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Saving newspapers: Decapitalize printing

19 Feb 2009
Posted by Jay Small

The marching pace of sucky economic news for American newspapers and their holding companies quickened again yesterday.

Papers' suffering began before the current economic crisis. We already occupied the front seats as the roller coaster started down this twisty slope. Sweeping global deleveraging makes quite the thrill ride, like an out-of-body experience during your own massive heart attack.

Ignore for a moment the unique characteristics of newspapers in today's competitive media/information landscape. Think only of what any high-fixed-cost, capital-intensive business would do -- should do -- in a deleveraging economy:

  • Cut fixed costs.
  • Don't buy depreciating assets you could rent, lease or otherwise pay-as-you-go. (Not to be crass, but this includes human expertise.)
  • Reduce capital as you deleverage. Sell big iron to help pay down debt.

I am no economist, but I know that much.

Strategies laid out by industry leaders to survive the current economy seem Darwinist: Adapt or die. Most publishers and holding company executives I know believe this, and want to adapt. Trouble is, Darwinism depends on chance and time. Newspaper survival strategies all attempt to rush the process well ahead of natural selection, and predict how to adapt.

(Climbing to higher altitude ... With respect to all personal beliefs, please suspend them hypothetically for a moment to imagine we all evolved from some single-cell organism simmered from primordial soup. That organism had no awareness of the many, diversified adaptations its kind would take between then and now. We humans -- highest on today's food chain -- may be smarter, more self-aware, than that cell. Yet even the most evolved species on this planet has almost no more ability to forecast which adaptations, or mutations, will survive and which will fail. For that matter, if you fall more in the intelligent design camp, you still realize we know almost nothing about our future that would help us adapt meaningfully for it. OK, back to conversational cruising altitude ...)

Newspaper holding companies already went through rounds of fixed cost cuts the past two years -- not so much adaptation as bunkering. Some local newspapers already cut the operating processes required to print and distribute newspapers to the point where those operations could fail more often, more completely. In fatter days, newspapers refined these processes to unprecedented levels of reliability and quality control, but now those levels are too expensive.

It costs plenty to own and operate a high-speed newspaper press. You can cut only so much and still operate one successfully. That leads strategists to the first big forecasting question:

Will local news and information, delivered in a printed form, inevitably die?

If you guess yes, then strategic planning must focus on pace and timing of decline, and how to decapitalize print operations to zero at a pace that coincides with the overall print death spiral. (Note this conversation so far does not include Internet/online/interactive mutations, only the fate of printed local news and information. Online evolution frankly just clouds the crystal ball for print.)

If you guess no, or truly believe no, then strategic planning must focus on the second big forecasting question:

Will local news and information, delivered in a printed form, survive without fundamental changes?

If you guess yes on this one, I commend you for your optimism and wish you well, but expect you to be shown wrong soon. As such, the rest of us can jump to the third big forecasting question:

How must printed local news and information adapt, or mutate, to survive?

Though I just burned through a lot of bytes explaining why we can't be sure of answers to this question, I'll offer some ideas anyway:

Digitize printing: At some point, many American newspapers will, or should, cross a line where it would be more practical and cost-efficient to sell off high-speed newspaper presses and replace them with digital print-on-demand units spread in distribution centers across their local markets. Fortunately, newspapers with different business models in emerging international economies still want presses, so good used printing equipment fetches more than salvage rates.

It still costs more per copy, above a fairly low press run threshold, to roll out periodicals on digital printers than high-speed offset printing presses. Those lines, however, cross at a higher press run threshold every year. As it stands, the digital process generates far less waste, offers far more configuration options (paper size, folding/binding, color) and allows more granular tailoring of the output right down to different contents in each copy.

Watch Dan Pacheco's Printcasting developments closely. My read: This project attempts to cut cost, waste and inflexibility out of producing printed periodicals, while adding customization and speed to market for publishers of most any scale. I don't know if it will work -- Pacheco doesn't either, I'd guess. But it represents a creative, logical and valiant effort, with realistic chances of success.

Any such conversion becomes expensive for an incumbent local newspaper that owns "big iron" presses. In that case, you can't just stop what you're doing and sell the big presses, then use the money for the digital printers. Holding company CFOs probably would line up to remind me many companies cannot service current debt, let alone float more for the transition. Junk bonds, anyone?

I imagine, therefore, that Pacheco's experiments and others like them may favor new entrants to local economies for printed news and information. Incumbent holding companies might be able to free up funds for capital investment by consolidating printing if they are fortunate enough to have local newspapers clustered geographically in ways that would support regional printing centers. One press rolling off 10 newspapers in a 100-mile radius saves money vs. 10 presses, or even five, printing the same titles. That short-term efficiency might release funds to invest in digital printing that could, eventually, replace even the remaining central press.

