Belo localizes interactive division in bid to recapture classifieds

January 19, 2005

Belo localizes interactive division in bid to recapture classifieds

The Dallas-based media company absorbs Belo Interactive and integrates operations at the local level, while losing some veteran managers. Can renewed focus save Belo from Craigslist, Monster, et al?

By Mark Glaser
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The newspaper industry's traditional stranglehold on the classified advertising business is slipping, slowly but surely, like an aging, myopic dragon that's losing treasure each day from its hoard. In this case, the nimble knights making off with the booty are upstarts such as Monster, eBay and that rascally do-gooder Craigslist.

So what's an old-line media company like Belo Corp. to do? The owner of the Dallas Morning News, Providence Journal, KING-TV in Seattle and various other newspapers and local TV outlets decided it was time to implode Belo Interactive (BI) as a wholly owned subsidiary that ran all its Web properties and just make it an interactive division. The division will retain some central functions (technology platform, national ad sales) at HQ in Dallas, while integrating Net operations at each offline media outlet.

The words that bounce off the tongues of Belo execs are expectedly convoluted (e.g. no more "Belo Interactive," now referred to as "Belo's interactive operations"), but two words stand out: classified verticals. What does Belo have that the online upstarts such as Craigslist and Monster don't? Journalism. Or in Belo's case, the content of its offline media properties. So how better to sell classifieds than to combine forces and sell people on the idea of "online-plus." Online plus the newspaper. Online plus local TV.

"It was a decision to integrate the Web sites into legacy operating units that they are a part of," said Carey Hendrickson, Belo vice president for investor relations and corporate communications. "We felt like that was the best way for the very important classified verticals to do their best."

Not surprisingly, Wesley Jackson, vice president and general manager of Belo's interactive operations, echoed Hendrickson on the basic strategy.

"The major reasons for doing this [reorganization] were to maximize revenue growth of the local sites and to stimulate innovation in the company's important classified verticals (especially recruitment, real estate and automotive)," Jackson said via e-mail. "Local sites will now be managed by local editors and sales managers, rather than by BI managers in Dallas. We expect that with more local involvement, the Web sites will become richer in content and at the same time become a more tightly integrated part of the local sales strategy of our stations and papers."

While loathe to admit it, traditional media companies are now chomping at the bit to boost old-line media revenues, which are largely flat or declining, with the growing profits from new-jack online divisions. Plus, these combinations might help media companies make the case that their print circulation numbers should include online visitors as well.

"Ironically here they're profitable at Belo Interactive, but as a result that profitability has been something corporate has grabbed to help prop up the print [and broadcast] side," said Vin Crosbie, consultant and president of Digital Deliverance. "They've finally made money, and then the print folks say, 'that's part of us, the content is coming from us.' The result of the profit is that they're grabbed by the legacy media."

Belo Interactive is expected to hit break-even for EBITDA (earnings before interest, taxes, depreciation and amortization) for 2004, and with this change, Belo will include those revenues with those at the motherships, i.e. DallasNews.com income with the Dallas Morning News print newspaper. That can't hurt after the newspaper was hit with a high-profile and costly circulation scandal.

The New York Times Co. recently stopped releasing its high-flying digital revenues on a monthly basis, instead absorbing those numbers into the old-media numbers. And ESPN decided to combine its online sales staff with its TV, radio and magazine sales staffs, according to a report in CNET News.com.

Kathy Park, spokeswoman for the New York Times Co., said New York Times Digital will still exist as a division, but that the company will emphasize a "multiple media platform approach pursuing both audiences and advertisers within the markets in which the company competes."

People in the dark, out the door

For every reorganization, there are downsides. Employees have to learn a new way of doing their work, whether it's newspaper executives understanding behavioral ads online or Web producers getting video from local TV stations. Plus, the people out at the local outlets need to understand how the transition is running and who their new bosses might be.

For instance, Sean Polay, news and operations manager at the Providence Journal's Projo.com, was looking forward to reading this article to find out what would be happening at Belo. "I'd be interested in what the folks at Belo say, mostly because we're still in the dark because the transition is still taking place," Polay told me. "We have some assumptions as to how we'll be operating, but I don't have any hard facts."

