Newzmaven

Ron James never wished the San Diego Union Tribune ill. The venerable daily – the last of the erstwhile Copley chain – was, after all, where James served as managing editor for the newspaper’s web site, SignOnSanDiego.com for 8 of the last 9 years. But, when he, and the senior SignOn managers were laid off in May of last year, he had a decision to make:
• Should he apply to other news organizations in a collapsing market for journalistic talent, and possibly leave the community he loved? Or,
• Should he stay put, exercise his entrepreneurial talent and see whether he could ply his trade as a journalist independently online.

He chose the latter, and the result of that decision, San Diego News Network, went live March 23 as “Beta 2.9” at SDNN.com. It’s being watched with no little angst by newspaper publishers nationwide.

Why this entrepreneurial journalistic enterprise should merit such scrutiny boils down to a number of factors.
• SignOnSanDiego.com, with revenues of $19 million or more in 2008, was dominant in its market. It was also among the most profitable and heavily trafficked online newspaper sites anywhere in the country when the folks who were largely responsible for its success were given their walking papers. Everybody in our business was left to wonder – if an online newspaper site at the top of its game won’t suffice – what will?
• SDNN is comprised largely of the editorial talent laid off by the San Diego Union-Tribune. So, another point worth pondering is, did the paper sew the seeds of its own demise?
• SignOn and SDNN now battle for ad dollars in an environment where the traditional publisher has to sustain an expensive printing operation, and the upstart doesn’t. The ensuing battle for local digital supremacy may offer the industry a true apples-to-apples test-tube environment to help evaluate new business models.

That’s a lot to throw onto James’ shoulders, but he’s got the experience to be a worthy competitor, and seems to have made a lot of the right moves to date. He detailed the work in progress in an exclusive interview March 25.
First, a bit of background: James has always been an entrepreneur, and has had his own business, The James Gang, with his five brothers for more than three decades. At Time Warner, he pioneered broadband content for Road Runner, and in 1995 he launched San Diego Magazine, along with one of the first local blog networks winning him the first Webby for community. He took his video experience and multimedia storytelling techniques to the San Diego wildfires, and this work was featured and awarded at an NAA CONNECTIONS conference. He was pioneering SignOn Radio, an online radio station, admittedly a little before its time, when the pink slip came.

“I started looking around for other opportunities,” he said, “but that was difficult in San Diego, because the Union-Tribune was the be-all and end-all in this region.” At the same time, he didn’t want to move. While serving as SignOn’s managing editor, he’d done a survey of “who could compete with us online.” The fact is that what he calls the “big dogs” –CitySearch, Microsoft’s Sidewalk and AOL, all had tried and failed to make much of a dent in local reader awareness.

In assessing the local competition, it appeared that the TV stations didn’t have a big enough newsroom to challenge the Union-Tribune’s news supremacy, but did have an effective promotional vehicle with their daily broadcasts. There also were an assortment of community dailies who focused on their local towns and delivered what Web-savvy publishers today call “hyperlocal” coverage.

The question was, could James forge a coalition of enough local media outlets and enterprise reporters economically enough to become profitable? James thought it was doable. He began by getting letters of intent from local media companies to both cross-promote and deliver their reporting to what became the San Diego News Network for a share of the return. He then began recruiting a core staff to cover breaking news, enterprise subjects and other lifestyle areas that are popular online. Within the first week he’d secured San Diego Magazine, Channel 6, three radio stations and several community and ethnic newspapers. “Many of them knew they needed to be online, but they couldn’t compete on their own,” he said. (A full list of current partners is here.)

James, looking to fund the venture, reached out to Neil Senturia and Barbara Bry, well-known local entrepreneurs who had an entrepreneurial show on James’ local online radio station. Senturia, now the CEO, Bry and Kevin Hall forged a partnership with James and spearheaded a capital raising effort where investors contributed between $50,000 and $100,000 each. Together, they raised on the order of $1 million to launch the company.

