Author: Mark Fletcher

Thanks to referral by Steve Outing at Poynter Online and his piece Newspapers’ Big Mistake: The Historical View I have read How Transistor Radios and Web (and Newspapers and Hi-Fi radio) are Alike by Rich Gordon. Gordon is Associate professor of journalism, Northwestern University, Illinois. He has real world experience in publishing.

This essay by Gordon is an important and timely piece of writing for newspaper publishers and all who work in the newspaper supply chain. It is not a doom and gloom rant. Rather, this essay explains how the disruptive technology of the internet is connects with and meets the needs of a younger audience just as the transistor radio did in the 1950s.

Some newspapers get this and you can see them responding as early adopters of podcasting and other online technologies, aggressively pursuing their news brand into the non print space.

Rich’s essay provides more take away for newspaper publishers than for newsagents for a publisher controls the brand and can make appropriate decisions to extend the life of the brand. Publishers have the ability to respond and grow their connect with their audience.

The Australian newsagent network, 4,600 retail and distribution businesses, does not have the luxury of the publishers. We are the conduit for access to publisher product. We do not have the same connect with the brand. The challenge we face is enormous as publishers will reach a tipping point where online is more important than print and while this may be many years off, we need to be engaged with strategies today.

The newsagent response to the challenge of fast low cost mobile technology has to come from outside the current playing field. There is not much sense is us shifting to the right or left within the same playing space. We need to reinvent dramatically to create the necessary emotional and economic connect with the new consumers.

Rupert Murdoch has engaged McKinsey and Co to advise on the News Corporation Internet and related technologies strategies. Newsagents need to engage with a similar skilled consulting group to advise on the best strategies for the future.

I was talking with a senior executive in an Australian newspaper publishing company a few weeks ago who told me that the Internet would have an impact some day but it would be long after he was gone. The implication was that he didn’t want to discuss the impact it might have because it would be felt after they were gone. As a test I asked whether he thought podcasting was something they would get involved in. He said “podwhat?“.

While I have said that publishers and newsagents need to separately find and follow their own road forward, given that the newsagent network was created by publishers it is appropriate that through these transitional years they work together – but with genuine openness, honesty and shared economically fair goals.

Read the Rich Gordon essay.

I have analysed data relating to almost 5,000,000 shopping baskets and while the analysis is not yet complete and not all data has been collected, it is timely to share some information.

This data has come from 80 newsagencies. Considering the four key departments of cards, magazines, newspapers and stationery here are the percentage basket penetrations for each for 2005 vs 2004. I have not included lottery product sales because of the number of newsagents not selling the product.

While the percentage differences between 2005 and 2004 do not seem that great, in the rural magazine area, for example, the difference equates to 40,926 more magazines sold.

There are a couple of contexts in which we can consider this basket data: Suppliers want deeper penetration as this reflects improved efficiency in the channel; Newsagents want penetration spread across all categories they carry, commensurate with the capital at risk, the floor space allocated and the operational overhead expended.

Regardless of the view taken, basket penetration reflects the success of the category in the context of all sales. On any view the higher the penetration the better. Of concern is the drop in basket penetration for the magazine category comparing 2005 with 2004 in suburban newsagencies. Newspaper basket penetration increased over the same period. In rural newsagencies, over the same period the only change was a small increase in newspaper basket penetration.

Using the figures in the table above and looking at specific newsagencies there are some at each extreme of the measurement. For example, in 2005, looking at the suburban data there is a newsagency achieving 5% penetration for magazines and one achieving 41%.

The benchmark allows this type of store by store comparison and therefore consideration of high achievers compared to relative under achievers.

The basket penetration data collected also allows day of week views and supplier views, both taking analysis into more complex yet valuable areas. The data also allows for analysis of single unit sales and single category sales. That is, baskets containing one item and baskets containing only items one category. The single unit sale data is providing the most concern at present. This shows a concerning reliance on newspapers as traffic generators yet poor success at extracting add on sales from the shopping visit.

There is, of course, a risk of too much data.

At this point our focus is on the basket penetration numbers. For the four departments of cards, magazines, newspapers and stationery we can see the importance of these to rural and suburban newsagencies and develop strategies to increase penetration.

