Thomas Schultz-Homberg: “There are no ready products anymore. It is a process of continual market research that we are in, and we won't stop!"

Interview with Thomas Schultz-Homberg, CEO of KSTA, Kölner Stadt-Anzeiger in Cologne since October 2020.

Thomas Schultz-Homberg has previously worked in many editorial and management positions at several newspaper publishers, most recently for the last seven and a half years as Chief Digital Officer at FAZ. Since 2001, he has been particularly involved in the digital business, particularly in introducing new technologies such as artificial intelligence and machine learning as well as developing audio products.

We had the pleasure of talking to him last week, and he told us about the way he works to position the KSTA newsroom in the business of news. We discussed why advertising is still such an important part of the business model, about how new products are developed, and about his plans for the metaverse.

Ioana Straeter – Thomas, would you like to tell us more about yourself and your love for the digital world?

Thomas Schultz-Homberg – Yeah, thank you. My journalistic education was in the eighties. There was no Internet back then, there was no cell phone. When the Internet came up, I didn’t immediately grasp its significance; what a total revolution it was going to be. Only after a while did I grow aware of that importance and I realized that for journalists we just had to get into this. I assumed that the world of print was going to shrink more and more, as the pressure from new technologies and new platforms grew. I started to train and to look into what was going on and digital became the driver of my profession by 2001, some 20 years ago. Since then, I’ve been driving digital businesses in media. And [shrugs], I’m a tech nerd. I love my iPhone, and my wife. I hug my MacBook, and all that stuff. I love technology. I think that the revolution of technology that came with the digital revolution makes society, and the world, a better place. That’s the reason why I’m so engaged in digitizing the world around me.

IS – Two years of pandemic changed a lot for the media industries. How did you and KSTA Media get through the pandemic and what lessons did you learn?

TSH – We were lucky. We made it through the pandemic okay. The revenues were shrinking, of course, in certain periods, but the results were okay. So, we are fine with how we performed over the last two years and we achieved very, very good results in 2021. New technology helped us, by the way, because as print media and the print media advertising was shrinking, and because people were not allowed to go to real shops, online shops were very much still there. We made some pretty good revenue through digital media advertising along the lines of ‘if you can’t buy at your local store because it’s closed, then you can buy it at our online store’. This helped us make our way through this period.

Our biggest learning was the change of culture in the company, the change of culture of work. Before the pandemic, everybody was sure that it is not possible to make a newspaper, or a news website, without journalists sitting in a newsroom.

Suddenly, due to the pandemic, nobody was sitting in the newsroom anymore. Everybody was sitting at his or her kitchen table: and it worked. We learned that flexibility of work makes people’s lives better in many ways. Not being tied to one certain place that you have to go to every day, which doesn’t make sense if the next appointment you have is around the corner from where you live, after which you can go back home and write up the story, for example. Then you just have to send it to the editorial staff, or head office. There is no need to drive to the head office, then drive the longer way back to the place around your corner, then drive back to the head office and write your story, and then drive back to home in the evening. So much drive time – that does not don’t make any sense and that is not very effective.

That’s what we learned.

We also learned that people get used to this.

Now we have the situation that offices are open again. Everybody is invited to come back, but not everybody goes back, because some people think the time is better spent by them working from home. And we accept this. We have a flexible model now so everybody can talk to his or her manager, and make or modify a contract to define when and how often you’re going to be in the office, and how often you’re going to be at home. This is totally flexible, shaped around both people’s needs and the needs of the company. Of course there are certain employees who can’t realistically work from home – you can’t print the paper from home for example. We also have hybrids where sometimes it is necessary for people to be in the office and sometimes it’s not. So this is freely negotiated by the managers and their teammates. This is probably the biggest single learning we have taken from the pandemic.

IS – What does this mean for your newsroom and what is your vision for a sustainable journalistic future? As a self-professed ‘tech nerd’ do you see a growing role for the likes of automation and artificial intelligence?

TSH – Yes, we do, and we are about to make it happen. In my opinion we aren’t using it enough in all the aspects we could.

