Keeping the Faith
Newspapers are taking a beating, but don’t sound the death knell yet. The work they do will remain unique—and important.
By John Morton
At times in the past, worry about the future of newspapers has loomed large, but never so persistently as now.
John Morton (email@example.com), a former newspaper reporter, is president of a consulting firm that analyzes newspapers and other media properties.
The current concern is driven by the continuing, and apparently accelerating, decline in newspaper circulation. Add to that the rapid growth of the Internet and the uncertainties about its impact on the newspaper business, sluggish advertising revenue and rising newsprint costs.
The stock prices of publicly traded companies serve for many observers as a key indicator of the health of newspapers since these companies publish more than half the national daily circulation. In 2005 the stock prices dropped more than 20 percent on average, following a year of essentially flat performance.
There was even concern last November about whether Knight Ridder would draw bidders when the company was forced by disgruntled institutional shareholders to put itself up for possible sale (see "Sherman's March"). That fear, at least, was allayed by the emergence of several potential bidders, although at this writing the price they are willing to pay — another indicator of newspapers' future — remains unknown.
Further fueling anxiety were announcements of layoffs and buyouts at several of the nation's most distinguished newspapers, affecting in a significant way newsroom staffing (see " "Under Siege"). Undoubtedly there were cutbacks at many smaller, less well-known newspapers that we never heard about.
A frequent theme on blogs and in other discussion venues is that in this era of 24-7 news distribution, newspapers have become obsolete and will soon become irrelevant. It has even been suggested that newspapers will be replaced by citizen journalists creating real-time news and that the news will no longer be subjected to the biases and spin of conventional news organizations.
In light of all this, it is worth bringing forth some facts to consider in pondering the state of newspapers.
First, consider financial performance, from which all else flows. The newspaper business remains highly profitable. The average operating profit for the newspaper operations of
publicly reporting companies in 2004 was more than 20 cents for each dollar taken in — more than twice the operating profit of the Fortune 500 companies. True, newspaper profits slipped through the first nine months of 2005 because of sluggish advertising and rising newsprint costs, but to just a hair below 19 cents on the dollar. (When full 2005 results are in, I expect the average to drop another penny or two.)
Still, newspaper companies are alert to likely future pressures on profitability from rapid changes in consumer behavior, and are acting accordingly. The change is driven by the Internet, of course, but it is not as though newspapers are absent from that arena. Even if in any city in America half or more of the adults never pick up the local newspaper, they are still aware of it. That brand recognition has helped newspaper Web sites to become some of the most popular in the nation. It is common for the local newspaper Web site to have the second-largest audience in the market, after the daily newspaper.
I once thought it foolish for newspapers not to charge for information on a Web site that they charged for in the printed paper, but except for newspapers with special appeal (the Wall Street Journal and the New York Times), that no longer makes sense.
Offering free information draws many users, and that, in turn, draws rapidly growing newspaper Internet advertising — by 30 percent to 40 percent a year. And Internet advertising can be highly profitable because it does not require a printing plant, newsprint, delivery trucks and the other costly requirements for a printed newspaper. One newspaper executive told me that 40 cents of Internet advertising can bring more profit than a dollar of print advertising.
My fear is that as this transformation to the Internet continues, some newspaper executives will treat the Internet profits as found money and not use it to shore up the faltering print newspaper's economic model, for the print model now underwrites the only serious effort to gather mass amounts of news.
Which brings me to the bloggers. Where do they think the news they endlessly opine and rail about comes from? It comes from newspapers, no less for bloggers than for most of the news presented on radio and television. Take that away, and all they'll have left are their opinions. It would be analogous to the Dark Ages before the Enlightenment, when ignorance, witches, demons, dragons and slaughter ruled dysfunctional societies.
One can worry about how well newspapers do their job, and I do in this era of staff cutbacks, bureau closings and the dumbing-down of content. It was once an article of faith with me that all a newspaper needed to do to improve its circulation was to become a better newspaper. Sadly, that no longer seems to be true, since young people increasingly are disinclined to take up reading even good newspapers, although quality might help.
But newspapers will remain necessary because of what they do, and it does not matter whether the news they gather is delivered online or in print or in some other way as yet unimagined.###