Recently, the venerable Chicago Tribune was able to splash the story across its masthead about how native-son Barack Obama had just won the US Presidential Election. Yet only a few weeks later, the Tribune was itself the news story, as Tribune Co., owner of the Chicago Tribune, the Chicago Cubs, the Orlando (FL) Sentinel and Hartford (CT) Courant, sought Chapter 11 bankruptcy protection from creditors.
As with many newspapers, there are a number of reasons that this year has been one of the hardest for the Tribune. The most obvious was the deal that owner Sam Zell had arranged in 2007 to acquire the company in the first place, essentially using the company itself as collateral for the purchase of the company, which he managed to do with a $300 million dollar margin to purchase what was then an $8.5 billion dollar company.
Doing so, however, meant that the company had to generate roughly $500 million in revenues each quarter in order to pay off that debt, and the rapidly disintegrating advertising market caused revenues in the last two quarters to fall off a cliff, and even selling off smaller holdings has failed to satisfy the payments. In the bankruptcy hearing, the Tribune announced that they had only $7.6 billion dollars in assets while holding more than $13 billion in debt.
Reports of My Demise ...
Beyond the obvious factor of a badly engineered business deal that couldn't stand the hurricane force winds of the current economic meltdown, there is a more troublesome underlying story ... newspapers themselves are dying. This is not in and of itself news - the decline and ultimately the demise of newspapers has been an ongoing theme since the emergence of the radio, and while readership has been declining steadily for nearly the last century, newspapers themselves have always seemed to reinvent themselves at the last minute.
With the advent of radio, newpapers differentiated themselves by providing many more channels of potential information, and providing that information at far greater depth than most radio shows could. Television news proved more competitive in some respects - the novelty of seeing the news unfold before the viewer made TV especially attractive for visceral "stories", but overall, the newspaper has managed to maintain a broader appeal for those things which couldn't readily be broadcast - it's difficult and not terribly cost effective to broadcast a want ad, for instance.
The emergence of the Internet proved newspapers' most challenging competitor, and the one that ultimately may have managed to do the newspaper industry in altogether. Most newspapers, from the veritable New York times on down, launched their own websites, reasoning that this was simply another medium in which to publish their own writers, but this viewpoint may have been somewhat shortsighted.
In 2003, the term blog first entered into the modern lexicon, an online editorial or journal written not by professional journalists but by eager amateurs who could publish by overcoming a far smaller barrier to entry - setting up a blogging site. With contemporary tools, the blogger could effectively start producing his or her own "news" within a few hours, and if they happened to be reasonably competent, were willing to invest some time into promotion and consistent in publishing content, they had a good chance to gain more "eyeballs" than professional journalists with thirty years of experience.
As of April, 2008, only three newspapers had a subscriber base in excess of 1,000,000 readers - USA Today (2.3 million), The Wall Street Journal (2.1 million) and the New York Times (1.1 million). Most newspapers average approximately 300,000 subscribers. This of course doesn't reflect total readership numbers - many papers sell a significant proportion of their subscriber levels in newsstand and library sales - but it does provide at least a basic metric for understanding the dynamics of newspaper publishing vs. the web.
Blogging guru Robert Scoble compiled a list in 2007 of Google Reader subscribers for a number of newspapers, individual bloggers, and online news providers. Keep in mind that these rates reflected the number of RSS feeds that were read through Google Reader, which represents perhaps five percent of the total news-feed consumers. Using that as a (very rough guide), organizations such as Tech Crunch had around 130,000 subscribers from this source alone, which equates to perhaps 2.5 million readers online either from direct site visitors, or increasingly due to RSS links. The New York Times, by comparison, had perhaps 40,000 such Google Reader subscribers (maybe 800,000 total readership). Significantly, Scoble himself had about 5,000 individual Google Reader subscribers.
Put another way, organizations such as O'Reilly Media, Tech Crunch, the Huffington Post, or even individuals such as Robert Scoble are able to capture comparable or greater audiences than organizations such as the New York Times - and are usually able to do it at tenths of pennies to the dollar in comparison to the Times.
