The Elite Newspaper of the Future   

A smaller, less frequently published version packed with analysis and investigative reporting and aimed at well-educated news junkies that may well be a smart survival strategy for the beleaguered old print product.

The endgame for newspapers is in sight. How their owners and managers choose to apply their dwindling resources will make all the difference in the nature of the ultimate product, its service to democracy and, of course, its survival.

In an article in the December 1995 issue of AJR called "Learning to Love Lower Profits" I predicted the financial turbulence that we are seeing today. The piece urged stakeholders in newspaper companies to accept the inevitability of lower returns and to apply their resources to maintaining their community influence.

A decade later, I marshaled the evidence for that strategy in a book titled "The Vanishing Newspaper: Saving Journalism in the Information Age." The argument was quantitative and complex. Judging by the Google alerts the book's title has accumulated since then, readers took away the wrong message.

This reference from The Economist is typical: "In his book 'The Vanishing Newspaper,' Philip Meyer calculates that the first quarter of 2043 will be the moment when newsprint dies in America as the last exhausted reader tosses aside the last crumpled edition."

That's a clever image, and it is true that extrapolating the recent linear decline in everyday readership would show a zero point in April 2043. But newspaper publishers are not so relentlessly stubborn that we can expect them to continue churning out papers until there is only one reader left. The industry would lose critical mass and collapse long before then.

Moreover, straight-line trends do not continue indefinitely. Nature throws us curves. Even the daily-reader chart showed the barest suggestion of a leveling off in the 1980s before resuming its downward march.

Recently, I took another look at the readership data from the General Social Survey of the National Opinion Research Center at the University of Chicago and tried a different metric. Reasoning that you could still make a pretty good business from an audience reading less than daily, I tracked the percentage of adults who reported reading a newspaper at least once a week. That chart, from 1972 to 2002, shows a much clearer leveling off in the 1980s. Then, at the end of the decade, as though somebody blew a whistle and ordered a column-right march, the line snakes downward again.

Acting on a hunch, I got newsroom census data from the American Society of Newspaper Editors. In 1978, when the census began, daily newspapers had 43,000 news/editorial workers. Their number grew until peaking at 56,900 in 1990, after which an irregular decline set in. That temporary growth in staffing corresponds neatly with the temporary halt in the readership decline of the 1980s. Having more people to put more things in the paper kept more people reading.

After 1990, of course, the effects of the Internet kicked in. When writing "The Vanishing Newspaper," I underestimated the velocity of the Internet effect. It is now clear that it is as disruptive to today's newspapers as Gutenberg's invention of movable type was to the town criers, the journalists of the 15th century.

The town crier's audience was limited to the number of people who could be assembled within the range of an unamplified human voice. Printing changed everything. It made the size of the audience theoretically limitless and, by the creation of multiple records, enabled more reliable preservation of knowledge.

The Internet wrecks the old newspaper business model in two ways. It moves information with zero variable cost, which means it has no barriers to growth, unlike a newspaper, which has to pay for paper, ink and transportation in direct proportion to the number of copies produced.

And the Internet's entry costs are low. Anyone with a computer can become a publisher, as Matt Drudge demonstrated when he broke the Monica Lewinsky story in 1998 and countless bloggers have shown in the decade since. These cost advantages make it feasible to make a business out of highly specialized information, a trend that was under way well before the Internet.

Way back in 1966, sociologist Richard Maisel reported on it at the annual conference of the American Association for Public Opinion Research in Swampscott, Massachusetts. Since World War II, specialized media had been enjoying more growth than general media. It was true across all platforms. Quarterly magazines, with their limited audiences, did better than monthly magazines, which did better than weekly magazines. Community papers grew more than metropolitan papers. The effect was visible even in New York theater. Off-Broadway productions, with their smaller theaters and more specialized content, were growing more than those on Broadway.

Postwar newspapers met the specialization challenge fairly well for a while. A metropolitan newspaper became a mosaic of narrowly targeted content items. Few read the entire paper, but many read the parts that appealed to their specialized interests. I still remember a fellow Navy trainee in 1953, when the Korean War was on. He religiously bought the newspaper every day. Instead of looking for the war news, he worked the crossword puzzle and threw the rest of the paper away. "Crossword puzzles," he said. "That's all newspapers are good for." Newspaper marketing since then has stressed ways to optimize the selection of pieces for that mosaic of such highly specific interests.

Sending everything to everybody was a response to the Industrial Revolution, which rewarded economies of scale. The model became less and less efficient as printing technology improved and made more specialized publications feasible. At the same time, retailing became more specialized, with boutiques squeezing out the big department stores. Specialized advertisers discovered that they could get mailing lists to target their most likely customers with tailored appeals and high-quality printing. Newspapers matched their printing quality with slick-paper inserts, but that did not solve the targeting problem.

Robert Picard, a media economist who looks at newspapers from an international perspective, believes that they try to do too much. He expressed this view in June at the Carnegie-Knight Task Force conference on the Future of Journalism at Harvard University. Newspapers "keep offering an all-you-can-eat buffet of content, and keep diminishing the quality of that content because their budgets are continually thinner," he said. "This is an absurd choice because the audience least interested in news has already abandoned the newspaper."

If they should peel back to some core function, newspapers would still have to worry about the Internet and its unbeatable capacity for narrowcasting. The newspapers that survive will probably do so with some kind of hybrid content: analysis, interpretation and investigative reporting in a print product that appears less than daily, combined with constant updating and reader interaction on the Web.

