Where Print and Digital Meet

Industry Project
MBA Part-time Cohort 6

Robert H. Lee Graduate School
The Sauder School of Business
University of British Columbia

Sunday, April 4, 2010

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Table of Contents
Executive Summary 4

Introduction 5

Background 5

Company Background 6

The Problem 8

The Models 8
Model Number One - Pay Wall 8
Concept 8
Rational 8
Implementation Requirements 9
Market Research 10
Business model 13
Feasibility Estimate 14
Challenges 14
Opportunities 15

Model Number Two - Hyper Local Strategy 15
Concept 15
Rational 15
Market research 18
Business Model 20
Challenges 21
Opportunities 21

Model Number Three - Mobile Solution 22
Concept 22
Rational 22
Market Research 25
Business Model 26
Challenges 26
Opportunities 27

Where Print and Digital Meet Ian Cruickshank 2 of 37

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Model Number Four - eReader or digital reading devise 27
Concept 27
Rational 28
Market research 28
Business Model 30
Challenges 30
Opportunities 31

The Comparison 31
Competitive Strengths and Weaknesses 31

Effect on Competitive Advantage 33
Competitive Advantage #1 33
Competitive Advantage #2 33
Model 1 Pay Wall vs. CA’s 33
Model 2 Hyper-local vs. CA’s 34
Model 3 Mobile vs. CA’s 34
Model 4 eReader vs. CA’s 34

Recommendations and Conclusion 35

References 37

Context specific to this document:

Within this document the term User and Users should be taken to mean consumers of
digital and/or printed news and information. The terms Firm, Company should be
taken to mean the Pacific Newspaper Group or Canwest Publishing Limited
Partnership. The term Newspaper.com refers to any newspaper online product.

All dollar figures are in Canadian currency unless otherwise stated.

All terms in BLUE are live links to the associated document online.

Thank you:
Thanks to Hunter Madsen, Regional Vice President of Digital Media: Pacific Region, for your
assistance in the development of models and assumptions contained within this document.
Thank you also for your guidance, mentorship, and friendship.

Thanks to Rami Lama for your assistance in the development of the Mobile Model.

Special thanks to my incredible wife Amber Dawn Cruickshank, without which none of this
effort would be possible or worthwhile.


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Executive Summary
The era of Newsprint as a dominant and highly profitable form of news delivery and
advertising revenue has been forever changed. This paper will examine 4 different
business models with the goal of providing recommendations on the path forward in the
digital age.

Each model will be put through a series of tests and analysis. For each business model
market research will be examined to assess; market size, demand, price sensitivity,
perception of the value proposition, strength of differentiators, and other important
market product based elements. Assessing each from a competitive standpoint using
Michael Porters analysis of the five forces. Finally we will examine how each of these
models affects the current Competitive Advantage held by the firm.

The firm that this paper will use for analysis and testing of models is the Pacific
Newspaper Group, a devision of Canwest Publishing LP. This company was selected
due to the nature of their current delivery strategy, its position in the market, and the
availability of information.

Based on the Model Comparison table which examined a number of potential strengths
and weaknesses pared with the information which came from analyzing what effect each
model would likely have on the Company’s two primary Competitive Advantages there is
a clear favorite among the models. The one which has emerged as the most likely to
succeed is the Hyper-Local Model.

However, the Hyper-Local Model alone is not enough to solve the current problem that
the Newspaper industry is facing. The revenue potential which comes from the increase
in Page Views is still not likely to be enough to compensate for the losses in print
advertising revenue.

Therefore it is recommended that the Pacific Newspaper Group proceed with the Hyper-
Local Model and the Mobile Model. Due to the limited negative effect that the Mobile
Model will have on the two Competitive Advantages’s and because of its positive cash
flow forecasts it is certain that these two models will not conflict with each other.
Moreover, there will likely be synergies found in the two models.


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“In the broadest, deepest worldwide economic downturn since the Great Depression,
newspaper revenue streams are collapsing, forcing a rethinking of business models that, for
many, seem as familiar yet as outdated as rotary telephones. With great change, though,
comes great opportunity.”
-INMA, Feb 2009: Turning danger to opportunity: Expediting your newspaper’s
transformation during a crisis economy

Introduction
The era of Newsprint as a dominant and highly profitable form of news delivery and
advertising revenue has been forever changed. This paper will examine 4 different
business models with the goal of providing recommendations on the path forward in the
digital age.

Each model will be put through a series of tests and analysis. For each business model
market research will be performed to assess; market size, demand, price sensitivity,
perception of the value proposition, strength of differentiators, and other important
market product based elements. Assessing each from a competitive standpoint using
Michael Porters analysis of the five forces. Finally we will examine how each of these
models affects the current Competitive Advantage held by the firm.

The firm that this paper will use for analysis and testing of models is the Pacific
Newspaper Group, a devision of Canwest Publishing LP. This company was selected
due to the nature of their current delivery strategy, its position in the market, and the
availability of information.

Background
For over 500 years newspaper has been a consistent medium of communication in the
world, The first English newspaper by today’s standards was the London Gazette of
1666. 1704 saw the first newspaper advertisement, an announcement seeking a buyer
for an Oyster Bay, Long Island Estate, is published in the Boston News-Letter. In 1751,
John Bushell published the Halifax Gazette, the first Canadian newspaper. In 1856 the
first full-page newspaper ad was published in the New York Ledger. Large type
newspaper ads are made popular by photographer Mathew Brady. 1

Since those early days the growth in newspapers and the newspaper business has been
massive. For the year 2009 and 2010 ZenithOptimedia predicted global ad spending
growth will be 0.5%, taking spending up to $447 billion. Formally, newspaper
advertising held the lions share of marketers ad dollars. With the introduction of TV
and Radio, newspaper saw erosion of their market share but the degradation of that
market share has been minimal as compared to what is currently being experienced. 2

1 http://adage.com/century/timeline/index.html
2 Global Ad Spend to Inch Upwards 0.5% in 2010: Zenith Adweek.


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According to Group M “Interactive media will represent nearly one of every five dollars
spent by marketers on media in the U.S. next year, according to their estimates
interactive media, primarily online, will represent 17% of the U.S. advertising
marketplace in 2010, up from 15.4% in 2009. 3

This compared to the table to the right,
produced by eMarketer, which estimates US Ad
spending on Internet products will surpass
Newspaper spending in 2011. These massive
shifts caused by the changes in technology have
ensured that the Newspaper Industry will never
be the same. The time has come for a major
paradigm shift. With all of the content
distribution methods now at the disposal of the
newsmaker, Newspaper companies need to shift
their thinking away from the paper and into
news and content distribution. The printed
word is now simply one of the many options. 4

The ideal which Newspaper companies are
currently striving for is well contained in this
catchphrase often used by Denis Skulsky, CEO
Canwest Publishing LP: “We deliver the content
people want, when they want and in the way
that they want to receive it.” Skulsky is
referring to the content methods such as
printed word, digitally on ones computer, on their mobile phone, or on an eReader
device. This is the new age and the new paradigm of news publishing.

