Failure of imagination

So this is what passes for innovation in the newspaper industry? Taking the Times-Picayune, with its passionate daily print readership, from seven days to three is the best idea we’ve got?

Surely we could do better.

Those who style themselves realists point to the fact that newspapers like the Times-Picayune lose money most days of the week they print. The money’s in the fat days like Sunday; Monday’s a loser. Tally it up, and the decision is clear: Cut Monday. And why stop there? Why not cut Tuesday, cut Thursday and cut Saturday? Job done; here’s your new, “more robust” New Orleans Times-Picayune, as the management memo styled it.

What that ruthless logic overlooks, though, is the value of the readership habit. Generations of newspaper readers have grown accustomed to reading their paper every morning or afternoon. That daily habit forms a powerful bond between readers and their paper, and you disrupt it at your peril.

We certainly learned that in Frederick. Three years after cutting out our Monday publication, the lack of a Monday paper was far and away our top reader complaint.

The simple math of the hard realists also overlooks the basic reality that many businesses lose money some times of the day, some days of the week and even many months of the year. Outside of a few key buying periods, especially Christmas, many stores don’t cover operating costs every day of the year, or even every day of the week. Restaurants may scrape by early in the week to make their money as the weekend approaches. Yet these businesses stay open even during lean hours and lean days. After all, a customer who finds a business shuttered on Tuesday may go elsewhere on Friday, too.

The hope in New Orleans is that even if readers go elsewhere for news four days a week, they’ll still come back to the Times-Picayune on the other three. Maybe so. Maybe their readers are more flexible than ours were, or maybe there are fewer alternatives for them to choose from.

But what’s profoundly discouraging is that publishers in New Orleans, Michigan and elsewhere have embraced such radical surgery before attempting other therapies.

Would a tabloid format lower production costs enough to support at least weekday publication? What about differential pricing, for advertisers and for subscribers? Where are the radically re-conceived newspapers that try to meet readers where they are today? Why no experiments with targeted-interest papers, or cafeteria-model papers? Why not a three-day core news product with up-sells for a Business Monday edition, an Entertainment Friday edition, and so on?

Maybe none of these ideas would be enough to save a paper like the Times-Picayune. I only wish someone was trying. Otherwise, if the Internet and the economy don’t kill newspapers, we might just do it ourselves first.

Related readings:

The Wedge Strategy

It’s painfully apparent that digital revenue cannot yet support substantive professional journalism for smaller daily newspapers. I don’t know that it ever will, either. Fortunately, it does not necessarily follow that community newspapers are doomed.

If the goal is to find a near-term replacement for all the revenue necessary to support a newsroom and newspaper operation something like the papers we know today, the logical response is either to proceed on blind faith or give up in despair. But that’s the wrong goal. Think instead in terms of what I call the Wedge Strategy.

In simplistic terms, the Wedge Strategy frames the goal more modestly (and achievably) than trying to replace all the print dollars. With a Wedge Strategy, the goal is to fill the profit gap created by declining core revenue and increasing expenses.

You can expect long-term deterioration of core newspaper revenue. The rate and shape of that decline is anyone’s guess, but the fact of digital transformation cannot be denied. Meanwhile, there is inexorable upward pressure on expenses. The two lines move in opposite directions, and simple extrapolation quickly produces losses.

A Wedge Strategy assumes the key to survival is not necessarily to toss out the entire print newspaper business model in a desperate grab for digital dimes. Rather, the key is to work hard on bending both of those core newspaper trend lines, for revenue and expenses, while at the same time developing new revenue sources, especially online revenue, that fill the wedge.

Implicit in the Wedge Strategy is a belief that the physical daily newspaper is a unique, valuable and durable medium. It offers a level of engagement that’s hard to replicate online, it’s convenient and efficient for many uses, it’s cheap, it’s an old-school push technology that rewards curiosity and leverages hundreds of years of information design evolution to serve readers.

