Recently, the New York Times and Washington Post, both flagship newspapers, announced layoffs as a result of declining ad revenues, competition from online news sources, and, of course, the deepening economic downturn.
In addition to layoffs, the Times is slashing non-union salaries by up to 5% for the remainder of 2009 and forcing furloughs, and the Washington Post is offering buyouts.
As all news junkies are aware, it’s not just the two flagship newspapers that are suffering.
Major newspapers are either ceasing publication completely (Rocky Mountain News), publishing online only (Seattle Post-Intelligencer), or have filed for bankruptcy (Chicago Tribune and LA Times, among others). Innumerable regional and local newspapers have shuttered doors, as well.
This is not an entirely recent occurrence, however. Data from the Newspaper Association of America indicates that both newspaper circulation and the amount of daily newspapers have declined sharply over the past twenty years.
It is thus no surprise that, out of the "Silent/Greatest, "Boomer," "Gen X," and "Gen Y" cohorts, in 2008, according to an August 2008 study by PEW News Media Consumption Survey, not even the least tech savvy cohort, the Silent/Greatest generation, eclipsed 50% of print newspaper readership.
Of greatest concern, in the eyes of Generation X and Y, which collectively includes individuals from around ages thirteen to forty, is that the print newspaper is, for all intents and purposes, dead, with readership between 12 and 15 percent in 2008. The other salient point from examining this graph is the relatively sharp decline between 2006 and 2008. I’m not alone in my subscription to the theory that this decline is a result the ascension of online news sources and social media sites–the New Media.
Something has to be done, or else the industry will surely die.
Why the Old Media is decaying
It is no secret why this is happening.
People are just not buying newspapers. According to 2008 data from the Newspaper Association of America, newspaper sales dropped tremendously between the first quarter of 2006 and the second quarter of 2009.
The business model just does not function adequately in the 21s century.
Traditionally, the lion’s share of revenues had been derived from ad sales, which are reliant upon a critical mass of readership to generate an appropriate return on investment (ROI). As readers have turned to online news sources, applying the theory behind the business model, so have advertisers. Data from the Newspaper Association of America and the Bureau of Labor Statistics, released in 2008, shows the extent to which advertising sales plunged between 1997 and 2007.
The decline began around 2000 when the Internet reached a critical tipping point, accelerated during the early to mid 2000s with the growing popularity of craigslist and businesses beginning to understand the new model, and, just within the past few years, exploded with the social media revolution, as businesses have become cognizant of cheap methods to advertise and market their products.
An Indeed.com job posting trends analysis for "online advertising sales" positions between early 2005 and January 2009 is additional evidence of the steadily increasing dominance of digital advertising methods.
Just poke around Facebook, and you’ll notice that so many companies are operating viral marketing campaigns to grab your attention. To wit: do you really think companies are sponsoring "free virtual gifts" that you can give to your friends just because it’s fun? Absolutely not! It’s a clever marketing gimmick, and Facebook, not newspapers, is getting the revenue. I’m not suggesting that there is a causal relationship between declining newspaper sales and exploding Facebook membership, but advertisers are naturally following the people.
Business wants the most bang for its buck, and it’s clear where money should flow. New Media Visionaries, such as Mike Germano of Carrot Creative and Dave Ford of Branded Evolution, have founded agencies to meet the needs of companies looking to seize on online brand development opportunities.
For most companies, the New Media revolution is, well, a new concept for them, as is for everyone, but companies like Carrot Creative and Branded Evolution employ professionals with disparate skill sets to guide companies through this new wave.
I spoke with Mr. Ford about how New Media companies like his Branded Evolution are changing the media landscape, and he is confident that advertising opportunities are much more accessible now than prior to the revolution.
"Our vision is to provide an avenue for ALL advertisers to be able to compete with the big boys through the use of online video," said Ford. "New Media is leveling the playing field; the barriers to entry are slowly being eliminated."
Couple Mr. Ford’s thoughts on the New Media and the future of advertising with the booming social networking industry, and you have a marketing and an advertising monster.
With both Generation X and Y–again, the vast majority of individuals within these groups do not read print newspapers–quite comfortable with social networking sites, future advertising money will be spent on these sources, although Internet advertising expenditures were down in 2008.
A March 30, 2009 Wall Street Journal article by Emily Steel indicates that Internet advertising revenue only grew by a comparatively paltry "10.6% in 2008 to $23.4 billion" to $23.4 billion, which is the worst growth showing since 2002. The telling point, however, from this PricewaterhouseCoopers report is that a 10.6% growth in 2008, compared to 26% in 2007, is well beyond that of print newspapers.
With surging usage of social networking sites, once the current recession breaks, advertising spending may revert back to its upward trajectory, especially on these services.
Facebook and Twitter are the leaders of the social networking industry, and the numbers indicate the people are flooding both.
Unique visitors to Facebook have surged by 159% in the past year alone.
