PeppercomBlog

Newspaper Econometrics

Posted by Milos Sugovic

After posting on the economics of newspapers and discussing the sustainability of the newspaper business model, I can’t help but discuss a piece of empirical work that ties it all together. 

I came across quantitative analysis from 2007 that examines correlation between daily newspaper circulation and monthly unique Web site visitors. The correlation gives a rule of thumb for measuring a newspaper’s success in attracting online readers, and here’s the regression equation:

The picture is straightforward: Newspapers with higher daily circulation also exhibit more unique Web site visitors. No surprise there - as is the case with most empirical research - the popularity of the NYT spills over to NYT.com.

Newspaper Economics

Posted by Milos Sugovic

Note the blog post from The Economist titled “Newspaper Economics” which echoed our discussion on the bankruptcy of the Tribune.  Our analysis of supply and demand forces and the sustainability of the business model - the Achilles heal of the newspaper industry - was spot on. Look at the following:

“Technology hasn't just changed the demand for newspapers, it's also changed the supply of information. News used to be an oligopolistic business, now it's just about perfectly competitive. Barriers to entry are minimal, and plenty of suppliers are happy to provide content at next to nothing. That's a recipe for a big drop in price, and any organisation built on market power and rents is sure to fail in such an environment.

Does this mean that news, as a business, is dead? Not necessarily. Some papers will survive by selling things other than news—reputation, say, or exclusivity. Others will hang on until the print market shrinks enough that profitability is possible for a handful (or fewer) of national papers. Survivors in both groups are also likely to capitalise on the demand for news products that remain scarce—especially investigative reporting.” - Economist, December 15, 2008

Moody Objectivity

Posted by Scott Krady

The NYT ran a lengthy piece on Sunday detailing Moody’s failures on mortgage securities. Nothing new, but a case study on how and why this business needs to be overhauled with no one watching the watchdogs. My favorite line is where Moody’s changed an issuer’s ratings “even though no new and significant information had come to light.” Huh? 

Unfortunately, for investors, all of the criticism comes too late via e-mail trails dating to 2000 and former executives. It would seem that with Moody’s silence thought leadership is there for the taking - for someone like an S&P that is pushing its new initiatives. But neither will likely take the lead, since a 50-50 split of the revenues in this business is still a lot of money.    

e-Tribunes

The Tribune -- owner of the Los Angeles Times, Chicago Tribune, Baltimore Sun and other dailies  -- filed for bankruptcy this Monday, giving the struggling newspaper and television station owner time to put finances in order. It also stirred a discussion between Peppercom analysts, Matt Purdue and Milos Sugovic, on the implications for the media business and the public relations profession.

Milos: I’m wondering if we’re seeing creative destruction brought about by the Internet. With newspapers filing for Chapter 11 left and right, the PR business will undergo some massive reshaping. Do you think PepperDigital will become the core business of this firm if media evolution leaves newspapers extinct?

Matt: Well, there’s going to have to be a digital component to everything we do. The folks in our industry who really get digital will rise to the top. Print newspapers just can’t sustain the business model.  

Demonstration of Power

Posted by Milos Sugovic

If you doubt the influence of blogs on sales, you’re welcome to stop now. Here’s why:

A couple of weeks ago, Greg Mankiw, a Harvard professor, frequent blogger, and one of the most influential economists in the world expressed his dissatisfaction with the sales success of a new economics book. Authored by Nariman Behravesh, the book is titled Spin-Free Economics, and has “A No-Nonsense, Non-Partisan Guide to Today’s Global Economic Debates” subtitle. 

In an effort to propel it into Christmas shopping lists, Professor Mankiw recommended the book to social science newbies. Apparently, it lives up to the challenge of remaining bias-free, a claim to fame for many biased economists.

When the blog was written, the book was ranked at number 41,218 based on Amazon sales rankings. Fifteen hours later, it was ranked at 998. How this exactly happened is up for debate as networking is organic and difficult to trace, especially with regards to generating interest (willingness to pay), and then action (consumption). But as Greg notes, it’s “a nice demonstration of the power of the blogosphere.” 

The $16 Million Man

Posted by Matt Purdue

If you want to punk one of your PR colleagues, just tell him that he’s been assigned to the team for a new client: a professional athlete. Then watch as he runs screaming for the hills—or the nearest pub. From Stephon Marbury’s pouting to Plaxico Burress’ poor aim to Sean Avery’s love life, sports icons are having a bad week. It’s the kind of behavior that will add some gray hairs to even the most seasoned PR professional’s pate. 

And now along comes Andy Pettitte. The Yankees starting pitcher finds himself embroiled in a salary dispute, and just does not seem to understand good public relations. The New York Times reports that Pettitte is trying to avoid a big salary cut. He “earned” $16 million this year, making him one of the best-paid pitchers in baseball; he wants at least that much in 2009. His team, however, is offering something like $10 million. Andy, it’s time to wake up. 

First, let’s look at the facts that Pettitte refuses to address. He’s 36, far from spry, and suffered shoulder problems in 2008. He underachieved this year, going 14-14 with a 4.54 ERA, and won only two out of his last nine games as the Yankees missed the playoffs. Of course, we can’t expect a professional athlete to engage in a point-by-point debate over his stats. Arguing over details is never good PR.

Think (for a year) before you speak

Posted by Milos Sugovic

It’s finally official: Recession since December of 2007, the National Bureau of Economic Research (NBER) said on Monday, confirming what Americans already knew. Immediately after, yields on Treasuries sunk to new lows as investors sought out low-risk government debt, and the S&P 500 stock index took only six and a half hours to plunge nearly nine percent. But NBER, the organization that formally determines U.S. business cycles, took a full year of economic barometer reading and deliberation to declare a recession. I’m sure these CEOs wish they did the same.

Managing expectations is tough. Managing messages is easy. That’s why “think before you speak” is a pretty good life lesson, and one that NBER is religiously following. It doesn’t take a full year to figure out the economy is in a recession. Even McCain’s Joe Six Pack knew we were in a trough every time he went to collect unemployment benefits. But NBER is cautious when stamping economic trends with the capital ‘R,’ and rightfully so. 

Information has profound economic repercussions on market expectations. That’s why making statements (which might, in fact be false, or just plain old stupid) can produce the outcome you’re trying to prevent, as well as unintended consequences. So communicating necessitates extreme caution. As an exercise, try deciphering Bernanke’s speeches and you’ll see what I’m talking about.