Another Tough Step

Folks,

Today Digital First Media announced Journal Register Company has filed for Chapter 11 bankruptcy and will seek to implement a prompt sale.

We expect the auction and sale process to take about 90 days, and I am pleased to tell you the Company has a signed stalking horse bid for Journal Register Company from 21st CMH Acquisition Co., an affiliate of funds managed by Alden Global Capital LLC.

So why file Chapter 11?

The Company exited the 2009 restructuring with approximately $225 million in debt and with a legacy cost structure, which includes leases, defined benefit pensions and other liabilities that are now unsustainable and threaten the Company’s efforts for a successful digital transformation.

From 2009 through 2011, digital revenue grew 235% and digital audience more than doubled at Journal Register Company. So far this year, digital revenue is up 32.5%. Expenses by year’s end will be down more than 9.7% compared to 2009.

At the same time, as total expenses were down overall, the Company has invested heavily in digital with digital expenses up 151% since 2009. Journal Register Company has and will continue to invest in the future.

But also from 2009 to 2011 Journal Register Company’s print advertising revenue declined 19% and print advertising represents more than half of the of the Company’s revenues. Print advertising for the newspaper industry declined approximately 17% over the same time period, according to the Newspaper Association of America. As well, both print circulation and circulation revenue have also declined over the same time period.

Since 2009, printing facilities have been reduced from 14 to 6; 9 of the 50 owned facilities have been sold and 8 distribution centers have been outsourced.

During the same time period, debt was reduced by 28% with the Company currently servicing in excess of $160 million of debt.

All of the digital initiatives and expense efforts are consistent with the Company’s Digital First strategy and while the Journal Register Company cannot afford to halt its investments in its digital future it can now no longer afford the legacy obligations incurred in the past.

Many of those obligations, such as leases, were entered into in the past when revenues, at their peak, were nearly twice as big as they are today and are no longer sustainable. Revenues in 2005 were about two times bigger than projected 2012 revenues. Defined Benefit Pension underfunding liabilities have grown 52% since 2009.

After a lot of thought, the Board of Directors concluded a Chapter 11 filing was the best course of action.

Journal Register Company’s filing will have no impact on the day-to-day operation of Journal Register Company, Digital First Media or MediaNews Group during the sale process. They will continue to operate their business and roll out new initiatives.

If you have questions just ask – you know how to reach me.

I know this announcement will leave you with questions – ask. Your managers, I and any member of senior leadership at Digital First Media will be available to answer.

And while I get this news may make some of you nervous, don’t let it. Concentrate on the job at hand and we will work through this. This really is the right decision for Journal Register Company.

John

John Paton
Chief Executive Officer
Digital First Media

In Defense of the Times-Picayune

Stop me if you’ve heard this one.

An old and distinguished business in New Orleans has seen more than half of its revenue disappear in five years and has decided to change how it conducts business – before it goes out of business.

It is going to sell its old line of products three times a week instead of seven times and will focus on selling a new product line. The owners believe the new product line, if successful, will ensure the business survives.

The business is not alone in its problems. Everyone they know in the same industry has the same problems. Everyone knows something has to change.

So, they start on their plan. 

They don’t handle it very well out of the gate. They poorly communicate the changes to their employees and to their customers.

They mis-step by not having their new product line anything close to being ready and clearly didn’t take the right steps to protect their top talent. The very talent that can make a big difference in the new product line.

They chew up a lot of goodwill all round. 

And no one believes the owners for a half-century or so suffered having to let go employees because the business of the future cannot support the same expenses of the old. These would be the same owners who used to try and guarantee employees a job for life.

But imagine the owners’ surprise when they are lambasted for not continuing with the old line of business that is driving them out of business. 

Imagine their surprise when community leaders  - politicians, musicians, restaurant owners – demand the owners sell their business to them (for a song surely, it’s a dying business after all) because they want to stick with the old dying business.

Imagine their surprise when their industry colleagues and critics lambaste them for changing when change is what is needed.

As for me, the owners are doing what they think right. 

Could they do it better? I think they could do it a lot better but they are attempting to dramatically change their business.