Meanwhile, at DallasNews.com, editor Chris Kelley sounded like he was up-to-date on the transition and even told me his new title, assistant managing editor for interactive at the Morning News. Kelley said he'd now be attending all management meetings for the newspaper, which would be soliciting ideas for improving the Web site from print and online staffers.

"We will consider these ideas -- and other major Web-related issues -- at a retreat in early February," Kelley said via e-mail. "We will come away from that retreat with a list of actionable content ideas -- short-term, mid-term and longer-term. The retreat will involve about 30 people from all areas of the newsroom and reps from advertising, marketing, the interactive department (formerly BI) and our other local newspaper properties (Al Dia and Quick). Right after the retreat, we'll convene a multi-department newspaper task force to blend content and business-side initiatives into a comprehensive plan."

There's also been a shuffling of the deck, so to speak, of the managers at the interactive division as priorities change, with some longtime staffers leaving for jobs at other companies or moving to local operations. Jay Small and Wes Williams both took jobs at E.W. Scripps, while Gerry Barker will be general manager of new media at the Columbus (Ohio) Dispatch. Barker had been at Belo for six and a half years, and helped start the pioneering StarText project for the Ft. Worth Star-Telegram in the early '80s.

Crosbie says it was "crazy" for Belo to lose Barker, though Barker says he has nothing negative to say about Belo. "I take a lot of pride in what we did, and what we accomplished," Barker told me. "It was one of the best career experiences in my life. I just thought it was a fantastic opportunity, and I'll always be proud of what we did."

Could it be that Belo was looking to dump high salaries to make up for losses incurred from the circulation scandal at the Morning News? Both Hendrickson and Jackson deny that there is any cost-cutting behind the reorganization and say that the overall headcount will stay the same, or even increase in 2005. But expect those jobs to be focused more on classifieds than overarching online strategy.

"This was not an initiative whose mission was to reduce the workforce," Jackson said. "In fact, it's extremely likely that in 2005 there will be more Belo employees working on interactive products than there were in 2004. I would not in any way characterize the departure [of some employees] as a brain drain. Over the years, Belo Interactive has assembled a team of more than 230 highly talented individuals. The vast majority remains with Belo and are focused on innovation and interactive growth. It is always difficult to lose talented people."

Jay Small, whose new position at E.W. Scripps is director of online content and operations for newspapers, concurs that the changes were more about jobs changing than disappearing.

"I was offered a job to stay and it was a good job, but it wasn't a great fit for me," Small said. "Meanwhile this job came up [at Scripps] and it was a great fit for me, and I left with no regrets. I know of some cases where some people just didn't have a job that fit them well, but I would describe that as a handful of people."

Think locally, act locally

Small says Belo will lose some momentum with the reorganization, but he still expects some breakthrough initiatives, especially at the larger sites in Dallas, Providence and Seattle.

"As a result of the change, I think you'll see the best at Belo getting better," Small said. "And on the money side of things, the financial initiatives will start to bear fruit in classified verticals and behavioral and targeted advertising. And on the content side, the sites that want to apply resources to it, [you'll] see some breakthroughs in content development there."

In the Belo hometown of Dallas, those breakthroughs can't come fast enough. An upstart called Pegasus News is hoping to create a network of hyperlocal news sites starting with Dallas in late 2005. The anonymous blogger who will be the publisher of the site told me that Belo seemed to be getting out of local news coverage rather than beefing up on it.

"I saw the cutbacks they had at the newspaper and now at Belo Interactive, and I don't see them having meetings and saying, 'What are some cool Web-only features we can add?'" the blogger told me, remaining unnamed to protect his day job. "Everything I see in the [Dallas Morning News] newspaper on a daily basis tells me the opposite of that. There's less and less local content, which is bad news for the readers, but good news for us."

But if Belo sticks by its strategy of trying to strengthen local outlets by combining forces between offline and online media properties, the initiative could pay dividends. Crosbie says Belo is on the right track because all the growth potential for advertising at newspapers comes from local -- and not national -- advertising.

And Kelley from DallasNews.com says the reorganization at Belo and the Morning News could bring powerful new features to his site more quickly.

"The closer association means we will be able to develop even closer relationships with reporters, editors, visual journalists, our IT staff -- and the business side -- to accomplish some of our biggest dreams faster," Kelley said. "BI was a smaller, very disciplined organization with a start-up mentality. I hope we can preserve as much of that as we can in the Web operation as we integrate with the newspaper operation."

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