Content Bridges

Sam Zell: FCC-Anointed Prince of "Multi-Media" City

Think of FCC Chairman Kevin Martin's blazing-guns Tribune (TRB) waiver in two ways. In one way, it's a celebration of feudalism, as the new Sam Zell-led Tribune gets an unexpected prize, principality status in Chicagoland. In another, it's Martin's own way to propel the local newspaper and broadcast industries fully into the 21st Century, opening the door to singular, city-based companies producing multi-platform journalism and selling multi-platform ads.

By itself, today's ruling just gives the Tribune the ability to go private, keeping its portfolio intact for awhile, pending other FCC actions and court appeals. In FCC Commissioner Jonathan Adelstein's words opposing the waiver, "The Order employs certain novel, ill-advised and back-breaking legal gymnastics that will surely leave observers with their heads spinning." That's certainly true, but I'll leave those gymnastics to other observers, focusing instead on the media and journalism implications of what we're seeing.

The ruling -- allowing the company to keep its broadcast stations and newspapers in key markets for now -- should be enough to finally allow the Tribune deal to go through and for Sam Zell to begin his restructuring of company. The work of his teams of analysts roaming the Tribune building will take effect, and 2008 won't be much like 2007. The share price has been snaking up towards the $34 offer price expected, today closing at $31.04. A little more confidence-building as CEO Dennis Fitzsimons re-re-re-affirms that the bank financing will hold and Sam Zell affirms he's ready to roll, and the price, like it did in the News Corp/Dow Jones buyout, will move toward its target.

On the decision, the feudal part is the easiest to understand. The language:

64. IT IS FURTHER ORDERED, that a permanent waiver of the newspaper/broadcast cross-ownership rule, 47 CF.R. Sec. 73.3555, to permit the common ownership of WGN, WGN-TV and the Chicago Tribune by Sam Zell, The Tribune Employee Stock Ownership Plan, as implemented through the Tribune Employee Stock Ownership Trust, and EGI-TRB, LLC IS GRANTED.

The "permanent" is the shocker, putting into good Tribune Tower granite, the long-time domination of the Chicago media landscape.

Why? According to the ruling:

"Here, we find that the nature of the market involved combined with the uniquely long-term symbiotic relationship between the broadcast stations and the newspaper warrants a permanent waiver.  In this regard, our examination of the record confirms “the myriad public interest benefits that have resulted over the almost 60 years of Tribune’s common ownership of WGN-TV, WGN(AM), and the Chicago Tribune in the Chicago DMA.” 

It's hard to know whether the FCC is enshrining the near-monopoly or just re-enforcing another longtime Chicago tradition -- of course, a Daley will be mayor, and Tribune will run the media.

For Zell, though, this is probably the best prize he can get. He's now becoming the new Media Mayor of Chicago, a role he'll savor -- and can afford to subsidize.

It's the 21st Century part of the ruling that's really quite ironic.

I take you back to the year 2000. Newspaper valuations were good, and the Tribune company pulled off its blockbuster deal, buying Times Mirror for $8 billion, gaining properties in L.A., New York, Baltimore, Hartford (all subject to today's waiver granting) and a couple of others. On the foundation of that deal, Tribune, uniquely in the newspaper industry, set off on a strategy of grabbing more ad share and higher ad pricing by its ownership of newspaper, broadcast and, then, quickly, Internet sites in each site. It was a big strategy, at odds with many of its newspaper brethren. Long story short, it didn't work.

Speed the Scythe: Newspaper Staff Cutbacks Accelerate

Two recent newspaper cutbacks show those cuts are coming deeper and faster. New owners are no longer taking months to make cuts, now moving at light speed to reduce costs.

On Thursday, we saw the news the Herald Argus ("Where local news comes first!"), a daily of about 13,000 circulation, in LaPorte, Indiana, was cutting up to half of its 80-person staff.

