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Monday, 28 May 2012 19:07

Page turned? MLive’s circulation declines, but its president is pleased with new model

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WEST MICHIGAN — Six months ago, MLive Media Group Inc. announced it would turn over a new page on the statewide newspaper chain’s business model.

Beginning in February, MLive scaled back the home delivery of printed newspapers to just three days a week as the company adopted a digital-first news strategy. The switch hurt the company’s audited circulation numbers, but the magnitude of the slide depends on how one interprets the data.

Regardless of any negative affect on circulation, MLive’s president says the company's strategy is working, thanks in large part to growth in electronic news products and its new emphasis on advertising and market solutions, a move that has occasionally pitted MLive against ad agencies, marketing firms and web developers.

“We’ve effectively turned the business upside down,” MLive President Dan Gaydou told MiBiz in an exclusive interview.

Some experts, however, warn that MLive’s early results might be tough to sustain because of the newspaper company’s legacy costs. What is certain, though, is that many media insiders across the country are watching closely to see if MLive’s new strategy could serve as a model as the industry wrestles to survive in an ever-changing media landscape.

Circulation drops

The newspapers in the MLive portfolio in West Michigan — the Grand Rapids Press, Kalamazoo Gazette and Muskegon Chronicle — all lost circulation for the six-month period ending March 31, according to the Audit Bureau of Circulations, a third-party auditing group for publications.

Based solely on the ABC report, the three papers’ total weekday average circulation fell sharply, posting losses between 40 percent and 46 percent after the switch to a three-day home delivery model on Feb. 3 of this year. The audited circulation numbers count the printed papers and the use of digital newspaper replicas, which became an important piece of MLive’s strategy after the company dropped four days of newspaper home delivery.

However, the audit’s reported weekday circulation declines are “extremely inaccurate” and “misleading” without explanation, Gaydou said. He acknowledges the decline in print circulation over the past six months, but says the company has experienced significant growth in online traffic.

The recent ABC report tells a tale of two delivery models at the MLive newspapers. For the first five months of the report, the three West Michigan papers still had home delivery of their daily editions as they had for decades prior.

But on Feb. 3, MLive switched to three-day home delivery on Sundays, Tuesdays and Thursdays. Papers continue to be printed in small numbers on the non-home delivery days, but are only available at select retailers and newsstands. Digital replicas of those papers are delivered to subscribers electronically, whether via an app or by email.

At the Grand Rapids Press, total average weekday circulation fell by more than 45,700 — or 40 percent — in the new delivery model, according to the ABC report. For the first four months of the report, the average weekday print circulation was 110,417 printed editions and 4,154 digital replicas for a total of 114,571. After the switch, the average weekday circulation fell to 41,988 printed papers plus 26,877 digital replicas for a total of 68,865.

Susan Kantor, assistant manager of communications at ABC, said the auditing firm split the data in the report to reflect the MLive newspapers’ change in publishing frequency. The report includes average circulation numbers each day the paper is printed, and the daily numbers are compiled into a weekday “combined daily average.”

“Because the Press still has Monday through Friday circulation, it reports the (Monday through Friday) combined daily average,” Kantor said in an emailed statement.

However, Gaydou said the average numbers fail to tell the whole story. Because the Press still prints about 7,000 copies on non-home delivery days, those numbers are included in the weekday average. He countered that a more apples-to-apples comparison is to compare current and past print circulation averages for Tuesdays and Thursdays, the weekdays that still have home delivery.

Using that two-day comparison, Gaydou said the papers still lost circulation. He said the company’s internal data shows the loss was only 5.4 percent at the Press, 4.8 percent at the Gazette and 11.8 percent at the Chronicle over the period covered by the ABC report.

By comparison, when Detroit Media Partnership, the company that manages the joint business operations for the Detroit Free Press and Detroit News, ended home delivery on Mondays, Tuesdays, Wednesdays and Saturdays in March 2009, weekday circulation dropped 13 percent at the Free Press and dipped 10 percent at the News, according to a report in Crain’s Detroit Business. However, the Detroit papers don't offer an exact comparison because ABC changed how it includes digital circulation in the last 18 months.

Print Sunday circulation, typically the benchmark for newspapers, also declined across the three MLive newspapers: 3.8 percent at the Press, 4.0 percent at the Gazette and 7.7 percent at the Chronicle, according to ABC.

Around West Michigan, newspaper circulations were mostly down in the recent ABC report. While the Battle Creek Enquirer saw Sunday circulation grow 1 percent, Monday through Saturday circulation declined by 1.5 percent. At the Holland Sentinel, Sunday circulation fell 3.7 percent, while weekday numbers plummeted 13.3 percent. The Ludington Daily News experienced a 2.4 percent decline.

Digital shift

Part of MLive’s new business plan includes offering all subscribers seven-day access to an electronic replica (eReplica) of the printed newspapers. The product was created to provide an electronic newspaper to readers on non-home delivery days.

