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We’re Just Sayin’: In Newspaper Death Spiral, Save the Reporting

Apr2

By Phil Trounstine and Jerry Roberts

Here’s some free financial advice for panicked newspaper owners: If you want to save some real money, stop publishing the news altogether.

Unfortunately, that seems to be the direction that many papers are headed. With papers across the nation contracting, collapsing and folding, and reporters and editors seeking safer ground – the bad news in the industry is going to get worse before it gets even worse.

Simply put, American newspapers are in a death spiral.

A handful of national papers like the New York Times, Wall Street Journal and USA Today will hang on, and so probably will some in the category of small-bore, small-impact community papers. But the once-powerful, once profitable big metro papers – the Los Angeles Times, San Francisco Chronicle and San Jose Mercury News come to mind – which combined both the resources and the motivation to serve as public interest watchdogs on school boards, city halls, cop shops, courts, their state legislators and members of congress, all are in big-time decline.

Metros, scandalously slow off the mark in adapting to new technologies, reacted to economic decline by slashing the amount and quality of local news coverage that was the central value proposition in selling the paper to readers. Faced with plummeting circulation, owners and publishers ensured the downward trend would gain momentum, by cutting back on the very product readers were looking for: journalism .

The result: readers found their local newspaper was not something they had to have in their daily lives. So circulation declined even further, leading newspapers to cut back more, leading to further decline in readership and further cutbacks. That’s the death spiral.

BROKEN BUSINESS MODEL: THE DECLINE OF CLASSIFIEDS

The internet upended the traditional model for newspapers – aggregating a mass audience and selling it to advertisers – by fragmenting the very notion of a mass audience. Instead of one-stop shopping for news, weather, sports and comics in the daily paper, consumers now had an almost infinite number of new sources of specialized and in-depth information about specific subjects of interest to them – along with the power to engage in a conversation with those producing that information.

Dumping most of their resources into hanging on by their fingernails to their old franchises, publishers and owners failed to invest adequately – in bodies or in dollars – in exploring in a big enough way how they could use the new technology to build on their greatest strengths: the expertise and intelligence of their reporting staffs.

Suddenly then, the revenue to cover their vast overhead nut started disappearing. Nowhere was this more dramatic, or more damaging, than in the rapid loss of classified advertising.

Yes, once upon a time, BCL (Before Craig’s List), newspapers sold classified advertising. It was like printing money. Every line was a source of revenue. And significantly, classified advertisers really didn’t care how big the home delivery circulation of the paper was because people looking for a job, home, car or repairman bought the paper because they needed the classifieds.

Today, people looking for any of these things – especially jobs – don’t bother with the newspaper. They go online, usually to a site that has no connection to their local newspaper.

When newspapers could no longer rake in cash from classifieds, they became more heavily dependent on display advertising. And display advertisers – from big national chains like Target to local restaurants and shops – do care about the size of circulation. They might pay $10,000 to place an ad in a large circulation newspaper but only $2,000 to place that ad in a paper with smaller circulation. It’s all about paying for eyeballs.

In order to survive, newspapers needed to focus more sharply on their primary business – local news. People interested in what was happening in Uzbekistan didn’t need the L.A. Times to tell them about it – they could go online and find all and more of the information they sought. What people couldn’t find was what was going on in South Central or West Hollywood. That’s not on the Internet, except when it’s aggregated by sites that pick up the work paid for by local newspapers.

But when classifieds dried up, newspaper managers responded by cutting the one thing crucial to saving their business – those who produced the local news that readers could find nowhere else. Less compelling content (and the rise of the Internet and other channels of information) led to declining circulation, which made newspapers less attractive to other advertisers. Stockholders and owners long used to annual profit margins of 20% saw their dividends shrinking so they demanded further cost savings. And the death spiral deepened.

For some papers — like the San Jose Mercury News, for example — where the business model depended on classified advertising for more than half its revenue — the evaporation of classifieds was a devastating blow to the bottom line. But instead of making itself indispensable to readers by increasing resources for local news, the publisher cut the newsroom budget even further. (See “death spiral” above)
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WHAT IS TO BE DONE?

There are only two ways to stop the spiral. And at this point, it’s not clear either will work.

– Newspapers can invest more resources, not less, in local reporting, leaving every national, international news and sports story to the national papers and wire services. They have to concentrate all of their force and fire power on their own communities, making themselves indispensable to local residents. People need to feel that they have to take the local paper to know what’s going on in their hometown. It’s the only way to maintain and grow circulation.
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– Or, a business like Google or Yahoo, which is expert at online advertising – including personalization at the individual user level – can begin to pay reporters in communities to produce content. We’re talking about covering city councils and school boards, writing about local development and utilities, local sports and arts, etc. This might kill local newspapers, but it might save local reporting.

Why can’t local papers themselves do this? Maybe they can – and the Hearst Corp. is trying in Seattle, where they’ve shuttered the venerable Post-Intelligencer but kept a small staff of local reporters on hand to try to do its job online. Freed from the costs of paper, ink, presses, mail rooms, bundlers, delivery trucks, pressmen, racks and real estate, maybe they can find an online business model that works. But it’s clear that news operations that have to carry all those legacy costs can’t make enough on the Internet to sustain themselves.

