- Denial and isolation – The “This won’t happen to me! I don’t really have to worry” stage.
- Anger – The “Why me?” How dare you do this to me!” stage.
- Bargaining – The “Maybe I can evade this fate by co-opting or sidestepping it ” stage.
- Depression – The “It’s really happening and I can’t stop it” stage.
- Acceptance – The “Let it happen; I don’t want to struggle anymore” stage.
The news industry is dying. In which of Kübleresque stages is this industry. There have been some major changes this year.
But first, do I exaggerate the patient’s condition? I don’t think so. Nor do others. Furthermore, when I state that the news industry is dying, no, I don’t want it to die. I am just stating the condition of the industry. There will always be a need for journalism, but the question is whether there will be an industry in which journalists can work.
Let’s examine the patient. Its vital signs have been fading for decades. Circulations and readership of newspapers and news magazines has been evaporating. Listenership and viewership of broadcast news programs have likewise been are dissipating. These declines had been slow, about half a percent annually, but in the past few years have accelerated to a few percentages annually. The industry’s heart still beats, and some industry leaders still to profess its vigor, but now even its core vital signs its revenues (adjusted for inflation) and its profit margins the pulse and blood pressure of the industry, have begun to wane.
Many industry executives claim that a transplant into the new-media will save the patient. However, an examination of data shows that their online editions are read by fewer people and less often and less frequently than the dying print or broadcast editions. Moreover, ten years into these efforts, the online editions are earning only one-twentieth to one-hundredth per user what the dying print edition earns per reader.
The news industry is in critical condition everywhere except countries that only now are forming their economic middle classes such as China and India; places only now rising to the levels North America and Western Europe reached 90 years ago (during the heyday of newspapers). The patient is dying everywhere else. The industry needs a radical course correction.
The eldest form of mass media will likely be the first to kick the bucket. ‘Who Killed the Newspaper?‘ asked the cover of The Economist weekly news magazine on August 24th. , In a post-mortem a priori to newspapers’ death, the magazine (which in a quaint British tradition styles itself a newspaper) The Economist cover story began with an editorial stating:
Newspapers have not yet started to shut down in large numbers, but it is only a matter of time. Over the next few decades half the rich world’s general papers may fold.
And later in a 2,900-word special report about the newspaper industry, it noted:
Even the most confident of newspaper bosses now agree that they will survive in the long term only if they can reinvent themselves on the internet and on other new-media platforms such as mobile phones and portable electronic devices. Most have been slow to grasp the changes affecting their industry “remarkably, unaccountably complacent,” as Rupert Murdoch put it in a speech last year–but now they are making a big push to catch up.
Newspapers’ complacency is perhaps not as remarkable as Mr. Murdoch suggested. In many developed countries their owners have for decades enjoyed near monopolies, fat profit margins, and returns on capital above those of other industries. In the past, newspaper companies saw little need to experiment or to change and spent little or nothing on research and development.
As my friend Bob Cauthorn remarked in a speech to the American newspaper industry eight years ago:
“Even the dairy industry spends more on research and development than the newspaper industry does. And milk doesn’t face anything like the new forms of competition that newspapers do.”
For nearly a third of a century, newspapers companies have been gaming their own system. As readership declined a clear signal any other industry would recognize that the product is no longer satisfying its consumers and needs a crucial overhaul the newspaper industry not only held its course but maintain its profit margins (last year averaging 19.2 percent compared to an average 8.3 percent for other U.S. industries) simply by diminishing the product.
It didn’t diminish the frequency of production. It diminished the product itself. It did so by cutting newsroom staff. According to the Newspaper Association of America, the number of people employed in the industry fell by 18 percent between 1990 and 2004. Because original journalism doesn’t lend itself to automation, the plurality if not the majority of those cuts were in newsrooms.
From the 1970s into the mid-1990s, the newspaper industry was able to automate pre-press and pressroom operations as much as possible through automation and computerization, leaving few jobs in those departments that could be cut. So, when staff cuts have since been made during the past ten years, newsrooms were targeted. As the State of the News Media 2006 report put it:
With circulation declining and advertising flat, 2005 brought cuts in newsroom staffing nearly as alarming as those during the newspaper recession of 2001. …
In some cities, the numbers alone tell the story. There are roughly half as many reporters covering metropolitan Philadelphia, for instance, as in 1980. The number of newspaper reporters there has fallen from 500 to 220. The pattern at the suburban papers around the city has been similar, though not as extreme. The local TV stations, with the exception of Fox, have cut back on traditional news coverage. The five AM radio stations that used to cover news have been reduced to two. … As recently as 1990, the Philadelphia Inquirer had 46 reporters covering the city. Today it has 24.
