The Buggy Whip Business

The recent report on the state of the American news media by the Project for Excellence in Journalism paints another dismal picture of the newspaper industry. Circulation continues to decline. Classified advertising still moves online. The average age of the newspaper reader inexorably climbs.

In this environment, one of the ideas bandied about for solving the industry’s problems is for newspapers to leave the field of battle and become non-profit institutions. However, that only further shelters publishers from the need to innovate -- something they foolishly avoided during many years of monopoly markets and amazing cash flows that now are coming to an end.

A major step forward is “Newspapers Next,” a $2 million project by the American Press Institute that recommends an approach called “disruptive innovation.” It is encouraging that Newspapers Next calls on publishers to identify “nonconsumers” and “unsatisfied needs” of readers and advertisers and develop products to address them. But Newspapers Next stresses innovation for innovation’s sake. And it fails to ask newspaper publishers to take the essential step of defining the business they really are in.

That very same failure is what famously put the buggy whip manufacturers out of business. The classic business school story is that, with the advent of the automobile, they continued to act as if they were in the buggy whip business. But if they’d defined themselves as being in the “acceleration” business they would have adapted and survived long enough to worry with the rest of us about the fate of Chrysler, Ford, and General Motors.

Newspaper publishers who insist they are in the news business are like the buggy whip manufacturers of yore. No better are those publishers who claim to be in the “information business” or mumble words like “platform agnostic” to indicate they really have gotten the new media religion. “Information business” suggests a focus on the product rather than the customer -- a perspective that is partially responsible for getting us the mess we are in. And “platform agnostic” indicates a focus on only one of a publisher’s two sets of customers -- the reader.

So what business are newspaper publishers in? If a newspaper is to make maximum use of some or all of its most important assets -- a powerful brand, a relationship with advertisers, the ability to generate content, and a delivery force -- I would argue it must understand it is in the business of aggregating audiences for advertisers.

Other advertising-supported media reached that conclusion years ago, as evidenced by their migration from mass to niche to meet advertiser and user demand. The Lifes and Looks of our childhoods gave way to successful magazines as narrowly targeted as Bassmaster and Vegetarian Times. The big three networks now share the television set with channels aimed at African-Americans, Hispanics, golfers, and gays. Radio formats and time-of-day programming are highly targeted. The Internet was born as a niche media form. But newspapers (with the arguable exceptions of national titles such as The New York Times, the Wall Street Journal, and USA Today) remain geographically focused rather than demographically targeted.

Audience aggregation is not as noble a reason for being as defending democracy or rooting out evil. But one doesn’t obviate the other. The New York Times, for example, aggregates a very attractive national audience of affluent and influential readers. Its advertisers so prize that audience that they spend the money required for The Times to support a $200-million-a-year newsgathering operation that provides the content to aggregate those readers. And Metro International aggregates an audience of more than 20 million readers in more than 100 cities worldwide with a free daily newspaper aimed at 18- to 34-year-olds. Metro is not The New York Times, but with its abbreviated content, easy-to-handle format, and free distribution, it informs and engages young people who otherwise wouldn’t be reading a newspaper.

The audience aggregation approach should be embraced by editors as well as newspaper publishers. That’s because it argues for newspapers to develop new products, outside the core newspaper itself, for the audiences that the newspaper doesn’t reach. Newspaper companies shouldn’t tart up their flagship brands with a few Spanish-language pages, an expanded gossip section, or a Su Doku puzzle in a misguided attempt to stem the flight of readers. Such changes to good newspapers are likely to hasten the departure of traditional newspaper readers, who are a valuable, albeit ever smaller, audience to aggregate.

So how does a newspaper publisher become an audience aggregator? The first step involves a visit to the research department, whose manager often is as lonely as the Maytag repairman, called on primarily to update the media kit. Most publishers know the characteristics of the audience they are reaching -- how many people, in what areas, of what sex, and of what age and education level. But the really important research query is about the audiences the newspaper isn’t reaching. How many 18- to 34-year-olds live in the market? Is the number increasing or decreasing? What percentage read the newspaper? How many singles are in the market? How many new movers? How many Hispanics, African-Americans, etc.? In recent years many newspapers have engaged in audience segmentation research, which identifies different groups of newspaper readers. But here we’re talking about identifying instead demographic or psychographic groups that aren’t reading the newspaper and must be aggregated some other way.

Step Two is finding out whether advertisers want to reach these unserved audiences and how they go about it now. If your advertisers aren’t interested in reaching young people, for example, is that an audience you want to spend the money to aggregate? And if advertisers already have a method of reaching that audience, what can you offer that is better or more efficient? Few of the newspapers that have closed in the last 100 years died for lack of readers. Most failed because advertisers found a better or more efficient way of reaching the readers they delivered. This is a step, by the way, best carried out by business analysts rather than sales people, whose optimism and drive -- great qualities in closing a sale -- make them less than objective at gathering data.

Step Three is to find out how to best aggregate desirable audiences not served by the core newspaper. This also requires research. If new mothers need information about child care, would they like to get it on the web or via a mailed newsletter or magazine? Is there a large population of new movers interested in advice on home furnishings, renovations, and lawn care? Is that group best addressed with a monthly tabloid newspaper, a website, or a semi-annual home furnishings fair? Is there a population of young people who don’t read the newspaper and aren’t exposed to local advertising on the national web sites they visit? Is that group best reached with a free daily newspaper or an exclusive arrangement to distribute product samples or show advertising videos at local nightclubs? Or perhaps both? A publisher that defines itself as being in the audience aggregation business is able to contemplate these and many other possibilities long seen as outside the scope of the traditional newspaper business.

Steps Four through Eight are the sort of development process familiar to most consumer products companies -- developing a prototype, then testing it with consumers, then testing it with advertisers, then devising a distribution method, and finally building a P&L to see if the return on investment justifies the effort.

If all of this sounds simple, well, to some degree it is. It doesn’t require mastery of business school jargon or swearing allegiance to the concepts of the latest author of an airport book on business success. It does require a senior manager to champion the effort, a well-funded research team, the willingness to take measured risks, and the willingness to fail. But most important, it requires the willingness to rethink your notions about what business you really are in.

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