Content Bridges

Betting on a Silicon Valley Rebound?

Could Silicon Valley's turnaround be tossing a wild card into Knight Ridder's* sales talks? Joint Venture Silicon Valley recently released data showing the first job increase -- just 2000 jobs 2005 over 2004 -- in four years. Most importantly the report pointed to a rosier job and regional economy picture going forward.

The San Jose Mercury News had proclaimed itself "the newspaper of Silicon Valley" in the wild days of burgeoning growth in the valley. That growth produced the highest household incomes in the country and the highest property values.  They also produced unprecedented classified revenue, as the Mercury News at one point ran more classified lineage than any other newspaper in the country.  Much of that high-priced lineage was for recruitment, as the tight job market produced columns and columns of job ads.

The burst Internet bubble first drained that revenue. Short time-on-market limited real estate  revenue. craigslist, launched out of San Francisco, then compounded  the Mercury News woes. craigslist has  grown revenue that some estimate at $20M a year, largely from recruitment. In addition craigslist has made mincemeat of the "for sale" merchandise ads, largely replacing a paid marketplace with a free one.

Wall Street analysts, picking through KR data, have estimated recent Mercury News margins at 8%, well less than half of what they were pre-bubble.

As KR execs made presentations to bidders, those bidders were surprised at the "optimism" of the numbers. That optimism is partly fueled by a sense that Silicon Valley is upwardly trending once again, and that the Mercury News will participate in that upside, craigslist and other Internet competitors notwithstanding.

Let's also consider the other laggard KR market, Philadelphia. Hugely important because it is the top revenue producer, Philly saw its margin drop to 9%. We haven't seen a lot of press about an improving Philly regional economy, but one recent Philly Fed report does point to a long-awaited manufacturing growth.

Why would a rebound, even a modest one, in these markets potentially be so significant?

Consider Morgan Stanley's estimate of KR by-market margins overall:

San Jose Mercury News, 0perating margin of 8.0% on revenue of $235,000,000, $18,000,000
Philadelphia Inquirer & Daily News, operating margin of 9.0% on revenue of  $520,000,000, $46,800,000
St. Paul Pioneer Press, op eating margin of 10.0% on revenue of $121,000,000, $12,100,000
Contra Costa, op eating margin of 18.0%
Charlotte, op eating margin of  20.5%
Akron Beacon Journal, op eating margin of 21.0%
Miami, op eating margin of 22.0%
Fort Worth, op eating margin of 24.0%
Kansas City, op eating margin of 26.0%
All others (Including papers acquired in 2005 from Gannett), op eating margin of  26.4%
Knight Ridder margin (before corporate expenses of $70 million), 19.4%

So, overall, KR's new estimates -- and bidders estimates of those estimates -- may be giving a headache to all those trying to figure out just what the company is worth and what they are willing to pay for it. And that will make the question of who's willing to bid how much, and whether the board will find that number acceptable, more intriguing.

 

 

*Disclosure: Ken Doctor is a retired Knight Ridder journalist and retains financial holdings in the company.

 

 

ESPN=Excessively Spit-Fired Palookas Nattering?

Jim Cramer's just a shill for Zoloft, right? I mean those hyperkinetic superstockpicker moves have to be tied to generating anti-anxiety drug sales?

Maybe Pharma is also working hand-in-hand with ESPN on pills to 1) promote; 2) reduce; 3)  and/or help viewers cope with excessive gesticulation.

Try this test:  Tune your TV (Hi-Def if you dare) to ESPN in the a.m. for "Cold Pizza", on Monday through Friday.  Mute it.  Then just watch. You see human beings incapable of just speaking.  Instead you see a non-stop whirlwind of expansive gestures, up, down sideways, pumping fists, fingers, and (this is where the Hi-Def part gets scary) stuff flying from the mouths of commentators Woody Paige (pictured) and Scott Bayless. Scarier than being first row at a David Mamet yellathon.

