The costs of newspapers' struggle to survive

By Samuel Gaytan
blackscorpion.com
April 15, 2009

Lately, I've used Editor and Publisher to track just how dismal the newspaper industry has become. Besides the daily parade of job layoffs, a recent article, "Marriott to End Automatic Free Newspapers for Guests," showed how a major hotel chain is finding it hard to even give newspapers away.

I have to admit I always liked the free newspapers I get at hotels. I also have to admit I rarely actually read them. Usually I end up using them as placemats so I don't mar the table with condensation or grease from the soggy containers of whichever fast-food place I've driven through.

I always found a major drawback with USA Today's giveaway is it isn't localized. If I'm in a city and want to get movie times or find local activities, it's useless. I can get online on my cell phone and find the information quickly, without having to kill trees or toss away something that cost a great deal of effort to produce. Travelers who lug around laptops can do the same on hotels' usually complimentary Wi-Fi. Plus, if you're on vacation or on business, do you really have time to read a newspaper? I always believed a free local paper or a localized edition of a national paper might find more readers, but free papers don't count much toward circulation anyway, so it doesn't make much sense for a local paper to pursue that costly option. And it is costly: newsprint, ink, gasoline for distribution, and pay for staff or contractors to deliver the product to hotels. Then hotels have to pay someone to pick up the unused copies from hallways and send them to a recycling center, send them back to the newspaper for auditing purposes or toss them in the trash.

Which raises a bigger question: Is there any hope for daily newspapers?

I doubt it.

Each week brings more doubts that the seven-day business model will survive.

I made my living in newspapers for years. I also helped launch Web sites for two large U.S. newspapers. During start-up of the first one, most people were so thrilled with the idea of putting content online that they didn't worry about the long-term economic impact. Initially, we did have subscriptions to the online site, and people signed up. Subscriptions also were part of a package for an ISP the company owned. When we began breaking even, everyone got free shirts and some champagne as a celebration. But later, the decision was made to remove the firewall and give away the content. I warned people it was going to impact circulation. No one else was worried about it. At the time, the mentality that things should be free on the Internet reigned. But as soon as the pay wall came down, the calls and e-mails started coming in: "Thanks for putting the paper on the Web. Now I can cancel my newspaper subscription."

After moving to another city to launch another newspaper Web site, similar calls and e-mails flowed in.

Charging for content

Now, media companies are looking for ways to charge for online content.

It might help, but only for a while. In the long run, it's too late.

Newspaper divisions continue to weigh down stocks for publicly traded media companies. Some are splitting the newspaper side into separate entities to minimize the damage. Before the economy took a hit, most newspapers, even with declining circulation, still were making ample profits, but with the downturn, they've just became money pits. Add the debt load that some of the larger newspaper companies are carrying and even a profitable newspaper isn't guaranteed survival.

And as people cut back in these tough times, they'll find that newspapers are a cost they can do without.

I found this out after a blizzard hit Northern Nevada. I was the news editor at a newspaper there. Each day, most of the staff managed to make it through the snow to put out the paper, some at great risk due to snow and icy roads. We even moved the deadline up to get the newspapers out earlier. But too many carriers couldn't or wouldn't make the trip to pick up and deliver the newspapers. Some streets were snowed in, so even if they had wanted to, they couldn't have delivered them without using snowshoes or snowmobiles.

Readers started calling in, complaining that they weren't getting their newspapers. Cancellations spiked, and circulation never recovered. People who had gone without their newspaper for days found out they didn't need the printed product. They could get it online from inside their warm homes for free.

Sometimes I find myself thinking about the students in journalism school today and the world they'll face when they graduate. Some I've spoken to who have entered the newspaper industry say they know there's no future in it, but they want to be in the field for at least a few years to get it out of their systems, then they'll switch careers. They'll meet fantastic people who will do crazy things, including risking their safety, to put out a newspaper that fewer and fewer people want. (One possible employment hope for them might be be smaller and medium-sized papers that are independent or aren't owned by chains carrying unmanageable debt. They usually pay less, spend less on employee benefits and cover smaller geographic areas and consequently have lower staff and circulation costs.)

Hope in the online world?

One thing they could do, and I would recommend it, is using the experience to gain online skills: digital photography, Web software, and video and audio editing – after learning journalism basics. Then, if they want to stay in the communication field, they can move into online media as more Web sites go online. But even there, media are competing for the same advertising dollars. And it might come at a cost.

A recent Pew Research Center survey, "Online Journalists Optimistic About Revenue, Concerned About Quality," found that:

"Journalists who work online are more optimistic about the future of their profession than are news people tied to more traditional media platforms, but at best their optimism is an uneasy one, according to a new survey of members of the Online News Association produced by the Association and the Pew Research Center's Project for Excellence in Journalism."

The survey also found that:

"A solid majority of those surveyed (57%) say the internet is 'changing the fundamental values of journalism.' The biggest changes, the respondents said, were a loosening of standards (45%), more outside voices (31%) and an increased emphasis on speed (25%)."

I would say that the emphasis on speed has had an impact on the loosening of standards, but a bigger impact has been the increasing need to boost online advertising dollars to make up for the decline in print income. It's about survival. If you put up content that no one wants to advertise on, you've wasted your resources. The need to balance editorial efforts with financial reward has had a significant impact on the wall between editorial and advertising. It increasingly determines the type of content that is going to be built. There is a logical need to match advertising with editorial content, and online sections offer advertisers a unique method of targeting a specific audience. Working journalists might not want to admit it, but they understand it's happening. And in fact, in order for companies to stay in business, it needs to happen. But just a few years ago, the very concept of that need being recognized by editorial staffs would've sparked newsroom protests. Now, the people left in newsrooms have other things to worry about: mainly, keeping their jobs.