Raw and early as this data is, the next stage of this project is to understand the differences between the locations and see whether there are learnings for those low in penetration for any given category which, when applied, lift their penetrat

Good piece by Australian Investment Review about classified advetising in newspapers. It reports that analysts expect some growth in the face dramatic growth in online.

A couple of consultants from McKinsey and Co (the same people advising Rupert Murdoch on News Corp’s internet strategy) provided newspaper publishers with a reality check a couple of months back at the NAA conference:

Luis Ubinas and Jochen Heck warned that newspapers could lose $4 billion of “highly profitable” classified revenue by 2007 — or around 20% of newspapers’ 2004 classifieds revenue and just under 9% of the $46.6 billion in total newspaper ad revenue last year — if trends that afflict help-wanted classifieds spread to automotive and real-estate classifieds. Source: adage.com

For more than five years Craigslist has been nibbling away at the classified business in several major US cities. In San Francisco, for example, they have decimated the apartment for rent marketplace. In New York they are having the same effect.

Craigslist is now in Australia.

Then there’s the impact of eBay on general classifieds. And the many other lesser known advertising sites. Of course, in Australia, there’s tradingpost.com.au (part of Telstra).

Newspapers are responding will all manner of offers. These include price cutting and dramatically changing the offers by putting content online and in print.

The McKinsey experts talk about “price destruction” in when considering the impact of the internet on newspaper classified business. Advertising is falling and rates are falling as well.

One option newspapers have is to develop a unique value proposition built around local communities. In Australia, especially, publishers could embrace ‘local’ by partnering with their 4,600 newsagent retail and distribution outlets in a smarter and more valuable classified business.

This is only half an idea at present but it seems to me that newspaper publishers and newsagents share a challenge in terms of how to address the pressure of internet businesses like Craigslist. Craigslist is a one way model. It’s a website where people advertise free of charge. By harnessing newsagents into the mix, maybe as collect points or payment points or product display points newspaper publishers, in partnership with newsagents can offer a different form of advertising – a substantially better value proposition.

As I said, it’s half an idea at present. But, I suspect, an idea worth considering.

Newsagents and newspaper publishers need to be developing strategies which help them better compete against the likes of Craigslist. The offering could be put to consumers as safer and more reliable.

Beyond a publisher/newsagent offering, newsagents could also be part of an eBay drop off/pick up strategy.

Dave Morgan comments in Newspapers: Playing Defense Won’t Be Good Enough at Online Media Daily about the future of newspaspers and, in particular, classified advertising. He refers to this as their fortress and calls for more than defence if newspapers are to survive.

Reports from around the world including here in Australia over the last month confirm that advertising is the battleground of the moment. Both classified and display. Newspapers will need to respond not as newspapers if they are to successfully address the situation.

“Newspapers are cockroaches.” With these words, Jon Fine opens his Net To Newspapers: Drop Dead piece in the latest issue of Business Week.

The artcile presents further evidence of how publishers are evolving their brand away from the traditional medium in pursuit of economic viability.

BEWARE! A bit of self indulgence here.

My newsagency launched as newsXpress Forest Hill yesterday.

We have re-branded as a result of joining the newsXpress franchise group. We’re the first outside Queensland for this forty strong group of newsagencies.

Here’s the Saturday team of employees just before the launch – all looking nice in their new uniforms.

newsXpress offers the valuable discipline of a national group yet with the flexibility necessary for proud independent ownership. Being part of this will help my newsagency compete with the major chains and with the government owned Australia Post.

newsXpress provides me with a strong brand behind which my business can trade. The photo below shows our magazine header cards – professional, branded and meeting Magazine Publishers of Australia (MPA) standards.

I’m proud that my store is the first outside Queensland. The first in New South Wales opens in early August. newsXpress has a goal of 100 stores by the end of the year.

Disclosure: I have taken a shareholding in the master franchise company and am a Director of the business.

The Age and the Australian Financial Review are reporting this weekend about a twelve month trial to commence in July in Sydney involving Telstra and up to 1,000 users of the Nokia 7710 mobile phone whereby they will have access to 15 television channels.

