November 01, 2011

The business of going digital first at Morris Communications

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Although the Journal Register Company has claimed the name “Digital First” for their new spinoff, JRC is not the only news organization making big—and long—bets on the ascendancy of digital media.

In late September Morris Communications (which publishes 13 daily and over two dozen non-daily newspapers, plus other media) announced a significant reorganization to refocus its priorities on being “digital first.”

Executive VP Derek May explained how this shift is about more than journalism and media. It’s also about how Morris makes money and does business…

By Amy Gahran

In his Sept 26 blog post announcing the refocusing of Morris Publishing Group, May wrote that this initiative has two key goals: reversing the company’s fortunes from contraction to growth by 2013, and changing from “a newspaper company into a digital-first media company that publishes newspapers.”

These are ambitious goals, especially considering that from 2006 to 2010 this company saw a fairly steady decline in revenue (down nearly 40%) and cash flow (down nearly 75%). May believes that digital media, not print, offers the only viable long-term strategy for turning around that business picture.

Other publishers have launched similar initiatives—many of which have foundered on the rocks of entrenched cultural resistance to change. But May claims this is not the case at Morris.

“If anyone in the media denies that we’re in a world that’s moving toward digital, they’re not in the right business,” he said. “Culture change starts with the leadership. Everybody has to believe in the new direction, and that has to come from the top. Also, our reporters and salespeople really want a digital future. This is music to their ears.”

Here’s how Morris is reconfiguring its divisions, executive team, and sales operations:

Morris Digital Works (MDW) is being folded back into the main corporate structure at Morris Publishing. This award-winning operation, which launched in 1996, has been supplying tools, technologies, consulting and web development services to Morris newspapers.

Several MDW executives will play a leading role in guiding the digital shift at Morris.

MDW president Michael Romaner will become executive VP for digital across all of Morris Communications, the parent company of Morris Publishing. This includes not just newspapers, but also the company’s magazine, radio, book, and other divisions.

Steve Yelvington, a renowned strategist for MDW, will join Morris Publishing to play a key role in audience development. He’ll be working under his MDW colleague Bob Gilbert, who has been named vice president of audience (a new position at Morris Communications).

Last month Yelvington described his thinking on how to get “digital first” right, so that newsrooms can refocus on engaging audiences rather than traditional one-way publishing.

According to May, Morris plans to increase not just the size of its digital audience, but also the level of engagement via its websites, apps, and other digital offerings. “We’ll have a plethora of new products and platforms for engagement,” he said. “I expect our digital audience growth will be dramatic over the next few years.”

A new spinoff company, NIIT Media Technologies (NMT) is a joint venture with NIIT Technologies—an established global provider of outsourced business and information technology services. This company will be headed by Paul Buckley, former CIO for Morris Communications. Much of Morris’ IT and engineering staff also will be folded into NMT.

May noted: “NIIT handles shared back-office services for all types of businesses, and they have a worldwide footprint. But we bring special expertise in media to the table, and that gives us an edge in this market.”

NMT will provide back-office and technology solutions for media companies—a strategy aimed at generating revenue by helping companies (which otherwise might be viewed as competitors) cut costs and increase efficiency. Its offerings for all kinds of media companies will include outsourced accounting services, customer call centers, billing systems, technology services and more—potentially even development of digital media platforms, tools, or products.

Media companies will hire NMT’s services via a transactional relationship. “When NMT does something for you—handles a customer call or sends out your bills—you’ll pay them a negotiated fee for that service,” said May.

“Compared to many other media companies, we have pretty advanced back-office technology,” May explained. Morris Publishing has been operating a shared service center for its media properties. “Our call center has already been handling overflow calls for other companies.”

If NMT gains traction, this spinoff could yield a new revenue stream from a potentially substantial market via an established business model: outsourcing.

In an era where the traditional media business model (advertising and subscription sales) faces an uncertain future, having a different revenue stream from a different—but proven—business model could become a stable basis for growth. Consider how many media companies are looking to cut costs. Outsourcing business and some production operations is conceptually similar to how news organizations have cut costs for decades under joint operating agreements, while maintaining independent editorial operations.

Changing how Morris Publishing does sales is another big part of the digital first strategy at Morris, May explained. Mark Lane will become the new VP of sales for Morris Communications—a new position for Morris Communications, but a role he’s held at the Florida Times-Union.

One thing that May says must change is selling digital ads mainly as add-ons to print ad purchases—a practice called “forced bundling.”

“Digital media has its own value and brings its own strengths to customers and markets,” said May. “We want our reps to sell all of our products. By 2012 we’ll be moving away from forced bundling. Our digital ads will no longer be like the toaster that gets thrown in when you buy a print ad. When you sell a forced bundle, you’re not allowing digital offerings to set their own price in the marketplace.”

May said Morris also plans to update internal systems and processes for generating and qualifying sales leads, customer relationship management, sales calls and channels, and more. “We employed a company to help us look at our sales practices,” said May. “We feel like we have more opportunity in our sales operations. We’re going to adopt a much more disciplined approach to selling.”

This means, in part, that Morris will rely more heavily on lower-costs sales channels such as telesales rather than in-person sales calls.

“Digital ads are a lower-cost product,” May said. “You have to be careful when you’re selling something that’s kind of a commodity. There’s a lot of competition. Your reps can’t be driving all over the place to make those sales.”

Mobile media will play a big—but not clearly defined—role in Morris’ future

The audience for Morris’ mobile web sites is growing rapidly, May said. Also, the company has introduced digital newspaper replica editions for tablet devices in three markets. “I know that approach sounds clunky, but so far it’s been well received by audiences. They like the curated look of the newspaper,” said May. “But it’s a multimedia experience that includes video and interactivity.”

Some Morris media brands are also extending into the low end of mobile via customizable text messaging services. One example is Amarillo.com’s KnowItNow SMS service, which launched in July and allows subscribers to choose from dozens of types of local news and alerts. (This service is free, but standard carrier messaging rates apply.)

May concedes that Morris is facing challenges clarifying a mobile strategy. “To try to share best practices, we have a mobile task force that gets together every week,” he said. “But it’s hard to make a decision. About the time you want to choose a direction to go, something new comes out.”

The News Leadership 3.0 blog is made possible by a grant to USC Annenberg from the John S. and James L. Knight Foundation.

The Knight Digital Media Center at USC is a partnership with the Annenberg School for Communication & Journalism. The Center is funded by a grant from the John S. and James L. Knight Foundation.

By Amy Gahran, 11/01/11 at 8:18 pm

Comments

so glad to see morris is trying to make the shift. but if they don’t start talking, embracing, integrating “community” instead of “audience”, they sure won’t reach their goals.

By jestevens, 11/03/11 at 2:10 pm