I’ve covered the newspaper industry so much in the recent past that you’d almost think I ran a newspaper company. But, I don’t. I work online and count my blessings every day. Yet as online operations fight tooth and nail for every single dollar of revenue, newspaper companies continue to print money.
Here Today, Gone Tomorrow?
Of course, as Washington Post investor Warren Buffett pointed out in his most recent letter to investors in Berkshire Hathaway’s annual statement: “Average daily newspaper circulation in the United States has declined each year since 1987. “ That’s not a pretty looking macro trendline.
But, there’s also some micro problems facing the newspaper industry. Newspapers like all media firms can be broken up into business and creative people.
Monopoly Rules
Continuing to quote from Mr. Buffett: “As one not-too-bright publisher famously said, ‘I owe my fortune to two great American institutions: monopoly and nepotism.’ No paper in a one-paper city, however bad the product or however inept the management, could avoid gushing profits.”
In Buffett’s words, it’s not through management ingenuity that newspapers have become behemoths, it’s through such externalities. Naturally, by now we know that the Web exposes these inefficiencies and brings the orgy of excess to a grinding halt. As such, the only way for the newspapers to shelter their core business and profit from the new media opportunity, it would be argued, is to leverage their balance sheet to reposition operations to inject their income statement with the upside that the digital revolution presents.
An Online Assault
Yet, they’ve done nothing of the kind. Today eBay announced it was moving Kijiji (what?) to the US, in newspaper companies’ backyards. While conventional widsom suggests this is an affront to eBay, it’s not, it’s a dual attack by eBay and Craigslist to the newspapers.
Hindsight is Always 20/20, but Corrective Surgery is Always an Option
We know the brutal truth: the decline in traditional revenues is accelerating faster than the uptick in digital revenues, and that’s partially because newspapers did not invest early enough in new media. Hindsight’s 20/20, because a cynic would argue that if they would have been more aggressive with the Web, it would have cannibalized their offline business sooner, faster. Take the Chronicle, this year it lumped off 25% of its staff, and critics and supporters would argue that the Chronicle was one of the more progressive companies around amongst newspapers.
I myself have encouraged print to go free, but that would simply cannibalize offline revenues faster. So while it’s a long, long term option that might prevail, short and mid term, that’s painful.
I think we’re all - including Mr. Buffett - suffering from a myopic view of things: “Simply put, if cable and satellite broadcasting, as well as the Internet, had come along first, newspapers as we know them probably would never have existed.”
Hmm… true, but then neither would have anything other than the plane, no? Yet we still use horses - where applicable - and cars. That’s an apt analogy, for sometimes the concept of printing content and publishing it on paper to distribute nationwide is as odd as using a horse to transport goods from coast to coast. It’s backwards, and if horses could write, we’d probably still be using them.
Business meets Creative
In other words, while business is half the equation, part of the problem (and solution) of newspapers is the creative.
Please, hold off on the attacks until you read the end.
Mr. Buffett’s comment is akin to rewriting history, but history is being written as we speak and it’s being written by a generation that doth not pick up papers.
While I have long encouraged technology companies looking to profit from advertising to buy, invest and own content, I don’t think for one second any one of them to acquire NYT; MSFT won’t, Google won’t, neither will YHOO. IAC might, but I doubt it will. It can’t really afford to.
IAC, of note, is looking increasingly into social media, as is Yahoo! Frankly, they’re lazy. But more on that later.
The Social Media Myth
One of the more prevalent themes is the notion of social media. This has impacted news and changed the dynamics for good.
Social news and social media is not - or rather, should not be - about empowering citizens to become journalist, because everyone these days can pontificate and become a journalist. Ages ago, business became a discipline at school and that made business lose some of its lustre because anyone could technically become a businessperson (it was believed) by earning a diploma. Nonsense! The same could be said about journalism. What makes someone a journalist has nothing to do with what they studied; it’s a set of skills, interests, and lifestyle, frankly.
These days, with all due respect, you need to demonstrate a hustle and entrepreneurial spirit to succeed as a journalist. In other words, whether the powers that be at DJ, NYT, WPO, etc. like it or not, the very definition of journalism has changed because the times have changed, if they choose to evolve and adapt with the times, then they will make up the definition of journalism in the future, otherwise, they will be as relevant to the ecosystem of communications as brokers or travel agents are to the marketplace of securities and trips.
But given that everything is connected: how can journalists be expected to become entrepreneurial if management (business people, basically) is risk-averse?
Sow What You Reap
They did not invest during the 1990s. Not sure they’re investing properly today, either.
In fact, once the newspapers invested in Topix, it seems that went off the rails. It’s done admirably well, cracking the Top 20 news sites, but at first glance, Topix had top 20 site potential, not just Top 20 news sites potential.
And, history also suggests that when the newspapers backed CareerBuilder, it gained traction, something I documented here, for the love of all things holy, the post was called “Craigslist Achilles Heel”.
Why on earth them do companies like NYT suffer from inertia then? I’d be scooping up companies right and left and investing in new technology. Yet, given the size of these enterprises, the opposite is happening: the NYT launched Times Select, for example, going against the grain of every trend and case study online. Every day that passes by, the more irrelevant you become by behind walled gardens. Is there no one from About.com that can sing the praises of openness to HQ at the NYT? I myself used to think that it’s good to have a dual strategy: both free, ad-supported and paid subscription-based… but there’s way too much money being shifted from offline to online and not enough people willing to pay for content, so that argument is blown away. You’d think of all people, companies like NYT who have seen their revenues and market cap erode would be the ones singing the praises of free, ad-supported content online…
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