Six
years ago I saw the writing on the wall: Print media
was in decline, digital media was ascendant. After
16 years as editor and then publisher of Virginia
Business magazine, I didn't foresee a happy
future for print media.(1)
It was far from clear what cyberspace held in store,
but I knew it was time to jump ship.
And
jump I did, launching the Bacon's Rebellion
e-zine, followed by a blog, and dabbling in a half
dozen other small-scale publishing experiments. I've
experienced some disappointments in the digital publishing
arena, enjoyed some successes and learned a lot.
While I can't say that I have it all figured out yet
-- the emerging shape of online media and news
creation remains frustratingly fuzzy -- the broad
outlines are coming into focus.
My
hunch about the decline of regional print media has proven
all too true. As recently as the mid-1990s,
newspapers were phenomenally profitable, generating
margins of 10 percent to 20 percent of revenue (as
compared, say, to Exxon's "obscene" 8.5 percent
profits margins in the most recent quarter). Today
sales and profits are in freefall. As the Associated
Press reported
in July:
Regional
and national newspaper publishers, already
staggering with a drop in ad revenue more severe
than the industry has seen since the Great
Depression, say the second half of 2008 may be
even worse.
The
situation has grown so dire that it's not too
far-fetched to ask the questions: Can newspapers
survive in their current form, or are they the buggy
whip manufacturers of the digital economy? If there
is no future for newspapers, is there a future for
journalism? Who will report the news?
The
bear's case for the newspaper industry is simply
stated: Print circulation is eroding, and advertising
revenues are plummeting. There is no obvious bottom
in sight.
In
1965, according to the Pew
Research Center for the People & the Press,
a Gallup survey found that 71 percent of all
respondents had a read a newspaper the previous day.
By 1994, readership of print newspapers declined to
about 50 percent of the population. By 2006, the
number tumbled to an estimated 38 percent, and there
was every indication that readership would continue
its death spiral: Young people weren't reading print
newspapers at all. Readership, limited to older age
cohorts, was literally dying off.(2)
And
that's the good news. At current rates of
readership decline, newspapers can console
themselves that it will take two or three decades
before they give up the ghost. Here's the bad news:
The collapse of advertising revenues will kill them
a lot sooner. This year, revenues are in an
unprecedented freefall: Many newspaper chains are
reporting a revenue decline of 15 percent or more.
These
trends are mirrored in Virginia publications. Media
General's Virginia newspaper group, which includes
the Richmond Times-Dispatch as well as papers
in Charlottesville, Lynchburg, Danville, Bristol and
other locations, saw month-to-month revenues plunge
17 percent in July. While Media General reported a
nominal loss in the second quarter, the
once-formidable Washington
Post Company racked up a $2.7 million loss,
reflecting $133 million in early retirement
write-offs
for the Washington newspaper and Newsweek
magazine. Print advertising revenues at the
newspaper sank 22 percent. Privately owned Landmark
Communications does not report its financial
results, but the fact that the Virginian-Pilot and
Roanoke Times are still for sale after
months and months on the market suggests that they
aren't faring much better.
Once
upon a time, there was a rule of thumb that
classified advertising accounted for 50 percent of
newspaper profits. Those fat profits have been
hunted down and devoured by a succession of ever
more potent competitors: weekly tabloids, auto
shoppers, real estate pubs, job websites like
Monster.com, and auto-sales websites like Cars.com.
Not only have monopoly margins disappeared,
newspapers have to
share the spoils with a host of national, regional
and local scavengers. Once lost, this business will
never return.
Meanwhile,
display advertising is migrating en masse to the
Internet. Static newspaper ads are giving way to
flash graphics and rich media that combine text,
images, animation, audio and video -- with the added
advantage that advertisers can track readership
precisely and adjust ad campaigns on an ongoing
basis. The only category where newspapers enjoy a
competitive advantage, it seems, is in delivering
advertising inserts. It turns out they can still
out-hustle the U.S. Post Office in delivering junk
mail.
Sadly,
the story doesn't end there. Newspaper enterprises
are slow, asset-heavy leviathans. They require
expensive printing presses in a factory-like
building. They maintain large, dedicated news staffs
(often unionized), sales staffs, accounting
departments, H.R. personnel and corporate staffs.
They've built up bureaucratic policies and systems
that are not easily dismantled. They literally
cannot downsize fast enough to keep pace with
shrinking revenues. Many media enterprises face the
prospect of losses.
The
great hope of the newspaper industry, of course, is
to shift readers and advertisers to the Internet.
Every newspaper in the country now has an affiliated
website to which it feeds its news stories. Many
newspapers are shifting to a 24/7 model of reporting
news as soon as it breaks. As a result, total
newspaper readership -- defined as print advertising
plus Internet advertising -- seems to be holding its
own.
But
it's a delusion to think that websites will save the
newspapers. First, print revenues are falling faster
than website revenues are rising. There is massive
leakage of advertising revenue to national players
like Yahoo! and Google that are capable of competing for
regional and local advertising, as well as to a
multitude of community websites and blogs. Second,
as newspapers slash newsroom staffs and cut news
holes, they produce less content -- their main
competitive advantage. Fewer stories = fewer clicks
= fewer eyeballs = smaller revenues.
