Lauren Rich Fine on newspapers' future

This has been a most interesting American Copy Editors Society convention this week in Cleveland.

Apprehension is palpable about the state of the newspaper industry. It would be too strong to call it fear, but too weak to merely label it concern. Clearly, a significant number of people are wondering what the future holds for those who dedicate their jobs to getting it right, not just in punctuation and grammar, but in fact, tone, display and logic.

Two years ago, in Houston, you could have swung a large pica pole and not hit anyone in the new media sessions. A very prescient Tom Mangan warned that copy editors were coming to a crossroads, and if they didn't take control of their jobs and those jobs' relationship to the Net, those jobs could well be endangered.

Last year, Nicole Stockdale and I had great turnout at our session on blogging for editors. A lively discussion ensued as Howard Owens, then new media chief for the Ventura County Star joined us to deliver the message that "citizen media" had arrived and we ignored it at our peril -- and, by the way, that also probably meant we had to accept that some things would be posted without editing. Owens has moved on to Bakersfield, Calif., where he has just revolutionized that paper's Web site by dropping AP and with a design that puts a greater premium on learning to write good heds for the Web.



This year, the new media sessions and those looking at the future have been packed, especially the one this morning with Lauren Rich Fine, Merrill Lynch's advertising and publish industry analyst. Fine, undeniably one of the most influential people on Wall Street in evaluating newspapers, lives in Cleveland, so she was in the comfort of home, and she let loose with one of those conversations diplomats like to call "frank."

Her bottom line: Newspapers are going to have to innovate, try things and see whether they work. It's probably a good idea to just write down the value of the companies now, and then go about the business of trying to fix them. And news people are going to have to get used to the idea that some of those long-cherished shibboleths are going to have to go.

"You can't make everyone happy. Those days are gone. No one will pay you for it," she said. "You'd better have a better balance of what they want than what they need if you expect to sell papers."

Nevertheless, Fine, who has been Merrill Lynch's analyst for 18 years, is a big supporter of newspapers -- just not their current business models or acumen. There is seldom a better vehicle for local advertising or news, she said.

(You can compare what she says now to her 2004 industry rerport.)

What follows is a condensation of her 90-minute discussion with a roomful of copy editors wondering what's next:
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The newspaper industry is far from dead. "I would argue it provides the greatest value to readers." No one challenges that, she said. What people are asking is how valuable is the business itself. Although newspaper stocks have dropped sharply, they are not yet to the point where she would recommend them as a "buy."

Fine discounts those who say newspapers will be around because they always have rebounded from competition, first from radio and then TV. She does expect them to be around for quite a while, but says the radio-TV comparison is a bit bogus. Those two mediums were not really competitive but instead created new ad channels, she said. "You didn't lose money; it was never yours to be had."

But cable TV marked the first competitive threat to those ad dollars because now it was possible to buy a local spot with the money in your wallet. In some cases, it can be targeted (such as the east side vs. the west side of Cleveland), and that starts to become a threat.

Then came the Internet. Not only does it provide intense targeting for advertisers, it has become the fastest-growing medium in history. Further, if you withhold your content from it or don't create content for it, then there is plenty of citizen-generated content to be had.

On the news side
"You can't think of yourself as a once-a-day medium. I see a big cultural divide here," she told the audience.

Fine drew parallels with her 18 years with Merrill Lynch. She used to be praised for the depth and thought of her analysis, taking the time to get it right, she said. Now she is praised for how fast she is.

"You need to change. You no longer are being paid for putting out something one time a day. ... You need to risk being wrong, knowing you can change it later in the day."

(When I questioned her later about saying this in a roomful of copy editors, Fine said she was not speaking in the sense of being wrong factually, but in a more metaphysical sense of trying something, determining it isn't working and then quickly changing it.)

This speed translates not just to reporters and editors, but to photographers, she said. No longer can they afford to take dozens of photos, then pore over them trying to find just the best one. In that time, ordinary people may well have posted dozens of photos of a news event on Flickr or similar services, Fine said.

