AJR  Columns
From AJR,   March 2001

At the Crossroads   

Overly aggressive cutbacks by newspapers during the downturn will hurt them in the long run.

By Rem Rieder
Rem Rieder (rrieder@ajr.umd.edu) is AJR's editor and senior vice president.     



IT SEEMS LIKE only yesterday that dotcoms were hotter than hot. Every time you looked around someone was jumping ship at a newspaper to join a high-flying Web start-up. Salaries were high, workplaces were cool--and then there were those stock options.
Day after day came news of IPOs that were turning ink-stained wage slaves into gazillionaires--on paper, anyway. Besides, all these hip Web savants were smugly pronouncing that online journalism was the future. Newspapers, hopelessly retro behemoths, were about to go the way of the Edsel and the 45.
The obit, of course, turned out to be a little premature. Newspapers are still rumbling along, cranking out hefty profit margins, even in a downturn, that are the envy of virtually every other industry.
Meanwhile, online journalism is in free fall. The red ink flows unabated. For the first time, the online advertising pie is shrinking. Site after site is pruning its roster (see "Downsized Dotcoms"). Some highly regarded venues, like Voter.com, have gone under.
Even the survival of Salon, the most artistically successful independent journalism site, is hardly guaranteed (see "Can Salon Make It?").
The problem is that no one has yet figured out a business model for these things. Paid subscriptions don't work (except for the Wall Street Journal, with its specialized information and expense- account-funded clientele). Charging for content flies in the face of the culture of the Internet, which is all about free.
And online advertising (except for help-wanted) doesn't have much pull; click-through rates are painfully low. Compounding the problem, many of the Web advertisers have been dotcoms, which, if they still exist, are less likely to be pumping dollars into ads in the current money-challenged climate.
What's the answer? It's hard to imagine online journalism going away. The Internet is so pervasive, and the potential for Web newspapers and zines seems enormous. It's just that at this early stage in the medium's development, the blueprint remains elusive.
While print people have every right to be bemused by the rapid shift in conventional wisdom, they would be wise to avoid complacency. Because the industry stands at a very serious crossroads.
For while newspapers remain cash cows, all is not rosy. The circulation slide, the nagging failure to attract young people and minorities, portend big-time trouble down the road. What's more, the slumping economy and the uptick in newsprint prices are putting on the squeeze.
In today's climate, with relentless Wall Street-induced pressure to increase profits, or at least keep them at their very high levels, that tends to mean only one thing: cutbacks. Kathy Wenner wrote in our December issue about the layoffs and buyouts that were starting to crop up at newsrooms, a trend that has continued.
Obviously when costs go up and revenue goes down, that's a good time to be prudent when it comes to spending money. But newspapers have to be careful that they don't get too carried away. This is a time when papers need to do a better job of appealing to readers and potential readers. They have to make themselves essential.
That costs money.
But in crunch time, the instinct is to cut, cut, cut. That certainly was the case during the newspaper recession of the early '90s. But that's a recipe for short-term gain and long-term disaster.
The sky-is-falling reaction to increases in the cost of newsprint is particularly bogus.
Newsprint prices are cyclical. Like day following night, it's entirely predictable that at some point they will go back up. You would think that during periods when they are relatively low, like the fairly lengthy one that recently ended, papers would be factoring eventual hikes into their planning. But each time prices start their ascent, the industry acts as if it has been blindsided by a massive blizzard the meteorological wizards missed entirely.
It will be particularly interesting to see how newspaper companies (and TV networks) treat their Web operations if the slowdown continues or worsens.
Most old-media companies rushed online--often without a clear sense of what they were doing--out of fear (see "Fear.com"). Newspapers, in particular, were terrified that the dotcoms would steal their classified ads. (Remember all of those heady "We'll-eat-your-lunch" boasts from the new-media barons.)
Once the Web sites were up and running, it was relatively painless to maintain them during a boom that seemed like it might last forever. But even a relatively mild reversal triggered instant trimming. If the economy truly heads south, who knows what will be sacrosanct?

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