Hearst Plans to Ration Some Print Content From Its Websites

Now it's a growing trend. Just days after Newsday announced it will charge viewers for its web content, Hearst Corp. revealed it is planning to hold onto some "paid content" from its newsprint.

Steven Swartz, Hearst Newspapers president, said in a staff memo that the chain would hold back some printed content from its free websites as online advertising slows sharply industrywide.

"Exactly how much paid content to hold back from our free sites will be a judgment call made daily by our management, whose mission should be to run the best free Web sites in our markets without compromising our ability to get a fair price from consumers for the expensive, unique reporting and writing that we produce each day," Swartz wrote.

Here is the text of the memo:

Dear Colleague:

We are at the halfway point in our “100 Days of Change” program and I want to share with you the progress that we’ve made on ideas that fundamentally change the way we do business. Many of you have taken the time to write to me or to the various task force leaders with your thoughts and suggestions, and I’m extremely pleased by the level of energy and cooperation I’ve seen across our newspaper company.
One inescapable conclusion of our study is that our cost base is significantly out of line with the revenue available in our business today.

It is equally inescapable that during good times our industry developed business practices that were at best inefficient. For example, all newspapers look pretty much alike, and yet they are not similar enough to allow for efficient production or common content sharing. This must and will change. Another example is that while we have a tremendous opportunity to continue growing our advertising business with small customers, we cannot afford to do so by calling on every advertiser in person every other week and then having a team of artists build and rebuild their ads.

We must and will learn to use outbound telemarketing and self-service ad platforms more effectively. I’m confident we can move to rationalize our costs without impairing our ability to give our readers and advertisers the best news and information products in our markets. Even with the cost reductions we are making we have far more resources devoted to reporting local news and information than any other local media outlet.

Thus, each of our management teams is at work to complete a fundamental restructuring so we can turn our full attention to product innovation and revenue growth.

Next, we have a revenue and business model problem as opposed to an audience problem. Yes, it is true that fewer people read a newspaper on any given day today than they did in the past, but with the proliferation of media options, consumption of individual media types isn’t what it once was and probably never will be again. Our audience is still the largest of any local news and information media outlet. And when combined with newspapers’ Internet audience, our audience has actually been growing in recent years while our revenue has been declining. So it is our business model that must change in several ways.
We believe we must begin to provide greater differentiation between the content of our free Web sites and the content of our paid product, be that paid product read in print, on a digital device like Amazon’s Kindle, or online.

This doesn’t mean we wall off our Web sites behind a paid barrier. Our sites must continue to be the superior and dominant free Web sites in their markets. This means they must offer the best in breaking news, staff and reader blogs, community databases and photo galleries. In fact, we need to expand the number of reporters, editors and photographers who are running a truly great blog, creating a rich dialogue of opinion and data sharing.

We must do a far better job of reaching out to prominent citizens in our communities, those who already have a blog and those who don’t, and providing them a prominent platform to state their views. We must develop a rich network of correspondents to help us grow the deepest hyper-local community microsites in our markets.

We must do a better job of linking to other great sources of content in our communities. And we must put staff resources behind building those channels of interest that have the greatest potential: those built around pro sports teams, moms and high school sports, to name a few. Exactly how much paid content to hold back from our free sites will be a judgment call made daily by our management, whose mission should be to run the best free Web sites in our markets without compromising our ability to get a fair price from consumers for the expensive, unique reporting and writing that we produce each day.

We must continue to ask readers to pay more for their subscriptions. Our print subscribers don’t pay us enough today that we can say they are actually paying for content. Rather, we only ask readers to pay for a portion of the cost of printing the paper on newsprint and delivering it to the reader’s doorstep. We must gradually, but persistently, change this practice. We ask our readers to pay for their subscriptions on the Kindle today, and we must begin doing the same thing on the iPhone and other advanced smart phones and reading devices that allow us to create a user experience worth paying for. We also need to make our paid product available through the Internet for those who prefer to read it that way. And we must innovate to constantly enhance the reading and advertising experience on these platforms.