The Debt Trap
Subscribers do not, in general, provide a huge revenue base for newspapers. This has been true since well before the time of the Internet. What subscribers do provide is a reasonably accurate portrait of what the typical demographic of the total readership looks like - are they affluent or bargain basement, are they likely to have children at home, do they conform to a particular ethnic group, and so on. The subscriber number also provides a rough guess as to the overall size of these demographics ... all of which are of course of interest to advertisers and marketers.
Those eyeballs represent revenue for advertisers - what's the best ad buy for a given market, how can you target your advertising so that it will appeal most closely to a targeted readership. Search engine optimization (SEO) sounds like a technical discipline, but it is in fact far more of a marketing phenomenon - how do you develop searches in order to make site X the most likely to come up in search engines when searches are typed in by the people the marketers are most likely trying to attract. It is similar to the kind of marketing analysis that ad buyers make when attempting to penetrate newspaper readerships ... but it also competes directly with those newspapers for revenue from an advertiser. (It's worth noting that many direct marketing companies have either morphed into or established SEO departments).
When times are good, companies are generally able to pour more money into advertising. Keep in mind that advertising is an expense, however - you need to spend the ad money in order to gain returns, and if you aren't generating sufficient returns then either your advertising is not effective or the venue is insufficient (it's also possible that the product is just no good, but in reality that's never been a big factor in ad expenditures). When times are tough, those same advertisers will start cutting out those markets that are providing only marginal rates of return or worse and concentrate increasingly on those markets which generate the most profit.
A newspaper publisher has a product - a newspaper or magazine. That product needs to be printed on newsprint or gloss paper, both of which are becoming increasingly dear as anyone who's bought paper recently can tell you. The product needs to be distributed, which costs gasoline and airline fuel, and needs to be mailed (which has also becoming increasingly prohibitive). These operational costs aren't going away anytime soon, but they are also only a part of the picture.
The Tribune deal is an example of the broader conglomeration of papers. There are comparatively few independent newspapers anymore. In the United States, a significant number of regional market papers were purchased by a handful of consortia - Murdoch's News Corp., Gannett, McClatchy Company, Hollinger International, and a few others. In most cases, these independent papers were purchased both to expand the reach of the given consortium into a given market, but typically the papers purchased were those that were already struggling with costs given the economy of scale of production.
As these consortia grew, they did so by taking on debt to acquire the new papers (in many cases by leveraging the company itself as collateral for that debt). In general, because of the diversity of papers purchased, servicing this debt usually involved making sure that you had two or three top tier papers that were able to subsidize the cost of the second tier papers, then letting local economic conditions contribute as possible.
Unfortunately as the credit crisis continues to expand globally, it places a number of these consortia into the same position as the Tribune - they are faced with declining revenues in all markets simultaneously, and suddenly once feasible debt payments are becoming increasingly onerous. Typically, the only real response that a given consortium can take is to reduce staff at the paper (which causes readership to decline as quality of the product declines) or in many cases to close the paper itself.
The New York Times may be in a similar position, at this stage. CNN Money reported recently that the Times now has net negative revenue (it's losing money). As a consequence, it has repeatedly trimmed staff, including its IT staff. This ironically means that the online sites of newspapers may actually be cut even though locally they are revenue positive, primarily because the costs of maintaining the IT infrastructure is still a net negative.
As prestige papers like the Times move into this spiral of declining quality and fewer stories, this is also having the impact of making it harder for these companies to effectively leverage their brand online, at a time when the online news space itself is just really beginning to solidify into distinct brand names - and those brand names are increasingly tied into individuals rather than corporate identities.
The Changing Face of Advertising
Advertising, additionally, is changing dramatically. General Motors, forced to make an ignominious trip to Washington to ask for a bailout (with Ford and Chrysler on their heels), has cut most of its ad buys for the Superbowl and has significantly scaled back its advertising overall as car and truck sales plummet. This is happening with most sectors, right now, and advertising agencies and marketing firms are, as a consequence, also going under in record numbers.
This has had a particularly negative influence on the publishing industry, because for the most part these advertising agencies were geared very specifically to mesh with the publishers - ad buys were typically done primarily with a focus on targeting newspaper and magazine advertising first, especially for items that were not cost effective to market via television advertisements. With the ad agencies either no longer there or receiving far fewer such contracts, they are not making the ad buys from these channels.
