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From AJR,   June 1999  issue

State of The American Newspaper
FEAR.COM   

Newspapers are on the Web because they have to be, but they’re still trying to figure out what to do there.


By Chip Brown
Chip Brown, a former reporter for the Washington Post and contributing editor of Esquire, has written for more than two dozen national magazines. His book “Afterwards, You’re a Genius: Faith, Medicine, and the Metaphysics of Healing” was published in January 1999 by Riverhead Books.     

1. Romancing the Abyss

If you had canvassed the 10th annual Editor & Publisher's Interactive Newspapers Conference last February you would have been hard pressed to find people eager to define themselves as relics of a lost age. Most of the 1,100 journalists who gathered for three days at the Hyatt Regency in downtown Atlanta worked for newspaper companies that were the bastions of what has long been called "Old Media." But these weren't clueless Old Media fogies and Luddite computer-phobes who wouldn't know a monitor refresh rate from a URL. They had cool jobs, jobs not normally associated with the newspaper business. They were site designers, and online producers, and chat room hosts, and directors of New Media-this and Interactive-that. The sort of work, in short, that put them in the vanguard of a frightened industry's attempt to reinvent itself.

And yet there were times in Atlanta when it seemed that even these most digitally sophisticated journalists were fated to spend the rest of their careers tottering on the threshold of a new world, wondering if there was a place in it for them. It was going on five years since they had been swept up (or in some cases blindsided) by the online era. And still the question was, were they nimble enough to survive? Or would they be remembered as the woolly mammoths of the information age, too shaggy, too slow, too complacently wedded to business as usual to do anything but blunder inexorably toward the abyss?

It was this question that accounted for the worried air, the whistling-past-the-graveyard bravado, and even the occasional outbreaks of hand-wringing. You had to feel especially sorry for some of the older journalists in the crowd, the graybeards trying to get up to speed. They had begun their careers when the "web" was the ribbon of newsprint that rushed through the presses. Now the Web was--well, if you had to ask; if you didn't know; if you weren't really at home in that pell-mell, hydra-headed cyberscape of frames, sites, portals, links, search engines, chat rooms, banner ads, HTML, Perl, Cold Fusion, streaming video, e-commerce, day-trading, personalized stock portfolios and underage porn stars; if it had somehow escaped your attention that this virtual frontier, with its unimaginably vast and invisible traffic of ones and zeroes, was gathering new users at the rate of seven people per second and producing new competitors almost as rapidly--well, it was probably too late, you were hopelessly behind. The bromide about time on the Web was no joke: A few months were the practical equivalent of a year; a few years, a virtual eternity.

For three days the graybeards and their junior colleagues attended seminars and speeches and workshops. Dutifully they scribbled notes on pads supplied gratis by RegionOnline.com and tried not to flinch under the barrage of blunt advice and bitter observations:

"Round one is over and America Online has won."

"Newspaper journalists love words too much."

"The Web is about speed, not accuracy."

"Young people, who grow up with interactivity, get as much value getting information from each other as they do from editors and writers."

"You have to stop thinking of yourselves as newspaper people and start thinking of yourselves as 'information utilities.' "

During breaks they milled among the booths in the exhibition hall, listening gamely as baby-faced sales reps rhapsodized "Internet platform solutions" and "local portal functionality." In the eyes of its most evangelical advocates, online technology had spawned not just a new medium but a new culture with its own lingo and metaphors. You surfed, you linked, you drilled down. It had also created new ways of publishing, selling and using information, and it was these last, practical developments that were causing panicked newspaper executives to fear for their franchises.