Now it looked like Bayless was mad enough to spit when he served, briefly, as a serviceable sports columnist for the Mercury News. But, god bless newsprint, we were protected, insulated.

Jon Stewart may have egged on CNN to cancel Crossfire, but the Culture of Argument remains a TV staple.   Curiously before people acquired the ability to speak (maybe about 50,000 years ago if my memory of an WSJ piece is correct), they used their hands to communicate. When they could speak, they could use their hands for other things. Hence: "civilization" as we know it.

Are we regressing?

What is the best contemporary acronym for what ESPN has become. Maybe:

Excessively
Spit-fired
Palookas
Nattering

 

Jungle GYM*: David Mandelbrot

Search Engine Watch reports that  David Mandelbrot has left Yahoo.  David was vp of search content.

We all live in overlapping circles in and around Web content.  Veeps of Yahoo, MSN and Google rarely participate, much less attend, such events as Go!, E-Content, SIIA and ASIDIC.  David did, lending a great public image to Yahoo's partnerships with publishers and serving enthusiastically on panels.  His participation was welcome antidote to the reflexive GYM bashings that too often go on at such conferences.

What new faces, and voices, will appear so that GYM companies can better work with, not just make deals with, the content-producing companies?

*GYM=shorthand for Google, Yahoo and MSN, the dominating Web forces of our time.

Tainted Trials, Stolen Justice

As if to strike a chord during the increasingly disharmonious Knight Ridder sale talks, the Mercury News struck back with a novel concept.

Journalism.

Done well in five parts, "Tainted Trials,  Stolen Justice," began Sunday and unfolds through today. Fredric Tulsky, the project's lead reporter, lays out a three-year Mercury News investigation into the fabric of the Santa Clara County criminal justice system.

Defendants wrongly convicted.  Innocents in prison.  Courts failing to follow basic procedure. Key evidence overlooked. Incompetent judges.

Of 727 criminal jury trail cases examined, fully 261 were found to have some "questionable conduct."

It's a piece of journalism that reminds us why the Knight Ridder sale question looms so large, and why daily journalism, even though it is practiced by companies with old-fogy brands, matters.

Only a local daily newspaper has the staff resources and the legacy mandate to do such a series. Some local TV and radio stations do exemplary work from time to time, but few have ever devoted the kind of resources to a project such as this.

Working with Tulsky were nine staffers, including data analysts, research librarians, graphic artists, designers, editors and writers. We don't know how much of their time they put into the project.

But let's guess that staff time and the pages of newsprint the project required cost $400,000. Reasonable guess. 

Guess where that $400,000 is in the how-to-cut-costs presentations to bidders by Knight Ridder and its banker representatives. Guess where that $400,000 is on the spreadsheets of most of the private equity bidders.

Gone.

Investigative journalism sells no ads.  It can't be proven to spur readership.

It is the core, though, of why we value newspapers. They are local.  They have a responsiblity in and to the community. Exercising that responsibility means challenging the powerful institutions that determine our lives, such as the justice system. Given the increasingly complexity of those systems -- and the increasing efforts of many of those running them to cloak them in secrecy -- the only response is to put good, smart people on the watch. And to give them the time and tools to do their work.

So salute the Mercury News for an investment well-made. And remember the example as we wind through a couple more months talking about Knight Ridder's fate. It may not seem like it, but in the long run, we may be talking about the fate of all of us.

No, They're Not Talking Private Equity.....

......Or are they?

Sent: Wednesday, January 25, 2006 11:22 AM

To: KRD SJ All
Subject: Rodent Abatement Measures
Importance: High

Dear Headquarters Colleagues:

Recently we've noticed that some rodents have been sighted in the building. Please be aware that we've taken some steps already, and today will employ additional measures to abate this problem.  We've hired an exterminator who placed traps in the basement near where the rodents are gaining access.  Today he will place traps throughout the building.  The building owner is closing up the points of entry today. As soon as we know of other extermination options we'll update you.