Paxton Media Group, publisher of 32 daily newspapers with a total circulation of 370,000, bought the paper from Small Newspapers, closing the sale Oct. 1. Recently, some 30-plus staffers have been told they're terminated, some by the certified mail.

If you think readers don't notice who owns their local paper and or what it means to editorial quality, check out the 38 comments on the Herald Argus' own sale story. Readers get it.

Community coverage can't help but be significantly curtailed with such cuts, furthering papers' downward spiral. They become become less essential. Then readers' drift  becomes a stampede. Finally, advertisers find less of a mass market and further reduce spending. We can now see farther down the end of that funnel than we ever have before.

Farther east, in Connecticut, a Hearst/Media News partnership has closed on its purchase of the (Stamford) Advocate and Greenwich Time from Tribune. Gannett had bought papers earlier, but then backed out of the deal when an arbitrator said it couldn't break the existing union contract.

So Tribune made a new deal with Hearst (which is having Media News, a publisher of 10 Connecticut papers post-sale, manage the properties). As soon as that sale closed at the month's beginning, 13 veteran newsroom staffers found out their jobs were history. Among those on the list were top-ranking editors, including Editorial Page Editor Joy Haenlein,Sports Editor Bob Kennedy, Features and Food Editor Valerie Foster, Design Director Nelson Martinez, Weekend Editor Jonathan Rougeot and even Greenwich Time Managing Editor Bruce Hunter.    

We're reading editor's note after editor's note, it seems, but here's one that connects the passing of these staffers into the papers' 180-year history. Worth reprinting, from the article of by the (Stamford) Advocate's City Editor John Breunig:

Joseph F. Pisani, editor of The Advocate and Greenwich Time, saluted the departing editors for their dedication.

"There's a trend in the newspaper industry that suggests newspapers are 'better than they have to be,' that readers don't really want or need quality. But I can't imagine any of these editors settling for anything less than excellence. They were part of a 180-year tradition at these papers that will continue," he said. "They were the people who made The Advocate and Greenwich Time the best small papers in the country - all of them were committed to community journalism."

These cuts are coming at an unprecedented rate, not surprising given both the plummeting circulation and ad numbers. Who knows what 2008 has in store?

Porn & User-Gen: Amateurs Rain on Pros' Parade

Talk about disintermediation.

The new edition of Portfolio, Conde Nast's recent, retro entry into the business magazine market, tells us the conventional porn industry is, well, slowing down. Maturing may be the wrong word, but it looks like the industry, according to Claire Hoffman's piece (helpfully suggested by my friends at Newser), has hit middle age, faced with plummeting DVD sales, as alternatives proliferate.

The culprit: DIY porn, or what we in and around the Internet industry would call user-generated content. That's right. Why pay for professional content -- high-branded journalistic content or low-branded porn -- if you can get it for free? Why let mainstream media or mainstream pornographers dictate what we see, when so many of our fellow citizens are willing to blog or shag for free? It's the ultimate democracy of the web, though I'm not sure how Google's Page Rank is going to adjust its algorithms on UGC porn. (Is that one of those Google use-20-percent-of-your-own-time-for-what-you-want-projects?)

Here's how Portfolio describes the YouPorn challenge to Old Porn site, Vivid:

YouPorn lets users upload and watch a virtually unlimited selection of hardcore sex videos for free. The user-generated clips on YouPorn—like those on YouTube, the site it mimics—range from the grainiest amateur footage to the slickest professional product. Also, like YouTube, the site has far more traffic than income. Just nine months after going live, in September 2006, YouPorn was on pace to log about 15 million unique visitors in May, Jones told the Vivid executives, and its audience was growing at a rate of 37.5 percent a month. Today, YouPorn is the No. 1 adult site in the world; Vivid.com, a pay site, is ranked 5,061.According to Alexa, a website-ranking company, YouPorn’s overall rank is higher than CNN.com (84), About.com (114), and Weather.com (195). (Those numbers are averages for the three-month period from mid-June to mid-September.)

