Strib, PiPress: Some Gain, More Pain

This is John Reinan’s weekly marketing column for

Recent developments in the media business offer some hope for the future of Minnesota’s two largest newspapers. But those welcome rays of hope ultimately could be dimmed by other, more powerful currents that threaten to drag down both of the old-media giants.

First, the good news: Last week, Apple and Google both announced new subscription services for tablet devices like the iPad. In return for a cut of the revenue, Apple and Google will provide an easy way for news consumers to pay for their favorite publications on a tablet.

I won’t go into the details of the competing services; you can read more about them if you’re interested. The main point is that old-media publishers now have a clear path to seek revenue from tablets, which many analysts see as the next great frontier in digital communication. Newspapers fumbled their opportunity on the existing Web by giving away their content for free; now they have a chance to make consumers pay for their news on these new devices.

I expect the Star Tribune and the Pioneer Press to take advantage of this opportunity, which should lead quickly to growth in their digital revenues.

But there are long-term trends that won’t be reversed by the addition of paying tablet readers. Among them is the continued growth of so-called “content farms,” which exist solely to churn out cheap and often worthless Internet fodder. The point of content farms is to deluge the Web with short articles that will turn up in searches– and provide a convenient location for related advertisements.

New-media companies are aggressively hunting for cheap content. That was the motivation for AOL’s recent purchase of the Huffington Post, and the merger of Tina Brown’s new-media Daily Beast with old-media Newsweek magazine.

I wouldn’t be surprised to see a company like Yahoo make some sort of deal with one of the remaining newspaper chains, like McClatchy or Gannett, to provide content for the Web. And that’s where things begin to look dicey for the locals.

Old media have credibility and depth. But those are qualities not often valued by the Internet. Content farms like Demand Media and Associated Content have growing revenue and economies of scale– and they look to be the future of online content. It may be that many of the remaining old media will be folded into the content farm empires, bringing a veneer of respectability to the new media for a while before they’re ground down to the lowest common denominator.

The Star Tribune is a stand-alone company. The Pioneer Press is a lone outpost whose owner, MediaNews Group, has been aggressively clustering its other properties in close geographic proximity to get economies of scale.

The McClatchy Co. sold the Star Tribune four years ago in the same way a balloonist jettisons cargo to stay aloft. Now, McClatchy itself could become the target of a bottom-feeding Internet giant that needs the cheap content its nationwide stable of news gatherers could provide.

But that scenario doesn’t do anything for the Star Tribune, which has no economies of scale or national reach. The Strib has to survive on whatever Minnesotans are willing to pay for it. And tablet readers– even thousands of paying ones– might not be enough to keep it afloat as print readership continues to decline.

The Strib last week announced positive financial results for 2010– suggesting that, for now, it’s gained a foothold. But that foothold came only after hundreds of jobs were slashed, with pay and benefits cut for those who remain. Meanwhile, revenue continues to fall, albeit at a slower rate of decline.

As part of a larger entity, the Pioneer Press might be in better shape, but not if its corporate owner makes a deal to provide content focused on areas where its other properties are clustered, such as the San Francisco Bay area. In that scenario, the Pioneer Press could find itself cut out of the action.

I hope both newspapers gain significant revenue from a new generation of tablet readers. But it may not be enough for them to prosper long term against the Internet’s growing stable of content sweatshops. Ultimately, the fate of both newspapers depends on whether Minnesotans– both readers and advertisers– value them enough to pay the costs needed for the newspapers to survive.