A Bright Future for Newspapers
Stop hanging the crepe. A contrarian argues that despite those discouraging circulation numbers, the old behemoths are well positioned to thrive in the new-media world.
By Paul Farhi
Philip Meyer, who has studied the newspaper industry for three decades, can see the darkness at the end of the tunnel. If present readership trends continue indefinitely, says the University of North Carolina professor, the last daily newspaper reader will check out in 2044. October 2044, to be exact. "I use that as an attention-getting device," says Meyer, whose latest book, "The Vanishing Newspaper: Saving Journalism in the Information Age," spells out the bad news in elaborate detail. "It's shocking, but that's what the numbers say."
Senior contributing writer Paul Farhi (email@example.com) is a reporter for the Washington Post.
It's not hard to understand how we could get from here to there. The media have been covering the bad news about newspapers for years. To see and read these accounts is to encounter an industry that seems on the verge of crisis, and possibly on the edge of the abyss. "In many U.S. markets, the dominant paper is a fading enterprise," wrote Slate media critic Jack Shafer this spring. "In the long run, no newspaper is safe from electronic technologies." Barron's Online columnist Howard R. Gold put it this way recently: "A crisis of confidence has combined with a technological revolution and structural economic change to create what can only be described as a perfect storm... [P]rint's business model is imploding as younger readers turn toward free tabloids and electronic media to get news." The Washington Post was more succinct: "The venerable newspaper is in trouble," it declared in a long feature story in February.
Wait a second. Newspapers, which predate the founding of the American republic, are "imploding," "in trouble" and staring at oblivion? Is the future really so bleak?
To be certain, all is not as well as it once was at the average daily. Circulation, which has been on an orderly downward trajectory for two decades, has lately shown signs of free fall. (Daily newspaper circulation dropped 1.9 percent in the last year, according to the Audit Bureau of Circulations numbers.) Young readers are scarce, newsroom budgets are tight, and the competition remains unrelenting. Newspapers have wounded themselves with a series of credibility-shredding scandals and screwups from Jayson Blair's and Jack Kelley's fictions to Judith Miller's mistaken WMD stories to last year's Enron-style circulation-inflation mess. The Internet, with its vastness, its vibrancy and its immediacy, does seem poised to blow away the snoozy old newspaper.
And yet all of this misses a bigger, more positive picture. Media accounts of the rise and fall of newspapers are greatly exaggerated, if not flat wrong. The case for the survival of the daily paper is at least as compelling as the one for its much-reported demise. Considering the hurricane of change that is buffeting all segments of the news media these days, I'd argue that no part of the business is as firmly anchored as the average daily newspaper. Rather than accepting their own mortality, newspapers may have the best chance of any of the old media to survive in a new-media world.
All of the pessimistic assessments of the newspaper industry's future invite a simple rejoinder: Compared with what? Since all traditional media--newspapers, magazines, radio, TV, etc.--are gradually losing readers, listeners and viewers, assessing any single medium in isolation provides a flawed and distorted picture. Compared with the rest of the media industry, newspapers are doing no worse, and in some respects quite a bit better, than the competition, including the Internet.
Let's take a quick tour.
Cable TV news? Except for the surge in interest late last year due to the presidential election, the three news channels--Fox News Channel, CNN and MSNBC--likely would have experienced their third no-growth year in a row.
In any case, the audience trends in cable news aren't promising. For one thing, cable news viewing is subject to extreme volatility--people come and go, driven to the set by the big breaking stories but paying only sporadic attention the rest of the time. More important, cable and the all-news networks it carries are at saturation. Cable's audience grew during the last decade partly as a result of expanded distribution--as more households could receive Fox News or CNN, more people watched. However, the wiring of America is all but complete now. So cable companies have had to look for new ways to grow, and they're doing so by expanding the number of channels available to their existing household customers. This can only mean more audience fragmentation, as viewers click around their new digital channels. Since new viewers aren't rushing to watch the all-news channels (and the audience for cable news is small to begin with--between 2 million and 3 million people at a time), the only way a network can grow is by cannibalizing the other guy's audience. Hardly a vibrant scenario.