Company Background
The Pacific Newspaper Group (PNG) is the publisher of two daily papers, two websites,
and two mobile optimized websites. These news organizations are: The Vancouver Sun
founded in 1912, and The Province founded in 1898.

In 1958, the Sun and the Province joined to create the Pacific Press in response to the
rising costs of producing newspapers. First the papers merged their mechanical and
financial departments, then they both moved into the Pacific Press Building on
December 27, 1965.

In November 2000, Canwest announced its acquisition of the Southam newspaper chain
from Conrad Black, in order to pursue a media convergence strategy. Canwest
executives believed this acquisition would enable a single reporter to file stories for

3 GroupM: Interactive Overtakes Newspaper Ad Spending by Joe Mandese, Thursday, June 25, 2009, 8:15 AM
4 Jack Myers Media Business Report, “Advertising & Marketing Investment Forecast 1998 - 2012


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newspapers, TV, and the Web, however media regulations enacted in the subsequent
months prevented the Company from achieving their intended efficiencies. 5

Over the last ten years digital media has greatly improved in its efficiency and usability.
As a result of these improvements and the overall growth of internet Users nationally
and globally, the use of news and information websites has also greatly increased. The
new strategy employed by each of the newsrooms within the aforementioned news
organizations is a “Web First” delivery method. Breaking news is delivered first on the
website for personal computers and mobile devices, then in depth reporting and
analysis is delivered in the daily printed product.

For many years the changes in the publishing industry have been imminent. Since 2006
PNG has see a massive change in its business. While readership numbers have
remained consistent for the Vancouver Sun and The Province, circulation has fallen and
population growth has resulted in a percentage decrease in market reach. The print
product has changed from a market reach of 90% to one of 70%. Conversely readership
of the Company’s online product has grown tremendously. The growth in the
readership of news and information websites overall has also grown exponentially. In
Q4 2008 Ipsos Reid found that 88% of the online audience had visited a news and
information website in the last 7 days. 6

The change in market share has resulted in a change in revenue. The first part of the
business to change was the classified division. With the emergence of Craigslist, Kijiji,
and other free listings sites, classified liner ads are verging become a thing of the past.
A section of the paper which used to be 8 to 12 pages daily has been reduced to 1 or 2.
Regular advertising has also seen it’s fair share of change. The largest drop in print
advertising revenue occurred over the last 12 months. A combination of market
perception, affected by stories of newspaper publishers closing their doors in the United
States, and the stock market crash of October 2008; the ad revenue of fiscal year 2009
was the worst decline on record. PNG posted close a ~50 million dollar decline in ad
revenue from a ~180 million dollar fiscal 2008 to ~134 million dollars in fiscal 2009.
Profitability was maintained with diligent cost cutting and expense management.

In fiscal year 2009 another record was set; this was 140 percent growth in online display
advertising revenue. The growth was from a one million dollar year end total in fiscal
2009 to a 2.4 million dollar year in fiscal 2009. In the current fiscal year the sales were
budgeted at 3.2 million and they have recently been re-forecasted with the expectation
of hitting 3.6 million dollars. While this double and triple digit growth is excellent, 3.6
million is in no way able to offset the 50 million dollars in lost revenue. These changes
are not sustainable.

5 http://en.wikipedia.org/wiki/Canwest
6 The Ipsos Canadian Inter@ctive Reid Report, Canadians Internet users (n=2,520), Q4-2008


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The Problem
The current business model at the Pacific Newspaper Group has been carefully
examined and proven to be unsustainable. With declining circulation and and declining
ad revenue from the printed product, PNG and its local daily newspapers are at risk of
collapse within five years if major changes are not executed. The remainder of this
paper will examine four business models and make recommendations on what direction
PNG should move, in order to change their business and best manage the digital
environment.

Any one of the following models will likely not be enough to mitigate the current losses
in revenue. It is more likely that a combination of the following as well as additional
measures will be required to solve the current issues.

The Models
Model Number One - Pay Wall

Concept
Journalism Online is a company formed by Stephen Brill, Gordon Crovitz, Leo Hindery.
They believe that the solution to the current difficulties is to band together in a united
front of newsmakers and to establish a Pay Wall access to the news they produce. 7

Rational
The perceived Competitive Advantage is a model which says - we have the best of
something and we’re going to charge for it. Canwest has built a sizable dedicated
global audience online relative to its print circulation, however the current online
advertising revenue of $7.7 million among the National Post,Vancouver Sun, and the
Regina Leader Post is modest compared to the 2.6 million average monthly Unique
Visitors. Among these three newspapers, their websites yield approximately $3 per year
per unique visitor, average for the newspaper industry, but low relative to print
advertising returns. Monetizing traffic from outside Canada via advertising alone is
challenging. By converting a small proportion of the most engaged online Users to
become paying subscribers, Canwest and PNG will generate incremental earnings of
$3.8 million in the first year and $11.7 million in the second year.
Beyond the new digital revenues, the print edition of Canwest’s papers will benefit from
having a deeper direct relationship with an increased number of print subscribers, due
to the number of new “bundled” print and online subscribers.

The Pay Wall
Example from MoneyWeek Magazine
Sixty per cent of the magazine content stays behind the subscriber paywall for one
month – this is cover stories and in-depth articles. The remaining 40 per cent, the free
content, is the magazine’s latest news and comment including their daily email, Money

7 Journalism Online - Concept Plan, Concept designers: Stephen Brill, Gordon Crovitz, Leo Hindery


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Morning, and their blog. After month after publication of the magazine the restricted
content also becomes available for free so that it can be indexed by search engines. 8
Example from the Financial Times
The Financial Times currently gives readers 10 free articles a month before they are
required to pay for access. The CEO, Mr. Ridding, said the site would add a new form of
paid Web access next year involving micropayments (Micropayments are financial
transactions involving very small sums of money.) for individual articles, something that
Wall Street Journal executives are also said to be considering. That way readers would
be able to buy individual articles in lieu of subscribing. 9
Example form The Standard Times (a publication in Massachusetts with similar
readership to the Vancouver Sun)
This publication offers a maximum of 10 free articles a month followed by soliciting the
purchase of “Premium Online Access” at a cost of $3.37 per week. All Users are required
to sign up with a basic login which includes Name, Email, Zip Code, and basic
demographic information.

Implementation Requirements
Journalism Online Technology Solution
Content
Allow publishers to integrate e-commerce tools into their websites, dividing
content into “free” and “paid” areas based on each publishers approach to paid
access.
Prevents display of content to unauthorized Users.
Identity
Manages a single User account with a single-sign on across all affiliated websites.

