Thursday, August 9, 2007

Death Of The Newspaper

There has been a lot of talk lately about the death of the newspaper, and I decided to address this and throw it in as a little extra. This isn't the normal kind of posting that I make, but I thought that it might be of interest to some ...
I have been around the newspaper industry for the last 30+ years, and have had a unique opportunity to watch its evolution during that period. Don't misunderstand me, I do not write for a newspaper, and have never in fact worked for a newspaper (though I did work for a distributor of newspapers in Chicago when I was a kid, selling the Sun-Times, the Tribune, and the Daily News on Sundays). I read one most days of the week however and have worked with the industry very closely. The interesting thing to me about it seems to be all of the misconceptions about this business, and what the future may hold for it. In order to set the stage for my take on this, let me set out some premises for our understanding on the subject:
  • 97% of the newspapers in the US have experienced a circulation decrease in the last 5 years, some by over 20%
  • While many newspapers used to be family owned 30 years ago, most are now under the Corporate ownership of less than 20 organizations
  • The average 2004 operating margin of publicly owned newspapers was at 20.5 percent, double the average margin in the S and P 500.
I'll bet that last one surprised you, huh. The truth of the matter is that while circulation has been going down, that this has little impact on the actual revenue generated at a newspaper. Advertising in fact, is the driving revenue source. If it weren't for advertising, you would probably have to pay $4.00 per day for a newspaper. Now some advertising has been going down as well during this trend. ROP advertising (it stands for "Ripped On Page" and means advertisements printed in the paper) and classified advertising have both been declining at a significant rate. Revenue however, has been maintained at a reasonable level because of the increased volume in pre-printed inserts. Yes, all of that stuff that you pull out of the paper so that you can read it is paying for most of its printing, and the growth here has been as astonishing as the decline in the other forms has been. For example, when I started in the business the average number of inserts in the largest circulation newspapers was around 10-12, now those same newspapers place as many as 60 in the same product. Inserts used to be in a paper 1-2 days a week, now it is 6-7.

Corporate ownership has also contributed to the survival of the business through successful labor negotiations, the use of more part-time / no-benefit labor, and plant consolidation. Today it is often the case that more than one newspaper is printed in the same building, with some properties producing as many as 10 products. Technology has played its parts as well by giving newspapers the ability to print up to 3 times faster than they used to, with some printing presses now producing newspapers at speeds of 100,000 copies per hour, and all with a great deal more color in the product.

On the negative side of the equation however, is the fact that the newspaper industry has lost none of its pretensions while struggling to stay alive. Editors, reporters, and columnists still seem to want to write to win a prize (The Pulitzer) or push an agenda instead of informing the public. They don't seem to understand that what they do is contribute to a 'product' which must in turn sell. If the product is not something that the market wants or a product that does not meet its market's needs, it doesn't sell. Much like government programs, they continue to follow a flawed path and make excuses as to why their product isn't as viable as it used to be, refusing to accept any responsibility for the problem. Additionally, they are offended by the notion that a newspaper is a business rather than a form of literary art. Yet while all of the hue and cry goes on about their art, with the old quote that: "If it bleeds, it leads" remaining alive and well. While crying out to have sex violence removed from TV and the movies, they put forward their own brand of it every day unrepentantly. These contradictions only feed a growing argument at to the viability of the medium itself.

Newspapers will remain viable for the foreseeable future however (Thank God, since I need the job), and I know this because of all the major capital investment being made by the corporate owners in their properties all around the world. Newspaper ownership groups have proved themselves to be pretty savvy businesses and these investments are not made without an expected return. Based on that level of investment, I would expect to see the industry remain intact for a minimum of another 20 years (just in time for me to retire). Those enamored of the art concept however, should be prepared for their product to become more and more of shopping bag, as competition from other forms of media (including from the websites of the newspapers themselves) take over market share.

Remember, today's newspaper is tomorrow's hamster cage liner.

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