Newspapers : learning a new paradigm

The Internet disruption has transformed the paradigm that rules the newspaper business. Newspapers have to find new value for their readers. They have to reinvent the pricing model. They have to learn again the basics of their business. But how do you do this while keeping on running your day to day operations ? The IHT (International Herald Tribune) gives us a simple answer. First, they set a separate Internet team to experiment the new media. Later, when online news were more mature, they started integrating the Internet team and the Paper team to create a multi-channel team.

Online news has grown to become a major information media. The Internet revolution started in 1995 when the emergence of web sites created the possibility to publish news online. In 2006, everybody admits the hard facts : there are at least as many readers on the web as there are for printed newspapers. As many as 2.5 Million users visited the IHT Online Edition in the month of January 2006. On the other hand, overall newspaper circulation (the number of printed newspaper copies issued) is flat or decreasing.

Unfortunately, the financial picture of the Internet revolution is not that bright. Readers’ enthusiasm for online news does not show in revenues. Since the early days, the disruption raised a fundamental question : if news are published for free on the web, will the Web cannibalize the printed press ? Will it destroy the industry’s profits ? Advertisement, the main source of newspaper revenues, generates much less from online than from paper. However, according to TNS Media Intelligence, the French Internet advertisement market, although small in size, grew 74 % in 2005. Could it get big enough and and compensate the decrease of paper advertisement revenues? Nobody can tell.

In order to learn how to deal with the new paradigm, IHT (International Herald Tribune) initially created a separate Internet team. They were not alone: the New York Times created a separate subsidiary named New York Times Digital to run the Internet activity. IHT’s traditional core business was keeping employees focused on paper. At the same time, the IHT’s Internet team was free to experiment the new possibilities of the web. They re-designed parts of the site frequently, for a nicer look and a better user experience. They moved from a once-a-day-update to 24-hours breaking news publishing. They launched blogs around events such as Davos. They learned the new processes required by a publication on multiple media. For instance, if an article is published on paper and web, any correction to the text has to be reflected on both media. They continue to test and learn. In spring 2005, they have launched a new mobile service that makes news content available on smart phones. 9 months later, this service already enjoys 350 000 page views per month. 

Thanks to the freedom it was given, the Internet team did not have to worry about online cannibalizing paper. It could take a completely new approach to rethink its pricing model. Paper can be bought by the copy in a kiosk or by subscription. This model does not fit the web. Meredith Artley, director of IHT.com, says : “Readers can easily find so much news and information on the Web for free. Certain aspects of the site are incredibly unique, such as opinion pieces. That was part of the thinking behind creating TimeSelect, a fee-based service that gives readers access to popular columnists, multimedia content and archives”.   

Today, with the growing flow of online readers, newspapers have no other choice than getting a strong online presence. As Meredith Artley says: “The internal debate about cannibalization is now gone. Web readership being so big, everybody knows that if we do not have a presence over the web, a competitor will take our place.” Mentalities have changed. Journalists view an online experience as a plus on their resume. The web has become a central part of the newspaper business.

IHT is now organizing the integration of paper and Internet teams. Upper management has clearly set the direction : IHT is moving from a paper business to a multi-channel business. It is the future of the company and everybody in the organization has to understand it. The core business is set to produce news for both paper and web. Individuals from the Internet team are working closely with the print side of the business, and vice-versa. They make their expertise available to their colleagues to migrate smoothly to the new paradigm.

This is a good lesson on how to take a new direction in a market disruption. In the beginning, the effect and benefits of the market disruption are not clear. As a first step, it is best to create a separate “disruptive” team to learn and experiment the new possibilities made available by the disruption. The core business is kept on running the existing business in the traditional market. When things have matured and the market direction is clear, the second step consists in integrating the disruptive team and the core team to embrace the new paradigm.

Comments

[Bernard Slede]

Very good article! Here is an additional take on this theme. “News-papers” are not in the business of "paper" any longer but they are still in the business of "news". Paper was the physical manifestation of the news until the end of the XXth century. In order for newspapers to survive in the internet age, they need to redefine their business accordingly, in the same way International Business Machines no longer makes any typewriters. By separating their core competency from the material product, and focusing on the former, newspapers retain substantial relevance in the internet world as a trusted source. And they can rely on outsourcing or syndication such as that enabled by www.verican.com to let go of non-core tasks. Non-core tasks are a good way for newspapers to lag technologically, lose further readership, and sink enormous costs into website maintenance.

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