Article

How to manage legacy newspaper’s transformation and adapt to digital disruption

by Clark Gilbert, Paul Edwards, Chris Lee, Mike Petroff 17 January 2012

The leadership team at the Deseret News has found that newspaper transformation requires repositioning the core even while launching a new disruptive business around digital growth. The end result? Increased print circulation, Web site traffic, and digital revenue in old and new channels.

When we began the transformation process at the Deseret News, we knew we needed a new organisation to harness the power and potential of the Internet. What we didn’t realise was that we would need to reposition the core print business in a way that would allow it to grow as well.

In an attempt to share what we are learning in a way that would be helpful to others in the industry, we have focused here on two separate transformation processes:

Transforming the legacy print business.
Launching a new business built around the digital disruption.

While we still have a great deal to learn, we are pleased with the progress we have made thus far. That progress has led to:

Significant cost reductions in print.
The expansion of a national publication that has grown our Sunday print circulation by more than 40%.
And the launch of Deseret Digital Media, which has seen digital revenues grow by more than 50% two years in a row.

Transforming the legacy print business

Restructuring the cost structure of the print business

In transforming the legacy core business, media organisations must restructure the print cost structure as well as reposition the print product for a sustainable post-disruption world. Our efforts to reduce costs began with understanding our cost structure. We conducted detailed analysis that provided us with a cost-per-story target. We also looked for ways to partner with other media entities to lower the overall costs of news production.

At the Deseret News, we have partnered with our sister companies that produce television and radio news, creating an integrated newsroom. This has allowed us to reduce duplication in reporting efforts (covering an event with one reporter rather than three) while increasing the number of events we can cover. We also began tracking story productivity and Web traffic per story that added rigor and measurement to our news production process. The resulting impact was an overall reduction in cost per story of more than 40% for our traditional newsgathering efforts.

We also began to use new media models to help source story content from remote contributors. Deseret Connect was launched based on insights from emerging new media models, including Demand Media, Patch.com, Huffington Post, and Examiner.com. But Deseret Connect was also built in a way that allows us to screen, qualify, and edit external contributors who have a unique fit with our voice and mission. We are still learning how to most effectively use our remote contributors, but we have found great initial success, particularly in features and sports content areas. Today we have more than 4,000 Deseret Connect contributors who have produced more than 10,000 stories for both the print and Web versions of the newspaper. Our costs for Deseret Connect stories are one-tenth our traditional newsroom costs.

Focusing on areas of differentiation

Combining newsrooms and sourcing stories from remote contributors has required a great deal of innovation. But transformation requires more than just cost reductions. Truly transforming the legacy print business also requires that newspaper leadership identify and understand where they can differentiate their product in the market.

The Deseret News is one of the properties of the Deseret Media Companies whose mission is to be “trusted voices of light and knowledge, reaching hundreds of millions of people worldwide.” This unique mission allows us to ask how we might differentiate what we do in comparison to other traditional news organisations.

Lisa Williams, the founder of Placeblogger, has described the challenge for traditional newspapers thusly: “The Web favours things that are ‘narrowly comprehensive;’ that is, everything about something. Newspapers, by contrast, are variety shows: something about everything.” In the world of the Web, if you aren’t the best, you are a click away from something better. With this challenge in mind, the Deseret News editorial team chose to focus on six areas of editorial emphasis:

The family.
Faith in the community.
Care for the poor.
Education.
Financial responsibility.
Values in the media.

We also carefully focused our target market on people who view faith and family as critical. And while many other news organisations view this as a niche segment, our own research shows that this audience accounts for more than 60% of the American public. In other words, the faith gap in most American newsrooms has created a large and under-served market segment. Thus, even as we reduced costs in traditional newsgathering, we actually chose to invest in reporting on those issues that are both highly relevant to our audience and often overlooked by other news media.

We created a dedicated enterprise team with beat assignments in each of the six areas. For example, on family, we have reported on the fact that more than one-third of American children grow up in a home without a father; we examined the social cost of divorce and broken homes; and we looked at reasons why, for the first time in U.S. history, more than half of all adults are not married. These stories are done rigorously, with deep analysis by award-winning enterprise journalists at the Deseret News. They also reflect the type of coverage many mainstream media outlets ignore, despite their overwhelming significance to American life.

The growth and impact of these stories has allowed the Deseret News to launch a national Sunday edition of the newspaper that focuses on the Deseret News’ editorial emphasis. In less than one year, this has enabled the newspaper to grow Sunday print circulation by more than 40% at a time when most U.S. newspapers are showing negative circulation growth.

Launching a disruptive growth business

It’s like arguing against gravity

More than 10 years of research at the Harvard Business School looking at disruptive ventures in the media industry shows one clear trend: newspapers that kept their digital business fully integrated into the legacy print business significantly under-perform the industry average. Every newspaper with more than 15% digital market share has a separate digital division. While there are many newspaper organisations that think they can counter this trend, we often respond, “Go ahead and try to manage digital from inside your print organisation, but it is like arguing against gravity — it just doesn’t appear to work.”

The first decision we made when we were asked to help transform the Deseret News was to set up a separate digital organisation called Deseret Digital Media. The new organisation would have separate financial statements, digital sales teams, and a leadership group that came with new media background. For example, Deseret Digital talent comes from digital organisations including Omniture, Overstock.com, Yahoo, Demand Media, MyFamily.com, and many other new media organisations. In other words, they are not legacy newspaper people.

