>> Earl J. Wilkinson
Executive Director | INMA
Newsmedia Outlook 2009
Converting Bandwidth to Innovation

Financial Crisis
American political leaders, Democrats and Republicans,
address the mounting financial crisis in Washington 14 days ago

Bandwidth

Newspaper Industry Crisis
 Market Cap Erased: U.S. publicly traded newspaper companies have lost 78%
of market value since 2004
 Classified Verticals Collapsed: Ubiquitous broadband access prompting
collapse of classified verticals
 Retail Declines: Retail advertising marketplace shifted to low-marketing big-
box retailers
 Circulation Declines Accelerating: Urban dailies have seen 1% annual
circulation declines in 1990s accelerate to 3%-5% annual declines
 Newspapers Losing Money: At least 19 of the Top 50 newspapers will lose
money in 2008
 Debt Loads Unbearable: Average debt-to-EBITDA ratios increased from 1.3 in
2004 to 3.1 in 2008; anything above 3 is considered dangerous
 It’s Going To Get Worse Before It Gets Better: INMA network feedback:
latest banking crisis could prolong downturn

Bandwidth

Mental Bandwidth:
Managing Complexity
 Rising complexity in deriving economic
value from media assets
 How to generate enough
transformational bandwidth to re-
engineer media companies while
simultaneously maintaining operations
 How to get the right people and
structure highly talented people
toward company goals
 How to expand (and manage) the
ideas cultivation process
 More market knowledge needed for
product development and advertisers

Today’s Presentation
 Get our arms around mental
bandwidth issues and try to
make sense of them
 The 2009-2012 environment
 From content to audiences
 The rising value of the
“context of content”
 The role of innovation in your
growth strategy

What 2009
Will Look Like

Environment
 Economy: Soft economy
through 2009, with growth
returning in 2010
 Marketing Communications:
Long-term share shifts from
advertising to direct marketing,
public relations, events,
promotions
 Advertising: Structural shift
from one-way communications
to two-way communications, will
negatively impact newspapers

Managing Risk
Potential Upside Potential Downside
 Acceleration of online  Acceleration of eyeballs to
revenue growth the internet
 Higher prices from online  Under-performing job growth
advertising and retail sales
 Faster rebound in job  Further deceleration of
growth circulation volume
 Stable newsprint prices  Faster-than-expected
newsprint price increases
 Lower access to capital
through dropping profit
margins

Mid-Term Outlook
 Through 2012, traditional media will pay the bills, non-traditional media
will drive growth
 Classified advertising from print to online will accelerate with
broadband growth: more with jobs and property, less with cars
 Digital/mobile distribution accounts for 5% of media/industry spending,
projected to be 11% in 2012 (will represent 24% of industry growth):
PricewaterhouseCoopers
 We don’t need digital to replace print; we need digital to fill the hole
left by print declines
 This will begin to happen in 2011 and could be an industry average in
the U.S. by 2013 (Deutsche Bank)
 Cost structure must be adapted to Digital Age; focus changing from
content to distribution

Circulations Down 8%
Paid Dailies in Western Democracies During Past Decade

Circulation Performance
Paid Daily Circulation in Key Geographies Worldwide Since 1995

Circulation Winners, Losers
Circulations decrease, 1997-2007
Circulations increase, 1997-2007
Others: unaudited, incomplete

Why Do They Grow?
 All are “aspirational societies,” newspaper is linked to aspiration
 All have rising middle classes
 All have low advertising as a percentage of GDP
 Brazil: The fast-emerging “quality popular” newspaper
 India: Low-cost newspapers for fast-emerging classes, low-cost
subscription canvassing, focus on an infusion of youth
 South Africa: Finding the right formula of newspaper for young adults
who never read a newspaper
 China: Government-encouraged “market newspapers” exposing local
corruption
 Indonesia: Major players found niche in diverse society

News Diet Changing
Evening News Buffet, 1945-1970
6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00

News Diet Changing
Morning News Buffet, 1970-2000
6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00

News Diet Changing
Diabetic News Consumer, 2000-Present
6:00 7:00 8:00 9:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00

Complexity Accelerating
Source: Mediaedge:CIA

Backvertising, Assvertising,
Nailvertising

Lipvertising, Teethvertising,
Headvertising, Fruitvertising

Eggvertising?

