Million Dollar Strategies for Newspaper Companies_9.5_P

Shaping the Future of the NewspaperANALYSING STRATEGIC DEVELOPMENTS AND OPPORTUNITIES IN THE PRESS INDUSTRY

STRATEGY REPORTVolume 9 N5 JUNE 2010 WAN-IFRA

MillionDollarStrategies forNewspaperCompanies

www.futureofthenewspaper.comAll the strategy reports are available to WAN-IFRA members and subscribers at the SFN Web site

New prospects for revenue-making and money-savingabound. Innovativenewspaper companies haveseized the opportunities and have earned millions in incremental revenue

9.5

Shapingthe Futureof the Newspaper

www.wan-ifra.orgA WORLD ASSOCIATION OF NEWSPAPERS AND NEWS PUBLISHERS PROJECT, SUPPORTED BY WORLD LEADING BUSINESS PARTNERS

www.atex.com/ THE LEADING SUPPLIER OF SOLUTIONS AND SERVICES FOR DIGITAL, ADVERTISING, CONTENT MANAGEMENT AND SUBSCRIPTION APPLICATIONS.

www.man-roland.com/en/p0001/index.jspA LEADING COMPANY FOR NEWSPAPER PRODUCTION SYSTEMS

www.telenor.com/THE LEADING NORWEGIAN TELECOMMUNICATIONS, IT AND MEDIA GROUP

www.norskeskog.com/A WORLD LEADING PRODUCER OF NEWSPRINT AND MAGAZINE PAPER, WITH 18 PAPER MILLS AROUND THE WORLD

WORLD ASSOCIATION OF NEWSPAPERS AND NEWS PUBLISHERS, 2010

VOLUME 9 REPORT N 5 MILLION DOLLAR STRATEGIES FOR NEWSPAPER COMPANIES

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TABLE OF CONTENTS

Executive Summary 51 The SMART Advertising Department 7

Tools and Training 8Audience Focus 10New Product Development 12Behavioural Targeting 15Yield Management 16

2 Strategies for Advertising Departments 19Online advertising networks 19Local Advertising Strategy 23Multimedia and Nontraditional Campaigns 25Power of Newspaper Campaigns Targeted to Advertising Agencies 29

3 Subscriptions, Content and Circulation Revenue 31Audience Research and Database Marketing 31Price Elasticity 33Charging for E-editions 35Loyalty Clubs 37Content Subscriptions Online 42News Outlets Trying Paid Models 44

4 Efficiencies and Cuts 47Job Cuts 50

5 Outsourcing 59The Role of Outsourcing as a Money-Saver 59Outsourcing Companies Discuss How They Can Save You Money 62

Conclusion 69Cost-cutting 70

JUNE 2010 SHAPING THE FUTURE OF THE NEWSPAPER

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The profitability that newspapers sustained inthis last century was an anomaly. Newspaperswere not profitable for most of their lives. Andas Warren Buffett would say, when it wasprofitable, it was a toll booth, KatharineWeymouth, publisher of the Washington Post,said at a recent Poynter Institute gathering. Itwas a brilliant model. If you were an advertiserand you wanted to reach the local audience,you had to advertise in the newspaper. So ourclassified section for those of us localnewspapers were terrific and brought us inhundreds of millions of dollars.

Newspaper industry experts say that the daysof unbridled profitability with print advertisingare gone forever. Most newspaper publishersaround the world are seeking out new revenuemodels and new business practices that willsustain their businesses and pay for qualityjournalism well into the future. The Million Dollar Strategies for NewspapersCompanies report focuses on three core areasof opportunity to regain millions of dollars inthis difficult media ecosystem: advertising,circulation and cost-cutting. Each strategy has

its own set of challenges and opportunities.Each strategy is illustrated by case studiesaround the world.Experts say revenue-making and cuts should bebalanced carefully. Its not about only cuttingthe cost side, its about going to go back torethinking and reinventing the business model,operations and manufacturing models, andasking fundamental questions. How do wedistribute the newspaper? Is there a moreefficient model? How are our sales teamsperforming? Are they going to use rate sheets,or is their entire focus on collaborativeselling? said Sandy Nelson, CEO of AperioInternational, a consulting firm in Washington,D.C., that helps companies rethink theirbusinesses. It has worked with companiesincluding the Orange County Register and Apple.In Chapter 1, we explore five key elements ofthe SMART Advertising Department:Tools & TrainingConsultative Sales ApproachYield ManagementAudience FocusNew Product Development

Executive Summary


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In order to make millions more in incrementalrevenue, newspaper companies must employan aggressive Print Plus strategy; one thatfocuses on maximising print revenues andadding a focus on multiple digital revenuestreams now and for the future.

A good media company should have in fiveyears, on the revenue side, probably 30 percentof the revenue coming from digital, if not 35percent, said Moritz Wuttke, founder ofNextMedia Initiative and former CEO ofPubliGroupe in Asia. On the net profit side(after costs of goods sold, printing costs, etc.)the gross profit contribution from digital, willcontribute 80 percent and print will contribute20 percent of the total gross profit, he added.

In Chapter 2, we hone in on several strategiesthat make millions of dollars for newspapercompanies around the world:

Online Advertising NetworksMultimedia Advertising CampaignsHyper Local Advertising StrategiesPower of Print focus

Chapter 3 focuses on monetizing content,through subscription and pricing strategies,online content monetization and loyalty clubs.

The underpinning to the most successful andinnovative content strategies is audienceresearch and database marketing targeting foranalysis, campaigns and product developmentpurposes. The strategy allows newspapercompanies to expand audience penetrationwith new products and platforms, targetsubscription offers more successfully,engender loyalty and reduce churn.

Chapter 4 is focused on efficiencies andcutbacks. Saving millions of dollars throughbudget cuts has become a top priority strategyamong newspaper companies around theworld. Among the tactics to save moneyinclude reduction of employees, consolidationof offices and printing plants, integration ofmultiple media staff members, consolidationof sub-editing and production units, shrinkageof newspaper widths and number of sections,reduction of publishing on certain days of theweek, and so on.

According to the 2010 World NewspaperFuture & Change Study, conducted by theWorld Association of Newspapers and NewsPublishers (WAN-IFRA)s Shaping the Futureof the Newspaper Project, saving money on

traditional costs of paper, ink, printing anddistribution top the list of tactics thatpublishers will implement in the next year.

Of 500 publisher and top executiverespondents from 84 countries, materials suchas paper (48 percent), printing (45 percent),administration (42 percent) and distribution(33 percent) ranked as the top four prioritiesfor cuts in the next year. Content generation,the key deliverable of journalists, ranked aclose fifth, at 29 percent, followed by officespace (27 percent), information technology (16percent) and content syndication (14 percent).Chapter 5 delves deeply into outsourcingfunctions across the value chain, includingeditorial editing and production, advertisingproduction, accounting, IT, pre-press andprinting, administration, distribution and more.According to the Future & Change Study, 17percent of the 500 newspaper executiverespondents said they plan to outsourcefunctions in their newspaper company toachieve greater efficiency and cost savings inthe next year.

The potential for making and saving millionsof dollars across the value chain of newspapercompanies is immense, and is limited only bythe imagination. According to a recent surveyof 1,500 chief executives by IBMs Institutefor Business Value, creativity is the mostimportant leadership competency forsuccessful businesses in the future.

Respondents said that success requires freshthinking and continuous innovation at alllevels of the organisation. A strategy ofcreative thinking should disrupt the status quo,disrupt existing business models, and disruptorganisational paralysis, according to thestudy.