Content model innovation

The digital team has worked hard to manage the deseretnews.com Web site as something more than a newspaper online. Its members have built content strategies around multiple Web-only products. For example, they built the Deseret News Family Media Guide, which leverages other user reviews to answer two simple questions around movies: 1) is this movie appropriate for my family, and 2) is it worth my time? This has led to increases in traffic versus traditional critic reviews and provides additional product differentiation to faith- and family-oriented audiences, all at costs much lower than traditional in-house media critics.

Similarly, the team has invested heavily in search and social media strategies. Today, nearly two-thirds of all inbound traffic for the deseretnews.com comes from other referring Web sites, including search. This has been particularly impactful on stories around the six areas of editorial emphasis. The unique stories around the family or faith in the community are driving national traffic beyond our traditional base. Today, as much as 60% of the unique users for the Deseret News Web site come from outside of its home state of Utah.

Business model innovation

Reach is an important driver of our overall mission. However, without business model innovation, newspapers will continue to fall behind. Part of our growth in our business has actually come from the effective development of legacy sales reps. Many industry observers have mistakenly taken our commitment to the new digital team as evidence that we are ignoring the legacy sales team. Ironically, over the past two years we have been able to more than double the digital revenue produced by our legacy sales channel. This has come in large part by providing digital specialists from Deseret Digital Media to support the legacy sales reps with collateral, training, and even joint selling efforts. We are even launching a digital sales certification programme for all sales leaders.

Nevertheless, and despite the rapid growth in revenue from the legacy channel, most of our revenue growth has come from new digital-only sales channels. We now view our overall sales strategy as having four core channels:

Legacy sales reps supported by digital specialists.
Digital-only sales reps.
Telesales targeted at small- and medium-sized advertisers.
E-commerce customers.

The last three channels now account for more than 55% of our revenue, and none of these channels existed three years ago. In other words, despite doubling revenue from the legacy channel, our total revenue now comes predominantly from new sources that are housed entirely in Deseret Digital Media. The net impact of this growth is the Deseret Digital Media has seen digital revenues grow by more than 50% two years in a row.

More importantly, much of this new revenue growth is accretive — in other words, it doesn’t actually cannibalise the legacy revenue but grows the overall media opportunity for the company. For example, the digital-only sales leaders sell product to many advertisers that have traditionally not advertised in our legacy businesses. These are not newspaper advertisers but digital buyers who track metrics and digital data a newspaper organisation has typically been unable to provide.

Similarly, our telesales team targets almost exclusively small and medium advertisers that can’t afford to advertise in traditional media. Many of these contracts transact below US$500 monthly. Yet this has opened up thousands of new advertisers we would never have been able to reach with traditional media.

Finally, our e-commerce channels are increasingly broadening our revenue portfolio beyond traditional advertising. We are rapidly investing in what we call “marketplace” products that tend to have a self-serve transactional element to them. Examples include deals, classifieds, local directory search, and other transaction-oriented products. Borrell and Associates estimates more than half of the top 20 local U.S. digital businesses are commerce/marketplace-oriented rather than content and display advertising oriented. For newspapers to survive, they will increasingly need to have strong investments in revenue streams that are less dependent on display advertising. Our investment in e-commence channels is a big part of that effort.

Conclusion

The media industry will continue to evolve. Even as we see signs of progress, we also recognise that the pace of innovation in the digital world will require constant reinvention. Regardless, we believe the core efforts at reinvention for media executives should remained focused on leading a dual transformation effort:

Lowering costs and repositioning the legacy print business for sustainable expansion.
Rapidly investing digital growth through a separate digital venture.

For the Deseret News, that has come in sharpening our editorial voice and growing our print footprint while launching an entirely new business model through the creation of Deseret Digital Media.

What is Deseret Media?

History: Formerly known as Deseret Management Corporation, Deseret Media Companies (DMC) was organised in 1966 as the for-profit arm for The Church of Jesus Christ of Latter-day Saints. Today, its primary business is in media, including Deseret News Publishing Company, KSL Television & Radio, Deseret Digital Media, and Deseret Book Publishing Company.

Location: DMC is based in Salt Lake City, Utah, USA.

Mission: All DMC companies operate under a unified mission, which is “to be a trusted voice of light and knowledge reaching hundreds of millions of people worldwide.”

Newspaper: The Deseret News began publishing in 1850 and is Utah’s oldest continuously published newspaper. It is a morning publication with a local daily circulation of 70,000 and Sunday circulation of more than 140,000, making it one of the fasted-growing Sunday newspapers in the United States.

Digital reach: Deseretnews.com is also growing rapidly with peak monthly usage of more than three million unique users and average monthly Web traffic of more than 30 million page views.

Author/Contact: Clark Gilbert (cgilbert@deseretdigital.com) is president and CEO of the Deseret News Publishing Company and Deseret Digital Media, Paul Edwards (pedwards@desnews.com) is editor of the Deseret News, Chris Lee (clee@deseretdigital.com) is publisher of the Deseret News and vice president of Deseret Digital Media, and Mike Petroff (mpetroff@deseretdigital.com) is chief operating officer of Deseret Digital Media. All are based in Salt Lake City, Utah, USA.

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