A print paper may not be everyone’s preference, and it is not likely to dominate even smaller markets in the future, but my assumption is that it will continue to adapt and will retain a valuable niche, perhaps serving educated, affluent, engaged members of the community. It may publish fewer days, it may shrink and change focus, but it will remain a significant factor.

As an illustration of what a Wedge Strategy might look like, I modeled a typical small daily newspaper with a nice, even $10 million in current revenue from its core operations. That might correspond to a paper with 20,000 circulation.

With $10 million in core operations, I assumed circulation revenue of $3 million, display revenue at $3.5 million (50 percent of ad revenue), classified revenue at $2.1 million or 30 percent of ad revenue and preprints at $1.4 million. Your mileage may vary, but those are within the bounds of industry experience.

I assumed this paper has not been terribly aggressive or successful at getting online revenue, so I put that at $250,000, with another $250,000 in “other publications.” Those I call the growth revenue opportunities.

I put expenses at $9 million, which gives this paper an operating margin of a bit under 15 percent. That’s pretty low by historical standards, but it’s certainly not crazy for this stage of the recession.

Now come the real critical assumptions. The value of a simple model like this is not that it might actually predict the future. I don’t know anyone that smart. Rather, it can help you identify what you need to do to succeed over time given certain reasonable assumptions. Then you have a goal, and you can begin to evaluate how likely you are to make that goal. And then you can start playing with better or worse scenarios.

My approach with this model is basically to solve for the wedge — to figure out what you need to raise is growth revenue to maintain a reasonable rate of return from operations.

My starting assumptions are the following:

  • Display revenue will increase modestly over the next few years with recovery, then it will flat-line for a few years, then it will start to decline at 5 percent annually. After 10 years, it will have dropped about 6 percent.
  • Classified advertising will just keep going down at 5 percent a year, dropping 40 percent over 10 years. (A straight-line is unlikely, but it makes modeling simpler, and, really, who knows?)
  • Preprint revenue will drop by 1.5 percent over the next four years and by 5 percent thereafter, leading to a 31 percent drop over 10 years.
  • Circulation revenue will drop a steady 1.5 percent, the assumption being that some online subscription revenue will offset slightly larger print declines.
  • One the expense side, I grossed everything up and assumed increases of 0.75 percent every year. That’s pretty tight cost control, but that’s our new reality.

Here’s what it looks like graphically:

With no growth, the paper dips below 10 percent operating margin in Year 5, and by Year 10 it’s losing more than $1 million a year.

So what’s the wedge?

To hit a 10 percent margin in Year 10, you need to maintain an average growth rate in online revenue and other publications of 18.2 percent. To hold a 15 percent margin, you need to grow at 20.8 percent.

In practical terms, a steady growth rate of 20.8 percent over 10 years is, of course, highly unlikely. But in absolute dollar terms, the numbers are somewhat less daunting, in part because this mythical paper is starting from a low base. That kind of growth rate gets this paper to online and other publication revenue of $1.65 million (each) after 10 years. That’s a bit less than 15 percent of total revenue.

That’s a stretch, to be sure. But it’s a tangible challenge that presents at least a possibility of success, a possibility that becomes more and more attainable the more you can do to hold those other numbers in line. Sure beats despair.

Here’s that future:

A good read from 1995

Thanks to Steve Yelvington for unearthing a prescient piece by Philip Meyer.

In AJR, back in 1995, Meyer predicted much of the disruption now shaking the news industry. Reading it today is fascinating, both for what he hit and what he missed.

First, a quibble.

Meyer talks about newspapers as high-turnover operations, similar to supermarkets, and suggests that high-turnover businesses should typically expect lower margins — unless they have a fortified (monopolistic) market position. So newspapers, he said, should get used to single-digit margins, say 6 or 7 percent instead of the 20 or 30 percent once common. And he suggests that new owners would be happy to step in to operate newspapers returning 6 or 7 percent.