Based on the recent news of an Optus PBL alliance (refer to my PBL/Optus comment) expect more to follow very soon.

This trial is along the same lines and based around the same technology as the trial in Finland which I discusses here a couple of weeks ago.

There’s nothing which dictates that content accessed via mobile technology must come from traditional producers/broadcasters. In several cities in the United States now audio and video news bulletins are broadcast by newspapers. Existing media companies will have to respond to these new technologies quickly so that they brand is accessible to new markets and old and new customers in those markets.

Also, with technology and production costs now lower than every before, watch for a new generation of content creators getting into the space.

So, the impact of these developments needs to be considered more broadly than just in terms of television. How where and for what cost we access news and information is in play. Especially in a country like Australia where mobile phone use is among the highest in the world.

These new devices and the technology enabling high quality video content to be accessed cost effectively almost anywhere will pressure print media companies and their supply chain. Businesses like mine in that supply chain ought to be working harder on ensuring consumer relevance in a mobile media marketplace. We can do this by being better at recharge business. We can also do this by offering content ourselves and by being part of the wireless access network.

As I write this I know that around 4,500 of Australia’s 4,600 newsagents will not be aware of these developments and how they might affect them. To more aggressively report to them could be seen as being a doomsayer. I’d hope that the publishers who created the newsagent network might brief newsagents on their view of the media landscape in five and ten years.

The National Federation of Retail Newsagents has come out fighting overnight in response to the Office of Fair Trading’s Consultation Document on its draft opinion on Newspaper and Magazine Distribution.

The NFRN press release is strong compared to what we have seen in Australia from many (not all) newsagent associations as that channel has become less regulated.

Rather than just complain about the OFT position the NFRN has proposed an alternative with sound commercial principles:

This battle is interesting here on the other side of the world because it demonstrated how an industry association can strongly represent its members and it provides further evidence of how the distribution of news and information is in play and the potential harm of this for small businesses.

The internet is a cache of gems. I just found this Election 2001 document, Delivering The Future from the Liberal Party.

The document talks about Australia Post and the Liberal commitment to public ownership, the Universal Service Obligation and a bright future of good service for Post customers.

It has this to say about small business:

The availability of affordable postal products and services is essential to the operation of any small business. Whether it’s sending out accounts, sending items COD or business banking at the local post office, small business relies heavily on the broad range of services provided by Australia Post.

To assist small business in accessing postal services and obtaining information on the best products and services to meet their needs, the Coalition will work with Australia Post in establishing dedicated Small Business Units in each State and Territory. These units will be responsible for providing advice and assistance to small business operators and act as the first point of contact in relation to disputes.

The document does not talk about Australia Post competing with small businesses such as newsagents. Sure, it’s not part of the party’s policy. It should be. The Liberal party and all parties for that matter should adopt a policy of Australia Post exiting retail or the government divesting itself of Australia Post retail outlets with such divestment allowable only to individuals or companies operating businesses below a certain size.

The Liberal manifesto is quick to point out what it considers to be the Labor party’s failings in relation to Australia Post. Today, four years on, small business ought to be up in arms about the Australia Post story and the Liberal party failings to deliver for small business.

Here we have a government owned enterprise competing against small businesses like my own on non traditional Australia Post product such as ink jet cartridges, greeting cards, paper, pens and other basic stationery items.

The Howard Government ought to show that it is a friend of small business by introducing a policy of non competition with small business. It has no business owned these Australia Post retail stores – not now that they are clones of newsagencies.

If the government wants to be in retail why not open up against Coles and Woolworths? Ridiculous I know but think back to a Post Office fifteen years ago and visit one today. The difference is amazing. Small business owners are the losers.

Those driving Australia Post have got away with their commercialisation strategy for long enough. It’s time the government brought in a policy which created a level playing field. It’s time for the government to deliver for small business.

The Australian reported yesterday that ABC’s Radio National is achieving great success with its podcast trials with 75,000 downloads achieved last week.