Where online has helped journalism is the ability to team video, databases, documents, surveys, audio and other elements with related stories in order to give readers more information and background.

As for more outside voices being added to the mix, a newspaper or local Web site should reflect it's community and that should show up in news coverage. But if the voices are the voices of hate and intolerance that too often flare in the comments sections of news stories, blogs and forums, then they can have a seriously deterimental impact on the readership experience and help produce a negative reaction to the journalism behind it.

Another finding in the survey was that:

"Despite current trends, most of these online journalists are pinning their hopes on the future on advertising. Roughly two-thirds of these online journalists predicted advertising would be the most important form of revenue at websites three years from now. Only a quarter of respondents named some other new revenue model."

Unfortunately, online ad revenue still makes up a relatively small share of newspaper revenue. Even where it's 15 percent, that's still not much in the grand scheme of things, although before the recession, it was growing at many places. However, one reason for the growth could be the decline in print revenue.

Which means that newsroom staffs will continue to be cut. Anyone who expects these jobs to be resurrected once the economy improves is being unduly optimistic. In reality, the bare-bones staffing at newspapers that is emerging will become the new norm because, as the layoffs devastating the industry show, newspapers aren't so much about being watchdogs for the public anymore as they are about profits.

What does this mean for journalism? Less eyes scrutinizing government for fraud, waste and worse. Smaller staffs mean less resources to dedicate to long-term projects. Will corruption and safety issues remain undiscovered because of reduced staffing? Probably. Unless a blogger breaks it. Reporters who previously covered these types of stories probably will be writing books or taking jobs in private industry, especially if they have children or mortgages they need to support. But some might like betting their futures on an industry that seems hell-bent on suicide.

I'm betting the best won't.

Increasing Web sites' revenue

But there are ways to bring in added online revenue.

Put most of the content that was printed behind a firewall: Print subscribers would get free accounts to both the main online and mobile sites. Non-print subscribers could be charged a nominal fee for access. The information subscribers enter would allow for increased targeted marketing. Channels, blogs and forums could be open to the general public, as would a few of the news stories of the day. Local advertisers would know that their online ad dollars were reaching a mainly local market and not being wasted on people who don't live in the area and aren't going to frequent local businesses.
Reach agreements with cell-phone carriers and Internet service providers: Offering access to subscription news sites would be a good marketing point for these companies: "Get all your local news when you sign up." It might not bring in a great deal of revenue for newspaper sites, but it might bring in enough to pay for a few staff positions.
Monetize channels more effectively: For example, pre-sell a cooking channel to sponsors such as grocery stores, department stores and food companies. Have an idea for a home repair channel? Find out whether Home Depot or Lowe's would be interested in sponsoring it. If no company wants to sponsor a channel, then it's likely going to be a waste of time and resources. Yes, it blurs the lines between advertising and editorial, but channels need to be thought of more in terms of specialty magazines than online newspaper sections. Ethical arguments won't cover up the fact that a channel that can't draw revenue to pay for staffing is a failure.
Explore paid membership in special-interest online clubs: Sites can use local sports teams or organizations as starting points for activities and benefits, including unique online content such as photos and videos, "free" sponsored posters, shopping discounts, club meetings at local taverns or restaurants, and the opportunity to see practices for free or to get discount ticket packages. Teams gain by heightened fan interest and selling seats that otherwise might go unsold. Sponsoring merchants gain by moving products targeted at a unique audience. Everyone wins. The same type of packaging can be done with other areas of interest, such as dating. Simply having a section that offers nothing more interesting than ads, blogs and forums isn't going to make a section stand out from similar ones across the Web. Consider the channel a way of achieving real-world social networking while building an online community of faithful users.
On mobile Web sites, use an initial "flash ad page": I know people hate ads that appear on a site before you get to any content, but realistically, mobile sites for newspapers don't have a lot to offer advertisers. Selling an initial ad at least brings the opportunity to definitely gain readers' attention. The page would offer the choice of getting more information or going directly to the newspaper Web site. Section ads still could be sold to different advertisers to help with the targeting of mobile ads.
Develop an online coupon section: Not only will Web sites be helping their visitors, but they also can charge advertisers in the process.
Sign up for partnership agreements with online merchants: If a movie or music release is reviewed, link up to Amazon, Netflix or iTunes so people can buy the product and decide for themselves. Newspaper companies would get a share of any resulting sales.

These are just a few ideas, the first meant only for most daily print newspapers. Papers that only publish or home deliver two or three times a week need the Web to try to make up for ad revenue lost on the other days. For these papers, trying to go to a subscription-only Web content model probably would speed their closure.

They won't end circulation loss, but they might help give print editions a few more years of life. But in the years to come, print circulation and jobs will continue to decline as more readers turn away from it due to financial, environmental and generational issues. And in the end, most Web sites will have to be free in order to generate ad revenue to support slimmed-down editorial operations. Eventually, as circulation shrinks, print ad revenue might not even be enough to support production and circulation costs. Going Web-only, with perhaps a weekly print product, might be the only way newspapers manage to hold on. Sunday editions at least offer the option of multi-million dollar printing and insert contracts. Presses still could be used to bring in revenue from contract print jobs, including ads, national newspapers and special-interest publications.

Newspaper companies already are cutting the number of editions, limiting distribution areas, entering coverage partnerships and evolving into slimmer entities with greatly reduced staffs, leading to more use of contract workers.

All of these moves will help to a point, but eventually, they'll find that while there are ways to slow print's decline, there is no way to stop it.

Other views:
Editor and Publisher Special Report: To Charge, or Not to Charge?
Newsweek: Digital Dad Versus the Dinosaurs
Newsweek: Dubious New Models for News