There
may be a future for national newspapers like USA
Today, the Wall Street Journal and the New
York Times. But for regional newspapers, the end
game is a business model as an online publication...
a publication with lean staffs and paper-thin profit
margins... a publication that produces a small
fraction of the news content that it did in its
heyday. The prospect that such publications can
cover the full range of news -- state politics,
courthouse politics, business, sports, culture,
lifestyles, opinion -- with any authority, much less
recreate the glory days of in-depth, investigative
journalism, is problematic.
If
newspapers are imploding, who will produce the news?
This is the Knowledge Economy, after all. The demand
for information is insatiable.
I
wish I knew the answer. If I did, I'd be picking out
my 100-foot cabin cruiser right now. But digital
media are evolving too fast to say for certain.
Yahoo! and its Internet "portal" are
yesterday's buzz. YouTube and FaceBook are hot
today, but who knows what's coming next? Twitter?
Sounds daffy, but who knows? All we can safely say is that each new
generation of digital media/communications will
cannibalize the previous generation just as surely
as it undermines traditional print and broadcast
media.
Making
the analysis more difficult is that the new players
in regional and community media are small and
privately owned, which means they don't report their
profits. My sense is that profitability is modest at
best. If someone did devise an earnings powerhouse,
you can be sure they would shop it to a venture
capitalist to replicate the model nationally. I
haven't seen any sign of such a phenomenon.
Despite
the uncertainty, I am willing to hazard a few
predictions. Here are the forces shaping content
creation in the future:
Gurus
and paid
content. People will pay for content of a highly
specialized nature that is crucial for the conduct
of their business. Industry newsletters will
proliferate. Analysts will provide market
intelligence. Contract research for business
intelligence will flourish.
Locally,
a fascinating example is the Boomer
Project. Operating out of Richmond, a
second-tier business center, marketing mavens Matt
Thornhill and John Martin have leveraged a blog, a
book and a newspaper column into national renown as
experts on selling to Baby Boomers. That has led to
a lucrative speaking fees and consulting engagements
with clients across the country, including several
Fortune 500 companies. As gurus in the field,
Thornhill and Martin hope to cantilever those
relationships into value-added content delivered
digitally. (Full disclosure: I have done free-lance
work for the Boomer Project.)
Public
relations. Enterprises will push self-promoting
content into cyberspace. We're seeing this already
with "press releases" pushed through
BusinessWire and PR Newswire, which are republished
unedited in a multitude of news aggregators and show
up in search engine results. As this trend blossoms,
groups likely will produce Web-based micro-publications
that create journalism-style content for
distribution in electronic newsletters and for
pick-up by the search engines. (This is the model
for publications like Richmond
Biosynthesis that I produce for the Greater
Richmond Partnership.)
As
traditional media decline into senescence, public
relations firms will spend more time developing
these alternative models for distributing their story
lines. The drawback for consumers of this
information, of course, is that the content creator
has an agenda that may not always be obvious.
News
aggregators. As online content proliferates,
independent news aggregators tailored to the needs
of niche markets and constituencies will arise to
scoop up, digest and comment upon information from any source
they can find -- newspaper websites, broadcast
websites, YouTube, blogs, press releases. (This is
what I do for the R'Biz
business channel at Richmond.com.) Occasionally,
these aggregators may create their own content, but
such efforts will limited by scarce resources. For
the most part, the aggregators will be low-overhead
operations running on tight margins.
Superstars. As digital technology allows people
to download video content directly to their PCs,
televisions and hand-held devices, people will
access the content where they want, when they want.
The logic behind national broadcast networks and
local broadcast franchises will dissolve. News
operations, dramas, comedies, talk shows, whatever,
eventually will reside on the Internet and be accessible for download whenever the viewer wants
it.
Inevitably,
the advantages of bundling shows in television or
cable "channel" line-ups will disappear. Advertisers
will migrate to proven products like Oprah Winfrey,
Rush Limbaugh or Keith Olberman or to niche shows
that deliver precise demographics. The gurus and
superstars will capture the value now commanded by
the networks and broadcast stations, and will extend their brands to magazines, as
Winfrey has done with "O", or newsletters
as Limbaugh has with the "Limbaugh
Letter." If you think Oprah and Limbaugh are
wealthy now, just wait.
Thanks
to the Internet, the barriers to entry will be
incredibly low. Competition will intensify. Media will become more
fragmented and fluid than ever. Profit
margins for traditional business models will
deteriorate, and new winners will emerge. The great challenge
will be breaking through the cacophony of
voices.
The
Internet has demolished a 60-year epoch of newspaper
monopolies and broadcast networks. Whether the old
dinosaurs can evolve into fleet-footed digital
mammals is questionable. Creative destruction will
cull the old species and give rise to new ones. The
only thing for certain is that the media landscape
-- and the journalistic profession it supported -- will be unrecognizable a generation from now.
--
September 8, 2008
(1).
I'm happy to report that Virginia Business is
still alive, kicking and, to all outward
appearances, still doing fine.
(2).
Some of the circulation decline may be due to
newspapers' editorial policies. As Ed Risse argues
in his "Estates
Matrix" series, newspapers have largely
abandoned their "fourth estate" role as
independent observers providing impartial
information to their readers and become apologists
for Business As Usual politics favored by the real
estate interests that constitute a pillar of their
shrinking advertising base. Many readers are seeking
alternate sources of news and information.
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