Most newspaper companies around the worldtypically derive about half of their revenuesfrom advertising and half from circulation.Even in the United States, where advertisingtraditionally represented two-thirds or three-quarters of their revenues, newspapers aregravitating toward a 50-50 revenue split asadvertising revenue diminishes and publishersraise subscription prices.

Most advertising departments still earn 90percent of their revenues from print, despitethe swirling cyclical and structural changesaffecting traditional advertising businesses.The other 10 percent is earned from digitalbusiness. As the development of print revenueshas proven more challenging over time, theopportunity for digital revenues has becomemore lucrative. Industry experts say newspapercompanies need to push digital advertisingsales in online and mobile platforms as theprint platform becomes weakened. Somesuggest pushing their sales staffs to produceone-third or more of their revenues fromdigital in the next five years.

In order to make millions more in incremental

revenue, newspaper companies must employan aggressive Print Plus strategy; one thatfocuses on maximising print revenues andadding a focus on multiple digital revenuestreams now and for the future.

A good media company should have in fiveyears, on the revenue side, probably 30 percentof the revenue coming from digital, if not 35percent, said Moritz Wuttke, founder ofNextMedia Initiative and former CEO ofPubliGroupe in Asia. On the net profit side(after costs of goods sold, printing costs, etc.)the gross profit contribution from digital, willcontribute 80 percent and print will contribute20 percent of the total gross profit, he added.

In this age of transition and extreme change,what are the characteristics of the mostsuccessful media company advertisingdepartments? What are the best practices?What are the most lucrative businessdevelopment schemes? What are the mosteffective sales techniques? These and otherbest characteristics of ad departments havebeen studied by the Shaping the Future of theNewspaper project. The far-reaching study

1. The SMART AdvertisingDepartment


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determined that a healthy mix of audiencefocus in new product development content, aconsultative sales approach toward advertisersand ad agencies, careful adherence to yieldmanagement and constant and appropriatedevelopment of tools and trainingopportunities represent the strategy goingforward for media company ad departments.

The underlying characteristic for successfulSMART advertising departments around theworld has been a culture of constantinnovation and a tireless effort to change alongwith the fast-transforming marketplace, allamidst the tides of the evermore demandingadvertisers and audience members.

Tools and TrainingAdvertising sales training is among the mostimportant training and development prioritiesfor newspaper companies worldwide, and is asimportant as journalist training, according tothe WAN-IFRAs 2009 World NewspaperFuture & Change Study.

Further, more than half of the respondents saidthat in 2010 from 2009, they expect to increasenew business development and innovationtraining (68.3 percent), advertising salestraining (57.3 percent) and e-businessdevelopment training (64.1 percent).Among the most popular forms of salestraining is cross-platform sales training forformerly print-only and online-only salespeople. Many newspaper company salesdepartments around the world are integratingprint and Web sales units, and requiring single-media sales people to learn how to sellmulti-media packages. Oftentimes, cross-media sales houses employ both cross-trainedsales people and single-media specialists. Forexample, the Houston Chronicle andChron.com in the United States employs 75cross-trained generalists and 15 online-onlyspecialist sales professionals.

For advertising customers purchasing largecampaigns, the Chronicle typically sends ageneralist and an online-only specialist tounderstand the customers needs, and todevelop the multimedia campaign.


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Characteristics of SMARTAdvertising DepartmentsCharacteristics of SMARTAdvertising Departments

Source: Shaping the Future of the Newspaper 2010 WAN-IFRA 2010

Training& Tools

ConstantInnovation

YieldManagement

New ProductDevelopment

ConsultativeSales Approach

AudienceFocus

Note: Base = 485Source: 2010 World Newspaper Future & Change Study, WAN-IFRA, University of Central Lancashire and Norwegian School of Management WAN-IFRA 2009

What are your training and development prioritiesfor the next 12 months?

(All respondents)

314 64.74

56.70

47.42

44.95

38.35

33.40

30.93

9.07

275

230

218

186

162

150

44

0Count 50 100 150 200 250 300 350

Multimedia skills for journalists

Advertising sales training

Management and leadership development

Journalism skills training

New business development skillsfor editorial teams

e-Commerce development training

Change management

Legal & ethical knowledge

N


CONSULTATIVE SALES APPROACHTraditionally, newspapers have soldadvertisements based on the products theyhave to offer in other words, an internallyfocused sales process. The consultative salesapproach focuses on the client, the advertiser,and his or her business needs. If the clientwants to introduce a new product, highlight agrand opening, improve brand recognition, orreach a certain demographic, then newspapersales people can construct a campaignincluding a host of publishing elements toachieve success for the advertiser.

The first thing is to identify what customersneed. This is very important. After identifyingwhat they need, its very easy to find somesolutions for that. During these crisis years, itsnot easy to demand budgets from the client. Soyou should come up with good ideas, youshould come up with convincing ideas, inorder to demand budgets. Thats why weshould focus more on customers needs. Thatmeans we should we must create specific andspecial projects in order to get revenues. Weshould come up with multimedia ideas in orderto get better solutions, said Jackie Ventom,sales trainer from the Byrne Partnership in theUnited Kingdom.

The Houston Chronicle and Chron.com in theUnited States have had an agency strategy

for a year and a half, providing an array ofprint and digital products for their thousandsof advertising customers in Houston andacross Texas.

The majority of campaigns are audiencepackages, or campaigns focused on the needsof the advertiser. The sales representativesconduct a needs analysis of the advertiser,and then offer an advertising campaignpackage targeted to audiences most suited totheir product or service.

We really sell in an audience-based way, andnot in a product-based way. If its an advertiserwho wants to reach men in the age range thathave a propensity to play golf, then we sayhere are three options for you. Using our salesfunnel, we place the products in the funnelsand give the advertiser price points they maywant. That may include an ad in the paper,geo-targeting, a Facebook page, search a vastarray of products to deliver what an advertiseris trying to achieve, said Stephen Weis,executive vice president of the HoustonChronicle.

During the campaign, the sales team monitorsthe performance of the print and digitaladvertising, and adjusts the campaign formaximum performance. For instance, if searchis not performing well, sales people wouldshift the ad dollars to hit their performance

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Note: Base = 490 WAN-IFRA 2009 Source: 2010 World Newspaper Future & Change Study, WAN-IFRA, University of Central Lancashire, and Norwegian School of Management

Areas for Possible DevelopmentPlease check those that your company is expected to prioritize over the next 12 months

(All respondents)N

52 10.61

12.45

22.45

26.73

30.00

36.94

40.20

46.73

51.22

55.10

57.55

61

110

131

147

181

197

229

251

270

282

0 50 100 150 200 250 300

More diverse workforce(age. gender. ethnicity)

Competencies of the board

Develop distribution partnerships

Develop technology/technological partnerships

Develop content partnerhips

Develop a good working environment

Management and leader development

Encourage understanding and cooperationbetween different departments

Convergence of multimedia operations

Count

Develop journalists' skills

Develop skills of sales people

goals, he said. Were 100 percent transparentbased on performance.

Some ways to track performance includeputting an 800 number on a print or Web ad, ora unique URL or a text code for moreinformation, he said.

Weis said that although its difficult to quantifyhow many more dollars the customer-focusedselling brings in, he is sure the techniques givethem the edge against their competitors insales numbers and retention.

Does it work? Thats the million dollarquestion about selling in agency way. Theanswer is, its difficult. We find out as muchabout [the] advertiser, and put an audiencepackage together, based on an array ofproducts. We do a lot of product training, soyou can do a better job of needs for clients, toput a media campaign together, itschallenging for sure, he said.

