The newspaper industry is dying. The data is conclusive. As baby boomers die off, so will the business model of the daily newspaper, and there’s no way to stop it.

As someone who works for a daily newspaper, it’s tough to hear this. People in this industry want to pretend that there’s some magic solution waiting, but everyone has that fear that maybe the death spiral will continue until the business model collapses in on itself and there’s nothing left but some novelty papers kept for the sake of posterity.

But what really got me wasn’t what I was hearing, but who I was hearing it from: Guy Crevier, the publisher of La Presse, one of Canada’s largest and most prestigious newspapers.

And he wasn’t just repeating some attention-grabbing phrases he heard at the latest industry conference. Crevier’s conclusions are based on numbers and analysis that his company has spent millions to produce.

First impressions

Six months ago, La Presse launched La Presse+, a free iPad app that it said cost $40 million over three years. On the day it started, I wrote a blog post saying the plan didn’t make sense to me. How does creating an app you give away for free, and encouraging people to stop paid subscriptions to a newspaper, make business sense? It boggled my mind, and I wondered if this wasn’t evidence that senior managers at Gesca had gone mad with the seemingly endless cash flow of parent company Power Corporation.

Not long after that blog post, I had a meeting with one of those senior managers, who tried to explain the business model to me over lunch. I remained unconvinced, but started to see how someone smart could come to the conclusion that this might make sense.

After that, I met with Crevier. Over the course of an hour, he explained to me the logic behind the move, and his vision of the future of La Presse. It was certainly eye-opening.

The first thing I learned is that, of that $40 million, $2 million was spent on research. How should a tablet-based medium work? What software should they use? How often should it be updated? There wasn’t really an existing model to go on, so they had to do a lot of thinking based on numbers and experimentation.

During the three years before launch, “we were in research (mode) almost the whole time, except during the final two summers and Christmas holidays,” Crevier said.

The cold, hard truth

“The printed paper is a phenomenon of baby boomers,” he said. “These people, like me, have adopted a mode of consumption that is consumption of a printed paper.”

This won’t come as news to too many people. But Crevier said that it’s not just an age thing. Younger people won’t grow into reading newspapers as they get older. The change in habits is permanent.

In 1998, he said, looking at a chart on a sheet of paper in front of him, there were 1.5 million adults 25-34 in Canada who said they will read a newspaper during a given week. In 2011, that had dropped to 699,000.

On another sheet, more figures: In 2006, the North American newspaper industry had revenues of $49 billion. In 2011, it was $23 billion. In five years, newspaper revenue dropped by half.

“Even auto companies, which are the main advertisers for newspapers, are planning to leave traditional advertising,” Crevier said.

“Just on this basis alone, you ask: ‘How can I continue? What’s the value of continuing?'”

But most newspaper publishers haven’t gotten to that point yet. So they do continue, trying to find ways to boost revenue or trim expenses and hoping that by going leaner and finding cheap ways to make money, they can save their newspapers.

Most have tried to increase revenue and avoid a drop in subscriptions by setting up paywalls.

“I don’t believe in paywalls,” Crevier said. “I think the New York Times will succeed. I think the Financial Times will succeed. I think probably one or two large European papers will succeed. Why? Because they have content that is really, really unique. Secondly they’ll succeed because they have content that is so specialized and so business-oriented. Take the Financial Times. Half of their paying readers probably put it on their expense accounts. The other papers who have paywalls, there hasn’t been much success yet. Nobody’s making a distinction (when reporting figures) between those who get it free (because they have a print subscription) and those who pay for online access.”

Crevier is right. Most publishers of paid newspapers have moved to paywall systems: The Globe and Mail, Postmedia, Sun Media, Le Devoir, and recently the Toronto Star have all implemented them. But there hasn’t been any strong evidence of their success. Much of the news they produce is also put online for free by competitors like CBC, local television and radio stations, and anywhere else that republishes The Canadian Press.

Crevier compared paywalls to cancer treatments that merely delay the inevitable.

There are other gimmicks being used to raise money, like selling ebooks or hosting conferences. But much of these are the equivalent of bailing water out of the Titanic with a tea cup.

“So what do you do? You start cutting,” Crevier said. “You cut in the quality of your content. When you cut content, you lose readership. You enter into this circle.”

Sure enough, that’s what almost everyone has done in the newspaper industry, and many other forms of traditional media as well. They’ve cut staff, which inevitably leads to negative effects on their content.

But not La Presse.