"I would argue it's yours to lose because you should be doing it and doing it better than anyone else," she said. Instead Fine sees an industry running scared, especially after Jayson Blair and similar scandals.

"This industry has gotten really defensive, afraid of taking risks, afraid of bias at the same time people want you to take a stand," she said. That does not mean slanting the news, she said. It means uncovering the facts but also making the logical and other tests necessary to evaluate truthfulness and authenticity and then taking those into account when presenting the information. Fine said the biggest criticism she hears is people saying they want those multiple points of view and "I can figure it out."

(Later she explained further: "They want you to be objective, but they also want you to bring it (the story) to a conclusion, which sometimes means a point of view.")

"The industry has gone astray by putting things on the front page that they don't want from you," Fine said. What they don't want is the breaking news they've already seen on TV or read on the Internet; what they want is more context, analysis and the fascinating stories they can't get anywhere else because no one else has the resources to cover them, she said.

On the business side
Circulation will remain the minority revenue stream it is among American newspapers, 15 percent to 20 percent of the total. "It would be misguided to think it's going to save any of you by raising circulation prices," she said.

The push to make over papers as more youth friendly is also misguided, she said. "News flash, they never did" read the newspaper, she said. "You don't want to change your newspaper to be a youth rag because they will never read it."

Her advice:

• Accept that circulation will drop
• Don't try to be all things to all people
• Find your best reader profile and learn how to sell that
  

National advertising will continue to be a problem for most papers as budgets shift to the Internet and more targeted ads, she said. Retail, the "bread and butter" at about 50 percent of ad dollars, will be soft as chains merge, cut back budgets and also look toward more targeted ads. Retail advertisers are starting to ask why papers are raising their ad rates every year when circulation is dropping. (Unlike TV, which until recently has been able to do that because there was a finite supply of programming. Newspapers never had that finite supply, and now TV is finding it doesn't either, with video on the Web.)

But the small local advertiser remains the sweet spot for many papers. "The industry has gotten defensive. Newspaper advertising works beautifully, period," she said.

As for classifieds, the industry rode its monopoly in the late 1990s by raising rates five and six times a year. The ultimate effect, of course, was to anger during the tech boom the very people who were savvy enough to use the new medium the minute things like Monster.com became available.

The industry needs to take classifieds online -- not concede to sites like Craigslist -- she said, but it will have to learn that raising rates -- or perhaps even charging for basic classifieds -- is a way to drive customers away. The money will be made by what you surround the ads with, she said. (Think ads for new suits, resume services, etc.)

What must the industry do?

• Go ahead and say since everyone hates us anyhow, we're going to fast-foward five years, trash our margins, "put up the work in progress sign" and "figure it out ourselves."
• Return the industry's enormous free cash flow to stockholders in the form of share repurchases or dividends. Let the stock price drop to a more sustainable level so you buy time to try things.
• Try things, but be smart and quick enough to determine when they are not working so you don't burn up precious cash. "I just don't see enough innovation. I see a lot of hand-wringing." (For instance, she specifically mentioned that with three girls, the oldest 15, who like to shop, she would pay for a service that alerted her to sales.)
  

Even with all this, however, "I don't know that there is a happy ending."

The worst thing is announcing round after round of layoffs, she said. "It's going to guarantee your own demise" as quality -- and the perception of your quality in the public's eyes -- goes down. The industry will have to work with fewer people but figure out how to keep the quality, she said.

Some other quick observations:

• Newspapers were always flush with cash. They went public for all the wrong reasons, not to get access to capital but for liquidity so heirs could cash in their positions.
• Don't charge on the Web unless you want to lose readers. Instead, figure out a way to charge the Yahoos and the Googles that are using your content.
• Charge for value-added in classifieds. For instance, will people pay to be one of the first 20 people to see a new real estate listing, especially in a hot market or hot area of town?
• Times Select, the attempt by the New York Times to charge for access to some of its content "ultimately will not work."
• The Wall Street Journal online "is brilliant" because it is set up like the paper, so people already trained on the paper can migrate easily.
  

Ultimately, Fine said, "The worst thing you can do is go down fighting, and the best thing you can do is go out fighting."