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Dorian Benkoil Dorian Benkoil
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Bob Cauthorn Bob Cauthorn
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Dorian Benkoil senior consultant at Teeming Media. An award-winning journalist and editor, he was a foreign correspondent for AP and Newsweek, and international and managing editor for ABCNews.com. At ABC News he moved to the business side, handling sales integration and business development, before joining Fairchild Publications as General Manager for their Internet division, becoming editorial director for mediabistro.com, then a consultant for Teeming Media in New York. He graduates this year with an MBA from Baruch's Zicklin school of business. Learn more about him at Benkoil.com or his blog - MediaFlect.com.

Robert Cauthorn is a journalist, former vice president of digital media at the San Francisco Chronicle, and was the third recipient of the Newspaper Association of America's prestigious Digital Pioneer Award. He launched one of the first five newspapers web sites in the world and is generally considered to have delivered the first profitable newspaper web site in 1995. Cauthorn has been in the middle of the transition from old media to new and is recognized as frank-talking critic when he believes newspapers stray for their mission. In mid-2004 he became the president of CityTools, LLC a new media startup based in San Francisco.

Ben Compaine has divided his career between the academic world and private business. He was a journalist when manual typewriters were considered state of the art, but also led the conversion of his college newspaper to cold type. He has started and managed weekly newspapers. His dissertation at Temple University in 1977 was about the changing technologies that were going to unsettle the landscape of the staid and low profit newspaper industry. Since then he has focused his research and consulting on examining the forces and trends at work in the information industries. Among his most well-known works (and the name of his blog) is "Who Owns the Media?".

Vin Crosbie has been called "the Practical Futurist" by Folio, the trade journal of the American magazine industry. Editor & Publisher magazine, the trade journal of the American newspaper industry, devoted the Overview chapter of executive research report Digital Delivery of News: A How-to Guide for Publishers to his work. His speech to the National Association of Broadcasters annual conference was one of 24 orations selected by a team of speech professors for publication in the reference book Representative American Speeches 2004-2005. He has keynoted the Seybold Publishing Strategies conference in 2000; co-chaired and co-moderated last year's annual Beyond the Printed Word the digital publishing conference in Vienna; and regularly speaks at most major online news media conferences. He is currently in residence as adjunct professor of visual and interactive communications and senior consultant on executive education in new media at Syracuse University's S.I. Newhouse School of Public Communications, and meanwhile is managing partner of the media consulting firm of Digital Deliverance LLC in Greenwich, Connecticut.
About this blog
Two forces have shattered the news media. Technology is the first. Although media technology is undergoing its greatest change since the day in 1440 when Johannes Gutenberg first inked type, for more than ten years now the news industry has mistaken new technologies merely as electronic ways to distribute otherwise printed or analog products. Estrangement is the second. The news media has lost touch with people's needs and interests during the past 30 years, as demonstrated by rapidly declining readerships of newspapers and audiences of broadcast news. How we rebuild news media appropriate to the 21st Century from the growing rubble of this industry is the subject of this group weblog.
In the Pipeline: Don't miss Derek Lowe's excellent commentary on drug discovery and the pharma industry in general at In the Pipeline

Rebuilding Media

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August 20, 2008

Transforming American Newspapers (Part 1)

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Posted by Vin Crosbie

Ignorance isn't bliss to the dying. Witness the pathos of American daily newspaper companies. Most have finally begun to realize that the deterioration of their businesses isn't cyclical but grave. Yet few, if any, understand why. Almost all grasp for the reasons.

Some attribute their grave condition to advertisers suddenly switching huge portions of spending from print to online - an excuse that ignores more than 30 years of declines in those newspapers' printed editions' circulations and readerships. Some others attribute their deterioration to not having transplanted their content into online quickly enough -an excuse that ignores not only the dozen years they've spent transplanting it but how their online editions are now read even less frequently and less thoroughly than their printed editions.

Most of the print newspaper experts who diagnose these companies' condition still prescribe stale nostrums such as more consumer focus groups, subscription price incentives, more stylish typography, or shorter stories. Meanwhile, most of the experts who diagnose these companies' Web sites prescribe balms and accessories such as giving blogs to reporters, adding video, or having the readers themselves report the stories. American daily newspaper companies have long been too financially impatient to submit themselves to anything but ostensibly quick cures and they've even longer been too conceptually myopic to perceive the real reasons for their declines.

I'll declare the real reasons. There are but two and neither has anything to do with multimedia, 'convergence', blogs, 'Web 2.0', 'citizen journalism,' or any ancillary topics you may have heard presented at New Media conferences this millennium.