Our go-to market strategy and philosophy is,we represent ourselves as a more of a fullmedia services organisation, from thestandpoint of what we own: the HoustonChronicle, chron.com, and we represent thirdparty products like Yahoo and Zillow. Wherewe feel our products dont fulfill needs for ourcustomers, we act like an agency and put forththe best portfolio of products for whatever theadvertiser wants. One thing we dont do issling products.

Singapore Press Holdings is a firm believer inthe consultative sales approach. Geoff Tan,head of marketing for SPH, said the idea, theconcept and the solution for the customer is ofprime importance in the multimedia companysales strategy.

Dont sell boxes, sell solutions. Sell ideas. Dontsell inventory, he said. Part of the companysphilosophy on consultative selling comes fromSolution Selling. Creating Buyers in DifficultSelling Markets, by Michael T. Bosworth.

Part of the solutions approach at SPH is basedon creating Print Plus packages, or print,plus online and TV campaigns. Dont [be]selling your products indiscriminately.Remember, one size does not fit all.

Audience FocusIn addition to becoming more customer-focusedtoward advertisers, news media companiesaround the world are also becoming morefocused on their reader/viewer/user audienceson behalf of their advertisers and their editorialdepartments. Hundreds of media companies areramping up their audience research in order todevelop new products in print and digital, andalso to offer their advertisers more insight intotheir own customers.

The Daily Telegraph in London has created sixsegments of readers that are attractive to


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E-mailRewards

Commerce

Magazines

Newspapers

Sections

Call CentreMobile

Telegraph TV

TCUK

Supplements

Specials

Editorial

The Telegraphs 13 Touchpoints

Source: Telegraph Media Group, 2010 WAN-IFRA 2010

advertisers, including Work Hard Play Hard,a group made up of young, active people withlarge disposable incomes with an average ageof 27; Platinum Spenders, who have plentyof free time, spending money and average ageof 62 years of age; and Living the Dream,upmarket professionals who live large and arean average of 42 years old.

The Telegraph also segments campaignsaccording to 13 touchpoints, includingnewspaper, mobile, Telegraph TV, call centreand more.

The Sacramento Bee in California offers as anadded value to advertisers a detailed profile oftheir customers demographics and geographiclocations, which assists them in creating moresuccessful advertising campaigns that targetthe right people, on the right channel, at theright time, in the right geography.

For example, the Bee uses databasingtechnology that pinpoints where advertiserscustomers live and profiles their incomes,consumer habits and media habits. The Beesadvertising department combines the database


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The Telegraphs Audience Segments

Source: Telegraph Media Group, 2010 WAN-IFRA 2010

Family FocusedTMG 12%

Average age 41

Slightly older adults who are settling down

many moving into a life of routineand family responsibility

Living the DreamTMG 23%

Average age 42

Upmarket and successfulprofessionals with broad horizons

and a penchantfor enjoying themselves

Work Hard Play HardTMG 13%

Average age 27

Young and driven individuals living life at a fast pace

Platinum SpendersTMG 24%

Average age 62

Older affluent individuals,quality-driven and with the free

time and money to enjoythe good things in life

Discerning IndulgersTMG 8%

Average age 54

Middle-aged and olderindividuals who enjoy

shopping and like a bargain

Established EliteTMG 21%

Average age 56

Upstanding settled citizens,married, middle-aged

and with a successful careerthat has provided for them

(and their children)

Sacramento Bee Internetand Mobile Advertisements

The targeted Silverado Nursery campaign

Source: Sacramento Bee, 2009 WAN-IFRA 2009


knowledge of their customers with non-subscribers to form a robust database fromwhich to create a targeted campaign. Longtimeadvertising customer Silverado Nursery andthe Bees advertising department cooperated tocreate a targeted campaign to Silverados bestcustomers (see demographic breakdowngraphic) and plotted the customers on a map ofSacramento. This allowed the Bee to deliverprint advertising and online advertising topeople in the database who had given bothphysical addresses and online registrationidentification information.

The result of the targeted campaign was thatthe print, Web and mobile advertisingcampaign was the most successful ever in thehistory of the home landscaping business.

Emphasis on target audiences using specificmedia channels also is an area ripe foradvertising exploitation, including mobile andiPad advertising campaigns, with an addeddimension of audience segments that have agreater propensity for using these devices.

In the future, we will definitely combineonline and offline and also mobile. Thesethree are so important. Online and offline workstogether well, in my point of view, and mobileis very important; in Turkey, [there are] 65million mobile users and just approximately 60or 65 percent of them under [age] 25 Thatshows that mobile is going to grow very fastand mobile is going be very important in themedia. So in the next five years, well definitelycombine online, offline and mobile inadvertising campaigns, said Altug Acar, deputyhead of advertising at Hrriyet in Istanbul.

New Product DevelopmentThe most innovative sales departments spendresources understanding the variety ofaudiences in their marketplace, and understandwhich audiences are valuable to advertisers.

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Source: Sacramento Bee, 2009 WAN-IFRA 2009

Lifestage Group Total population (000)Siverado company (%)Siverado usage index

Weekly print audienceSacbee.comWeekly combined audience

Text messagingInternet usageE-mail usageYahoo!

Y2189K9.4%

68

107152118

110107101107

Under 45, No KidsY1

195K23.1%

163

103133106

130124118124

Y340K

2.2%30

403741

43677681

F2213K

13.0%143

107148111

123113111121

Affluence25-54, Children

F178K

11.9%210

120134114

121129118131

F3191K7.8%

70

717971

10898

10088

F449K

2.7%40

385136

108726584

Silverado Nursery Ad Campaign SegmentsThree demographic segments show a variety of media behaviour

that informs media channel targeting. The highest usages are highlighted in red.

M2244K9.2%100

12987

126

71979789

45+, No ChildrenM1

182K9.7%188

150114146

97114111112

M3140K6.0%

76

1046399

72757381

M467K

4.9%52

754471

64727171

New Product DevelopmentTop challenges for newspaper companies

from 2008-2012

Source: Erik Wilberg Management AS, 2008 WAN-IFRA 2009

1 Product development market and advertising

2 Stable and reliable distribution

3 Product development editorial

4 Employee motivation

5 Develop employee competence

6 Improve integration between different media platformin your company

7 Top customer service

8 Focus on profitability in all parts of the organisation

9 Rapid implmentation of changes

10 Develop a good working environment

The best sales departments also study thepotential of emerging platforms, andexperiment with publishing to a variety ofaudiences on new platforms, such as mobileand e-readers.

According to the WAN-IFRAs 2010 WorldNewspaper Future & Change Study, newbusiness development and innovation is theNo. 1 investment in training development forthe global newspaper respondents for the nextthree Some of the hottest new products includedevelopment for iPhones and iPads, accordingto the survey. Anecdotally, hundreds of mediacompanies worldwide are developing iPadcontent strategies, and are seeking ways tocreate revenue models for the iPad.

Some of the hottest new products includeproduct development for iPhones and iPads,according to the survey. Anecdotally, dozens ofmedia companies are developing iPad contentstrategies, and are seeking ways to createrevenue models for the iPad.

Enter PointRoll, a rich media advertisingagency in San Francisco and Philadelphia,specialising in Internet, smartphone and iPadadvertising campaigns. PointRoll is a wholly

owned subsidiary of Gannett Corp., Americaslargest newspaper chain, anchored by USAToday, the most circulated newspaper in theUnited States.

