Decline of Newspaper Industry

[erikzen]

I just stumbled across this thread and felt compelled to post. I work in the publishing industry and worked in newspapers exclusively from 1989 until 2005, when I was laid off by The Old Grey Lady. I've worked for independent distributors, The Financial Times, The International Herald Tribune and The New York Times. I've only worked on the business side but have been involved with everything from customer service, to production, circulation marketing, to launching new digital products, with distribution and single copy sales thrown in for good measure. After working the last couple of years as a consultant (read: unemployed) I currently work at a small but influential magazine as circulation director.

The decline of newspapers can be attributed to many things. Rising costs for things such as fuel and newsprint have been a major factor. Labor also has been an issue because many newspaper employees are unionized. Certainly this is a factor and newspapers have always suffered when the economy is bad.

However, the biggest thing that most newspaper executives point to is a loss of advertising to the internet, especially on the classified side.

Classified advertising used to be the cash cow for newspapers. The orders came in over the phone so there was no need for a highly paid sales executive; you only needed a warm body to take the order. Classified space is sold at a premium compared to display advertising, so overall classified was much more profitable. The key classified categories that newspapers lost were recruitment and real estate. These categories are better served through the internet.

Another reason newspapers have floundered is it took them too long to embrace the internet; and when they did they tried to operate their online businesses separately from their traditional businesses. I think this hurt the overall operation because the people with business experience were pushed aside to work on the print side and new propeller-beanie wearing kids were brought in to run the online side. The old timers knew how to make a buck but their product was declining and they were asked to foot the bill for the development of the online side. The younger generation knew how to build an audience through online products but they had no idea how to monetize it because they didn't have the business experience; there's always been this internet culture that thinks everything should be free. That's because the internet developed in a non-profit environment - through universities and government.

Currently, newspaper audiences are growing because of the internet but they have no idea how to capture revenue from that audience. Newspapers still derive 90% of their revenue from the print product.

To compound the loss of advertising the print product has lost audience to the internet, which makes display advertising less attractive as well. While circulation revenue was never a profit center most newspapers tried to at least cover the costs for production and distribution with the sale of newspaper subscriptions and on the newsstand. Shrinking print circulation means advertising dollars have to cover a greater share of the costs.

While we never gave the product away in its print form, newspapers have been compelled to give away their content online. On top of that, news aggregators use this content, which costs thousands of dollars to gather every day and distribute it to an even wider audience - for free.

Newspapers are losing readers to the internet, especially younger ones, they have tried to make editorial changes that either don't appeal to their core audience or just plain devalue the product. At The New York Times they had a phrase "like-minded non-readers". They were always trying to market the product to an audience that just didn't exist. Add to that all of the cost cutting on the editorial side and you have a paper that more and more alienates the core reader. Newspapers have to realize that they are A) no longer a mass medium and B) that their readers are older and the product should be tailored to them and not the people that don't read it.

A good friend of mine, who is a senior executive at Nielsen Business Media, and also a long time newspaper veteran, told me once that his boss came to him and said he needed to make cuts, especially if he wanted to expand his online presence. My friend's response was "show me one example of 'cut, cut, grow' and I will follow that business model. As far as I know I have only ever experienced 'cut, cut, die'".

Newspapers cannot continue to cut editorial staff, cut pages, cut the newshole and expect to do anything but slowly become irrelevant.

There is an audience out there that still likes to read a printed product. It is not the mass audience of the 1950s or even the 1980s, but they are loyal, will patronize advertisers and can keep newspaper companies afloat until senior management figures out how to fix the business model.

Just to put a little icing on the cake, most of the problems of the newspaper industry could have been fixed if the owners of these companies knew what they were doing. First, most major newpaper chains are or were owned by families that have held them for generations. Except for certain rare instances, for example the Graham family that owns the Washington Post, these "executives" used their newspapers as their own piggybanks amassing large amounts of debt that have them in huge trouble now.

Newspapers should have been on the forefront of the internet; they should have been investing in digital infrastructure, content development, social networking, micropayments, all the things that make the internet so compelling and in some cases profitable. Instead they were focused on their product and not on their market. They viewed themselves as manufacturers and not as information providers.

