‘It’s Time For Newspaper Publishers To Reset Targets So We Don’t Live In A Constant State of Depression’ – Frank A. Bennack Jr, Hearst Vice Chairman

Philip M. Stone March 13, 2008

Frank Bennack Jr., immediate past president of Hearst for some 23 years and now board vice chairman, told a California audience this week it’s about time newspaper publishers got real and understood print margins will never again see 30% plus and it’s time for publishers to accept new lower goals. And by coincidence it was a similar message this week, too, from Rupert Murdoch in a presentation he made in New York.

The message from both seemed to be that severe newsroom cutting will come back to haunt publishers. “If newspapers don’t cover the news and do it with detail and context, someone else will,” Bennack warned  his audience at the 40th annual Hays-Press Enterprise Lecture sponsored by the University of California Riverside.

On the opposite coast Rupert Murdoch was telling the Bear Stearns Media Conference pretty much the same message. He predicted that classified advertising will “go to the Internet almost entirely” and because of that local titles would produce “a 15 to 20% margin instead of a 35% margin” over time.

Murdoch said there has been a near revolutionary move of job want ads from print to the Internet. “Basically the thing that has been certain (for newspapers) has been classified advertising … until the last two or three years, when you have seen the growth of the Internet,” Murdoch told the investors conference. “The  biggest single type of (classified) advertising was job advertising. I think that has changed to the Internet fairly fast, and I think we’ll go there almost completely.

“This is a local newspaper phenomenon and it is going to hurt their profit margins,”  pointing out that this was not a doom and gloom scenario  but publishers had to understand “they will make 15 or 20% margins instead of 35% margins.”

Bennack told his audience he expected “circulation and ad revenue for the printed paper will, at best, probably be in the future pretty flat with 2007’s depressed levels.” And that, he said, means that publishers have to get realistic about their business, and reset advertising, circulation and profit targets “so we don’t live in a constant state of depression.”

Bennack’s advice to publishers is to expand to as many platforms as possible  -- televsion, mobile phones, personal digital assistants, and download and read products such as Amazon’s electronic book reader, Kindle – “every gadget that people will use to tether themselves to their work, their friends and family, and to the news,” he said.

Kindle, coincidentally also came up at the Murdoch presentation when none other than Martha Stewart (yes, that Martha Stewart) told Murdoch that she used Kindle for her $119 subscription to the Wall Street Journal.

And it’s not that Bennack doesn’t understand what’s going on out there. For 23 years as Hearst CEO he built the company into the powerhouse that it is today. He understands that newspapers had to make cuts – inevitable in such dire situations – but he noted newspapers printed with ink on paper will continue even as they utilize new platforms.

But is Murdoch really right – that job classified advertising will move entirely to the Internet? When the New York Times Company reports that for all its January newspapers classified advertising was down  22.6% in January over a year ago, then, yes, maybe the writing is on the wall.

In the UK, Reed Employment, a major recruitment company, says its recent research shows that fully 89% of recent university graduates only search for jobs online. Only 3% said they regularly check newspaper job sections.

Stephen Harrison, operations manager at Reed Graduates, said graduates were more receptive to receiving information online than in print. “To attract top graduates, businesses will need to rethink the ways in which they recruit ensuring that online recruitment and perhaps even social networking are included.”

And it’s a similar situation in the US, according to a survey of recruiters by Classified Intelligence in conjunction with ERE Media. The bottom line: “print advertising is an ineffective medium for recruiting candidates."

Some 70% found print was either "very ineffective" or "ineffective" and only 14%  said that print was a good way to find employees.

So with the recruiters saying print job ads don’t work anymore maybe it does behoove publishers to go along with Murdoch and figure that particular print business is lost (possibly retrievable in part on their own web sites).

It’s been said often before, but if publishers kept a closer eye on Main Street than they do on Wall Street they would be a lot better off. And if they were to set realistic margin targets that permit  the necessary investment for  top local reporting – to provide a news product that no one else can and therefore a vehicle which advertisers want to be part of --  then there will be little need for the daily Prozac.