Borrell Associates, Inc

I had a spirited panel debate in Orlando recently with three individuals from newspaper companies who were hell-bent on proving that convergence sales forces worked.   When it was over, I was more convinced than ever that local media companies have internal Rasputins who are hypnotizing them into forgetting the past.

Unfortunately, many newspaper companies are on a path to remain, well, newspaper companies. Unlike their predecessors in the 1920s who leapt into radio with separate staffs and in the 1950s who leapt into local TV with separate staffs, many legacy media companies aren’t going to make this particular new media transformation.  They have either not read or completely forgotten the principal lesson of disruptive innovation: When a disruptor comes along, the winner is virtually always the organization that pursues the new venture with separate resources.

A lot of local media companies – newspapers, TV, radio, yellow pages and cable –labor under the delusion that their existing print or broadcast staffs are all they need to tackle the Internet.  While I believe that these legacy staffs can develop online content and sell online advertising, there’s overwhelming proof that they’re merely enhancing the core business, not building a new one. Those who have devoted significant and separate resources to the Internet have a far better chance of creating new value for their organizations.  McClatchy, for instance, derives about half of its online revenue from new, non-print advertisers; Fisher Communications in Seattle is outsourcing much of its sales to a separate telemarketing sales force and now has more than 2,000 advertisers – almost none of them broadcast advertisers.  They are creating new value, not shoring up old value, for their companies.

I’d really like to see newspapers win this game.  I started out as a reporter and editor, and the only board that I sit on is the Suburban Newspapers of America board of directors.   But I’ve seen newspapers continue to believe in this thing called convergence – that their print reporters and print salespeople have all the bandwidth they need to tackle this on their own.  They do not.  They need help, and a lot of it.  I’m afraid for newspapers, which I why I keep pounding the desk on this issue.  Newspapers had a 44% share of all locally spent online advertising back in 2004.  In 2009, they had a 23% share.   Competitors with a different strategy – and a lot more time on their hands to compete – are gobbling up all the growth.

Meanwhile, quite a few publishers are rushing to lock down their Web sites by allowing access only to paying subscribers, or looking for riches in eBooks.  A case in point is the Newport (R.I.) Daily News, a 12,000-circulation paper that started charging $35 a month nine months ago for online access.  The goal, as stated by the publisher, was to “drive people back to the printed paper.”  Another is the 23,000-circulation Valley Morning Star in Harlingen, Texas.  The publisher says the pay wall was instituted to “allow greater value to our many loyal print-edition subscribers by not giving away the news to non-subscribers.”

I wonder what would have happened if these publishers were around a half-century ago. Would they have tried to shut down their companies’ new media ventures at the time — TV stations — for fear that local news broadcasts were eroding newspaper circulation?   TV did erode newspaper circulation, just as the Internet most certainly does the same.  New data from Pew Research this week shows just how unwilling people are to pay for news online:  82% said they’d go elsewhere if a site erected a tollgate.  If you dissect the numbers a bit more closely, the figure is actually closer to 93%. 

I don’t want newspaper executives to say – like Encyclopedia Britannica executives said in 1996 – We have the most respected brand.  We have quality content.  People will pay for quality content.  We can’t continue to lose subscriptions by giving away all our valuable content.  Britannica thought this was a convergence play as well.  They completely missed something like Google because their internal managers saw the Internet opportunity from an internal perspective.

MTV, Barnes & Noble, and scores of others are in the same camp – thinking they can seize the opportunity under the same brand and the same managers.   Do 18- to 24-year-olds go to MTV.com?  No, they go to Facebook.  When you want to buy a book do you go to BarnesAndNoble.com?  No, you go to Amazon.com.  

The strategy at Britannica, MTV and Barnes & Noble blinded them to the bigger opportunity, and the strategy at many newspapers to use one combined print-and-online sales force to sell newspaper Web sites is likewise blinding them to a bigger opportunity.