In a way they were under siege. On one side of the castle were their traditional competitors, the magazines and TV and radio stations, which had also begun to migrate to the Web. Old Media in all forms was feeling pressed to defend its brands in the new medium and stake out a share of the Web's enormous audiences and potential business. These organizations knew what was at stake because they'd all printed or aired stories about how the current total of 62 million North American users was expected to grow to 150 million by the year 2002, and how by the year 2006 some 90 percent of Americans would be surfing and linking and drilling down. A huge new audience lay at the far end of their servers. The New York Times alone had discovered that half the 3 million registered users of its Web site had never bought a copy of the paper. And a survey by the Pew Research Center found that the percentage of Americans getting news online at least once a week had tripled from 1996 to 1998 to over 36 million; in the lush demographic category of under-30 college graduates, 47 percent were reading news online. And then there was electronic commerce, growing at a rate exceeding 200 percent a year. And online advertising revenues, which, while they represented less than one half of 1 percent of the U.S. ad budget, had nonetheless grown in a few years from virtually nothing to more than a billion dollars by February 1999.

And on the other side of the castle there was a freaky Star Wars horde of alien new rivals, companies that had grown up in the medium and were doing a lot better in it, as if possessed of some innate advantage, the head start of being "Web-centric" where newspapers were merely "Web-enabled." (Or disabled, as the case may be.) The superstars among these new organizations owned the lion's share of the ad revenues and user traffic: There were portal sites such as Yahoo! and Lycos, which were known as "content aggregators" and were threatening newspapers because they provided access to Associated Press and Reuters and Bloomberg wire service news, and they ran classified ads too. There was the software giant Microsoft, which was molting into an information services company, having created the Microsoft Network, Sidewalk city guides and a high-profile Webzine, Slate. The company @Home had partnered with the portal Excite, and had contracts with cable television companies that promised blazingly fast, always-on connections to the Web. America Online had cleverly blended Web content into its proprietary, subscription-based online service and had emerged as one of the traffic kingpins of everything from e-commerce to New Media. Even the entertainment conglomerate Disney had forged an alliance with the portal Infoseek and cobbled together the Go Network, which featured ESPN's popular sports coverage. Hundreds of other sites threatened to usurp the social and commercial niches newspapers had traditionally occupied. They ranged from e-commerce giant Amazon.com and virtual auction house eBay to such community sites as theglobe.com and Tripod to specialty classified ad sites devoted to jobs, houses and cars.

The extent to which the newspaper industry was running scared and in the midst of some weird identity crisis was illustrated on Friday afternoon, when the organizers of the Interactive Newspapers Conference thought it would be a good idea to rally any flagging spirits with an inspirational speech. The morning before, business-information tycoon Michael Bloomberg had painted a bleak picture, telling the journalists, "If you mix the ink and chop the trees, you'll probably be put out of business," and furthermore that if they didn't find and publish information people wanted, they could just "forget about it," they were goners. He did concede that "serious people" would always value what journalists did, but it seemed more of a sop to get out of the room before everyone burst into tears.

So on Friday afternoon there was a full house as "anthropologist, journalist, mountaineer, adventurist" Jeff Salz bounded onto the stage like a golden retriever that had been waiting all day for a trip to the park. The lights went down, slides came up, and Dr. Salz launched on his theme, which was "the adventure of change." What he hoped to do, he said, was to pass along some "timeless certainties in uncertain times." Some were simple:

"Leap before you look."

"Aim high."

"Give it all you've got."

"Work some magic."

"Enjoy the view."

Some were more complex:

"People don't care how much you know until they know how much you care."

"If you always do what you always did, you'll always get what you always got."

Were things so bad that 1,100 men and women who worked in the daily rush of novelty and ought to be priding themselves for their part in writing the "first rough draft of history" needed a pep talk on the adventure of change? Wasn't the adventure of change their reason for being? And yet they sat there without so much as a rolled eye or an ironic "Hallelujah!" No one told the adventurist to go sit on a piton even when he repeated that bit about them being "information utilities," not newspaper people. What restraint! What civility! Were anxieties so high that any Pied Piper was welcome who promised to turn the prospect of oblivion into the Adventure of Change? Perhaps people would soon be bolting from their seats to shout "When the going gets tough, information utilities get going!" The real question was what they would do after the fog of platitudes had lifted. Had they truly missed their chance? Had the future come and gone already and now they were all just marking time, romancing the abyss?

