News

Can Cable TV Save the Newspaper Industry?

6/06/2008 8:00 PM Eastern

When Cablevision Systems agreed to pay $650 million to buy Newsday, optimists hoped it might pave the way for other cable companies to invest in — and rescue — the newspaper business, while potentially boosting cable’s local ad sales and local content.

After all, both businesses sell to a local market, both produce community news for the Web and both depend on a staff of reporters and editors to cover news. “It’s one of those things that makes a lot of sense on paper, but I’m not sure the reality works out quite as well,” said Mark Potts, a new media consultant and ex-newspaper editor.

A quick survey of the nation’s cable-newspaper partnerships turns up sparse few, and analysts said there’s good reason. First, the two mediums have a legacy of bitterly competing against each other for local ads, a rivalry that’s hard to set aside. That contest reflects the diverse corporate cultures of print and TV, with newspapers more risk-adverse and conservative. Moreover, ad agencies are not structured to buy combined cable TV-print packages. And in terms of sharing content, newspaper stories aren’t easily translated into compelling TV programming.

More practically, it would be hard for most cable operators to find newspapers up for sale in the same markets as their systems, or individual papers going on the block.

“Newspapers’ culture is sort of notoriously prickly, for one thing,” said Potts. “They do things their way, in a certain way. They’ve been very resistant, unfortunately, to change. Cable’s got a little bit more of a cowboy mentality, a little more free-for-all kind of mentality. … You wind up, potentially, with some frustrations trying to blend the cultures.”

Print In Peril
Newspaper ad revenue, print and online:
SOURCE: Newspaper Association of America
Year Billions % Change
2004 $48.2 4.5%
2005 $49.4 2.47%
2006 $49.3 -0.32%
2007 $45.4 -7.9%

Newspapers are on a well-publicized decline, with circulation falling consistently, down 2.5% last year and ad revenue falling 7%, according to the Poynter Institute. The industry has seen massive staff cuts, and just last week Moody’s Investors Service put out a report that said the fundamental credit outlook for the newspaper industry remains negative, due to the migration of readers and advertising to the Internet.

Large companies such as Cox Enterprises and The Washington Post Co. own cable systems and papers, but not in the same markets, and there are no Federal Communications Commission regulations barring ownership of a cable system and daily newspaper in the same market. (The Cablevision-Newsday sale still must get antitrust clearance from the Justice Department.)

But if past history is any guide, cable-newspaper synergy isn’t so simple. Companies that own both cable systems and newspapers have had a tough time taking advantage of joint advertising opportunities, crosspromotion and the transfer of newspaper stories from print to television. The New York Times and Discovery Communications were partners in a cable network, Discovery Times Channel. But the Times sold its stake back to Discovery two years ago, saying it planned to concentrate on producing video for its Web site.

The possibility of Cablevision and Newsday selling joint ad packages of print, TV and online “is a possible benefit and it is kind of logical,” according to Rick Edmonds, the media business analyst for the Poynter Institute, a nonprofit school for journalists.

But, he cautioned: “It has not turned out as well as hoped in many of those arrangements. It has to do with these are fairly different sales cultures and it’s much easier said than done to get newspaper people to sell broadcast or cable, or cable people to sell newspapers. They are used to selling against each other.”

In Toledo, Ohio, for example, Buckeye CableSystem, local sports channel BCSN and The Toledo Blade are all owned by Block Communications, which cross-promotes them. For example, a current “Treasure Hunt” contest incorporates full-page ads in The Blade. The promotion touts the many networks the Buckeye offers, and tries to build the paper’s circulation.

But on the ad sales side, “we don’t have a formal relationship where we’re generally out pitching both media together,” said Buckeye vice president of ad sales Steve Piller. “We’re still competitors trying to eat each other’s lunch.”

Added Block Communications chairman Allan Block, “The newspaper is facts, the cable system is video.”

Cablevision says its planned purchase — some say rescue mission — of Newsday from the Tribune Co. will give the cable operator clout and leverage with local advertisers, as owner of the dominant daily paper and video provider in that suburban enclave. It plans to lean on Newsday for its local ad-sales expertise and to promote spots on its 70 channels. The cable company will now have many more options and platforms for advertisers, including increased reach for classified ads via Newsday, and Cablevision’s Optimum Homes and Optimum Auto interactive-TV services.

In addition, Cablevision said that through cross-promotion, it can better market and build circulation for the paper and subscriptions for the cable service, attracting “a larger audience than either company could on its own.”

And Newsday will give Cablevision a source of more local content, which can not only be used to help program its local news channel, News 12 Long Island, but can also form the basis for new services. For example, Cablevision officials are especially interested in Newsday’s feature section, “Part Two,” as popular content the cable company is eyeing for other platforms.