I’m not so sure. I think turnover is less determinative than operational leverage, capital requirements and profit variability. Unlike supermarkets, newspapers have high operational leverage, with substantially fixed costs in production and distribution. They also have to make huge, lumpy capital investments in everything from presses to front-end systems. And, Gannett’s profit smoothng aside, profits can be highly variable. Even if circulation revenue is fairly stable, or at least predictable, advertising revenue swings with the fortunes of advertisers, and newsprint costs can quickly eat profits from the other side as the newsprint companies gain pricing power.

(A tangent: I’d love to see a chart comparing the profitability of newspapers and newsprint manufacturers over time. I’ll bet it looks a lot like the famous charts of the wolf and moose populations on Isle Royale.)

For newspapers, all of those factors mean risk, and with risk comes the need for higher margins to compensate. Ten percent is probably a more realistic minimum return to run a newspaper comfortably.

But that quibble aside, Meyer was right on the mark on so many points that his article still makes great reading:

He did a great job of explaining the trap imposed on current owners by high valuations, with his golden goose analogy. It’s the difference between a good business and a good investment.

He laid out the existential choice publishers faced, and largely failed, between squeezing their geese or accepting lower margins and investing in the future. (Of course, in fairness, it’s never been very clear exactly where one should be investing for the future.)

He emphasizes the importance of the virtuous circle, where dominance in an information marketplace leads to greater dominance. (I also find it helpful to think about this dynamic in terms of network externalities and lock-in, phenomena explored by Brian Arthur and many others.)

And he identifies trust as the key to maintaining dominance in an information marketplace, which is a great insight.

Unfortunately, I don’t think he or anyone else could foresee how effectively new, Internet-based businesses would slice up the newspaper business model and take over revenue streams like classifieds.

And it’s hard today to echo his confidence in trust as the critical monopoly-building asset. As we navigate a world of blogs and social media and channel proliferation, trust seems like a much more contested asset, and one that people are doing more to define on their own terms.

Patch and the Sonoma paywall

While writing about the Patch business model, I noticed in Romanesko that the Sonoma Index-Tribune dropped its $5/month paywall after Patch opened up in its market.

That action pretty well crystallizes the challenges news organizations face as they move toward paid-content models in competitive information markets. And it suggests that many, or even most, will ultimately fail.

Although incumbent print media may have good reasons to try to get value for their content online, even if only to slow the erosion of their print products, other actors may not be so compelled. Companies like Patch are operating purely under the Axiom of the Audience Imperative, where they rationally will always seek any additional reader they can attract for less than the marginal cost of production and delivery. Since the marginal cost of serving one additional reader online is essentially zero, they will always tend toward free. After all, they have no interest in limiting their attractiveness as an advertising platform by charging for content and restricting their audience.

The only way to escape this imperative is to carve out a non-competitive niche. News outlets could, in theory at least, so distinguish themselves on the basis of quality or depth or timeliness or perspective or ease of use or some other dimension that they can effectively lift themselves out of the competitive fray and charge for access. The Wall Street Journal is probably the best example of this, with its unique value in the business world; the New York Times may have a shot, too, because of its high quality and depth.

And countless publishers are now counting on the unique value of their local news reports to pull off the same trick in their markets.

As someone who hopes they succeed, at least for a while, and who has indeed pushed down the same path, what’s discouraging about the Sonoma reaction is not that they caved, but that they caved so quickly and to such a weak competitor.

I’m not familiar with the Index-Tribune, but it appears to be a pretty typical small weekly, or twice-weekly in its case, with a paid circulation of about 8,000 and a sister lifestyle magazine. (It actually sounds similar to the Monadnock Ledger-Transcript, where I was publisher for a few years, before the paper absorbed the competing Transcript and added a second day of publication.) It has an editorial team of about six. It’s got a Town News-built site; nothing flashy but serviceable.