The Big Picture:
Chasing Fragments
 Consumers Fragmenting:
Technology and abundance
disrupting information
consumption
 Advertisers Chasing
Fragments: Advertisers
shifting to multi-media
 Newspapers Regrouping:
Newspaper business model
changing as a result
 Fast Change Rewarded:
Companies changing faster
rewarded, those changing
slower punished

Culture Change:
From Content to Audiences

Value Levers
Audience Brand Content

Value Levers
90%
5% 5%
Audience Brand Content

Value Levers
50%
25% 25%
Audience Brand Content

Audience Management
Strategic Suggestions from Forrester Research (June 2008)
 Aggregate
content to bring your audience to the
newspaper first
 Bring in all non-newspaper sources
 Syndicate to engage audiences wherever they are
 Newspapers using YouTube video channels
 Use social technologies to reach audiences
 Connect newspaper readers with each other
 Allow readers to create their own blogs

Pricing Value Tiers
Light Medium Heavy
 Allow 30 free  Annual online  Subscriber to print
FT.com articles per subscription newspaper
month to be  £100/year  Maintain average
consumed free daily rate of £1.00
 Single-copy buyer – lower than
single-copy price
of print newspaper
 Increased from
£0.30 to £1.30

“What our business will be about going forward is the skillful
management of the slow decline of the printed product and the
accelerated growth of the internet.”
-- John C. Mellott, Publisher, Atlanta Journal-Constitution
Target Market Segmentation
Print = Older Readers Online = Younger Readers

Future of Print

Future of Print
Philadelphia Model (Quality)
 Audience migrates from print
to online
 Raise print circulation prices
and sell “quality audience” to
“quality advertisers”
 US$3 cover prices OK daily

Future of Print
Norway Model (Quantity)
 Audience migrates from print
to online
 Lower print circulation prices
to maintain mass audience
until inflection point …
 Convert paid dailies to free
dailies to maintain quantity
audience

Future of Print
Philadelphia Model (Quality) Norway Model (Quantity)
 Audience migrates from print  Audience migrates from print
to online to online
 Raise print circulation prices  Lower print circulation prices
and sell “quality audience” to to maintain mass audience
“quality advertisers” until inflection point …
 US$3 cover prices OK daily  Convert paid dailies to free
dailies to maintain quantity
audience

INMA Newsprint Survey
What are the strategic drivers of your company’s use of newsprint?

INMA Newsprint Survey
Key findings worldwide and regionally: ROI of print
 65% worldwide said will use less newsprint in 3 years
 89% of North Americans considering gradual format
change vs. 33% of all others
 42% of North Americans considering cutting back on
publishing frequency vs. 20% of all others

Context of Content

The Crumbling Bundle
 When newspaper moves
online, the bundle falls apart
 Each story, each section, each
content section stands “naked
in the marketplace”
 Invisible system of
subsidisation disappears
 Subtle effects on journalism
and story selection
 Hard journalism adds to the
print bundle, becomes hard to
justify economically online

Fortress Newspapers
Content Verticals Advertising Verticals
News Classifieds
Sports Local retail
Business National
Features
The Newspaper Bundle

Fortress Newspapers
Content Verticals Advertising Verticals
Breaking news Property
Investigative journalism Jobs
Wire service news Cars
Pack journalism Private-party
Local sports Local retail
National sports National
Stock listings Matrimonials
Weather Brand
Puzzles Price-point
Photography All categories
The Newspaper Bundle

Content’s Declining Pure Value
 Percentage of media-produced
content shrinking in growing
world of communications
 Amount of free content available
skyrocketing online and offline
(editorial/classifieds)
 Advertisers unwilling to fund
certain disaggregated content
 Obtaining content “frictionless”
 Ease of access to content
damaging perceived financial
value to consumers
 Consumers willing to pay far less
for same product outside of
print