We also need your help.  If you have food in your work area, please dispose of it or put in in sealed containers immediately.

Thanks - more news soon.

Howard

When the Well-Coiffed Tail Wags the Mangy Dog

What do we do when the well-coiffed tail wags the mangy dog?

The tail: the spending on advertising in the U.S. According to a much-quoted assessment by Zenith Multimedia.

The total: $250 billion dollars spent on advertising in these 50 states in 2005. You can see on the chart that the newspaper portion of this is almost exactly one-fifth: $50 billion. And as we weigh the meaning of the pending Knight Ridder  sale, it's good to thing about this number and what it means.

Ad spending to a great degree determines what we read. No, not because of overt advertiser pressure, but because ad revenues determine how many journalists produce our news.

As Jim Batten, Tony Ridder's predecessor, and a visionary of his
transitional time, leading KR from 1988-1995, said: "The institution of the American newspaper owes more to the department store than to the First Amendment."

Batten was a former top editor and as tough a journalist as any of us could have hoped. He delighted in the First Amendment, as we all do.  He understood though that it was the accidental contribution of the department store that made more difference to what journalism could accomplish than the intentional contribution of the Bill of Rights writers.

Department stores came along and grew with the daily press. In a great symbiotic arrangement, they reached broad masses of buyers (browsers of another age), through large single- and double-page ads in the "A" sections of metro papers. Later, they embraced colorful inserts, packaged with the Sunday paper, to reach customers.  The ads drove their cash registers. Their ad payments fueled the growth of American newsrooms.

Now the accidents of history have taken another turn. Department stores have consolidated greatly, and their share of retail spending has shrunken. The great confluence of events in our day has produced a paid search advertising revolution, galloping along under the auspices of the Google and Yahoo, with news publishers at best second-tier players.  News publishers' ad revenues are under siege, growth prospects are uncertain at best and newsroom staffing is seeing its steepest decline (almost 4% in 2005 alone) in anyone's memory.

So as we think about new models of news publishing - - public ownership models, new content (journalist+blogger) aggregations and others -- let's remember the $50B number. And let's figure out ways for the dog to rebalance itself , and put its tail back where it belongs.

 

What's the Half-Life of Web Middleman?

The joke was built right into the release:  Warren Buffett's, the gazillionaire whose company still used fax in preference to email as recently as a year ago to send out company info, had bought Business Wire for about $3M.  Business Wire, along with industry leader PR Newswire, and wannabes Market Wire and MediaZone, are in the business of getting a company's own words out directly  to the world, via the web.

Those companies are in a classic sense Web 1.0 companies. They smartly figured out that the web needed a point of aggregation and a facilitator of press releases. Companies knew out to get out press releases in the old days.  Write 'em and mail 'em, painstakingly, one by one . Or hire a p.r. company to help get the message right and the receivers right.

Write once, distribute many, said PR Newswire and Business Wire.  Get your message out instantly. It was a cost-saving, direct-to-receiver revolution like so many others that we've seen.

Now the question came up in the stories of the Business Wire purchase by Buffett's Berkshire Hathaway:  Is this a company of the future, or of the recent past? Will its market position erode as RSS delivery lets companies do such distribution for themselves, saving the $250+ per release cost of the service? Will such 21st century quasi/pseudo coops as Google Base (ENTER ALL, RECEIVE ALL) make such services obsolescent?

Well, maybe, but probably not so fast. In fact, the question reminds me of a several current areas in which we may learn what's the value of a web middleman and how long that middleman can sustain an evolving business model.

