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Expert: New Business Models Needed for Local Papers

Friday, February 16, 2007 at 11:38 AM

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An expert on the newspaper industry says local papers should look for new ways of doing business. Merrill Lynch analyst Lauren Rich Fine tells the Cleveland City Club that newspapers' profits will continue to shrink and circulation is only part of the problem. ideastream's Mark Urycki reports.

In August, the new publisher of the Plain Dealer, Terry Egger, told the City Club that reports of the death of newspapers is premature. He was in the audience yesterday listening to Lauren Rich Fine say yes, but changes need to be made.

Lauren Rich Fine: The PD does have to go more local. It doesn’t mean it has to turn its back on international news. But with the national distribution of the New York Times and other papers and given the economic woes of the industry, you have to pick how you’re going to allocate your resources to best serve your readers. And if your readers really care about that type of news they do have other sources.

Fine may be one of the most well known newspaper analysts in the country but she lives in Cleveland and reads the Plain Dealer. She’s quoted in the ongoing PBS Frontline Series News War as saying even the L.A. Times needs to go more local. To do that she recommends embracing the internet and being interactive.

Lauren Rich Fine: I’d give PDAs to all high school students and parents and let them cover high school sports, because I think it would be a lot of fun. The PD has made a great step in that direction by giving readers a vote on what should be covered any given week. And Lockeroom has been a great contribution in attracting younger people to the paper. Think about a time where everybody could contribute to a website all their comments about what happened at a basketball game. The newspaper can edit it and put it in the paper.

The reason to focus coverage is to save money. But that’s not just because fewer young people are taking up the habit of reading newspapers. The Plain Dealer’s publisher has said if you combine the readers of the PD and Cleveland.com, they have a bigger readership than ever. And Fine agrees that interest in news is still as strong as ever.

Lauren Rich Fine: I saw in an article today in the Wall Street Journal a statistic that suggested that 70% of 18-to-34-year-olds used to read a newspaper in the 1970s and only 35% are doing it today. I would suggest that they are online and we don’t need to worry about democracy.

The problem is that internet sites have gobbled up the lucrative market of classified ads, and papers are making half what they once did from them.

Lauren Rich Fine: At the peak in the late 1990s, Classifieds accounted for 80% of the profits of an average newspaper. That’s a pretty astounding figure and it allowed a lot of great news, investigative journalism. But it really was supporting the economic franchise.

Fine predicts that classified ads will all be free on the internet and newspapers will have to try new business models.

Some papers have been supported by other ventures. The Washington Post makes most of its money on an education service it owns. Cincinnati-based E.W. Scripps owns the Home and Garden Channel and other cable networks. And then there are papers where profit margins just aren’t that important. Fine notes it almost happened with the Akron Beacon Journal when the non-profit Knight Ridder Foundation tried to buy it but was outbid. Now, she says the eventual buyer, Black Press, has to make cuts to pay off its debt. And owner David Black may be looking at buying the Canton Repository.

Lauren Rich Fine: It would make sense for much the same reason the PD was looking at the Akron paper when it was for sale because you can leverage your resources on the cost side. But more importantly on the advertising side because there is really an artificial divide between Akron and Canton. So from an advertising point of view to seamlessly be able to offer the whole region makes a lot of sense. So there’s very good business reasons for it. Having seen what he’s done at the Akron paper, however, if I worked in Canton I’d be frightened.

Do they need to maintain their own identity?

Lauren Rich Fine: Absolutely. You can’t homogenize. That’s the one thing that I found in life is that a Clevelander wants a Cleveland paper to look like their paper. They don’t want it to look like an Akron or Canton paper.

Lauren Rich Fine says those kind of mergers have worked in other markets. And she says very focused and targeted newspapers will survive.

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