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In an unprecedented move, The Salt Lake Tribune and Deseret News have decided to pursue separate digital futures while preserving their six-decade-old joint operating agreement that controls printing, advertising and other non-news functions of the two papers.
The change started in 2009 when Deseret Management Corp., the commercial arm of the LDS Church, formed a new division. Known as Deseret Digital Media, it consolidated the websites of Deseret News, Deseret Book and KSL Broadcasting under one umbrella led by Clark Gilbert, a former Harvard University business school professor. Its mission was to become the "trusted digital voice" to its audiences.
The change accelerated last spring, when Deseret Digital took over the responsibility of selling ads for DeseretNews.com. Until then, ads for the News and Tribune websites were sold by MediaOne of Utah, a company formed in 1952 by The Tribune and the News to carry out business duties for both papers as they competed editorially. Revenue was split, 58 percent to The Tribune, the rest to the News.
"When the joint operating agreement was first conceived, it was designed for print media, and not for digital media. Most of those reasons [for a print-centric business agreement] don't carry over to the digital media space," Gilbert said last week.
As the exit of DeseretNew.com has played out, MediaOne has set up Utah Digital Services, a subsidiary that sells digital ads solely for The Tribune without having to share revenue with the News.
"The Deseret News moved its digital functions out of MediaOne to go into Deseret Digital, along with KSL and the other digital assets that are owned by the [LDS] Church," Tribune Publisher William Dean Singleton said last week.
"When that decision was made, MediaOne needed a digital strategy that did not involve the Deseret News. While MediaOne handled all the print operations of both The Salt Lake Tribune and the Deseret News, effective in May it [stopped handling] digital for the Deseret News. It only handles digital for The Tribune and the other digital assets that MediaOne had that didn't involve either paper," Singleton said.
The split clears the way for both papers to develop digital news and information products without any requirement to share expenses or revenue, as they must continue to do on the print side of their businesses under the joint operating agreement, which will remain in force until 2020.
It comes at a time of unparalleled upheaval in the newspaper industry. Battered by the recession and abandoned by readers who have turned to the Internet for news, the industry is awash in challenges. Adjusted for inflation, advertising revenue last year was at 1985 levels, prompting the new CEO of MediaNews Group, which owns The Tribune, to declare that "traditional journalism is dead."
"As if more evidence was needed, in the United States our key customers have abandoned us," John Paton, who is also CEO of The Journal Register Co. and a new company, Digital First Media, said in June in a speech to the World Association of Newspapers and News Publishers. "Now, more Americans get their news via the Web, and this year more advertising dollars will be spent on the Web than in newspapers." He has expressed the same sentiments in his blog.
Singleton chose Paton to replace him as CEO of MediaNews. Like Paton and like Gilbert, who now runs the Deseret News, as well as Deseret Digital Singleton believes digital will eventually become the dominant medium in U.S. journalism. Over the past five years, print advertising has been declining, while digital ads have been growing rapidly. Still, print advertising accounts for 80 percent of all newspaper revenue, so Singleton and others do not see newspapers' imminent demise.
Like Paton whose digital-first, print-last catchphrase will be the touchstone for all MediaNews papers in coming months Singleton is moving to position The Tribune in the evolution to digital. It will be up to MediaOne of Utah CEO Brent Low to figure out what information products Utah Digital Services will offer. Singleton says Low can pattern the subsidiary after Paton's yet-to-be-spelled-out corporate digital strategy, or Low can strike out in other directions.
"While MediaOne will pay close attention to the initiatives at MediaNews, it's up to the management at MediaOne to determine which of those initiatives they use and which ones they don't," Singleton said.
Low said he sees strong parallels between Utah Digital Services and what Paton's digital-first game plan is likely to be.
"What he has done [at Journal Register's 18 newspapers] is, he has changed the business model, first and foremost, in the newsrooms," Low said. "Utah Digital Services is not a newsroom ... but what we are trying to do at Utah Digital Services from an information perspective is exactly what he's done at Journal Register putting most of the emphasis on the content and getting the right content through digital means to the consumer.
"It's all about the user experience. If you get the content and the user experience right, all the rest of it falls into place. By that, I mean the traffic, the revenue, the profits," Low said.
Existing lines of MediaOne's business, such as its real estate brokerage service, already make up 40 percent of The Tribune's annual revenue. Digital services could boost the contribution to perhaps 60 percent. But, Low adds, that estimate is guesswork.
"We forecast things, we prognosticate, but very seldom do things turn out exactly as one speculates," he said.
Skeptics abound. They think the Internet has demolished the financial and technological barriers that protected the newspaper industry for decades. As newspapers try to move toward digital, they are running into non-newspaper competitors such as Google, Facebook, Craigslist, Yahoo, eBay and Amazon, which have taken big bites out of the news industry.
"Most newspaper companies will tell you privately, not publicly, that they do believe that they are going to be mainly digital businesses at some point in their future," said media analyst Ken Doctor, who writes for Harvard's Nieman Journalism Lab. "They don't [speak openly] because there is not a clear route to how that happens.
"It's essentially saying that the print business is going away, and that a digital business that will provide more than 50 percent of [a company's] revenue will replace it. But we can't exactly tell you what will happen, or what that business will look like.
"Instead, what they say is, we are managing the maturity of the print business, and we are growing digital as quickly as we can. That sounds better to investors."
To Doctor, the jury may still be out. To Gilbert, the Deseret Digital CEO, the jury has delivered its verdict. Deseret Digital's revenue has increased by more than 50 percent in each of the past two years, he said.
"We obviously have a lot of growth we anticipate ahead of us, and we are working really hard to get there," Gilbert said.
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