Thursday, March 12, 2009

Out with the Dead Wood for Newspapers

YES, all newspaper publishers will have to convert their dailies to online. Here's how it might work

WELL before he began thinking and writing about management, Peter Drucker learned firsthand the joys of journalism and the perils of economic crisis. In fact, when he was a young reporter in Germany in October 1929, his very first story for the Frankfurter General-Anzeiger was about the New York stock market crash.
Still, it's hard to imagine that even Drucker could have foreseen the astonishingly rapid decline of the newspaper industry itself.
Already under tremendous pressure from readers shifting their eyes to the Internet, one media giant after another these days is finding the recession too much to bear. Tribune Co., publisher of the Chicago Tribune and Los Angeles Times (my old employer), has filed for bankruptcy. So have the owners of The Philadelphia Inquirer and Philadelphia Daily News and Minneapolis' Star Tribune. Denver's Rocky Mountain News has stopped publishing. Hearst Corp. is threatening to take the San Francisco Chronicle off life support, and Gannett (GCI) may close down the Tucson Citizen.
Nobody has an easy answer. But Drucker surely would have called for something that has, by and large, been missing from the scene: a genuine boldness and decisiveness of action by top management. To stop the red ink, newspapers need to get rid of the ink altogether. It's high time for online-only operations.
"Every decision is like surgery," Drucker wrote in The Effective Executive, his 1967 classic. "It is an intervention into a system and therefore carries with it the risk of shock. One does not make unnecessary decisions any more than a good surgeon does unnecessary surgery." And yet, despite the dangers, Drucker was quick to add that "one has to make a decision when a condition is likely to degenerate if nothing is done."

"This also applies with respect to opportunity," Drucker explained. "If the opportunity is important and is likely to vanish unless one acts with dispatch, one acts—and one makes a radical change."
This is precisely what newspapers must recognize: They have to grab the future that's right in front of them—and before it's too late. For long-established businesses, this can be terribly difficult.
"Innovation requires us to systematically identify changes that have already occurred in a business—in demographics, in values, in technology—and then to look at them as opportunities," Drucker asserted in a 1996 interview. "It also requires something that is most difficult for existing companies to do: to abandon rather than defend yesterday."
As a guy who loves to go out and pick up the three newspapers that land on my front lawn every morning, I'm sorry to say it's inescapable: The Web needs to be embraced much more fully than most papers have done. This means no more tentative, halfway initiatives. Dead-tree editions must immediately yield to all-Internet operations. The presses need to stop forever, with the delivery trucks shunted off to the scrapyard.
Some may be moving this way. Hearst's Seattle Post-Intelligencer is evidently contemplating shuttering its print edition and going totally online. Bigger newspapers need to take the leap, too.

How realistic is this? To get a sense, I called an old friend and colleague, Russ Stanton, who is now the editor of the Los Angeles Times, and asked him what the paper would look like if it were available strictly on the Web.
After a day or two of playing with the numbers, he came back to me with an interesting picture: Based on its current level of online ad revenue, he says, the L.A. Times could support a staff of about 275 people at their present salaries, and even offer a slight bump in benefits. This factors in office space, equipment, and all other major costs. And get this: The paper would be a solid moneymaker, boasting a profit margin of about 10%.
Of those 275 folks, Stanton figures, about 150 would work in the newsroom; the rest would sell ads, provide tech support, and handle various administrative duties.
This is far from a perfect solution, of course. Many older readers, in particular, are bound to balk at any arrangement that tries to force them online. What's more, cutting the news-gathering ranks to just 150 would sharply curtail what the Times could do, while causing a great amount of pain to those who've lost their livelihoods. The paper today has about 625 reporters and editors around the world (a stable that's down from the 1,000-plus when I was there just a couple of years ago).
But perfect isn't an option for the newspaper industry anymore. "In turbulent times," Drucker wrote, "the first task of management is to make sure of the institution's capacity for survival." And that's just it: With 150 journalists, a paper such as the L.A. Times could indeed survive—and still provide an indispensable service to the community.

Stanton and his team would have to make some very hard choices, and he stresses that the Times hasn't actually considered a Web-only model, in large part because it would entail walking away from more than $500 million in print-ad revenue.
But in chatting with him, it became clear that 150 troops could do a decent job of writing about (and videotaping, too) their own backyard. (How exactly you define "backyard" is another matter.) They could cover local sports, area business, and entertainment. Most significant, the paper could indeed maintain at least something of a watchdog function, holding L.A. politicians and institutions accountable.
I have no doubt that legions of customers would applaud this mission. After all, where else are they going to find reporting of such depth and distinction about their own city?
News outside these narrow confines, meanwhile, would have to be accessed by clicking elsewhere, conceivably through partnerships with other news organizations—an example of the "bewildering variety of alliances" that Drucker believed many enterprises would need to rely upon in the 21st century.
"There is a business here," Stanton says. "It's just not the business we're currently in."
What the Times and its peers must finally come to grips with is that they had better get to this new place fast. Or, pretty soon, they won't be in business at all.
* By Rick Wartzman - Director of the Drucker Institute at Claremont Graduate University and an Irvine senior fellow at the New America Foundation.

Source: BusinessWeek

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