PointRoll has been developing iPad campaigns,particularly for USA Today, and expects thecompanys iPad advertising business to growquickly with some of the worlds largestadvertisers including Ford motor company,retail outlet Target, Unilever household productsmaker and hotel company Marriott. Courtyardby Marriott is sponsoring the USA Today iPadapp for the first three months for an undisclosedsum, which entitles them to an exclusiveadvertising campaign on the device on the No. 1 most downloaded free news app in the world. But Marriott did not agree to bundlethe iPad ads with a Print Plus package.

For us it probably makes sense to have someflexibility with that, Gini Gladstone, seniordirector for Courtyard marketing, told AdvertisingAge. Because were buying less print andmore digital over time, it would be difficult forus to say Lets bundle those together.

However, prices for iPad advertising could besold at a premium.

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Source: PointRoll 2010 WAN-IFRA 2010

PointRoll iPad, iPhone ad campaigns

I actually think publishers should charge waymore for ads on the iPad than in print, GeneLiebel, partner at the New York digital agencyHuge, which works with both publishers andmarketers, told Advertising Age. Youve gotroughly the same format as print but youve gotway more measurement, way more targetingand the ability for cost-per-click tracking andeven transactions that can happen.PointRoll creates immersive, interactive adswith videos and other creative provided fromthe advertisers, according to Max Mead,director of business development forPointRoll. The agency also works withagencies to ensure the advertising campaign isproperly tagged and reported.Jan Rezab, a social media and mobile servicesexpert from Europe, says within five years,digital video and interactive advertising will bekey. More and more people are watching TVvia the Internet. Many people around me, andmany even much younger people in school, arewatching Hulu in the U.S., theyre watchingYouTube, and they perceive that as television.They dont perceive their standard television,they go to the Internet and download andstream video. So, I believe, basically, digitalwill eat a lot of that pie of advertising too...and it will become bigger and raise a lot.IPADS DELIVER ELUSIVE ENGAGEMENTFACTOR

With two million iPads sold in America, andupward of 10 million expected to be soldworldwide by the end of 2010, the potential toreach wider audiences are growing foradvertisers. PointRoll calls the iPad theultimate device for gaming and working on thego, which has implications for mediacompanies investment in the revolutionarymedium.The touch screen makes the iPad highlyinteractive, just at the time when advertisersare demanding engagement in theiradvertisements. Mobility and the large-screenformat represent an excellent hybrid betweensmartphones and a PC experience. The high-resolution screen renders sharp, attractive stilland video images.[In five years] I would hope to give all myreaders an iPad, and just from one day to thenext to give them an iPad, and say this is yournew newspaper. Cut out all the printing costsand cut out all the distribution costs, and here

you have so I think in the next five years, thedigital is the future, said Theo Blanco, vicepresident of sales and marketing for the NTMMedia Group, Sweden.

PAYING FOR CONTENT ON THE IPADAs Apples iPad continues to be launched incountries around the world, the debate overwhether the device will be the saviour of thenewspaper industry continues. Most agree theiPad is no silver bullet, but rather part of theoverall picture and one of many importantrevenue streams for the future.

As digital platforms grow and evolve, the iPadis likely a stepping stone to the future, andignoring ways to showcase content and chargefor it could be a fatal flaw.

I think the iPad is really delivering what wewere all waiting for. Its a device that enablesyou to visualize content in a very emotionalway. It is an easy-to-use device. The price is amass market price, Mathias Dpfner, head ofGerman publisher Axel Springer, recently toldU.S. journalist Charlie Rose.And, by the way, there are a lot of things thathave to develop if Im saying we have to prayand thank Steve Jobs that he established thisdevice and that he most likely saved the wholejournalistic industry. At the same time, weshould sit down and start renegotiation withthe Apple people about, for example, therevenue share, he said. I mean, 30 percentfor Apple, its too much. But the competitionamong the devices will help. There is aMicrosoft device, there will be a Googledevice, there will be the Amazon Kindle. Thatwill help.

Research from business and technologyanalyst firm Ovum found that consumersadoption of the iPad will likely be slow, andpublishers would be wise to take time indeveloping products and workflows for theiPad as one of many in a wide range of digitaland non-digital readers, according to Ovumsreport, Reformatting News & MagazineMedia.

Meanwhile, the report also noted that, asstrange as it may sound, part of publishersiPad strategy should be an investment in print:The value of the presence of the mastheadbrand at the newsstand and a print audience is[a] powerful tool for surfacing applicationsand promoting other premium digital services.


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The iPad is unique because it creates a newmarket segment in the gap between laptopsand mobiles, one that many publishers believegives newspapers a new chance to charge fortheir content. The device also adds a new levelof interactivity, and enables publishers tocharge advertisers more for a more enrichedadvertising experience.

Charging for content is still in theexperimental phase, and is expected to changeand grow as more publishers release iPad apps.Below is a sampling of whos charging what.

Behavioural TargetingAnother key digital advertising strategy isbehavioural targeting. One of the hottest areasof growth is how we do a better job ofoptimising the dollars we have, one of thembeing behavioural targeting. We are the topperformer in selling Yahoo BT, said StephenWeis, executive vice president of the HoustonChronicle. We see a lift in performance whenan advertiser uses BT. Its better than typicalrun of site or a content-matching (contextual)play.

More than 800 newspapers in the United Statesbelong to the Yahoo! Newspaper Consortium.Part of the partnership is the use of Yahoo!stechnology engine, which enables the deliveryof behaviourally targeted ads. If a user isidentified for searching for a certain brand ofautomobile across a series of Web sites inpartnership with the consortium, for example,the technology will deliver advertising to thatuser that may inform him or her about an offerapplicable to the search.

The algorithm can create behaviouralsegments, such as auto buyer, furnitureshopper, vacation researcher and a host ofabout 400 segments, Weis said. Part of thestrength of the partnership is that Yahoo!reaches 75 percent to 80 percent of the users ineach marketplace, so oftentimes the bucketsof segments are large enough to serve targetedadvertising.


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iPad App Prices

The New York Times: Free

The Wall Street Journal: $17.29 per month

Popular Science Magazine: $4.99

Die Welt: Free

The Australian: $4.99 per month

Reuters News Pro: Free

Eurosport for iPad: Free

El Nuevo Da: Free

AP News: Free

USA Today for iPad: Free

The Guardian Eyewitnesses: Free

The Times of London: 9.99 per month

Terra News per iPad: Free

Time Magazine: Free

BBC News: Free

*Note: Prices do not include other subscriptiondeals. Dollar prices are in U.S. dollars.

Oregonians Dailyand Targeted PublicationCirculation and Crossover

Oregonians Dailyand Targeted PublicationCirculation and Crossover

Source: The Oregonian WAN-IFRA Shaping the Future of the Newspaper 2010

Total WeekdayCirculation

315,212

Total TargetedProduct Recipients

120,000

ExclusiveOregonian

269,381(69%)

SharedAudience

45,832(12%)

ExclusiveTargeted Product

74,168(19%)

When we go out and sign up an auto dealer,we know they have sold autos off of thosecampaigns, we also know we have a goodretention rate. We have one of the lowestsingle digit cancelation for advertisers. We dosell a ton of behavioural adsmore than runof site ads, he said.

The ads are still sold on a cost per thousandbasis, about two to three times the rate of run-of-site ads. Upward of 50 percent of thoseadvertisers buying display campaigns onlinealso buy behaviourally targeted ads.

NEW PRODUCTS IN PRINTThe Oregonian newspaper in the United Statesidentified an underserved market in upscaleyoung adults with high disposable income,who do not subscribe to the newspaper.

The target market was very likely to use theirdisposable incomes for wining and dining atlocal establishments, so the Oregoniandeveloped a magazine called MIX. It is homedelivered to the demographic and focuses onhip new restaurants and drinkingestablishments in and around Portland, Oregon.

