, that which was had always been. The world was immutable.

After Darwin, we would come to see the world as a constant struggle for survival, a never-ending story of life and death, of evolution and extinction.

The finches adapted to their new environments, they evolved into new species to do so.

Newspapers today are also faced with a new environment. The world that nurtured them, that gave birth to them, has changed.  The web, new technologies, shifting demographics.

In a Darwinian sense, if the news business is to survive, it must, like the finches, evolve. It must in fact, become an entirely new species.

One that is physically reflective of the environment in which it feeds – like the finches.

This is not a matter of paying lip service to a few ideas to see if they work out, but retaining the old design. The finches that failed to adapt are not here to defend themselves.  Like any species that does not adapt, they became extinct.

So too for any media or news business that does not evolve to the new realities around them.

You do not get to have both. You do not get to try a curved beak while keeping the old one, ‘just in case’., or because it has worked so well in the past.

Darwin’s world was cruel and unforgiving.

Just like the news business.