That said, JRC’s digital revenue is still growing fast at 33 percent during the first half of this year. The question for its long-term survival is how long can it continue to keep up this kind of pace? As it surpasses the digital revenue percentage of companies like Lee and approaches others like the NYT, McClatchy, and Gannett, those digital gains are likely to moderate. JRC almost surely won’t end the year up 33 percent, as it will be harder to grow the second half off a bigger base.
Paton says it won’t be quite so daunting, “People like Lee are in the mid-20s. Gatehouse is in high 20% growth,” he says. “It’s just a bigger pie. There’s more money in digital right now than there is in print. With the right products in the marketplace we can keep growth in the 20- or 30-percent range. And from the cost-cutting perspective that has to continue. That’s not going to change anytime soon. The trick is if you can do that cost cutting and not go after (news) and sales.”
We’ll see, but I seriously doubt that level of growth can continue for long. Growing 30 percent a year through next year alone would entail nearly doubling last year’s digital revenues. (It’s also worth pointing out that much of that $30.1 million in digital revenue isn’t really digital. Paton told David Carr late last year that 60 percent of it was digital-only. The rest is bundled as upsells with print ads. That “digital” revenue has typically been declining across the industry as print advertisers exit.)
In the meantime, Paton tells me he hopes to cut tens of millions of dollars in costs (debt and pension and the like, not operating costs like the newsrooms, he says) via the reorganization. If JRC is able to get out from under a good chunk of the debt its owner Alden Global Capital also controls, it will have some breathing room.
At some point in the newspaper industry, print will have fallen so far that print-ad declines will get smaller on an absolute basis and digital revenue gains will be able to offset them. But that’s several years away.
I’ve long argued that digital subscriptions would help slow the fall of print and increase digital revenue. Paton is famously anti-paywall. But ironically, he also controls more newspaper paywalls than just about any other executive, inheriting 23 newly installed ones when Alden took over MediaNews and installed Paton as CEO of Dean Singleton’s former company. “Everybody thought I would kill them,” Paton says. “The first test that they did was abysmal. We’re talking about de minimis revenue over a 12-month period.”
But those were relatively crude paywalls. Paton, though he doesn’t seem too optimistic about it, says he is moving MediaNews’s paper to “paywall 2.0, using the all-access strategy test similar to what The New York Times is doing. We’ve redone them now with all the best practices that Journalism Online and Press+ say they have.”
“I’m not hoping for this not to work,” he says. “It’s real money. A paid print product is probably not going to be a great idea for the future. I do think, however, that when you create and spend tons of money creating apps for smartphones and for tablets that there’s a real possibility to have an all-access strategy. You take a look at the Denver Post’s iPad 2.0 app. It cost a fortune to build. Trying to reimagine how content is created and consumed is not trying to imagine how to get newspaper stuff on the iPad. I think people will pay for that down the road.
They will pay, I believe, for something that uses the medium for its strength. But then you’re going to have to spend that kind of dough to start having more resources. It’s a high-wire act.”
(Further reading: Bill Grueskin’s open letter to John Paton.)