Of course, that approach presumes you have to buy the digital equipment outright. You don't. Through direct leasing or partnerships with digital print shops (e.g., FedEx Office, nee Kinko's, and its kind) you could try before you buy, or skip the buy step altogether until and unless it makes financial sense to own depreciable capital.

Customization: Digital printing allows much more granular customization of the printed products. "The Daily Me" becomes more tangible in print vs. just pointing locals to a me-too version of My Yahoo on the Web.

(Reminder: One time only, we're stipulating that the future for print newspapers is not inextricably tied to interactive services, and focusing only on ways print might survive. If you think everything's going online no matter what, this whole line of reasoning probably means nothing to you, and that's OK. Thanks for stopping by, and please avail yourself of the 99 out of 100 posts here that focus on interactive media instead of print.)

I recommended print product customization years ago to cater to niche interests, but in broad strokes that seem crude by comparison to what we could do now. I did not presume at that point that we would decapitalize printing and shift to more nimble digital equipment. But at that time, though we all feared it, no one really forecast the steep slope of today's decline in business fundamentals.

Frequency: Moving printing from a central facility to distributed digital presses means shorter transportation distances -- in some cases, no transportation at all. Eventually digital printing could achieve a price point where it makes sense to replace dumb boxes at single copy points of sale with on-demand printers. People buying a paper at the nearest convenience store would always get an up-to-the-minute edition that way.

In that world, online represents instant plus archival information on demand; single copy represents the freshest news "snapshots" with print portability, fidelity and disposability; and home delivered print still represents the old tradeoff of doorstep convenience vs. information time lag. Even for old-school home delivery, you shorten the time lag by moving good-quality printing out closer to the customers. But I guess home delivery might not survive -- might not need to -- even if the rest of this digital printing franchise succeeds.

I wrote most of this post last night, then decided to sleep on it before posting. I'm glad I waited.

Newspaper industry executives soon will convene at MediaXChange, the newly coined uberconference and trade show put on by the Newspaper Association of America. I'm going, so I started receiving direct mail solicitations from vendors coming to this show a week or so ago. This morning, I received a vendor postcard that was obviously digitally printed, and customized with a headline and marketing copy that included my name several times.

Though the vendor's products run a bit out of scope for my "day job," the custom digital printing made me take notice. Print still has power when the beholder finds it relevant.

I would humbly suggest that executives in attendance at MediaXChange walk the floor hunting for ways to use this same approach for our own venerable direct-distribution products: printed newspapers. The adaptations I noodled through here may not be enough, or even in the correct direction, to save print. But print won't last anyway as long as we're chained to those expensive, depreciating, big-iron presses.

The theory behind Printcasting

Great post, Jay. And thanks for the shout-out to Printcasting.

I indeed do not claim to know 100% that the Printcasting experiment as currently defined will work the way we except, but thanks to the Knight Foundation (which funds the project via the Knight News Challenge), we will have 15 months after launching to tweak things based on local community response. We will learn a lot during that time, make changes where we need to and end up with something that is more than just a theory, and hopefully a big success. For the record, I do believe it will be a big success -- I just can't point to anything that proves it will be. That's the nature of innovation. It all comes down to making intelligent bets and staying flexible.

Our objective is not so much to "save print" as it is to find new, sustainable ways to meet the news and information needs of local communities -- beginning in Bakersfield, but ultimately serving many different local communities.

Our idea for Printcasting came out of our experience in Bakersfield of creating multiple niche-focused social networking sites. We noticed that the brands that had a lot of user-generated content AND printed magazines that locally distributed that content attracted more ad revenue than the sites that had less user-generated content and no print component.

As the business model supporting the general-interest printed product (the daily newspaper) began to crumble, but the business for niche digital-print hybrid products remained steady or increased, we asked ourselves, "what would need to happen in order for this new niche model to replace what we're losing in the general-interest space?" The answer was that we needed not just a handful of niche sites and magazines, but hundreds or thousands, all in a network that was supported by affordable self-serve advertising. We then submitted that idea to the Knight News Challenge, got funding and got to work.

We plan to launch in March and should be in open beta soon, so stay tuned! -Dan

The online-print hybrid model

Sorry for multiple comments, but I also wanted to point out that we're not assuming that all delivery of Printcast publications needs to be via physical printing and delivery. And since the focus of our product is democratized publishing, where anyone can be a magazine publisher, we also don't want that. As with blogs and any type of user-generated content, there will be a wide range of quality and we will only invest in printing those that merit printing.

