Newspapers are doomed
Sam Zell made a terrible mistake when he bought the Tribune Company:
When the Tribune Company announced that it was filing for bankruptcy, last Monday, Sam Zell, the man who bought the company a year ago, for $8.2 billion, said that its problems were the result of a “perfect storm.” You take readers and advertisers who were already migrating away from print, and add a steep recession, and you’ve got serious trouble. What Zell failed to mention was that his acquisition of the company had buried it beneath such a heavy pile of debt that any storm at all would likely have sunk it. But although Zell was making excuses for his own mismanagement, the perfect storm is real enough, and it is threatening to destroy newspapers as we know them. Layoffs and buyouts have become routine. The Miami Herald and the San Diego Union-Tribune are reportedly on the selling block, while lawmakers in Connecticut are trying to keep two newspapers there afloat. Even the New York Times Company has slashed its dividend and announced that it would borrow against its headquarters to avoid cash-flow problems.There’s no mystery as to the source of all the trouble: advertising revenue has dried up. In the third quarter alone, it dropped eighteen per cent, or almost two billion dollars, from last year.
Newspapers are simply a method of delivering ads:
It turns out that subscribers are more expensive, not less expensive, than online readers. Yes, they pay more — but they’re not paying for intensive reporting, experienced editors, and the like. They’re paying for printing presses, mobbed-up newspaper delivery operations, and the whole enormous physical infrastructure involved in getting thousands of tonnes of newsprint delivered to millions of front doors every morning. It’s a hugely expensive operation, and its costs are nowhere near covered by subscription revenues.
There’s an old saying that you’ll never understand newspaper economics until you understand why newspaper vending machines are designed so that you can take as many papers as you like for your quarter. Newspapers are, first and last, devices for delivering ads to readers. It’s the ads which account for all the profits, not the cash coming from subscribers or people who buy their paper at the newsstand. Yes, news itself is free, nowadays. But it always has been. What we’ve been paying for all these years was never news, it was papers.
Lately there have been a lot of articles about the newspaper industry. We are told that this recession is killing off newspapers, everything is moving to the web. There is some mourning, people wonder how journalism will survive once the newspapers are gone. But consider the other side – where will the ad dollars go? When the next boom hits, America will have a lot less newspapers than it has had in the past. And much more of the public will think it natural to get their news online. Doesn’t it seem that at some point quite a bit of ad revenue must become available to online ventures?
January 1st, 2009 at 5:17 am
[...] no longer seem hip, modern, cool or youthful. It will simply be the way that people get their news. Many older organizations will fail to adapt. Fortunes will continue to be made by the entrepreneurs who build media empires online. (I tried to [...]