The report in today’s Australian, pg 22, asks the question “Who said no one listens to Radio National?” Hmmm, people downloading are probably selecting the downloads based on content rather than being connected with Radio National. Their content is referenced widely outside the ABC website. Check it our here, and here, here, here and here. I could go on. There are many non ABC references.

The viral nature of news and information on the internet gets information on subjects to those interests in faster ways and reaching ever widening circles.

Trawling through the many links for ABC Radio podcasts is a lesson in itself in the power of the Internet and the power of the blog and other online content publishing forms which give people voices.

This is the lesson for the Australian and other mainstream media outlets. It is the interactivity, immediacy and personal connect with news and information on the internet which makes it attractive to some than the traditional mainstream media offerings.

This, to me, is the story. The ABC with no real promotional budget has a runaway hit on its hands.

Footnote: as a newsagent I keep asking myself how I can connect with this. It’s hard living in a purely bricks and mortar space. But there must be a way to build relevance for the newsagent channel in the ways consumers connect with new media.

Good to see my home town paper, The Age, give some coverage to topics in discussion here. Even though the piece by Stephen Quinn
does not cover developments in the context I would like, I understand the audience his piece is for. For example, he lists a few newspapers which have started podcasts recently. He could have told us that at least 35 major city newspapers have commenced podcasts now. He could have told us what the plans for The Age are in this regard.

Rumors circulating among some (including Bambi Francisco at Marketwatch) I’d expect to be in the know that Google is preparing a significant classified advertising play. The world’s biggest media company could be hungry to get bigger.

The Google USPs are its exceptional algroithms, its knowledge bases and its mapping tools.

According to Court TV, “over 45,000 people signed up for real time wireless alerts on the Jackson trial & Verdict Watch via cell phone text messages”.

In the PBL / Optus relationship announced earlier this week you have content creator and efficient supply chain. No middlemen. No overhead.

Consider the Jackson vertict and consumers’ desire to access this through mobile devices as how some consumers will want to access stories in the future. That these mobile devices facilitate easy access to moving stories makes them more interesting to the younger consumer.

“Across the media sector we have factored in a zero growth year in fiscal year 2007, to reflect a cyclical downturn in advertising. However, in our view, the risk of an advertising slowdown earlier has increased appreciably,”

So says Goldman Sachs as resported by the Australian Financial Review.

We, newsagents, need to be aware of what the analysts think and consider this in our own businesses when seeking traffic and sales growth opportunities. It’s not as if there is a drought of options.

The new relationship between PBL and Optus was all over the Australian and international business press yesterday. This is a very significant move for PBL and the Australian media landscape generally. The deal pushes convergence strategies in this country to a new level. Watch for others to follow quickly.

Optus provides PBL with a new supply chain through which to deliver its key brands: television programs and magazines. PBL provides Optus with valuable content.

Put this deal together with faster access from new cable technology and with the new multimedia handsets about to hit the market and you can soon see the value.

Once it starts delivering content, the Optus/PBL relationship will put PBL in a box seat way beyond its traditional television and magazine properties. Whereas today a story is on the cover of Woman’s Day and it’s on the shelf for a week, through this new alliance the store becomes the focus rather than the aggregated product (the magazine). With devices consumers enjoy using offering access to a video version of the store and Optus providing fast and easy access, I can imagine consumers buying stories rather then or maybe in addition to existing print product.

I reckon that for a few cents I will be able to buy a story through my new sexy phone and that as the story evolves, for the next few days, I will receive the updates without cost.

For PBL they get to a new marketplace full of early adopters and can manage the impact on their physical product. Good leadership.

People often tell me that consumers like the ease and flexibility of access to magazines and newspapers. I don’t disagree. However, as more devices come out with great interfaces, consumer attitudes will change. An this is why the convergence strategy of Optus/PBL is fascinating and timely.

Beware! Here’s my cracked record comment. The traditional news and information supply chain (newsagents) needs to develop its own strategies for changing consumer desires and the changing technology playing field.

Mediaweek last week ran an interview with Brian Evans, new COO for Fairfax. Evans was quoted as saying:

“We would like to have a stronger marketing relationship with newsagents and we’d like them to embrace our product. We would like to be treated like Lotto where there are huge signs up and we support promotions. I think newsagents do a very good job for us and it’s a very cost effective way of selling newspapers. Like any relationship it gets a bit tired and it needs to be jazzed up a bit.”