The broadcast networks and local stations? They've been shedding viewers for years. It's not just the networks' prime time entertainment schedules that have been faltering; sports, soap operas, talk shows and game shows have been, too. Over the past two decades, the networks' news programming has lost viewers at a much faster pace than newspapers have been losing their readers. The Big Three still command the attention of roughly 29 million people each weeknight--but that's down 10 million, or 26 percent, from as recently as the mid-1990s.
Unlike cable, the broadcast networks still have a massive audience, and thus have further to fall. But TV networks are hypersensitive to even small movements in the Nielsen numbers these days. It's easy to lament, but not hard to understand, ABC's deliberations over the fate of "Nightline." In the past decade, the program has lost almost 40 percent of its audience (it still averages a respectable 3.8 million viewers per night). Journalists may shudder at the possible cancellation of "Nightline," but competence and prestige are no longer guarantees of survival on network TV.
Radio? Long ago, in a quainter, slower America, radio was a significant source of news and information. But since deregulation and consolidation, hundreds of commercial stations have dropped news, even the most rudimentary rip-and-read kind. The audience for all-news radio has remained relatively stable (and in the case of stations carrying NPR programming has actually grown). But conventional over-the-air radio seems to be in about the same position now as broadcast television was a couple of decades ago--on the verge of huge change. New technologies--satellite radio, multichannel digital terrestrial radio, podcasting, even enhanced cell phones--are already starting to chip away at radio's car-bound audience.
Magazines? They're also losing their claim on the ever-shortening attention span of Americans (a Pew Research Center for the People & the Press survey reports that only a quarter of Americans said they read a magazine "yesterday," down from a third that reported the same thing in 1994). Magazines have always lived in a world of ferocious competition and fragmentation--they're easy to start and can be tailored for readers interested in almost any subject. But the magazine industry is, in many respects, among the least economically healthy segments of the media. Consider: There were nearly one-third fewer titles being published in 2004 than there were in 1999, according to the National Directory of Magazines.
The most interesting and complicated case is the New News Media. Despite the hype, the Internet isn't swallowing everything in its path. A mere 2 percent of the people surveyed by Pew last year said the Internet was their only regular news source. The appetite for news from the Internet is growing, but it's just one part of a varied diet. The average person gets news from a variety of sources--some online, some from TV or radio, some from newspapers and magazines, Pew's figures show. The Internet is actually a small part of that; the average amount of time spent reading the news online was just seven minutes a day last year. No question Internet advertising is growing rapidly, but from a base of almost nothing just a few years ago.
Unlike TV, which created instant and sustained riches, Internet news pioneers are still grasping for a sustainable business model 10 or so years into the online era. Only a few news Web sites earn their keep--and prominent on this list are the online versions of print-and-ink newspapers. This is not to say that the Internet, with its speed and near-zero distribution costs, won't someday dominate news delivery. It could, but it's still hard to see how that day will come about. Will people pay for content online, or is the free model an established fact of life? If it is, will there be enough advertising, at high enough prices, to support as many reporters and editors as now staff even a small newspaper? Will general one-stop, online newspapers amass enough visitors (and enough geographically concentrated visitors at that) to attract lost print subscribers and local advertising? And with people spending relatively few minutes a day on news sites, will anyone be sitting still long enough to see an online ad in the first place?
A couple of aspects of the changing media landscape plainly seem hyped, or maybe just misreported. One is that young people don't read newspapers. They don't, to a shocking degree (just 23 percent of people under 30 said they had read a newspaper the day before they were interviewed, according to the Pew survey). But here's the other part of the picture: The same survey says young people aren't very interested in news from any source, electronic or print. The time spent watching or reading the news by adults under 30 has dropped by about 16 percent in the past decade. The advent of online news hasn't helped reverse the trend.