In September, the Index-Tribune started its paid content experiment. The numbers on Compete appear show a big hit to their traffic, cutting it by maybe a third to a half, but it’s hard to tell precisely, because of seasonal variation and the short time frame. In any case, Patch comes in less than three months into the experiment, presumably with its typical single-reporter staffing plus stringers, and the Index-Tribune throws in the towel.

The inescapable conclusion is that the Index-Tribune’s site and content was not sufficiently differentiated and irreplaceable in the eyes of readers.

Now it may well be that the Index-Tribune is not a very good paper and had no chance of succeeding with paid content, with or without Patch. Maybe all of its 8,000 print readers are just traditionalists who need to feel a paper in their hands, no matter how bad it is. Certainly their website is not as slick as the Patch site, which can’t be helping them in this battle.

But I suspect the Index-Tribune’s experience points to a more discouraging truth, one that will dismay publishers across the country in the months and years ahead, as they try to charge for content while facing an ever-widening array of free, community-based competitors: Our readers don’t love us as much as we think.

For most people, I suspect, general community news is pretty much a commodity. Journalists may see a huge gulf between established players and thinly reported news sites that rely on community contributions, but for many people the competitors are good enough. Readers may still respect and turn to the traditional outlets. But if there’s a free, “good-enough” alternative online, they are unlikely to pony up the subscription fee to support the old standby.

Sigh.

Even so, it’s probably still a good idea for print publishers to push ahead on paid content models. (As long as they do it wisely. And as long as they are prepared to act quickly if conditions in their markets change.) It certainly won’t help their web operations. But it may help to preserve their flagging print operations long enough for them to step smartly into the electronic future.

Re-engaging readers

The stats I’ve seen about online reader engagement are pretty discouraging, as I discussed in “Disengagement.”

Leaving aside, for now, the challenges related to the medium itself, which are difficult to control, I think there are some basic approaches and principles that news sites can keep in mind to engage their readers more deeply.

Beyond the basic requirement that you offer compelling and distinctive information and services, I think it’s useful to think about three important characteristics of what you could think of as web-positive publishing. I call them the Three I’s: immediacy, interactivity and interneticity.

Immediacy is about recognizing the voracious desire among our readers for good old-fashioned news, with the emphasis on new. Having spent many years poring over news site traffic logs, I can guarantee that the big preview of coming legislative battles and priorities, however important and well-written, will drop like a stone to the bottom of the most-read list, while the short newsy item about the fire that consumed a meth lab will rise to the top. Also: Quirky news wins, short wins, timeliness and urgency win, images help and feature stories can be either big hits or traffic flops and there’s no way of knowing beforehand. And, yes, controversy loves a crowd.

That’s not to say that a steady diet of meth lab fires and short quirky blurbs is the solution for every news site. (That’s what local TV news is for.) And that’s not to say that you shouldn’t do the big takeout on the upcoming legislative session, or the heart-warming profile or what have you. All of those may be essential to your mission and equally essential to maintaining your brand and personality, both in print and online.

But the content strategy for news sites has to begin with the understanding that online readers are looking for information fixes. You need to meet that need with a steady flow of timely, newsy, relevant information.

Pew offers some insight into news readership habits. According to Pew, online news junkies typically patronize a slowly evolving core list of trusted sites that they visit frequently. For most internet users, the core list includes just a handful of sites. Only 11 percent regularly visit more than five news sites on a typical day. Critically, news readers are not terribly attached to the sites they visit — about two thirds do not have a favorite site.

One key aspect of online news readership appears to be missing from the Pew study, though — the frequency of vsits from regular users. As far as I can tell, the Pew study only went as far as measuring daily use. My belief — and it is a key assumption — is that a news site’s best users will come to it habitually, perhaps several times over the course of a day.

Or at least they will if the site rewards repeat visits. A site that doesn’t change quickly kills that impulse to check in. A site that has a sense of urgency and recency rewards repeat visits — and stays on that reader’s short list of core news sources.