Hmmm. Newspaper publishers have driven newsagents to focus on their category linearly. Lottery companies and, to a lesser extent, magazine distributors have done the same thing. This linear approach to newsagencies has created freeways of traffic. Customers come in, buy their product, don’t get off the freeway and don’t shop the shop.

Newsagencies have excellent traffic. But too much of it is freeway type traffic.

If newspaper publishers, Lotto companies, magazine distributors, greeting card publishers and stationery wholesalers worked together they could come up with an important and timely format change for newsagencies which would generate incremental sales in these five core categories. Achieving this would mean that value is added back to the newsagency shingle and this is more important than a huge sign for The Age or the Sydney Morning Herald or the Herald Sun.

There is anecdotal evidence of significant sales success being earned in newsagencies where effort is put into cross category promotion. (Promotion which is usually against supplier rules but which benefits them.) This suggests that sales growth is there for the asking based on existing traffic flow.

Rather than pursuing incremental sales outside the newsagency retail channel, Brian Evans and the team at Fairfax ought to understand the freeway like traffic flow in a newsagency and then talk with the Lotteries and other folks. Co-operation between newsagency suppliers and active support from newsagents could generate the sales boost everyone is looking for.

Newsagents achieving sales growth are doing so without expensive shop fits. My research suggests that there are several simple and immediate steps which cold be taken to address the issues with freeway traffic. The feedback from these steps could then drive more structural change in retail newsagencies.

On average, newspapers are sold alone 55% of the time in newsagencies. Newsagents will say this is because they are shackled from cross promoting other product with newspapers. Others will say it’s because of poor retail. A retail expert I have spoken with says it’s because of placement/display rules newsagents have to live with. If Brian Evans could find a way to help newsagents leverage newspaper traffic into more business he could expect to receive reciprocal growth from other categories.

In How to Speak “Craigslist” Dayana Yochim of The Motley Fool writes about how rule breaking is the norm at Craigslist and why this small almost home based business is scaring newspapers around the world.

Then there is this, an interview with Craigslist CEO Jim Buckmaster originally broadcast on National Public Radio a week back. This interview gives you a sense of the community connect Craigslist achieves. With readers growing rapidly, no wonder newspapers are concerned. Buckmaster talks about the US$18 billion classified advertising industry and says the money spent on classified advertising should be spent on humanitarian efforts.

And as if you needed more evidence of the impact Craigslist is having, across at ecommercetimes.com there’s a story about how newspapers and eBay are responding to Craigslist. Telling numbers from this article: “Nielsen/ NetRatings show that eBay’s page views in April were up less than 0.5 percent from the previous April. At Craigslist, page views grew 130 percent in the same period.” Wonder what the classified growth was for the same period.

Attention newsagents and others in the news and information supply chain: what’s your piece of the Craigslist action? Nothing! Classifieds have been crucial to newspapers since they began. In years gone by they were called the rivers of gold. It’s a phrase you now hear rarely in the context of classified advertising. These are developments newsagents need to have a commercial response to otherwise the river will be flowing elsewhere with nothing to replace it.

PS. If you’re in Melbourne and looking for a car, check out this ad on Craigslist. Of for Sydney residents, check out this ad for a house in Kellyville for rent.

Editor and Publisher is reporting that the Denver Post has achieved 2,000 downloads in its first four weeks of podcasting. The Post’s podcasts have good production values and provide an alternative form of access to news and information delivered under the Post brand.

I recall from the launch a month ago that they were targeting non newspaper readers. Listening to the podcasts you soon understand that they podcasts are self contained. Not radio quality either. But they should not be compared to radio. These are for a different maketplace and need to be judged without comparison to other more developed media.

Their playing in this space is smart.

A new report, Podcasting as an Extension of Portable Digital Media – Fact, Fiction, and Opportunity, from The Diffusion Group claims demand for podcasts is expected to grow from < 15% of portable digital music player owners in 2004 to 75% percent by 2010. Source ipodnn.com.