And it is a change largely directed at a future that focuses on the new line of business and less on the old.

Importantly, they remain committed to their core business and mission with what resources they have.

So I support them because their industry is my industry and it will not survive without dramatic, difficult and bloody change.

And like them I am willing to do what it takes to make our businesses survive.

Not Your Grandpa’s Old Newspaper Company

We are looking for people who want to transform the newspaper industry.

We’re looking for people with ideas, energy and the guts to implement them. And we’re looking for people who would rather fail trying to succeed than play it safe.

Is that you?

Wanna come play newspaper Digital First Media style? Have a look.

The ideaLab and the Amazing Photo Dept at the Denver Post

Denver Post ideaLabber and photog R.J. Sangosti, along with his colleague Eric Lutzens and their boss Tim Rasmussen, showed me today how they have figured out how to use the iPad to post to any site within minutes from remote locations.

Using very high quality cameras – much more capable than Flipcams and iPhone cams – they can shoot pix and videos; edit, infotag, write cutlines and post to a site within minutes. Amazing quality and extremely fast.

They demonstrated by asking me to discuss our Project Thunderdome. Shot, edited and posted within minutes. See the link below.

The ideaLab and Denver Post photogs – a great combination.

Thunderdome In Less Than 60 Seconds

A Lot Still To Do

Folks,

We asked our editorial leaders across all Digital First Media properties about the impediments to getting the job done.

Above is what came back.

Still so much to do. Not bitching. Not whining. Just saying.

And never giving up. We’ll get this done.

John.

Meet The Newest Members of the ideaLab

Folks,

Meet the newest members of Digital First Media’s ideaLab.

These 25 fantastic MediaNews Group employees join their 15 enterprising colleagues at Journal Register Company who have made up the ideaLab for the past two years.

The latest members of the ideaLab hail from all parts of MediaNews Group across the country and from different areas of the company. They were chosen from more than 500 applicants.

Jeff Jarvis, Jay Rosen and Emily Bell of Digital First Media’s Advisory Board – led by Editor-in-Chief Jim Brady – had the tough task of choosing 25 winners out of so many wonderful ideas.

Great ideas like Allison Barrett’s.

Allison, who works in sales at MediaNews Group, wants to help our employees re-connect with their communities through volunteerism.
Allison has a plan to use social media and a central data base to connect and help employees communicate their volunteer efforts. A win-win for us and the communities.

The Denver Post’s Jason Blevins wants to tell visually Colorado’s outdoor industry from high-country hiking to extreme skiing and whitewater rafting. The outdoors is not just an industry in Colorado it’s a way of life. Check out some of Jason’s “head cam” work here: http://bit.ly/zdajqM.

Omar Shadid is an accountant with MediaNews Group. Born and raised in the US, he is a first-generation Pakistani American. He’s a practicing Muslim and he is getting married this year. His is an arranged marriage. He has only met his wife twice and spoken with her for a total of 60 minutes. He wants to tell Americans about his Muslim culture from an American perspective.

Here’s what he plans to do:

“I plan to set up a column or online blog to load videos, pictures, and stories of my Muslim culture and my time leading up to the arranged marriage, as well as, life after the marriage. Many co-workers, friends, and neighbors are fascinated with the Muslim culture and there is no better way to experience the culture then a Muslim wedding with over 300 guests,” Omar told us.

The new ideaLab members will be equipped with the latest tools and the Company will provide them the time and money to experiment. Each member of the ideaLab will be equipped, initially, with a Smartphone, tablet and laptop.

The Company will carve out 10 hours a week from their regular jobs to allow them time to experiment with these tools and report back on how we can change our business for the better. And we will add an extra $500 per month to their pay.

Other than that – there are no rules. Just go play and come back and tell us how to run our business better.