8 Paywall Q&A with MoneyWeekʼs Toby Bray, PressGazette, 23 February 2010, By Dominic Ponsford
9 The Paper That Doesnʼt Want to Be Free, By ERIC PFANNER, New York Times, Published: August 16, 2009


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Gives User a “My account” page at Journalism Online for reviewing transactions
updating payment information and opening new subscriptions.
Collaborates registered User information with affiliates to understand details
about Users: location, print subscriber, other publications, demographics, and
potential for behavioral targeting data.
Payment
Integrated technology will manage purchases, taxes, bundling of micro-
payments, and other subscriptions.
Manage refunds, prorating subscription revenue and collects recurring charges.
Reporting
Provides data on Users to show what offers in the market work best, tracks
financial performance against forecasts and generates analyses to optimize
revenue.

Market Research
The growth of paid online services under the Financial Times banner shows that
the paper was right to maintain pay walls at a time when other media
companies were yielding to the Silicon Valley mantra that “information wants
to be free,” said Tim Luckhurst, a journalism professor at the University of Kent
in Britain and a former editor of The Scotsman.
“It was pretty lonely out there for a while in paid land,” he said last week. “But it
has become pretty clear that advertising alone is not going to sustain online


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business models. Quality journalism has to be paid for.”John Ridding, the chief
executive of The Financial Times.
For other online publishers seeking to charge readers, the big question is whether
consumers would be willing to pay for general news, as opposed to specialized
financial news. Some analysts doubt it, but Mr. Ridding said he thought they
might. 10
Only 6% of people in the U.S. pay to subscribe to news online.

Do you currently pay to subscribe to any online content?

6%

94%

Yes No

If asked, 92% would pay on average several hundred per year. 11

Now much money are you willing to spend on online content per month?

8%
13%
10%

24%
21%

24%

None Up to $5.00 Up to $10.00 Up to $25.00
Up to $50.00 More than $50.00

10 The Paper That Doesnʼt Want to Be Free, By Eric Pfanner, New York Times, Published: August 16, 2009
11 Penn, Schoen & Berland Associates research, presented at All Things Digital Conference. May 2009; broad survey
of US citizens.


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Conversely when the question is asked in a different way the results seem to
be vastly different. Here only 15% say they would continue to use their
preferred news site if they began to charge for content. 12

What would you do if your favourite site began to charge for content?

3% 15%

82%

Would continue to use it Would ﬁnd somewhere else Don’t know

It is also very important to consider the impact which a Pay Wall has on traffic
to a news site. The char below depicts the impact the Pay Wall had on the
NBR’s site performance.

12“Will Consumers Pay for Online News: Even Those With a Favorite Site Say No” Pew Project for Excellence in
Journalism and Pew Internet and American Life Project. 2010, http://people-press.org/news-interest/


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Business model
Looking only at The Vancouver Sun

Canadian print circulation of 138,570
Monday to Friday circulation of 120,565 for home delivery and 17,305 for
newsstands. Saturday circulation of 131,953 for home delivery and 44,297 for
newsstands.
Canadian monthly Unique Visitors of 704,392, and global 901,000
For modeling purposes, assume annual online subscription price of $60.00 or
month-to-month price of $6.00. Micropayments per article of $0.25 with a total
of 6 per such User per month. Current online advertising of $1.6 million per year.
Current print circulation revenue of $31.4 million per year. Current subscriber
retention and acquisition cost of $2.0 million per year.
Additional Assumptions for The Vancouver Sun
A significant amount of continued free access, but with selected content offered
to the most engaged online Users on a paid basis. this approach optimizes
advertising inventory alongside high margin subscription revenues. 10% of
monthly uniques subscribe within two years. Assumes 10.0% of the global
monthly Unique Visitors sign up for an online subscription by year two.
Subscriber conversion breakdown assumes 47.5% annual, 47.5% month-to-
month and 5.0% micropayment.
Total online subscribers at the end of two years is 90,075, counting people who
buy annual or monthly subscription or a single article through micro-payment.
70,439 Canadian subscribers and 19,636 Global subscribers. Assumes a 90%
subscription renewal rate.
Overall Page Views decrease by 12.2% at the end of year 2. A 15% decrease in
non-subscriber Page Views is offset by paying subscribers having 25.0% more
Page Views per User than non-paying Users.
A 30% higher CPM for pages viewed by subscribers produces and overall online
advertising revenue decline of 9.6%. Cost of sales for advertising is 20%.
Journalism Online commission of 20% of subscription revenues net of credit card
fees of 3.5%
Adding a paid strategy for selected online access, the bundling online and print
subscriptions. Providing a discount incentive for those who buy both yields a
3.8% increase over the two years in print subscription circulation revenue.

Pro Forma Financial Summary

$CAD in thousands unless otherwise stated Year 1 Year 2
Incremental Revenue
Print Circulation Revenue Increase $419 $1,189
Online Net Subscription Revenue (1) $826 $2,370
Total Increase in Revenue $1,245 $3,559

Decrease in print subscriber acquisition cost (2) $203 $203


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Online advertising revenue decrease -$215 -$152
Cost of Online Sales (3) $43 $30

Net Decrease in Online Sales -$172 -$121

Total Beneﬁt $1,276 $3,641

(1) Net of Journalism Online commission of 20.0% and credit card commission fees of 3.5%.
(2) Assumes a cost savings of 10.0% on print subscriber acquisition cost by year 2.
(3) Assumes a cost of advertising sales of 20.0%.

Feasibility Estimate
Challenges
Implementation of the system from an IT standpoint. Currently the billing
system used by PNG is a legacy system dating back to 1970 which makes merging
systems very difficult and costly.
To properly measure the effectiveness of the current and future system an
complete ERP and CRM should be installed.
Potential for incorrect assumptions.
There is inherent danger in attempting to “...take a centuries-old business model
and apply it to the Web will work, ... we need business models that
simultaneously leverage the role of the professional writer/report and takes
advantage of community, relationships and the real-time nature of the Web ...
some of the fastest-growing games are the social games on Facebook (e.g.,
Zynga’s products) and these use a hybrid model of free-to-play with the option
to pay for virtual goods that enhances your experience. Maybe there’s a lesson
there for traditional journalism?” 13
A February 2010 Nielsen study, Changing Models: A Global Perspective on
Paying for Content Online, found that only 36% of respondents had paid for—or
would consider paying for—an Internet-only news source. In an even more
discouraging finding for content owners, an Adweek Media/Harris Poll study
noted that only 23% of US Internet Users were willing to pay for online news. Of
those, most said they would be willing to part with up to $10 a month, while a
smattering were willing to spend between $11 and $20. A negligible 1% of
respondents said they would pay $20 and up to access online newspapers. 14
This model has similarities to the attempt made by BMG music to secure its
music in a digital age. This was a failed attempt. The digital age requires
business leaders to rethink model and incorporate the changes into the model.
Best said here by a business man who embraced the change: "acknowledge what
the marketplace is already showing us: free exists whether you want to
acknowledge it or not. Let’s acknowledge that, use it and do something with it.”
Nine Inch Nails manager Jim Guerinot (May 2008)

13 A Brief History of Paywalls, by Jon Radoff on NOVEMBER 30, 2009
14 Paid E-Publishing Content: Books, Newspapers and Magazines, Paul Verna, March 9, 2010


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Opportunities
Financial
Revenue from all-you-can-read packages.
Revenue from special packages and newsletters.
Higher margin revenue stream associated with subscriptions.
Recurring subscription revenue decreases riskiness of cash flows and improves
working capital metrics. Higher valuations and lower cost of debt associated with
higher margins and predictable revenues.
Diversification of revenue streams. Mitigates cyclicality of advertising sales.

