Crisis and Confidence

By: Jennifer Saba In recent years, The Newspaper Association of America has managed to wrangle a varied crew of scolders from within and outside the industry to shake up publishers during its annual conference. Ann MacDonald, then CMO of Macy's Corporate Marketing, took a dim view of newspapers' circulation slide. Wal-Mart CEO Lee Scott told the crowd the world's largest retailer had little use for newspaper advertising. Craig "Craigslist" Newmark, the guy who siphoned millions of classified dollars from newspapers, blithely informed publishers that they were "screwed."

This year, at a particularly trying time, the super confab billed as the Capital Conference brought together the NAA, the American Society of Newspaper Editors, and NEXPO all under one roof at the cavernous Washington Convention Center in Washington, D.C.

On paper, it looked to be a terrific time for this rare combination of meet-ups. Two weeks prior, the NAA tallied the advertising revenue for U.S. dailies in 2007, and found that print fell 9.4% year-over-year, the largest plunge since the association began keeping track in 1950. And last year was not even (officially, at least) a recession year. The NAA chose to highlight the growth of online ad revenue in 2007 ? up 18.8%, to $3.1 billion ? and ignore the print slide (which represents some $42 billion).

Even more unsettling is that the online growth rate is decelerating. In 2005, online ad revenue grew 31.4% to $2 billion, and in 2006 it rose 31.4% again, to $2.6 billion. Now it's not even up 19% ? and The New York Times News Media Group's Internet revenue came in a little lower than that in its latest monthly report.

Would this year's NAA affair turn into an emergency session? The annual conventions are really more about catching up with peers, and schmoozing. But this year, given the immense pressure the industry is under, the Capital Conference might have seized the opportunity to speak frankly, as one distinguished Washington Post reporter told me, about the elephants in the room ? and have full discussions about how to move forward. But there were no MacDonalds, Scotts, and Newmarks. Instead, we got McCain, Clinton, and Obama.

That's not to say that those present were all sunshine and backslaps, or that parts of the agenda didn't meet expectations. Several executives were excited about the innovation session, a panel featuring the heads of other beleaguered industries ? among them, Eastman Kodak Co.'s Philip Faraci ? who spoke about the transformation of their own businesses. But the mood this year was different than in years past. It was subdued. Not wake-like, but with a pervading sense of seriousness.

Attendance was sharply off. Gary Pruitt, newly named chairman of the NAA and CEO of The McClatchy Co., had told his 31 publishers not to come on his account if they thought they could save money. "I would prefer they make the wise decision due to economic conditions," he told E&P in February. "The vast majority are not attending."

Apparently, lots of other industry figures took Pruitt's advice. About 550 editors and publishers attended the conference, according to the NAA, which only reported a combined number. Last year, ASNE alone drew 500 editors at its annual meeting.

The NAA, recognizing that these are lean times, suggested a variety of affordable hotels and configurations including triple and quad rooms ? four to a room, if you wanted. That's a long way from the gilded Fairmont San Francisco, the NAA's conference destination just three years prior.

"It's a hellish time for newspapering, for reasons we all know," outgoing NAA chairwoman and outgoing president of Gannett's newspaper division Sue Clark-Johnson said during her opening remarks at a general session. She called upon the audience to "move faster and be more aggressive," and also take further steps to ensure "balanced and fair coverage" of the industry itself ? a common theme during the four-day confab. "What we do hasn't changed. What we stand for hasn't changed. And it is this above all else that must be championed and preserved," Clark-Johnson added.

Facing the music, sort of
"Why do you say 'crisis'?" asked a mildly affronted Jason Klein, president and CEO of the Newspaper National Network. "I think the industry is in more of a transition."

It was Sunday night, during Parade's welcome reception ? held at the new baseball stadium for the Washington Nationals. Klein was looking down from the luxury-suite level at the baseball diamond, where executives and their families stood in line to take turns swinging at a few pitches.

Highly leveraged companies, like Journal Register Co., were the ones with big problems, Klein said. But he believes the industry will weather the drain of classified advertising. Who else, he asked, can provide the community with local news and support?

