Like the once mighty Times Mirror, the newspaper industry is having a tough time moving beyond ink and paper. Almost anything that fits the rubric “information” has drawn the cash spun off by an industry that, while highly profitable, has barely gained daily readers since Dwight Eisenhower was president. The aim is to find synergies that could let papers parlay their franchises into new businesses with peppier earnings. The results have rarely earned headlines. As everyone from the Tacoma News Tribune to The Boston Globe pushes into new electronic services, history offers a warning. Says Cox Enterprises chairman James Kennedy, “Synergy is a great word, but it doesn’t happen very often.”
That’s not a strike against diversification. Times Mirror’s legal and medical publications are highly profitable, and Hearst and Advance Publications, both with newspaper roots, have struck gold in magazines. Cox, which has papers in Atlanta, Dayton and other cities, is building itself into the nation’s third largest cable operator by adding Times Mirror’s 1.2 million customers. But the hoped-for tie-ins between the printed page and video, computers and multimedia have been slow in coming. Says James Hoge, former publisher of New York’s Daily News, “Most mature industries that are very dominant have extreme difficulty making the switch to something new. The newspaper business is no different.”
Consider the experiences of two chains that have pushed into the fast-growing field of selling computerized information to business. Dow Jones & Co., publisher of The Wall Street Journal, figured that its reputation would give its Telerate system an edge supplying government-bond prices. Knight-Ridder, which owns such papers as The Philadelphia inquirer, built a financial service out of its expertise in commodities reporting. But their backgrounds in delivering news blinded both companies to the very different nature of business information, which requires heavy capital spending to keep systems on the leading edge. Thinking of customers as readers rather than users didn’t help: when computer graphics came on the scene, the newspaper giants were slow to grasp that subscribers didn’t just want to receive data but to chart it. The more flexible systems offered by Reuters, originally a wire service, and by upstart Bloomberg Financial Markets, run by a former bond trader, now dominate.
That story may be repeating itself in the database business. Dow Jones News/Retrieval and Knight-Ridder’s Dialog both offer on-line access to huge collections of statistics, news reports and scientific articles. Both services, however, are notoriously user-unfriendly. “I don’t even bother with [Dialog],” says Goldman Sachs cable analyst Barry Kaplan. “You have to go down to the librarian and do a song and dance about what you want,” rather than calling it up on a desktop computer. Dialog’s Patrick Tierney says the system is being made more accessible, while William Clabby, of Dow Jones information services, promises that new software will eliminate some of News/ Retrieval’s arcane code language. But the systems’ problems open the door for competitors who may offer photos, charts and audio, not just text. Says consultant Dennis Waters, “Expecting a newspaper company to have an advantage in the electronic-information business is like expecting a car company to do well with a computer-service business.”
Misunderstanding the technology and the market has plagued other newspaper spinoffs as well. Remember tax newspapers, all the rage in 1991? As it turned out, few readers wanted excerpts by fax. Gannett, the largest newspaper publisher, tried a television tie-in, but USA Today on TV crashed and burned in 1990. “The pioneers are the guys with the arrows in their backs,” says Erwin Potts, head of McClatchy Newspapers, which has been slow to move into new businesses. It is instructive that one of the few successful newspaper spinoffs to date comes on paper: Gannett figured out that it could repackage sports info gathered for daily USA Today and resell it as USA Today Baseball Weekly. “That particular publication started making profits the day it rolled off the press,” says Thomas Farrell, president of Gannett New Media.
Amid all the noise about new ventures, Chicago’s conservative Tribune Co. has emerged as the leader in finding ways to build on its big papers. Take ChicagoLand TV, a 24-hour-a-day local news channel carried on Chicago-area cable systems. Many CLTV stories come from Tribune reporters via a camera on the fourth floor of the Tribune Tower, while the company’s WGN radio supplies traffic reports. The 18month-old service is still in the red, but “it’s going to be a good, profitable business, assuming it continues the way it is.” says Tribune broadcasting chief Jim Dowdle. The next question: can the newspapers be tied into Compton’s Multimedia Publishing, which Tribune acquired last year?
Tough sell: If getting businesses to work together is tough, getting them to sell together is even tougher. At most chains, each paper manages its own advertising and TV stations, cable systems, magazines and new on-line computer services sell ads separately. Enticing advertisers to mount crossmedia campaigns means overcoming news companies’ internal bureaucracies, reducing the autonomy publishers cherish.
Despite bleak returns from earlier efforts, dozens of new experiments are underway. About 50 papers offer computerized information by phone, for a fee: New York investment banker Martin Maleska estimates that with an $18,000 investment, a small newspaper can bring in $50,000 a month. The Washington Post Company, which owns NEWSWEEK, has an electronic newspaper in development. The New York Times last week gave readers with modems access to entertainment news and restaurant reviews on line. As for Times Mirror, much of the $2.3 billion it will receive for its cable systems will be plowed into ethic programming, although starting a new cable channel can run upwards of $100 million. “You can find people with common interests who are geographically dispersed and through technology reach them in a different way,” insists Times Mirror chairman Robert Erburu. Trouble is, a lot of other folks seem to have the same idea.
