I would like to see the US hardcopy newspapers survive, not least because of their importance for local news. Yet every time a San Francisco Chronicle arrives in the morning, it seems to be smaller than the one the day before. So as I watch the hardcopy Chronicle dwindle steadily, it's easy to forsee that one day it will dwindle to nothing.
The news market is not specifically a market for hardcopy news or newspapers in particular, the market is for news. And by embracing more and more of an infotainment model for their products, American newspapers make their product less and less attractive to news consumers. They have both a quality and a market targeting problem in that regard. There is also an ownership problem. It seems pretty obvious to me that Sam Zell's Tribune Company should not have allowed to purchase major newspapers with a deal so heavily structured with debt that they ran a huge risk of winding up in bankruptcy, as they currently are.
In face of their problems, I find it really astonishing that the newspaper industry is looking to a proven failed strategy pioneered by the music business: Start-Up Plans to Make Journalism Pirates Pay Up by Saul Hansell New York Times 07/26/09. With business strategists like this, debt loads are definitely not the industry's only problem.
The recording business went this route for years and let their own business get devastated. The recording industry famous fight with Napster and similar music-sharing services should serve as a paradigm of self-destruction. Record companies by the late 1990s had the technological means to begin selling their products online. And the marketing surveys of the time showed that Napster was actually boosting CD sales. The industry lobbyists pushed stories about college students downloading a bejillion songs but that was very rare, to the extent that the stories were anything but lobbyist fantasies. Most people who downloaded a song went on to buy the CD. The file-sharing services were probably the greatest free advertising the industry ever had.
The sensible route would have been to start selling their songs directly online with software that could do it faster and with better quality than the file-sharing services could. Those services were incredibly slow. Selling the digital versions of the song cut out an enormous amount of distribution, packaging and shipping costs and still leave a healthy profit for the industry. Instead of jumping on the opportunity, they instead tried to make time stand still by fighting the file-sharing services and rending their clothing over copyright protections. Immediately after the industry won a court ruling shutting down Napster, which was by far the most popular of the file-sharing services, CD sales plummeted. I don't know if they ever truly recovered.
Now, of course, digital sales are normal, as are digital promotions. Shakira's current record company Live Nation made the English version of her new song "She-Wolf" available for free several days before the commercial release. The thinking is presumably that people who get the song for free and like it will be more likely to buy the full album in either CD or digital formats. I don't know exactly what share third-party music services like iTunes Amazon.com have of the digital music market, but it's huge. But it seems to me that setting up direct sales, or even some kind of industry consortium, ten years ago would probably have provided the industry higher profit margins than the iTunes or Amazon.com models. But the industry was too focused on spitting into the wind, as the polite version of the saying goes.
The London Financial Times had a tough first half in 2009. But they are still in the black. And their online subscriptions are up, as reported in Earnings: FT Profits Hit By Ad Downturn, Online Subs Up by Robert Andrews Financial Times 07/27/09:
Free and paid subscriptions are still growing, but not by enough to keep Financial Times profits in the same direction. FT Publishing’s January-to-June operating profit crashed 40 percent from last year to £14 million ($23 million), on 13 percent worse revenue of £176 million ($289 million). But at least it’s still in positive territory.Say what? For ten years, FT has been working on a model that built up subscriptions both hardcopy and digital and moved steadily away from dependence on advertising? And because they did so successfully, even the advertising crash they experienced in the current Great Recession didn't put their profits under water? And they don't even have to run Michael Jackson on the front page for weeks to do that?
FT has been weening its revenue mix away from advertising and toward subs and digital since 2000; it’s slimmed advertising’s contribution from 25 percent last year to 18 percent today. Nevertheless, it’s precisely the advertising crash that has hurt it this time, blaming "tough market conditions for financial and corporate advertising, as expected". [my emphasis in italics]
Also, with the Wall Street Journal now owned by Rupert Murdoch and being steadily Murdochized, I would be amazed if the Financial Times doesn't pick up a significant chunk of the Journal's market. The WSJ's editorial pages has been in outer space for decades. But prior to the Murdoch takeover their news articles had an outstanding reputation.
To summarize the variety of business models in use:
AP: Harass bloggers who give your stories lots of free publicity and attract mucho clicks onto the commercial versions; to heck with free advertising!
US newspapers: Try to dial the clock back to 1995; respond to financial pressure by cutting news staffs and lowering quality
Financial Times: recognize reality and develop a hybrid business model using both online and hardcopy channels and keep quality high while competitors in the US decimate their own quality.
Which model looks more promising? Just a thought: adopting a business model that diversifies revenue, builds a core audience and distinguishes your product's higher quality has a appealing sound to it. If you're trying to stay in business, that is.
Tags: establishment press, mainstream media, mainstream press
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