Whither Newspapers?

January 18, 2009, 3:30 p.m.

Newspapers' Challenges Outrun Choices
(Brought to you by FromDC2Iowa.blogspot.com*)
As Iowans continue to mourn the firing of the likes of the Register's Brian Duffy and the Press-Citizen's Bob Patton, along with dozens of their colleagues at those papers and the 15,000 laid off nationwide, things are looking pretty bleak for the newspaper industry generally all across the country.

The Tribune (which means the Los Angeles Times and Baltimore Sun as well as the Chicago Tribune) is bankrupt, the New York Times has mortgaged its headquarters building, the Seattle Post-Intelligencer will close in 60 days if it can't find a buyer, the Detroit News and the Detroit Free Press (a joint publishing operation) limits home delivery to Thursdays, Fridays and Sundays, and the Christian Science Monitor has stopped printing (while retaining an online presence) -- among a great many similar stories from around the country. E.g., Richard Perez-Pena, "Times Co. to Borrow Against Building," New York Times, December 8, 2008; Whitney M. Keyes, "Bye bye Seattle PI: Six survival tips for struggling newspapers,", The Biz Bite: A Blog to Boost Business, Seattle Post-Intelligencer, January 17, 2009; David Cook, "Monitor shifts from print to Web-based strategy; In 2009, the Monitor will become the first nationally circulated newspaper to replace its daily print edition with its website; the 100 year-old news organization will also offer subscribers weekly print and daily e-mail editions," Christian Science Monitor, October 28, 2008.

Meanwhile, Stephen Buttry of the locally-owned Gazette describes this morning what that paper has been doing recently, rethinking its mission, goals and response to what I've characterized as the "broadside blows" that can hit any company in a fast-paced, technologically innovative information age. Stephen Buttry, "Gazette Working on Transformation," The Gazette, January 18, 2009, p. A2 (use drop-down menus to go to "Su 01/18/2008" and "Page A2").

In 2007 there were about 110 million housing units occupied year round. From 2000-2008 the number of U.S. daily papers has declined from 1492 to 1447 (that's morning (833) and evening (614) editions, so greater than the number of local newspaper companies). During this time the total circulation has declined from 55,772,000 to 52,329,000. "Newspapers and News Organizations Marketing Research," Research Wikis. I have no idea (and can find no data) on how many of those 52 million papers go to households (as distinguished from those delivered to news stands, businesses, or are distributed free to students or travelers on trains, planes and in hotels) -- and how many of those subscriber households account for more than one newspaper (in my case there are four, plus of course a variable additional number of online papers). But it seems clear that far fewer than 50% of American households subscribe to even one paper.

(Richard Perez-Pena, "Newspaper Circulation Continues to Decline Rapidly" New York Times, October 27, 2008: "The long decline in newspaper circulation over the years continues to accelerate, with sales in the spring and summer falling almost 5 percent from the previous year, figures released on Monday show, deepening the financial strain on the industry -- from 1.9 percent for The Washington Post, to 13.6 percent for The Atlanta Journal-Constitution . . . circulation at The Houston Chronicle, The Boston Globe, The Star-Ledger of Newark, The Philadelphia Inquirer, The Orange County Register and The Detroit News fell 10 percent or more. The exceptions . . . were USA Today and The Wall Street Journal, . . . virtually unchanged, at 2.3 million for USA Today and 2 million for The Journal on weekdays.")

Couple the decline in readership with the even greater decline in advertising revenue, the rising costs for printing and distribution, the loss of the classified advertising revenue to the likes of Craig's List, the seeming need to give it all away for free on the Internet, and Wall Street's demand not only for beter-than-average-Fortune-500 rates of return, but ever-increasing rates of return, and it's a wonder there are still any newspapers out there. Mark Fitzgerald, "'Several Cities' Could Have No Daily Paper As Soon As 2010, Credit Rater Says," Editor & Publisher, December 3, 2008 ("Newspaper and newspaper groups are likely to default on their debt and go out of business next year -- leaving "several cities" with no daily newspaper at all, Fitch Ratings says in a report on media released Wednesday.") Bill Boyarsky, "The Newspaper Industry Is Dying Before Our Very Eyes," Truthdig, AlterNet Media & Technology, December 18, 2008.