"Look out here," Klein said, pointing to the giant signage over the diamond. "The only local advertiser on the board is The Washington Post. I mean who is PNC?!" he added, about the national bank.

Klein was in good company. William Dean Singleton, CEO of MediaNews Group, wasn't fond of the "crisis" label either. "It's a cyclical downturn," he said from astride the scooter he was using to wheel around a Monday-night party at the newly opened Newseum. "We've seen this before." He conceded that 2008 is "the perfect storm" and a "lousy year," but he believes signs of a recovery will start popping up in 2009 ? something which, he added, requires the "rightsizing of expenses."

Singleton's not a fan of starting an industry-wide marketing campaign as a way to combat some of the negativity. "I don't think you solve anything by tooting your own horn," he said, just before he was surrounded by other MediaNews executives.

Perhaps it was the party atmosphere, but every time the question was raised ? is the industry in a crisis? ? it had the same effect as throwing a stink bomb in the crowd.

Nancy Lane, president of Suburban Newspapers of America, responded that the industry at large was experiencing "challenging times," but that on the whole community newspapers were doing much better than their metro counterparts.

American Community Newspapers CEO Gene M. Carr said the industry is "under siege." From the top floor of the Newseum, where tables lined the balcony with an unobstructed view of the Capitol, he added that the entire advertising industry is going through a crisis, but the newspaper industry, he said, "remains viable." The declining results are due in part to newspapers coming down from the real estate advertising high of prior years. With the exception of new media, he stressed, "all media has struggled."

In fact, many other executives were also quick to note that radio and broadcast TV are also in the dumps ? and you don't hear executives griping about the same problems via those respective mediums.

Later that evening in the bowels of the Renaissance Hotel, Singleton was introducing Johnny Rivers, the '60s hit-maker ("Secret Agent Man"), when he offered some encouragement to the crowd. "We're going to have fun tonight and worry about the year tomorrow," he said before Rivers and his band took the stage. MediaNews Group and USA Weekend hosted this year's bash partly to pay tribute to a very relaxed-looking Clark-Johnson.

For a moment it looked as if Rivers would have to drag people out himself. "Don't just sit there!" the singer admonished. It took three songs before anyone would set foot on the large parquet square. USA Today Editor Ken Paulson sparked the dance party (he's not bad, either) and before long the floor was packed with execs and their spouses flapping away to tunes of the late '60s and early '70s.

'Crisis'? Yes. No. Well, maybe.
Go and shout about the good things newspapers are doing, suggested Indianapolis Star Publisher Barbara Henry ? a panel member on the last day of the conference discussing the publisher/editor relationship. "Let's tell our story," she stated. "We're hunkering down instead of beating our chests! What the hell are we doing?" Oliver Knowlton, president of MediaNews Group Interactive and late of Sports Illustrated, said during a panel on the digital future that he's been taken aback by all the self-flagellation: "I'm surprised by how tough the newspaper industry is on itself."

From an opposite perspective, Scott Smith, publisher of the Chicago Tribune, responded with an emphatic "yes" when asked if he thought the industry was in a crisis. "We have to be honest," he said at a cocktail reception before Sen. Hillary Clinton was due to address the luncheon crowd. "We learn from that, acknowledge it, and move forward with optimism. The biggest challenge is the shifting disconnect between reader results and advertising results."

Smith's counterpart in Los Angeles, David Hiller, was equally frank: "I think 'crisis' is a fair word for it, yes." His solutions? Be even more aggressive with newspaper Web sites, launch smart niche products, get costs in line.

But George Irish, president of Hearst Newspapers and next in line for the NAA chairmanship, said that he disagreed with the 'crisis' tag: "The headline is opinionated and wrong. The industry goes through lots of cycles, ups and downs."

In his view, at least 50% of the ad plunge is cyclical, and related to the housing meltdown. He acknowledged the business' current challenges, but countered with such past events in newspaper-publishing evolution, as the shift from p.m. editions to a.m. editions. "That was problematic for some folks," he said. He also noted the transition from hot metal to cold type. His point: In most of those cases, change was beneficial to the industry ? in the long run.