With new phones and other podcast friendly devices hitting the market almost weekly, enough corporations have invested in mobile access to guarantee these forecasts are easily met. Consumers have shown how much they want access to information and entertainment anywhere. The challenge is for mainstream content providers to ensure their relevance by being in this space quickly. In Australia that’s not happening at the moment.

We have been handing out flyers about our LocalNews Daily citizen journalism project across the counter of your newsagency for a few weeks and these have generated considerable feedback but no site contributions. The feedback falls into four broad areas:

Great idea. Can’t wait to read stories. But no desire to post.

How much to advertise?

Will you pay me to post.?

This is a new concept to me and I think I want to be involved, give me some time to think it through.

The last comment is the most encouraging.

We’re in a smaller pond in Australia and I’m suspecting that the tiny pond we are playing in the eastern suburbs of Melbourne is yet to have what is necessary to sustain a project like this. So we’re rethinking and planning on a broader push with some other newsagents maybe. We are committed to the project but need to do more research success stories from overseas. We also need to engage someone from a journalism background to help drive this forward – a partnership of technology, local focus and professional journalism.

We’re engaging with some former journalists and writers to encourage quality content. We realise that in our community we need to do more than build the framework so others can play, we need to show what it’s all about by delivering some content. We’re also taking the opportunity to make better use of the drupal engine our site is based on.

We’re finding the posts of people like Steve Outing at pointer.org to be most helpful in our planning to get this right. Especially his piece: The 11 Layers of Citizen Journalism.

As we see things at present we’ve got another few weeks work to do (while keeping busy with our day jobs) before we get LocalNews Daily looking more like we want it to look.

In the week that we (newsagents) learn that our independent small business channel has lost the contract to deliver the Foxtel magazines to Foxtel subscribers to the government owned Australia Post, we (in Victoria at least) have been granted a delivery fee rise for the Herald Sun newspaper to take effect in a few weeks. What one have gives another takes away.

The delivery fee rise is most welcome. It’s been a long time coming given the wage and other cost increases since the last fee increase about 8 years ago.

The news about the Foxtel contract going to Australia Post ends the week on a sour note. I wouldn’t be annoyed if the government ownership did not extend to any part of the business for which there was active competition. In other words, the government should divest itself of the retail operation and the commercial distribution operation. A government concerned about business and, in particular small business, would get to work on this.

Australian Newsagents are a product of newspaper and magazine publishers. But the umbilical cord was cut decades ago. While the relationship is challenged at times it remains strong or is at least perceived as strong by people on both publishers and newsagents.

But the world is changing. Publishers are adapting to the changes faster than newsagents. Newsagents continue to act as servants, expectant of a master delivering continued purpose.

It’s time for newsagents to acquire or create additional purpose for themselves. This might in the content space or in an allied product service category which fits with the typical newsagency consumer.

While some individual newsagents are playing in new spaces – invitations, printing etc – none seem to be genuinely searching for new revenue streams. This ties newsagent relevance to their existing product/service mix and that’s dangerous considering the changes coming in lotteries, newspaper sales, magazine sales and further competition in the stationery space.

This deregulated channel does not yet understand what deregulation means and how to commercially deal with that.

I’m concerned about this today because of spending another evening reviewing figures for several newsagencies. Similar demographics, similar sized businesses yet wildly different business numbers. Those growing are pursuing growth. Those not growing are complaining about it. It’s this negative mindset which is the biggest challenge for the channel.

Newsagent leaders need to be pursuing new products and or services which they own or have a greater piece of to shore up customer traffic fall and to bring new customers through the doors.

This is a business case study unfolding before our eyes. If only we could intervene…

In his blog at PC World, No More Dead-Tree Newspapers?, Editor in Chief Harry McCracken gets right to the point and says: the classic morning newspaper no longer feels essential. He talks about news online being free versus the high cost for a home delivered newspaper. He also talks about more content in a newspaper than he has time for. He ends posing a question: How has the Web changed how you get your news?

Newsagents and those in the news and information supply chain ought to ask customers that question. It’s time for some unscientific research on flat and falling newspaper circulation.