Our sales forces must make a transformation similar in scope to the one that IBM underwent in the 90s when it went from a mainframe selling culture to a strategy of being true IT consultants to their clients, even selling them non-IBM products when warranted.

In our case, we must fully make the leap from simply selling pages to selling audiences, and in doing so be able to sell packages of products, some of which won’t be our own. The best of our Hearst Newspapers colleagues are already doing this, combining our offerings with those of Yahoo!, Google, MSN, AOL, Ask.com Yahoo! HotJobs and Zillow and networks of local Web sites that we have assembled. All of these products are in our portfolio today.

Our advertising task force has created a three-month course of transformational instruction built around a massive sales contest that each of your markets either has launched or is launching. I’m confident that most of our reps will emerge from this process set on a path to become topflight, consultative sellers of audience.
One final overarching thought emerges from our look at advertising sales: we must use third-party printers in all of our markets in order to significantly add more color to our products, not so much for our readers’ needs, but to be more competitive in the battle for advertising dollars in a high-definition world.

Finally, while our savviest advertising customers know that our products still work well for them, as do our most passionate readers, we have done a poor job of telling our story. This becomes even more important as we change our business model. Our communications task force has developed a wonderful new campaign that begins to put us back where we should be—on the offensive about the vital role we play in the politics, social lives and commerce of our communities. We’ll have samples of the campaign available next week on 100DaysofChange.com.

Please discuss these ideas with your colleagues, your managers, our customers and our readers, and let us know what you think. Our goal is to emerge from the “100 Days” with a cost structure we can build our future on and a business model that seeks, by 2011, to get more than 50 percent of our revenue from circulation revenue and digital advertising sales—two areas of our business that we know we can grow and grow consistently as this recession subsides.

I know these are difficult times for those in businesses like ours that are buffeted by so many forces. Yet I know that we have the wherewithal to emerge from this recession with a changed business, yes, but one that is back on a path of growth. Thank you again for your commitment to see us through this journey.
Best regards,
Steve

Hearst: San Francisco Chronicle Must Drastically Cut Costs Quickly or Face Closure

New York-based Hearst Corp. announced today that it must sell the financially strapped San Francisco Chronicle or close it if it can't dramatically lower expenses within the next few months.

It didn't specify a savings target in Tuesday's grim announcement, but said that the cost cutting will require significant layoffs. The newspaper's Linkedin profile lists the number of employees at the newspaper from 500 to 1,000. Hearst said the Chronicle lost $50 million last year and is hemorrhaging even more money so far this year.
on the sales block, have filed for bankruptcy or are facing a possible shutdown.

Here is the text of the announcement:

Hearst Corporation announced today that its San Francisco Chronicle newspaper is undertaking critical cost-saving measures including a significant reduction in the number of its unionized and nonunion employees. If these savings cannot be accomplished within weeks, Hearst said, the Company will be forced to sell or close the newspaper.

Hearst said that the Chronicle lost more than $50 million last year and that this year’s losses to date are worse. The Chronicle has had major losses each year since 2001.

“Because of the sea change newspapers everywhere are undergoing and these dire economic times, it is essential that our management and the local union leadership work together to implement the changes necessary to bring the cost of producing the Chronicle into line with available revenue,” said Frank A. Bennack, Jr., vice chairman and chief executive officer, Hearst Corporation, and Steven R. Swartz, president of Hearst Newspapers. They added, “Given the losses the Chronicle continues to sustain, the time to implement these changes cannot be long. These changes are designed to give the Chronicle the best possible chance to survive and continue to serve the people of the Bay Area with distinction, as it has since 1865. Survival is the outcome we all want to achieve. But without the specific changes we are seeking across the entire Chronicle organization, we will have no choice but to quickly seek a buyer for the Chronicle or, should a buyer not be found, to shut the newspaper down.”

Hearst noted that these cost reductions are part of a broad effort to restore the Chronicle to financial health. The Chronicle has been asking its readers to pay more for the product through home delivery and single-copy price increases. In June, the Chronicle expects to begin printing on new presses owned and operated by Transcontinental Inc., which will give the Chronicle industry-leading color reproduction capabilities.