This is even bleaker for publishers long term. When the economy finally does recover, new advertising companies will be the first companies to emerge from the doldrums. However, these companies will be filled (if history is any indication) by bright, eager twenty-somethings far more experienced with Facebook, Google, iPhones, YouTube and Twitter than with newspaper or magazine advertising, and they will be far more likely to think in those terms not only in the production of new advertising media, but also in pushing specific sales channels over others. As most newpapers can be thought of as advertising vehicles with a thin layer of editorial laid over the top, the consequences of this will be devastating.
Another advertising trend that will prove deleterious to newspapers is the increasing focus by companies in creating cohesive internal "worlds" in which they are able to sell just their own products without having to worry about competition. Such worlds shouldn't be confused with virtual reality worlds (though these will be one such vehicle). Rather, what's involved is the creation of branded widgets, of comprehensive catalog sites that include editorial as well as interactive content, and of cross media campaigns in which each particular medium expression has a complement in other media (a series of YouTube videos that tie into forums or Flash games, with downloadable widgets and themes). These, unfortunately, do not generally work well with newspaper content - and as a consequence the ad buys in that space will represent a small percentage of the overall ad budget.
The Decentralization of Journalism
Perhaps the final challenge facing newspapers (and to a lesser extent magazines) comes from the declining authoritativeness of the newspaper as the arbiter of what is editorial content - in essence, what is news. Advertisers were originally attracted to newspapers because newspapers presented novel, interesting information about the world around the reader, and what's more, because the cost of publishing was so high (and the readership so broad, comparatively speaking) some pain was taken to insure the accuracy of this news. This was compelling to the reader, and as such, it represented for the advertiser a venue in which to also gain a certain degree of legitimacy.
New information technologies has expanded the effective universe of the reader, and has also made the world far more immediate. Radio then television served to bring distant frontiers much closer to home, and this in turn has meant that the cost of providing relevant news has also exploded ... especially since news organizations tended to remain centralized for much of their existence - syndication existed, but such syndicates in and of themselves became news organizations that effectively controlled the content provided to other news media (effectively the news syndicates became competitors as much as providers to the newspapers over all).
With the Internet, however, most of these equations have been rewritten, with the new language the language of decentralization. Google, as an aggregator of content, became the table of contents for the new media, while Wikipedia became its fact checking archive. Bloggers became its reporters, and as such they are increasingly able to beat the "professional" journalists to "the story" because such bloggers were local to where the story was. Moreover, such bloggers could often disseminate queries to others within their networks within minutes of a contentious story being published, a fact that was displayed constantly throughout the 2008 political campaign.
These bloggers may not necessarily be "journalists" in the same sense that a newspaper or magazine reporter is, though this more reflects the bias of these same reporters than it does any real grounding in professionalism or ethics. The blogosphere is developing its own sense of ethics concerning what journalism is and isn't, one that's different but no less legitimate in its approach (and the blogosphere is generally brutal to those who do not get their facts straight, something which most print journalists have long not had to worry much about beyond the level of theoretical exercise).
It should also be noted that in 2008, for the first time, more online journalists were imprisoned last year than print journalists were, according to the Committee to Protect Journalists, as reported by the Berkman Center for Internet and Society at Harvard University. In 2008, 48% of all journalists that were imprisoned by censoring governments were online journalists ... bloggers, for the most part ... while 45% were print journalists. This is an important metric - one of the roles of the press should be to provide a spotlight on the inner workings of both governments and corporations, and the fact that bloggers are now doing this more than their print colleagues (and as a consequence, are being seen increasingly by such organizations as being "dangerous" enough to jail) gives to bloggers a degree of legitimacy that is difficult to argue with.
In the short term, its likely that this will improve journalism overall, which has for some time been fairly heavily intimidated by those same governments and corporations. In the longer term, however, it is likely that most print journalists will also become proficient as online journalists, and as such will continue to erode the authority of print publications.
Yet this points to an important (perhaps critical) distinction. While newspapers are likely on their way to the recycle bin, editorial journalism isn't. We are moving to an era where journalistic integrity and personal prestige of the individual journalist is becoming more important than the prestige of the newspaper or other media that the journalist writes for. Journalism is becoming decentralized, and there are many indications that this is, just perhaps, a good thing.