The magic tablet

It was January 2010, the same month Steve Jobs announced the first iPad. Crevier assembled a team in a conference room. “We told them to create a new medium. Keep the DNA of La Presse, but create a new medium that exploits the full potential.”

There are a lot of reasons basing this new medium on the tablet makes sense. Because along with all the sad statistics about the newspaper industry, Crevier had some equally surprising numbers about tablets, a medium that is less than five years old.

One of them is the time between when a product is developed and when it reaches 10 per cent audience penetration:

Telephone: 25 years

Television: 11 years

Wireless telephony: 11 years

Internet access: 9 years

Smartphones: 7 years

Tablets: 2.5 years

“Our profound understanding is that the tablet will become its own media, stronger than television, stronger than newspapers, stronger than magazines. Because it’s interactive, it’s mobile, it has exceptional reproduction, it has sound, video.”

And it’s growing. La Presse has 1.7 million readers over various platforms, and Crevier said 500,000 of them said they planned to buy a tablet within the next year.

“It’s phenomenal.”

But there were still a lot of things to work out. And much of the next three years would be spent doing just that.

In the meantime, while other media companies were announcing layoffs by the hundreds, La Presse was hiring. It increased its newsroom by about 100 people, including journalists, columnists, photographers, videographers and page designers, to about 350 people total, though some people hired have since been let go, and severe reductions in distribution staff meant the number of actual employees didn’t change much. La Presse redesigned its offices so the editorial and technology groups combined now take up three floors of the building at St-Jacques St. and St-Laurent Blvd.

$40 million in context

Much ink has been spilled about La Presse spending $40 million constructing this app.

“People say $40 million, that’s a lot of money,” Crevier said, before trying to put it into context.

“How much do you think it would cost me tomorrow morning to replace La Presse’s printing presses? It would cost me between $150 million and $200 million. And when I build a plant to print La Presse, I’m limited to 250,000 to 300,000 (copies) maximum. What does this money bring in future obligations? It brings me expenses of $100 million a year in paper, ink, trucks.”

Shipping the paper to far out places like Lac Mégantic, Thetford Mines, Beauport, Chicoutimi and even Fort Lauderdale is “excessively expensive,” he said.

But if the iPad app replaces the newspaper, most of these expenses disappear. There’s no printing presses to run, no ink or paper to buy, no delivery people or shipping costs to pay. And doubling, tripling, or quadrupling the readership can be done easily. The size of the publication and its audience reach both become limitless.

“The only additional expense is bandwidth.”

Because of this, Crevier expects the startup costs to be made up in only a couple of years.

Besides research, and $24 million in salaries for all those people that were hired, another $8 million went into software. “We had to modify 20 pieces of software,” Crevier said, and create five of their own. The biggest issue was that, because they wanted to lay out individual pages, they couldn’t just copy the apps of other newspapers that just feed every story into a standard template.

“The only people who did layout on the iPad on a regular basis are people who do magazines, who don’t have the stress of (daily) deadlines,” he said.

That deadline pressure meant they needed a way to have multiple people working on a page at the same time. A reporter writing a story, and designers laying it out, for example. Crevier said it was a German company that finally created software that allowed this.

Why free?

Newspaper executives have argued that the biggest mistake they made collectively is giving away content for free online. It taught the younger generation that news should always be free online, and they failed to grow up to be accustomed to paying for it.

But the iPad world isn’t quite like that. Many popular apps are paid ones. And provided the cost is cheap enough, people don’t mind paying.

So why did La Presse’s app insist on not charging people?

“We could have launched a paid La Presse app,” Crevier said. “We might have gotten 30,000 subscribers, people who are very happy, very satisfied.”

But the real money isn’t in paid subscriptions, it’s in advertising. “What do I do with 30,000 subscribers?”

“Say it’s been three years that we’ve done this and we’ve reached 150,000 subscribers, and then Radio-Canada releases a free app and reaches 600,000 or 700,000 subscribers?”

So the decision was made to make the tablet free, and to make all the money off advertising.

It’s one of the principal ways La Presse+ plans to be different from The Daily, a similar tablet-only publication launched by News Corporation that lasted less than two years. The Daily was a paid app, and its national focus meant it had less relevant local news than La Presse does. The Daily failed because it couldn’t get an audience. La Presse expects not to have the same problem.

A new kind of ad

Because it would be their main source of revenue, a lot of attention was paid to advertising in designing the iPad app. There were 1,400 ads presented to focus groups to determine which ones worked and which ones didn’t. Unsurprisingly, those with interactive components scored better in terms of recall.