So how do you engineer immediacy? It doesn’t have to be a huge effort. News blogs, alerts (even automated alerts) on stories that are hot, most-read and most-commented lists, “coming tomorrow” promos, integrated wire tickers, quick mid-day updates and quick page remakes to emphasize popular stories all help. You can look beyond the main news stream, too, to things like featured reader comments, Twitter feeds, reader queries, rotating classified displays, featured reader business reviews, reader-submitted content and anything else that’s relevant and timely.

Interactivity is the second pillar of engaging readers, and it should include both content interactivity and institutional interactvity. Make it possible for readers to grab hold of your offerings and make them in some sense their own, through comments, social media integration, personal clipboards, ratings and so on. And embrace the notion of dialog with your readers, making it easy for them to submit tips or photos or news, offering chats or other interactive events, giving them opportunities to shape presentation, coverage and priorities.

(Update: Robert Niles has written a post at OJR: The Online Journalism Review on baby-stepping your way toward interactivity.)

The third “I,” interneticity, is my own horrible neologism, for which I apologize to anyone of linguistic sensibility. By interneticity, I mean taking advantage of the possibilities of the medium for smart, useful and engaging information presentation. Some of the best examples of what I mean by interneticity can be found at the New York Times, where their team of data-smart designers regularly produce stunning information graphics. Fortunately for the rest of use, there are lots of tools out there for integrating maps, timelines, charts that can be manipulated by readers, interactive Wordles, tag clouds, slide shows, etc.

There’s no one path to re-engaging readers online. But keeping immediacy, interactivity and interneticity as touchstones for news site content strategies will reward and promote more frequent, deeper site use.

Disengagement

I spent a couple of days recently modeling the impact of paid content on a representative small daily newspaper.

I hope to post a little more later on my approach and results. (Spoiler alert: The near-term loss of ad revenue can be minimized fairly easily, to the point that it’s offset by even microscopic subscription uptake, when you have a lot of unsold ad inventory.)

But right now what I’m really wrestling with are some of the implications of the reader segmentation I did to prepare for the modeling.

Much as Jonathan Stray did several months ago with his paywall calculator, I started with a look at who’s coming to the site.

The site I was looking at does not have great data on its users. It relies mostly on Google Analytics and gets some corraborating information from the ad-serving platform. Registration currently is not required, so there’s little useful information there, and there has been no real effort to mine that.

Google Analytics is not a great tool for doing user segmentation, I found. Like Omniture and other stat services, it seems to be mostly focused on generating visit-based data. But I was able to back my way into a rough picture of site users, breaking them into four groups: fly-by, casual, moderate and loyal users.

The results were sobering.

Here is an open news site in a market that doesn’t have a lot of direct, local online news competition. The paper has a good reputation and enviable print penetration. It’s been online for years, and it has a really full news report with all the standard folderol — yellow pages, classifieds and verticals, photo galleries, reader comments and so on. Yet very few online readers demonstrated loyalty or use approaching anything like the readership of the daily print paper.

Consider: For every thousand Sunday print readers (calculated using the well-established 2.3-times-sales factor), this paper had only 55 heavy website users and another 54 moderate users.

There are data complications, of course. Without tying back to registrations, I can’t tell if some of the casual UUs are home visits from people who are moderate users from their work computer, or vice versa. If I could track that duplication, I would likely see more moderate and heavy users.

On the other hand, it’s anyone’s guess how many of those heavy users simply have the site loaded as their browser’s home page, which would boost their apparent usage without reflecting actual readership of the site. And, more importantly, I set a pretty low threshold on the segment definitions. I defined moderate users as those who came to the site more than 10 times in a month, meaning they looked at between 40 and 50 pages, because I wanted their use to correspond roughly to the likely metered threshold.

There’s plenty of room to argue about the absolute precision of the numbers, but to me the real takeaway is clear: This site’s online readers are nowhere near as engaged with the product as are its print readers.

