February 11, 2013

Newspapers Turning Ideas into Dollars

Columbia Herald – A Culture of Innovation

For a while, the 164-year-old Columbia Daily Herald-serving a small Tennessee city 50 miles south of Nashville-had been insulated from the worst of the economic ills that have battered larger daily newspapers.

But in recent years, the recession has hit the community of 35,000 hard and the paper has suffered.  For publisher Mark Palmer-who knows, to the dollar, how much money the Herald has earned on virtually every revenue initiative-the mission is to compensate for $300,000 in revenue that disappeared when  a number of the paper’s advertisers closed up shop.

Thus far, Palmer says the paper has made up about $100,000 of those absent dollars, and “we continue to press after that [money] with everything that we know to do, all the time.”

The Herald operates in a world of small numbers. It has a circulation of about 12,800, a 13-person newsroom and an eight-person sales staff that services about 720 business accounts. Revenue initiatives that bring in a few thousand dollars are valued. Within that universe, Palmer has instilled the mantra of “doing everything they know all the time.” The paper is constantly searching for “winners,” new revenue streams that will become a permanent part of an evolving business model-even as it seems that its limited resources are sometimes stretched to the breaking point.

In Palmer’s view, the single biggest problem facing his industry has been “complacency…If there’s any business in the world that is built around the excuse that ‘it’s always been done this way,’ it is the newspaper.”

In its quest to find new revenue streams, the Herald in 2012 alone introduced, among other things: a digital subscription program (a metered paywall); a digital agency that provides online marketing services to local merchants; a daily coupon program; an online ticket selling service; a program that puts advertisers on five different print and digital platforms; and a new male-oriented lifestyle magazine. At the same time, the company is working on plans to roll out a real estate publication, develop improved video technology, introduce an e-commerce retail mall on the website and unveil a database marketing project to identify new customers for its advertisers.

The results of these experiments can largely be seen in the growth of the digital revenue stream. At the beginning of 2011, before many of them launched, digital dollars were virtually non-existent at a paper that had been reliant on print revenue, accounting for only about 1% of the Herald’s total revenue pie. They grew to about 6% by the end of 2012, and by the end of 2013, the goal is to raise that to 15%. Revenue at the paper was only down about 2% in 2012 with digital gains helping cushion print revenue losses.

“We do very well in Columbia, says Michael Ferguson, the CEO of Herald parent company Stephens Media. The Herald “is more innovative than a typical paper of that size…and personif[ies]  what I think has to happen at every paper…We need to be making transitional [moves] now.”

Palmer-who has spent more than 40 years in the newspaper industry and been a publisher at four different papers-may not look the part of an aggressive digital-age innovator. But Herald sales director Craig Duncan jokes that “for as old as he is, he’s a very progressive guy.” And one of Palmer’s fellow Stephens publishers calls him “the youngest old publisher he’s ever seen.”

The Paper and the Market

Columbia isn’t the kind of community that was an early adopter of digital technology. Asked to rate the digital expertise of the city’s merchants, Duncan says that on a scale of one to 10, “I’d say a three-and-a-half or four. Some are just absolutely dynamite. But it’s the exception, not the rule right now.”

“Some people don’t own a computer here,” adds Thomas Browne, the paper’s first (and currently only) digital ad rep.

Indeed, Columbia is the kind of city that has traditionally been somewhat kinder to print. The median household income of about $38,000 is roughly $6,000 under the state average and the poverty rate (21%) is four points higher. Fifteen percent of the residents have earned a bachelor’s or graduate degree, which is eight points lower than the state average.

The Naples Daily News and Columbia Daily Herald both serve communities that are relatively friendly to the print product, although they are very different demographically. But when hard times hit, it was the Daily Herald that focused on a more aggressive digital strategy, even in a place where that might have been a harder sell.

The Herald Dives into Digital

Until a few years ago, the Herald business story was a happy one. “We were rocking along, we were doing our thing,” says Palmer. “We didn’t have any really bad years, so we were weren’t feeling the pressures a lot of papers were.”

