Know your own business model

As I observed Friday, newsrooms are categorically blind to the underlying business realities of their own employers. This leads to needless shock and amazement when an overleveraged newspaper chain falls on hard times, a lot of pointless hand-wringing about the future of journalism, and a parade of kooky ideas about how "we" are going to "make them pay" for all the really great content that Google, et al, are "stealing."

But clarity isn't that hard to find. A couple of recent posts from Advertising Age columnist Nat Ives and NYU new-media theoretician Clay Shirky provide a reality-based framework for cutting through some of the clutter.

Let's take the easy one first. Ives points out that "newspapers got dangerously addicted to advertising long before digital came along." That's surprising language to see in the journal of the ad biz, but true.

We are deeply addicted, so addicted that the business of newspapers is advertising -- specifically, local advertising. They are one and the same. Many newsroom folk do not want to hear this, as you can see in the comments to my Friday post. We aggregate an audience, and then sell the attention of that audience to (mostly local) businesses.

That addiction comes with dangers, and we can see one manifesting itself right now. When employers aren't hiring, they don't run employment ads. When car dealers can't line up financing to sell cars, they don't run car ads. The dependency on advertising makes the newspaper company highly exposed to economic cycles. At a planning meeting back before the storm struck, one newspaper association executive said newspapers are a leading indicator of a down economy, and a trailing indicator of recovery. Think about that.

Back when Joel Kramer (founder of Minnpost) was publisher at the Star Tribune, he led an effort to raise circulation pricing and shift the economic model toward the relative stability of reader revenue. First thing McClatchy did after taking control of the paper was to blow that away and leap back into the kettle of discounting.

Ives asserts that newspapers don't really have a paid content model for print. He actually understates the case. Over the last few decades, changes in auditing rules allowing hotel distribution and other bulk sales, and long "grace periods" of delivery to canceling subscribers, have rotted out whatever claim to a paid content model newspapers may have had.

The second post I want to recommend is Clay Shirky's wonderful essay "Newspapers and Thinking the Unthinkable."

It's getting a lot of online buzz right now. In particular, these two paragraphs resonate with increasingly bitter online folks inside the newspaper industry (and those who've already bailed):

"Revolutions create a curious inversion of perception. In ordinary times, people who do no more than describe the world around them are seen as pragmatists, while those who imagine fabulous alternative futures are viewed as radicals. The last couple of decades haven’t been ordinary, however. Inside the papers, the pragmatists were the ones simply looking out the window and noticing that the real world was increasingly resembling the unthinkable scenario. These people were treated as if they were barking mad. Meanwhile the people spinning visions of popular walled gardens and enthusiastic micropayment adoption, visions unsupported by reality, were regarded not as charlatans but saviors.

"When reality is labeled unthinkable, it creates a kind of sickness in an industry. Leadership becomes faith-based, while employees who have the temerity to suggest that what seems to be happening is in fact happening are herded into Innovation Departments, where they can be ignored en masse. This shunting aside of the realists in favor of the fabulists has different effects on different industries at different times. One of the effects on the newspapers is that many of their most passionate defenders are unable, even now, to plan for a world in which the industry they knew is visibly going away."

If necessary, print it out and leave it on your boss' desk.