Crevier used the example of a fake ad for Crest teeth whitening, involving a slider used to show before and after. After asking people to flip through an issue that had that ad in it, everyone could recall the ad afterward.

He also used an example of an ad for Adele, which features excerpts from her songs. Using equipment to track eye movement, the results showed a big red blob at the play button. People were looking at this ad and focused on it far more than they would be any newspaper ad.

The interactivity allowed by the new medium not only gives advertisers more tools to make their ads stand out, but they give tools to La Presse to see how the audience responds to them. Its app tracks how many people see and interact with an add, and for how long. Combined with demographic information, it can provide a lot of useful information to advertisers, and make advertising much more efficient and therefore lucrative for both parties.

Interactivity comes at a cost. Rates for interactive ads are higher than non-interactive ones, and those rates go up for each form of interaction. That resulted in some criticism that ad rates are too high.

Crevier dismissed that criticism, noting that it came before the app was even launched by someone who never used it.

“We’re not more expensive than other media,” Crevier said. And in any case, it’s not the price that’s important per se, it’s the ability to show that the price is worth it. And in his opinion, the higher impact of the interactive tablet ads are worth the extra cost.

Crevier has said the price of a full-page ad in the app is about $16,000. The idea is to make it equivalent to a full-page ad in the paper.

The rate charged for advertising is of critical importance in the business model for electronic media. Rates for banner ads on websites are dirt-cheap because of the immense supply and because of how much they’re ignored by users, even those without ad blocking software. As a result, the ads have become more intrusive, many playing video unprompted, others taking over the entire screen to grab the reader’s attention.

For Crevier, the iPad is different. It’s more like a newspaper that people flip through than a website that people click on. And data show that people spend 35 minutes flipping (or swiping) through the app on average during weekdays, and 70 minutes on weekends. The hope is that because of that, the ads will be able to draw more newspaper-like rates.

Whether that’s true, we’ll have to see. A lot of early advertisers got special deals, and because La Presse doesn’t report financial results publicly, we won’t know unless they tell us whether they’re getting what they hoped in ad revenue.

La Presse has an ad creation kit online for the app, in case you want to see all the various interactivity options available.

Why iPad-only?

One of the criticisms of La Presse+ is that it forces people to buy an iPad to access it. There’s no La Presse+ experience online, nor is the application available for any other tablet. This led some to question whether La Presse was in bed with Apple or had some secret exclusivity deal going on.

Well, they don’t, though La Presse worked closely with Apple in developing the app and they do have deals to encourage La Presse readers to buy iPads.

The reason why La Presse+ launched just for the iPad is once again about numbers. Nine out of 10 tablets are iPads. And the iPad is a closed system which makes it easier to develop for. Google’s Android is offered by multiple manufacturers, so even something as basic as screen size can vary from one device to the other, making programming more complicated. It became clear that developing for the iPad first made sense. But a version for Android is being developed. The plan was to have it ready by December.

So why not a web-based app? Because La Presse wants people on this new medium and its new, more expensive advertisements. It will continue to have a website with breaking news, but the app is now the “flagship” product, Crevier said. And this is why, while “screens” with stories can be shared through social media, things like videos are only available through the app.

I’m not sure I entirely understand this strategy. But it’s what they’ve decided. And, it should be noted, the Washington Post’s new owner, Jeff Bezos, feels the same way.

As for arguments that this is La Presse forcing people to get iPads, Crevier once again says to look at the numbers. “A subscription to La Presse costs $200 a year,” he said. “You can buy an iPad for $300. In one year, you’ve (mostly) financed the cost of the iPad, on which you can do plenty of other things.”

Why only one edition a day?

Another major criticism against La Presse+ is its update schedule. Like a newspaper, it updates only once a day, overnight. That means that if major news breaks in the morning, you won’t see it on the La Presse+ front page until the next day. A major failure according to one analyst (who does some work for The Gazette’s parent Postmedia), that has prompted even some mockery by competitors.

This criticism is based on an apparent misunderstanding of how La Presse+ works. Its designed pages aren’t supposed to have up-to-the-minute breaking news. If that’s what you want, it has a tab called “en direct” that features breaking news from its website. (A similar tab in the sports section allows access to live sports scores.)

Crevier admits this tab isn’t as prominent as it should be, and he’s “not happy” with that. He hopes a future update will make it more obvious.