Like the number of red blood cells remaining in a patient, the count of people who actually produce the news is a vital sign. By produce the news, I don’t mean ‘producer’ job titles the print edition desk editors or the staff who shovel that edition’s contents into online but the actual number of reporters on the streets. They are the tap root, the marrow of this industry.
This year has seen an accelerating number of newsroom jobs cuts at major newspapers: The New York Times, The Washington Post, The Wall Street Journal, Chicago Tribune, etc. The Akron Beacon Journal is cutting a quarter of the 161 employees in its newsroom. The Dallas Morning News this weekend cut 111 people 20 percent of its newsroom staff and this wasn’t its first round of layoffs during the past five years. Also this weekend, the Los Angeles Times‘ media reporter wrote that its parent company, which has already cut 20 percent of his newspapers’ overall staff (including newsroom), now wants to cut another 15 percent:
As Times staff writer James Rainey reported this week, “the editorial staff currently numbers about 940. Since 1999, the Times’ photo department has shrunk by about one-third. The graphics and design department has lost more than 40% of its employees. Large daily operations in Ventura County and the San Fernando Valley, scaled back before Tribune’s purchase, have been reduced to just a handful of reporters.
A Bear Stearns newspaper equity analyst last month noted that approximately 2,500 jobs were cut last year and roughly 950 jobs had been cut by past June, compared with 450 in the same period a year ago.
Rather than crucially revamp its products, the newspaper industry has cannibalized itself to keep its profit margins high. As the State of the News Media 2006 report stated boldface:
At many old-media companies, though not all, the decades-long battle at the top between idealists and accountants is now over. The idealists have lost.
How ironic that it’s ultimately been a Pyrrhic victory for the accountants. They slashed jobs to keep the companies’ profit margins high and therefore keep Wall Street happy, but the investors are now realizing all this has been ultimately gaming the system: using job cuts to prop up the profits of failing products. Moreover, the investors have finally realized that what is being cut nowadays isn’t ‘extra weight’ but the skeleton itself of the industry:
Wall Street analysts, typically cheerleaders for budget tightening, were skeptical about this round of newsroom cuts. Peter Appert of Goldman Sachs told Editor & Publisher that the Philadelphia and San Jose downsizings were “dramatic to the point where readers will notice” and circulation and ad losses might follow. Visitors to San Jose who compared the paper today to the paper of a few years ago might be hard pressed not to notice. Consider that the business section of the paper one of the core franchises of the Mercury News five years earlier had a staff of more than 45, editors told the Project. After the latest round of cuts, the number was closer to 25.
Or put another way:
“Financial restructuring is not the answer to what ails the newspaper industry,” said Peter P. Appert, a newspaper industry analyst at Goldman Sachs, which advised Knight Ridder during the sale. “It’s not a panacea that’s going to create value from a shareholder point of view.”
“The real story of the fall and decline of Knight Ridder is not Bruce Sherman [the investor who forced the sale of that company],” said James M. Naughton, once executive editor of the Philadelphia Inquirer, formerly a Knight Ridder paper, and a retired president of the Poynter Institute for Media Studies. “It’s the notion that you can continue whittling and paring and reducing and degrading the quality of your product and not pay any price. Tony [Ridder]’s legacy is that he destroyed a great company.”
I think you’re getting an idea of who killed the newspaper. One of the cannibal chiefs was Mr. Ridder. But what a roller coaster ride he had!
By building Knight Ridder Digital, he avoided the first two stages and jumped directly into the Bargaining stage. The KRD division was the pioneer at shoveling print content online, but that nevertheless didn’t avoid the core problems of that content. Newsprint wasn’t the factor making the Knight Ridder newspaper’s content less popular to the public, so distributing that same content online and using the same business model as in print wasn’t the solution. When his major investors saw through this bargain, Mr. Ridder quickly experienced the Depression and finally Acceptance stages of Kübleresque grief.!
So much for Mr. Ridder. But where are news industry executives among the Kübler-Ross stages?
Since the start of 2005, most ended their long passage through the initial stage, Denial and Isolation (The ‘I don’t have to worry about the future of my industry’ stage). The end of that stage may have been signaled by the Murdoch speech The Economist cited above.
Until the start of that year, most publishers and broadcasters probably believed the continuation of their businesses was certain. The newspaper and news magazine publishers believed that their printed products’ circulation and readership would continue to decline slightly each year but not begin falling off a cliff; that they would be able to transplant online intact the economics of their print business; and that they would not face new, online-only forms of local news competition.
They failed to heed decades of predictions about how the elder generation who regularly read newspapers was rapidly being replaced by new generations that won’t. They also mistook the online economics as that of print and are still miscalculating each online user to be as valuable as each print subscriber they’re losing. And most of them are still oblivious to how declining costs of online technologies are beginning to make competition from dedicated groups of local individuals perhaps citizen journalists but much more likely from the journalists and advertising sales people who are out-of-work economically viable (competition that should become apparent during 2007).
