Wednesday, November 1, 2006

Heading for the Exits: Investors Losing Faith in News Chains

The Wall Street Journal covers in its "Heard on the Street" section the revolt of minority shareholders in the Sun-Times Media Group Inc. seeking a quick sale of its holdings, even as the rival Chicago Tribune and other Tribune properties is sniffing out a potential sale. Add to this the potential sale of seven of The Copley Press Inc.'s holdings and Dow Jones' sell-off of six community papers and it's red all over. In spite of its planned sales Dow Jones received a lower debt rating and negative outlook from Fitch today, underscoring the challenges that traditional news organizations have in convincing financial analysts that they're on anywhere near the right track to regain lost ad revenues.

Is there still a winning formula to be had for traditional metro newspapers? As The New York Post crows about its improving circulation against major competitors the answer may be to consider the low-brow route to survival for print. With broadband access relatively stunted in U.S. markets less affluent Americans are going to be sticking with newsprint for longer than others. The NY Post goes for 25 cents at metro news stands - just enough to convince people to sell them - and manages to provide a fresh mix of local information and gossip that is the commuter's answer to supermarket tabloids. That doesn't bode all that well for ad dollars for upscale products and services, but it provides a niche that can keep it ahead of free street newspapers.

But looking down the road newspapers need to think about how they can make better use of mobile platforms to reach the broadest demographics possible. While not everyone on the lower end of the economic scale is going to have a computer, most everyone does have a mobile device that can receive downloads. Getting news and advertising in context with your local whereabouts is where newspapers started centuries ago; it's a core mission that they need to translate to electronic platforms more effectively. Doing so will give them access to both low-income and high-income audiences far more effectively.

Unfortunately most newspapers are massively under-invested in mobile localization capabilities: it's the Googles of the world at this point that will be the local contextualization kings. News chains need to amp up their mobile capabilities quickly and arm them with social media features. If not, then they may find themselves looking a lot more like Weekly World News than today's robust news outlets.
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