Take contextual ads. What Bill Gross and Ted Meisel pulled off with Overture, copied and expanded by Google, is instructive.  They were able, first, to manage the interdependent growth of a expanding database of advertisers and of available inventory on Web pages.  This ad matching system is of course fundamental to the business. But they didn't stop there, because ad matching is something others could and have imitated. Importantly they built out tools that help advertisers manage their contextual ad business, measuring different approaches, calculating yields.  It is this growing set of tools -- now being taken to radio, print and TV -- that make Google and Yahoo clear leaders in the paid search business. And it's the reason few are predicting they will be knocked from the perch soon.

They are middlemen who continue to earn their worth and prove their value.

Take a much smaller sector: blog enablers. Everyone is getting into the business now, with Apple the latest entrant with its iWeb service. I use Typepad, as do many of my fellow bloggers. It's been a good experience (thanks to quick-on-the-spot Help Desk of Laura, Colleen , Carla and Kymberlie).  But when I wanted to learn more about traffic patterns for my site -- where are people coming from, going to, etc. -- Typepad was unable to give me more than a day's data, and limited at that.  Helpfully, they suggested several 3rd party applications.  I compared them and am testing sitemeter for now, both for its tracking and blog promotion services.

How successful a middleman will Typepad be, if it doesn't help its customer succeed more easily, with such tracking and promotion help?  It's definitely less essential without the services, making switching easier.  (As well as depriving itself of another revenue source through an upsell.)

One last example, near and dear to our editorial hearts. Content. News content. It's not enough, we've learned the hard way, to just offer, and re-offer, and re-offer the same content for reading.

Which is why news readers increasingly go to places like Yahoo to read it. Yahoo gets tools deeply. Around content, we see Yahoo's social media revolution taking place.  It's all about saving and sharing content -- My  Web, My Yahoo, Web 360, Flickr. Yahoo gets the idea that being the middleman means helping the customer make more of the product, in this case the news.

Which brings us back to Business Wire. Look at the Business Wire site and you see that it has added many  services.  Those services are all around making its business sticky. They help companies get the word out, as always. But they also help customers  add multimedia, translate their releases into multiple languages, target customers, measure campaigns and more.

These are the kinds of services, value adds, that will make the difference. They  separate a mere redistribution service from a service that helps companies -- and non-profits of every description -- succeed with getting their messages out.

So will Business Wire and PR Newswire succeed in Web 2.0 RSS'ed world? Maybe, if they continue innovating and provide a largely unduplicated set of services to their clients.

So what's the half-life of a middleman?  It comes to making what's hard for others easier. Let us quote Albert Einstein (who would have loved the Web):   "In the middle of difficulty lies opportunity."

What's a Story Worth?: Looking Ahead to 2006

WHAT'S A STORY WORTH?   Okay, we know that "Desperate Housewives" goes for $1.99 (on an Ipod), Beyonce goes for 99 cents (on your favorite music player), but we're still perplexed about what a story -- current or archival -- is worth? That of course is the big question for all paid products (see "ARE YOU PLANNING TO PAY FOR THAT?" below). It's now becoming the question about the news companies that create them. As Knight Ridder* twists in the wind, and the financial re-valuation of news companies continues madly in the board suites, we're see  how content-creating companies (text and non-) are perceived in '06. 

YOU FROM AROUND HERE, BOY? It's not the old West, it's the new west, and it's getting wilder.  Back in the day,  local news sites, put up by newspapers and broadcasters, considered themselves the local authorities.  By default.  Then came local entertainment guide competition, initiated by Sidewalk and perpetuated by City Search and now Yahoo, as its Upcoming purchase provides a foundation for a revolutionary local entertainment product. ESPN and then MLB, followed by other national sports sites, have picked away at the sports franchises. Marketwatch has made local business news far less essential.  Then over the last two years, Google, Yahoo and MSN all beta'ed Local (cap L) and then added it to the top toolbars.  Geocoding, done well to poorly, but marketed like hell, for everything from movie times to weather to sports scores, to, gasp, local news.  Now vcs have put significant early funding into the Local Search category (given the paid search bonanza, anything seeking attention and funding has to have the word "search" in it). The result: The battle for Local news and information users kicks into higher gear, as GYM and local search-plus sites like Judy's Book, Local Matters, Backfence, Innovectra, Cairo,
and Yelp all are going after Local Eyeballs.