Nor is either of the real reasons advertisers' abandonment of printed newspapers. Their abandonment is a symptom, not the reason for the decline. Contrary to myopia of many newspaper executives, advertisers aren't newspapers' primary customers. Although advertising revenues may be sunshine for newspaper executives, the roots of their business are readers. A newspaper with readers will attract advertisers but a newspaper without readers will not. Readers ultimately support and sustain the newspaper business.

To understand the real reasons why the American daily newspaper industry is dying, first understand why more and more Americans are no longer reading daily papers and how their abandonment of newspapers has been wrought by changes in their own media economics. Also comprehend why the epicenter of the newspaper industry's problems in post-Industrial countries is America and exactly how grave the situation is there.

The Fate of American Daily Newspapers

More than half of the 1,439 daily newspapers in the United States won't exist in print, e-paper, or Web site formats by the end of next decade. They will go out of business. The few national dailies -- namely USA Today, The New York Times, and The Wall Street Journal -- will have diminished but continuing existences via the Web and e-paper, but not in print. The first dailies to expire will be the regional dailies, which have already begun to implode. Those plus a very many smaller dailies, most of whose circulations are steadily evaporating, will decline to levels at which they will no longer be economically viable to publish daily. Further layoffs of staffs by those newspapers' companies cannot avoid this fate - not so long as daily circulations and readerships continually and increasingly decline. (Layoffs are becoming little more than the remedy of bleeding that was used in attempts to cure ill patients during the 18th Century and cannot restore the industry's health.)

'Hyperlocal' news startup companies, whose services will be delivered not on newsprint but online, might replace many small dailies, but not most, and certainly not before the printed products' demise. The deaths of large numbers of daily newspapers in the U.S. won't cause a new Dark Age but will certainly cause a 'Gray Age' for American journalism during the next decade. Much local and regional news won't see the light of publication. (America alone won't suffer this calamity. Many other post-Industrial countries' newspaper industries will suffer or, at best, skirt a version of this disaster.)

Is the Situation Really That Bad?

Last year, the most authoritative newsletter covering the American newspaper industry intentionally went out of business. The Morton-Groves Newspaper Newsletter, in a front page editorial entitled 'Passing the Inflection Point,' co-publisher Miles Grove, the former chief economist of the Newspaper Association of America, politely stated:

"The market momentum guiding the future of newspapers is especially brutal in the larger markets. Many have already passed the point of opportunity as it is too late for newspapers that have not successfully adopted marketing practices needed to support the core product and integrate with alternative distribution channels ...For those who have not made the transition, technology and market factors may be too strong to enable success."


Last month, Goldman Sachs equity analyst Peter Appert put it more bluntly in a Reuters in a story about the dwindling number of equity analysts who still covering the deterioration of this $40 billion industry:

"If I covered only the newspaper industry, first of all I would have been fired a long time ago; secondly, I would have had to kill myself."

Among the largest American newspaper companies, the losses of equity have been titanic. On the August day in when I write this, stock in the Journal Register Company is trading for less than four pennies per share, down from $3.25 a year ago, a loss of 99 percent. Any of the buildings housing any of its 22 daily newspapers is worth more than the company's current stock market capitalization (currently $1.4 million). Journal Register reports that it has $77 million in assets, $719 million in liabilities, and lost $102 million last year. Standard & Poor's, which downgraded its rating of Journal Register's stock to junk, has now withdrawn any rating of it. Meanwhile, stock in Gatehouse Media, which publishes 97 dailies, is trading at 57 pennies per share, down from $22.00 two years ago, a 97 percent loss. That company faces delisting by the New York Stock Exchange and the equity research firm Morningstar this week declared its stock to be essentially worthless, valuing the fair price as zero.

Meanwhile, stock in the McClatchy Company, which publishers 30 dailies, has dropped from $74.30 three years ago to $3.78, a 95 percent loss. Stock in Lee Enterprises, which publishes 51 dailies, has dropped from $48.57 to $3.83, a 92 percent loss during the past four years. Media General, which publishes 25 dailies, has seen its stock price drop 83 percent in the past four years. Stock of The New York Times Company, which publishes 17 dailies, has dropped 75 percent during the past six years, from $51.50 to $12.98. Stock in Gannett Company, which publishes 85 dailies, has dropped 65 percent, from $90.14 to $17.40, during the past four years. Despite these results, Morningstar still calls newspapers, "the market's most overvalued stocks," according to the newspaper industry trade journal, Editor & Publisher.

