Newspapers, radio try to find ways to make Web profitable

Isaac Bonnell

The Times, they are a-changin’. And so is every other daily newspaper in the country.

As the economy continues to worsen, newspapers are suffering just like any other business. The story is the same for papers of all sizes, from The New York Times to The Bellingham Herald: Advertising revenue is down and circulation continues to drop as more readers migrate to the Internet to find their news.

The Puget Sound region was especially rocked in January after the announcement that the Seattle Post-Intelligencer is up for sale — and could cancel its print edition if a buyer is not found soon. The one glimmer of hope for the P-I is that it could continue as an online-only publication.

But that business model is largely untested and newspapers, including The Bellingham Herald, have been tirelessly working to figure out how to operate profitably on the Internet.

“We’re rapidly becoming a hybrid company, a multimedia company,” said Bellingham Herald publisher Glen Nardi. “And we’re still searching for ways to monetize online [content].”

Though the paper’s revenue from online advertising grew last year, it is still not enough for the Web site to stand on its own, Nardi said. Rather, the Web site and newspaper act better in conjunction.

“We’re making money online, but the model isn’t mature enough to displace print advertising,” he said. “It’s growing as a pure dollar figure and as a percentage of our overall revenue, but it’s still in its infancy.”

As daily papers slowly transition to the Internet, the economy continues to slam their bottom line. Last month, the McClatchy Company (which owns The Bellingham Herald) announced that it lost $21.7 million in the fourth quarter of 2008 and is planning to reduce its costs this year by $100 million to $110 million.

McClatchy is also freezing its pension plans, temporarily suspending its matching funds to 401(k) plans, and extending a salary freeze that was initiated in 2007.

‘We’re all in the same boat’

The company didn’t provide any details about the reductions, but Nardi said cuts are forthcoming at The Bellingham Herald. This comes on top of previous cutbacks in June and November 2008, during which the newspaper reduced its staff by 20 percent.

“Newspapers have traditionally been a cyclical business, so when the economy goes down, advertising contracts and it affects newspapers,” Nardi said. “It’s not only dailies, it’s media in general. We’re all in the same boat.”

Michael O’Shea, general manager for Cascade Radio Group, which operates five radio stations here in Bellingham, said radio is seeing similar downward trends.

“Radio across the country is down about 20 percent,” O’Shea said. “Our worst months were October, November and December — but January has picked up a bit. We’re seeing a light at the end of the tunnel.”

Most of the businesses that regularly advertise on the radio — auto dealers, furniture stores and jewelry stores — have been struck particularly hard by the recession and have thus cut back on their advertising, O’Shea said.

The same is true at the Cascadia Weekly. Editor and publisher Tim Johnson said that many advertisers have scaled back on the size of their ads in the paper and Johnson is becoming increasingly concerned for local businesses, which represent a large portion of the paper’s advertisers.

“We’re no different than any other business in Bellingham. Things have become very challenging,” Johnson said.

In these tough times, though, Johnson said many businesses are being proactive in promoting their business through traditional forms, including print.

“Businesses are going back to more traditional means to reach their clientele, so they are reinvesting in newspaper and TV and radio and they’re knocking off a lot of stuff like Web advertising,” Johnson said, adding that Web advertising is still relatively uncharted waters.

Though many non-daily papers are not being hurt as badly as daily papers by online advertising, they are not immune to the sinking economy. Sound Publishing, which owns The Bellingham Business Journal and 50 other publications in Washington, has cut expenses by 15 percent in the last six months, said company president Manfred Tempelmayr. The company also closed its print press in Bainbridge in January and shifted printing to its Everett facility.

“We’re doing what we can to reduce our overhead,” Tempelmayr said. “We’ve reduced our consumption of newsprint and all other materials to address these costs.”

In general, though, community papers have not been hit as hard as daily papers because classified advertising is not as big a revenue stream for small, non-daily papers, Tempelmayr said. Also, these types of papers do not face as much competition from online news.

“If you’re a small community paper, your product is not generally available elsewhere,” Tempelmayr said. “But if you’re a daily, every other Web site has the same information on national and international news.”

The new model

Many newspapers currently have both a print edition and a Web site that is updated daily. This system developed mainly as a way for newspapers to reach a growing audience of younger, online readers.

But news Web sites have quickly become more than just a companion to a printed product. Videos, photo galleries and hyperlinks to related articles are redefining what it means to be a newspaper Web site. It’s also forcing an examination of how the business is organized: Which product gets priority?

“The fact of the matter is that [a Web site] is inexpensive to operate: you don’t need paper and you don’t have print presses,” Nardi said. “What it’s requiring is that we restructure the print business to allocate resources online. Print is going to be with us for a long time, but we need to transform to the new model.”

This new model has yet to be clearly defined, but nonetheless it has sparked numerous discussions among Western Washington University journalism department staff. What skills will reporters need to work in this new media model? Why is the Internet affecting newspapers to such extent?

“I think newspapers have failed to differentiate between their two products,” said journalism instructor Jack Keith, who used to be an editor for The Bellingham Herald and then The News Tribune in Tacoma. “Most papers today replicate their print product on their Web site. Some give you updates throughout the day, but the core of the Web site remains duplicative.”

Four years ago, the journalism department began offering classes in online journalism to prepare students for a changing industry. The department also recently added a new major — visual journalism — to train the next generation of photographers and multimedia experts.

Now in its second year, the program is widely popular despite the dire state of daily newspapers, said Shearlean Duke, who chairs the department. Though the current economy seems to be pushing out newspapers, there is still a market for journalists.

“Even 10 years from now, you are still going to want news,” Duke said. “Someone is going to have to gather and present that news.”

The McClatchy Company: fourth-quarter report

The McClatchy Company owns The Bellingham Herald and 29 other daily newspapers. It recently announced its 2008 fourth-quarter results, which include:

• A net loss of $21.7 million.
• Advertising revenue for 2008 was down 20 percent compared to 2007.
• Online advertising grew 10 percent in 2008, but still accounts for only 11 percent of total ad revenue.

As a result, the company is planning to reduce its costs this year by $100 million to $110 million. Details of the plan have not been finalized yet.

“Still, 2008 was a good year for our online business; online audiences and revenues rose sharply,” said CEO Gary Pruitt in a statement. “But the economy remains mired in recession and our industry is still in a period of transition. The advertising environment continues to be weak and we expect print advertising revenues to continue to be down.”