James now has a staff of 9 full-time journalists focusing on breaking and enterprise news locally, and acting as editors for the different sections. Staffing the lifestyle sections was easy – “we got the best people out there. With the newspaper in a death spiral, they were cutting back on travel, food, gardening and science. These were all people who really love journalism and wanted the opportunity to get back into the business. “I told them that this would be journalism without the BS. Now they’re loving life, covering what they want to cover, how they want to cover it.” There are also 4 full time sales staff, with plans to enlarge this team to 9 by the end of next month.

Aside from the small, core staff, most of the section editors and writers are paid with a share of the revenue delivered by page views to their content. A freelancer might choose to be paid a flat fee, say $100 for an article, or can forgo a flat fee, or receive the recurring revenue from ads delivered by their growing audience. Visceral topics like wine, food, gardening, technology and the environment seem to attract talented writers with a love of their subject matter, and a willingness to join “the long tail.”

The typical ad placement is an IAB-standard big box ad; the writers don’t sell it and have no say in what goes into the ad, so there are no church and state issues, James said. Some 20 percent in commission comes off the top of that ad for the ad sales team, but the writer keeps the other 80%. SDNN derives revenue from other ad placements on the page. “The more quality stories a journalist can generate, the more revenue they’ll make, and it will keep paying regardless of whether it’s three months, six months or 6 years old.”

The truth is, many of the writers laid off by the Union-Tribune received a year’s severance, so they had the time and the inclination to invest in a new venture that could benefit from their expertise. California law bans non-competes.
SDNN’s media partners enjoy the same benefits, but each of the 25 plus is contractually obligated to promote SDNN in their own media. There are 15-16 newspapers, four radio stations, TV ads – James says it amounts to “the largest, longest lasting media campaign in media history.” Radio ads began airing about three weeks prior to launch. On launch day, March 20, the site served 177,000 page views.

There were glitches from the federated nature of the site – while the Word Press blogging platform was ideal to allow category and contributing editors and freelancers to maintain their own publishing spaces, it confounded the publishers’ attempts to maintain a single sign on scheme for users, leading them to have to post an explanation/apology.

James explains, “The first CMS (content management system) we had was so complex and arcane, it required people with HTML experience to pull it off. We needed something really simple so we abandoned the CMS just weeks before launch.” But in every challenge, there’s a silver lining, or as James puts it, “a chance to turn lemons into lemonade.”
“Rather than unveiling everything all at once, we’re now having a kind of rollout launch, section by section. You don’t see all the sections we’re going to have, but this gives our visitors a chance to get to know us and meet our staff.” Staff-generated articles carry the SDNN logo, which James intends to be a kind of imprimatur for the quality visitors can expect from his editorial team. Within 6 to 8 weeks, the site will boast over 24 sections and subsections. But the introduction process means there’s always something new for readers to check out.

James is confident the site will be profitable by year’s end. As for the Union-Trib’s near $20 million mark, that income supported a staff of 70. – “If I could have a staff of 20 people and came anywhere close (to that figure), I’d be in hog heaven,” James laughs.

Fundamentally, SDNN’s model is still ad-supported, but with a more sophisticated kind of search engine optimization model built in. Ironically, by centering on the very categories Web users find most entertaining and targeted, the opportunity exists to build robust channels that can be more easily matched to their corresponding advertising interests. “We’re getting higher CPMs because every story has its own locale, and its own traffic and revenue generation (infrastructure),” James explained. “Instead of going out and just selling to everyone (in San Diego), we targeted five vertical packages for launch. We sold out in three days.”

Media partners will share in a pool of revenue that’s apportioned from gross proceeds once the site is profitable. They all know there’s a building process, so they’re willing to be patient. They deliver SDNN all their stories, from which James and his editors are allowed to “cherry pick.” Each has the same ad inventory ratio as SDNN, so they can sell it themselves, use it to promote their other media, or give it back to SDNN to sell for them. Whoever sells the inventory keeps 80% of the revenue generated.

