Wednesday, July 2, 2008

IN THIS ISSUE:

HIGH DRAMA FOR THE YAHOO NEWSPAPER CONSORTIUM
HUFFINGTON POST GOES LOCAL: NO NEED TO GET HUFFY
ONLINE AND MOBILE VIDEO IS A YOUTH MOVEMENT
LOOK WHO’S BLOGGING NOW: THE TSA
A MEDIA SHIFT JUST WAITING FOR DISRUPTION

HIGH DRAMA FOR THE YAHOO NEWSPAPER CONSORTIUM (Terry)
The Daily Yahoo!The tech world is abuzz this with the imminent break-up of Yahoo (see The Humiliating Detail Yahoo (YHOO) Left Out of Its “Microsoft Timeline”, Ballmer on Yahoo Deal: The Bankers “screwed everything up.”, Fred Wilson: The soap opera drama that won’t go away and Microsoft Not Done With Yahoo, Circling For The Kill — GigaOM), and the steady exodus of the Yahoo brain trust is only adding to the bad vibes associated with the company. This has to be causing heartburn among the 40% of U.S. daily newspapers that have married their 2009 growth to the consortium deal. At issue is the continued development and timeline for the advertising platform (AMP) being created for the deal, one that will allow the consortium members to provide sophisticated contextual and behavioral advertising across their own platforms and Yahoo’s.

Media analyst and consultant Ken Doctor wrote on his Content Bridges blog that the newspapers and Yahoo are playing with fire, adding: “As Yahoo burns, the newspaper industry watches, hoping it won’t get singed.”

…Jerry Yang’s tenure has got to be coming to an end, and where will that leave his #2 Sue Decker? The exec leading the newspaper consortium build has been ex-Knight Ridder Digital head Hilary Schneider, who’s gained power in lockstep with Decker. If Decker ascends, well, maybe that wouldn’t hurt.

But given the blood being called for by Carl Icahn and other increasingly upset and litigious shareholders, don’t bet on Decker moving up. What’s more likely is new leadership, leadership called upon to reorient the company mightily, or as likely, prepare it intelligently for sale. New management certainly means at least a rethinking of the substantial resources Yahoo is devoting to the consortium.

The short-term negative: a confusion about priorities that slows AMP development down.

The potential longer-term positive: with national and search advertising growth both slowing, maybe local advertising really is the major growth opportunity Schneider’s been touting and new leadership doubles down on it.

Place your bets.

And the bet is a big one, because the value of a newspaper company is sliding precipitously, faster than most observers ever imagined. According to veteran media executive and new media entrepreneur Alan Mutter, the “value of 11 newspaper companies traded on the public market since 2005 dove a combined $23.7 billion in the first half of this year, falling almost as much in six months as they had in the three prior years put together.” Mutter is Managing Partner with Tapit Partners in Silicon Valley, where he works on pioneering start-ups, but he’s mostly known as the author of the popular and informative “Reflections of a Newsosaur” blog.

Wall Street’s intensifying repudiation of the industry means that the companies in the group have lost a cumulative $49.7 billion in market capitalization in 3½ years, vaporizing 51% of shareholder value since Dec. 31. 2004.

…Journal Register Co. and the Sun-Times Media Group (née Hollinger) suffered the worst losses in the 3½-year period, respectively shedding 99.1% and 96.9% of their value.

Journal Register is deemed to have a 72.9% chance of defaulting on its crippling debt, which in all likelihood would render its shares valueless. Sun-Times, which has a legacy of tax and other issues resulting from the criminal mismanagement of former chief Conrad Black, has been for sale all year, with no takers identified at this writing. Both publishers were booted off the New York Stock Exchange earlier this year, because their shares fell below the minimum price required for listing. They now trade on the Pink Sheets under the symbols JRCO and SUTM.

Two big media companies split their newspaper divisions from interactive and broadcast properties earlier this year, and the newspaper entities are taking a real beating. Tuesday was the first day of trading under the split of E. W. Scripps into two units. Wall Street boosted the stock price of the new cable TV unit, Scripps Networks Interactive (up 3.7%) but lowered the value of E. W. Scripps itself by 5.6%. The pure-play newspaper spin-off created by Belo, has slid 68.7% since its debut in mid-January.

I still feel strongly that Yahoo benefits more from the consortium than do the newspapers, because the major revenue growth opportunity for all media over the next five years is local. The pureplays lack feet-on-the-street, which is the big thing consortium members bring to the table. Yahoo brings its reach and the ad technology, and I’m unconvinced that a local newspaper needs either (from Yahoo).

