In the media industry, where disruptors are plentiful, the approach The New York Times Company CEO Mark Thompson is prescribing could not be more appropriate.
In the midst of a global revolution in the way people access and distribute news, the 2016 U.S. presidential election cycle freshly highlighted the uncertain footing of the newspaper industry. Journalism outlets now require a successful digital strategy in order to have a continuing voice in these eventful times, and it’s illuminating to explore the relative success of various approaches to this digital transformation. The preeminence of The New York Times puts it in the spotlight, as it seeks to forge a sustainable pathway forward. Its changes can be mapped against two other media companies: the success of The Washington Post and the recent well-documented struggles of tronc (the new lower-case name for what was formerly Chicago’s Tribune Publishing, owner of the Los Angeles Times and The Chicago Tribune, as well as many other papers).
The Challenge for the Grey Lady
While The New York Times added 200,000 new digital subscriptions during the fourth quarter of 2016, its latest earnings report painted a picture of a rapidly evaporating print business. The report shows that the company’s print advertising revenues have been continuously falling in 2016, with a 14-percent drop in the second quarter of 2016 following a 19-percent drop in the third quarter. Although the sagging print-related ad sales have dragged down total advertising revenue by 8 percent, the news is not all grim. The Times’ income from digital advertising has been growing steadily, and it now accounts for 36 percent of all their advertising revenue. In the same quarter that saw that 19-percent drop in print advertising, digital ad revenue increased by 21 percent, bringing in $44 million in that period.
The results of the Times’ final full quarter of election coverage from a financial perspective were not a surprise, and the company’s leadership was already keenly aware of their next steps: “Over the coming months, we will take a series of steps to reduce the legacy cost base of the company so that we can continue to invest in digital growth and grow operating profit,” Times Company CEO Mark Thompson said on an earnings call.
In the media industry, where disruptors are plentiful and fringe voices can become influential thought leaders, the approach Thompson is prescribing could not be more appropriate. A keen eye toward competitors mandates a stringent quality control in the world of serious reportage, as profitable digital practices can easily result in questionable journalism. It was not so long ago that a list of 21 pictures accompanied by a sentence or less of text description would not have passed for journalism. Neither would a quiz matching you with your spirit Gilmore Girl character. But in the age of BuzzFeed, Snapchat and The Onion, that type of coverage can be a more reliable way to drive traffic and even comprehension among readers.
Similarly, the thought of video production for a traditional newspaper organization was wildly foreign to most of the entrenched leaders in the industry. Suddenly (and led quite convincingly by The New York Times and online-only purveyors like Vox), every outfit seems to be sprouting a video production unit, hoping to take advantage of new technology to gain widespread distribution. However, the success of these ventures is only as good as the company’s digital strategy, as two different stories reveal:
How Two Paths Diverged in the Digital Woods
The drop in print-based advertising revenue reported by the Times is common among legacy journalism outlets. Indeed, The Wall Street Journal recently announced substantial cutbacks to its print team. Likewise, The Gannett Company, publisher of USA Today and over 100 other papers, cited financial difficulties in its decision to back away from a planned acquisition of tronc. Both companies responded to their financial concerns by launching digital publishing platforms.
Keeping Afloat With the Arc
The Arc, established by The Washington Post as a hedge against its falling print revenue, represents the digitally sophisticated vision of owner Jeff Bezos. The platform provides a means for other journalism outlets to reconfigure themselves for the digital age. The growing list of Arc clients includes the Alaska Dispatch News, Willamette Week, Santa Fe Reporter and even a newspaper in Paraguay. Bezos bought the then-struggling paper in 2013, for a rock-bottom price of $250 million, and has transformed it since then into a respected news outlet with the largest digital audience in the United States.
When Digital Doesn’t Have a Strong Strategy Behind It
Digital innovation isn’t as easy as it looks from the outside, however, and carrying it off successfully requires a clear understanding of the emerging media ecosystem. The hazards of introducing digital changes without a strong strategy behind them can be seen in the recent failure of the unfortunately named tronc. Its owner, Michael Ferro, attempted to make that company become a “content monetization engine” by creating a content management system (named Hermes) that he planned to license to other papers. Unfortunately, Hermes never really got off the ground; Gannett backed off from its planned purchase of tronc, and shares of both companies dropped like rocks. Meanwhile both Ferro and tronc came in for ridicule across the internet and lawsuits from shareholders. Bloomberg News attributes tronc’s failure to a range of factors, including Ferro’s lack of understanding as well as the fact that tronc didn’t hire enough coders and couldn’t meet the demand.
Digital Benchmarking Is Key to Success
It’s important to look at the way in which tronc stumbled, despite saying all the right things, while The Washington Post is currently succeeding. A press release from tronc that was widely mocked on Twitter as “the worst press release in the history of journalism” used digital-sounding jargon to express its intentions. Representatives from tronc stated that it planned to become a “content curation and monetization company focused on creating and distributing premium, verified content across all channels.” This cautionary tale highlights a clear path forward to The New York Times, which holds the strongest position in journalism in the United States. Digital benchmarking is the keystone in sustainable innovation, and it may be that a CEO like Bezos, who knows enough to hire great digital executives like Shailesh Prakash, have succeeded because they know how to measure their progress.
At Centric Digital, the concept of digital benchmarking against a company’s closest competitors has long been a driving principle. To successfully introduce a digital transformation process, companies need to be able to evaluate the leading digital innovators in their own field, and be willing to emulate their successful adaptations.
Standardization Reduces the Chaos of Disruption
The longer the digital ecosystem exists for traditional business leaders, the more important it is for them to gauge their success with quantitative metrics. As tronc’s crisis clearly illustrates, words are not enough. When disruptors can emerge from around any corner and completely restructure what is expected from companies, leaders need to integrate a solidly quantified digital strategy. This strategy must be standardized with a clear roadmap, using logic, reasoning and rationale.
Establish Capabilities and Then Dive Deeper
The approach to benchmarking can be simple: Company leaders need to identify a set of characteristics or capabilities that all industry peers are seeking. Once those are established, then the next step is to understand the granular pieces that determine the company’s ability to achieve those capabilities. The more fine-grained an evaluation process is, the more actionable its data becomes. An accurate “apples-to-apples” comparison is essential in order to produce a truly useful and holistic understanding of competitors.
The benchmarking mindset is largely dependent on a company’s willingness and ability to accept and probe the changing industry landscape. If an organization takes their finger off the pulse of the larger global transformation, or if they mistake digital jargon for an authentic strategy, they run the risk of losing ground in what has become a fast-changing ecosystem.
In The New York Times’ case, Thompson’s approach to invest in digital growth to drive profit is admirable, but the way forward is obviously one that requires caution and skill. Using the approach outlined by benchmarking in a repeatable and standard way can help to establish leading capabilities in an industry that is getting more democratized every day.
Looking Forward to Journalism’s Future
One telling change that will define the future of journalism occurred quietly in September. That was the month in which The Newspaper Association of America, which has been the newspapers’ trade group since 1887, changed its name to the News Media Alliance. This shift in language reflects the fact that, as the NY Times says, a news organization can’t even call customers “readers” anymore, because there are millions of them are now viewing video content online.
Washington Post CIO and VP of Technology Shailesh Prakash comments, “The speed of innovations in mobile, big-data, video and virtual reality (to name a few) can be feared as disruptive to the media industry or embraced as opportunities.” A systematic approach to digital strategy is the only way that companies in the journalism industry — and indeed in any industry — will be able to embrace these opportunities.