How depressing 2: Chicago meeting of newspaper business leaders should scare anyone who cares about the industry

It’s regularly and rightly said that most newspaper journalists were too slow to jump into the possibilities of the Internet. What’s less often said, but I believe even more true, is that the business side at most newspaper companies was even worse. If you want any proof of how bad things are on that front, just look at the recent Newspaper Association of America meeting in Chicago, where the American Press Institute and others presented suggestions to industry leaders for saving their businesses.

Imagine you’re a young business school graduate trying to decide where you want to start your career. (OK, I know there are no jobs, but imagine it anyway.) You attend a newspaper industry summit and hear one of the big ideas from an organization at the heart of this world is to compete with Craigslist. What do you think you would think? Talk about an industry looking in the rear view mirror. Isn’t that an idea that might have had legs, oh, maybe five years ago? How could it represent in the eyes of that young business school graduate any kind of exciting opportunity today? The advice boils down to, “Let’s win back our business from the guy who’s eating our lunch.” How is the newspaper industry going to attract any of the best and brightest into its ranks if its ideas are stale, at best?

What might even be more troubling about this proposal is how newspaper people seemed to denigrate the Craigslist brand, when all they need to do is talk to people – including in their own buildings – to find out that most of those who’ve used the site seem to genuinely value it. Why? Because it gets results and it’s free.

Veteran newspaper business analyst Rick Edmonds, writing on Poynter’s Web site, says that API’s white paper on taking on Craigslist quoted one publisher as describing the free site as “a flea market on the bad side of town.” What does that make newspaper classified sites if they’re trying to take back their old business from Craigslist?

It almost seems like newspaper business folks don’t know what business they’re in anymore. But one thing is clear: the industry is on the defensive. The “ideas” to make money from content that API presented at this meeting seemed more about getting paid for their existing assets than serving readers and communities in ways that would build a future business. Clearly, many in the industry already think their news reports have more value than they’re being compensated for. That’s why they keep talking about pay for content, which was the thrust of API’s other white paper. But the big question is whether most newspapers are producing content people would pay for. My answer, with some exceptions, is no.

The first recommendation of the API white paper on paid content is, you guessed it, to “adopt a paid content model.” The way the first model for getting paid is described reflects the tone of the entire document: “Put a wall around unique news content, establish a marketplace for news, and let consumers pay for it a nugget at a time.”

I’m not arguing that there isn’t a place for paid content. Clearly there is. But the idea that most newspapers have “unique” content that people would pay for is questionable in the first place. As is the idea that the money a paper would receive for its online content would offset its decline in print revenue or make up an adequate stream to pay for the continuing business. Newspapers in many communities (especially mid-size and large) are no longer in a monopoly position where they can “establish a marketplace” for what they offer. The marketplace already exists. It’s out of newspaper publishers’ control. And there are plenty of others – TV stations, radio stations, football teams, specialty web sites, retailers, and, yes, even bloggers – happy to provide much of the “news” that some newspaper folks still seem to think is their exclusive franchise.

The white paper goes on to tout the “successful” subscription Web sites at papers like the Albuquerque Journal as examples other newspapers might follow. Now, because of my former role with the E.W. Scripps Co., I happen to know something about the “successful” Web site of the Albuquerque Journal. By what definition is it successful? You don’t find Scripps emulating the Albuquerque model at its own papers even though it’s fully aware of the economic results of that approach in New Mexico. Why not? Smart people committed to building new revenue streams are running Scripps.

API’s second recommendation is to “capture revenue from rights.” OK, that may be a problem worth addressing. But the white paper says the total dollar amount the industry is losing is $250 million. That’s 10 percent of the decline in advertising sales in the first quarter of 2009. So even if it recovered every penny it was losing, which is unlikely, it would barely make a dent in the economic condition of the industry. Is this really a big idea?

The third recommendation is to “seek fair compensation” for their content from aggregators who are already paying them. Wait a second; this is at a meeting of the same people who’ve been responsible for getting compensated up till now. And this recommendation is coming from an industry group whose board is larded with senior executives from what looks like every company of any significance. Put yourself in the position of shareholders who learn that the executives running the company they invested in haven’t been getting “fair compensation” for their product. You’d think they might ask why they were paying these people big salaries to run their company when they weren’t getting “fair” compensation for its owners. This would be like a recommendation in a report on how to improve journalism saying reporters should tell the truth. What, you mean they haven’t been up till now? That’s pretty disappointing.

No. 4 is typical pabulum: “Invest in innovation.” That sounds good, but if you look at what most newspaper companies are doing it comes down to one word: Cutting. They’re not investing. How should they do this under current conditions?

No. 5 is even better: “Refocus on readers and users.” Again, put yourself in the shoes of the shareholders, for whom the people on the board behind the API study are generally supposed to be working. You mean, they might ask, you haven’t been focused on making money from readers and users? What’s wrong with you? Why were you leaving money on the table?

Then the white paper tells the industry leaders the three steps they’re going to need to take if they’re going to become consumer-centric.

“ Become part of the social web. Newspaper executives should take it as a personal and professional challenge to participate in social media: Share photos and video online. Follow industry experts on Twitter. Create a Facebook or LinkedIn profile. This is extremely valuable market research. Learn all you can.”

Of course leaders should always be learning. That’s a given. But are they serious? Isn’t this a little late? If newspaper industry leaders aren’t doing this already, do they really belong in their positions? Why should shareholders pay executives to learn all they can when they should be able to find ones who already know what they’re doing? If people need advice like this, should they be running newspaper companies?

The next step: “ Encourage journalists to develop expertise. Create deep content with special value for communities of interest. Launch specialty sites that revolve around content and community building.”

How do you encourage journalists to develop expertise at the same time as you’re dramatically reducing the size of editorial staffs, making it necessary for most journalists to cover more topic areas? Don’t get me wrong. I’m a believer in the value of expertise and in the value of specialty sites and publications. But there seems to be a yawning gap between this recommendation and the world most newspaper people are living in. How should newspapers that are in the red or dangerously close to that point achieve this objective?

Finally: “Create a marketing services function. Focus on helping your business customers to use the Internet more effectively to meet their goals.”

This, to me, might be the most important recommendation in the entire paper. If newspaper customers are more successful as a result of newspapers’ help, newspaper companies should be more successful. But how does a company do this when it’s strapped, doesn’t have the expertise in house, and few people with this kind of knowledge want to join it because who wants to become part of an industry widely perceived as dying? If you could work for Google helping businesses use the Internet more effectively or for the San Francisco Chronicle, losing $10s of millions a year, which would you choose? Which company is going to get the better talent? I think the answer is obvious.

Finally, the white paper gives some guidelines for “moving forward” on the economic action plan.

Here’s #7. “Infuse the workforce with people who are technologically savvy and audience attentive.

Am I the only one who senses a disconnect here? Very few newspapers are hiring. And if they were, why would people who are technologically savvy and audience attentive choose to join companies that for the most part aren’t? Those people want to join businesses that have a story to tell, businesses that can paint a picture of a brighter future. What is it in the offerings from API that would make people want to join a newspaper company? (We’re going to beat up on Craigslist?) The first mantra of the newspaper business, according to API, seems to be, “By god, the users will pay, because we say what we have to offer is valuable.” The second seems to be, “If anybody messes with our stuff, we’ll force them to pay.” And the third might be: “Businesses that are paying us should pay us more.”

As someone who still loves newspapers and the possibilities of thriving local news organizations, I find the thinking of this industry group depressing. What does it say that these API white papers may represent the best ideas of the industry’s business leaders?