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The Internet isn't killing newspapers

Submitted by yelvington on January 7, 2009 - 1:08pm

I know I'm repeating myself, but it bears repeating: The Internet isn't killing newspapers.

The Internet didn't create the conditions that left the Lee Enterprises, the Tribune Company, Journal Register, Gatehouse Media, the Star Tribune and a dozen others hanging off a cliff, dangling from a tree root.

By far and away, it's the economy, the economy, and also the economy, combined with some badly timed financial bets. And the economy is cyclical.

But that doesn't mean print is coming back. Happy days will not be here again. Because as the economic cycle knocks down the newspaper, secular change rushes in to the empty seat at the table. Secular change includes the effects of the Internet, but also market fragmentation, restructuring of the retail landscape, and other changes.

Whether newspapers participate in the coming economic recovery will depend on how well they focus on new products, especially digital, and whether they take off the blinders and discover the breadth of the playing field.

The scale of the opportunity is stunning.

A new report from Jim Chisholm of iMedia and Randy Bennett of the Newspaper Association of America has a compelling data point: Newspapers, which are accustomed to thinking of themselves as the dominant player in local markets, currently attract only 9 percent of all marketing expenditures. Unless my grade-school arithmetic fails me, that means 91 percent of the money is going somewhere else. Marketing expenditures have been growing in new directions, and newspapers have not been along for the ride.

But money being spent elsewhere also can be seen as opportunity for growth.

To pursue that opportunity, we have to stop limiting ourselves to advertising -- including search and behavioral targeting, which are the celebrated Internet growth points. There's also telesales, direct mail, catalogs, couponing, in-store media, custom publishing and event marketing. Many of these may fit reasonably well with current newspaper competencies and assets.

We're in a crisis. A crisis is a terrible thing to waste. Let's use this one to refocus -- not on rowing harder in the old direction, but to explore new ones.

Comments

Good point, but the reason newspapers haven't sought out diverse forms of advertising is because in the past they've only had to compete with themselves. Now that the internet has diverted audiences, newspapers may look to more advertising, but will likely continue with the cost-cutting strategy that's become second nature -- slashing departments and cutting jobs.

Newspapers have enjoyed very good margins for a long time, and that combined with a short-term focus and accountability, it can be argued that the newspapers didn't need to be so forward-looking and thinking. However, diversification in any portfolio helps to keep a company flexible ... introducing, offering, and focusing on additional business models other than advertising can help to balance out the potentially cyclical nature of any model. To follow-up on Mark's comment above, unfortunately, the cost-cutting strategy will only take the newspapers so far... unless they start to execute on strategic ideas other than incremental improvements in the print, at one point, they will be far behind other media in the eyes of the audiences.... and unless they start to implement and focus on other business models, they will continue narrowing their margin on their once lucrative business.

Some would also argue that the concentration of media ownership among regional newspapers and a drive to maintain profit margins of at least 30 per cent has led to relentless cost cutting that has damaged the journalism those papers produce (which used to be a reason to read newspapers). Why pay to read crap in newspapers when you can get crap for free online? If you agree with that view, then newspaper publishers have only themselves to blame for their current predicament and are now reaping the seeds they have sown for their own destruction. Nothing to do with the internet, as you say.

Maybe it's like what they say in Alcoholics Annonymous: you have to hit rock bottom before you can change. I sometimes wonder if the bottom has already been hit - there has to be some kind of stabalising situation soon. I hope to God, as a newspaper journalist, that things will pick up soon.

And another thing - and this isn't directed at this excellent blog - all the doom-mongering on blogs etc (often backed up by little or no evidence) I think fuels the job-cutting we see. It pushes the options right to the forfront of owners minds: "Oh, the industry's doomed - everyones cutting...lets join them. Might as well, no-one will notice or complain to badly because it's par-for-the-course these days."

I am retired from daily and weekly newspapers, fortunately, but when I was in the biz a few years ago and newspapers started climbing aboard the Internet, the first question I asked of my publisher is "Why are we providing stories on the web for free and still expect people to plunk down 50 cents for our newspaper?" I never received a logical answer. True, classifieds are a big loss for print with the migration to the net, but I have yet to see evidence that the effectiveness of display advertising is better in electronic form. One idea that all newspapers should try: Offer your papers for free. Besides the savings in reducing big circulation departments there very well could be increased display ad revenues once advertisers realize that their ads are out there blanketing the area, getting maximum exposure. It works for many small papers and could work for the big ones. Finally--don't forget journalists' version of "All politics is local" --all news is local.

I can answer the question "Why are we providing stories on the web for free and still expect people to plunk down 50 cents for our newspaper?" Or at least the first half of the question. Simply:

1. The net is where the customers are going. If we want to continue the business, we have to be there. (This does NOT mean "online newspaper" is the right product model, however.)

2. It's free because paid doesn't work. This isn't theory, but practice speaking; I've tried it and seen many others try it. Broadly, we've moved from scarcity to surplus in the information business and charging for content works only in an environment of scarcity.

The question of why we expect people to plunk down 50 cents for print is a lot tougher.

The free delivered print newspaper idea has a lot to recommend it but one big problem: It radically increases your exposure to economic cycles, because you go from 70-80 percent dependency on ad revenue to 100% dependence. And right now, of course, we're in a pretty nasty ad revenue trough. Other problems include a radically higher cost base for manufacturing and distribution (you're going from 30-55% coverage to 100%), and the fact that you can't give up as many of the circ management costs as you might hope.

Back in the 1980s at the St. Louis Globe-Democrat, we launched a free-circulation Sunday Globe with about 400K delivery. It succeeded spectacularly at sucking all the ads out of the paid daily editions and probably contributed to our economic collapse. Hell of a product, though.

Just realised my post should have read: "I am a STUDENT journalist"...Not a "Newspaper journalist"!!

Interesting post here: http://www.huffingtonpost.com/dan-froomkin/what-google-can-do-for-jo_b_156033.html

So then why didn't newspapers disappear in the 1930s, a bigger downturn than this one? And they are going to disappear, I mean market cap 1% of what it was two years ago (Lee Enterprises)? The captains of the press have been irresponsible in a stellar fashion at exactly the moment that myriad alternative news sources have become available. Irresponsible in a business sense, to be sure, but also politically. Long gone are the days of the newspaper as community representative and guardian. I would set myself on fire before re-subscribing to my Bush-enabling local paper (Lee Enterprises, btw) in this 90% Democratic town. Good riddance.

I agree the Internet is not killing newspapers. But the newspapers failure to adapt is what is driving the dagger in. My lcal newspaper, the Plain Dealer, includes mostly reprint stories from the AP. With an economy in turmoil, and the Feds investigating many of our politicians, the last thing I want to do is pick up a newspaper and read the same article I saw online days before. Newspapers can't compete with the Internet for global stories unless they have their own reporters assigned to it. I think newspapers should focus more on local and state issues. This is the news that impacts me most and what will nudge me to pay for a subscription fee. But I refuse to pay any money to read reprints of AP articles.

My post below is nothing really new and not as well written, but I wanted to add my voice. My sense from recent discussions on the net is that this approach is starting to get some traction. Anyway, my two cents. http://sellingprint.blogspot.com/2009/01/its-not-internet-its-not-news-its.html