After the company switched to three-day delivery, the average daily digital circulation for the MLive publications — outside of the Sunday edition — has grown more than fivefold versus the first four months of the ABC report, when the publications delivered papers every day.

“The eReplica is very important to us because it gives readers the opportunity to have a continuity of seven-day delivery to their homes or offices,” Gaydou said.

The digital circulation numbers reflected in the ABC report indicate readers that actually open the eReplica. The number doesn’t just count the people that have the ability to access the service.

Gaydou said about one-third of the readers open the digital replica every day, and the rest of the people “come and go.”

“People are finding (the digital experience) to be satisfying to the point where they're finding it to be an equal,” he said. “What I’m learning is that people move back and forth between print and the eReplica pretty seamlessly.”

Gaydou said the company has signed up more than 50,000 subscribers to the eReplica editions. He's pleased that the growth in MLive’s electronic circulation outpaces the “anemic” growth for other publications across the country.

“The fact that we’re over 50,000 is an unbelievable number,” Gaydou said. “We get calls from people across the country (who) say, ‘How did you do that?’ Part of it is, of course, that we changed our strategy. Now, you have home delivery of three robust editions — the seven days of value and three days of delivery. But then you have those single copy editions, which are certainly not as robust, but are satisfying, particularly in the eReplica format. They’re easy to read and digest, and they’re quick.”

Gaydou also said the ABC audited numbers fail to reflect the success the company has experienced in growing its subscribers to the various e-newsletters, which have found favor with seniors who might be put off by navigating the MLive website or the digital replica. Every day, the company sends out some 80,000 e-newsletters.

MLive’s website — www.mlive.com — recorded more than 3.3 million unique users in the six-month period covered in the ABC report.

All eyes on MLive

While newspaper circulations in general have been declining for years, the steep erosion of ad revenues during the economic recession in 2008 caused many papers to take a hard look at their business models. As a result, many newspapers across the country have eliminated print editions or delivery on unprofitable days.

John Morton, president of Jessup, Md.-based media consulting firm Morton Research Inc. and columnist for American Journalism Review, said many newspapers lose money on at least one, if not two days per week. In recent years, many papers ended Monday delivery, almost universally a money-losing day. The profitability of other days depends on the market, he said.

“A lot of newspapers have been struggling with having unprofitable days,” Morton said. “They will be watching how the (MLive) papers do.”

However, scaling back on home delivery could affect the publications’ ability to get advertising on what had traditionally been good advertising days, namely Friday and Saturday, Morton said. Advertisers might be reluctant to spend money on the non-home delivery days given the limited print circulation and a fractional but growing eReplica circulation, Morton said.

MiBiz analyzed a week’s worth of non-home delivery day eReplica editions of the Grand Rapids Press and found most days had minimal advertising, with the exception of house ads promoting MLive and a classified advertising section. The outlier was one weekday edition that featured more than a page of public notice advertisements.

“The disadvantage in going to a three-day delivery model is that you're forcing your subscribers to decide how badly they want your newspaper and how badly they want to go to a newsstand,” Morton said. “Managers are hoping that they’ll seek it out on the newsstand, but what they’re asking them to do is a considerable inconvenience. It forces choices on (the readers).”

Circulation is a factor, but not the sole determining factor, in daily newspapers’ business model, Morton said. A publication’s circulation helps determine advertising rates, but don’t expect a paper that loses circulation to decrease its rates in parallel, Morton said.

Because MLive Media Group is owned by the privately held Advance Publications Inc. based in Staten Island, N.Y, there’s no way to know how profitable the company is, he added.

The new MLive business model is “getting real traction,” Gaydou said. “Financially, we’re doing very well.”

In the transition, the MLive operations also eliminated some printed products — special sections and niche publications, including Business Review West Michigan — that were not adding to the bottom line. As a result, print revenue is down slightly, Gaydou said.

“We quit doing a lot of things that maybe were not our highest return products to put our efforts into the digital space,” Gaydou said. “Let’s face it: The model we’re building is based off of, long term, growing the digital revenue at a continuingly strong pace. We’re not walking away from print revenues. Print revenues are extremely important to us. We’ve been able to sustain a huge percentage of those.”

He said the company has “maintained” run-of-press (ROP), classified and automotive ads, while growing its major account insert advertising — the ads and sales fliers that are inserted into the center of the folded newspapers.

“We didn’t build this model thinking that we had to keep every dollar. What we had to do is keep every dollar that was adding the greatest value to the enterprise,” Gaydou said.

Traditional print advertisers — including car dealers — continue to spend money and find value in the printed MLive newspapers, he said.

Blair Sharpe, president of the Grand Rapids New Car Dealers Association and general manager of The Sharpe Collection, said the change in the frequency of newspaper home delivery doesn’t have much affect on car dealers, so long as the industry’s traditional advertising day, Sunday, remains unchanged.