That’s a problem. And I don’t think the problem is specific to the site I looked at.

The engagement problem is obvious to anyone who spends time looking at news site stats and compares them to research on print readership. Visits typically range from four to six pages, which means maybe three or four actual stories read. Visit times are just a few minutes, compared to the 20 minutes or so the typical print reader spends with the paper. And precious few online readers have established the kind of daily reading habit that comes with a home subscription.

To a certain extent, much of this may just be the nature of the medium. I seem to recall once seeing data that suggested traditional news readership made up about 7 percent of the average online user’s time, but I was not able to find good recent data on that. Beyond any measure of time devoted to news readership online, it may also be that web-based news sites serve and reward quick-hit news grazing, as opposed to the kind of immersive experience you get with print. (Perhaps tablets will help to change that.)

And, of course, you have to look at what traditional news sites are publishing. With most news sites still shoveling print content online, leavened with a few breaking updates and some extra photos (if you’re lucky), it may be that news sites are still doing “radio on TV” and haven’t adapted quickly enough to the online medium.

Whatever the cause or causes, news sites simply have to focus on engagement if they are to thrive. If what we’re doing is not captivating readers, we have to change. Especially if we want to charge.

For 2011, my early resolution: Ignore PVs. Focus on metrics of engagement like PVs/visit, visits/UU/month, time on site and the raw count of heavily engaged users.

On muddling through

There’s nothing more seductive than the next big thing. Especially the next big sexy web thing, the clever idea like Twitter or failblog or Groupon that takes almost nothing to launch, turns 20-somethings into multi-millionaires and seems so retrospectively obvious that anyone could have done it.

News companies, in particular, seem eternally desperate for the next big thing. As they see their traditional business models founder, they bound, ever hopefully, after verticals and micro sites and user-generated content and multimedia content and paywalls and hyperlocal and business blogs and whatever else flashes before them.

Having done my own share of bounding after mirages, I’ve come painfully to realize that a great idea and a buck will get you a medium coffee at Dunkin’ Donuts, and that’s about it.

That’s not to say that paywalls, or pay curtains, aren’t a good thing. We’ll see. As well with hyperlocal and business blogs and all the rest. But no brilliant idea is going to save us. What just might save us, though, is what I’ve come to think of affectionately as the modest virtue of muddling through.

Which is to say that every brilliant idea is flawed in some unexpected way, and even the best ideas are quickly challenged by changing technology and evolutions in online habits and mores. What distinguishes successful online innovators is not the brilliance of their ideas, but rather how well they muddle through partial successes and even outright failures to arrive, eventually, at something that works for their audience and their organization.

As far as insights go, mine is not terribly original. After all, Edison said a century ago that success is 1 percent inspiration and 99 percent perspiration. We’re not talking relativity here.

But it’s something of a relief to realize that brilliance is over-rated. You don’t have to wait for some earth-changing inspiration to get cracking.

You do, however, still have to put in that other 99 percent.

Among media companies I consider to be successful innovators, there are some common features and lessons that can be drawn.

First and foremost, I think, is to expect and plan for failure, at least implicitly. I’ve been told the mantra of one Harvard B School professor is, “Fail early and fail cheap.” That deceptively simple prescription suggests that you won’t blow your whole budget on one Hail Mary project, it suggests that you will start by thinking carefully about what success would look like so you can change course rapidly, if necessary, and it suggests that you will understand the keys to success so you can learn from your experience.

I also think some work cultures are more conducive to successful new media innovation. A broadly shared understanding of the strategy and roadmap is critical, as is meaningful involvement from top management and a relatively flat and collaborative workgroup structure.

So there you have it. With these ideas and a buck, you can go coffee up.

Seeing a site-less web

Jim Boulton has me thinking more broadly about the challenges that aggregators and social media links present to news companies.