But in 2009, Columbia and its newspaper were hit with a double whammy. The national recession drove the local unemployment rate up to the mid-teens and a key area business, the local General Motors plant, closed in 2009. (It was recently re-opened.) Those events had major ripple effects on smaller businesses.

“The moms and pops were closing by the dozens,” says Palmer, who counts about two dozen shuttered businesses since 2009. In the last four years, he says, only one new major retail business has opened in Columbia-a sporting goods store. The loss of advertisers left Palmer feeling like “I was losing control. I was in favor of just about anything I could do…We had to pick [the advertising] up somewhere else.”

In the last few years, that somewhere has largely been in the digital realm. Before he became a digital sales rep, Thomas Browne was the paper’s marketing director. One of his responsibilities was to research ideas that were working at other media companies and then brief department heads. After a while, this regularly became what Browne calls a digital “dog and pony show.”

One major digital initiative introduced in February 2012 was the plunge into paid digital content.  The mandate for that move came from parent company Stephens, which Palmer credits for conceiving and supporting a number of revenue initiatives. But Daily Herald executives admit to feeling trepidation about charging for online content and concern about the potential impact on web traffic.

“I was scared to death,” recalls Duncan. “And Mr. Palmer said, ‘like it or not, we’re doing it.’”

The paper’s metered digital subscription plan allows visitors 15 free page views per month. A digital subscription costs the same as the print subscription-$9.75 a month-and print subscribers can add it for $1 extra.

As of now, the initiative-which has signed up a few hundred subscribers-is very much a work in progress. Palmer plans to reduce the number of free page views allowed under the program, first from 15 to 10 and then down to five “and pray to God we don’t lose any ad revenue out of it.” In the past few years, the accelerating pace of digital transition at the Herald has also included:

  • A digital SWAT program highlighted by a two-week sales push every January, traditionally the paper’s slowest month for advertising. In those blitz weeks, each account representative is responsible for taking digital ad rep Browne to five or six meetings with advertisers in a half day.
  • The digital agency program that began late in 2012 and helps merchants build and maintain websites and teaches them to use social media for marketing and branding purposes. Columbia sells the service and keeps the revenue, but corporate headquarters services the program-which is just getting off the ground.
  • Tiq IQ, an online ticket sales program that allows customers to purchase tickets to shows, concerts and sporting events across the country, with the Herald taking a commission on each transaction. That program began late in 2012.
  • The proliferation of reader contests on the website. The contests have thus far proven to be the biggest online revenue producer, according to Palmer. These have included contests for picking pro football games, a contest to the pick the first snow day, A Mother’s Day photo contest and a contest picking the winners of college basketball games, among others.
  • A Platinum Plus program that allows merchants to advertise in a package of five platforms-three in print and two in digital, including on the paper’s website and in an email blast. That initiative was implemented in the summer of 2012.
  • A new digital coupon program, that began in the second half of 2012 and was designed initially to replace the paper’s “Cool Deals” daily deal initiative. Because Cool Deals has had more staying power than anticipated, both products are now being sold.
  • A drive to accumulate email addresses, now numbering more than 8,000, spearheaded by the paper’s circulation manager. The Herald editorial staff delivers breaking news by email blasts as well as a daily morning briefing of top headlines found in the paper and on the web. In addition, the ad department uses about 800 email addresses to communicate with advertisers on a monthly basis.

But while pushing ahead on digital initiatives, the scramble for new revenue in Columbia also includes some major print-oriented efforts.

In December, the Herald rolled out the debut edition of The Man Magazine, a male lifestyle magazine that is distributed in two wealthier communities outside of Columbia, Franklin and Brentwood, and is produced through the staff of its weekly publication The Spring Hill Advertiser News. The content includes locally flavored stories about everything from best fishing spots to an interview with the athletic director at Middle Tennessee State University. Palmer is also the publisher of the Spring Hill weekly paper as well as the three monthly products.

One item on the to-do list is a long-awaited glossy real estate magazine, to be produced by the Herald’s editorial staff, that is aimed at recapturing some of the vanishing real estate advertising market and will include an online and print newspaper ad component. (The paper also launched what Palmer calls a “very profitable” Living Healthy magazine in 2009.)