Print Magazine’s Value
in Digital Spaces
 Print Magazine: 100% =
print magazine
 E-Paper: 47% of print
copy’s value if an e-paper
 Mobile Web: 35% of print
copy’s value if a mobile-
based web site
 Computer Web: 19% of
print copy’s value if a
computer-based web site
Source: PricewaterhouseCoopers

Value = Context of Content
 Content becoming the “commodity backbone” around which
contextual services can be delivered
 CityAM’s bluecasts in London an example
 Postal code mobile alerts
 Metrics needed to determine value: Who saw it? How was it
consumed? How many people viewed it?
 Advertising-supported content would rise in value more people saw it
 Certain content (stock tips) would drop in value more people saw it
 Next-generation editors will be “content strategists” who
decide which stories get told and what the best storytelling
platform is
 Book industry: print for long-form, e-readers for in/out reference
 Print pays the bills and encourages long-form journalism
 Re-take breaking news via online and mobile

Commercial Value of Platforms:
Philadelphia Inquirer
 Shifted high-value unique
journalism to “print-first”
 Breaking news nationally, widely
covered local news, and
commodity news would continue
to be “internet-first”
 Inquirer makes lion’s share of
revenues from print advertising
 Segmenting their content
verticals and flowing them to
commercially relevant platforms
 Part of “quality journalism” for
“quality audiences” drawing
“quality advertisers” strategy of
CEO

Movie Industry
Value Chain Platform Experiences
 Theatres for new releases  Digital theatres
 Home video 3-6 months later  Multiplexes
 Digital downloads and pay-  High-definition DVDs
per-view  Mobile/internet platforms
 Internet television  Home pay-per-view
 Pay cable television  Events
 Commercial television

“Some claim that content is
King in the world of media.
Our research indicates that
content may only be Queen.
It is the creation of an
experience for the consumer that
promotes true engagement.”
– Anne Moser-Wellman, Author, “Running While the Earth Shakes,” Media Management Center

Experiences
 Desire for participatory, interactive media experiences
 Demand for content disconnected from devices and
time slots
 Everything an “experience”
 Advertising OK if it’s relevant to the experience and
to the individual

Music Experiences
 CD
 Buy a download
 Wallpaper for mobile device
 Mastertone
 E-ticket
 Music video
 Become friend on social
network
 Sign up for subscription service
 Justin Timberlake’s Futuresex/
Lovesounds: 115 products, 19
million units sold, 20% sales
from CDs

“When somebody raises their hand and says, ‘I’ve got five minutes,’ you want to
make sure you give them five of the best minutes they’ve ever had.”
-- Scott Bowman, chief executive officer of MLB Advanced Media
MLB.com Experiences
1. Attending game in person
2. Broadcast television
3. Radio
4. Streaming video online
5. Text messages
6. Mobile device
7. Satellite radio
8. Cable/satellite television
9. Internet/satellite radio
10. Fan chat rooms
11. Online graphical play-by-play

Reader’s Digest
 Print magazine
 Books
 Music
 Videos
 Home accessories
 Gifts
 Insurance company
 Financial services company

The Times Property:
Cool In Your Code

The Times Property:
Cool In Your Code

The Times Property:
Cool In Your Code

The Times Property:
Cool In Your Code

The Times’ Globrix:
Aggregating Property Ads

The Times’ Globrix:
Aggregating Property Ads

The Times’ Globrix:
Aggregating Property Ads

Context of Content
 Studyof platforms is yielding new thinking on value
propositions
 Howto create a browsable experience in print that
maximises value to advertisers
 Breaking news via mobile and online
 Enterprise reporting/journalism in print
 Consideration
of reducing print frequency and
channel energies into best browsing days