We have to look at two factors here. One point is that editorial staff do not like automation and do not like A.I. because that means losing control over what place, what picture, what article might be published. Because if a machine does decide whether you see this while I see that, this feels like a loss of control for the editors. You have to do it in a smart way; where editors can still be sure that the quality of journalism is not in any way destroyed by artificial intelligence.

Let’s say we have an article about an opera, and that is not something read by too many people.

Maybe that might be read by more people if I can predict that somebody who is very interested in cultural topics will come if I display the opera article at a higher spot on the website. If I do so, there might be more people who are potentially interested in this topic who are confronted with the article, and then choose to read more. I may make more subscriptions, and more advertising revenue out of it. This is the way to communicate the message of change that is coming to the newsrooms. You have to be careful, and you have to respect the interests of the editors as well. So artificial intelligence won’t replace journalism, or journalists, but it can help to do better in making people aware that we have quality available for them in our stock.

With a newspaper you might read from the first page, to the last. Or at least you look at all the pages. With a website, however, that is very complex; it likely has about 2000 pages. Nobody is going through 2000 pages every day just to look and see if there is something that might be interesting for them. So it helps if I can bring your interests to you, to your door.

The other point is that automation helps, and robotics might even help to produce articles. For example, articles about sports events that you can’t cover because you don’t have enough reporters and editors to be there on the sidelines of every football pitch, every weekend. If automation and robot reporting means we can provide people with information we just can’t provide them with now, because we don’t have the resources, that could be a winner.

There might be other topics of journalism that could be covered by robotics as well. For example, the stock exchange report and similar data. What robot journalism can’t do now, and I predict won’t be able to do for the next ten or 20 years, is the emotional angle of covering stories. A portrait of a person won’t be written by robot journalists. So automation can best be seen as an aid to enhancing the broadness of our coverage.

IS – Subscriptions are core business for media houses and newsrooms alike. How do you embrace that when it can sometimes be difficult to convince journalists to also think in terms of business.

TSH – Well that’s certainly the cliché, yes. But we have made huge progress in this perspective by teaching journalists to look at the job they are doing from a business perspective.

Our digital subscription product is KSTA+. We have a KSTA+ team in the editorial, in the newsroom, that works to improve the number of new subscriptions we get every day. The majority consists of journalists. We have people there who are ready to think about how much money they are going to make with their digital publishing business, and to look beyond how many clicks they get. They look at the subscriptions, and they have daily goals for how many subscriptions they should generate. If they make fewer, then they try harder the next day to make more, to close the gap.

I have the privilege of a very, very comfortable situation that may be different to that of other CEOs of news outlets. Because I already have an editor in chief, and an editorial staff, that is ready to go for this and who understands that this is crucial to the future of news.

The print money is shrinking, and nobody can stop this. If we don’t start making enough money digitally during this period where we still have the revenues from the print business, then we won’t survive. But we will survive because we are ready to do this, and our people are already working the way we’ve described.

IS – Your newsroom is already big when it comes to the business of news. Let’s go to the other area of monetization: advertising. Local media houses have been severely affected by big tech in the past decade. What is your perspective on advertising? As a CEO, what can you do now, and how do you see the future of advertising?

TSH – It’s not just the local news businesses who were affected by that; national news businesses have experienced the same. Maybe it was harder for us. My perspective on advertising is that it is a crucial part, a truly essential part of our business model. We can’t live on subscriptions alone. That just won’t work.

We need a revenue stream from the advertising business as well. This is essential for the future of revenue, because as digital subscriptions make less revenue than print subscriptions make, you have to identify new businesses where you can make back that money. Advertising is as traditional a source for news outlets in the digital business, as it is in print. Of course, you have less revenue there as well, but you also have lower costs for publishing technology in the digital world than in the printing world as we know it.

So that can work. I think we need a strategy for each.

Even with quality local journalism websites, you don’t just have to look at subscriptions. You need stories to drive your reach, because reach drives revenue in advertising.

I think that we must make up our minds about what we do in the post-cookie era that is coming. Our main business as we do advertising today, is that we make the highest prices on the home page. If there is no cookie anymore, then I don’t know you when you come to my page.

