Q&A about the changes in the business of the ADN

Posted by editorsblog

Posted: January 20, 2009 - 9:54 am

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Tony Hopfinger co-publishes a local news blog called the Alaska Dispatch. A couple of weeks ago, he wrote and asked if I would participate in a Q&A about the current state of the newspaper industry, the McClatchy Co. and the Daily News.

I told him I would if he would do the same with my questions about independent blogging. He was up for it, so we agreed to swap Q&A’s, with both of us posting the interviews simultaneously on our respective blogs. (You can see his answers to my questions posted below.)

What follows are his questions and my answers.

McClatchy Co.'s stock has traded in recent days below $1 a share. What would happen if the stock price hit $0? Would McClatchy still be in a position to operate? How much should investors and customers of McClatchy worry about the stock price? What is the upshot of the company's performance these days? (I know Howard has mentioned a few thoughts on his blog about this topic.)

Stock price reflects Wall Street’s bet on the prospects of the company and has no direct effect on operations. If the stock price falls below certain levels, it can be “delisted” from the New York Stock Exchange, in which case it would be traded elsewhere. How well it trades determines some of the company’s capital capacity, but has no effect whatever on the balance sheet, operating profits or the like.
McClatchy management has always said it did not make business decisions based on influencing the stock price, and that remains as true now that the price is low as it was when it was high.

It’s been well reported that stock analysts are pessimistic about the entire newspaper sector, but McClatchy expects that when business performance improves, as we are confident it will, the markets will respond by valuing the stock more highly.

I don’t think stock price has any relevance to customers, either readers or advertisers. If you need to buy a car, how much does the price of Ford or Toyota stock influence your decision? Readers will choose the Daily News if it gives them valuable information they want, and advertisers will use the medium if it serves their business needs. Wall Street has nothing to do with that.

I own a modest amount of McClatchy stock, and I don't worry about the price. I’ll admit that I feel happy when I see it go up, and less happy when it goes down. Of course, the same is true of my mutual funds. These days, I don’t look at any of my stock investments if I can help it.

How are Alaska-based advertisers responding to the online ad environment, and specifically for the Daily News?

I think our local advertisers are starting to learn how to take advantage of online opportunities, and will become smarter and smarter about them as they experience the benefits. Especially for local advertisers, online is new and unfamiliar. Advertisers with lots of experience in print and broadcast now have to figure what works best online, and how to mix print and online for the best result.

We’re all moving into the new reality together – advertisers, readers and journalists. The Daily News is the only medium in Alaska that can offer advertisers a portfolio of ad options: the broad reach of the daily paper, niche publications, online advertising and other digital products like mobile devices, email alerts and electronic newsletters.

A new partnership with Yahoo, which rolls out this year, will greatly expand our online capabilities, allowing our sales force to offer local advertisers the power of demographically and behaviorally targeted online advertising for the first time. We expect that to be a powerful offer.

The paper, which I'm guessing is the largest venue for online advertising in Alaska, seems to have reasonable ad rates. What hesitation, if it exists, has made Alaska advertisers slow to get their feet wet in the online ad environment?

I think your assumption is correct. To the degree that there is hesitation, I would imagine it's because advertisers behave like any consumer: They are wary of spending money on something that’s new and unfamiliar. Once they try it, gain a better understanding of the value proposition, and learn what works, they will do more and more of it.

My job as an editor is to produce content that builds the audience, because access to our audience is what advertisers buy. With respect to content that builds an audience, adn.com is a phenomenal success (see my earlier post on our 2008 traffic).

I’d also note that we have the Alaska.com website, which is really going to develop this year as the state’s premier tourism site. We believe the long-term opportunity there is huge.

We’re also looking hard at the opportunities to build our online Yellow Pages business. We already have the best online Yellow Pages in Alaska. Local advertisers may be ready to switch from expensive ads in one of three printed Yellow Page books to something more economical online.

How can this be solved and what advantages are there in the online ad world vs. print advertising?

It's important, first of all, to understand that there is still a large print audience. It’s surprising to me that some people forget that. Advertising in the newspaper remains amazingly effective. In Anchorage, to reach the number of readers who see the Daily News in any given week, you would need to combine the audiences of Channel 2's 6 and 10 p.m. broadcasts with the half-dozen top-rated radio stations for the same period. The reports of the newspaper’s death way are premature.

When you add in our adn.com audience, nothing in the Alaska market comes close. The challenge for the Daily News as a company is simply to be an effective sales organization, one that helps advertisers understand both the newspaper’s and the website’s ability to reach that very large audience.

The big change in our advertising situation has been the loss of private party classifieds -- the mattress and box springs or used snowmachine for sale, or the roommate wanted. That advertising has largely left the paper to go online for free and won't come back (unless we figure out a radically new approach). Private party ads like those are perfect for the immediacy, searchability and low overhead of the internet.

You don’t need a large audience to sell a queen mattress; a small, self-selected group of potential buyers is perfect. That’s Craigslist. But if you're a business that needs to sell dozens or hundreds of mattresses, you need a huge audience and you can't wait indefinitely for that audience to seek you out.

In Alaska, the Daily News offers the big audience: some of it we reach in print, some of it online. A paid ad in the paper to sell one mattress just doesn’t make sense any more.

Some people seem extremely, almost frantically eager to pronounce the newspaper industry dead. I do believe some newspapers and newspaper companies will go out of business, but I don't think we’ll see the end of newspapers in my career, which should last through the next decade.