Strategic
Negotiating power may improve with intermediaries through the combination of
multiple publishers under one platform.
Information on pricing models that work best for publishers will be shared using
aggregated data.
Ability to enhance consumer value through bundled pricing options and one-
stop-shop subscription website.
Change customer expectations that journalism is free on the web.
Restore publisher ability to invest in journalism, protecting key asset and
competitive advantage.
Developing a long lasting and sustainable paid content model.

Model Number Two - Hyper Local Strategy

Concept
Augmenting the existing value proposition available through the current
Newspaper.com model. Currently PNG delivers a high quality news and information
resource in print and online. The Local Digital Strategy would augment the value to
Users by increasing the quantity and quality of local content and resources. Through
the creation of extensive guides and directories the local User will be given an
information hub which will provide information for most of ones daily digital
requirements.

Rational
The philosophy which this model is based on is that Users are indiscriminate. They are
increasingly disloyal to their news source. This is demonstrated by the earlier chart
depicting who would leave their favorite site if they began to charge for the content.
News content is becoming increasingly commoditiesed. In this model the perceived
Competitive Advantage is that PNG will be able to capitalize on two factors: its 100 year
old brands (The Vancouver Sun and The Province) as well as its existing power as an
editorial force in the marketplace. PNG’s combined newsrooms are more than three
times the size of its nearest competitor. This provides a sustainable competitive
advantage in the ability to produce and manage a massive volume of locally relevant
content.


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“It’s confusing out there in the information age so let’s put together the local Hub that
makes it easy. ‘Own Local’ – secure a leading share of local time spent online and
advertising spend – by delivering the news,information and social venues that our
communities deem most relevant to their daily lives. For local consumers, our
destinations will be a ‘must visit’, for advertisers, a ‘must buy’.” Canwest, Local Digital
Strategy Document

Strategic Objectives
Build online revenue quickly to replace lost print revenue by creating a long-term
platform for sustainable, high-margin revenue generation.
Retain and transition our local print advertisers as they shift to online by
capturing a high percentage of their online buy.
Preserve, strengthen, & transform the value of our local news brands through an
evolved relevance, broadening the audience, using multi-channels.
Leverage online to extend the value/revenue streams of our print products while
allowing print to remain a core revenue component for years to come which
online strategies have responsibility to support.
Put the people and tools in place to empower newspapers to “own local” by
creating an infrastructure that enables newsrooms, marketing groups and sales
organizations to innovate and adapt in order to serve their local customers.
Achieved by:
Increasing the level of granular information that people need
increasing community exchange and input
Creating micro-content
Augmenting evergreen listings and directories
Building out multimedia content
Enabling a robust mobile experience
Allowing for individual customization
Encouraging creation from the community

A complete refitting of local sites to incorporate a large amount of new features enabling
the shift to hyper-local and hyper-relevance
The addition of a robust Voting and Commenting tool.
Four tiers of database functionality:
Community - Ability for consumers to create their own groups.
Simple Editorial - enable the newsrooms to create simple databases quickly
and easily.
Complex Editorial and Guides - Customized databases with functionality
specific to the page or topic.
Secured - ability to set secure preferences to protect private or personal
information.
Flexible mapping functions
Portable identities and logins from most popular sites (Facebook, Twitter,
MSN...)


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Enable mass sharing and following of any and all information through simple and
complex sharing methods (Email, RSS, Digg, dilicious...).
Greatly improve search with proper Tagging and Metadata.
Allow for Wiki-style community editing.
Customization - Enable profiles to be created by Users:
Ability to differentiate “level” of Users to determine what degree of editing /
access they have.
Track and manage their content contributions.
Favorites, friends, communities, groups.
Personalized content aggregation and mass customization - What does the
User like?(similar to iGoogle)
Ability for consumers to design and create their own groups:
Upload events to a community calendar.
Create group forums.
Community tools. (Stats tracker for sports teams, manage group distribution
lists, track event signup and registration... )
Enable community bloggers held in a space separated for Editorial Blogs.
Enable total portability - Mobile access to all key elements for both Users and
creators of content. 15

So how would this transformation look from an internal/external communications
perspective. The change is from a model of Reporter only dissemination of information
to a shared conversation - a multi-directional free flowing discussion:

Source: Local Digital Strategy Document; Canwest, By Hunter Madsen, Steve Buors et al. March 2010.

15 Local Digital Strategy Document; Canwest, By Hunter Madsen, Steve Buors et al. March 2010.


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Market research
According to Forrester Research: “Will “hyperlocal” serve the information needs of
local neighborhoods or communities — offer a viable future for media companies
online? ... data shows that more consumers care about what’s happening in their
country than what’s happening in their neighborhood. In addition, there’s a disconnect
between the sources consumers rely on for local news and information versus those
they rely on for business listings. This is a huge problem for local TV stations and
newspapers, which bear the cost of content production without reaping the benefit of
classified ad sales. Companies that are poised to dominate the hyperlocal space will
have three key assets: 1) low-cost, community-generated content; 2) an agile human
sales force paired with smart ad sales automation; and 3) mastery of the mobile
channel, which drives local offline interactions.” 16

While there is a great deal of importance placed on local content it will be up to PNG to
properly position itself within the aforementioned three key factors. The design of the
Local Digital Strategy does take each of these into account.

The following three charts give an indication of the importance of local information and

resources. It is clear from these charts that the Hyper-Local strategy will need to be
supported by continued Provincial, National and International coverage. Failing in any
of these three areas will result in lost interest and in turn lost revenue.

16Is
Hyperlocal Hype Or Happening? What US Online Consumers Want From “Local” Media, by Sarah Rotman Epps
and Elizabeth Stark, January 27, 2009


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Business Model
In the digital news business the creation of additional traffic is the near equivalent of
increasing the revenue stream. Growth in Unique Visitors and increase in Page Views
causes an immediate increase in sellable ad impressions. With an average of three ad
units per page, an increase in Page Views of 10 will equate to and increase in available
ad impressions of 30. The current market environment is one where the increase in
digital ad sales is growing faster the the increase in Page Views and available ad
impressions. Many of Canwest’s digital assets are currently sold out of inventory. The
primary assumption made in this model is that an increase in Page Views will in turn
increase revenue.

