I look back with a mix of pride, gratitude and anger on my experience with Christensen’s partnership with the American Press Institute in the Newspaper Next project. We offered the newspaper business a strategy and process for changing our business model to adapt to the digital earthquake that was destroying our foundations.
If someone had embraced and fully pursued that approach, instead of merely dabbling with it, I think that company would be dramatically better off today than the rest of the news business (it would be so different that we certainly wouldn’t call it a newspaper company, even if it still produced newspapers). I could be wrong, but I’d like that company’s chances. And it could hardly be worse off than its peers are.
And, of course, we’re such a copycat industry that other companies would have followed that company and they would be better off as well. Instead, the newspaper industry copied each other in acting timidly and protectively.
We published the first N2 report in September 2006. That year newspaper ad revenues would decline by 1.7 percent from 2005’s peak level of $47 billion
million. In my lifetime, newspapers’ print ad revenues had fallen in only seven years, according to Newspaper Association of America data. Only two of those declines were more than 3 percent, none larger than 9 percent. On the other hand, 10 times during my life, we saw double-digit growth in ad revenues.
The newspaper business was used to the gravy train and it wasn’t ready to change.
Christensen, his Innosight colleagues, N2 Managing Director Steve Gray, my API colleagues and I sounded the alarm that the disruption of our business was following patterns familiar from the steel industry, department stores, telecommunications and other industries devastated by their failures to recognize the dangers and opportunities in changing markets. This was not a cyclical slump, we said, but a permanent disruption that required transformation of revenue and content strategies, organizations, processes, culture and thinking.
The newspaper biz yawned, launching some niche products and drawing some new org charts but never coming close to fundamental change. At a time when we needed bold action, the leaders of our industry settled largely for nostalgia, cost-cutting and wishful thinking.
And it turned out that that 1.7 percent ad decline in 2006 wasn’t a dip but the edge of a cliff. In 2007, when I presented probably more than 50 overviews, workshops and seminars on the N2 approach, ad revenues fell another 9.4 percent, the largest decline of my lifetime. By 2008, I bailed on API, wanting to try my own innovation approach at the Cedar Rapids Gazette (and not wanting to continue working for an organization whose future was tied to an industry so unwilling to change). The U.S. economy crashed that year and ad revenues fell a disastrous 17.7 percent. But 2009 was even worse, down 28.6 percent.
For reasons I’ll never fully understand, the Gazette didn’t attempt the depth of innovation I had hoped, and I moved on from there in 2010. I left the newspaper business for TBD, a local digital news operation affiliated with Washington TV stations. Newspaper ad revenues fell that year by another 8.2 percent. The business was heaving sighs of relief after a decline that just four years earlier would have been the second-worst drop of my lifetime.
Last year I jumped back into the newspaper business (sort of) after discovering that resistance to innovation was just as stubborn in television.
I am confident that I finally have found a company willing to move boldly into the future. Digital First Media is the second-largest newspaper company by print circulation. But, as the name indicates, John Paton is leading us swiftly into the digital future. That’s good because national print ad revenues tanked by another 9.2 percent last year and fell by about 8 percent the first two quarters of 2012.
This year will be the seventh straight year of declines after seeing only seven down years in NAA figures that go back to 1950. As I noted earlier this year, we’ve wiped out all the ad growth of my lifetime.
So I looked at Christensen’s piece for Nieman Reports, Breaking News: Mastering the art of disruptive innovation in journalism and wondered why he even bothered.
Maybe he’s as optimistic and stubborn as I am. With as much as our industry has pissed away over the past seven years, we still have the largest sales and content-gathering teams in our communities. We have strong brands. We have creative people. If we have endured enough decline that we’re ready to seize our future and transform our culture, our products and our business model, I still think we can find a path to prosperity.
So I’m glad we’re hearing from Christensen again.
Lots has happened in the news biz since 2006, and Christensen is not merely recycling his message. He uses current examples and illustrations. But the principles aren’t dramatically different. Christensen’s principles of disruptive innovation aren’t unique to the news business. He has developed these principles studying dozens of industries. We still need to identify jobs to be done for the people and businesses of our communities. We still need to learn the principles and processes of disruption.
It’s critical to avoid falling into the trap of believing that you can charge for content just because it costs money to produce. Instead, the content must be so compelling that users will pay for it. This requires targeting the right jobs.