The American newspaper industry's losses of advertising revenues have been so well reported elsewhere that I see no need to outline those here. Likewise the industry's losses of weekday and Sunday circulations, except that the industry maintains the façade that its overall circulation losses during the past three decades have been relatively minor. Weekday overall circulation was 62 million in 1970, dropped to 55.8 million at the turn of the century, and is approximately 53 million today. An overall loss of 9 million or 14.5% isn't paltry but doesn't seem that bad in the span of 38 years.

However, those absolute numbers fail to account for population growth during that time. The American population was 203 million in 1970 and 304 million today. Had the American daily newspaper industry at least kept pace with population growth, its weekday circulation should be 93 million today, not 53 million. The industry's weekday penetration proportionate to population dropped from 30.5 percent 1970s to 17.4 percent to today, a relative decline of 43 percent.

To combat news of these declines, the industry has stretching its yardstick of readership plus begun conflating daily print circulation and monthly online usage. Its readership estimates vary from 2.3 people to 2.5 people per printed copy, numbers which, if true, would also mean that the majority of people who read a daily newspaper don't themselves purchase it. More likely, the industry is stretching readership to mean the number of people who might live in a household where at least one person happened to buy or subscribe to a newspaper. But the other 1.3 to 1.5 people haven't necessarily read it.

An independent survey released this month by the Pew Research Center for the People & the Press reported that 46 percent of Americans a newspaper 'regularly', down from 52 percent two years ago and as high as of 71 percent in 1992. Moreover, only 34 percent say they read a newspaper 'yesterday', down from 40 percent two years ago.

Meanwhile, the industry has begun combining its Web sites' total number of monthly users and its printed editions' daily circulation totals - even though the average monthly unique user of the average American daily newspaper Web site use the site on only four to seven days per month. The resulting muddle of daily and monthly vastly overstates the number of people who use a newspaper daily, whether in print or online.

Despite those financial, advertising, circulation, and readership declines, an article of faith among newspaper companies has become that the cure lay online. The most widely prescribed remedies are multimedia (also called 'convergence') and interactivity (mainly in forms of 'Web 2.0' and 'citizen journalism'). The companies hope that adding those attributes to what their newspapers have always done will reverse their industry's fate.

Yet adding multimedia, convergence, interactivity, Web 2.0, and 'citizen journalism' to what their newspapers have always done aren't cures but merely balms and accessories. No matter how well intentioned those New Media prescriptions are, no matter how much more animated or responsive multimedia and interactivity can make daily newspapers, adding those will prove to be little more than analgesics.

The absences of multimedia or interactivity aren't why the circulations and readerships of American daily newspapers have been declining in relation to both population and households for more than three decades. Half of American newspapers' declines in weekday circulation and readership relative to population occurred before the Internet opened to the public in late 1991, prior to popular awareness of interactivity or multimedia. Although Americans nowadays expect all media to have multimedia and interactive attributes, the absence of those attributes clearly aren't the major causes of the deterioration of the newspaper industry nor will adding those reverse those declines.

So, what are the two reasons why the American daily newspaper industry's is dying?

The major one is simply that American newspaper companies have violated a specific part of the Principle of Supply & Demand when consumers' supply of news and information radically changed in the past 15 years. (I'll describe which specific part of the Principle in Part II of this essay). The other and more reasons why American newspapers are dying is because how far too many of them have deviated from their local roots (the subject of Part 3 of this essay).

The major reason alone is a mortal wound for the industry, but the minor reason exacerbated it due to a corollary effect of newspapers' violation of a Principle of Supply & Demand.

On Friday Sunday In the next part of this essay, I'll explain the major reason. I'll explain the minor reason in an essay early next week. And later next week I'll outline what the American daily industry might have done to avoid its demise.

Comments (4) + TrackBacks (0) | Category: Convergence | Internet | Newspapers | Revenue models | Strategy


COMMENTS

1. Mike Lyons on August 21, 2008 9:35 AM writes...

I'm confused. Buzzwords aside ... is it the Internet or not?

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2. Wasted 3 min of my life on August 24, 2008 8:05 PM writes...

"violated the Principle of Supply & Demand" - wow, how could have those media executives not realize this obvious fact?

Permalink to Comment

3. Concernedcitizen on August 26, 2008 12:13 AM writes...

Where's a good editor when ya need one...

Permalink to Comment

4. Educated on March 18, 2009 10:12 PM writes...

You should consider hiring an editor to review your pieces before posting them as coherent arguments. This article is exactly the reason we need newspapers - to promote professionalism in journalism.

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