Here are the winners:

Jason Blevins, Denver Post (newsroom
Jonathan Boho, Denver Post (designer)
Lauren Boyer, York Daily Record (newsroom)
Richard Chin, St. Paul Pioneer Press (designer)
Neil Devlin, Denver Post (newsroom)
Allison Barrett, MediaNews Group (advertising)
John Brewer, St. Paul Pioneer Press (newsroom)
Courtney Cashour, MediaOnePA (research)
Lisa Fernandez, San Jose Mercury News (newsroom)
Alex Fong, San Jose Mercury News (designer)
Aimee Heckel, Boulder Daily Camera (newsroom)
Dan Herman, Farmington Daily Times (presentation editor)
Dana Hull, San Jose Mercury News (newsroom)
Michael McGowan, MediaNews Group (circulation)
Ned Oliver, Berkshire Eagle (photographer)
Thomas Peele, BANG (data)
RJ Sangosti, Denver Post (photographer)
Omar Shahid, MediaNews Group (accountant)
Jack Storrusten, LANG (advertising)
Zahira Torres, El Paso Times (newsroom)
Angela Woodall, Oakland Tribune (newsroom)
Marc Cabrera, Monterey County Herald (newsroom)
Gina Dvorak, LANG (multimedia)
Jason Halley, Chico Enterprise-Record (photographer)
Katie Murphy, Denver Post (advertising)

Congratulations to all the winners. Let the experiments begin.

Until next time. John.

Old Dogs New Tricks and Crappy Newspaper Executives

(Speaking notes for an address to the Canadian Journalism Foundation
Toronto, Canada, 2/16/2012)

Good evening.

I’m old media.

This is my 36th year as a newspaper man – apologies – my 36th year as a multi-platform news executive.

It’s a career I started as a copyboy on this same street about a dozen blocks east of here.

I was hired for taking a picture of a belly dancer fooling with a drunk columnist. I was given the job of a guy who had just been fired for being a drunk. And I ended my first night on the job, taking home – dead drunk – the guy who hired me.

In my career the only reprimand I have ever received – if you don’t count the odd suspension for insubordination – was about expenses, specifically it was about booze. It read: “You are no longer allowed to order an Armagnac, digestif or any other after dinner drink that is older than you are.”

This is commonly referred to as the Golden Era of journalism.

And now, like many of you, I am struggling hard to teach this old dog new tricks.

Struggling to accept that much of what we know is no longer valid.

And trying to come to grips with the fact that crappy newspaper executives are a bigger threat to journalism’s future than any changes wrought by the Internet.

All of us have been subjected to the annual spectacle of a gaggle of print publishers gathering on a panel – Doug Knight, our moderator this evening, has officiated over a couple of these – to declaim they are not dead yet.

It’s an embarrassing display played out time and time again at conferences where our industry heads look like aging ingénues at Stratford declaring they can still play Juliette. And nobody has the heart to break it to them.

Or worse still, mediocre journalists, wrapping themselves in the flag of long-form journalism, to deride the value of social media as a reporting tool. A tool they don’t understand or care to understand.

And then having to watch them use that ignorance to dismiss the phenomenon of participatory journalism.

When I hear these hacks cry out that their work can’t be reduced to 140 characters I always think – if only – and pine for the useful hours I could get back in my life if spared their thumbsuckers.

And while these false, zero-sum arguments play themselves out, Rome burns.

And in the United States of America, where I work, the fire is burning faster and fiercer than ever before.

Since 2005, the U.S. newspaper industry has lost more than 60% of its advertising revenue and so many jobs no one can accurately count them.

And while this is not yet the story in Canada, I would say the only difference between here and where I work in New York City – is time.

It’s not like the Internet isn’t coming to your town.

The Journal Register Company – the Company I took over two years ago – and, more recently, MediaNews Group –which we now both run under Digital First Media – could be the poster kids for what ails the US newspaper industry.

We count our products in the hundreds.

Our employees in the thousands – ten thousand actually.

Our audience in the millions – 57 million actually.

And our revenues are counted in the “Bs” as in billions.

And, it is profitable. With better margins than an average Dow Jones listed company.

We have titles pre-dating the American Revolution and can stretch our lineage back to at least one predecessor title co-founded by Benjamin Franklin. Well, just about stretch if we stand on a high stool.

Another title was around to publish George Washington’s obit.

And our core mission is enshrined in the nation’s Constitution.

And none of the above will save it or other companies like it – unless we and our industry profoundly change how we do business.

