NEW YORK -- When many of your bosses -- the executive teams of publicly traded news companies -- meet twice yearly with their bosses (investors and analysts), the talk is relentlessly focused on "creating shareholder value" and the bottom line.
But a new bottom line emerged during this week's
Mid Year Media Review. In fact, the silence was deafening on expected earnings per share for 2006 and 2007. Instead the execs wanted to talk about a promising online future and how wholeheartedly they are now committed to making that business, still relatively small, a material part of company revenue and earnings.
To a panel of CEO's, analyst
Peter Appert of Goldman Sachs, posed a version of a question
I wrote about 18 months ago: how long will it take online to grow to 25 percent of revenue?
"June 2011,"
Robert Decherd of Belo shot back and drew some laughs from an audience assuming he was mocking the crystal-ball pseudo-precision of the question. But minutes later Decherd allowed as how his company had recently done some scenario modeling on the question, so he was not entirely kidding.
In the break room,
Paul Ginocchio of Deutsche Bank, and I crunched the numbers and got the same result. Online now accounts for 6 percent of revenue on average. Assume it continues to grow at 35 percent a year. Assume revenue growth at the newspaper itself will be flat or 1 percent negative. Online reaches 25 percent in 2011.
So for those in the trenches the view looking forward is for at least five years more of what more than one of the CEO's called "transformational change." Things feel disruptive now? Could be you ain't seen nothing yet.
In both the panel discussion and his company presentation, Decherd provided particulars.
"No one in the newsroom fails to see the change (in how people consume media)," he said. So at the
Dallas Morning News, for example, editors are tackling questions like "how do still photographers, Pulitzer Prize winners, get excited about videography for the Web?"
For 2006, Belo is expecting to increase operating expenses 12 percent to support online and niche publication initiatives. That is a genuinely big deal. In effect the company is daring to put investments ahead of the kind of cost cuts that pacify the Wall Street crowd with brighter short-term margins and earnings growth.
Another part of Belo's plan involves "shifting more resources" to where the growth prospects are. If Belo is on the leading edge, look for more of your work -- or all of your work -- to move online in coming years.
Decherd was one of several presenters -- including
Janet Robinson of
New York Times Co. -- who didn't even mention newspapers until well into their 50-minute presentations. Belo has rewritten its mission statement defining itself as a "journalistically-based media company." But that doesn't mean they have forgotten, as Decherd put it, about "vigorously supporting the marketing position of our traditional businesses" as the big push shifts to the new. In other words, he argued, the legacy businesses of print and local television need to be kept as strong as possible.
Specific discussions of journalism are always rare at these meetings, and the couple of exceptions matched the general theme of enthusiasm for the new.
Lee Enterprises presented several extracts from a citizen's forum on
BillingsGazette.com -- one from Michael Running Wolf titled
"Tribe wants justice, equity, not war" and another on a series of neighborhood cat killings. Each drew more than 40 posts within a day or so.
With 90 papers to choose from,
Gannett represented as a highlight a recent push for "
local, local content" at the
(Fort Myers, Fla.) News-Press, where a cadre of high-tech mobile journalist roams the neighborhoods posting text, audio and video direct to the web -- some of it later "reverse-repurposed" to the newspaper itself. The new content team is called the
MoJo's (prompting one of my fellow scribblers to suggest as a headline for the conference, "Has the Newspaper Industry Found Its
Mojo?").
Returning to business matters, several presenters suggested that part of the logic of online growth is that most future revenues will drop straight to the bottom line as the economies of nearly zero cost for printing or distribution kick in on a larger base of business.
Still, the assumption that 35 percent revenue growth is sustainable is debatable -- and was debated during the meetings. During a panel on Internet advertising, James Warner, an executive at Avenue A/Razorfish, an Internet strategy and media buying agency, suggested that as newspapers improved their cluttered site designs and create national networks, they can capture a new wave of advertising.
Shawn Riegsecker, CEO of the multi-media buying firm
Centro, even advanced the bold argument that market darlings Google and Yahoo could be headed for a fall. "Search accounts for 5 percent of the page views but gets 45 percent of the advertising now," he said. It's an easy buy but a progressively more expensive one as keyword combinations get bid up, so Riegsecker is urging clients toward a broader portfolio of online ads. Newspapers are potential beneficiaries.
Chris Hendricks, vice president for Interactive Media at
McClatchy Co., picked up the theme: "I want my sites to be where their (advertisers’) incremental dollars are going to go." By that, he said he meant local search, classified, new business from regional companies and a variety of display campaigns.”
The "on-the-other-hand" is that the biggest and most mature sites are not growing at 35 percent annually.
USAToday.com is growing at 15.9 percent so far this year. The New York Times Co.'s online division, with the acquisition of the
About.com shopping-oriented site, is running up 24.5 percent year to date.
Finally, the big bosses echo the concerns of editors and publishers in our package earlier this week on the
future of news that managing all this change is a monster challenge. That was the consensus answer to the concluding question for the CEO panel: what keeps you up at night. As
Dean Singleton, CEO of privately held
MediaNews Group, put it, the difficulty is managing the "balance of transition" between a small chunk of business that is growing quickly and "a great (legacy) business that may have peaked out," but will continue to pay the bills for a long time.
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Rank and file journalists -- especially those at Tribune -- may also look to these proceedings for hints of who they will be working for as time goes by.
As for Tribune, the conference room was packed at 9 a.m. Tuesday for the scheduled presentation by the besieged company. CEO Dennis FitzSimons was poised and good-humored. "So what's new with you?" he opened. But those who had taken a cab across town or flown in early for a gladiatorial confrontation had to be sorely disappointed. FitzSimons talked for 20 minutes, said virtually nothing new and took no questions, citing the "quiet period" appropriate to the company's attempt to buy back a quarter of its stick.
He schmoozed a little, huddled in a corner of the break room with Singleton, and then departed. That left Singleton telling a cluster of several dozen reporters that he expected Tribune management to prevail in its fight with the Chandler family interests, who are asking that it be put up for sale.
Even if Tribune's group of 11 newspapers does stay whole, the herd of public companies is being thinned. Knight Ridder, going out of business June 27, was not present. McClatchy, completing the Knight Ridder acquisition, chose not to present. Pulitzer, sold a year ago to Lee, is gone. E.W. Scripps, which these days styles itself as a cable network company that owns some newspapers, did not present.
The ownership story of the year, to date, has been the successful sale of 11 of the 12 Knight Ridder newspapers (all but the Wilkes-Barre Times Leader) McClatchy chose not to keep. A robust roster of private bidders emerged, and these less profitable papers in slower-growing communities, actually fetched a higher price, relatively, than McClatchy paid for its 20 Knight Ridder keepers.
Thus has about 2.5 percent of the industry, measured by circulation, passed from public to private hands already in the first six months of 2006.
Most Wall Street investors have a vista of 18 months or less. Given the likelihood that results will get worse before they get better through 2007, private bidders may value newspaper properties at an even higher premium than their stock price than they do today, thus fueling pressure for takeovers or break-up sales.
So add to our forecast of emerging disruption-as-usual the likelihood of continued ownership changes. Bigger and better-managed companies will swallow some of the marginal ones. Private owners -- spurred by a mix of optimism, flexibility, civic pride and local cachet -- are staging a comeback after 40 years of the vanishing family newspaper.