There are still lots of people who enjoy reading newspapers and they're not all reading on their deathbeds. Not as many as there once were, but still a lot. The McClatchy Co. has been around for 150 years, and not all of that time has been a walk in the park. We survived radio and we survived TV, although not everybody did. TV helped kill off hundreds of afternoon newspapers.

The Sacramento Bee, McClatchy's flagship paper, was an afternoon paper until it saw change coming and switched to morning. McClatchy was one of the first companies to foresee hard times for afternoon papers. Here in Anchorage, The Anchorage Times was an afternoon paper that didn’t recognize the danger. The Times declined to switch to morning, until it was too late, and it died. By adapting to changing circumstances, the Sacramento Bee and papers like it were able to survive and thrive.

We may be facing another major die-off of newspapers. The danger is especially acute for large, metropolitan dailies. The key question is which companies will adapt well enough and fast enough to survive. I believe the McClatchy Co. will be one that does.

I remember reading a few years back that McClatchy and other newspaper chains had invested in a company (I think from MIT's tech lab) to create electronic ink screens that would read like papers. Are those efforts still in the works and could you envision a time in the near future where such thin screens would be available to your readers

I haven't seen much about that technology in quite a while. Amazon has Kindle, and I've read that as a way of reading books interest in it is growing. I believe the New York Times has also been working on an electronic newspaper product. McClatchy still has modest investments in technologies we believe make strategic sense, but we aren’t and don’t want to become a technology company. We gather, organize and disseminate information. We need to be able to do that through whatever technology our customers want to use. It’s possible that will include electronic ink screens some day.

I would note that the U.S. seems to be pretty far behind much of the world in the development of cell phone technology. It seems to me that cell phones will become more and more important as a way for companies like ours to distribute information.

Similarly, do you envision a time in the next year or two when the Daily News will cease print publication, harnessing its resources completely online? From the sidelines, it would seem that at some point soon newspapers would find it financially better to end their print editions, rather than slowly cutting back and feeding two labor-intensive products? Do you agree with this?

There is no chance of our ceasing to produce a printed newspaper in the next two years. It would make absolutely no sense. A surprising number of people don't seem to realize that we’re running a substantial, solidly profitable business. Our business model has been disrupted, and revenues are down, so we’re having to change what we do and how we do it, but the newspaper is not about to go away.

It’s wrong to assume that the challenges newspapers face today will get endlessly tougher. We’re in the midst of the worst American economy in 80 years, but that won’t last forever.

The grave dancers underestimate our company. Two years ago, no one, including me, would have predicted that we could produce the state’s largest daily paper, and its best website, with 40 percent less staff and still have the largest audience in our history and still be solidly profitable. It wasn’t easy or painless, but we did what we had to do.

And in the same vein, has the Daily News considered selling its print press and contracting with the new owner? Could this be a good solution to overcoming the challenges of producing two very distinct products?

Some papers are doing this. McClatchy's paper in Idaho, the Boise Statesman, is one. As it happens, there isn't another press in Alaska big enough to print the Daily News, so that isn’t an option for us. On the other hand, smaller publishers in Alaska might be able to save money by outsourcing their printing to us. We could provide that service, saving them money and helping our own bottom line. Such conversations are taking place.

The Daily News has more readers than ever. How do they read and use the online edition vs. those who are still reading the print product? What steps must papers take to accommodate and satisfy online readers without compromising their traditional and core missions? For example, blogging has virtues but also takes time away from traditional reporting and presentation of stories.

We do have more readers than ever. You ask a big question that I'll try to answer concisely.

adn.com has many virtues, but I would say the principal ones are immediacy, interactivity and the depth of archival material. Readers can get information fast. A printed paper can’t compete with the utility of a breaking news email alert at 4 p.m. Friday saying an accident has closed the Seward Highway.

With respect to interactivity, readers can comment on stories and post their own photos and video. And they have access to our archives, so they are not limited to just the information created on any given day.

The newspaper, on the other hand, is a more pleasant reading experience. Take it anywhere. Lean back in your chair with a cup of coffee and enjoy the serendipity of turning the page and finding something you didn't know would interest you. I think people sometimes take for granted just how well black type on white paper works as a way to get information into your brain.

Some newspaper journalism traditions may evolve, but I don’t think our core mission will fundamentally change as we expand to online.

The interactivity of the traditional newspaper was pretty well limited to letters to the editor. Otherwise, all the communication went in one direction -- from the newspaper to the reader. It's now possible for readers to comment, contribute and participate actively in the presentation of news. We're getting used to that. But as any reader of our comments knows, that interactivity is not an unalloyed good.

A news story in a traditional newspaper might have gone through four or five editors and a proofreader before a reader ever saw it. In our current online operation, only one, or maybe two, editors and no proofreader will see a story before it goes online. That is less quality control than we had traditionally.

With the various formats available online, like blogs, we can easily publish useful or interesting little tidbits of information that would not have cleared the bar for a story in the traditional newspaper.

I love the new storytelling tools online. Things like video, photo galleries, audio slide shows, and the ability to post source documents. These are great additions to the journalist’s toolbox and we’re still learning to employ them effectively.

As you suggest, blogging poses a risk to the print newspaper approach to news. Blogging can easily merge the traditionally distinct roles of reporter and commentator. We have to make a conscious effort to produce blogs that keep those roles separate – some that are commentary and some that are reportage.

The core mission of our business remains the same: gather, verify, package and disseminate information, with a special focus on information that informs the electorate and thereby makes democracy possible.

That’s why it’s so damned important and worthwhile for us to overcome the challenges that confront our business.

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