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May 2, 2005

More on the Migration: Developments and Sightings starts up the engines. Newspaper union tells rank and file the Web migration is here. Lawsuit in Milwaukee pits big advertiser against the local daily. The AP as legacy media?

The context is PressThink, The Migration, and new reports released May 2nd—called “bloody Monday” by Editor & Publisher—on tumbling circulation.

A closely-watched start-up is starting itself up tomorrow: has launched in two upscale suburban towns— McLean and Reston, VA. Backfence’s co-founder Mark Potts, who helped launch back when, e-mailed tonight with his news:

The first Backfence sites, in McLean and Reston, Va., are at Members of these communities have begun posting their local news, information, comments, photos and events to share with their neighbors. These sites represent our initial launch; over the next months and years we will roll out additional sites in the Washington area and around the nation.
Over the past few months, we’ve created a proprietary technology platform that supports our ambitious plan to blend together elements of user-created content, blogs, wikis, calendar functions, photo galleries, classifieds, DIY ad tools, Yellow Pages (soon), a registration system, backend administration tools and other features—all based on a clean, simple user experience.

We’re looking forward to watching these and future communities share information, make comments and generally put their personal touches on the sites. As we open the gates, more and more people will populate Backfence’s online communities and the information that they contain will grow exponentially.

Steve Outing has a brief review and he likes it. For context, see this earlier Howard Kurtz article on Potts and Backfence; this Q and A with Potts that explains what he’s up to. But mostly, check into how the site works. (Welcome message from co-founders Mark Potts and Susan DeFife.)

The front page of the Pacific Northwest Newspaper Guild’s site (which I came across because it linked to PressThink) tells members: “While people have predicted the death of newspapers for years, the migration of advertising to the web is reshaping the market that once made newspapers an easy profit center.” It urges union members to educate themselves about the issue.

In Milwaukee, the area’s biggest real estate firm has sued the local newspaper, the Milwaukee Journal Sentinel, alleging circulation fraud. The plaintiff, Shorewest Realtors, is trying to recruit other advertisers to join in what amounts to a revolt against the newspaper— an attempted class action suit that could be joined by the paper’s biggest customers. It follows circulation scandals at other big metro dailies, notably the Chicago Sun-Times, Newsday, and the Dallas Morning News.

According to an AP account (which ran in Newsday:)

The lawsuit claims the Journal Sentinel counted as circulation papers that were distributed free to homes, businesses, on the street and at large gatherings; thrown into trash bins without ever having been distributed; donated to schools; and distributed to apartment tenants as part of a scheme in which the subscription cost was included in the rent, then kicked back to the apartment complex manager.

The suit contended the company, seeking “to cover up its own misconduct … recently terminated two employees and demoted another as a result of their participation in the pervasive scheme to overstate circulation rates.”

The Journal Sentinel, in its own article on the suit, said, “If the case goes forward as a class action, it would open the door for other advertisers to seek damages.” In this panel discussion, hosted by Mark Belling on the CBS affiliate in Milwaukee, it is said the paper may have to pay a fortune. One panelist who owns stock in the company that publishes the J-S said he was hoping “it’s like a trashcan fire and not one that brings down the building.” Mark Belling called it “an enormous crisis” for the newspaper. “The key is going to be what the three people who were fired will say on the stand.”

The significance of the Milwaukee suit was suggested by these details in an account in Monday’s Wall Street Journal. The theme was newspapers facing tough decisions as the circulation numbers continue to fall.

In the past year, some newspapers fabricated circulation figures. Hollinger International Inc.’s Chicago Sun-Times, Belo’s Dallas Morning News and Tribune’s Newsday have all acknowledged that they overstated circulation figures.

…And many other companies have come under scrutiny for bulking up their circulation with discounted copies that didn’t attract high-quality readers.

… Now, many publishers are taking fewer shortcuts to boost circulation. Chicago-based Tribune, for instance, is cutting back significantly on the number of discounted copies sold to places such as hotels, hospitals and schools. Scott Smith, president of Tribune’s publishing unit, said this number will be down 10% from year-ago levels. Such readers — who often pay nothing for the paper — often aren’t considered good quality and their actual numbers are impossible to validate. Good-quality readers tend to pay for the newspaper with the intention of reading it.

If the industry’s strategy is to not to conceal any longer with gimmicks and giveaways the growing fall off in sales, but to impress upon advertisers the good quality of the paying readers who are left, then success depends on advertisers who are not only willing to migrate from one pricing logic to another, but willing to overlook all the years when they were, in effect, charged for phantom readers.

That’s exactly what Shorewest Realtors is not willing to do with the Journal Sentinel— overlook the overcharges. Therefore the events in Milwaukee make the “quality” strategy even harder to execute. They suggest a completely different scenario is possible, in which newspaper after newspaper has to reach costly settlements with advertisers who have been burned.

Unlike the Sun Times, Newsday and the Dallas Morning News, the Milwaukee paper had not admitted, officially, any fraudulent numbers, although it fired three people and began to tighten up practices. Therefore the suit comes at a newspaper that was trying change on the fly, and catch up to where the accountability standards were going.

That’s what other newspapers are hoping to do: change on the fly. But their circumstances probably aren’t that much different from Milwaukee’s. More to the point, there are many hundreds of advertisers whose circumstances are similar to Shorewest Realtors. They are going to be very interested. What you have brewing is almost a raparations case against the daily newspaper. It’s not here yet, but the ingredients for it are.