2. Vanity and Panic

In some sense the story of newspapers in the online era is a business story first and a story of journalism and cultural evolution second. It has so far been dominated by business themes, the nuts and bolts of margins, revenue streams, investment strategies, barriers to entry, technology headaches, accounting questions, e-commerce and the still unclear issue of what's the best path to a profitable future. Is it to follow the tight, pay-as-you-go heading of the Thomson chain, whose shoestring online-newspaper operations netted a profit of $3 million last year? Or is it to take the loss-leading tack of the San Jose-based Knight Ridder chain, or Tribune Co. in Chicago, both of which are investing tens of millions of dollars in a sort of Field of Dreams strategy? Or is the wisest course the one followed by Gannett, the country's largest chain, which has severely reined in its online operations, and in some cases, such as at the Rockford Register Star in Illinois, canceled the online news part of a paper altogether?

Gannett's notable exception, its major New Media extravagance, is the online version of its flagship USA Today, a paper which may have finally demonstrated that even newspapers can undergo sex-change operations. USA Today is the Renee Richards of media properties. After years living a false life in a heavily subsidized, pulp-based body, and being criticized as the McDonald's of newspapers for conducting cutesy-wutesy but proto-interactive Q&A opinion polls, and running squibby Web-like stories before the Web even existed, the spirit of the paper has finally been liberated and found its true home in the twinkling palette of USA Today.com. It's one of the most popular news sites on the Web, and the company says it has been making a profit since September. The hand-held version that comes off the presses seems more and more what it always was--a Web-site printout.

That's one paper, one company. Every media company has a different approach. In its latest annual report, Times Mirror, which publishes the Los Angeles Times among other estimable titles, timidly says that the company wants to wait and "figure out where the new medium is going." But then the company also boldly dumped $25 million into Web sites last year. Depending on who's talking, that's either too much or not nearly enough; either clueless extravagance or foolish penny-pinching. All these business decisions and opinions reflect a social context. It's important to remember that Old and New Media rivalries are shaped by cultural conflicts and aesthetic differences and generational tensions. Not long after my trip to Atlanta I received a promotional copy of Min's New Media Report, which contained this item in a column called the Roving Eye:

"The puckish Eyeball thinks that E&P should rename its Interactive Newspapers Conference the Deathmarch of the Grey Bears. After repeated warnings from speakers that the Web will feast on their reticence to reimagine print news operations and embrace the new medium, crowds of fortysomething, white (but graying) male defenders of 'journalistic integrity' desperately latched onto Michael Bloomberg's fleeting reassurance that 'serious people' always will read newspapers. Sure, Mike...both of them."

What a buncha cards, those New Media kids! Or maybe they're just exasperated because the gray bears won't get out of the way. Pundits have been predicting the death of newspapers for more than 100 years. In 1880, the assassin was supposed to be photography. In the 1920s, newspapers were going to be destroyed by radio; in the 1950s, TV was going to destroy newspapers and radio. In the 1990s the Web was going to destroy...well, you get the idea, and it is a misleading one because the main theme of media history is not extirpation of one form by another, but mutal accommodation among forms. Old Media has shown a remarkable resilience. As Roger Fidler, one of the pioneers of electronic distribution, observes in his book "Mediamorphosis," even parchment scrolls, the preferred medium for 5,000 years, are still used in some tradition-conscious religions.

So it's a safe bet the $54 billion newspaper business is not about to sink into oblivion tomorrow. By some measures the industry is the healthiest it's been in more than a generation. Ad revenue was up 6.3 percent in 1998. Circulation numbers have stabilized after two decades of steady decline: Yes, the numbers were down last year in seven of the top 10 markets, but they were up in 19 of the top 30, and the bottom line, according to the Newspaper Association of America, is that "newspapers are still among the most profitable media companies."

Profitable, it should be noted, despite their infatuation with the Web.