After some fits, starts and delays, the real estate magazine is now slated to debut in March. “The big next push will be the real estate magazine,” Palmer insists.

Signs of Success in Columbia

Palmer, who is not quick to jump to conclusions about the success of a new initiative, particularly in digital, thinks the jury is out on the new paid content venture.

“We’re not convinced today that it’s working,” the publisher says.  Thus far, the Herald has generated about 400 new digital subscriptions at $9.75 a month and converted about another 100 print subscribers to the plan, for $1 extra a month.

In an attempt to generate more digital readers and eliminate some costs, the paper has undertaken an effort to switch roughly 500 customers who currently receive the paper by mail-the most expensive customer to serve-to digital subscriptions.

Success there could get the paper well down the road toward the 1,000 digital subscribers the publisher thinks it will take to be successful. And Duncan talks about one other less empirical sign of success. Initial complaints from readers about the conversion to paid digital content died down dramatically after two weeks.

Much of the concern in Columbia about charging for digital content revolved around the potential loss of traffic to the website, but Herald executives say that after a significant initial dip, traffic has rebounded, at least in some areas. A comparison of the monthly averages in 2012 compared with 2011 finds that while page views were down from 542,459 to 377,000, unique visitors rose from 49,783 to 65,299. The paper’s executives say the diminishing number of page views reflect the desire of those visitors not to bump up against the paywall.

One initiative that has proven to be an unambiguous revenue success is the growth of the paper’s online contests, which he says have generated $124,000 from November 2011 to November 2012. These contests are sponsored by local merchants, who get an online and print advertisement as part of that sponsorship package. “I am amazed at the amount of money we can generate through contests and how much the community likes the contests,” says Palmer.

The so-called Digital Swat sales push has grown rapidly, the publisher says, more than doubling revenues from 2010 (about $40,000) to 2012 (about $85,000).

The Platinum Plus program, which was launched in summer 2012 and gives advertisers a platform on email and the website, has accounted for $45,000 in revenue.

Tiq IQ, the new online ticket effort, is expected to bring in about $1,000 a month.

The new digital coupons program, which started in 2012, is what Palmer calls a “mediocre success” so far.

The push for business innovation at the Herald has really accelerated in the past five years, according to Duncan, starting first on the print side but then migrating online.

“It was in 2008 that we started having a first discussion about not only protecting some of our print [revenue], but understanding that the traditional advertiser of running three ads a week is disappearing,” he recalls.

That led to the rollout that year of The Value Guide, a total market circulation product with some news content that is basically a wrapper for the paper’s insert advertising. In calendar year 2012, Palmer says, the Guide brought in about $175,000 in revenue.

“Every year thereafter we’ve kind of invented a new product or a new thing, to try and just hold on to whatever we can,” Duncan adds. “Those first two years, ’08 and ’09 were non-digital, they were just other print products … Since then, in 2010, we started a big internet push.”

The Challenges to Innovation at the Daily Herald

It is a point of pride for Palmer to say he had gone 42 years without a layoff, but there has been some attrition at a newspaper that has 60 full time employees across all departments.  The publisher candidly acknowledges that the pace of innovation seems to sometimes outstrip the level of resources.

“We really were way over-stretched the first three or four months” of 2012, he says. “We were trying to struggle just getting enough people trained to sell” the new products.

And even with the innovations that were rolled out, other new revenue streams that the publisher wants have been delayed or moved back to the drawing board.

One of those is a database marketing program in which the Herald runs customer demographics for its advertisers, creates a deeper client profile base and reaches out to potential new shoppers with a direct marketing campaign. Past efforts to start one have been fruitless. “We’ve tried it four times, trying to get ourselves a winner,” says Palmer. Attempt No. five is currently in beta testing.

Two other delayed initiatives are a source of aggravation for the publisher.  The long-awaited real estate magazine project was hampered by repeated foot dragging on the part of a vendor. The efforts to improve the quality of video production so that it can become a revenue generator have also been complicated by problems in the allocation of precious resources at a small paper.