Basic Guide Model
Golf Guide
Annual Guide Sponsorship $24,000
(includes sponsorship badge, display media (ROG/ROS/RON), contests, ad mail)

Enhanced Listing Sales (12 mos.) $24,000
(200 golf-related businesses x 15% conversion rates x $500/yr)

Annual Revenue From Guides $48,000

x 10 markets (35% discount) $312,000
Reverse Publishing Opportunities?

Overall estimated revenue potential
Metric Current 2010 2011 2012 2013
Increase Unique Visitors > 50k 129,000 261,000 393,000 523,000
Display Impressions > 1M 56,000,000 113,000,000 170,000,000 226,000,000
Annual Revenue > $100k $1,100.00 $3,300.00 $6,300.00 $10,000.00
EBITDA - -$240.00 $837.00 $2,300.00 $5,300.00
x 1000

Detailed Revenue Estimate


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Challenges
How often does the Generalist beat the Specialist? This model proposes the
ability to be all things to all people, or does it. The intention is to be all News and
Information to all People. This will be a substantial challenge.
Current technical skills available to produce the full host of products and
platforms. In order to complete this project a great deal of its parts must be
purchased or outsourced. This comes at a higher capital cost as well as a higher
risk for potential issues.
Outsourcing issues - Saxotech is the major partner selected - they will be working
very closely with our developers to build a new functions into the site. I detailed
Service Level Agreement has been created and will be important throughout the
project. While there is no product in existence able to deliver the functionality
that we have outlines Saxotech has reduced their pricing to work with our teams.
A secondary benefit to the agreement is that future sales of the platform, outside
of Canada, with be shared among both parties. This design will be exclusive to
Canwest within Canada.
Establishment of proper sales channels will be required to fully maximize the
advantage created by this platform. This will likely include the expansion of a call
centre and the addition of a “Self-serve” ad platform. There is a comparable Ad
Sales Platform hosted by the New York Times.
Capital Costs - to establish such a platform will have initial cost of approximately
$3.2 Million which has been budgeted for in this fiscal year, however the overrun
which is likely in an IT project may well cause slowing in the development.

Opportunities
Currently there is not a well organized local platform for all of the information we
would be able to provide the User. This would allow for a first mover advantage.
Content - PNG and Canwest hold and create a massive amount of high quality
content every day. With the largest news rooms nation wide we are able to
continue the development of this content.
In each of the markets where Canwest Newspaper.com’s are present they hold the
oldest and most recognized news brands. Who better to provide a complete
source for information that Users seek.
Guides and Directories will be built using the deepest data sets in the market,
using up to 40 data points - Example for restaurants: Parking, Kid Friendly,
Atmosphere, etc. While aggregating all other reviews and information about the
topic. Thus providing a superior product, which would be very difficult to
duplicate without a comparably robust news room, and a sustainable competitive
advantage.
Heavy promotion - but also a qualitatively superior product enabling a viral sale.
Using a complete set of Sharing Tools such as Facebook, twitter, delicious, digg
and more.


! !

Model Number Three - Mobile Solution

Concept
The present mobile offering from PNG is two websites optimized for mobile phone use.
In late 2009 the launch of m.vancouversun.com and m.theprovince.com was completed.
This enabled smart phone Users to access news on the go. Since that date the Page
Views on the two sites have been growing exponentially. In this business model the
intention is to take the development of these offerings much further. The area of the
most growth, aside from mobile search, is the development of Mobile Applications or
Apps. These small programs downloadable to a mobile phone enable people to access
data that assist, entertain, and inform them in their daily life. Canwest and PNG will
develop a complete suite of Mobile Applications for all of its products and key
information segments (Example: Sports, Automotive, Travel, etc.) What ever we do and
for all of what we do, we must make it accessible in the mobile platform. This new
platform also provides an arena where consumers are open to paying for information
available online. It offers the potential to establish new revenue streams and then
repurpose them to areas where we are currently unable to charge, such as the the desk
top PC.

Rational
Mobile Advertising is set to be the largest
growth area in the advertising industry. As you
can see from the table to the right all of the
major forecasters agree that the mobile
advertising spending is in a growth pattern.
The variance for this growth is a matter of how
many multiples one expects the category to
grow by. Forrester Research is the on the
conservative side with 2.7 times growth in the
next three years and Kelsey Group is on the
high side with just under 10 times growth.

This model can be considered in a number of
different ways. It can be viewed as a separate
tool for the news business, or one to be used in
tandem with all other business models. The
Table to the right shows the penetration
level of mobile phones in the United States.
The growth of the mobile phone market
globally has created a new access to
information the media companies are well
positioned to capitalize on. The
Smartphone is the TV of the twenty first
century - before long everyone will have a
smartphone capable of nearly as much as
their computer. Mobile phone screens are


! !

now being referred to as The Fourth Screen (sometimes referred to as the third screen),
due to the evolution from Film, to TV, to PC, and now the Mobile. This screen is being
considered to be the most powerful of all. Its portability and its ability to intrude into
ones life is creating a place where advertisers can now reach their potential consumers
closer to the point of purchase than ever before.

Details
A three pronged approach

Advertising Supported Products
These content based offerings will provide easily accessible information to
Users on the move.
Offered in a variety of ways including mobile optimized websites and mobile
applications offering the most up to date information on the most relevant
topics from the local, national, and international stage.
These offerings will be supported by 3rd party advertisers
Mobile Creative Services
Full service creative design for advertising partners. This offering ads to the
competitive advantage which is transferred over from print sales. By
providing full design services the Company is able to keep the full budget
allotted for each campaign - most providers are forced to pay third party
creative houses for design work.
Application conception and design services. In the changing market the
interest in producing custom applications is high. The limitation comes from
ability to execute. Full application, conception, design and build will also be
available internally.
Complete campaign design and execution based on the ability to deliver
across multiple platforms and mobile sites contained in the Company’s
extensive digital network.


! !

Non-Traditional and Video ad units are also fully available
Content Licensing and Subscriptions
With the addition of multiple free mobile sites and applications the offering of
paid content and applications will also be available.
Custom sites will provide more refined content in a more interactive and
intriguing way. Custom sites will be available at a competitive cost.
Licensing content will enable an additional revenue stream. Due to the cost of
producing first hand content many providers are now scraping and serving
content readily available online. Our content will be protected from
aggregation by creating a licensing model with our mobile partners.
The subscription model will allow for the download of full information and
full length video viewing.

Further optimize our existing sites.
Build mobile applications for the top three mobile operating platforms; Apple’s
iPhone, RIM’s Blackberry, and Google’s Android. With the potential to add less
common platforms in the future; Nokia Ovi, Samsung Mobile Applications, LG
App Store, Windows Mobile, Sony Ericsson Play Now.
Begin with complete news and information applications.
Expand to customized applications based around the most commonly used
portions of the site. (example: Vancouver Sun Business Application, The Province
Sports Application, and custom guide applications such as restaurant and event
guides.


! !