All of this raises a number of issues.

First off, as a law school colleague is occasionally driven to ask a classroom of silent students, "Is anybody listening? Does anybody care?"

Few today miss the disappearance from the marketplace of the horse-drawn buggy industry -- aside from the Amish, and they make their own. Automobiles, and public transportation, filled the transportation gap and took their place.

Are there any reasons to believe the disappearance of the newspaper industry would be of any greater significance, or any less likely to be replaced by something else?

The answer turns, in part, on how one defines "newspaper."

I once sat next to a sliderule salesman on an airplane at a time when transistors and hand held calculators were beginning to come on the market. Needless to say, he had a warehouse full of some really beautiful sliderules with which he was willing to part at a discount. I had been brought up on calculation by sliderule, but passed by his offer.

It was not sliderules that were essential to American science, engineering and business; it was the ability to do calculations.

So it is with newspapers. It is not necessarily still essential that we chop down trees, grind them into wood pulp, create multi-ton rolls of newsprint, ship them by truck, rail, ship, and truck again, to gigantic printing presses, where it is inked, folded, bundled and put on trucks, dropped off for delivery persons, who in turn drive around town dropping individual newspapers on subscribers' doorsteps.

What is even more essential that the ability to do calculations, however, at least in my view, is the citizens' ability to get access to information, opinion and what we call "investigative reporting" in a self-governing democracy.

Our nation's founders, led by Thomas Jefferson and James Madison, recognized this central necessity -- and not just in the First Amendment ("Congress shall make no law abridging the freedom of speech, or of the press"). They saw the need for an educated citizenry, which ultimately led to a system of free public schools, and public libraries. (Jefferson helped create both the University of Virginia and the Library of Congress.) The postal system, with reduced rates for books, magazines and newspapers, was a part of this philosophical package, as was the ultimate licensing of broadcast stations to serve "the public interest." They knew that expanding the franchise (at first limited to white, male, landowners, over 21 -- ultimately expanded to include African-Americans, then women, then everyone over 18) would count for little without an informed electorate.

Given today's policy challenges, I continue to believe that the information gathering, processing, editing and distribution function continues to be, if anything, even more essential than it was 200 years ago.

And in addition to newspapers' role as newspapers, they also play a major role in the functioning of all media. I used to say of the evening news programs on ABC, CBS and NBC that their content was determined by morning editorial conferences at which all the participants had read the New York Times and then sat around deciding which stories they'd take pictures of that afternoon and put on the air that evening. Obviously, it's not quite that bad. But the Times is a kind of "newspaper of record" not only for our country but for the world (along with other great world newspapers); it is a repository of history as well as a serving plate of current happenings. Look at your local paper; how many of its stories come from this guy whose initials are "AP"? Who is he? He's hundreds or thousands of reporters working -- or at least who used to be working -- at newspapers all across this country that belong to the Associated Press and offer up their stories for other members' papers to use. Few if any local radio or television stations, or even networks, have journalistic resources remotely approaching those of the nation's large, urban papers -- or at least the resources they used to have. So to the extent we lose our papers we have also lost the network of journalists that supports all media (and individuals) that need or want the information newspapers provide.

But while I'm part of that small group who loves the feel of a newspaper in my hands in the morning, I also recognize that the "newspaper manufacturing industry" of my youth is not the only way our society can perform that informing function.

What do we mean by "the newspaper business"? The executives of every for profit enterprise need to ask themselves, in bad economic times as well as good, "What business are we really in, or do we want to be in?" Are we in "the steel business" or the "building materials business"? Are we just in the "department store business" or should we also be offering groceries for sale?

Stephen Buttry is clearly doing some of this kind of thinking for Eastern Iowa's paper, The Gazette. He and his staff have identified, and begun focusing on three or four separate businesses. Their response to newspapers' hard times is a willingness to "fundamentally transform" their company.

Of these four businesses, or functions, the first is information gathering; the input of others' information and opinion (news releases, statements at news conferences, online reporting), interviewing, observing, researching reports and other documents (primarily on the Internet, but elsewhere as well) -- and then writing it up as journalists and editors do, or simply present it raw.

