The outsider solution: chuck away your business..wrong, wrong, wrong

Now, normally I quite like Steve Rubel, but his recent lecture to the newspaper industry is way way off the mark. Under the head: how to turn problems into profits, he says that putting up cover prices to meet higher distribution costs is a flawed strategy, and continues:

What they should be doing instead is using this as an opportunity to put a hard date on when they will abandon print altogether, close down plants and migrate completely to a digital paradigm. They need to have faith that their brands and quality editorial product will encourage readers who haven’t already migrated to do so.

OK – this looks nice in a column, but it’s wrong, wrong, wrong.

First, a quick bit of maths let’s assume this is a standard newspaper organisation where digital revenues are at best 10% of your total – often less (see my little slide rule on Archant); and in some cases (eg – Tribune) those digital revenues aren’t actually growing at the moment.

The nub of the matter is you might save 30-40% of your cost by ditching print; but you’re probably going to lose 90% of your revenue -  more if you factor in the amount that. You’re not just left with a smaller business…you’re left with not much of a business at all.

At this stage ‘faith’ in your brand and your editorial quality is going to be very important – because you’re not going to be left with much cash to support either of them.

I suppose you could ‘name a date’ for your digital switchover – but it would have to be so far away as to be meaningless. 5 years? 10? 15? 20? How many of the chief execs who make such announcement will still be in place then? How many of the companies it affects will still be under the same ownership?

Not that this is a great situation to be in. Ideally we wouldn’t be here. Ideally all newspapers would now have 90% of their revenues coming in digitally and be soaring away. The industry has to take a fair bit if blame for not being there (read Ken Doctor’s excellent Newspaper Stories We Tell Ourselves on this). But we can’t play ‘coulda-woulda-shoulda’ for the rest of our days; we have to start from here.

I spoke recently with the chief exec of a business that has made a hugely successful digital transition. He said ‘as long as we can keep the print business going for another 18 months we’ll be ok’. That is a phenomenally powerful position to be in – but that is so far away from most newspapers’ experience.

Why am I so grumpy about this? Well – it’s the assumption that there’s always a quick fix for disrupted companies; normally one that involves them chucking away their past and embracing an uncertain future. Close up – when you have owners, investors, customers and staff to answer to – those decisions are much tougher.

A sense of detatchment helps – but complete detatchment from financial reality is utterly unproductive.

That is the reality of living through disruption. It is a process of constant, tough transformation rather than instant switch-flicking.  It is fascinating hard work. It is why I started this blog.

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