News companies certainly have been focused for some time on the risks presented by news aggregators, but mostly in a narrow context — we’ve been concerned primarily about the loss of revenue and traffic when readers go no further than the blurb presented by the aggregator. So far, it seems, the aggregators haven’t replaced on-site news reading — Google News and other aggregators now drive substantial traffic our way. So we’ve adapted, and we’ve learned to treat every page as a landing page, providing plenty of hooks to keep people interested.

And, oddly enough, despite all of the concern about Google News and so on, news companies seem to have jumped quite willingly into the social media game, providing all kinds of ways for people to post links and blurbs through Facebook, Digg and what have you. That’s curious, because social media linkages essentially turn all of us into aggregators, with all the attendant risks to traffic-based revenue.

Boulton comes at the issue from a different perspective. He’s not a media guy, first of all; he appears to have morphed from web designer to web marketing consultant at Story Worldwide, which calls itself a digital content agency. Kost recently, he was behind an exhibition called “Digital Archaeology,” a display of old websites celebrating the web’s 20th anniversary. For that show he was interviewed on the BBC’S “Digital Planet” program, where he made a bold prediction that has deep implications for news organizations:

“In five years time, websites won’t exist,” Boulton said. “So I think that means it’ll be a 20-year time when websites were the most important form of brand communication, and they’ll have gone from not existing at all to being the most important form of brand communication to disappearing again. We’re already seeing it now, the convergence of the browser and the desktop. Online experiences increasingly revolve around the individual rather than around the brand. It’s what we call the semantic web. So I think the notion in maybe five years time that someone will go to an online destination and experience a brand on its terms in its space will just be crazy.”

I have no idea whether he’s right about the demise of websites. But the trend toward Web 3.0-style integration is real enough, and that stands to fundamentally change the relationship our readers and viewers have with our sites.

In one sense, you could look at this as the same old aggregation challenge, where we struggle to lure people into our domains for some gentle monetizing while they, in turn, push for greater control over how and where they get information.

But Boulton’s focus on brand is interesting. Brand management, I think it’s fair to say, is not something most news organizations pay a lot of attention to. At a time when traditional media companies are struggling against the perception that they are old and tired and on their way out, that’s probably foolish. I’m no brand management expert, and I’ll confess that I think a lot of what passes for brand management is awfully close to witchcraft, but I have no doubt that thoughtful attention to the signals you are sending is essential, insofar as it presupposes some real thought about what your audience is, what your value proposition is and how well your strategy and product position you.

But how do you control those signals that when your readers and viewers are getting their information outside of your carefully designed site? In a world of mobile news blurbs and feeds and readers and social news, our stories and content become indistinguishable and commodified. Especially text-based content.

One approach I suspect we’ll see more of is more use of embedded messages, where news organizations start to pay more attention to everything from attribution lines and kickers to in-line references and even quasi-promotional features within the narrative.

There’s a third issue raised by Boulton’s vision of a site-less web, beyond the threats to traditional ad revenue and branding control, and that’s the loss of user information.

When readers and viewers consume our news in their own world or a world of someone else’s making, we don’t necessarily know anything about them and how they’re using our content. Small and mid-size news companies have been slow to take advantage of user data as it is; a site-less web could make it even harder.

For that, I have no prescription. Certainly, we’ll all be getting smarter about using social media alongside traditional web informatics, but beyond that much depends on what sorts of tools emerge for people to consume news in a site-less web.

Rampant conflation

The newspaper industry is fighting a two-front war. Some newspaper companies are fighting on three fronts. Most observers see only a single struggle for survival, and they’ve all but consigned us to the dustbin of history.

That’s premature.

On one hand, we’re fighting against long-term structural changes in the way people get news and advertising information. We’re also fighting a brutal recession, arguably the worst since newspapers were pretty much the only show around. And many newspapers are fighting on a third front, against unsustainable financial leverage.

All of these present real and urgent challenges. In particular markets, any one of these challenges could present an existential threat to traditional print newspaper publishers.