Currently the newspaper and targetedmagazine products at the Oregonian have a 12percent crossover audience. MIX is profitableand reaches more than 100,000 new audiencemembers. The magazine provides a variety ofnew advertising options for restaurants anddrinking establishments in print and online.

Yield ManagementWhat is yield and why is it an importantelement of profitable sales departments? Yieldis the net amount paid for an advertisement, orthe actual price achieved against the rate card.Yield is calculated by dividing the cost of thead by the unit of volume selected. It measuresvariance against published or standardadvertising rates.

Ultimately, tracking yield trends in a salesorganisation over time will red flag negativetrends, and will point to opportunities for ratecard optimisation, thus adding potentiallymillions of dollars of revenues to the bottom line.

At the heart of the yield and pricing issue is a fundamental change in the newspaperbusiness. The Digital Revolution has caused a seismic shift in the media landscape, and haschallenged newspapers to rethink their entireadvertising strategy. How do we change pricingas we incorporate digital product offerings?How do we make money from digital?

A young newspaper salesperson asked histhen-boss, Which of these is my priority,volume, revenue or yield? Surprised at thenaivet of the question, the managing directorreplied, Clearly, I want all three and thats abasic requirement.

Yield knowledge and execution arefundamental requirements in every newspapersales persons toolbox. Fundamental to


16

Source: The Oregonian, Claritas WAN-IFRA Shaping the Future of the Newspaper 2010

X

X

X

X

X

20,505

12,711

7,166

11,299

2,167

4,819

29,058

17,505

10,881

1,840

4,287

Oregonians Usership Breakdown of Young Target Groups

Segment

03- Movers & Shakers

04- Young Digerati

05- Executive Suites

11- Gods Country

12- Brite Lites, Lil City

16- Bohemian Mix

19- Home Sweet Home

22- Young Inluentials

23- Greenbelt Sports

24- Up-and-Comers

25- Country Casuals

H&G M

agaz

ine

X

X

X

X

X

H&G M

agaz

ine

X

X

X

X

H&G M

agaz

ine

Non-

Sub

HHLD

S

119

116

120

118

115

92

109

107

113

107

114

Dine

149

150

140

143

122

117

114

102

118

100

105

Wine

106

86

105

115

114

72

113

95

121

99

125

Pet

s

108

99

97

117

111

82

103

99

129

111

134

Out

door

136

139

135

129

119

123

113

118

117

117

97

Hea

lth

120

100

110

122

120

76

113

82

116

104

116

Home Im

p

119

93

115

126

113

64

109

81

120

98

121

Gar

den

/Lan

dsk

117

116

120

118

113

111

119

122

116

115

118

Women

82

143

116

95

96

97

97

110

103

142

78

Kids $500 million $100-500 million $30-100 million $15-30 million 40%

Cost Savings:Overall Buyer Perceptions

Cost Savings:Overall Buyer Perceptions

Source: ValueNotes Research, Magazines and Newspapers: Will publishers outsource? March 2010 WAN-IFRA 2010

14

28

45

14

3

0% 10 20 30 40 50

>40%

25-40%

15-25%

10-15%

None

Outsourcing Companies DiscussHow They Can Save You MoneySFN asked five top offshoring andoutsourcing company executives in Indiahow their services help newspaper companiessave money, to give an example of how theyhelped a newspaper save, and what savingsthey think they can provide that can't befound elsewhere.

Pervez Sikora, COO of 2adpro, Bangalore Robert Berkeley, CEO of Express KCS,Gurgaon

Tony Joseph, CEO of Mindworks Global,New Delhi

Ken Swanson, CEO of Affinity Express,Pune

Sandeep Senjit, Client Services Managerof Infosys Technologies Limited, Bangalore

How do your services help newspapercompanies save money?

Pervez Sikora: 2adprooffers highly customisedoff-shore design studioservices to newspapercompanies. Newspapercompanies outsource theproduction of print anddigital advertising to2adpro. This is a

function that newspapers in the U.S. and UKtraditionally handled in-house.

By having this work produced off-shore,companies can achieve savings of 40 to 50percent while improving turnaround times.The savings come from the lower productioncosts in countries like India and 2adprostransaction based pricing model whichallows a customer to better align their costswith advertising demand and volume.

Robert Berkeley:Express KCS specialisesin helping clientsidentify the parts oftheir creative servicesoperations that areappropriate foroutsourcing, and wework with them to put

these solutions in place. Our clients benefitfrom our use of lower-priced labor marketscombined with improved quality (betterdesign leads to more effective ads and

improved sales as well as reduced make-goods), more flexibility (ability to quicklymobilise capacity to meet demands of newinitiatives), operational efficiency andautomation technology.

Express KCS has a long history at the high endof premedia services and as such often bringsour clients the benefits of methodologies andexperience that are outside their usual domain.

Tony Joseph: Allnewspaper publisherswould agree that theircore proposition isunique, compellingcontent that drawsaudiences valued byadvertisers. Most wouldalso agree that that this

proposition will increasingly find expressiononline.

However, 30 to 40 percent of in-housenewspaper resources are today devoted to tasksthat are not part of the core proposition and arenot strategic. Examples include page layout,copy editing, pagination, image processing andad production.

Mindworks believes that this disconnectprovides a significant opportunity fornewspapers to strengthen their coreproposition. By consolidating and outsourcingnon-strategic tasks, they can free up theresources needed to keep their reporters on thebeat, and do more online.

The newspaper of the future, we believe, willhave a three-ring structure (see below). In theinnermost ring is a core team of reporters andsenior editors who focus on creating unique,local content. The second ring would consistof an outsourced team of copy editors anddesigners who would take on a range ofproduction-related tasks including copyediting, page layout, content aggregation,event listings, creating information databasesand repurposing existing content. The thirdring would consist of community residentswho provide crowed-sourced or user-generatedcontent such as updates on school sports andvideos of community happenings.

A consolidation/outsourcing project couldgenerate savings of anywhere from 35 to 60percent, depending on the existing costs of thenewspaper publisher.


62

Ken Swanson:Depending on the specificclient arrangement,Affinity Expressprovides savings rangingfrom 30-50 percent overinternal ad productionoperations. This is basedon reductions to internal

staffs and labour arbitrage.On top of the labour savings, the move fromfixed costs and overhead to variable costsbased on actual volumes with Affinity Expressis an important consideration because it allowspublishers to weather the peaks and valleys inadvertising demand throughout the year andpay only for ads produced.Along the same lines, the handling offluctuations in volume is valuable becausepublishers dont carry the extra staff neededfor busy times and Affinity Express isresponsible for ensuring adequate capacity.Especially when there are multiple properties,the standardisation of processes improvesefficiency and allows the benchmarking ofproductivity, driving additional savings.In summary, Affinity Express offers:30 percent to 90 percent headcount reductionin existing staff

20 to 50 percent efficiency improvementsfrom software

30 to 50 percent reduction in outsourced staffcosts

12-hour turn times on 99 percent of adsproduced

No expensive hardware or software purchasesnecessary as the state-of-the-art, web-basedad tracking system hosted by Affinity Expressin Chicago is part of outsourced adproduction costs

Sample Savings CalculationsExisting ad production staff 100

Out-of-pocket average employment costs* $44,000

Total employment costs $4,400,000

Aggregation headcount savings @ 25 percent $1,100,000

Software efficiencies on 12 percent of remaining headcount after aggregation $396,000

Outsourced savings using 70 percent remaining headcount balance @ 34 percent per FTE+ $662,000

Total savings $2,158,000

Percentage savings on original total cost 49 percent

Sandeep Senjit: For thelast few years, we haveinvested in understandingthe newspaper domain,its nuances and havedeveloped a deep set ofcompetencies andservices offerings whichhas resulted in direct and

indirect cost benefits to our clients in theinformation services area. Today, we are a verystrategic partner for many newspapers,providing business consulting, technology andbusiness process outsourcing services acrossthe value chain, i.e. advertising, contentcreation, content aggregation, content deliveryand sales and fulfillment. We are helping ourcustomers seamlessly manage their transitionto the digital media. Newspapers seeking tooptimise costs and improve their free cashflows need these services to centralise andstandardise existing operations, identify newermodels and revenue channels to monetize thedigital supply chain.

