The need for collaboration and a re-calibration of profit expectations


TTlked with a senior executive of a U.S. newspaper group yesterday, and it’s clear the urgency for collaboration among newspapers continues to rise. I’m hearing of a rise in bi-lateral and multi-lateral meetings among newspaper competitors and intensifying attempts to make transparent what they do – tough for competitors to do. The challenge is that while each corporation is set up with cross-functional teams, there are few methods to effectively get these corporations to cooperate with each other – call it “leadership,” “facilitation,” or a “gentle nudge.” This gets into the practicalities of collaboration.

As debt restructuring continues, I also heard the panic in the voice to push transformational change now before the opportunity disappears.

Yet here is a major nuance to understand. The executive’s company is still profitable. By any standard among companies in other industries, very profitable. But by the corporation’s historic standards, they are making only 40% of the profit they used to.

His objective – totally understandable – is to restore the level of profitability to fund the company and retire the debt. That’s who he works for. That’s his mission. He realises that things must change radically for meet that ambitious goal.

What’s the problem?

Profitability is not going to return to pre-recession days no matter how much we re-engineer. What I heard was that a newspaper company was still profitable during the worst economic downturn since the Great Depression. My jaw dropped at how profitable it was and thought it was great news. But to the executive, their performance is not meeting objectives.

How are we going to reconcile in the near future “good enough revenue” and “good enough profitability” to fund a “good enough level of journalism”? Post-recession, the tough conversation will be about the relative size of the company to fund the proper level of journalism or deliver the proper level of revenue. Yet it also will be about trend-lines.

I do agree newspaper companies need to find mechanisms to collaborate. At bare minimum, that’s a best practice that should have been adopted in the best of times. But a return to 30% profit margins? We need re-calibrate expectations.

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