Innovation

Converting Bandwidth
to Innovation
 Do we have the
transformational bandwidth to
manage our way out of today’s
industry crisis? No, not yet
 Management must create
innovation “bubbles”
 Being done at world’s leading
companies
 Innovation programmes
beginning to take hold at
traditional newspaper
companies
 Must create frameworks for
innovation and ideas

Rewarding Innovation:
Incubator of Experimentation
At least 3 major companies use a centrally controlled
innovation fund that customers can tap into to
experiment with unproven media
 Procter & Gamble
 Johnson & Johnson
 Unilever

Rewarding Innovation
 Google: Engineers encouraged to spend 20% of
time on their own projects
 CNN: “Free-Thinking Fridays” where best ideas are
shared
 MSNBC: “Innovation Days” where people share
ideas they are working on
 Yahoo: “Hack Days” where developers share tech
ideas with the rest of the company

Rewarding Innovation
 Boston Globe (USA): innovation awards, cash  El Nuevo Dia (Puerto Rico): director-level
bonuses “innovation office,” lunch-box meetings, innovation
part of competence to reward
 Mid-Day (India): quarterly Zagyom awards in
each major area of operation  Zero Hora (Brazil): regular internal seminars with
 West Australian (Australia): talent identification guest speakers and innovation process
programme, project teams populated by up-and-  Jawa Pos (Indonesia): appoints younger 20-
coming middle managers addressing specific something staffers to chair strategic and
strategy issues programme committees, bonuses and promotions
 Joong-ang Ilbo (South Korea): “Bottom-Up tied to performance
Idea” programme via intranet
 Die Burger (South Africa): pays employees a
 The Globe and Mail (Canada): “Reimagination” 10% commission on profit generated from new
project dividing hundreds of employees into initiatives
horizontal teams focusing on industry issues
 Bakersfield Californian (USA): 1% of revenues
 E.W. Scripps Company (USA): Scripps put into “innovation fund” for incubator-like
Entrepreneur Fund, brainstorming sessions, best projects; new initiatives treated as separate “start-
ideas submitted to board of directors up” companies
 The Telegraph (India): “Out of the Box”  Atlanta Journal Constitution (USA): hired a
programme, submit innovative ideas to save money “director of culture and change” to encourage
or grow revenue, cash prizes horizontal thinking
 The Free Press (Canada): innovation committee
across departments and processes to evaluate
ideas, submissions rewarded

Open Innovation
 Late 1990s, sales
decline at Procter &
Gamble due to lack
of new products
 Consultants advise
that P&G culture of
“not invented here”
pervasive
 Need to broaden
sources of ideas and
innovation
 New CEO: By 2010,
50% of P&G new
product ideas will
come from outside
of P&G
 Translation: Need
“master networkers”

Business Case for Networking
Schibsted Corporate Conference: 22 September 2008, Stockholm
1. Companies providing access to strong external networks attract better
young talent
2. Networks should be “strategic,” not just “nice to have”
3. Managers with broad networks promoted faster, make 30% more money
4. People with better external networks have better ideas
5. Higher % of ideas accepted by people with diverse networks
6. Most innovations come from networks, not individuals
7. Build network diversity, not just size
8. Build broad “weak ties” for new knowledge, narrow “strong ties” for
emergencies and tough projects (goal: 100 “weak ties” outside of
company, country)

Lead India
 Launched campaign on
Indian Independence Day in
2007 by The Times of India
 Country advancing in spite of
(not because of) its
politicians
 Encourages everyday people
to become leaders
 Multi-media campaign
showing India as “half full,”
not “half empty”
 Wrapping The Times of India
in this future

Islam File: Koran Giveaway
 Promote 15-part pullout
supplements in De
Standaard on Islam
 Gave away free Korans to
coincide with special
report
 Involve readers in
community discussions,
important in Belgium
because of Danish
cartoons unrest
 Single-copy sales up
138% on day of Koran
giveaway

Free Prince CD
 The Mail on Sunday aimed
to create buzz among
young readers and retail
outlets
 Free Prince CD
 Sold out 2.8 million
copies, including 600,000
new readers
 Largest promotional uplift
for a U.K. Sunday national
daily