In 1994 there were 20 newspapers online; today there are 4,925 worldwide, 2,799 of them in the United States. There's no ready figure for the investment such growth represents, but it's clearly in the hundreds of millions of dollars. "The U.S. Internet daily newspaper market has grown rapidly from a scant $21 million in 1996 to $203.7 million by the end of 1998," according to a Dataquest report by analyst Peggy O'Neill. With costs so high (newspaper sites were estimated to have lost more than $80 million last year), returns still meager and success so uncertain--more than 100 online newspapers have already died in their cribs--some critics are starting to argue that newspapers have not been too reluctant to embrace the Web, but too eager. The reasoning goes that it's not their Old Media pasts newspaper people can't escape, but their penchant for pipe-dreaming about a New Media future.

The spirit of spendthrift techno-romanticism goes back at least to the 1970s, when many papers were seduced into ill-advised ventures in audio- and videotex services. There were deals with cable TV companies, and by the mid-1980s many newspapers were hoping to cash in delivering their product by fax. That none of these gambits really caught the public's imagination didn't stop newspapers from piling into cyberspace. So why are they suddenly so eager to give away the content they used to charge for?

"Can you say fad?" asked University of Illinois journalism professor Eric Meyer.

Fad? For a phenomenon that encompasses more than 4,900 online newspapers?

"Maybe now that there's so many more newspapers involved, fad isn't fair," he conceded, "but what would you call it if you have all these intelligent people and they don't know why they're doing something other than because everybody else is doing it, and every day they're saying to themselves, 'If I don't do it, I'll get left behind!' And the venture is still just as shaky in terms of rewards because virtually no one is making money."

I had telephoned Meyer because for nearly 20 years he has been tracking the online fortunes of newspapers and has been making a census of the population, posting updates on AJR NewsLink, the Web site he operates with American Journalism Review. Lately he has emerged as one of the leading voices of the counterrevolution, wondering about the risks of the online gamble and questioning the claims of newspaper companies that say their Web sites are in the black. Last year there were notable declarations of online profitability from the New York Times and USA Today; recent surveys have reported that 24 percent of all newspaper Web sites are earning more money than they spend. But in Meyer's view most of these operations aren't taking into account the hidden subsidies, and the longer he looks at the great experiment the more he wonders how rational it is.

"Some newspapers like the Minneapolis Star-Tribune are making money doing design work. Morris Communications makes money hosting sites for churches and banks in Topeka, Kansas. Some papers have become Internet service providers. But I have yet to see any news sites that claim a profit being billed for the actual cost of putting out the newspaper. They're not paying for desks or supplies. They're not paying 20 percent of the city hall reporter's salary. And they're certainly not going to turn a profit on banner ads. Banner ad rates have collapsed. They started out at between $35 and $50 per thousand impressions, and now they're around $5, and some of the major national sites are getting around $2 per thousand hits. Subscription sales are the biggest bust of all. Nearly every newspaper that has tried to charge for content--the San Jose Mercury News, the Colorado Springs Gazette, the Hays Daily News in Hays, Kansas--has stopped. The only ones I know are the Wall Street Journal and the Champagne News Gazette in Illinois, which charges $4.50 a month just to read the sports pages. They have some columnist and everybody who went to school at Illinois and followed sports likes to keep up with him."

For these reasons Meyer said he was beginning to think maybe Gannett's conservative approach made a lot of sense. As a whole, the industry was growing out of its "Gee Whiz" period and into what Meyer called the "How Are We Going to Pay for This?"

"I would never argue that newspapers should do nothing," he said, "but the future is very murky and I would argue that they should make only a small bet, just to cover themselves. I said last year that it was going to be last year and it wasn't, but I still think there's going to be a major player that is going to cut way back--someone like Knight Ridder or the Chicago Tribune, which has lost close to $100 million."

