Theory alone won't change any business's fortunes. To succeed, you need the guts to put radical ideas into action. On this basis, perhaps we can all learn a thing or two from John Paton, the 54-year old Denver-based publisher who is trying to turn around America's second-largest regional newspaper chain.
When it comes to newspapers, strategists don't typically look to the struggling US industry for inspiration. Instead, they seek out innovation in Oslo, Mumbai or even London, where the Economist argues that Britain’s national newspapers have become "exceptionally innovative".
Paton, however, could be the man who changes the way we think about the newspaper industry, in the US and further afield.
A self-confessed "newspaperman" who started out as a copy boy at the Toronto Sun in the mid-1970s, John Paton can recall a time when people still smoked cigars in newsrooms.
For the past two years, however, he has been working to revive the once-bankrupt Journal Register Co.(JRC), a small newspaper publisher with operations in Detriot, Philadelphia, Connecticut and New York. When he took over the company, Paton admits it possessed "a terrible reputation". Debt-laden and risk-averse, previous managers had "cut costs to a point where they wrecked the business".
Paton’s radical turnaround plan has involved putting digital first on the list of corporate priorities – and print last. "You don’t transform from broken," says Paton. "You don’t tinker or tweak. But you can build a news and better house from the foundations of the old." Just today Paton extended his elegant vision of a mutalised, digital, news publishing business.
JRC is privately-held and doesn’t publish its financials. But there are signs that Paton’s medicine is working. Last year, revenues declined by two percent, against a US industry average of six percent. In 2009 the company was effectively bankrupt, but in 2010 it made a $41 million profit. Total audience has doubled and costs are now lower than they were in 2008. Online revenue at JRC is growing at seven times what Paton calls the "industry standard rate" in the US.
The hedge fund financiers who now own a large chunk of the US newspaper industry seem impressed. Three months ago, they handed Paton additional responsibility for Media News Group, a much larger chain that owns 57 daily newspapers including the Denver Post and the San Jose Mercury News, and which itself emerged from bankruptcy protection in March 2010. Paton now controls the second-biggest newspaper publisher in America, with 11,000 employees and revenues of over $1.4 billion a year.
So, based on what he’s been doing and saying, here’s John Paton’s recipe for turning around a half-dead newspaper company.
1. Salami-slicing is over: put digital first, print last
"To be in the news business now means you must run your business as Digital First," says Paton. "And that means Print Last."
Instead of doing this, Paton says, wave after wave of "really bad managers" have sought to perpetuate print by "going after the easiest things". They’ve "cut the marketing, cut the news hole, cut the newsroom, which they don’t understand".
Paton argues this approach has merely prolonged "the death of a broken business model rather than adapting to the realities of the present". Editorial staff end up "doing more of the same with less, which results in the same done worse".
At JRC this cycle is halted: headcount is down by 16.5 percent, but the number of staff in the newsroom (and on sales teams) has stayed constant. When digital comes higher up the list of priorities, editorial becomes more important, too.
2: Harness The Cloud, outsource as much as possible
Digital investment can only be self-funded by "driving down legacy media costs", says Paton. "You’re going to have to go after the infrastructure costs that are in the print part of the business."
He argues for outsourcing "printing, mailroom, delivery, pre-press, back-end digital, IT and finance" – in other words, everything beyond the "core competencies of content creation and the selling of our audience to advertisers".
"You have to slay the production god and the legacy costs that go with that old model," says Paton. "There are now companies who do most of this much better than any newspaper company does — no matter what their head of pre-press or production says."
3: Stop listening to newspaper people. Put digital people in charge of everything. And let them push you around.
That’s a direct quote from a speech that Paton gave last year. For 15 years, Paton argues, newspaper people have been proving that they are "no good at all" at digital publishing. This "aging managerial cadre" of "grey heads" in newsrooms is "cynically calculating how much they DON’T have to change before they get across the early retirement goal line."
It’s time to get rid of them. Or at least, to "stop listening" to them. Instead, Paton recommends putting "digital people in charge – of everything".
4: If journalists aren’t willing to change, get rid of them
"Adding a new person or expense for every function is just putting more water into a sinking boat," Paton says. Instead, journalists need to multi-task. "If they can’t learn you have to let them go and get those who can," he adds.
But management can do more than simply pull the trigger. At JRC Paton bought a Flip cam for every reporter. "They paid for themselves in about a month," says Paton. "We have gone from about 100,000 video streams a month to about 2 million."
5: Stop giving away digital ads to prop up print: start chasing digital dimes cost-effectively
"At some point, print is going to cost more money than it is worth," Paton says. "If you don’t have a viable business model to turn it off when that day comes, where does that leave you?"
Paton describes as "defeatist" the argument that newsrooms can only be sustained by "print dollars". His response? "If a digital ad is worth a dime, then find a cost-effective way to get those dimes."
This has involved experimentation. During Paton’s first year at JRC, the number of JRC's different revenue streams went from 13 to about 60. By the end of 2010, 60 percent of JRC digital ad revenue was generated independently of print.
5: Cut out duplication, get feet on the street
What’s the point of rewriting a press release one more time when 478 versions of it already exist on the web?
Paton believes that the only competitive advantage newspapers have left is "to be on the street locally gathering news".
Paton says his newspapers contain "about 40 percent local and 60 percent whatever else — wire, syndicated stuff". Non-local news pages (carrying national, health or other specialist coverage) are now assembled by centralised teams "who can do a good job of it". Result: "You get savings and a better product."
6: Convert your audience into partners. Properly.
"The new ecosystem for news is too big," says Paton. "No-one has the resources to cover it. You have to partner. If you don’t, in your communities, you will be out of the loop and out of business."
Paton set up Community Media Labs at each of the Journal Register’s 18 dailies. At the Labs, bloggers and citizen journalists sharpen their skills. "No partnership works if it is one-sided," says Paton. "If you want to harness the power of bloggers then you have to help them make a living."
7: Use free web tools
"We have built sales support systems using an iPhone and free Google tools," says Paton. "We have successfully printed pages on a press using only free web tools."
As a result, Paton claims to have halved capital expenditure within a year of taking over at JRC.
Here’s his advice: "The next time some rep comes to your shop brandishing a $20 million system," he says, "tell them the price just went down. Way down."
8: Give your people the tools, space and time to experiment
Most media executives have learned to parrot the Silicon Valley line about experimenting, failing fast and moving on. Paton puts it into action. On his blog he invites employees to set aside their regular duties for 25 percent of the time in order to "experiment".
Successful applicants get free tools like smartphones and iPads as well as $500 a month extra pay. Beyond this, "there are no rules" – apart from a requirement to figure out new ways of doing business.
9: Try to over-communicate
Paton speaks softly, with great precision and a directness that would alarm most boardroom types. (On reading recently that senior US newspaper executives don’t have time for social media, he replied via Twitter: "Bullshit – 54 here and a tweeter".)
He started blogging because the JRC email servers didn’t talk to one another. ("I couldn’t even e-mail our employees. Our infrastructure didn’t work. We had a collection of e-mail servers that didn’t communicate.")
"You can’t over-communicate," says Paton. "Nobody does it well. You just have to keep working at it knowing that it, like the website or the newspaper, is a job that is never done."
Working with established ideas, John Paton seems to be creating something remarkable. I’m left wondering whether Britain’s media establishment – including our "exceptionally innovative" national newspapers – boasts anyone to match him.
To finish, here he is in action at the #140conf in New York this year, introduced by Jeff Jarvis: