As a media format the daily newspaper as we know it is in trouble. It will not die in our lifetime. Indeed, it will linger for quite a while and produce profits for many publishers. But maintaining an appearance of health will take hard work and tough decisions. Newspapers are like a beauty queen past her prime. Make-up, exercise, and the proper lighting may produce an illusion of her old self. But beneath it she knows the reality. For newspaper publishers, cost cutting, judicious use of technology, and sharp management may produce a profitable newspaper. For the industry as a whole, a long term decline is inevitable.
I wrote that almost exactly 14 years ago for a speech to the Inter-American Press Association in Sao Paulo. I stumbled across it, covered with digital dust (it was in a WordPerfect 4.1 file) as I was preparing to address CEOs and top executives from about 45 newspaper publishers from 28 countries, ranging from southern Brazil to Singapore, Russia, Central America and Europe. They were in Cambridge, Mass. for a seminar called “What’s Next?” sponsored by the Innovation Media Consulting group I work with. Many of the same people had participated in a similar seminar in Cambridge 12 years ago and I had been trying to find any record of my talk back then.
The scenario I painted then is playing itself out. Not for every newspaper everywhere, but certainly for the industry overall. And it’s getting harder for the publishers to keep up the facade of beauty— or profitability. Recent earnings reports from Knight Ridder, (don’t left the headline mislead you—the profit is from a one time sale of assets, while operating earnings are down) Tribune Co., and Gannett are not pretty. Scrippsshowed higher operating earnings largely because of profit from the Shopzilla.com site they purchased earlier this year. The publishers have been responding the way any organization has to respond when their revenue is not increasing as fast as expenses—they cut expenses. In the case of newspapers, there are three main expenses: giant printing presses; paper, ink and fuel; and labor. The former is rather fixed: even if they print fewer papers they can’t save any money on the 25 year depreciation schedule they have on this capital equipment. With fewer or thinner editions, they do save a bit on paper and ink not used. But the loss in advertising revenue from lower circulation is greater than the lost circulation revenue. So by far the most substantial item to cut is labor. In short, a newspaper that today sells 160,000 papers daily cannot afford as large a staff as one that 10 years ago sold 200,000 paper daily.
We’ve heard the response that if these publicly held companies weren’t so obsessed with maintaining 20% net profit margins they wouldn’t have to cut. That’s true—to a point. That’s a very short, one time fix—sort of like showing higher earnings through a sale of assets. If the publishers were willing to accept a profit that was more in line with most manufacturing industries, they could maintain the current level of staffing and pay scales and watch their margins decline for a few years as expenses continued to outpace revenue. Then they are in the same place as today: Do they start cutting staff or let profit slide to the point where there are no resources left for travel, equipment and benefits?
So the down sizing of today is insidious if we think that newspapers are only in a temporary down trend. If only the publishers would hold on, things will get better and they can keep staff and profit. But that’s not the reality, as I noted 14 years ago (and further back, but I don’t have a 5.25” floppy disk drive anymore to retrieve older documents).
On the other hand, there are new opportunities for journalists and editors. Yahoo! has Kevin Sites in the Hot Zone, as well as an editor and journalist in the comfort zone back in headquarters. New players, such as Techdirt Inc., employ journalists for its service that edits your personal news feed and blogs to provide their expert commentary. Back Fence and Pegasus News may be prototypes of other new opportunities for journalists, editors and others who used to find work as top down journalists. And of course there are any number of Web sites and blogs that do or will be home for writers, editors and commentators who in the “old days” would be at a printed newspaper.
One of my messages to the publishers at “What’s Next” was not to look at change as a negative. It is also an opportunity—and that includes the downsizing at our old newspapers. Not only can those who have been let go recycle themselves, but a new generation of digital natives are coming into journalism without the baggage that “newspaper” needs to be on paper.
In another context, my generation loudly sang along with Bob Dylan:
Come writers and critics
Who prophesize with your pen
And keep your eyes wide
The chance won't come again
And don't speak too soon
For the wheel's still in spin
And there's no tellin' who
That it's namin'.
For the loser now
Will be later to win
For the times they are a-changin'.
(Copyright © 1963; renewed 1991 Special Rider Music)
So true in the context of Rebuilding Media.
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