Happy as they might be about it, the bounty of free news online has confused even some readers. The columnist Kurt Andersen, noting that he used to cough up $15 to $20 a week for the Washington Post and the three big New York papers--the Times, Post and Daily News--wondered why their publishers were suddenly willing to comp him on the Web. "They justify the practice vaguely as brand protection and R&D," he wrote in The New Yorker, "but the reasons look more like confused mixtures of vanity and panic."

The power of vanity should never be underestimated, but over the last couple of years it is panic that has been the driving force. Simply put, newspapers are spending money to keep from losing their classified ad base. Classifieds are the newspaper industry's lifeline, a $15 billion to $18 billion business. They can account for anywhere from 25 to 50 percent of a given paper's ad revenue. A publisher's vanity might be piqued at the idea of Microsoft or Yahoo! or America Online edging into the news business, but the prospect of companies cutting into his base of classified ads arouses nothing but mortal terror. And to make matters worse, the Web in many ways is a much better medium for classifieds than newspapers.

The interactive functions of the Web enable users to move expeditiously through massive databases in ways not possible in a pulp-based medium. Why plow through all the ads for Buicks and Oldsmobiles if what you want is just a red Honda no more than five years old with less than 60,000 miles? Plug in the variables, hit "search" and presto! Classified ad sites such as Autobytel.com and Monster.com were springing up on the Web; they offered faster and handier ways of posting and looking for anything you wanted--jobs, cars, apartments, houses, land in Florida, saxophones and every thingamajig in grandmother's trunk. Even more excruciating for newspapers, the ads were often free. The current projections are that in the next five years classified sites will capture as much as one-third of newspaper classified ad revenues, a loss of upwards of $6 billion.

"The classified ad stream is a goner in the coming years," said New York Times Electronic Media Co. President Martin Nisenholtz, speaking late last year in an online dialogue sponsored by the Webzine Feed. "That means taking the Internet seriously rather than treating it as a distribution channel." Or as Washington Post Publisher Don Graham once famously said, explaining the decision to put his paper online: "There are three reasons--classifieds, classifieds, classifieds."

The newspaper classified ad crisis is a classic variation on the leitmotif known as "disintermediation." Disintermediation is the Department of Media Studies word for the Web's potential to eliminate middlemen and directly connect producers or vendors with consumers. The prospect of being disintermediated looms over dozens of businesses. Why cut in Sotheby's if you can auction stuff on eBay or UBid? Why fork out fat commissions to a broker at Merrill Lynch when you can trade the same lot of stock at eTrade for 15 bucks? Or shop retail when the same book is 40 percent less on Amazon.com? Why bother with mortgage brokers and car dealers and drugstores and travel agents? And why--cue extinction scenario--pick up a paper for its classifieds?

The industry has made some large if belated moves to meet the classified crisis. In December 1997, a consortium of newspaper companies including Tribune Co., Times Mirror and the Washington Post Co., launched Classified Ventures, a family of Web sites that now includes searchable listings for apartments, jobs and cars. Cars.com was backed by Gannett, Knight Ridder and the New York Times, but it was one of the last sites to arrive in an already crowded field.

The biggest push has been to stanch the hemorrhage in the employment portion of the classified market, which the NAA estimated in 1997 accounted for $12 billion, or 70 percent or more of the entire classified market. CareerPath.com, a network of newspaper job listing pages begun in 1995 by the Washington Post, San Jose Mercury News, L.A. Times, New York Times, Chicago Tribune and Boston Globe (with additional investments from Gannett, Hearst and Cox) now has 83 newspaper affiliates and boasts that it is "the largest and most current database" of jobs on the Web, with more than 322,000 listings and, as of January, 8.35 million job searches per month. But the company is up against formidable competitors. Monster.com, owned by direct-marketing and yellow-page advertising company TMP Worldwide, saw a huge spike in its traffic after a hilarious Super Bowl advertising campaign that featured kids staring into the camera with deadpan expressions and confessing the ultra-modest prospects they faced without the help of a job search site like Monster.com: "When I grow up I want to be a yes-man." "I want to be forced into early retirement." "I want to claw my way up to middle management."

