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 seek
ing 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.