Another theory we will be testing out is what I think of as the "American Idol" approach to print publishing. After a few months of outreach we anticipate having a hundred or more Printcasts out there. Most will be subscribed to online so that readers who want to be informed receive an update in e-mail about new editions. They can read the content online -- in HTML form as well as a "pageflip" view of the PDF -- or download and print the magazine on their home printers.

We will track the traffic and downloads, as well as reader ratings, and use it to identify high-quality citizen publications that we think could attract even more advertising revenue if they were printed in larger quantities and locally distributed.

Here's just one example of how this may play out. Numerous people at the Californian over the years have suggested creating a local wine publication, but creating that ourselves would be risky. It would take a lot of up-front investment in design, planning, sales outreach, content creation, etc. and it may take many years for such a publication to break even, and it could fail.

With Printcasting, we'd reduce our risk and increase audience engagement by partnering with the community. We know there are people in town who know far more about wine than we do, and some are already blogging about it. Others -- such as local wine shops -- could write wine columns in their sleep, but they may not be doing it yet because they don't have an audience. We'd reach out to all of these people and get them to register their content (or post it on Printcasting.com), then in 5 minutes make a self-updating wine Printcast that features their content. Others may come along and create their own Printcasts about wine, or use the wine reviews in Printcasts with a slightly different focus. We may print a few thousand copies of our wine Printcast, or possibly even a citizen-produced version, and place additional pages of ads in it.

Meanwhile, the vast majority of other Printcasts may have a good online following of people who print copies, and they will be supported by self-serve ad revenue alone. They will each make a little money and reach a handful of people, and that will work just great for their publishers and readers. Some topics may be so niche that we would never, ever want to invest in printing them ourselves. But no matter -- the community is full of people with home printers that they can use if they want to. I should also point out that the Printcasting network will take a small portion (around 10%) of ad revenue from all Printcasts to support this activity, so it will be in our interest to foster wide adoption.

The revenue from the self-serve ads as well as the additional ads we sell would be shared with those bloggers. Why do that? We want them to continue contributing high-quality content, and letting them share in the rewards is one way to motivate them. But it will also cost far less to share a portion of ad revenue than it would to hire a writer or two or three to write about those topics -- let alone a publication designer, dedicated salesperson, etc.

Thanks for clarification

That's great clarification and enrichment for this discussion, Dan. Much appreciated!

Part of "suspending disbelief" in my post was setting aside the obvious opportunities for "symbiotic" relationships between print and digital. Clearly those opportunities must be recognized, and in many cases the sum will be greater than the parts.

Thanks for stopping by!

Is daily print even sustainable?

Great post Jay... just one thing though: I can't see daily print manufacturing - digital, offset , or pen and ink - as a process that is financially sustainable. At that frequency information distribution is about currency, real time reportage of facts on the ground. On that score print will always be one step behind digital media. By the time the paper hits the corner the news is already stale - any value the information had when the paper closed was gone by the time ink started going down on paper. It's hard for me to see a situation in which the market value of that stale information is anywhere close to the cost of manufacturing it.

It's not until you pull back to a frequency that lets you reflect on events, to contextualize them, analyze them, discern meaning from them, that print starts to make sense. This more measured, contemplated, analytical type of information inherently carries with it more value - enough to perhaps compensate for the cost of manufacturing.

It's debatable at what frequency print starts to make sense. My gut tells me that monthly would be the safest, yet I could still envision a weekly paper - a Sunday paper - as a profitable venture.

Regardless, I completely agree with your take on the switch to geographically diverse digital presses and away from the big iron. It will be fun and interesting to watch Printcasting develop (along with similar efforts at The Printed Blog - and even Magcloud).

That's the up-to-the-minute issue


Great thoughts. "Daily" is both too frequent and not frequent enough a printing cycle for a news periodical:

Too frequent, in that the longtime revenue model really supports only a few days a week.

Not frequent enough, in that the content is stale by the time it reaches readers.

Digital printing might work in a kiosk/on-demand mode where that single copy purchased at the convenience store is printed with up-to-the-minute content on the spot. That escapes the "stale" trap, in theory.

But even as I discussed that in the post, I wondered whether the investment required to enable the model could possibly pay back before we reach a time where we're all carrying around high-resolution, medium-format smartphones. Those, I think, could trump some of the remaining value propositions of paper overall: portability, readability, convenience.

Thanks for your comments!