Mexico's Grupo Reforma: 18,000 Citizen Editors
Traditional advertising-heavy media, like newspapers, magazines, television, and radio, appear to be endangered businesses. Thanks to the internet, virtually anyone can produce and distribute stories and information. Stanford Business magazine asked David Weir, a journalist who covers the media industry, to interview alumni in the thick of the changes but from dramatically different perches -- in Mexico, and China.
Executives inside the troubled U.S. newspaper industry are searching desperately for ways to return to financial health. They could do worse than to take a peek south of the border at Grupo Reforma, Mexico's leading newspaper company.
Grupo Reforma publishes 10 newspapers in 5 Mexican cities with an average daily circulation of 1.5 million. These include the largest metro newspapers in Mexico City (Reforma), Monterrey (El Norte), and Guadalajara (Mural).
Jorge Meléndez, 46, is vice president of new media for the company, where he has worked in a variety of positions for the past 18 years. He says the types of financial problems facing newspapers in the United States -- falling circulation and advertising revenues, waves of layoffs and buyouts, burdensome debt loads -- have been avoided at Grupo Reforma.
"Our major broadsheets, the ones you can compare to the New York Times, Los Angeles Times, the Chicago Tribune, have stable circulation and have maintained advertising growth over the last 10 years," says Meléndez.
One reason, he says, is an "ultra-local" concept -- that newspapers need to be embedded in their communities. "We have a saying in Monterrey, where grilled cabrito [young goat meat] is one of the main regional dishes: 'When you pick up El Norte, it better smell like cabrito.'"
The company also has developed unique ways to interact with readers in their communities and to build reader loyalty. The news-papers have created a series of editorial boards, each composed of 12 to 14 community leaders, corresponding to every section of the news-paper -- autos, food, fashion, and so forth.
The community boards meet with section editors at the paper every week or two to discuss three standing agenda items:
- What the section is doing well.
- What the section is doing poorly (and how to fix that).
- New Ideas for sources, stories or sections.
There is no compensation for board members; the term is typically one year, save for two or three members who stay on to preserve continuity.
The company's commitment to the boards is such that it pledges that it will fix whatever it is doing wrong and enact the ideas for new coverage or else explain why it cannot do so "to the board's satisfaction."
"Each year we have 900 people sit on these boards, and we've been doing this for 20 years," Meléndez says. Giving over this control to the community is entirely alien to the U.S. newspaper culture, and yet, in an age of "citizen journalism" and social media, it's precisely these kinds of ties U.S. companies need to learn how to forge if they are going to survive in the digital age.
"The community is a gold mine," he says, "because we have to know when we are wrong so we can correct it." Over the years, roughly 18,000 people have served on the boards, so they now make up 10 percent of the group's subscriber base.
"They are extremely loyal, plus they know how we work," Meléndez says. "They know who to call or email. They are a source of stories, new sections, and opportunities."
There are many other things U.S. news-papers could learn from Grupo Reforma, including how to survive the transition from free to paid content online. The company made this change seven years ago and now allows print subscribers free access to all of its websites. Others must subscribe to the web version, which is priced at 80 percent of the newsstand price.
How the company pulled this off goes back to those community editorial boards. It used them essentially as focus groups to figure out how to help as much of the audience as possible make the transition. The boards held many meetings with readers helping them learn how to access the websites and create passwords. A lot of communication was involved as they slowly brought the readers along. "We thought we would lose 90 to 95 percent of our online readers, but working with the boards, we lost only about 25 to 30 percent," Meléndez says. "And you know what? Our internet advertising revenues actually went up that year!"
Another key to the group's success is the production of multiple editions targeted at different audience segments. Inner-city inhabitants get tabloid editions with plenty of photos and an "emphasis on police stories, girls, and entertainment."
One of these in Mexico City has grown from a circulation of 25,000 seven years ago to 320,000 today. "It is a very aggressive paper," he says, "and very well designed to appeal to its audience."
Next up are the big city metro broadsheets, which do award-winning investigative reporting about drug lords, government corruption, and business scandal, and have successfully campaigned for open elections, a freedom-of-information law, and other important national reforms.
Covering the drug war is particularly demanding because of the Wild West-style ruthlessness that produces a steady series of brutal murders. The company covers the drug violence closely but publishes no bylines to protect its reporters from retribution.
Finally, besides the tabloids and the broadsheets, the company produces a regular set of suburban editions for its wealthier readers. These once again take advantage of the group's tight relationship with its readers, as they are thick, photo-crammed books covering the marriages, vacations, and lifestyles of Mexico's wealthy.
The rich families clearly welcome the group's reporters and photographers into the intimate routines of their daily lives, which is not always the case in the United States. In the process, the group gets to collect lots of hyper-local advertising from the restaurants, furniture stores, resorts, and other businesses that cater to these prime consumers.
From a business perspective, margins in places like Sierra Madre, the suburban Monterrey county that is the wealthiest in Mexico, are impressive: An investment of only 20% of the company's overall production costs yields a return of fully 50% of its total ad revenues. There are additional factors behind Grupo Reforma's success including its early and consistent focus on technology, which in turn led it to establish one of the earliest major websites in Mexico as well as a proprietary printing system.
With his excellent English and U.S. degree, Meléndez has often served as a point man in attempts to establish partnerships with other North American newspaper companies. In this role, he says he is astonished to see the difference in focus at the top of the U.S. companies as opposed to his company.
"In the U.S., being editor-in-chief of a newspaper seems to mean something quite different than it does here," he says. "They seem to see themselves as stars who appear on television and go on long book tours. Here, if I am the editor-in-chief [one of the jobs he has held in the past], I don't travel, I don't write books. If I did, I probably wouldn't be doing the best job of covering my city.
"A newspaper begins at the local, then covers the national, then the international. But it all starts at home."