8/1/08

DISSAPEARANCE OF A FINANCIALLY GOLDEN NEWSPAPER PERIOD

Voices in and around the newspaper industry would have us believe the industry is falling apart and taking its last gaps. Investors are fleeing newspaper companies, publishers are decrying the lack of newspaper advertising growth, debt challenges are plaguing many companies, and there are layoffs and buyouts everywhere.

If one rationally looks at the industry, however, one sees that it is fundamentally sound, but that a unique, financially golden period in its history is ending. It is that change which is creating the bulk of the turmoil in the industry, but the biggest problem is that those working in the industry have short memories about the newspaper business and don't remember it any other way.

The generation leading newspapers and newspaper companies today has only experienced a period in which extraordinary growth of advertising increased newspaper revenue across the nation. That growth, combined with the development of local monopolies, created a period that enriched papers highly. This, of course, created great interest in investors and produced capital that allowed public companies to grow and acquire papers, driving up newspaper prices and the value of newspaper assets.

Today, the conditions that drove the growth of the past 3 decades are ending, wealth is being stripped from the industry, investors are losing interest, and publishers are struggling with negative and low growth.

Things are terrible, right? They are worse than every before, aren’t they?

Those views are only true if one takes a limited historical perspective and conceives the industry as a way to riches, something few newspaper owners did in generations past. With the exception of a few major cities, one could not get rich being a newspaper owner. Publishers nationwide could make a living in newspaper, but much of their reward came from being socially influential in the community. Before the extraordinary profitability of the last quarter of the 20th century, newspapers were relatively unprofitable and breaking even was the primary financial goal of most publishers.

Contemporary developments are taking us back toward that situation, but even with the u-turn in the business, we need to recognize that newspaper revenue today is better than it was in 1950s, 1960s, 1970s, 1980s, and 1990s. In fact, adjusted for inflation, newspapers in 2007 had two and a half times the advertising income that they had in 1950. In terms of employment, there are still twenty percent more journalists working in newspapers than in the highly profitable years that fueled the growth of corporate newspapering.

Those working in the newspaper industry need to be realistic and understand what the effects of contemporary changes mean. They don’t mean disaster, but they mean changes in the business of newspapers, the way the industry has operated for the past three decades, and how they need to perceive the industry.

4 comments:

nicolas. said...

Robert,

"their reward came from being socially influential in the community."

Now that a smaller and shrinking share of the community reads newspapers, what could be the motivation for running a news company?

Robert G. Picard said...

The socially, politically, and economically active members of society still pay attention to newspapers so a good deal of influence is still possible. There is less direct influence on the mass audience, however.

For the broader audience, the influence will exist in the online editions and the effects conveyed through opinion leaders who still use print.

Grant said...

Another positive for newspapers (and I'm speaking as a former tv news guy) is that local newspapers generally still have stronger brand identities and deeper journalistic resources than local TV news operations. In the converged world, there is absolutely no reason that the local newspaper Web site shouldn’t become the preferred source for information (not just news) in most cities(if they're smart).

Tony in SLO said...

Dr. Picard's comment of Aug. 1 certainly holds true in the community where I am the business editor. They care a great deal about our content and even our critics among them have shown that they also care about our economic future as well and our ability to continue to provide good journalism.

This is because local TV has demonstrably less experienced journalists and an appeal to a mass audience with thinner journalism and because the a startup Web-based local investigative journalism site has proven to those most influential members of our community that it is not credible.

I liken what newspapers are to the mass media, more specifically the information media, as theater is to the entertainment industry.

Theater once dominated as the easiest, quickest and cheap way to reach a mass audience. But now it's expensive, labor intensive and requires heavy attention to detail. And it now caters to a narrower, more affluent, educated and cultured audience.

Newspapers are headed in that direction. Theater hasn't gone away and neither will newspapers. They just won't be what they are today.