Local content — the more the better — is considered one of cable’s super weapons, a valuable retention tool in the competition against rivals like the satellite providers and telcos such as Verizon Communications.

Other like-minded companies that believe in cable-newspaper synergies are largely in smaller markets and are family-owned, including the News-Press & Gazette Co., Block Communications and The World Co., which owns Sunflower Broadband, the local cable Channel 6 and the Lawrence Journal-World in Lawrence, Kan. NPG, Block and the Journal-World have varying levels of cooperation and partnering between their newspapers and cable systems, with the World having the most integration of the two.

“From a news-gathering standpoint, you can do very rich multimedia coverage,” said Patrick Knorr, the company’s chief operating officer. “We’re just scratching the surface.”

The Journal-World has been recognized on a National Public Radio story as “Lawrence, Kansas: Convergence Capital USA,” and in The New York Times as “The Newspaper of the Future,” for its success with making local content available in print, on cable and on the Internet.

Knorr has tried to engender additional cooperation between the paper, cable and the Web in the past month by having the paper’s editor oversee TV and online news coverage, as well.

“There’s a news camera in the newsroom,” Knorr said. “We’ll interview the reporters. For years, the company took the approach that they were two rival news organizations, and that ceased to be the case five, six, years ago, and we are increasingly trying to operate them together.”

Cross-promotion and product bundling can take place, but they aren’t always a slam dunk. In St. Joseph, Mo., NPG owns local cable system NPG Cable; St. Joe Now, a local cable news and weather channel; and the town’s paper, the St. Joseph News-Press.

The cable system put together a bundle that not only includes cable’s traditional triple play — video, telephone and Internet service — but also a subscription to the paper, said Bill Severn, NPG Cable’s chief operating officer.

“We’re not very good at selling it, but we have what we call the 'Home Run Package,’ and that includes the newspaper — the newspaper bundled in on top of the triple play at the lowest subscription rate,” he said.

To foster cooperation from print, Severn involved the News-Press’s editors in the successful launch of his local news channel from the get-go, putting the operation under the wing of the paper’s city editor — and its set smack in the middle of the paper’s newsroom.

Initially, News-Gazette reporters didn’t want to give their print “scoops” to the company’s local cable channel first. Severn said he created “buy-in” from the print reporters by offering short teasers of their stories on-air, telling readers to check out the full articles in print.

Ad-sales staffers for Sunflower Broadband and The Journal-World cross sell each other’s advertising, and last summer they were all moved into the same office. “That’s a really critical step for true convergence,” Knorr said.

But selling joint ad packages is still a challenge, according to Knorr. “We’re working on cracking the right safe,” he said. “I’m not sure we have exactly the right combination.”

One major hurdle: Ad agencies aren’t accustomed to joint ad packages, according to Knorr.

“It’s almost like talking to Martians,” he said. “In many cases, they’re still organized in an old way. You have your print buyer and your video buyer, and they decide how they’re going to divvy that up.”

Miller Tabak analyst David Joyce noted that Cablevision could offer multiple platforms to Newsday’s roster of blue-chip advertisers, but conceded those opportunities are “tangential at best.”

Indeed, many Wall Street analysts remain skeptical about Cablevision’s plans to enter the newspaper arena, a troubled business with far lower margins than cable.

“So far, we’ve heard nothing from Cablevision nor the Dolans of how they plan to integrate Newsday, what its financial outlook is, how it helps Cablevision more broadly, etc.,” said Pali Research analyst Richard Greenfield. “So generally, the investment community is largely operating in the dark about this acquisition. That’s all we know so far.”

The day Cablevision announced its planned Newsday purchase in May, its stock dipped 45 cents from the day before, to $24.52. But the company’s shares have rebounded, and last week were trading at $27.22.

Still, Greenfield doesn’t expect Cablevision’s cable comrades to join it in its jump into the print business.

“I don’t think you’ll see any other cable operators buy newspapers,” he said. “This is very unique and hard to explain.”

Indeed, most analysts agree Cablevision had a unique opportunity with Newsday, given that the cable company’s footprint precisely matches that of the paper’s circulation territory.

Newsday has home delivery to 300,000 households, and Cablevision has almost three times that number in subscribers — customers to whom it can market the paper.

“It’s a unique situation,” Potts said. “If it works, you may see more of it. It was a Perfect Storm kind of situation: 'Hi, we own Long Island, and they own Long Island, and let’s get together and own Long Island together.’ ”

Most industry executives believe the Newsday purchase is planned to strengthen the Dolans’ hand in a showdown with Verizon’s video service, FiOS TV.

Newspaper analyst John Morton said: “That company already owns a lot of the major institutions, like the New York teams (the New York Knicks and New York Rangers), and this is just sort of another, I guess you can say, feather in their cap, as far as the overall market is concerned.”

September