Sounds familiar, doesn't it, to observers of news media. It's hard to compete with free, and the established porn industry -- built on DVD sales -- can't fathom a "free content" that only be meagerly monetized right now, with advertising. So the Portfolio piece captures this well, as industry leader Vivid considers buying YouPorn, not knowing whether it could really be the YouTube of online porn, or just another site among its multiplying competitors, all colorfully named, like PornoTube and Megarotic.

Besides the humor here, there's great irony that Porn, often seen as the pay-model pioneer in the wider "content" arena, is already seeing its basic business model compromised by the combination of user-in-control content and the Internet ad revolution. Welcome to the club.

Nine Questions on How The Latest Circ Decline Will Drive Market Moves

Today's FAS-FAX report is numbing in its lack of revelation. The newspaper industry's circulation swoon continues, and at a pace that hasn't changed much over the last three years.

Daily: Down 2.5%
Sunday: Down 3.5%

So nine questions on how today's numbers will drive the next set of market moves:

1) Last year, newspaper publishers said they were ending junk (freebies+) circulation that advertisers really didn't want and that those terminations were largely responsible for the 2%+ decline in circulation. They said 2007 would be better. Now who believes them that 2008 is the year that those cuts will have cycled through?

2) The New York Times wowed Wall Street with 3Q earnings, in part based on a 4.1% increase in circulation revenues, due in part to its aggressive price increases. Now, does the Times have a significant new churn problem, as evidenced by its woeful numbers, down 4.5% daily, and huge 7.59% on Sunday?

3) The Times' newest competition, the Wall Street Journal, had a smaller turndown of 1.5% daily. So don't the Times deepening woes just whet the appetite of the Journal's soon-to-be-owner Rupert Murdoch?

4) Today, soon-to-be-former New York Daily News TV columnist (and Fresh Air contributor) David Bianculli announced his own place on the web, www.tvworthwatching.com. Isn't it a good irony that he did it on the day his paper reported its circulation decline of 6.8% on Sunday and 1.7% daily. It's another sign of the times that the top talent is jumping (and being pushed) off boats as they take on more water. 

5) With the Star Tribune down (6.5% daily and 4.3% Sunday ) and the Pioneer Press eking out .1% increases, daily and Sunday, don't you think the MinnPost people -- set to launch their site Thursday are smiling, seeing, at this point, only upside?

6) With the Tribune's top three papers all down on Sunday (Chicago Tribune, 2.1%; L.A. Times, 5.1% and Newsday, 4.3%), how much deeper a hole will the Tribune have to dig out of, if the Zell deal falls apart, on FCC moves or other factors?

Gary Pruitt: Let Us Now Praise the Last Mass Medium

Where’s it all going?

Will newspapers go away?

Will media be digital operations, with a little high-priced – or free – print here and there?

Newspaper readers and reporters aren’t the only one asking those questions. One of them – Lisa Monaco, on her way out as a news industry financial analyst for Morgan Stanley, caught in the Wall Street carnage – recently asked Gary Pruitt a cousin of those questions, the to-the-point: "Is one of the possibilities significantly scaling back the print side of the business?"

Here’s how Gary responded, and it’s worth noting as The Plan, circa late 2007, for negotiating the print to digital transformation: 

"We have no plans to significantly downscale our print operation. We do recognize that -- we think, in fact, it will be quite profitable for us to be the only daily newspaper in each of our markets and be that last mass medium. But we do recognize that over time, print circulation will likely decline. It will be a slow and gradual process and at the same time, our online business and audience and revenues will grow. 

That evolutionary change will allow us to be more efficient over time because the online business is a higher margin business. So while I don’t think you’ll see a dramatic shift in any one year, I think you will see that transition continue as we become much more of a hybrid company, print and online, with the growing area being in the more efficient and higher margin area of online.” 

