Tuesday, March 10, 2009

Online killed the newspaper stars

According to some, bloggers are almost solely responsible for the dire straits many newspapers find themselves in these days. If it wasn’t for bloggers “stealing” content, they argue, everything would be fine.

Their argument basically goes like this: Newspapers publish their stories online, and also through sites like Yahoo! News or Google News. Bloggers see the stories and react to them (or restate it in a newsy sort of way) with or without links or even citation. This erodes the value of the news stories printed in the papers, fewer people buy them, advertisers bail, revenues fall, journalists are laid off, the newspaper dies. Therefore, bloggers—and the online world generally—are responsible for the death of newspapers.

Like all myths, there’s an element of truth: The availability of news online does make people less inclined to buy a paper and declining circulation leads to declining ad revenues. But that lets the publishing companies off the hook too easily.

Big media conglomerates, like all corporations, are focused primarily on return to shareholders. Profitability at a paper must be high enough to produce ever-increasing returns or the investors want out by selling the paper or closing it down. The media companies, meanwhile, have plenty of other revenue streams to produce the returns investors demand. Companies without those profit pressures—smaller companies or not-for-profits—are better positioned to deal with declining revenues and many small, independent papers are still thriving.

However, increasingly people expect to get their news online and for free, and that is a threat to ink-on-paper news reporting. Some newspapers tried to charge readers for access to online content, but it was pretty much a dismal failure. Why would people pay to read about a topic when they could find free stories about on other mainstream news sites? That’s still true.

To attract more online readers, newspaper companies have adopted the tools of the new media—blogs, podcasts and video news reports. And yet their revenues continue to decline. Even free papers have faced this problem, despite their printed content being free to readers.

The problem is not that bloggers or anyone else uses newspapers’ content, it’s that the old way of doing business just doesn’t work anymore. Classified advertising—once newspapers’ most profitable type of advertising—has migrated to online sites. Retailers and service companies try and market directly to potential customers, rather than use the “shotgun approach” of newspaper or free-to-air TV advertising. If every blogger stopped right now, none of that would change.

Ultimately, media companies will have to adapt and evolve, using the tools of the new media where appropriate. They also need to get innovative.

What doesn’t work is complaining about the way things are, or blaming others for the current situation. Action and experimentation are required, and if newspapers can’t manage that, they will die. The news, however, will not, but what emerges could be very different.


Roger Owen Green said...

There was an article in advertising age, Feb 23 - "It's Not The Newspapers in Peril; It's Their Owners". Even in this economic climate and competition from bloggers and whatnot, most papers are still profitable, if one just calculates the costs and the receipts. The problem, as a letter writer in a subsequent issue put it: "the same kind of genius that got the economy in the mess it's in prevaded the newspaper industry's brain trust." Taking on debt, paying too much for acquissitions, etc.

Arthur Schenck said...

That's very true. Greg Mitchell, the editor of newspaper industry journal Editor & Publisher was on Rachel Maddow's MSNBC show last week and pointed out that it's not that newspapers aren't making any money, just that they're not making as much. But a larger problem he pointed out is related to what you were mentioning: Debt. Many newspaper companies have piled on huge amounts of debt and, I'd add, usually for stupid reasons.

For example, Tribune Company is in bankruptcy because Sam Zell, the tycoon who bought it, used a HUGE amount of debt. He put the Chicago Cubs/Wrigley Field on the block to try and raise cash to pay down debt, but it wasn't enough (my prediction: Tribune Company will be sold off in pieces and Sam Zell will emerge even richer than he was before).

Journalists, of all people, ought to know how wrong and pointless it is to scapegoat. I realise they feel threatened and squeezed by what media conglomerates are doing to them, but it's not helpful to criticise people who aren't causing the problem, even though they're also not helping it.