The major fear in the newspaper industry is that today's young people won't grow into the next generation of readers. That's a reasonable concern, but the evidence suggests it's far too narrowly focused. If young people are less interested in consuming news of any kind, isn't this a problem for news organizations of all types, including those on the Web? Some of the "young reader" problem is self-correcting; people tend to become more interested in the world around them as they buy houses, pay taxes, raise families and generally settle down. Some of these people will probably read the paper, someday. Where will the rest seek news and information (if they go anywhere at all)? How about the Internet? If that is the case, newspapers are as well positioned as anyone at the moment to offer the most comprehensive package of daily local news and features on the Web. Forget paper and ink; journalists (and publishers) have to be ready to deliver the goods via whatever delivery system "end users" want it in.
The other piece of misinformation is the kind spread by the blogosphere about the blogosphere. Despite their role in fanning a few important stories (such as Dan Rather's flawed "60 Minutes II" report on President Bush's National Guard service), bloggers seem at best a part of the news media's future, not the future itself. At the moment, most people have never even heard of blogs. Fifty-six percent of all adults polled by CNN/USA Today/Gallup said in February that they had no knowledge of blogs, and fewer than a third (32 percent) said they were very or somewhat familiar with them. For all their self-infatuation and all their (often useful) criticism of the Old Media, many bloggers would be out of business without the traditional media. Blogs draw their lifeblood from the raw material served up each day by conventional news organizations.
So how do newspapers fit into this dynamic cosmos? Nicely, I'd say. Consider just a few unique competitive advantages that newspapers (still) enjoy:
Monopoly status. A hundred-plus years of competition have left most American cities with just one newspaper. This is, by far, a newspaper's biggest competitive advantage and the source of even the lowliest daily's fat profits.
Newsgathering power. Local newspapers typically still have the largest reporting staffs in town of any single news outlet, print or electronic. This (coupled with wire sources) enables a newspaper to produce the broadest range of daily news and features of any single news outlet. In a world of specialty, there's still great value and convenience in such a general package. Think of the retail analogy: Some people prefer shopping at boutiques and specialty stores, but lots of people still patronize supermarkets and department stores.
Localism. Readers will always want to know about the schools, government, businesses, taxes, entertainment and teams closest to home. No news organization is better equipped or staffed to supply this information than a newspaper.
The best customers. Newspapers typically beat their direct competition in both the quantity of customers (i.e., readers) and their quality (i.e., demographics). Even with declining circulation, this advantage remains relatively stable. As traditional newspaper advertisers--airlines, retailers, banks, auto dealers, etc.--undergo their own transformation, newspaper advertising remains one of the most efficient ways to reach relatively large numbers of educated, affluent people. Young people may not read the newspaper much, but in strictly business terms, this is somewhat irrelevant. Advertisers already know this. They buy newspaper space to sell goods and services aimed at an older, more moneyed crowd.
Lots of attention. Newspapers no longer play the central role in people's daily lives they once did, but they are far from irrelevant. Some 42 percent of adults surveyed by the Pew researchers in 2004 reported that they had read a newspaper "yesterday" (a figure that rose slightly over 2002). With the exception of local TV news, no other news source reaches so many people on a given day.
Brand-name recognition. Newspapers big and small have spent millions of dollars over the years reminding people what they do. This has created a vast but hard-to-measure reservoir of goodwill for newspapers and represents a major strategic advantage over, say, the latest shopper startup or flashy Web site. It partly explains why, even today, no one has been able to create a local news site that outdraws the newspaper's own on the Internet (and Microsoft and America Online have tried).
Historic profitability. Thanks to all of the above, newspaper companies enjoy profit margins unmatched not just by most other news media but by most other industries. Industrywide, newspapers reaped about 23 cents of profit for every dollar they took in last year, according to Merrill Lynch analyst Lauren Rich Fine. Newspaper revenues and profits are rising even as readers are deserting. This could be because newspapers are raising prices while skimping on long-term investment in their plants and people--harvesting the assets," in business speak.
Of course, the newspaper industry's high profitability cuts both ways, as many newsroom managers know. The need to maintain those margins to satisfy the short-term demands of stockholders and Wall Street analysts compels some companies to cut back on hiring, newsgathering and the size of the newshole. This can create its own vicious cycle: As the amount of news shrinks thanks to the pursuit of higher profits, readers despair and depart, thereby undermining the basis for higher profits.