Who could have imagined in the recent pastthat business critical applications like printing,billing, print production, advertising andcirculation could be supported from overseas?But, Infosys is doing just that and at the end ofthe day, our clients have realised not onlydirect savings of more than 20 percent, buthave also benefited from enhanced servicelevels & rapid time-to-market for strategicinitiatives. For them this is a differentiator inthe market place.

Newspapers are outsourcing their back-officeoperations in the content management andcustomer management domains. We have ashared service centre set-up for advertisingaccounting process including-billing,collections, GL entry, GL reconciliation,accounts payable and vendor management;advertisement order entry and ad operations(ad creation). Due to outsourcing, our clienthas realised cost savings of 40 percent to 50percent using a shared service model acrosstheir different properties and bringing inprocess efficiencies.

Our best bet going forward will be our NewsPaper In a Box (NIAB) solution. It is ourfully hosted platform to support all functionsand the perfect opportunity for newspapers tohive off their infrastructure, reduce cost ofoperations and focus on their core strengths. If


63

newspaper properties are looking toconsolidate, then we strongly encourage themto look at NIAB. Another key benefit of theplatform is a transaction based pricing modelas against a product license thus movingyour cost Ssructure from a Capex Model to aOpex Model . This in the true sense changesyour cost structure thereby making you moreagile in business conditions like today.

Please give a specific example of how anewspaper company saved money usingyour services, and how much thatcompany saved.

PS: Treasure Coast newspapers in Stuart,Florida was looking to create an on-demandstudio services solution to handle theproduction of print ads. The company selected2adpro in early 2008 as their partner andwithin six months had transitioned close to100 percent of their total production ad volumeto 2adpros studios in India. The projectenabled Treasure Coast to reduce their highcost on-shore operations by nearly 75 percentand realise annual savings of nearly US$1MM.Due to the success at Treasure Coast, Scripps the parent company of Treasure Coast, hasselected 2adpro as a single vendor to handleadvertising production needs for allnewspapers owned by the company. Read thecomplete case study athttp://www.2adpro.com/case-study-TCN.html.

RB: The San Jose Mercury News began areview its advertising operations in 2006 toidentify and replicate best practice whereverpossible and rationalize asset use. Key to thishas been the relationship built with ExpressKCS. We performed a thorough assessment ofthe existing workflow operations, systems andtechnology to understand any potential gapsthat might restrict remote operation, andimplemented a broad solution that enabledSJMN to work seamlessly with our productionstudio as if it were in-house. Our servicemodel delivered around 70percent savingsimmediately and continues to bring newinitiatives and operational efficiencies today.

TJ: In 2008, as newspaper revenues cameunder pressure, the international edition of aleading U.S. newspaper on the East Coast hada tough choice to make. The only way theedition could be saved was by a dramaticreduction in the cost of producing the 24-pagedaily. This could be achieved only if all tasks

other than news selection copy editing,image selection and page layout wereoutsourced to a low-cost location.

As one of the editors said: We had 2-3months to outsource and if we could make itsucceed, we could keep the edition.

The company set a clear target for the nextthree months: To outsource all productiontasks for the edition and keep just one editor tosupervise operations.

Creating a base for outsourcing: Intense workwas carried out in June, July and August 2008to chalk out the details as September was themonth by when all staff, barring the editor,were to leave. The main concern was whetherit could be done at all, given the pressure ofpulling together all the pieces to makeoutsourcing possible, while still producing thepaper locally, during the transition.

The newspaper appointed a chief coordinatorfor the project, making him the one-pointcontact for the outsourcing partners, thetechnical team and management and otherinternal teams. It became a project of detailwhere he and his team worked on creatingdetailed documents outlining how the paper wasto be designed and what it ought to look like.

Identifying the right partner: For thenewspaper, getting the right partner at the firstgo was crucial. It needed a service providerwho could get under the skin of the newspaperquickly and transition the process to theoffshore team within three months.

Mindworks Global Media Services fit the billperfectly. Founded and staffed by senior mediaprofessionals who have created and led someof the most respected newspapers andmagazines in India, and supported by peoplewho have created some of the largestoutsourcing companies, Mindworks offered arare combination of editorial skills andindustrial-strength processes.

The client was already familiar withMindworks other services such as archivingand comment moderation, two projects thathad been operationalised without muchdifficulty. So it decided to test Mindworkseditorial capabilities.

Transition: The key challenges in transitionwere technical and workflow-related.


64

These included:

Getting an off-the-shelf design software thatMindworks could use and that would work aswell as the existing system Managing real-time information flow halfwayaround the world Feeding material, photos, wires etc. to theMindworks system Documenting the way editorial decisionswere made Documenting step-by-step details for eachsection of the newspaper. E.g. for the businesssection, the team documented: How many stories would go on page 1 How many of those would jump to page 2 Which columns were to be used for business

briefs

The chief coordinator held meetings twice aweek with the IT team to troubleshoot issues.He and his team wrote endless documents tocapture what we do and how we do it. Theyworked 10 to 12-hour days, managing theproject with Mindworks, as well as bringingout the newspaper. An excellent workingrelationship with the Mindworks projectmanager, who was the one-point contact atMindworks, helped in accomplishing whatmany here thought was impossible bySeptember, says the Chief Coordinator today.

Project preparation: Several systems andprocesses were put in place at Mindworks toensure that transition from one stage to anotherwas smooth.

Transition process: It was decided that the firststep towards outsourcing would be Mindworkstaking over the production of the 12-pageSunday supplement a mix of travel, opinionand entertainment pages that was producedover the week. The non real-time nature of theSunday supplement made it an ideal launchpad for the project. Mindworks startedbuilding the supplement in July, after whichthe clients editors handed over moreresponsibilities science page, feature pages,people page, business and inside news pagesetc. By October 2008, all pages were beinghandled by Mindworks. The clients editorwould provide page-wise story lists whilerelying on Mindworks to select photos, pulland copy edit stories and create attractivelayouts.

Benefits: The outsourcing project reduced theclients editorial expenses from $400,000 a

year to less than $150,000 a year over time,which allowed the edition to survive.KS: Affinity Express supports one of thenations largest diversified media companies.Its major interests include magazine,newspaper and business publishing, cablenetworks, television and radio broadcasting,Internet businesses, TV production anddistribution, newspaper features distributionand real estate. The company owns 15 dailynewspapers.