News broadcasters for their part, whether a network hub or local affiliate, thought that they would be able to control distribution of their radio or video programming online, programs and schedules intact, and not face new, online-only news or niche competitors.
Like their print brethren, they failed to anticipate how the declining costs of online technologies are beginning to fracture their control and programming and make competition from individuals or groups of individuals economically viable. They didn’t expect podcasting, YouTube.com, LonelyGirl, and other innovations that are reshaping broadcast. And if the broadcasters are local affiliates, they didn’t expect their network’s direct distribution deals with iTunes, Google, and Yahoo! and others that circumvent them. Though it was forecast long ago, they didn’t expect how suddenly the digital tornado would reshape the broadcast landscape.
The results are that most news industry executives are now in Kübler-Ross’s second and third stages of grief:
- Anger — The ‘Those Internet bastards are stealing our lunch’ stage.
- Bargaining — The ‘I’ll make a deal with them or buy them’ stage.
There have many examples of the Anger this year. To keep this posting from being too long than it already is, I’ll give just my favorite example:
Gavin O’Reilly, the president of the World Association of Newspapers, which is coordinating the campaign, said on Tuesday: “We need search engines, and they do help consumers navigate an increasingly complicated medium, but they’re building [their business] on the back of kleptomania….”
“The search engines are increasingly aiming their strategic efforts at traditional content originators and aggregators like newspaper publishers,” Mr O’Reilly said. “The irony is that these search engines exist, largely, because of the traditional news and content aggregators and profit at their expense….”
“I think newspapers have developed very compelling web portals and news channels but the fact here is that we’re dealing with basic theft,” he said.
(And that campaign may have some legal traction because European Union laws can treat websites as proprietary data bases, quite different than the North American laws as a Belgian court today reminded Google.)
There also have been many examples of the Bargaining stage. Murdoch’s $1.4 billion purchases of MySpace.com, Jamba, etc., is one. The deal among The Wall Street Journal, The New York Times, The Washington Post, Time, and others to provide Google with multi-year archives of content is another.
What’s wrong with these traditional media companies purchasing or doing deals with notable new-media companies? Not much now, but it certainly raises the question of why those media companies didn’t themselves grow such new-media endeavors from scratch during the past dozen years when they had the opportunity?
As Bob Cauthorn said in his 1998 speech:
“Most of you here are from companies named Gannett, Knight Ridder, Cox, Pulitzer, McClatchy, Hearst, Dow Jones, etc. Companies named after people who tried new things, who had new ideas, and who took real risks. So, what have you lately done like that in their name?…”
“Microsoft, AOL, Yahoo!, and other companies want to steal your lunch. It’s natural for you to defend against that. But why aren’t you trying to steal theirs and other companies’ lunches when it comes to information services?
“Why are you fighting just defensive battles? Why aren’t you using new-media technologies to create new opportunities for yourselves, opportunities that didn’t exist in print. That’s what Frank Gannett, Charles Landon Knight, Herbert Ridder, James Cox, Joe Pulitzer, James McClatchy, William Randolph Hearst, or Charles Dow and Edward Jones would have done. They would have used these new technologies to go on the attack; to create entirely new business, new opportunities, and a new media.”
The deals and purchases that traditional media companies are nowadays doing with new-media companies are signs of the formers’ loss of opportunities to have become or run the latter companies.
So, how can the news industry at large avoid the fourth and fifth (the final) stages of Küblereque grief? How can we revive the patient?
I’ll have more postings about that. However, in The Wall Street Journal earlier this month, Alvaro Vargas Llosa, a former Knight Ridder newspaper Op-Ed page editor and now director of The Center on Global Prosperity at The Independent Institute, published a counterpoint to The Economist‘s cover story about the death of newspapers. (For those of you without an online subscription to the WSJ, Mr. Vargas Llosa reproduces his article at his institute’s site). In eleven paragraphs, he sums up the exact position of the news industry’s woes far more succinctly than I can.
What to do?
Like the big needle or the cumbersome surgery, the prescription requires a wracking change of direction for media companies, and that direction is away from the mass medium and into a truly new medium.
And that new direction probably requires new directors, just as a radically new course can require new pilots and navigators. Media analyst Laura Rich Fine of Merrill Lynch told The New York Times that the newspaper industry could benefit from fresh managemat at the top, “an outsider with a healthy respect for journalistm bu who has no times to the way [the newspaper] business has been done.”
But is it too late? The news industry’s reaction to more than 30 years of change to its environment has been ‘active inertia’ – doing the same as always but doing it now online. It’s cannibalizing itself and wasting it’s remaining breaths.