Newspapers have the largest local presence between print and the Internet, Irish noted, and the industry is making the shift to digital and especially to mobile ? the latter highlighted by AP at the confab.

Mixed emotions
As far as the panels go, some of the most interesting news came from the Associated Press. On the last day, AP CEO Tom Curley laid out his plan for rate cuts and other initiatives, thinking it would assuage editors who were already steamed at the organization for its high prices and opaque packages.

During the last few minutes, editors were given the floor ? and unloaded on Curley about their unhappiness with the AP's direction, what they considered an insubstantial rate reduction, and the AP's complete breakdown in communications with them.

But the AP also announced the Mobile News Network, created to provide a national platform for smart-phone users to easily access local, AP-member newspaper content. Most important, that content will be monetized by allowing newspapers to sell advertising around it.

During a session on navigating digital, Leon Levitt, vice president of digital media at Cox Newspapers, asked some tough questions of his panel members while noting the revenue transition to online is growing slower and more difficult. "We need to invest more aggressively," he warned.

The panelists, including Vivian Schiller, senior vice president and general manager of NYTimes.com, and Chris Saridakis, senior vice president and chief digital officer at Gannett, waved publishers away from the big networks that sell remnant online ad space. Schiller remarked, "Bargain-basement remnant advertising will drag down all of us."

Fast-talking panelist Lisa Williams, founder of H20town and Placeblogger.com, asked the rhetorical question during a packed Sunday panel, "Why do people read the newspaper?" The typical response, she said, is to stay informed. But Williams noted that one of the people she surveyed told her she reads the sports pages so she could chat with clients about scores. "People read the paper to feel connected," she added.

But what about the advertisers?
While many polled said they found the conference agenda helpful, one of the industry's largest advertisers was in disbelief. "What continues to distress me is that we are not talking about the value proposition to advertisers," said David Walker, CEO of the NSA, one of the biggest buyers of newspaper advertising with a $1.6 billion annual spend. He wants papers to go out and tell advertisers why they should put money in the medium, and felt there should be a dialogue about that at the NAA conference: "If not here, where?" Walker was disappointed about the lack of advertisers present or even invited to speak on the panels. He noted that about two years ago, the conversation with NSA's customers ? some of the largest advertisers in the country ? started to change. "We now spend an enormous amount of time defending the [medium]."

He mentioned that all the negativity surrounding the industry, justified or not, taints the views of advertisers ? some of whom think newspapers are already in an unrecoverable situation. Walker added, "The industry has a limited window to redefine its value proposition."

That message is not lost on NAA President and CEO John Sturm. During a frank conversation Wednesday afternoon as attendees headed home, he conceded the industry is under a lot of stress ? and remains in the early to middle stages of transforming its business model from print to digital. After pondering the term "crisis," he said, it "sounds to me sudden, and not anticipated." The quick pace of change, he added, "is rather significant, and that is most surprising."

Last summer, the NAA started under- going some changes of its own. Sturm announced the organization would narrow its focus on a few key issues including readership, advertisers, and policy. It significantly reduced its dues for members. Sturm said that at some point, the association might even drop "newspaper" from its nameplate, but if that happens it won't be for a while.

"This is a really tough year," he said, but added, "I actually thought [the mood] would be worse than it was. But I'm the eternal optimist."

Brian Tierney, one of the new owners of The Philadelphia Inquirer and Daily News, commented to E&P by phone later in the week about his takeaways from the conference. Tierney noted that his friends working as general managers at radio and TV stations are seeing their ratings and revenue sinking, too. "I was out meeting with some agencies and they were thrilled to have someone give them a fact-based [presentation] on where our business is, compared to radio and TV," he said. "It's shocking to me, the chasm" he added, about how down the industry is on itself and yet the medium still dominates the local market: "On one side is the reality, and on the other side is the perception. Every time I look at it, it looks wider and wider."

He continued: "The biggest story in TV news right now is [the failure of] Katie Couric. I bet you CBS News hasn't done a story about that!"