The Affinity Express design services for thisclient include print and interactive web adproduction, marketing collateral and creativedesign for commercial clients. For twoproperties alone, Affinity Express producesmore than 100,000 ads annually.The bulk of ads are produced overnight, within12 hours from input to output. The balance istypically completed during the same day forsupport of revisions and requests from salespeople and advertisers.Workflow is engineered to support qualityoutput with automated interfaces to orderbooking, preflight software for quality imageand file validation, electronic proofing andapproval tools to manage the sales processwith advertisers.Based on the success with the first twoproperties, the client expanded the agreementwith Affinity Express to its entire newspapergroup including digital solutions. AffinityExpress helped the client create a centralisedad production workflow to allow sharedproduction between all properties and increaseboth service levels and staff utilisation.In addition to taking on ad production, AffinityExpress has supported critical changemanagement from sales through delivery andprovided user training to lead the companyinto a common process for all users andfacilitate outsourcing with Affinity Express.At the first two properties, the client realisedmore than 40 percent savings and a reductionin production staff of more than 50 percent,while getting the AESB hosted technology tomanage the workflow, content and end-to-endprocess with no capital expenditure. AffinityExpress also improved turn times significantlyon interactive web ads.

For another major newspaper client, AffinityExpress achieved the following benefits:


65

Cash savings of more than 40 percentAll digital assets consolidated at one locationfor the use of all properties (in one move) Single workflow for all papers, small andlarge Workload balancing between properties toaccommodate absenteeism and changingdemand The same graphic applications across theenterprise Ability to use ads effortlessly betweenproperties Blackberry proofing for sales and production 50 percent more face time for salespeoplewith customers

SS: All initiatives start with the seniormanagement looking for cost efficiencieswithout compromising on quality of service.The complex maze of legacy technology posesserious limitations in aligning the applicationsto the changing business needs. Then there isalways the classical business vs. IT debatewhich actually acts as an enabler for suchtransformations. Todays CIO is measured onthe success of these transformations. SeniorManagements across functions are comingtogether to address these business needs. Ourclient who is one of the leading publishers inthe U.S. had multiple print plants across thenation to manage production of various printproducts. Legacy applications dotted thelandscape with multiple installations atdifferent print plants. These applications createand deliver daily data to the print plants,delivery partners and sales groups to managethe daily processes around newspaper delivery.The senior management was pushing to cutcosts, reduce cost of operations andmodernising the systems. Legacy technologystack posed serious limitations in aligning theapplications to changing business needs andinitiatives.

We partnered with business and IT to not onlystreamline the business processes, but alsofocus on aligning their IT applications to theirbusiness needs by automating, rationalisingand re-writing some of the applications. Theresults were very encouraging. Eighty percentreduction in effort due to automation and 150percent increase in orders and revenues due tostreamlining operations and processes. Thisresulted in cost savings and business valueaddition in the range of around $5 million tothe client. Their business case was met.

In another situation we were faced with achallenge to improve business parameters. Ourclients were incurring high costs of runningfunctions like finance, accounting and ordermanagement. There was a high dependency onpaper which resulted in low efficiency andthere was shrinkage in circulation ofnewspapers, shrinkage in advertising revenueand revenue leakages due to incorrectbookings.We adopted YB, LEAN and OIP Six Sigmatechniques across the focus areas to improveproductivity, reduce cycle time and avoidlosses. The processes were offshored and thenoptimised. With the automation of theadvertising process, overall savings of $140Kper year were delivered.

What types of savings do you thinkoffshoring and outsourcing can provideto newspaper companies that cannot befound elsewhere?

PS: Off-shore outsourcing offers a uniqueopportunity for newspaper companies toaccess resources and talent in different parts ofthe world at lower costs. This enables bothoutsourcing of current functions to locationswhere the work can be done more efficientlyand at a lower cost and outsourcing of newfunctions where talent is expensive and noteasily available on-shore. The off-shoreoutsourcing services industry has matured andthere are many companies that provideservices within IT, call centres, circulationmanagement, finance and accounting andadvertising production. Newspaper companiesmust take a strategic long-term view of off-shore outsourcing in order to successfullytransform their business models to meet thefuture needs of their audience and advertisingcustomers.

RB: Our ability to achieve savings above 60percent in some cases, combined with aservice level unrivaled in the industry, sets usapart from other types of ad productionalternatives and markets. Further, we haveconsiderable efficiencies of scale that allow usto provide technology solutions traditionallybeyond the reach of a newspapers internalresources. We have also developed a set of bestpractices through our work with hundreds ofpublishers across North America, Europe,Australia and Asia. This kind of experience,validated by our ISO 90001 certification, isgenerally unavailable from internal teams.


66

These features of Express KCS combine todeliver cost savings in three distinctdimensions: labour, technology, and quality.Our skills not only include print and onlinedisplay ad production, but also spec ads andcampaign planning, editorial services andimaging. We also provide sales teams withbackup support, and underpin all this withworkflows, asset management and technologythat connects all stakeholders into a singleoperating unit.

TJ: For a single metro newspaper, the savingscould range from 500,000 to $1 million a year,depending on its existing cost structure, andthe scope of the outsourcing and offshoring.

In the case of newspaper groups with multipletitles, we tend to see these as consolidation-cum-outsourcing/offshoring projects, sincethere are large efficiency gains (20 to 30percent) to be had by combining copy editingand layout tasks across multiple titles. Thegains for a newspaper group with 10 metro-equivalent titles could be anywhere from $7million to $14 million a year.Apart from the savings, consolidation andoutsourcing allows newspapers to focus theirown resources on their core proposition creating unique content. We believe this is asimportant as the savings at a time whennewspapers are being forced to reduce theirreporting staff, thus weakening their long-termcompetitive advantage.

A third benefit of working with an establishededitorial services provider such as Mindworksis that having worked with many newspapersaround the world, we are able to bring to thetable best practices and productivitybenchmarks that our clients find very useful inrestructuring their operations.

KS: Many newspaper groups and individualproperties have disparate processes and toolsacross the enterprise with mostly internaldesign staff and some external suppliers forproduction services. Today, publishers look tooffshoring/outsourcing to significantly reducethe costs of ad production while streamliningand increasing efficiency.

Some have tried a limited approach tooutsourcing, which essentially involvessending a portion of daily volumes or overflowrequests only to outside providers. While thisrequires lower start-up costs, there is no

integration for efficiency, limited commitmentto turn times and quality by vendors andsmaller savings. This means thetransformational benefits cannot be realisedand the financial impact for clients is reduced.

True offshoring/outsourcing results insignificant cost savings. The biggest impactcomes from the reduction in internal staff andlabour arbitrage with offshore providers, whichcan deliver an average of 25 percent to 40percent in savings.

An additional advantage is the move to flexibletransaction-based ad production pricing withsavings defined in agreements. This means theclients save right from the start and pay onlyfor the ads produced, switching from thetraditional fixed costs to variable. And thepositive impact on the bottom line is realisedquickly and guaranteed.

In the high-volume, time-sensitive publishingenvironment, cost savings cannot come at theexpense of quality or press deadlines.Outsourcing reduces risk by managing thedelivery of ads to agreed-upon service levelscovering creative quality and turn times, sonewspapers reduce expenses for make-goodads and lost advertisers.

Due to the nature of offshoring/outsourcingagreements for ad production, technology is acritical component to facilitate relationships.Depending on the provider, outsourcing is ameans to gain better technology withouthaving to purchase any hardware or software.This is a major advantage when mostnewspapers have expensive legacy systems andbudgets for capital expenditures have beenslashed. Ideally, publishers also benefit fromthe ongoing enhancements to the providersrelease to all their clients.

There are also soft-cost savings due to theability to cancel IT software fees, reduceinvestments in workstations and space, andreallocate IT support staff from legacy adproduction applications due to the use ofproviders hosted applications.