Offer a basic Newspaper.com applications at no cost and a more robust version at
a competitive price. Customized applications would also be provided at a
competitive cost.
All development can be carried out internally with the exception of a few custom
applications. These can be contracted out at a relatively low cost.

Market Research
All research is pointing to the growth of this
area, while there are still people who do not feel
the need to acquire a smartphone these are
people in older demographics. As seen in the
chart to the right the number of people who see
mobile phones as a necessity is now over 50% in
every age group.

The chart below shows the year-over-year
growth of the Smartphone category from
November 2007 to November 2008.

The following quotes further demonstrate this industry growth:

Google's DoubleClick Strategic Move
With its $3.1 billion acquisition, the Internet giant secures entry into the promising
business of display advertising… (Source: Business Newsweek, April 14, 2007)

AdMob Said to Talk With Apple Before Google’s $750 Million Deal
AdMob Inc. was approached by Apple Inc. about an acquisition before the company
agreed to a $750 million offer from Google Inc. … (Source: Bloomberg, November 14,
2009)

Apple acquires mobile ad company Quattro Wireless for $275 million
Apple Inc has acquired Quattro Wireless, as the iPhone maker looks to ramp up its
presence in the mobile advertising arena… (Source: Reuters, Financial Post, January 5,
2010)


! !

The two charts below also help to demonstrate growth of advertising spending in this
market:

Business Model
Valuation of a single Custom iPhone Application

Potential Revenue
Target Audience (USA): 3,120,000 iPhone users
Capital Requirements: $75,000.00
Apple App Store Retail Price: $1.99
Sponsorship and Ad Placement: $80,000.00
(Assuming value of $40,000 per sponsor x 2)

Rationale (Canwest/PNG could recognize): $315,440.00 Revenue in Year 1
(Assuming 600,000 downloads-5% of iPhone users)

Challenges
Ability to produce all products internally as required. While it is currently
believed that this is the case, history would dictate that the Company’s ability to
produce high quality digital products in a timely fashion is questionable.
Competition in the market when entering late. Have consumers mobile habits
already been formed - As new as this market is - it is unlikely have consumers will
be entrenched in habitual activities, however it will be important to move quickly
into this arena.
Canadian Adoption rates are lower that our cousins south of the boarder. As
noted in a survey completed by Telus and remitted to eMarketer in November
2009 - see chart on the following page.


! !

Opportunities
Willingness To Pay (WTP) is a key factor which will enable the success of this
business model. In the current market consumers are less willing to pay for
online content found on their PC, conversely they are willing to pay for content
delivered conveniently through their handheld devices.
While Canwest and PNG are late in entering this market it is still an open field,
there is no single provider who is dominating this market.
Currently there is not another content provider in the market who could produce
these products with the same depth of information that we could.

Model Number Four - eReader or digital reading devise

Concept
The most notorious digital device in the market today is Apple’s new iPad. While this
device is surrounded by as much humor as it is prophecy, the newest eReader has been
called the savior of the print industry. According to Matt Kleinschmit: “Even before
consumers can even see the new iPad it is already high on their radar with almost 80
per cent of Canadians and three out of four people in the US and the UK aware of
Apple's new device. Kleinschmit said such recognition is almost unprecedented for a
new product in the consumer electronics category.” 17 These devices - such as the
Kindle and Apple’s new iPad - have given Users the ability to read digital printed
products on a new type of screened device. These devices provide a clear alternative to
Users for their consumption of the written word.

Here the model is straightforward, optimize the digital content and distribute it via a
digital reading device. The sales model will be similar to that of a contract mobile phone
plan.

17Apple iPad expected in Canada April 24, is high on the radar for Canadian consumers, By Gillian Shaw, The
Vancouver Sun, 31 March 2010


! !

Rational
With this new format comes a new opportunity for the monetization of that content. A
digital subscription model. In this model we will explore the option of providing
consumers with an eReader as their “reusable paper”. The offering will be an eReader at
a reduced price with a multi year digital subscription.

Details
Kindle is a model which is currently a usurious option. The publication is made
available at Amazon.com at a monthly rate of $14.99 where the revenue split is
30% for the content provider and 70% is kept by Amazon.com. All attempts to
negotiate this rate were met with the same response, they do not negotiate
revenue splits it simply their terms if you want your content available on their e-
reader.
While iPad is the newest and most exciting of the available devices a partnership
with the likes of Plastic Logic to use their e-Reader may be more cost effective.
The Wall Street Journal, USA Today, The Detroit Free, FastCompany, Forbes,
CIO Magazine and a number of other Newspapers and Magazines have partnered
with Plastic Logic to provide an e-Reader based subscription models. 18 Various
digital publications are also partnered with Plastic Logic: All Things Digital, The
Huffigton Post, and Neatorama are a few.
Decision to be made - Which device to use: due diligence to follow, custom device
from Chinese manufacturer may be possible.

An agreement with Apple (or an alternative provider) direct or via a third party
such as a mobile phone provider.
Creation of a daily optimized version of The Vancouver Sun and The Province.
Development of a subscription model - taken from the mobile phone industry.
eReaders will be available at a reduced rate based on the number of years that a
User is willing to be contractually invested into the product.

Market research
According to Paul Verna, Senior Analyst at eMarketer: We won’t know the true impact
of the iPad (or other eReaders) for at least a few months, but its success will hinge on
the following factors:
How compelling is the reading experience? This will be determined not only by
Apple but by the publishers and other developers who create third-party apps.
What is the price of a digital subscription, and how does this price relate to an
existing print subscription? Pricing will be key for online periodicals.
Will Apple be able to create not just the product but the demand for it, as it did
with the iPod and iPhone? Or will the iPad be perceived as on oversized,
overpriced iPhone?
Magazine and newspaper publishers who think they’ll be able to sell
subscriptions just because they’re offering their content on a new device might

18 Plastic Logic eReader to be used by Detroit newspapers, By Darren Quick, 20:32 March 31, 2009


! !

be in for a rude awakening, no matter how “cool” that device might be. People
are strapped for cash, and in the coming years they’ll be bombarded with media
companies trying to sell them paid content. Only the most compelling, most
exclusive, most in-demand content will rise to the top.

Quantitative data from Verna’s complete report shows a few more details surrounding
this model:

Users are aware of eReader devices
but they are less likely to consider the
purchase than they are curious about
the technology.

Sales are certainly increasing, and
while this product is in the earliest
phase of the Product Life Cycle the
entry of a company like Apple may
take this category to a new level of
mainstream adoption.

The most important part of the puzzle
is the Users WTP. This chart shows a
very low rate as compared to the rates
which news providers are hoping to
charge for their digital products.


! !

Business Model
Similar to a mobile phone subscription model this is a rate structure which will provide
incentive to Users with the aid or a multipurpose eReader device. Based on the number
of years that the User agrees to subscribe to the digital product PNG will provide them a
device at an increasingly reduced rate.