Why should we care? Because city councils, school boards, water and sewage boards, police departments and more will have no one looking over their shoulder, rummaging through their waste bins, blowing the whistle on bad behavior or commending admirable work. Because democracy works only when there is an informed citizenry. Because corruption loves a vacuum. Because when you turn on the light switch, the cockroaches run for cover. Because we cannot afford to leave politics and policy in the hands of politicians and policy-makers.


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There are 19 comments for this post

  1. avatar Anonymous says:

    One thing that was not mentioned, at least in the case of McClatchy News Corp., and/or The Sacramento Bee is the left-leaning propaganda that continues to spew-forth.

  2. avatar James Richardson (formerly of the Sacramento Bee) says:

    I agree with your analysis of the death spiral of newspapers (how can one disagree?) though you’ve left out one important piece — the debt newspaper companies incurred acquiring other newspaper companies. McClatchy owes $2.5 billion for its ill-consider purchase of Knight-Ridder (and the Mercury News), and the debt service on interest alone is something like $100 million a year. How they get out of this without going into Chapter 11 is beyond me.

    Meanwhile, it is curious that newspaper folks are reluctant to look at another business model staring them in the face: PBS.

    What if newly organized local newspapers (paper or online) became non-profits? Local journalism is as vital to a community as the art museum, the zoo, or the symphony. Local philanthropists and smaller donors can be motivated to give, though it takes a different skill set than what currently resides in newspaper corporate suites. Publishers/executive editors would be paid like the executive director of a non-profit. Ads would become “support from…” as on PBS and NPR. The LA Times almost got their when some local LA deep pockets tried to purchase it a few years ago. Instead Sam Zell beat them to it and now the whole thing is in bankruptcy.

    The difficulty with thinking that better journalism will bail-out news organizations is that the business model dependent only on commercial ads cannot sustain itself just with better journalism. It will take a very different model, like the non-profits, or something close to that.

    The other thing that is nuts in all this is that news executives have scrambled to produce more on-line journalism. What they have done is increase the supply of news and give it away for free. Had they taken Econ 101 they might have known that is not economically sustainable. Now some great journalistic minds talk of charging for on-line news, but it is probably too late for that (and unlike iTunes, why would I pay for something like news that I plan to use only once?). So instead of producing more and more on-line news through the day, maybe the key is to produce less. That is arguable I suppose. The point I am getting at is purely commercial models are not sustainable for a public interest product.

    Anyway, thanks for the discussion. I hope there is more. — Jim

  3. avatar Daniel J.B. Mitchell says:

    The issue was covered in a PBS program on the LA Times. For an excerpt, see:

    http://www.youtube.com/watch?v=GHaolnGgGSg

  4. avatar Anonymous says:

    Left-leaning, bs. Surveys show that the politics of a newspaper have very little to do with cancellations. Bigger reasons given include perceived lack of time to read the paper, poor delivery, etc.
    The only people who believe otherwise are right wingers who spend far too much time writing comments on media blogs.
    Give us a break. Go start a movement or something.

  5. avatar Anonymous says:

    This story itself is old news. Nowhere is it mentioned how newspaper websites are KILLING their competitors in all of these cities the author says newspapers are floundering.
    That will have value at some point to advertisers.
    Do a little more updated homework before embarrassing yourself like this.

  6. avatar James Richardson (formerly of the Sacramento Bee) says:

    I fail to see how newspapers are "killing" anything except themselves at the moment. By the way, the numbers I've heard show that the paper circulation of newspapers is still more than the internet hits. Phil & Jerry, thanks for the post – anything to get this conversation in the public and going is a good thing. And not "embarrassing."

  7. avatar Anonymous says:

    I think you hit it spot on.

    Newspaper publishers are missing the point, but they’re not alone. Book publishers (and authors) also don’t understand: it’s about the content.

    Whether it’s delivered in print, online, through the radio or TV, people want to know what’s going on. The entities that do the best job of delivering will have a chance of surviving.

  8. avatar Anonymous says:

    As an elected trustee of a Community College District Board, I sincerely wish there were some journalists – any journalists – to poke around our $80 million annual budget. Administrators feel wholly unaccountable since no newspapers cover expenses or scandal.

    I have contacted reporters with details of financial mismanagement such as no-bid contracts, private enrichment with public funds, big raises for administrators, settlements of sexual harassment claims, etc. But, to date, there has been little coverage in my five years on the Board.

    Trustees who want to protect the public’s trust need help from the public. In a post-letters-to-the-editor era, we’re all trying to figure out how to serve without journalistic watchdogs. I don’t sweat losing 6-1 and 5-2 votes, but I note that administrators feel emboldened to publicly sass Trustees who ask questions at Board meetings because no media reps ever are present.

    Beware the Chancellors, Superintendents and City Managers who make over a quarter million a year and their deputies who make $200 K or more. These folks have no incentive to publicize financial mismanagement and are happy as can be to celebrate the demise of local journalism.