SS: If we compare other industries to thenewspaper industry, we strongly believe thatthe IT landscape in a typical newspapercompany is easier to replicate than the otherindustries. The overall workflow can bestreamlined effectively and there are littlevariations between 2 different newspaper


67

entities. It is due to this unique feature of thisindustry that it lends well tooutsourcing/offshoring. As we mentionedearlier our News Paper in a Box solution isbeing developed keeping in mind this uniquefeature of this Industry. Hence a SharedServices Concept fits well in this industry andwill lead of cost savings. It is practicallyimpossible to think the same for otherindustries.

So, in effect it is the uniqueness of thenewspaper industry rather than the uniquenessof the savings that can be provided. The typesof savings or avenues to reducing cost ofoperations have already been discussed in theprevious sections. Naturally, with a SharedServices Platform such as NIAB, cost savingscome from adoption of a streamlined process,shared software & hardware infrastructure,shared resource pool (and offshore makes iteven more cost effective) and the ability to geta flexible pricing model. And, even if anewspaper does not want to go the NIABroute, then the advantages ofoutsourcing/offshoring anyway remain which are labour arbitrage, ability to quicklyadapt to changing technology needs, ability torelease the bandwidth of internal SMEs tocritical business enabling functions etc.


68


69

For newspaper companies, the era of vast profitsis over. In many parts of the world, newspapershave let go of the dream of finding a silverbullet that will boost them back into the sameprofit margins of the 20th century. Meanwhile,publishers in parts of the world that are stillseeing growth know what's coming, and arebracing themselves and looking for solutionsnow before they are faced with the problemsnewspapers in North America and parts ofEurope are dealing with now.

The news publishing business is indeedevolving, and companies are looking for newrevenue streams, while also using cost-cutting asa tool to drive the business toward innovation.The end goal is to create a new business modelthat can support content creation and distributionacross platforms, and one that can adapt astechnology advances and user behaviour shifts.

To recover and begin making money from thenew media ecosystem, newspapers must aimfor a strategy that focuses on maximising printrevenues, while also strengthening digitalrevenue streams. Even if an area is currentlyonly making incidental revenues, such as the

mobile or tablet spaces, not strengthening anddeveloping those areas will likely mean a lossof future revenues.

Part of growing revenues is looking for newways to use the advertising department. Asdiscussed in Chapter 1, the SMARTAdvertising Department uses tools andtraining, a consultative sales approach, yieldmanagement, audience focus and new productdevelopment in order to strengthen and useadvertising in new ways.

According to the World Newspaper Future &Change Study, by WAN-IFRA, the University ofCentral Lancashire and the Norwegian School ofManagement, it seems that newspapers aroundthe globe are on the right track. New businessdevelopment and innovation is the top investmentin training development around the world.Respondents said they are developing productssuch as new print and digital publications; newtraditional and non-traditional businesses, such asinsourced printing and events and conferencing;and developing iPhone and iPad products. Inaddition, they are also developing and trying outnew content strategies for the growing types of

Conclusion

digital platforms, and dozens said they are lookingto create new revenue models for the iPad.

Taking a new look at subscription andcirculation strategies is also a way to earnmore in revenues, and lower distribution costs.

At the Boston Globe, for example, circulationstrategic pricing, with a greater emphasis on thevalue of consumer revenue, has proven to be away to extract value while also continuing to beBoston's top media outlet. The Globe increasedits weekday newsstand price in outlying areas,and also increased the price of its Sunday editionboth within the city and in the outer areas.

When looking at percentage of revenue, werenow at 50-50, advertising and consumer. Wewere at 60-40, ad and consumer. The simplemath is, you take the prices up X amount, youlose a certain amount, and then see what thatnet impact is. In terms of actual revenues,were up with circulation revenues, down withprint ad revenue, up with digital ad revenue. Ithink thats where we have to turn our focusnow rebalance that portfolio of revenue,Christopher Mayer, the Globes new publisher,stated in Chapter 3.

Were not going to cut our way from expensesinto a successful business model. Printadvertising will continue to go through test andlearn. Our marketplace and our position in themarketplace is that ... the decision-making inthe past used to happen locally. Now withmore national players making purchases, its adifferent type of selling relationship. The way wego to market has changed, and all this makesadditional challenges in print ads, and itsimportant to sell across mediums. Werecurrently more of a venture capital orientedcompany, and well have to test things and sehow were going to scale. Well have toapproach the business in Boston is differentthan other markets.

News publishers are also finding ways tocharge readers for digital and print productsand also to charge advertisers more, and aremaking those decisions based on audienceresearch and database marketing targeting. Awide array of paid models from completepaywalls, to freemium strategies, to bundledoptions are being tried out by newspapersaround the world, such as The New YorkTimes, Japans Nikkei, the UK-based Timesand Sunday Times, Frances Le Monde, andmore, all detailed in Chapter 3.

Cost-cuttingOn the other side of newspapers strategy iscost-cutting. Saving money from cutbacks isnecessary in the short-term, and part of aslimmed down, more efficient business planfor the future. Using cost-cutting as one ofmany tools to innovate into a 21st centurybusiness is the end-goal for news publishers.

Lowering costs while continuing to offer a morerobust, higher quality product is indeed adifficult balancing act. However, newspapers aretrying out different strategies, such as reducingemployee numbers, consolidating offices andprinting plants, integrating staff, consolidatingsub-editing and production units, reducing thesize of print products or the number ofsections, reducing publication days, and more.

Its not about only cutting the cost side, itsabout going to go back to rethinking andreinventing the business model, operations andmanufacturing models, and askingfundamental questions. How do we distributethe newspaper? Is there a more efficientmodel? How are our sales teams performing?Are they going to use rate sheets, or is theirentire focus on collaborative selling? saidSandy Nelson, CEO of Aperio International, aconsulting firm in Washington, D.C. that helpscompanies rethink their businesses, includingthe Orange County Register and Apple.

At MediaNews Group in the United States, forexample, a team was devoted to coming upwith a list of money-savers and money-makers.Processes were put in categories for quickwins, followed by secondary and tertiarypriorities, based on how they would benefit thecompany and the complexity of each.

Our goal was to focus our investment injournalism, particularly local journalism,MNG Chairman Dean Singleton stated inChapter 4. We will aggressively move tomonetize the online business, and develop newniche products.

When it comes to cutting employees, manynewspapers have received the advice to use thetool of cutting as a means to an end, not an endin itself. In other words, it is a scalpel, not amachete. When journalists and editors are lost,quality most likely suffers, and the strategy ofcutting can backfire if readers refuse tocontinue paying for a product of less quality.


70


THE PUBLISHER

World Association of Newspapers and News PublishersParis, France and Darmstadt, GermanyTel.: +33 1 47 42 85 00Fax: +33 1 47 42 49 48E-mail: [email protected]

WAN-IFRA CEOChristoph Riess

SFN DIRECTORMartha L [email protected]+ 1 847 778 9806

SFN EDITORIAL MANAGERLeah McBride Mensching

SFN BUSINESS ANALYST

Erina Lin

PAGE AND GRAPHICS DESIGNER

Marianne Audouard

World Association of Newspapers and News Publishers

WAN-IFRA June 2010

The contents of this report may be used in whole or part by publishersin the execution of their business. Use of any part of the content or intellectual property herein for the purpose of representation or consulting requires prior written consent of the author. Any reproduction requires prior consent of WAN-IFRA.

Shaping the Future of the NewspaperANALYSING STRATEGIC DEVELOPMENTS AND OPPORTUNITIES IN THE PRESS INDUSTRY

STRATEGY REPORTVolume 9 N5 JUNE 2010 WAN-IFRA

A World Associationof Newspapers and News Publishersproject supportedby four strategicbusiness partners

Documents

Million Dollar Strategies for Newspaper Companies_9.5_P