“I keep rewriting the business plan…but I can’t figure out what to charge for it and I can’t figure out how we’re going to get it accomplished,” the publisher says. “Is it going to be a newsroom function? Do I have to hire somebody?  Do I put my money in digital sales or do I put my money in someone carrying a camera around that only does three videos a month? I can’t afford that, so it’s got to be someone that’s a combination.  Well, where do you find a videographer that can also sell?”

One department that has lost bodies to attrition is the 13-person newsroom, which also took a blow when a Florida paper poached three of its best reporters in recent years. Improving the editorial product is a major goal for Palmer, and the Herald recently hired a reporter with investigative experience who had worked at the Detroit News, an infinitely bigger market.

“We’re going to be doing a lot of stories that are in-depth stories that we’re not performing right now,” says editor Chris Fletcher.

Fletcher, who came to Columbia from a far bigger market-he was in the AP bureau in Houston-has become, somewhat by default, the paper’s social media expert. Every editorial employee is now posting on social media; one sports staffer has about 700 Twitter followers and the paper has over 5,000 Facebook followers. Still, Fletcher thinks the jury is out at a paper where every innovation is closely evaluated for its impact on revenue.

“I think there is real value” in social media, he says. “It’s clear that you can use this stuff to create an audience and build an audience, and you can even funnel some of them toward paid products…But  it isn’t clear that we are yet seeing an acceptable return on investment for the time spent.”

Lessons from Columbia

Sitting in his modest office in Columbia, Palmer talks of the constant pursuit of the “winner,” a revenue stream that hits the jackpot. It keeps him up at night.

“You talk about things that I lose sleep over, it’s things like [the lost $300,000 in advertising] that I lose sleep over. That and trying to generate more revenue streams which are sustainable.”

While insomnia may not be a good lesson to take away from Columbia, the paper’s drive and energy might be.

  • Foster a nimble culture of experimentation, even with modest resources. Daily Herald executives use different words to describe their new revenue initiatives-they often refer to them as “products” or even as “gimmicks.” But even when resources are stretched, they see the ability to continually produce new projects as integral to the organizational DNA and central to the paper’s ability to survive at a time of harsh economic conditions.
  • Involve more people in generating revenue ideas. In an era when there is increasing cross-departmental communication, the Herald relies on its newsroom to generate revenue ideas-whether it be ideas for contests or the special print pullout section on the 2012 election that earned the paper a quick $8,000. “I do think a lot more about revenue for the paper than I ever did before, especially since the recession,” acknowledges the paper’s editor Chris Fletcher.
  • Implement a paid digital subscription plan even in a community where online aptitude may not be that high. A verdict on the ultimate success of the paid digital experiment at the Daily Herald is still a way off, but given the need to generate additional revenue streams, it has to be part of the growing digital tool kit there. Browne, the paper’s digital sales staffer puts things bluntly when he calls the idea “a necessary evil.”
  • Keep developing niche editorial products. In recent years, the Daily Herald team has rolled out a successful monthly health magazine and a new men’s lifestyle magazine and plans to introduce a real estate product early in 2013-keeping many of the costs in-house. It seems an ambitious enterprise for such a small operation, but Palmer says the health magazine has been “very profitable” and that initial results from the new men’s publication are positive.
  • Building editorial quality. Building up the skills in the newsroom is now a priority at the Daily Herald, and the publisher clearly thinks there is room for improvement: “We cannot lose the news franchise, so therefore, we have to keep the editorial department stronger than it is now to be able to own the franchise for as long as we want to own it.” The newly hired investigative reporter could have a significant impact. And with the paper discontinuing its use of AP content, Palmer says the staff will be producing 25% to 30% more local content than before.

One quality at the Columbia Daily Herald may be hard to quantify, but it is central to the culture and mission of the newspaper. It is the idea that no financial setback, no revenue loss, is either acceptable or manageable.

“If we’re a dollar off, we’re upset and we’re going to try to solve the problem,” Palmer insists. “And you know, if we don’t get that dollar back, then it becomes unmanageable.”

Cite this publication: Mark Jurkowitz and Amy Mitchell. “Newspapers Turning Ideas into Dollars.” Pew Research Center, Washington, D.C. (February 11, 2013) http://www.journalism.org/2013/02/11/newspapers-turning-ideas-dollars/, accessed on July 22, 2014.