The Orange County Register’s new owners want to reinvent newspapers from the ground up

The new owners of the Orange County Register don’t have a background in newspapers or journalism: between them, Aaron Kushner and his partner Eric Spitz have built a number of online businesses, including a greeting-card company and one that sells used computer equipment. Despite that — or possibly because of it — they believe they have the solution to the industry’s financial woes. But it’s about more than just putting up a paywall like the one the Register launched on Tuesday, Spitz said in an interview: it’s about fundamentally rethinking the financial model that newspapers have been based on for much of their modern history.

A hard paywall is a cornerstone of that model, said Spitz — who along with Kushner acquired the Register and various associated local papers last year. While many publishers have put up walls that are somewhat “leaky,” in the sense that readers can get in via social-media links and also get a certain number of free articles per month, the Register‘s paywall will be about as hard as they get — non-paying readers get nothing (although they can pay $ 2 for a 24-hour pass if they don’t want to sign up for a full membership). Says Spitz:

“I fundamentally don’t agree that a newspaper should be in the business of giving away its content to everyone who wants it, regardless of whether they are paying for it — McDonald’s doesn’t give away its burgers, and Boeing doesn’t give away airplanes. When it comes to life and death matters (fires, floods, earthquakes) we have built a mechanism where we can unlock any article and any section, and we will do that as a public service. But do I believe as the owner of a newspaper company that I have a public duty to give my content away for free? I absolutely do not.”

Content is for paying customers only

As part of its commitment to charging for all of its content, the Register has also cut back dramatically on the number of blogs written by reporters or editors on various topics: according to Spitz, the paper used to have over 100 and it killed all but 10 of the most popular ones, a move that at least some of the paper’s writers don’t seem all that pleased with. But the Register executive said it is part of the fundamental focus the paper’s owners have — which is that the only thing that matters is the subscriber, not the advertiser or the larger social “conversation” around the news.

But doesn’t blogging and using social media to engage with readers have value apart from just driving traffic to the website? Doesn’t that have value for journalism and the media in general as well? Spitz says he isn’t convinced:

“If you’re asking me whether I’m a big fan of crowdsourcing and open interaction between the writer and the audience, I wouldn’t say it’s the best thing in the world. Journalists get their information from lots of different places, but do those conversations need to be out in the open through what we call social media? I’m not convinced… I don’t know that I get a whole lot of value from one of our reporters tweeting something so that someone can read our stuff who is not a subscriber.”

Investing in the product is crucial

Unlike a number of newspapers that seem to have thrown up paywalls more out of desperation than anything else, without investing much in the content, Spitz says he and Kushner believe that in order to justify charging for their content they have to make it worth paying for — so the pair have invested tens of millions of dollars in hiring new reporters and editors, launching over a dozen new sections for the paper (both online and print) and adding other features. Spitz says the head count at the Register has increased by more than 300 people — or over 50 percent since the pair acquired the company last summer.

“Our fundamental insight is that the business itself in the newspaper space has been operated for 75-plus years as an advertiser-first, subscriber-second business. We think that’s incorrect, and that they should be run as a subscriber-first, advertiser-second business — and when you make that shift, you see that a lot of other decisions fall from it. The last thing you want to do is cut off more eyeballs if you’re in an ad business. But if you change that foundation and say it is really a subscriber business, then the first thing and the second thing and the third thing you think about every morning is how do I deliver more value to subscribers.”

Spitz and Kushner have also launched a number of features aimed at making their subscribers — whether in print or online — feel special. So in December, every subscriber got an envelope containing a check for $ 100, which they could donate to whatever charity or interest group they wanted in exchange for free advertising in the paper. Spitz says that move alone cost the company $ 12.5 million.

If there is value, advertisers will see it

But doesn’t relying more and more on subscriber revenue mean that a newspaper like the Register is doomed to shrink, since advertising revenue — both in print and online — continues to decline? Not necessarily, says Spitz. Unlike the vast majority of industry insiders and observers, the Register‘s owners believe that not only can the decline in print advertising revenue be arrested but revenue from print ads can actually increase, provided advertisers see the kind of engagement they want from readers who are paying for the product.

“Fundamentally, we don’t agree that it is the natural course for print revenue to decline, in fact we think that is at the heart of the problems in the industry… we are modelling for significant increases in print revenue for 2013, and we’re on budget for that for January and February… we believe that as you have more and more engaged subscribers, advertising becomes more valuable.”

Spitz admits that to some extent the Register is unique, since it is one of the few large-scale regional newspapers that doesn’t have much competition from local TV networks and other sources. And he says the model that the paper is relying on also might not work for national newspapers and other outlets, since there are so many free sources of similar content such as CNN. “While I’m a hard paywall advocate, I think it’s smart for USA Today not to go to a paywall — their content is just not differentiated enough,” Spitz said.

It’s more than a little ironic that the two men who seem to be the biggest fans of print and the biggest proponents of making people pay for news aren’t even from the industry, and have never worked for nor run a newspaper. But can they fight the forces that have driven many of their newspaper-owning colleagues into despair, and in some cases financial ruin?

Post and thumbnail images courtesy of Flickr users Arvind Grover and Rosaura Ochoa and Shutterstock / Daniilantiq