Basic Device Model
Plastic Logic (Basic Unit) Model No Contract I year Contract 2 year Contract 3 Year Contract
Cost of the Device $300 $200 $100 $0
Contract Rate per Month $10.95 $9.95 $8.95 $7.95
Unit Revenue $310.95 $319.40 $314.80 $286.20

Unit COGS 150 150 150 150
Unit Proﬁt 160.95 169.4 164.8 136.2
Adoption Rate 10% 50% 10% 30%

Potential Revenue Year 1 Sales Revenue Year 2 Sales Revenue Year 3 Sales Revenue
No Contract 2500 $777,375 7500 $2,332,125 15000 $4,664,250
1 year contract 12500 $3,992,500 37500 $11,977,500 75000 $23,955,000
2 year contract 2500 $787,000 7500 $2,361,000 15000 $4,722,000
3 year contract 7500 $2,146,500 22500 $6,439,500 45000 $12,879,000

Unit Sales 25000 $7,703,375 75000 $23,110,125 150000 $46,220,250
COGS $3,750,000 $11,250,000 $22,500,000
Total Revenue $3,953,375 $11,860,125 $23,720,250

Premium Device Model
iPad Model No Contract I year Contract 2 year Contract 3 Year Contract
Cost of the Device $650 $500 $400 $300
Contract Rate per Month $10.95 $9.95 $8.95 $7.95
Unit Revenue $660.95 $619.40 $614.80 $586.20

Unit COGS 300 300 300 300
Unit Proﬁt 360.95 319.4 314.8 286.2
Adoption Rate 10% 50% 10% 30%

Potential Revenue Year 1 Sales Revenue Year 2 Sales Revenue Year 3 Sales Revenue
No Contract 1,000 $660,950 2,500 $1,652,375 7,000 $4,626,650
1 year contract 5,000 $3,097,000 12,500 $7,742,500 35,000 $21,679,000
2 year contract 1,000 $614,800 2,500 $1,537,000 7,000 $4,303,600
3 year contract 3,000 $1,758,600 7,500 $4,396,500 21,000 $12,310,200

Unit Sales 10,000 $6,131,350 25,000 $15,328,375 70,000 $42,919,450
COGS $3,000,000 $7,500,000 $21,000,000
Total Revenue $3,131,350 $7,828,375 $21,919,450

Challenges
As mentioned in the secondary research the iPad and other forms of digital
readers have yet to be proven as the savior of the print industry. The adoption of
this tool will largely decide the success of this model.


! !

Gaining a profitable agreement from Apple or any other provider may prove to be
difficult. Rogers, an experienced hardware negotiator, proved this during their
efforts to build the agreement to launch the iPhone in Canada. 19
Developing the required optimization for the iPad device internally. This will
likely require external resources. Perhaps an extension of the current Content
Management System agreement with Saxotech.
Cannibalizing the printed product and a greater rate. This introduction of a
digital solution will almost certainly increase the rate of decline in the current
print circulation.
Many of the current devices do not allow for standard advertising or flash based
advertising.
Opportunities
Facilitate the inevitable transition to the digital reader without losing the User to
a competing brand.
Offer another opportunity to view news content in a format desired by consumers
- building on the mantra of “All content, All ways.
Enable more active ad units which will deliver greater results than the 2
dimensional option. While this is not the case with current eReaders these
opportunities may exist in the subsequent devices.

The Comparison
Competitive Strengths and Weaknesses

With Models that are so vastly different how can we compare each as apples when all are
clearly quite varied fruits. In this section we will examine each of the 4 potential
opportunities based on their competitive strengths and weaknesses. This examination
has been carried out through the completion of an extensive table. Specifically the
elements below outline the factors which are important to the success of each model
these characteristics are:

Market Size Internal Rivalry Revenue Potential
Pricing Buyer Power Cannibalization of Print
Demand Supplier Power Resources Required
Value Proposition Threat of Market Entry Cost of Good Sold
Differentiators Threat of Substitutes

From the Model Comparison Table on the following page the four models deliver
this summary. Two are rated as Good: the Hyper-Local Model and the Mobile Model.
There is one model which is rated as Fair: the Pay Wall Model. The model which seems
to be the least favorable after comparing the above criterion is the eReader Model. It
received a rating of Bad.

19 Spat with Rogers leaves Canadian Apple stores without iPhones By Kasper Jade


! !


! !

Effect on Competitive Advantage

Further to the Model Comparison chart it is important to measure each of the four
models against their impact on PNG’s Competitive Advantage. In fact PNG and Canwest
as a whole have two Competitive Advantages. Both of these advantages depend in large
part on Scale. The first is PNG’s ability to gather, process, and disseminate news. The
second is its ability to gather, prepare, and deliver Advertising.

Competitive Advantage #1
News gathering is something that PNG has been doing for over 100 years. In that time
they have developed the scale and processes that allow for the daily news delivery of
hundreds of relevant news stories collated in one, and now multiple, platform(s). This
advantage is made up of over 200 Editors, Reporters, and Photographers. These people
work every day with hundreds of sources each to enable them to garner up to the minute
information. The processes which are in place to collate and deliver this information in
a clear and concise manner have been refined over and over to the point at which they
are now. Replicating The Vancouver Sun or The Province newsrooms would be
extremely difficult for any competitor. Therefore it is a sustainable Competitive
Advantage.

Competitive Advantage #2
Advertising Sales is another part of PNG which has been delivering advantage for over
100 years. Today PNG has an Ad Sales Department of over close to 100 Sales People.
With a experienced sales management team continually training the sales force to
deliver results. The sales team is also supported by 23 Sales Assistants and an Ad
Production team of 40 people, inclusive of Creative Designers and Ad Traffickers. This
team of people is often solicited by other companies to sell their products in the local
market. The most recent example is a discussion taking place with Yahoo! Inc. This
Sales team and the relationships that exist with the businesses in the Greater Vancouver
Regional District are extremely difficult to emulate. Therefore it is a sustainable
Competitive Advantage.

How do these four models add to or take away from, these two Competitive Advantages?

Model 1 Pay Wall vs. CA’s
In the case of the first CA there is likely to be little disruption. The Pay Wall model will
not negatively affect the Newsrooms of The Vancouver Sun or The Province. It may
even provide increased revenue which could add resources to each respective property.

In the case of the second CA there will be a definite problem. The erection of a Pay Wall
will reduce the number of Unique Visitors and Page Views. This based on earlier
discussion will reduce available inventory and impede sales. The Pay Wall will damage
the second CA.


! !

Model 2 Hyper-local vs. CA’s
The first CA, though it will initially be stressed by added content management
requirements, will not be negatively affected by the addition of more local content.
Moreover when the model reaches its positive Network Effect it will be gaining
exponentially from User-generated content (UGC). This model will have a positive
effect on CA number one.

The second advantage is going to have some early stress as well. However, properly
managed, this will soon turn into an benefit to the advantage. Early and continuous
training on the new products as well as a development of new sales teams to handle low
dollar sales and an automation of micropayment advertising will enable further growth
in this advantage. The model will also serve to increase inventory enabling and increase
in sales and sales revenue. These are all positive effects on the second CA.