Stunt: All Eyes on (ST701)
 Miss Singapore lives in a
glass house for a week
 Lives on materials that
can be accessed through
Straits Times’ ST701
micro-site
 Keeps regular blog
 Ancillary contests
 ST701 web site traffic up
50% over 7-day period
 Generated lots of buzz

Drive-Through Classifieds
El Universal Creates Escape From Urban Chaos, Generates Revenues

Subscriber in Classifieds:
HNA Nachrichten

Toward Magazines?
The Power of Canada’s Globe and Mail Front Pages

Weight Club
Aftonbladet Generates Millions From 200,000 Paid Club Subscribers

Expressen TV
Online Video: YouTube Style With Quality News, Sports, Entertainment

Contest: Photo/Video Uploads
 Dallas Morning News
launches microsite for
high school sports
 Encourages students,
parents, fans to upload
photos and videos
 Daily cash prizes for best
photos
 School with most uploads
win US$10,000 cash prize
for high school prom
 129,004 photos, 5,497
videos uploaded

MediaLab for Advertisers
 Philadelphia
Inquirer created
MediaLab to show
advertisers the
power of newspaper
advertsing
 Shopping channel
QVC was shown
power of print in
national image
campaign
 Benefited Inquirer
and other
newspapers

Search Engine Marketing
Campaign Drives Traffic
 Houston Chronicle search
engine marketing service
that optimises traffic
volume to an advertiser’s
web site or physical site,
as well as quality of sales
leads
 Campaign enhances
Chronicle’s position as
local online advertising
resource
 260% growth in
customers
 317% growth in
Chron.com SEM revenue

Online Template For Students
To Produce Newspaper
 Ekstra Bladet creates “The
Newsroom,” internet-based
editorial platforms where schools
produce their own newspaper
 Only known application of its
kind in the world
 Develop writing skills, participate
in editorial meetings, lay out
newspaper
 Ekstra Bladet colour prints
copies and delivers to schools
(100 newspapers so far)

Conclusions

Hidden Assets
 Highest success rates from
legacy companies that have
discovered “hidden assets”
previously not central to
past strategy
 Diamond industry
 Swiss watch industry
 Scotch whiskey industry
 Comic book industry

Since founding in 1939, Marvel’s value proposition was comic books

Shifted from comic books to licensing Marvel characters for film distribution

Hidden Assets for Newspapers
 Audience: Brand-loyal readers
who have never considered
themselves a community
 Journalists: Valued journalists
trained only for broadcast
communications
 Money: Immense cash flows
and capital budgets
 Distribution: Infrastructure
second only to the postal
service
 Advertising Sales Force:
“Feet on the street” that even
scares Google
 Service: Making “smart” the
“help desk” concept

Fundamental Challenges
 Technology driving
consumers to consume
news on many platforms
 Advertisers chasing
consumers across platforms
 “Newspapers” reinventing
themselves as “multi-media
companies”
 Newspapers re-imagining
their value proposition for
Digital Age
 Audience development
 Value for advertisers
 (Im)patiently waiting for
business models to emerge

INMA: Harvester of Ideas
Constantly In Search of Global Best Practices
Europe
Newspapers: 2,398
North America
Newspapers: 1,577
Middle East
Newspapers: 272 Asia
Newspapers: 5,071
Africa
Newspapers: 400
Latin America South Pacific
Newspapers: 1,400
Newspapers: 89

INMA: Harvester of Ideas
What INMA sees for the years ahead
 2009 economic slowdown, 2010 beginning of recovery
 Where there is disruption, there is opportunity
 Change culture from “content” to “audiences” for growth
 Context of content: Flow content to platform with most €€€
 Inject innovation processes, become master networkers
 More and more about managing complexity (bandwidth)
 Prediction: will publish tomorrow; need ideas, networks

>> Earl J. Wilkinson
Executive Director | INMA
Newsmedia Outlook 2009
Converting Bandwidth to Innovation