The Sunday newspaper’s mass audience continues to appeal to dealers, “especially for a mass market brand like Chevy or Honda,” Sharpe said. But increasingly, the media landscape is getting crowded with options, which dealers need to sift through to find a platform that works. He said digital advertising and other options with targeted audience demographics have been the best option for The Sharpe Collection, which sells niche and luxury brands BMW, Jaguar, Land Rover and Mini Cooper.

“We really chase customers’ eyeballs,” he said. “And there are many different platforms from where it was a few years ago with just radio, TV and newspaper. It used to be if you ran an ad on Sunday, then Monday would be a big sales day. But it’s not that way anymore. ... Now you have search advertising, digital banner display, eBay and Craigslist. There are a lot of places that you want to be. And with digital ... there are a lot more analytics to it.”

Sharpe commended MLive for embracing change and being willing to shift its business model.

“I think it’s great to see the Press adjust to the changing times," he said.

Working the new model

At MLive, digital advertising revenue now amounts to more than 20 percent of the company’s business, up from a range of 2 percent to 5 percent a few years ago, Gaydou said.

“It’s certainly becoming a much bigger piece of our business,” he said. “Its importance is heightened. It’s got to grow quickly.”

As part of the new business model, MLive also shifted its sales focus to more digital offerings, which now includes a portfolio of more than 150 products. The push has the company dipping its toes into waters that have long been occupied by marketing, advertising and web development firms.

“We’ve turned the selling model around: We still sell ads, but we’re not ad peddlers. We are now solutions builders,” Gaydou said.

Instead of just print or website ads, MLive now offers ad packages including Google AdWords, Facebook and Microsoft Media Network, as well as search engine optimization services. The company can also tap into other ad networks across the country through its corporate parent.

Gaydou said many companies offer those individual pieces, but MLive’s value proposition lies in its ability to create packaged solutions for customers.

“We ... are not necessarily tied to our traditional customers. All of our old customer base is still important to us, but now we have new customers — customers we’ve never done business with before,” he said. “We’re having a lot of success getting to them with the message that we can help their business too. Now, you don’t have geographic boundaries like you used to.”

However, newspaper companies like MLive are finding themselves in a much different competitive environment once they step out of the familiar realm of print media, Morton said. In a crowded digital market, newspapers are no longer the dominant player.

“They’re in an environment they’re not accustomed to operating in, and it’s much more competitive than they’ve ever known before, and they cannot charge as high,” he said. “It’s cheap to distribute on the Internet, but newspapers have legacy costs — the presses and delivery trucks that they’ll need to keep going, unfortunately, for a decade or longer — that erode (margins).”

Via their websites, apps and e-newsletters, newspapers will also compete with TV and radio news and other new media in a 24-hour news cycle. Last year, the MLive papers adopted a “digital-first” platform that had their editorial teams breaking news online and then feeding content into the newspaper.

“They’re competing with everybody now,” said Tim Penning, associate director of the Grand Valley State University School of Communications and an independent public relations professional.

As a consumer of news, Penning said he subscribes to three newspapers, the Grand Rapids Press, Grand Haven Tribune and Wall Street Journal, and reads each one of them for different content. The Tribune has the “hyperlocal” news about the lakeshore community where he lives, while the Journal offers him national and international information. He reads the Press to keep up on Grand Rapids news and happenings.

The Press is in a tough spot as a regional paper, he said. It can’t cover the lakeshore like the Tribune, and its coverage of national and international news doesn’t have the value it once did because of the numerous sources offering that information, Penning said.

From a public relations perspective, however, Penning said the Press needs to be included in any effective strategy.

“They still have to be on the radar screen,” he said. “They are the daily paper for West Michigan. Even though people don’t do as much media relations as they used to — they have their own ways for reaching people with blogs and social media — the value of the newspaper is that you reach people who are not already interested, and there’s a third-party credibility, an understanding that a journalist doesn't have an agenda.”

Gaydou said filling that need for good community journalism is still the mission for the company. While MLive now has bureaus in Lansing and Detroit, the papers need to provide the most important local content possible, he said.

“Having strong news institutions in our communities is really important. When it comes to the end of the day, that’s what we’re about,” Gaydou said. “Yes, we sell advertising and that’s really important. But institutionally, the thing that distinguishes us as a company is that we have a mission.”

During the transition, the company can ill afford to lose sight of that mission, he said. What he hopes MLive has created is a “learning institution” that learns from its mistakes and adjusts accordingly to suit readers’ needs.

“What the public sees, I hope, is some really good work. What I see inside are processes that need to be polished: things that just don’t seem to work right, or a communication path that doesn’t quite work the way we hope it does,” Gaydou said. “The model is working as expected. We’re early, and it’s obviously a long run, but if you were to take where we are against what our expectations are, I couldn’t be more pleased.”

 

Read 5697 times Last modified on Thursday, 02 August 2012 16:42

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