You can’t fix what you won’t admit is wrong.

So let’s start with this one: Print’s coming back.

A show of hands please if you think that’s true – heads up people this is a trick question.

In America from 1985 to 2005 – the very peak of print newspaper advertising revenue – the average annual growth was 2.7%. Again, that was the Golden Era.

And for those of you wrapping the daily sheet in heavyweight glossy stock betting on a return to the Golden Era – at that rate of growth -it will be more than a quarter of a century before we are back to – 2005 levels.

But that is not going to happen as advertising gets ever less share of marketers’ dollars.

And newer, sexier platforms are targeting customers in such terrifyingly precise ways that we print folks are effectively taking a knife to a gunfight.

In 2012, in the US, it is expected there will be more advertising on the web than in newspapers and by most estimates more Americans now access their news via the web than print.

The customers have spoken.

But are we listening?

I would argue not nearly hard enough.

The debate rages on where that news starts – largely print – rather than how people access it – largely the web – and how it might be blocked.

And so, for awhile, we were treated to spectacles like the online copy enforcer RightHaven pursuing stay-at-home bloggers obsessed with their cats who happened to pick up some online news copy for a post. RightHaven died a deserved death.

Now we have the Associated Press playing around with NewsRight – the word Right is used a lot by print people. This time, we are told, NewsRight is out to nail companies who are not bloggers – it would seem – and to gather data on how our copy is used. Okay. We’ll see.

In the meantime, where are the industry efforts to understand and act upon how news is actually created and consumed?

Where are the industry efforts on understanding how professional journalists can come together with the people we used to call the Audience and who, armed with laptops and broadband access, are in the same business as us?

I meant what I said earlier when I used the word struggle.

I am not a Net native. I’m a newspaper man. My father was news photographer’s assistant and then a printer. The first hands that ever held me had ink under the fingernails.

And it’s tough enough struggling with concepts such as open publishing and participatory journalism and to let go the control we used to have on copy because of our control of the means of production, without print’s knuckle-draggers refusing to acknowledge we need to change at all.

Because change we must.

And if we are going to change we are also going to have to admit that the Print model is broken. Don’t believe me – then read any of the newspaper company Chapter 11 filings in the United States or Clay Shirky.

If you haven’t read Shirky’s essay Newspapers and Thinking the Unthinkable and you are in the newspaper business then brother let me tell you – you are not paying enough attention.

His message is simple:

“If the old model is broken, what will work in its place? The answer is nothing. Nothing will work. There is no general model for newspapers to replace the one the Internet just broke.”

And his message is clear:

You don’t tinker or tweak a broken model. You start again anew. And I would add build upon our foundations.

To do this you have to let go of those things we once held true. Like:

- We are the gatekeepers of information.

- That we are the agenda setters and that we decide what news is and what is not.

- And that we keep the Outside world outside and only let in the chosen few – people like us.

So, if we can admit the Print model is broken what else must we recognize isn’t working anymore.

I think it is this:

As career journalists we have entered a new era where what we know and what we traditionally do has finally found its value in the marketplace and that value is about zero.

Our traditional journalism models and our journalistic efforts are inefficient and up against the Crowd – armed with mobile devices and internet connections- incomplete.

Our response to date as an industry has been as equally inefficient and in many cases emotional.

“You’re gonna miss us when we’re gone” is not much of a business model.

The French philosopher Roland Barthes argues that when culture becomes nature we are in the presence of myth.

In our blustering for self-justification we have created a myth of our value. Without ever establishing its economic value, we have argued our value as journalists and journalism itself is self-evident and unassailable.

This has been one of the most gut-wrenching struggles for me to deal with because clearly journalism is not without value but, for sure, how it is largely practiced in print today – particularly “he said last night journalism” – nearly is valueless.

Today news organizations that do not embrace how news is now created and consumed – Digital First and Print Last – are ignoring not only how their customers desire to get news but how they understand it as well.

We ignore this at the risk of killing our business but worse we ignore it when the solution to our future is sitting under our noses – the power of our brands – if we would only let go of the past and embrace the future.