Where panic has been checked, there is nevertheless a lot of anxiety among newspapers that they aren't gaining the audience they need, or competing well enough, or that their position is fundamentally untenable. "I think we're in a totally critical stage," said Larry Pryor, the former editor of the L.A. Times Web site who now runs the Online Journalism Review at the University of Southern California. "What's driving online journalism at the moment is e-commerce; that's more important than content. If publishers get too far into e-commerce retailing, they're going to tick off their retail advertisers. But if they continue to lag behind, defending their classifieds and deferring to retail advertisers and not getting into e-commerce, they're going to lose their financial base."

Among the stark statistics discussed in Atlanta, none was more sobering than the site usage measurements developed by Media Metrix, the Nielsens of the Web. Media Metrix figures showed that in major metropolitan areas, newspapers were getting trounced in their backyards. No newspaper Web site cracked the top 10 in its local market except the Washington Post, which was eighth.

But dwelling only on the business questions you'll miss the bigger picture. If newspapers lack some crucial understanding of the Web, of how it works not just technically but psychically, it may be because they don't really want to understand the Web. "Most traditional news organizations are hostile to new media," Pryor wrote in a recent issue of the Online Journalism Review. "Editorial pages and even news reports use every opportunity to attack the Internet as being synonymous with confusion, clutter, gossip and sensationalism. A shaky study on a link between depression and Web usage gets page one treatment. Pornography, hackers and all forms of cyber-crime receive prominent but often superficial and inaccurate coverage. Matt Drudge gets elevated to Net Whipping Boy." As Roger Fidler, a longtime critic of news media myopia, put it: "People don't seem to grasp that we are in the midst of a tremendous transformation in communications. It's as historically significant as the development of the printing press in the 1400s."

If newspaper executives haven't fully grasped the extent of changes in communication or the opportunity the Web represents, then the story of online newspapering is as much about culture as business. Executives often seem handicapped by an almost mythic fear that their Old Media franchises will be devoured by their dot-com offspring. They forget how much more pleasant it is to be eaten by your own child than by someone else's. Web-centric companies (or Net-native, as they are also called) are at home in the language of interactivity that Web-enabled companies are still stumbling to learn; many have corporate metabolisms that enable them to move more quickly and imaginatively than Old Media organizations.

Take that January 1998 New Yorker column in which Kurt Andersen was bold enough to mock the "nutty" valuation of Yahoo!, then capitalized at $2.7 billion. Mocking Yahoo! and its ilk has become such a regular Old Media sport that the founders of the Motley Fool financial Web site use the volume of negative comment as a contrarian buy indicator for additions to their Rule Breakers portfolio. In May, 15 months after Andersen's column, Yahoo! was worth $33.9 billion. Hey, maybe Yahoo's valuation really is nutty now. But grossly overvalued or not, the stock gave Yahoo! leverage to gobble up Geocities and Broadcast.com, thus creating new reasons for people--onetime stalwarts of the pulp-based world, perhaps--to check out the site.

Disintermediation respects no franchise and is as liable to overrun a social niche as an economic one. Which means that people who work for newspapers, bastions of mediation, confront the prospect that the Web may usurp their role as agenda-setters and news filters. The Web puts a cornucopia of primary sources within everyone's reach, and makes the stuff of which news is made available to anyone, raw and unprocessed, minus the contributions of reporters and editors, minus their judicious evaluation and careful fact-checking, but also minus their "family newspaper" euphemisms, their pack-mentality blind spots and their sometimes patronizing determinations about what is in the "public interest."

"The time when newspapers were the gatekeepers of information is over," said Newsweek columnist and media critic Jonathan Alter. "What newspapers are now becoming is the authenticators of information, the quality control instruments on a huge river of rumor--and for that you have to have reporters. Newspapers will continue to be the primary instruments of newsgathering, but when you have so many sources of information, any one pundit has less influence. Even if there were a Walter Lippmann today, he'd just be another guy with a link to the Drudge Report."


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