The second is the multiple packaging of this information and reporting: much of it would simply be made available online as reference/research material; but there could also be a hard copy newspaper, a less-than-daily "magazine," supplements, advertisers (such as their "Penny Saver"), books, or sports publications. (One of the most potentially profitable things to think about are the multiples more "packaging" possibilities.)

The third is production: the creation and updating of Web pages and blog services, maintenance of the servers; the printing presses operation and maintenance; delivery services, whether by computer, truck, sidewalk boxes, or home delivery.

The fourth (as I break it down, but a part of the third in Buttry's conception) is the financial side of the business: sales of product, subscriptions, and advertising; the advertising and marketing of the various products; customer service; and collections.

This kind of thinking is not enough to make a "newspaper" profitable -- as Buttry seems to be the first to acknowledge. There are a lot of details to deal with between point "A" and point "B."

But it is an essential first step for which I think The Gazette is entitled to a lot of credit. Any corporate enterprise that continues to think of itself as being in the "newspaper business" in 2009 is probably in for tough economic times. Thinking of itself as being in the information gathering, packaging, production, and marketing businesses is not the only possible conceptual scheme, but it is a good one (in my opinion).

The survival of print. Hard copy papers have not yet totally disappeared, even if they've laid off reporters, lost circulation and advertisers. It's interesting, as noted above, that the Wall Street Journal is more than surviving. In part that's because at least a hard core of its readers can probably afford whatever the owners might like to charge subscribers, and advertisers are willing to pay handsomely to reach them. But it's also because the WSJ serves a niche, albeit one that is evolving. Visiting with Jim Hightower a couple days ago (here in town for an Iowa Corngrowers' gathering) we talked about his newsletter, which is doing quite well. I suspect there will continue to be a market for specialized, hardcopy newsletters. And some are suggesting that, however small the readership might be, it may be -- at least for a long time -- economically feasible for today's conventional newspapers to continue to publish and deliver hardcopy papers to the market that wants them, and is willing to pay for them the full cost of production, distribution and some profit.

Special interest publications. Some newspapers even today continue to have the words "Democrat" or "Republican" in their names. And there are thousands of other organizations, such as churches, and trade unions -- that will continue, or start, providing their members (and any subscribers) with hard copy reporting. About 30% of households get their television off the air. (These are the folks for whom the conversion to digital TV presents a challenge.) Something like half American homes don't have broadband Internet access. These folks will continue to be a market for hardcopy delivery of news and information, either from whatever future "newspapers" may look like, or from an organization to which these readers belong.

Blending print and online. Another model is to retain some home delivery (just not seven days a week) along with online distribution, like the Detroit papers are doing. The New York Times now offers a "special" on a Friday, Saturday, Sunday only package of delivery, thereby cutting the production and distribution costs by more than half (while possibly picking up some new subscribers who would not have wanted the paper every day, but welcome having three papers over the weekend -- and at a much reduced cost).

All online all the time. Finally, there is the Christian Science Monitor model: abandon hardcopy altogether, offering nothing but online content -- while updating it 24/7.

Home printing. I have a law school colleague, with expertise in the newspaper business, who has been urging papers for years to consider the possibility of putting printers in the homes of subscribers. Editorial (news) only accounts for about 15% of the cost of producing a newspaper. I don't know what percentage goes into producing and transporting newsprint, the printing presses, the printers' ink, and the transportation and delivery of the individual papers -- but it has to be enormous. And think about it: to receive television programs you must invest in a TV set (and these days a monthly payment for the entirety of your life to a cable company); householders have a significant portion of the capital investment in the television industry. All you need contribute to get a newspaper is a front step. The cost savings for the industry could be significant If those who want or need a hard copy of their newspaper would assume the cost of printing it in their homes. The New York Times now offers to deliver the entire paper, as each page is made up and appears in hard copy, to your home, everyday, for $175 a year (a substantial reduction from the hard copy price, if indeed the paper is even available for home delivery in your town). Admittedly, this is not the same as a printed copy, but it gives you an idea of what large, printer-ready copy might look like.

The blogosphere. Whether blogs cause you to sneer, or you view them as a form of "journalism," the fact is that they are already playing a role in the newspaper industry.

