Saving the News

Saving the News

Companies by Jean Gruss, editor/Lee-Collier

NewsBank is bridging the gap between newspapers and the Internet. It recently signed a deal with Google to give users access to newspaper archives.

The newspaper industry today is like an exploding star.

Media conglomerates are selling off their struggling newspaper holdings as shareholders such as Naples-based Private Capital Management demand action to boost sluggish stock prices. They're selling to anyone willing to pay, including high-profile individual investors such as former General Electric chief Jack Welch.

"This is going to be like a tsunami hitting our business," says Daniel Jones, the president and owner of NewsBank, a Naples-based company that helps newspaper publishers sell the content of their news archives to libraries and colleges.

But if anyone can navigate through the tumultuous changes rocking the newspaper business, Jones can. Over the last 35 years, he's transformed NewsBank from a small microfiche distributor to a leading provider of digitized newspaper articles via the Internet.

Today, NewsBank provides libraries with current and archived content from more than 2,000 newspapers in the U.S. and overseas, including 185 of the largest 200 newspapers in the U.S. by circulation. NewsBank also maintains the online archival systems for publishers of about 800 newspapers, handling their e-commerce and distribution. (The Observer Group, which owns the Gulf Coast Business Review, is a NewsBank customer).

NewsBank has ventured into other related areas too, including selling access to databases of obituaries and historical newspapers dating back to 1690. Historians, genealogists and students can use NewsBank's search tools to look for information through millions of newspaper pages.

Jones, 67, seems to relish change even though it's cut into his passion for golf. He's been criss-crossing the country speaking with dozens of new publishers.

Meanwhile, Internet companies such as Google and Yahoo are casting long shadows over traditional newspapers that are scrambling to expand their presence online. Jones is blunt about the future of online news: "We don't know where that's going."

But you can bet Jones will have the inside track. NewsBank recently struck a deal with Google to steer more traffic to publishers' Web sites via Google's news service. He's been secretly working with the Googleplex since 2004. So far, about 200 newspapers have opted to join the NewsBank service through Google (news.google.com/archivesearch).

Robbing the piggy bank

In 1972, Jones was a 33-year-old management consultant in New York City when he bought the newspaper archiving business. Back then, archivists cut newspaper stories with an exacto knife, pasted them on paper, indexed them and put them on flat sheets of film called microfiche.

Despite his young age, Jones had plenty of business experience. He ran the supply department of a U.S. Navy destroyer from 1961 until 1964, graduated from Columbia University's business school and started out in banking before becoming a management consultant with Knight, Gladieux & Smith.

"I was so desperate to have my own business," Jones recalls. He purchased the business for an undisclosed sum from a conglomerate that spun it off. Jones won't spell the details of the deal, but says the terms were favorable: "They couldn't give it away."

Jones is tight-lipped about the company's finances, but he says he barely had enough money to buy and run the struggling company. At the time, the company had 20 employees and sales were anemic. Jones and his wife, Susan, had a baby, a dog and a mortgage on their home in New Canaan, Conn. Susan made microfiche master in the corner of their bedroom. Money was so tight that they raided their kids' piggybank to buy shoes. "It was a real struggle," he recalls.

The first thing Jones did was to increase the number of independent salespeople who worked on commission. The market was ripe as even the best libraries only had a few daily newspapers for their patrons. For about $900 a year, NewsBank provided microfiche archives of 50 daily newspapers and it split revenues with publishers.

Sales and profitability turned the corner thanks to the Alaska oil boom. In 1975, the new Alaska oil pipeline boosted government revenues and the libraries in the state bought NewsBank's microfiche service. "We made enough to put us in the black," Jones says. "We had more business in Alaska than about four other states."

By the mid-1980s, NewsBank started putting newspapers on CD-ROMs, which made it less bulky and cost efficient. "You could get a full year of a newspaper on a CD-ROM," Jones says.

Although Jones declines to reveal exact pricing, he says his service was less expensive than Lexis-Nexis, a rival company that mainly targets law firms. Today, a subscription to NewsBank might cost as little as $200 a year for a small customer to $50,000 for a large one. NewsBank has other competitors too, such as Factiva. However, Factiva mainly targets corporate customers.

With more than 1,000 U.S. newspapers, NewsBank can now give its 20,000 customers access to archives of 90% of U.S. newspapers. Pricing varies depending on the size of the library and which newspapers it wants to access. The more local the content, the higher the cost. In addition, it also provides access to the archives of 1,000 international newspapers.