According to Facebook.com, the social networking site boasts:
- More than 175 million active users;
- More than half of Facebook users are outside of college;
- The fastest growing demographic is those 35 years old and older;
- More than 3 billion minutes are spent on Facebook each day (worldwide);
- More than 4 million users become fans of Pages each day; and,
- More than 35 translations available on the site, with more than 60 in development.
Most importantly, with the ability to share links, stories, pictures, etc, Facebook is becoming a major user created aggreator of news.
We’re not even talking about the array of other social networking sites (most notably Twitter) where marketing and advertising is free by virtue of having direct access to, and interaction with, customer bases–which, of course, could be the only element that will actually stymie ad spending.
In the past year, unique visitors to Twitter have exploded by a whopping 964.5%!
Clearly, Facebook and Twitter are surging with users, while newspaper readership is sharply declining.
Where would you rather spend your precious advertising money?
Where are people getting their news?
If people are not getting their news from traditional newspapers, then what are their sources? There will always be a voracious demand for news, and news, by nature, is dynamic, so there will always be methods through which it will be delivered.
Between 2006 and 2008, the only category that had increased in a 2008 Pew Research Center for the People & the Press news consumption survey is Internet news sources.
Over the past few years, according to this study, TV news remained fairly constant, while both radio and newspaper sources have declined. In fact, stretching back to 1991, the graph is further proof that both radio and newspaper outlets have steadily declined.
A Gallup survey corroborates the Pew Research Center for the People & the Press data, in that Internet new sources are ratcheting up, while local newspapers are fading.
Projecting into the future, Internet news sources will be dominant–more evidence that the Old Media business model is antiquated.
How can we save the newspaper industry?
With advertising money flowing to online sources and people choosing to acquire their news elsewhere, the newspaper industry is clearly in trouble.
What’s the solution?
A true capitalist may argue that, since the newspaper industry is in free fall, it should just die off; enterprising individuals will fill the void with a sustainable product. In my opinion, that is an untenable position, as what the newspaper industry provides us, i.e. professional journalism, is so critical.
As evidenced by the deepening chaos within the newspaper industry, some argue that the industry should convert to an exclusively online presence. As a cost cutting measure, this may be a viable option, but nevertheless, some major newspapers, like the Rocky Mountain News, are or will cease publishing entirely, online included. My take is that newspapers can publish entirely online, this may just be a "stepping stone" to eventual insolvency. In order to protect this critical instrument of democracy protection, something has to be done, and it must be done now.
Without a wholesale restructuring of the business model, or perhaps a government intervention, failure is imminent.
Are there really sustainable solutions?
Maybe not, but at least there’s a buzz on Capitol Hill, where billions upon billions of taxpayer dollars have been appropriated to bailout both the banking and auto industries.
Senator Benjamin Cardin (D-MD) has an idea.
As presented within his recently introduced Newspaper Revitalization Act, Senator Cardin wants to ease the path for inevitable restructuring by allowing a non-profit classification for newspapers, thus granting a variety of tax breaks for an industry that is having problems not only generating revenue, but obviously meeting costs.
Senator Cardin recognizes that it is not a panacea.
"This may not be the optimal choice for some major newspapers or corporate media chains but it should be an option for many newspapers that are struggling to stay afloat … We are losing our newspaper industry. The economy has caused an immediate problem, but the business model for newspapers, based on circulation and advertising revenue, is broken, and that is a real tragedy for communities across the nation and for our democracy." said Senator Cardin.
Reading between the lines, Senator Cardin may not be opposed to a full-blown bailout of the industry, as argued for by some media observers, but the Newspaper Revitalization Act stops short of direct expenditures for the newspaper industry.
With an governmental carrot, there comes the requisite stick, and the Newspaper Revitalization Act would permit non-profit newspapers to continue with objective political reporting, but end political endorsements. Cardin’s office has said the intent is to focus on saving local newspapers (they are the most at risk, and losing them would mean the death of much needed "watchdogs") rather than those controlled by conglomerates.
Here’s my opinion on the Newspaper Revitalization Act.
It’s a functional solution to a burgeoning crisis, but my take is that too many govt restrictions could potentially hinder reporting. I need more information before passing judgment on this proposal. The most salient question: what will happen to the op-ed page? That’s critical.
The bottom line is that we *need* the press to have complete freedom to keep our government in check. It’s a Catch-22. The industry must be saved, but at the expense of democracy and free expression?
Tough choices!
Sen. Cardin’s bill would strip a non-profit newspaper from making political endorsements, which is typically decided by the editorial board and appears on the editorial page/column, and therefore not within the news section. Thus, presumably political endorsements would be prohibited throughout the publication, thus effectively killing the ed/op-ed pages.
As I said, that’s dangerous and exposes us to a slippery slope, but then again, there are not too many options available.
Perhaps government stimulus package for the newspaper industry is a solution?
Just like the much maligned AIG, isn’t the newspaper industry–a cornerstone of democracy–too important to fail?