But the time for launching this strategy is growing short if it has not already passed. The most powerful feature of the Internet is that it encourages low-cost innovation, and anyone can play. I am ashamed to admit that "The Vanishing Newspaper" contains no mention of Craig Newmark. The significance of craigslist is not just that it uses the Internet but that it empowers public-spirited motivation. Newmark is what business school people call a "bad competitor" because he appears more interested in serving society than making money.

He does make money by charging certain kinds of users, but the bulk of his service is free. He is like Henry Ford who, after introducing the Model T, lowered prices, increased wages and concentrated on market share rather than maximizing profit. When challenged by shareholders unhappy that their dividends weren't higher, he replied that they should view his company as "an instrument of service rather than as a machine for making money."

Craigslist and more specialized online classified ad sites could not have appeared at a worse time for newspapers, which were becoming increasingly dependent on classified advertising. In keeping with the broad trend toward specialization, classified ads moved from 18 percent of newspaper advertising revenue in 1950 to 40 percent in 2000.

The lesson to take away from craigslist is that we should be prepared to be surprised yet again. There are other Craig Newmarks out there, waiting for their hour. Some will be on the news-editorial side, figuring out new, better and cheaper ways to do what newspapers have traditionally done. Newspapers can try to beat them to the good ideas, but, as Harvard's Clayton Christensen has noted, the very qualities that made companies succeed can be disabling when applied to disruptive innovation. Successful disruption requires risk taking and fresh thinking.

On the other hand, it is possible to envision a scenario in which newspapers trim down to a specialized product and survive by serving a narrow market well. They are already trimming down. But what are they trimming down to? Have they thought about what's left after all the shrinkage?

One of the rules of thumb for coping with substitute technology is to narrow your focus to the area that is the least vulnerable to substitution. Michael Porter included it in his list of six strategies in his book "Competitive Advantage: Creating and Sustaining Superior Performance." The railroads survived the threat from trucks on Interstate highways and airlines by focusing on the one thing they could still do better: moving bulk cargo across long distances.

What service supplied by newspapers is the least vulnerable?

I still believe that a newspaper's most important product, the product least vulnerable to substitution, is community influence. It gains this influence by being the trusted source for locally produced news, analysis and investigative reporting about public affairs. This influence makes it more attractive to advertisers.

By news, I don't mean stenographic coverage of public meetings, channeling press releases or listing unanalyzed collections of facts. The old hunter-gatherer model of journalism is no longer sufficient. Now that information is so plentiful, we don't need new information so much as help in processing what's already available. Just as the development of modern agriculture led to a demand for varieties of processed food, the information age has created a demand for processed information. We need someone to put it into context, give it theoretical framing and suggest ways to act on it.

The raw material for this processing is evidence-based journalism, something that bloggers are not good at originating.

Not all readers demand such quality, but the educated, opinion-leading, news-junkie core of the audience always will. They will insist on it as a defense against "persuasive communication," the euphemism for advertising, public relations and spin that exploits the confusion of information overload. Readers need and want to be equipped with truth-based defenses.

Newspapers might have a chance if they can meet that need by holding on to the kind of content that gives them their natural community influence. To keep the resources for doing that, they will have to jettison the frivolous items in the content buffet.

The best publishers have always known that trust has economic value. In "The Vanishing Newspaper," I reported that advertising rates increased by $3.25 per Standard Advertising Unit (SAU) for each one percentage point increase in the persons who said they believed what they read in the paper. And papers with higher trust were more successful in resisting the long-term decline in household penetration. Both of these results were based on a limited sample, newspapers in communities tracked by the John S. and James L. Knight Foundation. Since most of them were former Knight Ridder papers, the overall quality was pretty high. A more representative sample would have higher variance in quality and could show a stronger effect.

Won't democracy be endangered if the newspaper audience shrinks down to this hard core? Not at all. As far back as 1940, the sociologist Paul Lazarsfeld discovered that voters get their information from one another as much as from direct consumption of the media. He called this the "two-step flow" from opinion leaders to the general public. The Internet is enhancing that two-step flow, converting it to a many-step flow. The problem is not distributing the information. The problem is maintaining a strong and trusted agency to originate it. Newspapers have that position of trust in the minds of the public.

Another piece of the endgame should be bolstering whatever community papers are part of a newspaper company's strategy. A community paper benefits from a very important kind of specialization. Sadly, as staffs shrink, I don't see that happening.

There is some good news about investigative reporting: Nonprofits are turning out to be an impressive source of support (see "Nonprofit News," February/March). This development is not as radical as it sounds. Even at the peak of their earning power, newspapers relied on federally recognized charities for much of their staff training. My own reporting career at Knight Ridder included examples of charity and government support for investigations into the social issues of the 1960s and 1970s.

Nonprofit-financed investigative operations like ProPublica and the Center for Public Integrity might lead to a demonstration effect for local philanthropists. Mixing profit and nonprofit motivations might be awkward, but ProPublica's cooperation with "60 Minutes" for its maiden effort was an encouraging start. Replicating that kind of teamwork at a local level with local nonprofits and local papers is an intriguing possibility.

But it won't be a worthwhile possibility unless the news-paper endgame concentrates on retaining newspapers' core of trust and responsibility. The mass audience is drifting away, and resources should be focused on the leadership audience. If existing newspapers don't do it, new competitors will enter their markets and do it for them.