Not far in the background is an even darker fact: In Dallas, there’s a grand jury probe of possible criminal violations in inflated circulations: “Belo vows to cooperate as a grand jury looks into overstatement case,” read one headline.

Hugh Hewitt, who has been mentioning the circulation scandals when he can and predicting more bad news, asked a good question about General Motors in his recent speech to the LA Press Club. GM quit advertising in the Los Angeles Times due to “factual errors and misrepresentations,” the company said. So Hewitt asks: “What conclusion will we draw if GM’s L.A. dealers report higher sales year-to-year in April and May without any advertising in the Times?”

If that happened—and I’m not saying it will—I can imagine it serving as backward-pointing proof that newspaper advertising was always a rip off, even if the conclusion involves faulty reasoning from a single year’s results. The GM events—quitting one newspaper like that over articles and editorials—are unusual, and probably one-of-a-kind. But this is exactly what makes them a wild card in the psychology of the ad market. Someone pulled all ads. Others get to watch and see what happens.

Meanwhile, education blogger Jenny D (ex-journalist, featured in PressThink’s Fourteen New Voices) draws a parallel between failing urban school systems and fading urban newspapers, and between both those things and the problems at GM:

Families are abandoning traditional public schools by the thousands. In Denver, the public schools have lost about 4,000 students, and $24 million in funding along with them. The kids are now in charter schools. Detroit has lost almost 10,000 students in the last year, and is looking to layoff off thousands of teachers and other employees.

Does it sound like journalism? Do news organizations and schools sound like GM? I think so.

It’s not fully there yet. But her Dying Institutions, Thriving Institutions is… developing. Go see.

The discussion has begun in comments at Online Journalism Review, where Bob Benz and Mike Phillips of E. W. Scripps have published their manifesto for replacing the AP. Time for a change: The Associated Press as Napsterized news proposes to reinvent the AP as a digital co-op, using peer-to-peer technology to replicate the wire service at far lower cost.

I asked AP officials if they wanted to reply in a PressThink post, but I am told a reply is coming out soon in OJR, so watch that space. Read Doug Fisher’s lengthy and sharply put reply, A misguided slap at AP. Also see Alan Mutter’s reaction.

Now on the same theme—a digital-era AP—Pajamas Media, the new and ambitious initiative by bloggers Roger L. Simon, Charles Johnson of LittleGreenFootballs, and Marc “Armed Liberal” Danziger, with advice from Glenn Reynolds of Instapundit, gets some splashy treatment in the New York Sun. (But the article has no links in it, which is weird.) See Roderick Boyd, Three Political Web Logs Make a Run for the Mainstream.

“The idea of Pajamas Media is to use an extensive network of globally affiliated blogs to provide first-person, in-depth coverage of most major news events, including both camera and video footage,” Simon said. Syndicating advertisements through affiliated blogs so that advertisers can reach a global network is also a big part of it.

With 162 affiliate blogs in dozens of different countries, according to Mr. Simon, the new venture will have the ability to get “in the middle of stories’ that major news organizations can’t, “because our affiliates will have a physical proximity, language, and cultural knowledge that the Associated Press man will often lack.”

…The LittleGreenFootballs blogger, Charles Johnson, said the challenge is to keep the freewheeling character of a popular blog— where opinions and criticism are given freely—while meeting high standards and aggressively pursuing stories.

That’s one challenge. Avoiding episodes like this will be another.

Orlando Sentinel columnist Mike Thomas draws the parallels: “We are in same boat, those of us in theme parks and newspapers.”

Both of us have a huge capital investment in a product that seems a tad antiquated. We both have gotten hooked on hefty profit margins that are increasingly unrealistic. But our corporate owners demand them and so we cut our costs. With Disney, it’s off-the-shelf rides and maybe a little less maintenance. With newspapers, it’s off-the-shelf wire stories and smaller news holes.

And we both are trying to fit in with the new marketplace.

He’s more optimistic about Disney. I wrote about Disney and newspapers way back in the Introduction to PressThink, commenting on the brief period when Disney owned the Kansas City Star and other newspapers as a result of buying Captial Cities/ABC: “Newspapers were about the prosaic, the real and the local. Disney was about the fantastic, the imaginary, the global. It wasn’t a hard decision. A year later, Dinsey sold the Star, the Fort Worth Star-Telegram and two smaller newspapers.”

After Matter: Notes, reactions and links…

Norweigan critic and blogger Olav Anders Øvrebø at Undercurrent:

Another good marketing gimmick for a 1996 start-up news website without a paper parent was to claim that the printed newspaper would be gone by circa 2010. Our good print colleagues would protest furiously and give us more publicity, but I don’t think even the internet evangelists among us grasped what was about to happen. Do we now?

The history of the media and the web is a tale of permanent undervaluation, permanent lack of imagination. Wishful thinking on the part of newspaper executives (“there’s no way to earn money from the web”, “people will always want their printed paper on the morning breakfast table”) mixed with flawed analysis (“don’t link to other websites, it sends “eyeballs” away from our ads.”)

Ars technica: “Old media vs. New media, and the future of American journalism.” Doesn’t have anything new in it but summarizes well the current moment and analyzes well the import of Paul Graham’s essay on the PR industry, “lurking like a huge, quiet submarine beneath the news.” Graham’s The Submarine is a model for Web-based media critique. If you haven’t read it, you should.

Posted by Jay Rosen at May 2, 2005 7:55 PM