Model 3 Mobile vs. CA’s

This will have the least impact of all models on each of the two CA’s. In the case of the
Newsroom, they are currently producing content which is easily distributed on current
and future mobile platforms.

The sales team will only see benefit in the way of more solutions for advertisers
problems as well as a simple increase to digital inventory. Both CA’s will be affected
positively by this model - though the positive effects are minimal.

Model 4 eReader vs. CA’s

Of all four models the eReader seems to have the most negative effects on the current
Competitive Advantages held by PNG. Currently the content management system is
not producing a format suitable for eReader devices. The newsrooms would each be
required to create a full redesign of the content. This will also serve to reduce the
circulation revenue which is currently a large part of the revenue stream required to fuel
the news engine.

The CA of the sales force would also be negatively effected. Currently there is no
advertising in eReader subscriptions. This would reduce the inventory that Sales
Representatives have at their disposal available. Further, it would begin to reduce the
current acceptance level that Users have for advertising in the printed and online
format. With newspaper as the most accepted advertising medium PNG would not be
willing to have that benefit eroded. This Model would have negative effects on both
Competitive Advantages.


! !

Recommendations and Conclusion
The future of the media industry is as wide open as it has ever been. With the
introduction and refinement of new technologies it is clear that the future is any thing
but clear. The only certainty at this point is that in order to succeed in the news
business, companies like the Pacific Newspaper Group and Canwest need to completely
rethink their business models.

In examining these four business’ it is important to consider all which has been
considered above and to continue developing the models by examining the local markets
through extensive primary research. Over the next few quarters PNG will need to work
with their research partner Ipsos Canada to develop a complete research study of
Canadian metro markets. While assumptions can be taken from American studies, the
only way to garner a clear picture of what is going to be possible in these markets will be
to gather the required information personally. It is also ineffective to draw conclusions
on models when they are carried out by other companies. Looking at the Pay Wall
success of the Wall Street Journal or the New York Times will not translate cleanly to
our market and our products. Unfortunately much of the news that we provide has
become commoditized. We must now look to new models and new way of providing
value to Users, value which they are willing to pay for.

When deciding on which of the four models to recommend it is important to consider
the irony that two or more of them may be self or mutually canceling - if you decide to
use the wrong two at the same time the may cancel each other. Example - the Pay Wall
program and the Hyper Local model may have canceling effects due to the Page View
decrease of the Pay Wall model and the Page View increase of the Hyper-Local model -
this may in effect cancel or nullify any gains.

While a recent study from the Pew Research Center for the People and the Press found
that 90% of information on the internet originates at the door of traditional media
companies, January 20th, The day The New York Times announced that they would be
erecting a Pay Wall the Times Company stock fell 39 cents, closing at $13.31 it has
continued to fall to a current $11.07 marking a 20% drop. This is a good indication of
how the markets fell about this decision. 20

Based on the Model Comparison table which examined a number of potential strengths
and weaknesses pared with the information which came from analyzing what effect each
model would likely have on the Company’s two primary Competitive Advantages there is
a clear favorite among the models. The model which has emerged as the most likely to
succeed is the Hyper-Local Model. This model came out of the Table with a rating of:
Good. As well it was the only one of the four which had a substantial positive effect on
PNG’s two CA’s.

20 The New York Times Announces Paid Content Plans For 2011, TechCrunch, by Robin Wauters on Jan 20, 2010


! !

Is it enough to simply recommend this single model? Will this model be the answer to
the problem that the Newspaper industry is currently facing. Sadly, it is not. The
revenue potential which comes from the increase in Page Views is still not likely to be
enough to compensate for the losses in print advertising revenue.

This is why the recommendation is to proceed with the Hyper-Local Model and the
Mobile Model congruently. Due to the limited negative effect that the Mobile Model will
have on the two CA’s, and because of its positive cash flow forecasts it is almost certain
that these two models will work well in conjunction. As well there will likely be
synergies found in the two models.

Further to this recommendation there are more questions to ask. What other models
does PNG need to examine? A model in which we better reward current subscribers
with a suite of digital products and other benefits. Another model which further
enhances the solutions that the second Competitive Advantage can exploit, a model in
which the sales force is equipped with a full suite of digital products inclusive of Search
and Social Media. The frontier is wide open and the future is ready to be written, clearly
we will need reporters and newspaper companies to write that future. As some might
believe if there were not a free press to write the future - one might be written for us.

“Were it left to me to decide whether we should have a government without newspapers, or
newspapers without a government, I should not hesitate a moment to prefer the latter.” -
Thomas Jefferson, 1787.


! !

References
In order of appearance within the document:
1 http://adage.com/century/timeline/index.html
2 Global Ad Spend to Inch Upwards 0.5% in 2010: Zenith Adweek.
3GroupM: Interactive Overtakes Newspaper Ad Spending by Joe Mandese, Thursday, June 25, 2009, 8:15
AM
4 Jack Myers Media Business Report, “Advertising & Marketing Investment Forecast 1998 - 2012
5 http://en.wikipedia.org/wiki/Canwest
6 The Ipsos Canadian Inter@ctive Reid Report, Canadians Internet users (n=2,520), Q4-2008
7 Journalism Online - Concept Plan, Concept designers: Stephen Brill, Gordon Crovitz, Leo Hindery
8 Paywall Q&A with MoneyWeek’s Toby Bray, PressGazette, 23 February 2010, By Dominic Ponsford

The Paper That Doesn’t Want to Be Free, By Eric Pfanner, New York Times, Published: August 16,
9 & 10

2009
11Penn, Schoen & Berland Associates research, presented at All Things Digital Conference. May 2009;
broad survey
of US citizens.
12“Will Consumers Pay for Online News: Even Those With a Favorite Site Say No” Pew Project for
Excellence in Journalism and Pew Internet and American Life Project. 2010, http://people-press.org/
news-interest/
13 A Brief History of Paywalls, by Jon Radoff on NOVEMBER 30, 2009
14 Paid E-Publishing Content: Books, Newspapers and Magazines, Paul Verna, March 9, 2010
15 Local Digital Strategy Document; Canwest, By Hunter Madsen, Steve Buors et al. March 2010.
16Is
Hyperlocal Hype Or Happening? What US Online Consumers Want From “Local” Media, by Sarah
Rotman Epps and Elizabeth Stark, January 27, 2009

Apple iPad expected in Canada April 24, is high on the radar for Canadian consumers, By Gillian Shaw,
17

The Vancouver Sun, 31 MAR 2010
18 Plastic Logic eReader to be used by Detroit newspapers, By Darren Quick, 20:32 March 31, 2009
19 Spat with Rogers leaves Canadian Apple stores without iPhones By Kasper Jade
20The New York Times Announces Paid Content Plans For 2011, TechCrunch, by Robin Wauters on Jan
20, 2010


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