In the March 19, 2009 edition of The Nation, John Nichols and Robert W. McChesney, in the article "The Death and Life of Great American Newspapers," suggest that a potential solution may be a multi-faceted journalist stimulus package.
Among the recommendations, Nichols and McChesney call for a $200 tax credit for everyone to cover newspaper purchases, as well as a wide expansion of public broadcasting funding. The authors recognize the bigger picture:
These proposals are a good start, but then the really hard work begins. We have to come up with a plan to convert failing newspapers into journalistic entities with the express purpose of assuring that fully staffed, functioning and, ideally, competing newsrooms continue to operate in communities across the country. The only way to do this is by using tax policies, credit policies and explicit subsidies to convert the remains of old media into independent, stable institutions that are ready to compete and communicate in the decades to come. To get from here to there, and especially to make possible multiple competing newsrooms in larger communities, policy-makers should be open to commercial ownership, municipal ownership, staff ownership or independent nonprofit ownership. Ideally the next media system will have a combination of the above; and the government should be prepared to rewrite rules and regulations and to use its largesse to aid a variety of sound initiatives.
Nichols and McChesney frame the problem and potential solutions well. Understanding that stable advertising revenue is not a reality in this new era, government intervention is needed to sustain the industry.
There may be no other viable solution.
My only point of contention is their $200 tax credit proposal to cover newspaper expenditures for every American; with a sharply declining print newspaper readership across all cohorts, I do not believe this credit will necessarily induce black and white purchases, which now are outdated even prior to being printed. This just does not pass the laugh test; all indicators point to sharply decreasing print newspaper sales. Even though, as a 29 year old, I still buy and read the newspaper, I know that the vast majority of my peers only read publications online, if at all. The $200 tax credit could be better spent on "explicit subsidies," as recommended by Nichols and McChesney, to assist the newspaper industry becoming sustainable in the future.
The bottom line is that politicians, media observers, and policy wonks are debating potential methods through which the newspaper industry can be saved–this is good. Hopefully, this productive dialogue can continue, although with the trouble in the newspaper industry being a dominant story over the past year, decisions must be made expeditiously.
Final Thoughts
As I have shown throughout this piece, the writing is on the wall: the paradigm has already shifted to an electronic delivery of the news, and business has moved away from traditional newspaper advertising in favor of the New Media. The newspaper industry has recognized this new reality for years, as many publications have impressive websites containing full editions each day.
With government intervention, such as explicit subsidies, there is a risk of squelching innovation. With any government bailout, if clearly defined milestones are not set, there is a risk that the subject company will continue to amble along without much incentive to innovate, and the newspaper industry needs an influx of creative minds to save itself. Innovation, of course, in the form of the digital revolution, is responsible for most of the nails in the newspaper’s coffin. Ironically, digital innovation could be its savior, or at least, according to some, should be used to more past the old media model entirely.
Jason Calacanis, an Internet entrepreneur and founder of Mahalo, noted his displeasure of government intervention on the March 22, 2009 edition of the This Week In Tech podcast:
“Most of the time people can’t make the evolutionary shift. It’s just too difficult. You’re better off just shutting some of these things down. And you know what: Don’t cry for the newspapers. It’s an opportunity for young people with new ideas to make better things than newspapers… Don’t cry for the newspaper business. I’m sick of that. Engadget as a blog or This Week in Tech as a show are much better — Lifehacker, etc. — than the tech products that came before them. They’re better than ZDNet. They’re better than CNet. They’re better than PC Magazine. Nobody’s crying because G4TV’s gone. Who cares? Who gives a crap about TechTV? TWiT is better. People have this thing that progress everywhere else is good, but in the newspaper business, progress is bad. I think not killing trees is a good thing.”
Progress, as defined by Mr. Calacanis, is pushing those people or industries aside that refuse to innovate. With the dynamic nature of the Internet, it’s hard to argue with Mr. Calacanis.
Clearly, the future of the newspaper is online, and this will result in thousands of job losses (printing press operators, mechanics to service the press, truck drivers, administrative jobs, etc, etc, etc), while simultaneously simplifying operations and maximizing efficiency. Fixed costs will drop, but unfortunately, as a casualty of both progress and reality, restructuring would create even more layoffs in the industry.
This is why everyone now has a responsibility to serve as a citizen journalist, and social media is serving as a catalyst for this need. It is remarkable how individuals have so much power, by using social networking sites, writing blogs, etc, as a result of the nearly instantaneous reporting that is done on such a micro level.
We all know that the newspaper industry will have to change radically if it is to survive. Inevitably, innovative news collection and reporting methods will appear. Recognizing this, the New York Times, as just one example, debuted a neighborhood blog service in early March 2009 to cover metro news, which relies partially on citizen journalists.
We, the unpaid journalists, now carry a tremendous responsibility to report the news in our communities.
In examining all sides of the issue, one has to accept this fate and work to ensure reporting thrives in this new reality.