Most papers have online blogs created by their reporters and editorial writers, to which many add the blogs of ordinary citizens as well. Many papers provide readers access to the online reproduction of reporters' stories as a form of blog, to which readers may add their own "comments" about the story (and increasingly about each others' comments as well).

Blogs, including this one, certainly look to the mainstream media for information, quotes, and stimulation of ideas to write about. And there is a least some contribution the other direction -- as when bloggers got after Dan Rather for CBS' acceptance, and reporting, of what turned out to be a faked document regarding President George W. Bush's "war record," or as John Neff notes in his comment, below, when the mainstream media made use of the "here comes everybody" still and moving pictures of the recent Airbus "water landing" on the Hudson River.

The blogosphere is an example of Clay Shirky's Here Comes Everybody (2008). It does not require a hierarchial organization to be created or to survive; anyone can contribute and almost no one makes money from doing so. "On the Media" reported this weekend on Josh Karp's "The Printed Blog," an effort to pick from blog entries and offer them in printed form. Of course, "Google" in general, and "Google Alerts" in particular, enable anyone to create the equivalent as an online service -- and this is already being done; see e.g., BlogNetNews.com and Blog for Iowa.

The blogospher may not be to newspapers what the automobile is to the horse and buggy (that is, not only a replacement, but an improvement) but with enough participants, including the laid-off professional journalists (who will now need other sources of income to survive, but will still have some spare time and a desire to write), and more packaging/editing services, the blogosphere could fill at least some of the hole left with the disappearance of papers.

Make Google pay. For a mini debate about the wisdom, propriety and effectiveness of newspapers insisting on payment from Google for its ability to list their content, see Eric Etheridge, "Virtual Face-Off: What Does Google Owe Newspapers?" New York Times, February 4, 2009.

Sell online access to content. Since advertising revenue from newspapers' online content hasn't been the equivalent of what the hard copy ads once produced, one option is to try to move today's online freeloaders into the category of paying subscribers. This has not been easy. I at one point suggested the idea of an ASCAP model -- that is, for an annual flat fee one could examine any newspaper's online content, with a proportion of that fee (based on the proportion of hits on that newspaper's Web site to the total hits on all newspapers' Web sites) going to the papers you access. On reflection, that idea may be even more difficult to sell than the pay-per-paper approach. A more viable, and easily established, approach -- that is already being used -- is to give away most of the content while holding back some for which pay is required (for example, some of the New York Times' archives).

Sell the features, not the content. Another approach is to offer the content for free, as now, but sell the value-added features such as archives, special search tools, email alerts, delivery to cell phones and handheld devices -- while trying to think up and offer more such features.

Governmental subsidy. Finally, there is the occasional suggestion that if the government can provide a significant share of the funding for public broadcasting, and can provide bailouts for "essential" industries like investment bankers and automobile executives, it ought to be able to provide some subsidy to a truly essential industry: newspapers. My guess is that this is a non-starter, not the least of the reasons why being what I predict would be the opposition of the newspaper industry itself.

Endowments. [Jan. 29, 2009] After this blog entry was written I came upon another proposal: endowment funds to support newspapers. The authors estimate this would require something on the order of a $5 billion-dollar endowment for the New York Times alone which, in today's economy, might be a little difficult to raise on short notice from wealthy Times fans. But I thought the proposal worthy of inclusion here. David Swensen and Michael Schmidt, "News You Can Endow," New York Times, January 27, 2009.

For a thoughtful discussion of these issues from a couple years ago by some of the industry's leaders, not inconsistent with the kind of approach I've explored here, see "Challenges to the Newspaper Industry: A PEJ Roundtable," Pew Research Center's Project for Excellence in Journalism, July 24, 2006.

At this point in time there's no way of predicting for sure which route the failing newspaper industry will go. Many of the major players may have disappeared entirely. Others will be transformed into something barely recognizable. Other new start ups will have evolved -- not unlike Apple's emerging competition with the behemoth IBM nearly 30 years ago.

Whatever the path, we self-governing American citizens will continue to need diverse, independent and impartial gathering of data and reporting of information and access to wise opinion. Of that I am sure.
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* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source -- even if I have to embed it myself. -- Nicholas Johnson

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