But the chaos we see today in the newspaper industry is not simply an internet-led rout of newspaper market positions. That’s the conventional wisdom, but it’s too simplistic. What we’re seeing is a structurally vulnerable industry meeting a bone-crushing business climate while, in many cases, companies groan under massive debt. It’s worth teasing these three factors out a bit for a more realistic assessment of the industry’s future.

First, the recession:

Newspapers (and other ad-supported media, for that matter) always have been barometers of economic conditions. As much as we may talk about the value of advertising through hard times, at the end of the month our customers still have to pay their staff, utilities, suppliers and taxes first. Advertising is, sadly, more discretionary than many other expenses, and our revenue numbers always have shown that.

Much of what is shaking the industry now, I believe, is a predictable erosion of revenue as our customers struggle.

Of course, the structural changes aren’t helping:

Newspaper circulation and readership numbers have fallen as people shift some of their information consumption online. Some of our advertising is almost certainly gone for good.

But newspapers, even good old print newspapers, retain substantial advantages. Sure, people are going online for a lot more of their news, but newspapers remain the dominant source of that news. In a very real sense, demand for our core product, news, has never been higher.

Even our much-maligned “ink on dead trees” products retain surprising strength. (I’ll tackle some of those strengths in the next blog in this series.)

The final front faced by many newspaper companies is debt:

I don’t know how much I took away from business school, but one thing I did learn is that it’s dangerous to mix high operating leverage with high financial leverage in an industry that’s susceptible to big swings in revenue. And that’s exactly what many newspapers did to themselves. Hence the string of leading newspaper companies trading at penny stock levels or even facing bankruptcy.

That’s painful for investors and owners, to be sure, but it’s not necessarily a good indicator of the industry’s future prospects. A bad investment can still be a really good business. After all, Gannet stock is a shadow of its former self despite routinely turning in operating margins north of 20 percent. There aren’t that many businesses that deliver those kinds of operating margins even in the best of times.

The simplistic view of all this is that newspapers are a mess. Their revenue is falling, some of it’s gone for good and they’re going bankrupt right and left. Therefore, the industry is history. QED; let’s surf.

Well, maybe. But another narrative goes like this:

Newspapers are a mess. The recession has hammered them, and their debt loads are pushing some of the weakest and hardest hit into bankruptcy. Most, however, are still earning decent margins, despite historic revenue declines. When the recession lifts, newspapers may never reach their previous revenue heights, because structural changes have eaten some of their advertising. But the strong papers now will get even stronger, and the weak ones will improve. The industry’s future may be constrained, but the fundamental model is durable.

The beauty of my argument, of course, is that it’s largely untestable. In subsequent posts, though, I’ll explore some of the points raised above to flesh the argument out a bit. I’ll describe in more detail how the recession is affecting us, where I see strengths in the face of the structural changes and just why newspaper debt has been such a crusher (and why the wave of bankruptcies doesn’t necessarily spell the end of an era).

Not dead yet

It’s gotten so I can sense the question coming ahead of time. Friends drop their voices into a particular register, a low, sympathetic tone, and ask, “So how are things at the paper these days, anyway?”

It’s the same tone people use to ask about a relative with a terminal diagnosis.

I appreciate their concern. And it’s understandable, given the incessant hand-wringing over the fate of newspapers, especially here in the shadow of The Boston Globe.

My standard response is realistic yet modestly upbeat, touching on long-term trends and the immediate economic challenges. Depending on their level of interest, I sometimes veer off into general civic awareness and the implications for governance, and I may drop in a few statistical nuggets from our most-recent readership survey. If I’m feeling more combative, I may compare the situation of newspapers with that of broadcast TV, radio or magazines.

But what I really want to do is pull out a fake British accent and act out the great Monty Python skit:

Of course, that doesn’t end so well, does it?

In my next few posts I’ll tackle various aspects of The Big Question: “What is the future of printed daily newspapers?”

First up: Rampant conflation