Friday, June 17, 2011

Digital-first gets another advocate: UK Guardian CEO

John Paton, CEO of the Journal Register Co., has been generating a lot of buzz for his revolutionary pronouncements to newspaper editors that they need to put digital first, print last. (Here are his 10 Tweets to transform newspapers.)

Now he has something of an ally in the UK.  In an interview with Paid Content, Guardian Media Group CEO Andrew Miller echoed some of the scary phrases of Paton by saying that Guardian is realigning the business to be digital first.

He also predicted that all newspapers will eventually exit print, although he would not say when.

Less revolutionary

The transformation to digital from print as envisioned by the Guardian Group appears to be more gradual than that advocated by Paton, who recommends dumping two-thirds of the legacy business’s infrastructure costs through outsourcing.

Miller wants the Guardian Group to double its digital media revenue in five years.  At the moment, digital is about a tenth of the group’s total, so by Miller’s model, the exit from print is not going to happen any time soon.

Incapable of change

Any legacy industry, such as newspapers, is almost incapable of making the changes necessary to respond to competitors with disruptive technology, according to Clayton Christensen, a Harvard researcher. 

But you do not need to be from Harvard to understand the dilemma of a newspaper publisher: you have a legacy business (print) that generated 30-40 percent profit margins and is still producing 10 to 20 times as much revenue internally as the disruptive alternative (digital).

Why would you abandon print for digital given the current structure of your business, with heavy capital investment in production and delivery systems? It is not logical. It makes no sense to an investor. And the digital revenues are not enough to both liquidate the existing debt and incur the necessary new debt to make the transition.

According to Christensen, these are some of the reasons that newspaper executives cannot make the transition. It is not that they are all stupid (nor that they were all brilliant in the days of 30 percent returns), it is structurally difficult if not impossible.

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