The more newspaper values shrink, the more stress is placed on the deal with Yahoo. The consortium added 94 more papers last month, so there’s considerable faith amongst newspaper execs that the long term value is there.    Link>

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HUFFINGTON POST GOES LOCAL: NO NEED TO GET HUFFY (Steve)
The Huffington Post logoThe Huffington Post has announced it is going to start expanding its reach with local versions of its site. Starting with Chicago, the “HuffPo” hopes to launch about a dozen local sites, each specific to its city. Arianna Huffington’s site has built a name (and a brand) for itself as a place to go for liberal political opinion. It will certainly be a fascinating experiment. And since Chicago is the home of Barack Obama, the Democrat’s presidential nominee, the HuffPo is picking a logical city in which to start its operations.

Huffington made the announcement at the Guardian News & Media’s internal Future of Journalism Conference. A hint about its direction? “We are aspiring to be a newspaper in that we want to covering all news, not just the political blogging the way we began.”

But the Chicago edition is only going to have one editorial staffer. So how will it go about covering the city? From the Guardian:

“Huffington said the Chicago site would aggregate news, sports, crime, arts and business news from different local sources as well as contributions from bloggers…”

Aggregation, bloggers, original pieces, opinion… sound familiar? This is the model we — and especially Terry — have been pushing for years now. The Huffington Post is moving in, along with a third round of financing.

This is smart stuff. Where the local media sites have been afraid of opinion, Huffington has proudly filled the space. Why haven’t we launched liberal and conservative blogs? Arianna saw the need for liberal opinion, so she simply started the site. But we fear the appearance of taking one side or the other, so we don’t do it. Again, Arianna sees an opening. And she’ll come in and take a share of that local ad pie that we keep missing.

What do we do?

Two options:

1. You can outdo them. It’s not too late — we’re in a hot political season, and you could launch sites that proudly trumpet their bias. The discussion will get hot — and this is important — you can’t then decide to back off.

2. Partner with the local HuffPo. They will be looking for partners in each of the 12 cities. They’ll aggregate your content via RSS anyway, so it’s better to have some kind of official deal where you get a cut.

Opinion is a space that is sorely lacking in local news websites. Our fear of it is unfounded. It goes back to our desire not to offend — specifically not to offend advertisers. But real life doesn’t work this way. People have opinions, and some of those opinions trouble people. But if we don’t offer a forum for local notables and residents to give their opinion, they’ll wind up on sites like Huffington Post Local anyway. And the local ad money will follow.    Link>

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ONLINE AND MOBILE VIDEO IS A YOUTH MOVEMENT (Terry)
This shouldn’t come as a bulletin to anyone, but according to a report released today by Knowledge Networks, four out of every five dollars spent for video consumption go to traditional sources.

…while consumers are indeed turning to new video technologies — such as online streaming and mobile video — most of their video-related spending continues to be on conventional sources such as DVD rentals and purchases.

But the new technologies carry the advantage of youth, and that is what makes traditional sources nervous. It’s also what makes this study revealing.

consumers choose traditional methods

Look especially at the differences in video streaming, downloading and cell phone video. These people are the future of video entertainment and information.

According to this Knowledge Networks study, monthly video spending breaks down as follows:

  • $13.43 on TV service
  • $7.60 for DVD purchase; $5.14 for DVD rental
  • 76 cents for VHS rental; $1.85 for VHS purchase
  • 61 cents on PPV movies and events
  • 44 cents on VOD
  • 37 cents on streaming video
  • 26 cents on cellphone video
  • 25 cents on downloaded video

“DVDs are the bread and butter of content providers,” said David Tice, Vice President and Group Account Director at Knowledge Networks and Director of The Home Technology Monitor™. “But the growing availability of video in digital forms is impacting peoples’ expectations; we found, for example, that 84% of consumers expect to be able to watch video on the device of their choice. The question is, will consumers be willing to pay for the convenience of access in the digital world? And how can content and service providers encourage repeat use and buying in the new media?”

These are important questions as the whole marketplace changes. For broadcasters, of course, the big one to watch is television via mobile device and whether consumers will accept 30-second ads or pay for it via micropayments.    Link>

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LOOK WHO’S BLOGGING NOW: THE TSA (Steve)
TSA logoIt’s maddening — absolutely maddening — to deal with those lines at the airport and the arbitrary screening processes that take place. The transportation security administration seems heartless and indifferent. The people who work the lines seem robotic, cold and couldn’t much care that your 7:10 to Denver is leaving in 15 minutes. They seem to make up rules on the spot, and they can’t wait to frisk granny.

