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Spitz: Papers can stop chasing 'digital ghost'
Editor's note: This article originally appeared in The Wall Street Journal
Article Tab: Eric Spitz, president of Freedom Communications.
Eric Spitz, president of Freedom Communications.
LEONARD ORTIZ, ORANGE COUNTY REGISTER
This month a couple of successful businessmen with no newspaper experience acquired two of America's storied media institutions. Boston Red Sox owner John Henry purchased the Boston Globe and Amazon CEO Jeff Bezos bought the Washington Post.
Many people are wondering why.
I cannot answer for these new owners, but I may be able to shed some light. A year ago my business partner, Aaron Kushner, and I bought Freedom Communications, which includes the Orange County Register, the nation's 14th-largest daily newspaper. Neither Aaron nor I came from the newspaper industry, but we are both entrepreneurs inclined to question the conventional wisdom.
A contrarian zigs when others zag, but an iconoclast, derived from Greek, "smashes idols." The newspaper industry has erected two idols that must be smashed. The first is the notion that digital information must be free. The second is that the newspaper business can only be saved by digital solutions. Both are false.
One of the most important decisions every company makes is determining how much to charge customers for its products. Unfortunately, nearly the entire newspaper industry determined — at the dawn of the Internet era way back in the 1990s — to price its digitally delivered news at zero.
I don't know many industries that can survive pricing their core product at free. In fact, I'm less surprised at how many subscribers the newspaper industry has lost since this decision than by how many subscribers still remain, knowing that they pay for content that others get for free.
That's why in March the Orange County Register joined the few papers in the country with a strict online paywall, which means that readers who want to access our content online—whether by laptop, smartphone or tablet, must buy a subscription or pay a daily rate.
How can a newspaper charge for its content when other competitors choose to give away their work? The old-fashioned way — by differentiating the content, boosting its quality and making it essential to the community it serves. HBO, satellite radio and FedEx famously figured out this value problem. Why not newspapers?
I know of only two major newspaper companies that have not seen significant declines in their subscriber bases in the past decade: The Wall Street Journal and Groupa Reforma, the largest newspaper company in Mexico. The former has never given away its digital content, and the latter erected its first paywall in 2002.
The digital question is trickier. Over the past decade we have witnessed a wholesale transition of the global economy into one where we are all connected to the Internet and addicted to our digital devices. But it still feels like early days for digital advertising.
Most companies that sell digital ads are struggling mightily because these ads don't work as well as those in other media formats. Just for fun, walk into a Starbucks and ask the first 10 people you see, "When was the last time you clicked on or even paid attention to a digital ad?" The overwhelming majority will say "never" or "not on purpose."
Because advertisers are searching for ways to connect with digital natives, they are shifting dollars to online and mobile. But this shift need not come at the direct expense of print. Somehow, despite decades of shrinking ratings and declining consumer time spent watching TV, the television advertising market continues to grow. Newspaper advertising remains the most efficient means of reaching a local audience, so why has this industry ceded so much ground?
Today, digital revenue makes up around 10 percent of the industry's total, yet most newspaper CEOs would say that their core strategic initiatives are to find new digital revenue streams and to reduce the impact of print on their businesses. Why not focus on 90 percent of the pie and stem the declines — or even make the pie grow bigger?
By focusing on product quality and value, we've done that at the Orange County Register. In the past 12 months we've hired 350 people, built 25 new sections, launched a weekly set of magazines and created a subscriber rewards program called Register Connect. We've also revamped 24 of our weekly community papers, making two of them into dailies. Today we launched the Long Beach Register, a brand new daily.
Beginning in the first quarter of 2013, we have seen year-over-year increases in both subscription revenue and in advertising revenue. In other words, it's time to stop chasing the digital ghost.
Perhaps John Henry and Jeff Bezos, the industry's newest owners, will have innovative ideas that will make it strong again, or maybe they'll discover that the business isn't as broken as everyone thinks and that readers are actually willing to pay for news that matters to their daily lives.
I'd guess that we all got into this business for the same basic reason. We share a common belief that newspapers matter to our society and unite the communities we serve. Sometimes people buy companies because they want to do some good. Thomas Jefferson said, "An informed citizenry is at the heart of a dynamic democracy." I think he was right.
Eric Spitz is president of Freedom Communications Inc.