In marketing terms they were product oriented and not market oriented. To use an example from photography (this is a photography site after all) just look at Polaroid. Polaroid enjoyed much success in the 60s, 70s and 80s, but they never developed new products as the market changed. Instead they focused on the cameras that they already built. They changed the look of their cameras, they rounded out the shape, they made them in snazzy colors, but they never really changed the technology. They were the first company to provide consumers with instant photographic images. If they had looked at themselves as an imaging company instead of as a camera manufacturer, then maybe some of us would now be posting in the Polaroid forum instead of the Nikon, Canon and Olympus forums.

[JSPhoto]

The decline of newspapers can be attributed to many things. Rising costs for things such as fuel and newsprint have been a major factor. Labor also has been an issue because many newspaper employees are unionized. Certainly this is a factor and newspapers have always suffered when the economy is bad.

However, the biggest thing that most newspaper executives point to is a loss of advertising to the internet, especially on the classified side.

Classified advertising used to be the cash cow for newspapers. The orders came in over the phone so there was no need for a highly paid sales executive; you only needed a warm body to take the order. Classified space is sold at a premium compared to display advertising, so overall classified was much more profitable. .

And what drives the cost of ink (dye in newer presses) to go up? And why are employees wanting raises? Again, both lead directly to the rise in FUEL costs, no matter how you cut it fuel is the root of it all, even the decline in advertising. I have talked to a number of people who's businesses have dropped their advertising in the paper AND on the internet because of the cost of fuel. Three business owners said they made a choice, cut advertising or cut a job until things work themselves out.... advertising lost, but another place cut two jobs to pay for advertising in hopes it would generate enough business to be able to rehire the two laid off employees.

The papers I shoot for are the family owned types, one struggeling, the other is not struggeling (well at l east not to the point they are over extended) . It could pay off for the one that isn't struggeling as much as they are waiting to pounce on the wounded competitor which could add one or two nearby papers to the list that right now includes 10 or 11 papers.

BTW, my being laid off didn't last long as the powers that be finally saw the light and for now at least I am "back to work". Sometimes your work trumps the bottom line $!

JS

[mn shutterbug]

Glad to hear you're "back to work", JS.

The price of oil affects virtually everything in the country. Period!

[reverberation]

I just stumbled across this thread and felt compelled to post. I work in the publishing industry and worked in newspapers exclusively from 1989 until 2005, when I was laid off by The Old Grey Lady. I've worked for independent distributors, The Financial Times, The International Herald Tribune and The New York Times. I've only worked on the business side but have been involved with everything from customer service, to production, circulation marketing, to launching new digital products, with distribution and single copy sales thrown in for good measure. After working the last couple of years as a consultant (read: unemployed) I currently work at a small but influential magazine as circulation director.

I think you have written the best post on this subject that I have read. I have worked on the production side of the Newspaper industry for twenty years.

However, the biggest thing that most newspaper executives point to is a loss of advertising to the internet, especially on the classified side.
Another reason newspapers have floundered is it took them too long to embrace the internet; and when they did they tried to operate their online businesses separately from their traditional businesses. I think this hurt the overall operation because the people with business experience were pushed aside to work on the print side and new propeller-beanie wearing kids were brought in to run the online side. The old timers knew how to make a buck but their product was declining and they were asked to foot the bill for the development of the online side. The younger generation knew how to build an audience through online products but they had no idea how to monetize it because they didn't have the business experience; there's always been this internet culture that thinks everything should be free. That's because the internet developed in a non-profit environment - through universities and government.

I think the real culprit was high profit margins. Anyone who knows what they are talking about knows, THIRTY percent. Come on, thats not right. Capitalism run amok. This fact weakened the effectiveness of the executives. They tended to be numbers people, the owners tended to be republican, neither one of these groups was capable of leading an industry. They reacted, let this be the industries epitaph. If your intent is to celebrate freedom through truth you need not react because you are too busy in the present moment. My point is that Newspapers lost their soul, they lost the ability to responsibly relate to their clients. Nothing changed. Now it is a fight over the remaining flesh of a dead thing. Jackals.

