Both regional and local newspapers have enjoyed a viable business model for at least several centuries. Today, digital media technologies combine the convenience of print with the richness of television, but, importantly shatter the very barriers which entrenched newspapers during those centuries. The reason is less about the technology and more about enabling interaction and participation by the community; in short, it is about an exchange. The winners of the changing media landscape will be those who understand the needs of the community and can leverage those needs to create new and exciting business models. Those business models will be less about news and print, and more about being a destination for the community.
Things Are Different
As a middle school student 15 years ago, my friends and I realized that the Internet was the quickest and most efficient way to entertain ourselves due to our control over personalized interaction and entertainment. Our parents did not quite understand the richness of the Internet medium—instant, free, interactive and open—and no one realized, at that point, that the Internet would grow into a tool which could effectively serve the needs of a community.
The Gap
I work in an interesting space. I spend half of my time with early stage digital media companies who have ideas they believe will revolutionize the media world; and I spend the other half of my time discussing with established media companies how acquiring these new ideas may prevent them from becoming the next Bell Labs.
Both new and traditional media companies have many concerns. Digital media technology faces rapid commoditization as well as declining prices and smaller barriers to entry. These companies leverage technology in innovative ways, but also use business models that build upon the social needs of the community they are trying to reach. I believe that as soon as newspapers realize that the technology is not a barrier to entry, they will make the digital media startup world a much more difficult place.
Tomorrow’s successful newspapers recognize the problem is a cultural one, not a technological one. They will also recognize readers of newspapers share their opinions in the offline world and, with today’s technologies, want to share those opinions in an online world as well.
Changing Models
In addition to a community that requires interaction, newspapers must recognize that any individual has the tools to be both a competitor and a contributor. The business model has to change in order to accept a diverse set of inputs. Newspapers sit on a tremendous amount of brand value. That brand has been driven by years of targeted reporting and a community that has used the newspaper as an exclusive provider of information, news and advertisement. Successful newspapers must use their established brands as a platform for all the voices of their community.
Empowering a community to generate content yields a double-edged sword. There are evolving issues of liability and a fear of losing control. Technology, combined with the power of the community, can solve these issues. An empowered community can only happen when a newspaper trusts its community. The more engaged a community becomes, the more a newspaper can learn about the people who compose that community. Imagine the ability to analyze opinions, conduct research, produce free content and, overall, take advantage of the voices outside of the editor’s office. This interactive relationship enables newspapers to benefit from the opinions and personalities of its readership, something that is difficult with the current print model.
Stomaching Risk
Today, many newspapers have strong balance sheets and strong operating margins. They can approach change from secure financial positions. Unfortunately, advertising dollars are not shifting quickly enough to support the decline from print advertising for many newspapers. Now is not the time to move slowly. Digital media competitors grow overnight and the longer newspapers let competition take digital market share, the more catch-up they will have to play. Facebook’s 35 million user base that literally happened in less than 4 years is an example of a new media landscape that took the world by surprise.
Successful newspaper will actively seek out digital media investments to diversify their expertise and revenue models. Companies need to allocate a significant amount of resources and capital to these types of investments (both early and late stage investments). Participating in these types of investments will help companies acquire operating expertise and the technical knowhow. Importantly, newspapers must look outside of their organization to acquire and develop a “digital media” culture. News Corp. did just that with their acquisition of MySpace.
Vision for a Post-Transition Newspaper Company
The newspaper landscape will look very different in a post-shakeup world. Successful newspapers will embrace a cultural change and use technology to benefit from these changes. Newspapers will realize that technology is not the barrier to succeeding in an increasingly digital world; rather, success will be driven by tailoring their brand to the expectations of the target audience.
The revenue model for a digital media newspaper will be very different. The ability to provide advertisers with a flexible platform with which they can target the most relevant consumers will drive success. If a newspaper can become the “go to” online space for a given target audience, they can harvest rich amount of data about that community. Analyzing this data and interacting with the community can lead to many interesting business models, from market research to polling to targeted advertising.
The possibilities are only limited by a newspaper’s ability to think creatively about their community, its needs and how they fit into that picture.
Citizen Destinations
Obviously, the vision for a post-transition newspaper company looks a whole lot different than the newspaper world of today. Some of my colleagues see a move to 100 percent digital content and increasing fragmentation of content. These trends exist and the evidence is everywhere. Importantly, newspapers must also struggle with their identities. Unfortunately, the identity change will be less about news and even less about paper, so we need to accept a change of identity. I propose that newspapers start thinking about their mission as “Citizen Destinations” because this title better reflects the needs newspapers can fill.
As a platform and brand behind the voice of the community, newspapers will expand their reach and presence in a community, while at the same time enabling interaction amongst their audiences. Newspapers will successfully become “Citizen Destinations” by building on established strengths and realizing the benefits of technology.
Kyle Redinger is managing director of DeParis Redinger, a firm he co-founded to bring merger and acquisition banking services to progressive middle market clients. DeParis Redinger is an affiliate of Cribb, Greene, an 84-year-old merger and acquisition advisory firm for publishing companies. Kyle combines an extensive financial analysis background with a passion for progressive industries. Kyle and his partner Francesco DeParis, both 24, were named as top 25 finalists in BusinessWeek’s Best Young Entrepreneurs 2007. He also hosts a blog called The Media Age.