The University of London professor Celia Lury argues in her essay “The Brand as New Media Object” that brands themselves are platforms for content.

Dr. Melissa Aronczyk at Carleton University argues, with co-author Devon Powers, in their work “Blowing Up The Brand” that “the relationship between consumers and brands become less about the consumption of the product than about social relations, experiences and lifestyles such consumption enables.”

In an industry that has been hidebound to its production process – printing – but equally wedded to the belief that its brands stand for something, I think the professors’ arguments point to a way forward for newspaper companies as news companies.

Just as the printing press divorced the reader from the writer with the pen and created a whole new world of scalable audiences and techniques of communication, the new digital platforms demand journalists use each platform to its utmost advantage.

The first steps in this transition have been our Digital First strategy but clearly it is also a case of Digital Right – the right uses for the right platforms on the right occasions. And not just the simple re-purposing of content from one platform to another in order of priority.

Online stories today that do not link are now considered inferior by consumers. News companies, as brands, cheapen and destroy themselves if they do not allow the social interaction that society now demands of the new digital tool set.

Marshall McLuhan knew this when he said the Medium Is The Message.

In the news business, particularly a legacy business like newspapers, if we don’t understand this and take advantage of the Medium’s potential we will cease to be the Messenger.

And it is in this role of Messenger that we have tied up our ideas of brand values.

Such as:

- A Messenger the community can trust.

- A Messenger known for its accuracy, integrity, etc.

But what does it mean to be the Messenger in today’s new news ecology where the people we used to call the Audience are now equally participants, competitors, colleagues, arbiters and sources?

At Digital First Media we have started to answer that question by first unlocking our brands and sharing our content into this new eco-system for all to use. And where we, in turn, aggregate the Audience’s content, curated under our brands.

The Audience – at the Journal Register Company – has responded to this initiative by doubling in about a year.

Letting go of control is a very hard thing to do. And allowing the Audience – or the outside – in is even harder.

Often when I talk about bringing the Audience into the news conversation, the aforementioned aging ingénues respond sharply, reminding me:

- “We have always connected with our communities.” Read: letters to the editors or streeters.

- “Our readers are part of our process.” Read: surveys and citizen members of editorial boards.

- “We hear and act on their complaints.” Read: the ever-ineffectual Ombudsman.

When I worked at the Toronto Sun, as both a reporter and an editor, we said the same things usually wrapped up in this tidy little phrase:

“We produce a newspaper for the guy who rides the Queen St. streetcar.”

I bought into that, even though as a guy who actually did ride the Queen Street streetcar to work it was obvious about half of the riders – men and women of color; non-English speakers struggling to find their way in Canada’s largest city – looked nothing like the self-satisfied white guys – me included – who sat around the rim deciding what was news.

The web ensures that doesn’t happen anymore. Or at least it doesn’t happen for a long period of time for a news company trying to survive.

Extending Professor Lury’s argument that brands are platforms, at Digital First Media we have taken our initiative to unlock our brands and share our content one step further.

In Torrington, CT we have literally extended our brand, the Register Citizen, by using the newsroom itself as a platform.

At the Register Citizen we have established an Open-to-the-Public newsroom and all are welcome.

They are welcome to work at blogging stations set up right in the newsroom. They are welcome to use the community meeting rooms and they are welcome to attend the news meetings themselves. For those who can’t make it the news meetings are also live-streamed.

In Torrington we have tried to embody the basic values of the web – transparency, inclusiveness and interactivity.

Placing online fact-checking boxes on every story is our direct request for help to correct any mistakes we may have made. I believe this is an act of transparency that is bonding us closer to that community.

To be clear, we have accepted we are no longer the old-fashioned agenda-setters or gatekeepers of information for our communities. Clearly communities know what they want and can organize themselves around issues and activities.

What we can do, however, under the power of our brands, which are still trusted, is help organize relevant information out of the river of content now available in each community.

Vint Cerf, Chief Evangelist at Google and called by some the Father of the Internet, is very clear about this:

“People’s trust in journalism has always been about branding.”