Big media local sites will now have to regroup to defend their last bastions against the multi-armed invasion.

FORGET THE TIME CARDS, CHECK THE DANCE CARDS: It's mating season with a vengeance as  traditional media companies figure out on the fly how to do the mating dance with troika of Google, Yahoo and MSN.  They are feeding them classifieds on the one hand and withdrawing licensed editorial content on the other.  The troika in charge is driving the conversations and the deals, both relying on program-by-program and company-by-company negotiations, all of which disadvantages the media companies that need to drive bigger, better and more synergistic deals. 

DAUGHTER OF PRISON BREAK:  2006 may be the year that newspaper sites break out of their re-purposed cocoons, to which too many retreated after the Internet bubble. Most promising is the path chosen by a number of them, with washingtonpost.com leading the way. Post Remix is one of the most promising developments of the year, with the Post inviting in 3rd party developers to go semi-wild with useful applications (mapping, quizzes, tailored search+) that extend the utility of Post content.  The Post has also brought Technorati-fueled contextual blogs onto the site, opened up a Discussions area, nurturing community conversations.  Many sites are engaging their own columnists to write and participate in blogging.  At best, the 80/20 rule will apply here with a few of the blogs catching fire and becoming popular.  Only a few will both capture the informal flavor of informal blogging (vs. formal journalism) and find new audiences.  Look also for more community blogging enablement, like the Austin American-Statesman's experiment, powered by Pluck, as news sites try to colonize  community blogging as My Yahoo has done with RSS.

ARE YOU PLANNING TO PAY FOR THAT?: Times Select is a hit, at least of sorts, with a reported 300,000 subscribers (somewhat less than half of whom we'd believe are paying; the rest are newspaper subscribers). Now we hear that the sister Globe is going forward with Sportsplus, at a $49.95 annual price point, in time probably for the Bosox (Rudy Seanez, really?) season with a forward reaching mix of blogging, podcasts and audio/video. We've seen sports models work (Milwaukee, under the estimable Pat Stiegman, and Dallas) and fail (in Atlanta and Minneapolis). What needs to make sports and other products work: new, fresh, updated content and the many extensions of it, from podcasting and blogging to ways to encourage lots of reader interaction. Consumers are no fools -- they are only willing to pay for a lot more than they are getting in print.   

*Disclosure: Ken Doctor is a retired Knight Ridder journalist and retains financial holdings in the company.

 

9 More Questions About Knight Ridder, into 2006

1. What exactly happened in the NPR interview of Pew President Rebecca Rimel, when NPR reported that Pew would make a run at acquiring the Philadelphia Inquirer, only to correct its story a day later?

2. Still, will Rimel's comments -- "We have to put wise heads together to think about how the civic purpose and the democratic purpose of newspapers is served, first and foremost." -- help ignite a wider conversation?

3. What, then is the Inquirer worth, and what might a local model of ownership/management look like?

4.  If you put together fledgling sites like PhillyFuture.org with traditional newspaper sites, what might you get?

5) What if you added City Guide-like functionality like Yahoo's beta to the mix, what would you get then?

6) Is the Newspaper Guild's foray into buying newspapers a passing notion, or a growing part of the civic conversation Rebecca Rimel wants to get going?

7)  Can the KR* alumni editors group seeking a pro-journalism resolution to the sale join forces -- in conversation at least -- with the Guild and Rimel, to get things moving?

8) What other kinds of community groups, in other KR cities, may be moved to similar, civic action?

9) When current news publishers look at the St. Petersburg (this piece by Nelson Poynter in 2000), what are they thinking?

10) Your question here.  (Happy New Year.)

*Disclosure: Ken Doctor is a retired Knight Ridder journalist and retains financial holdings in the company.