Washington Post Associate Editor Robert G. Kaiser, the coauthor (with Post Executive Editor Leonard Downie Jr.) of "The News About the News: American Journalism in Peril," calls the huge profit margins enjoyed by newspapers both arbitrary and pernicious. Once newspapers began regularly achieving these profit levels in the early 1980s, Kaiser says, many publishers became unwilling to settle for anything less and began shortchanging their newsrooms in the drive to achieve them.
"The question we need to ask is, 'What's an appropriate profit for a newspaper?'" says Kaiser. "If you went to a newspaper publishers' meeting in 1975 and told them their papers could make 15 percent profits, they would have been overjoyed. Now, the standard is 20 percent, 30 percent. Why? Because it's possible, for no other reason."
But the thing about obscenely high profits is they're a whole lot better than no profit at all. For newspapers, they can be the seed that provides tomorrow's harvest. Wisely reinvested, today's profits could prevent the day Philip Meyer believes is coming. To be fair, many newspaper companies aren't sitting still. They've beefed up their Web offerings and expanded their Internet "footprint" by buying independent sites (see "Dotcom Bloom," June/July 2005). Dow Jones recently purchased MarketWatch.com, the New York Times nabbed About.com, and the Washington Post Co. bought Slate from Microsoft. Major industry players also are embracing ethnic media (primarily Spanish-language) and niche publications like real-estate shoppers. The hottest single publishing market of the moment may be the battle for young readers (see "Hip--and Happening," April/May 2005). In Dallas, the Morning News started Quick, an easy-to-read freebie. In Chicago, both the Tribune and the Sun-Times have similar papers. The Washington Post launched Express, beating to the punch a new tabloid called the Washington Examiner, which is delivered free to mostly affluent families and is not aimed squarely at the young. Critics can argue about the quality of these papers, but their existence does say something about the prospects for print. The Examiner, for one, is the brainchild of billionaire Philip Anschutz, who has revived the moribund San Francisco Examiner and registered the Examiner trademark in some 70 cities nationwide. While the extent of Anschutz's publishing ambitions remain a mystery, his moves raise a larger question: Why does a billionaire think investing in newspapers is a good idea right now? Similarly, executives at fast-growing Lee Enterprises see newspapers as a growth industry (see "Lee Who?," June/July 2005).
Ultimately, some in the industry believe newspapers will have to rethink much of what they do to survive. A recent white paper by the Newspaper Association of America suggested, among other things, publishing smaller editions some days of the week and charging higher subscription fees to offset ad losses. Kaiser says it's a lot simpler than that. The best defense, he says, is a great offense. Put more money back into the newsroom and build up the journalistic firepower--and the community credibility--that many newspapers have been frittering away for years.
He'll get no argument from Phil Meyer on this. The premise of Meyer's most recent book is that high-quality journalism--accurate, clear and in-depth--strongly correlates with, if it doesn't create, market success (see Books, February/March 2005). He worries, however, that even quality may not be enough to save newspapers. Meyer sketches a "tipping point" scenario that would hasten the end--the day when a paper's slide is so prolonged and deep that a critical mass of advertisers concludes it's no longer worth supporting it. Maybe. But the mistake the newspapers-are-dead crowd makes is believing that trend lines continue in the same direction forever. It pays to remember that new communications media rarely eliminate the old ones; the old simply adapt to accommodate the new. So movies didn't eliminate novels and TV didn't eliminate movies or radio.
It could be just as likely, therefore, that the worst case doesn't happen. Maybe newspapers will find stability and equilibrium with a core of loyal, demographically attractive readers. Old habits do die hard. In a world of ever-expanding choice, many people--pressed for time and seeking the trusted and familiar--may just stick with what they already know and respect.
Without doubt, it will take skill, vision and creativity for newspapers to survive. But I'd bet on success sooner than I'd bet on failure. It may be that newspapers are dinosaurs. But then again, dinosaurs walked the earth for millions of years. ###