Newspapers should have been on the forefront of the internet; they should have been investing in digital infrastructure, content development, social networking, micropayments, all the things that make the internet so compelling and in some cases profitable. Instead they were focused on their product and not on their market. They viewed themselves as manufacturers and not as information providers. In marketing terms they were product oriented and not market oriented. To use an example from photography (this is a photography site after all) just look at Polaroid. Polaroid enjoyed much success in the 60s, 70s and 80s, but they never developed new products as the market changed. Instead they focused on the cameras that they already built. They changed the look of their cameras, they rounded out the shape, they made them in snazzy colors, but they never really changed the technology. They were the first company to provide consumers with instant photographic images. If they had looked at themselves as an imaging company instead of as a camera manufacturer, then maybe some of us would now be posting in the Polaroid forum instead of the Nikon, Canon and Olympus forums.

I think the obvious route for newspapers to take would have been the digital hub model. They would be the place every local business contacted about building an online presence. They would be the place people went when thinking about visiting a city. If I were back in 1930 the way I would choose to attack a Democracy would be from the inside out. A secret weapon. I look at FBI data on criminality and interpolate it with insurance company data and I find the truth.

[erikzen]

And what drives the cost of ink (dye in newer presses) to go up? And why are employees wanting raises? Again, both lead directly to the rise in FUEL costs, no matter how you cut it fuel is the root of it all, even the decline in advertising. I have talked to a number of people who's businesses have dropped their advertising in the paper AND on the internet because of the cost of fuel. Three business owners said they made a choice, cut advertising or cut a job until things work themselves out.... advertising lost, but another place cut two jobs to pay for advertising in hopes it would generate enough business to be able to rehire the two laid off employees.

The papers I shoot for are the family owned types, one struggeling, the other is not struggeling (well at l east not to the point they are over extended) . It could pay off for the one that isn't struggeling as much as they are waiting to pounce on the wounded competitor which could add one or two nearby papers to the list that right now includes 10 or 11 papers.

BTW, my being laid off didn't last long as the powers that be finally saw the light and for now at least I am "back to work". Sometimes your work trumps the bottom line $!

JS

There is no doubt that the price of oil is an underlying cause of our economy being on the brink of a recession. There is no doubt that newspapers feel downturns in the economy more than many other busineses because when times are tough marketing and advertising budgets are the first things to get cut, plus the additional costs from everything from ink to labor puts additional pressure on newspapers.

However, I think it is dangerous to assume that the downturn in the newspaper industry is primarily attributable to rising costs and a bad economy. It is certainly hastening its demise but to blame fuel costs or other purely economic factors implies that newspapers will rebound if oil prices come down or we break out of the economic doldrums. I think that is a mistake and newspapers will never be the mass medium they once were. Newspaper executives had either be ready to retire, get into a different industry, or create a new business model. If they think they are going to ride out the storm they are going to find themselves in a whole lot of trouble.

I'm glad to hear that you're back to work. I've been in that situation myself and it gets pretty cold "on the beach" when October rolls around.

You're lucky because you're working for local newspapers and they obviously think that content is very important. I think those are two key factors for newspapers' long term survival. Those papers that continue to cut the newshole will eventually find themselves irrelevant. Newspapers that can provide niche information - such as local news - that can't be found in other mass media outlets, will be able to maintain a core audience.

[erikzen]

I think the obvious route for newspapers to take would have been the digital hub model. They would be the place every local business contacted about building an online presence. They would be the place people went when thinking about visiting a city. If I were back in 1930 the way I would choose to attack a Democracy would be from the inside out. A secret weapon. I look at FBI data on criminality and interpolate it with insurance company data and I find the truth.

That is an excellent point. Newspaper companies should have become web portals and should have embraced the interactive aspect of the web. Even today, I work for a publisher that is "afraid" to allow visitors to its blogs to make comments. This is missing the whole point of the internet.

Newspapers were in denial about the impact of the web for far too long. Despite any talk of being information providers, they continued to focus primarily on the manufacturing process. I agree that greed had a great deal to do with that, with a little arrogance mixed in for good measure.