  9. avatar Anonymous says:

    I have to agree that I’ve heard this “free advice” from others over the few years. Nothing new here.

    However, is it a crime for anewspaper to fold its print operation and focus entirely online (for other than sympathetic reasons)? I doubt it. As long as the online newspaper matches the commitment to local journalism it made in print, it should continue to survive.

    Keep in mind that newspaper circulation and revenue is declining, but news readership remains strong. Go where your audience is.

  10. avatar boho says:

    I’ve heard this idea before: that all newspapers need to do is get back to basics and report the hell out of their communities and they will prosper. But I still don’t understand how hyperlocal reporting is supposed to bring back classified revenue. How you pay for all that increased hyperlocal coverage with no money?

    Maybe content isn’t the issue. Maybe newspapers should instead work on hyperlocal *advertising* and finding ways to compete against Craigslist, which, frankly, has a lot of vulnerabilities.

  11. avatar Anonymous says:

    Newspapers have one other untapped resource that they might be able to sell online — their archives. Virtually every large newspaper and many midsize papers have 20+ years worth of stories and photos in databases. That is an unmatched local history.

    The community college trustee is absolutely correct that many institutions such as his get no coverage today. But that was not always true. If you want to know why that college created a program in, say, Farsi, or how that screwy water project ever got approved, or why a 4-story apartment building got built next to a bunch of single-family homes, the answers are probably sitting in your local newspaper’s archive.

    Now if only publishers would realize what a gold mine they’re sitting on — and how important it is both to provide that local history and to continue covering local issues.

  12. avatar Anonymous says:

    Nicely done, but the flow reads more like a smoothly constructed Roberts narrative than one of those classic drive-by Trounstine hit pieces. Jerry’s name should be first, no?

  13. avatar Anonymous says:

    I find reporting to be rare.

    Typically, we see something akin to: “The devil’s spokesman said ‘yada.’ ” “Joe churchgoer[or not]-on-the-street thought this…”

    Much of the media thus pretends they have “fair and balanced reporting” between quotes of persons not far removed from the above professionally-trained deceiver’s-agent and a common guy with a maybe good-sounding, but not well-considered opinion.

  14. avatar Anonymous says:

    Lemmesee: liberal slanted newspapers are tanking across the country. Liberal slanted network newsrooms’ ratings are tanking across the board. Liberal slanted cable news networks’ ratings have never been respectable. Fox News Network enjoyed unprecidented cable news ratings, until they actually started being Fair and Balanced and shifted to the left. They are still above the liberal slanted cable news networks. The openly liberal radio network went bankrupt three times and is now effectively dead. Independant liberal radio stations are closing too. Yet, conservative talk radio is bigger than ever and still growing. Could it be that the American people have had enough of liberal lies? Lazy college proffessors need not respond. You people can’t make it in the real world, so your opinions don’t count. Get back to work, or whatever you call it.

  15. avatar Anonymous says:

    I don’t much read newspapers now, but I do get three weekly news magazines – The Week, World, and The Economist. The traditional triad of Time, Newsweek, and U S News and World Report have, like many newspapers, stopped reporting the news, but even longer ago. It may say something that World is non-profit, the Economist is British, and The Week is a spinoff of a British magazine.

  16. avatar Anonymous says:

    Yep, liberals are sure on the run Anon137. Just ask President McCain and his popular predecessor, President WHO?

  17. avatar Robert Collier says:

    A very interesting and thoughtful post. But I think Jerry and Phil may err in assuming that newspapers should primarily focus on “politics and policy” — thus apparently downplaying coverage of business and the private sector. As we’ve seen from the economic debacle of the past year, newspapers failed their readers horribly by not covering local business practices with the same critical eye as they cover politicians’ peccadilloes. Granted, if newspapers had done less cheerleading for their local real-estate industries and banks, they would have been hammered even harder as “liberal,” lost more advertisers and repeatedly sued for libel (Jerry can say a few things about hyper-litigious billionaires). So maybe it’s easier to just focus on tawdry politicians and ignore the real criminals. But for the many average folks who don’t really care about politics per se, that strategy would push newspapers farther into irrelevance.

  18. avatar Michael Stoll says:

    The PBS/NPR model is becoming more and more attractive. Witness MinnPost, Voice of SanDiego, Chi Town Daily News, St. Louis Beacon, Gotham Gazette and others. A group of veteran journalists is starting up a nonprofit local news site in San Francisco, http://www.public-press.org, on a shoestring, though we plan to re-enter the print realm using public broadcasting’s membership model. Print is as good a medium as ever to unite local communities rather than aggregate millions of eyeballs to ads. The combination of the noncommercial business model and traditional print subscriptions could return the most vital press functions to viability.

  19. avatar Steve-O says:

    Great post, guys. Lots of people complain about CA being “too liberal”. Although a conservative Republican from the Bay Area, that’s not why I left the state.

    The lack of civic engagement out there is appalling. CA has it’s fair share of well-informed educated elites. But the average schmuck on the street couldn’t tell you the name of their mayor. One has to live in another state to appreciate how bad things are.

    Good local reporting won’t fix the problem. But it’s a good start.

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