And as the community has become even a physical part of the newsroom we are building a better connection with that community than we have ever had before.
In Torrington, the community has responded by driving the newspaper’s digital audience to more than five times its print audience and it has taken the Register Citizen from a loss to profitability.

Along with the Community Media Labs at all Journal Register Company dailies and which are now being rolled out at Media News Group, Torrington’s Open-to-the-Public newsroom is becoming a new model of community engagement that works and enhances the news organization’s brand value.

This is a brand value being built by the community itself as the community takes ownership in what the local news organization does and helps to establish its key values of community involvement.

The gate is forever open now. There is no longer a gatekeeper on community news. Communities will now value those institutions – like Twitter – that help the flow of news and those – like us – that add context and reflect the values the communities themselves set.

Adding value to the new free-flow of news requires a new news organization.

Our journalism tied to the power of participatory journalism is in my opinion an unbeatable combination as we help communities make sense of the river of information on the web.

In New Haven, CT we have created what we believe is a local newsroom that adds value.

It has four key components: Breaking News; Investigative Reporting; Audience Engagement and Widgets.

Audience Engagement and Widgets are the new no-brainers. Newsrooms must share content and they must engage their audience as demanded through the new digital tools that are powering social media.

No social media connection. No news organization.

While the crowd can be as fast or even faster on breaking news, adding the context we have through our community connection and professional newsrooms is both vital and additive to brand value.

However, it is the re-establishment of an investigative reporting unit – a victim of cutbacks in local newsrooms a long time ago – which can add the greatest value.

Finally, again, and using the new digital toolset, we are asking questions that others are not asking.

That virtuous circle is complete when the news organization’s engaged audience pick up those questions and demand answers.

From a business perspective we are getting closer to the Holy Grail of value alignment with our communities.

Trust me when I say all of this is easier to say than do and it takes a commitment from the entire organization. If you are not fully committed the community will know it in a heartbeat.

And then you are dead because a thing of value has to earn its value – constantly.
I strongly believe sharing content will mean more prosperity not less in the future.

One of the reasons I am so stern on paywalls and other walled gardens is because I firmly believe that in the future content will go the audience and not the other way around.

Smart, original content, tagged with advertising will gain value by being shared through networks.

Shared content equals influence.

And influence in the new eco system equals engagement.

And engagement equals value to those advertisers and others trying to reach that engaged audience.

While online news start-ups here in Toronto like OpenFile understand this intuitively too many newspaper publishers do not.

And they continue plow on by slashing editorial, research, marketing and even sales resources – our only core competencies – to meet profit expectations.

An aside, newspapers get the investors they deserve.

In the US with many newspapers either in, coming out of or threatening to go into bankruptcy, newspaper managers appear to be equally bankrupt of ideas as they seek to please investors by slashing costs and driving short-term gains.

Investors, being no fools and recognizing newspaper managers have no plans to truly transform their business, are simply doing their jobs when they keep management focused on producing short-term gains.

Investors don’t buy into myth. They buy into math.

If you want investors to take a long-term view on our industry or our companies then you better give them a long-term plan that works. Give them a plan they will back.

And I would add it should be a plan built on the editorial floor where the core of our business lies.

The rest of transformation is mechanics.

If it is not core to your business- and in newspapers core means content and sales – then reduce it, stop it, sell it or outsource it.

And for God’s sake stop listening to newspaper people. We have had since the mid-90s to get this right and clearly we are no good at it.

Put the digital people in charge – of everything.

They can take what we have built and make it better.

It is so very important we get this right – not just for the industry and investors – but for our communities.

“The newspaper is the place where communities are formed,” writes New York University professor Aurora Wallace in her book Newspapers and the Making of Modern America. Dr. Wallace continues: “Newspapers are … the engine behind the construction and maintenance of strong communities … when they falter, we must ask what else will suffer as a result.”

We owe it to the communities who have sustained us not to falter just because we are afraid to change.

Finally, I would say to newspaper execs learn to let go and love the ‘Net.

I am here to tell you, you can teach an old dog new tricks.

Metaphorically, I still chase cars down the street and bark at cyclists but I’m picking my marks better now and for old dog I’m starting to catch some of them.

Thanks.