Even more important, NewsBank executives are making a big push to manage publishers' archives. It already does this for about 800 newspapers by maintaining the archives and handling the e-commerce transactions.

All of that archiving and indexing takes manpower. Jones moved the company's headquarters to Naples in 1995. NewsBank has about 50 employees in Naples and another 35 who work remotely and report to headquarters. Much of the indexing and digitizing work takes place in Vermont and New Hampshire, where NewsBank has 210 employees. It recently bought a microfilm company in El Paso and hired the 25 employees who worked there. "The labor supply in the Northeast is pretty tight," Jones explains.

Internet revolution

By the early 1990s, the Internet's popularity was growing and publishers were worried subscribers would desert them for the Web. Jones was worried that the archives he was selling would now be free to anyone with Internet access.

"It created a lot of confusion and it was a frightening time," Jones says.

Initially, NewsBank resisted change because it was a privately held company and it didn't have the resources to build the systems needed to deliver archives online. "It kept us from doing things that were foolish," Jones says. "It would have been a huge investment to have online delivery."

But by the mid-1990s, it became financially feasible to put digitized articles online because the hardware and software became cheaper. That's not to say the conversion to the Internet was inexpensive; Jones says it cost the company millions of dollars.

However, Jones says 90% of the company's revenues today are from products the company did not offer before it converted to the Internet. "Now, the Internet is our best friend," Jones says.

The deal with Google took nearly three years to hammer out. Under the agreement, NewsBank provides Google News with access to its clients' newspaper archives.

A Google News user can type a key word or phrase and the site will provide a list of links to relevant articles. When a user clicks on an article, it automatically links to the publisher's archive. Publishers get traffic to their site and Google can become the first place researchers look to find information. Because it's a mutually beneficial arrangement, Google doesn't charge publishers to participate. So far, 200 publishers have signed up, including such large papers as the Denver Post and the Chicago Sun-Times.

Jones won't say what other deals with Internet companies are in the works, but it's likely others will follow. Already, newspapers have inked advertising deals with companies such as Yahoo and it's not a stretch to believe that news archives will one day be more widely available.

REVIEW SUMMARY

Company: NewsBank, Naples

Business: Helps publishers sell current and archived articles

Key: Good information has value and successful publishers can use new technology to sell it.

CEO INSIGHT

Management advice

Daniel Jones, the president and owner of NewsBank, was a 33-year-old management consultant when he bought the company more than three decades ago. He's since built it into a leading provider to thousands of publications around the country and overseas.

Here's Jones' advice on how to manage a business and grow it successfully:

• Watch your expenses. Most of the problems at a company occur on the expense side of the business.

• Cash flow management. Keep track of daily changes in sales, receivables, expenses and capital expenditures. "I still review all the checks that are cut every week," Jones says.

• It's all about the people. Pay the highest salaries, don't meddle constantly in their work and help them be happy and enthused about their job.

• Develop a positive culture. Employees who feel proud of their organization will ensure your success.

-Jean Gruss

New banks of information

History and death can be lucrative businesses.

NewsBank has been expanding its resources for academics and researchers with projects such as digitizing and indexing historical American newspapers dating back to 1690.

NewsBank's Readex division now provides access to 1,300 historical newspapers that give students and researchers access to three centuries of American history. The Web-based system lets a user type a keyword or phrase and Readex will search millions of pages.

Another effort is America's Obituaries and Death Notices, a program launched in 2003. NewsBank created a separate service that provides access to archives of obituaries because it found that library patrons searched for death notices more than any other news item.

The challenge with obituaries is that they're mostly advertising and often aren't included in a publisher's news archive. Until recently, publishers didn't realize the value in reselling that information. In order to build an archive of obituaries, NewsBank has had to work with the classified advertising departments of various newspapers. Today, NewsBank has access to 22 million obituaries, representing 70% of recent reported deaths.

What the demand for obituaries revealed was the value of local community newspapers. While larger metropolitan dailies report the big stories of the day, local newspapers report on neighborhood news that's unavailable anywhere else.

"From our perspective, the more local the paper the better future opportunity there is for us," says Daniel Jones, the president of NewsBank. The company charges libraries more for access to local newspapers than regional or national titles. "The closer the paper is to the buying institution, the more expensive it is."

-Jean Gruss