But unlike other news organizations’ apps, whose pages are automatically generated based on generic templates, redoing the carefully designed layouts of an edition of La Presse+ based on breaking news isn’t feasible, Crevier said.

“It takes 70 people to create a (complete) La Presse+ layout. Would I have a team at 8am to modify this edition in case something happens? Eight to 10 people to redo a page just in case?”

You’d think it wouldn’t be that difficult to have a generic template that could be used for breaking news, and that the existing staff that edits stories for LaPresse.ca could produce a page for La Presse+ that, even if it doesn’t look fantastic, would at least be there.

Though I guess that wouldn’t be much different than what you get already with the “en direct” tab.

Other issues

Among other complaints about the app that have been brought up by critics:

Download size : Reaching 100 MB for large issues. The application is insistent in its warning against downloading issues via mobile wireless.

: Reaching 100 MB for large issues. The application is insistent in its warning against downloading issues via mobile wireless. Orientation : It’s landscape-only. Having a version that allowed portrait layouts would have been too complicated.

: It’s landscape-only. Having a version that allowed portrait layouts would have been too complicated. Usability : It’s not 100% intuitive how to scroll through articles, make things full-screen and navigate the app.

: It’s not 100% intuitive how to scroll through articles, make things full-screen and navigate the app. Missing parts: The app has no classified ads, no obituaries. It only recently added functional crossword puzzles. Some things you expect from any newspaper aren’t yet present in this medium.

Multimedia focus

La Presse’s website had video as well as text, but video takes on a much greater presence in the La Presse+ app. So the company took the office space formerly used by La Presse Télé (now the independent LP8 Media) and created professional-looking studios. There’s a control room, similar to what you’d have in a TV station. There are audio recording suites. There’s even a makeup room:

Readership goals

“We expected to reach 200,000 users in September, and we’ll attain this in the next few days,” Crevier said proudly in May, as data showed that the app was getting more than 1,000 downloads each day.

Users, in this case, referred to the number of people who would use the app at least once a week, based on usage data and the assumption that each tablet has 1.5 readers. La Presse’s deal with Apple prohibits the paper from divulging how many downloads the app has received.

Nevertheless, in August, Crevier announced the application was installed on 250,000 tablets, and by the six-month anniversary last week that number was around 300,000. The next goal, of 400,000 readers by December, seems attainable, even if the growth rate has slowed.

The future of the paper

“The flagship of La Presse is La Presse+”

With all the talk of “digital first” strategies from people behind other newspapers, it was still odd to hear that from a publisher. Is La Presse, one of North America’s oldest newspapers, now a secondary medium to a just-launched iPad app?

Apparently so. “The intention today is to invest all our resources into our flagship product, which is La Presse+,” Crevier said.

And it’s not just $40 million that they’re betting on this app. It seems like they’re betting the future of La Presse itself. They’re practically encouraging readers to stop subscribing to the paper edition and pick up the iPad app instead.

That sounds crazy, not just because it means losing subscription revenue, but because the economies of scale in newspaper production means it needs as many customers as possible. La Presse doesn’t save 50% on its presses or delivery trucks if it has 50% fewer subscribers. And its huge fixed costs only go away when the paper shuts down for good.

Crevier said there’s no set timeline for making that move, though he does see it happening eventually.

“We’re not at that point yet. The more La Presse+ is a success, the more the acceleration toward the end of the paper. The consumer will decide. There’s no plan for shutting down the paper, other than the success (of La Presse+) will decide.”

I don’t know how long the paper will keep running. I think it’ll probably be longer than people think. And La Presse seems to be playing Russian Roulette here. If they win, La Presse becomes a leader in a new medium, well ahead of its competitors. If they lose, La Presse either becomes severely crippled by bad business decisions or goes under completely.

It’s a gamble I certainly wouldn’t have the balls to make.

I asked Crevier at the end of our interview whether he was worried.

“Sure there’s worry,” he said, laughing confidently. To me it seemed like the understatement of a lifetime.

More screenshots

Further reading

Recent:

Earlier:

If you haven’t already downloaded it, and have an iPad (second generation or above), The La Presse+ app is here in the iTunes store.

UPDATE: Readership data from the NADbank survey shows print readership for La Presse down significantly for young readers.

UPDATE (Nov. 18): Another update from Projet J, saying the Android version of the app is now planned for April 2014.

UPDATE (June 16 2015): A long series from NetNewsCheck on La Presse+. The paper also recently redesigned its newsroom, moving it into the hall that used to house its presses.