It’s safe to say there is no entity we deal with on a regular basis that has as bad a PR problem as the TSA. So what are they doing about it? They’re making changes. How do I know?

They’ve started a blog.

And, I have to say, it’s a pretty good one, too. It’s in plain English — not in government speak. And the people who are writing it seem to have a sense of humor and compassion for us. The best part is that they explain rule changes that might otherwise be confusing. Recently they passed a new rule saying, essentially, if you forget your photo ID, you’re going to be subject to further scrutiny. You can’t just say “Whoops — I forgot my photo ID.” As you can imagine, this led to rumors: “The TSA is going to kick me off the plane if I leave my wallet in the cab!” “The government just wants more control over us!” “They’re making our babies carry passports to fly to Newark!”

The Evolution of Flight (excellent blog name — I would have gone with “Can You People Just Chill?) tosses the rumors out with a quick example:

“Of the 650 people that showed up without ID, it’s taking us an average of 10 minutes to verify their identity and get them on their way. We’re able to do this so quickly because of the close coördination of our officers at airports and our 24/7 ops center.”

And, as I say, they’re sympathetic and want to show they’re people too.

“We’ve all been there. You’ve got a million things to do before you fly. Pay bills, pack, get the kids ready, get your clothes from the dry cleaner, you name it. Whatever it is you have to do, it’s inevitable that you’ll forget at least one of them from time to time. (Hopefully not the kids) I usually forget my toothbrush.”

“What if you forget your ID? Is your vacation ruined? Are you going to miss your meeting? Are you going to miss the Elvis Costello show this weekend at the Glasgow Royal Concert Hall? Not at all… If you simply state you forgot your ID, we will work with you to verify your ID, you may undergo some additional screening and will be permitted to fly.”

In fact the only — ONLY — significant rule change is this:

“…if you do not coöperate and state that you’re not willing to show us your ID, you will not be permitted to fly.”

So that’s it. With a blog, the TSA is able to clarify that the sum total of this “onerous” new rule is: coöperate.

They rolled out new uniforms and put up interviews on YouTube. In fact, they do several YouTube videos, including one that’s a simple POV showing what a passenger goes through at BWI. Breakthrough cinema? No. But a chink in the armor of secrecy shows a willingness to listen to the audience. That’s the breakthrough.

Each of the entries allows comments, and of course, things get nasty. It will take more than a blog and uniform changes to make people happy. We still have TSA horror stories. (The time they made me “surrender” my toothpaste comes to mind. Not throw out — “surrender.” Or the time they made me throw out the contents of my plastic bag because the bag was too big — despite that they could see there were only three conforming items in it.) The TSA has not won over this traveler.

But there is at least evidence that the TSA is reaching out — and listening. The bloggers are part of the comments section and will jump in with explanations. I’m impressed that they’ve started this initiative.

The lesson for us? Transparency. Media companies are thought of as these giant, faceless, money-grubbing machines. We need to put real faces and real answers out there. Blogging allows the audience to see us and interact with us. Sometimes they say silly things. So we respond. Don’t fear the audience: treat them as customers.    Link>

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A MEDIA SHIFT JUST WAITING FOR DISRUPTION (Terry)
Amazon's KindleThe Princeton Press announced this week that it would be offering hundreds of its textbooks via Amazon’s Kindle electronic book reader for students who’d rather buy electronic books than carry around the big printed versions. Yale University Press and Oxford University Press already have a similar presence for students. The University of California Press recently had about 40 of its volumes placed on Kindle and is ramping up.

According to an article in Inside Higher Ed, image-heavy textbooks aren’t conducive to the Kindle, but everything else is moving in that direction.

The university presses participating in Kindle were reluctant to describe the specific financial arrangements they have with Amazon (which also declined to discuss them), but said that they were revenue-sharing deals, and that preparing the books for release on Kindle was not particularly burdensome or expensive.

Surprisingly, however, the Kindle editions don’t come much cheaper than the always expensive standard college texts. Most of the electronic offerings run just a few bucks less than their printed counterparts — and, of course, the Kindle itself costs $359, so it’ll take a lot of downloads to pay off financially.

This is yet another example of a traditional form of media trying to hang onto a revenue stream that cannot be justified by the technology that provides it in a different format. The cost of making a printed book is significant. It costs pennies (if anything) to duplicate a digital file, but the textbook industry is enormous (and authors of textbooks can make a pretty penny) and won’t separate itself from all the money easily.

But this is exactly the kind of scenario that produces disruptions, and it should be fun to watch.   Link>

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QUOTE OF THE WEEK:
Mere words cannot do justice to the carnage. Alan Mutter on the ongoing collapse of the newspaper industry.