The beauty of the model is that each of them now feel that they share in a virtual newsroom, with an embarrassment of riches the Tribune decided it could no longer sustain – three former food and wine writers plus one formerly with the Los Angeles Times, just as an example. “We have eight writers in just the food section, and the Union-Tribune now has none. They’re relying now on contributions from writers in other departments.”

James knows he benefitted from a kind of “Perfect Storm” besetting the newspaper industry, and acknowledges that he’s living out a kind of “morality play. A lot of newspapers got very fat and happy. They can be hidebound and very arrogant,” he said. “They didn’t truly exploit the opportunities on the Internet. And it was always a struggle between the online newsroom and the print newsroom.”

On a more basic level, there was an unwillingness to acknowledge that people, especially young people, increasingly weren’t buying the newspaper – they were only getting it online. Rather than blaming online for the shift, the prudent thing to do would have been to channel more resources into the online operation, making Web-first publishing the core of the business. Such a thing would have called for “dramatic changes,” he explains. But, “if (SignOn) had put the resources into their own online operation, and beefed it up with our somewhat unusual strategy, they wouldn’t have left the vacuum” that SDNN now fills.

James acknowledges that, without the disruption caused by the layoffs (especially his own) and the resulting diminishment of the product, it’s hard to see how SDNN could have forged the foundation for success. But he still holds Union-Tribune executive managers responsible for the result. “They had to think outside the box,” and didn’t, he explains. “What was happening was that the online version of the San Diego Union Tribune primarily reflects the newspaper content. The newspaper’s lifestyle sections and business sections continue to shrink, and the online version suffers correspondingly.”

Unwilling to see the success of the online site as the future, managers instead cut back on the whole business. “In reinventing the wheel, they got rid of the people who’d brought them to the dance,” James said. “They knew we had a successful model, but they didn’t fully appreciate our stature as one of the best Web sites in the industry in our heyday. It’s a bit like the prophet never being followed in his own land. They didn’t understand what they had.”
In reinventing themselves, the newspaper lost some of their best talent and most diverse voices in the process, James says; “They set themselves up for this… it’s the ultimate unintended consequence. Instead of being creative and figuring out how the Web site could have addressed different interests, they did what they did with Craigslist. They let someone else jump in and get that business.”

Success for SDNN isn’t assured by any means – “It’s too premature to tell whether this is the ultimate model for regional news and information,” says James, but he adds that the community “response is overwhelmingly positive.” Readers comment that they’re seeing a lot of the names that they miss in the paper, and recognize the quality of the reporting. “There’s always this fear that, if the newspaper disappears, society won’t have a significant journalistic presence – that somehow the disappearance of the newsroom will cause news to disappear,” James says.

“We may never have newsrooms the size that they were again,” he says matter-of-factly. “But there will be organizations like ourselves that excel at entertainment and investigative journalism in a community. People worried about the quality and type of content they were going to get from us. We tried to demonstrate that we could deliver diversity and depth – some fluffy, some in-depth, always entertaining and informative and very well written.”
He adds, “I was at the right place at the right time, with a concept that works.” Newspapers, in order to survive, may have to apply many of the same strategies: leverage your partners, respect your talent, dispense with political games and let your writers and editors do what they love to do, and keep your costs down as much as possible.

Would such an experiment be possible in other communities, perhaps with the participation of the local newspaper? James says, “The answer is ‘yes,’ but it’s not an easy process. It’s not easy putting together a coalition of media companies, and the diverse journalists they comprise, but yes, it’s possible. It’s really the only way you can do it. In most communities you have these local media companies probably doing okay financially, but not doing anything significant online, so it’s a no-brainer for them to want to be a part of something like this.”

The amalgamation that emerges may well capture the best of all contributors, and blur the lines of traditional and Web media. “We’ll have our own SDNN radio and TV programs within a year,” James vows. He adds, without a touch of bravado, “I didn’t do this just to compete with SignOn and bring them down. I did this because this is what I do well, and I just wanted to stay in San Diego.”