Gary’s answer is a laudable one, but we’ve got to ask how much wishful thinking accompanies the strategy. Keywords:

• “Last mass medium”: He’s right. Cable has niched TV, as broadcast sees itself reduced from the mass medium it used to be. Does the ad world still want and need any mass medium to reach audiences, or is Web targeting superceding the need for mass media?  With the circulation decline, how much longer can  newspapers claim to be a mass medium?

FCC Rule Changes Pave Way for Roll-Ups and Mergers

Against the background of FCC Chairman Kevin Martin’s blitzkrieg effort to change long-standing rules on multiple media property ownership in American cities, we see what seems to be a confusing crazy-quilt of response from the big daily chains.

Tribune’s telling the FCC that unless it gets clearance (permanent or temporary waiver) to grandfather its newspaper/TV properties (in New York, Chicago, Los Angeles, Hartford and South Florida) its sale to Sam Zell won’t go through. Meanwhile, Scripps is busy splitting dividing its diversified company assets in two, creating a new “Local” company, comprising newspaper and broadcast TV assets, while separating out national/global cable and Internet. At the same time, Belo is tearing itself in two, separating out broadcast and newspaper assets, a notion Gannett is mulling as well.

So what’s happening here? What exactly is the commercial value of having multiple properties in a single metro area?

The answers are simple and complex. Long story short, though, I think, if the FCC changes are passed and stick, we’ll see a greater push of roll-up and merger, as print and broadcast assets inevitably come together, and in the hands of fewer, big players.

The answer is simple in that it’s better for those owning media properties to have maximum flexibility in keeping – or selling – properties. With government placing fewer fetters on who can own, merge and trade properties, perceived value increases. Would Sam Zell sell the L.A. Times and KTLA-TV? If so, buyers may well value them higher together than apart. And the same can be said for various other sets of assets and combos. If the FCC decision goes through, and makes it through the courts, expect an unprecedented level of sales and swaps.

But the complexity is more interesting – and raises the big questions about overarching news Internet strategy going forward.

The Tribune’s recent plaint is part of that complexity, and there’s an irony in it as well. You may remember that when Tribune bought Times Mirror in 2000, it distinguished its play with a big-city, newspaper/TV station, bundled-ad-buy-we’ll-get-more-market share strategy. That stood against the national network strategies of the day, including Knight Ridder’s Real Cities Network.

The Tribune said, no, the money’s in the market, and leveraging TV and newspaper (daily and niche), and in some cases radio, to get it would bring in lots of new revenue. The strategy didn’t work, many of those involved with it will tell you. Why? Even five-plus years ago, different ad buyers bought broadcast and print separately, and Tribune managed little pick-up of market share, eventually all-but-publicly acknowledging it had overpaid for the Times Mirror.

Flash forward to the brink of 2008, and we see an even greater change in ad buying. Almost $20 billion a year has moved to the web, but most significantly, web-based advertising is leading the revolution affecting all parts of the estimated $275 billion U.S. industry. Ad buyers have multiplying tools at their fingertips to measure effectiveness, and as those tools ravage all traditional ad selling models, the power’s moving from ad sellers to ad buyers.

So does owning both TV and newspaper properties in a single market provide ad advantage? Probably, not much, though owning two TV stations – a duopoly (which Martin’s rule relaxation might allow as well) may be marginally more valuable, same ad buyers at least.

What then might be the other advantages of owning a TV station and a newspaper in Chicago, Dallas or L.A.?

Certainly, we’d think there would be a certain promotional benefit. You know, “for more on this story” TV voice-overs pointing to print, for instance. But newspapers and broadcasters – usually by agreement, not common ownership -- have engaged in cross-promo deals for more than a decade now, and you can find few enthusiastic supporters of the results. Whether it’s been a matter of too little energy put into the relationship – as partners inevitably wrangle about leveling the relationship – or just the fact that the promo doesn’t really introduce customers to products they don’t already know about, the value’s been minor.