My opposition to paywalls is deeply rooted in what I learned from Christensen and his colleagues in 2006. News site paywalls don’t do a job for anyone except media executives nostalgic about the subscription model of the good old days. I’m not opposed to charging money — a lot of money — if we develop valuable solutions for important jobs people need help with.
My 2010 proposal for a new approach to obituaries and other life stories is built on providing unique value that I believe people would pay significantly for. I think Bloomberg Government is a well-designed high-priced news product based on doing high-value jobs for people and organizations willing and able to pay.
The disruption of the news ecosystem has exploded what was once an integrated, closed workflow. News organizations used to control the gathering, packaging, distribution and sale of the news product. Today, journalism is a disintegrated and open process.
While these disruptions can collectively seem like a terrifying transition for incumbents, they have also created a wealth of opportunities that are waiting to be exploited by these very same organizations. News organizations should challenge their own assumptions by looking beyond their existing business models for new ways of finding value.
One of the most important challenges we face is being able to accept less control than news companies historically had. But that’s not a choice. If we could still control what we used to, our ad revenues wouldn’t have fallen from $47 billion in 2005 to certainly less than $20 billion this year (without even adjusting for inflation).
Author and X Prize Foundation CEO Peter Diamandis put it succinctly when he observed that a Kenyan on a smartphone has access to more information than Bill Clinton had as president.
We have to figure out how to seize mobile opportunities!
General interest and breaking news reporting comprised of answering the “who, what, when and where” has become commoditized. It cannot create enough value to sustain a news organization in the long term.
The value for news organizations now increasingly lies in providing context and verification—reporting the “how, why and what it means”—and facilitating communities around that news and information.
That sounds like a substantive, exciting and fulfilling future for journalism.
The question of how best to survive in the new world will not be answered by hoping for a return to the past. Instead, now is the time for news managers to aggressively experiment with new distribution efforts.
It’s past time, actually, so let’s get on it.
And to those worried about cannibalization, we would say: If a company is going to cannibalize your business, you’ll almost always be better off if that company is your own, instead of a competitor.
Did you see those ad-revenue numbers? We’re being eaten up alright, but it’s not cannibalization. Or we wouldn’t be so hungry.
New opportunities can become apparent when managers change their perspective about a news organization’s role and its standing in the community. What can sales and marketing teams do to create additional value? Consulting services, event marketing, and long-tail repurposing are three possibilities.
I think the one thing I can say with certainty about whatever future media companies will be — whether they are transformed former newspaper companies or whatever comes next if we don’t survive — is that they will have a broader revenue base than our traditional mix of ads and subscriptions.
Sales teams whose bonuses are based on achieving specific goals are often more motivated to sell a traditional broadcast or print advertisement, where the margins are higher, than a digital advertisement. Given the priorities outlined by management, it is unrealistic to expect these sales teams to pursue digital pennies when approaching agencies and advertisers. Yet the long-term value of digital revenue is critical to the sustainability of the organization, and failing to develop sales team capabilities in this area will weaken the organization’s competitiveness over time.
One of our most important challenges is to develop the right incentives for sales staffs in the digital age.
Creating an innovative newsroom environment means looking within the existing value network and beyond traditional business models to discover new experiences for audiences, then realigning your resources, processes and priorities to embrace these disruptions.
I think we’re off to a good start at Digital First with our national Thunderdome newsroom. We’re making good progress in some of our newsrooms, but we still have a lot of work to do. Leading that transformation is probably the most important challenge of my job now.
I’m glad Christensen is trying again to share his amazing knowledge of disruptive innovation with the news biz. I hope we respond more boldly this time.
For further reading: This weekend I
hope to re-posted some of the Newspaper Next blog posts I wrote for API back in the day and added the links below. In the meantime, I suggest reading what Mark Potts and Guy Lucas had to say about Christensen’s piece.
Postscript/update: I should add two points that might leaven my criticism of the newspaper industry’s leaders. My criticism is I think is accurate and valid, but:
- Our industry’s response fits patterns Christensen has seen repeatedly in the dozens of businesses he has studied. It’s not that newspaper industry leaders were extraordinarily stupid or timid. They needed to be extraordinarily smart and bold and Christensen was showing them the way.
- I should note my role in the failure. I think my N2 colleagues and I worked long and hard to teach Christensen’s principles to the newspaper business. But if we (I) had done a better job persuading and teaching, maybe the news business wouldn’t be needing Christensen’s advice again.
Update 2: Thanks to Jeff Gauger for pointing out the billion/million error I corrected above.