Free Markets, Free People

Seattle Post-Intelligencer


The Dead Tree Media And The Future

I think what is happening at the Seattle Post-Intelligencer and other newspapers is an indication of where that industry is headed:

 The Seattle Post-Intelligencer reports that its owner, Hearst Corp., has made offers to some staffers to participate in an online-only version of the newspaper.

The paper says an unspecified number of the P-I’s roughly 180 employees received “provisional offers” Wednesday and Thursday to work for the online venture, if the Web site is approved by Hearst’s senior management.

Hearst announced in January it would put the P-I up for sale and either close the paper or go to an online-only publication if it couldn’t find a buyer by March 10. There has been no word on a possible buyer.

These are very tough times for the print media. And, at least among the big dailies, they’re burning through money like GM with no bailout in sight. They’re stuck with a business model that no longer works. And it has happened in a very short time, relatively speaking.  The problem is, those who run the business have never faced times like this.  Already in trouble before the financial crisis, the trouble has now been accelerated beyond measure.

I’ve worked in and around the industry for almost 25 years. Newspapers had a tendency to make money despite themselves sometimes, and were always a profitable business. In effect, they held a pretty solid position as being one of the only outlets for news in a city, region or state. Sure television had some effect, but not at all the effect many in the business worried about. Detailed stories, not 30 second to a minute coverage found on TV, could only be found in newspapers.

Another critical aspect of newspaper revenue was classified ads. They were the go-to place for jobs, cars, real-estate, etc. It was that revenue and advertising revenue which kept them profitable. Subscriptions never were their primary source of revenue.
newspaper
Then Al Gore invented the internet. And newspaper big-wigs worried about the impact. The impact was subtle at first. But as the breadth and depth of the ‘net grew, newspapers finally figured out the ‘net was a serious threat to them. The problem was they believed they were in the printing business instead of the news delivery business. So we saw these attempts to jazz up newspapers with more color and snappier features. But none of that really matters when the news that’s delivered is a day old and available when it happens on line.  Stale news does not sell well.

Then production costs started to go up. Newsprint has gone through the roof. Aluminum costs (plates) have risen dramatically. All the while, ad revenues have steadily dribbled away as advertisers found newer, cheaper and vastly wider coverage on-line. Classified advertising began slowing as eBay and Craig’s List began siphoning away potential customers with their wider reach. Firms tying to fill jobs went on-line as well.

Page count dropped. Subscriptions no longer even covered the cost of the newsprint each edition required. Web widths were cut. Every economy that can be thought of was enacted. Production facilities have been shut down and consolidated. Automation has been used to replace headcount. Vendors have been squeezed for every penny that can be squeezed. But formerly profitable newspaper groups are now hemorrhaging money and frankly they don’t know how to stop it.

That’s not to say all newspapers are in that sort of trouble. Interestingly the small town newspapers seem to be doing okay. They’re not raking in the money they used too, for sure. But they seem to be surviving. One of the reasons is they are in a unique position which large town and city newspapers don’t enjoy anymore. In many cases they are the sole source of news for that community. Some have local TV stations that cover news as well, but the in-depth coverage over many weeks that local stories sometimes require can only be found in the paper. Additionally many of these small town papers have a production facility that is bare bones but has been printing other business for years – neighboring weekly papers, commercial work, etc. So their production facility is at least paying for itself. And while they have an on-line presence, it is more of a business an archive site. They don’t deal much in national and international news. They’re focused almost exclusively on the community they serve and the news it generates. If you want national or international news, go to CNN – they know you do that anyway.

With the closing of the Rocky Mountain News, the possible closure of the San Francisco Chronicle and the Seattle P-I’s decision to go on-line only, you can see the larger newspapers are still struggling to find a business model that works. I’m of the opinion, and have been for a while, that the small town model, adapted for the larger communities, is the way to go – with an tight focus on covering the community they serve, an on-line presence that adds instead of detracting from the print edition and a plan for the future which takes the operation on-line through devices like the Kindle 2, provided as a part of the subcription for a certain subscription length.

Of course that means that the production end of it, which has been my bread-and-butter for many, many years, will go the route of the dinosaurs, at least among the larger newspapers. But I think that is the future. Small town papers will hold out for a while longer and continue to print, but the economies of scale won’t be there which enable paper companies to offer low prices on newsprint. My guess is, unless they have a tremendous base of commercial printing (other than newspaper printing), they’ll eventually come to a point where print production is cost prohibitive as well.

All of this, of course, means a much leaner staff for future newspapers. It will also mean a different way of billing -for subscriptions, advertising, etc. Single issue billing, subscription billing, even particular articles can be billed. And without the cost of production factored in, the pricing should be reasonable. In order for that to be attractive to potential buyers, the papers are going to have to deliver and necessary and attractive product that news consumers want.

That is the problem they are presently wrestling with. What is that product and how do we produce it and get paid to produce it?

I have no idea how this will shake out, but unlike many, I certainly don’t want to see newspapers go away. I think they’re a critical part of our nation’s democratic voice. But they are going to have to change and change radically to survive. It is going to be interesting to watch this over the next few years as the newspaper business goes through what the fed refuses to let the auto industry go through. My guess is, after all the bankruptcies, consolidations and mergers take place, a leaner, more focused and profitable business model will emerge. Whether they’ll be called “newspapers” is anyone’s guess, but they’ll still be with us in some form or fashion.

~McQ