So, if ad bundling and cross-promo are minor, what about editorial sharing?

Here’s where it may get interesting. Sure, early on, newspaper sites tried to do video-sharing deals with local news stations (usually as part of cross-promo deals), but those deals faltered. They often fell apart, again in partner suspicion of inequality or just for lack of care and feeding. In addition, broadcasters have had a hard time exporting their news video in a timely, segmented way – the way online news readers want it.

So looking back, you’d say, there’s not much here, not much to recommend owning print and broadcast assets in the same market. But think again. Clearly as we approach the next decade, the local media model is pixel-clear. Local media companies based on singular, multi-media producing newsrooms – use the medium (video, audio, text) best for the storytelling, produce once, distribute many. That’s the model newspaper companies from Gannett (Seven Desks) to Lee (Lee University) to Scripps (check out the new multimedia SIDS report) are slowly adopting, and it’s one that fledging companies from Pegasus News to MinnPost to The Politico must embrace as their funding allows.

If this world existed fully today, it would only take fast-charging operators (think Rupert Murdoch and Dean Singleton) to quickly dis-assemble the old pieces and re-assemble the new ones, with far fewer layers of management and overhead. It’s the newspaper clustering approach (put together lots of print properties in a single region) applied more broadly.

 

Is Roger Ailes the P.T. Barnum of Cable News?

The line keeps thinning between journalism and stand-up comedy. A few recent examples:

• FEMA, the punchline of the early millenium, managed to pull off a Katrina encore so jaw-dropping that even NPR could best respond with satire. When it become public that FEMA Deputy Director Harvey Johnson had called a press conference to answer questions on his agency's handling of the San Diego fires and peopled the "press" with his own staff, how could you report it. NPR's David Folkenflik did the best job of displaying the absolute folly of it, in this report. Well-reported and then he one-upped it all, both offering his own press conference in which only he answered the questions. Masterful. Original column by the Washington Post's Al Kamen, uncovering the story behind the story, summing it up with: "This takes the prize for chutzpah."

• The Fox Business Network looking for kudos and borrowing an old Hollywood technique -- pick only the words you like from the reviews. As Keith Olbermann pointed that out in declaring Roger Ailes, who I think is becoming the P.T. Barnum (“Money is a terrible master but an excellent servant”) of the journalism business, the worst person in the world (for Thursday). Ailes' promotion department used these two "kudos." Promoted part leads, with brackets containing, as Paul Harvey would say, the rest of the story:

Toronto Globe and Mail: "They set out to change the face of financial news. [Now please change it back.]"

Economist: "CNBC has nothing to compare...."  [with the 5pm show," “Happy Hour”, filmed in the Bull & Bear bar at the Waldorf. It remains to be seen if Main Street will be grabbed by a group of good-looking young New Yorkers chatting amiably about, say, how “metrosexuals are out and menergy is in”, after work in a bar—but, hey, “Friends” did okay.]

          The full and entertaining Economist take, here.

• And then of course the whole Colbert for President affair. It's so bizarre that sometimes you sense that Stephen himself is mulling what a real run might be like, having a hard time parsing the whole real business of fake media and fake politics from real media and real politics. Welcome to the club.

          Anne Marie Cox's take on it was best I heard, as she dissected Tim Russert's limping attempt to seem hip as he interviewed Colbert.  "The senior deans of the news corps have to appear like they're in on the joke....They seem sad and desperate." Cox, former Wonkette and Suck editor and now Time.com's Washington editor, pointed out the odd Russian nesting doll nature of this little, though meaningful, story. Her take is encapsulated several minutes into NPR Talk of the Nation's "Poltical Junkies" report. All kinds of entertaining Colbert posts at HuffPost. And of course the now-famed New York Times Colbert column, by way of "guesting" for Maureen Dowd, here.