Today I know who is coming and I’m in the position to display ads that might be of interest to you. If you come as an anonymous person, then of course I can randomly display some advertising, but that won’t be paid as well as if it is targeted. I think this will be a radical and fundamental change to the advertising business since we must identify people after the first or second click they make. That means that the pricing model and the strategy of where to put the right ad, for the right reader, will move away from the homepage because there will be more anonymous people. Instead we will strengthen the advertising business on the article pages. When you have already clicked once or twice, then with the help of big data models, AI, and machine learning we know who you are. Or at least what might be of interest to you. There will be fundamental changes, but advertising is a serious business that we cannot hold back from. We need it, and it will prove a thriving part of the revenue stream in the future.

IS – Another important area for monetization is new products. I know you are very much into that, and your digital competence center is doing a lot of great things. Can you tell me more about your work developing new products?

TSH – As we try to identify the right business models, so we must develop new products continually because in the digital world you can’t predict exactly what will work as a business model, and what will not. Compared to the past where you only had print products, life was easier. You knew your markets, and your readers better than in this massively fragmented digital world.

What we have to do is identify the right way for us. Markets in digital, as in the classic print world differ from region to region. If something works in the neighboring city, that does not mean that it will work in my city because people have different patterns and habits.

So we have the digital feedback loop. We try things, we publish them, then we do the data analysis and then we see, okay, is that right, or not? If not, then we try to refine the product and publish it again, and so on. This is an ongoing circular process; there are no ready products anymore.

What we are trying to do is get into the audio business. We have some podcasts that we are publishing. They are successful, but not so strong that this is already a serious revenue stream. Maybe it will be. We continue to improve those podcasts, and try to develop new formats that might work even better than those that we currently have in the market.

For example; we are experimenting a lot with audio formats that are not podcasts, such as text-to-speech so that you can hear the texts that we publish while you are driving, or running, or doing something else. The challenge is how to make money out of this, because it is not so easy for a local news outlet to build enough reach on those products, so that is interesting for the advertising business.

We continue to experiment and I’m sure we will succeed. There is always a right way out there; and we’re going to find it.

Another example is a tabloid product we have called Express. In its digital form it is more of a broadsheet and we are trying to improve it in the video advertising and video publishing businesses.

It’s all about trial and error. Nobody knows the single right path through the jungle; everybody has to find their own, because there won’t be one recipe that works for all.

That’s why we are experimenting; in a process of continual market research that we are engaged in, and will not stop.

IS – Innovation on quicksand. Not the easiest thing to do. Not least since the complexity of the digital world is only multiplying with factors like the metaverse, NFTs, and digital currencies. It’s as if we are moving into a quite different digital world before we even had a chance to master its predecessor. How do you envision the future of news media in this new world?

TSH – Very big challenge. Good question. I think the metaverse will become relevant. That’s an issue for me and for news in general as well, because if you spend maybe half of your day, or more, in the metaverse, you won’t have time to read your apps and your news on traditional publishing channels. We have to find a way to get into the metaverse worlds and yes, how to show our products and our content there.

I don’t have a solution for that, but I think that will definitely be both relevant to people’s lives and a means of enhancing people’s lives. We have to follow both the readers, and the money. We have to find out how we can thrive in that world, really make progress there, and recoup relevant revenues.

In terms of digital currencies, I actually don’t think that they are set to impact our industry that much. This is more of a challenge for the financial industry. It might conceivably be something that will become a part of our payment models but I don’t think that it is set to impact our core business. The metaverse, on the other hand, is something we have to look at very carefully, and get into very early.

We must not make the classic mistake that news outlets so often do where we only go there once everybody else is already there. That would be a big mistake. We’re going to get into this very early, and try to learn as we go from it.

IS – These were wonderful insights. Thank you for this interview, Thomas.

TSH – Thank you very much. It was a pleasure.

Thomas Schultz-Homberg: “There are no ready products anymore. It is a process of continual market research that we are in, and we won’t stop!”