Swimming in the Press Pool: Newspapers’ iPod Moment

The collapse of the newspaper bubble, and how we can move forward.

I’m a reporter at a daily metropolitan newspaper. I keep tabs on how politicians spend millions of dollars; I’ve covered world religious leaders. I write stories read by thousands of people. For someone who fell in love with newspapers at age 14, this ought to be a dream job.

But my 14-year-old self knew nothing about plunging profit margins and budget cutbacks. My employer, Tribune Company, recently filed for bankruptcy. And every six months or so, my wife and I wonder whether I’ll survive yet another round of layoffs, while I glumly curse my timing and my choice in career fields.

First there was the Technology Bubble of the early 2000s. Then last year saw the explosion of the Real Estate Bubble, triggering the collapse of seemingly every other financial institution. Meanwhile, my colleagues and I have been witnessing the slow deflation of the Newspaper Bubble.

Not so many years ago, my industry’s ridiculously high profit margins convinced many of this nation’s bigshot financial wizards that owning a newspaper was akin to printing money. Smaller newspapers across the nation were snapped up by publicly-traded corporate hydras (echoes of the Technology Bubble, anyone?), on the assumption that profits would keep on climbing and investors and buyers would make a mint (rather like the homebuyers who helped fuel the Real Estate Bubble).

Then came the Internet, and with it a decade of eroding print readership and profit margins. It doesn’t seem to matter how tightly the corporate honchos apply the budget tourniquets — the financial hemorrhaging continues. A year ago, foul-mouthed maverick real estate guru Sam Zell leveraged a takeover of Tribune, pledging to steer this ship away from the iceberg at last. He never realized that big newspapers, like ocean liners, need an enormous turning radius; here we are in Chapter 11.

So it seems profit-minded investors won’t save newspapers, and neither will corporate bean counters or financial hotshots. We need a new way of doing business.

And there’s a pretty promising example for my industry in this little green hunk of aluminum and silicon that’s piping acoustic guitar music into my ears right now.

I’m sick of hearing the argument — usually from my elders in this business — that we’re in this mess because we started giving our product away for free on the Internet. The logic goes that if we would only start charging for online subscriptions, we’d finally start bringing in money again.

With all due respect, that’s idiotic.

That argument’s first bad assumption is that newspapers, as an industry, ever relied on subscription money for profit. They never have — the real money is (or was) in advertising. In effect, millions of stores and other businesses have bankrolled this industry for decades, in exchange for the chance to parade their wares in front of the people reading newspaper articles. The subscriptions factored in only because higher readership led to higher ad rates, and therefore more profits.

This system used to work great, especially while giant department stores and could afford to funnel millions of dollars into nationwide full-page ads. Meanwhile, consolidation meant most major cities were left with only one daily newspaper, leaving networks of mini-monopolies across the country.

Ad rates kept going up, and because newsrooms are relatively cheap to operate, some newspaper companies were pulling in 20 to 30 percent profit margins. In any other industry, that kind of performance would have inspired backflips of joy; for newspapers, it came to be expected.

Then came the Internet. It should have been a boon, considering how much cheaper it is to reach readers online than through print — a handful of Web designers and an Internet server could replace huge printing presses, forests’ worth of newsprint and staffs of press workers and deliverypeople. Plus, there’s no need for paid subscriptions to indicate how many people are reading the newspaper’s stories: Web software does that easily.

The problem is that online ads sell for a pittance compared to the long-overinflated print ad rates. It didn’t help that Craigslist and others started offering better classified ads for free, and the Real Estate Bubble’s bust made things even worse by eviscerating demand for home listings.

And because the print ads were what subsidized the papers’ newsgathering operation all along, newsrooms across the country are bleeding talent through buyouts and layoffs.

But in most cases, simply charging money for online subscriptions won’t reverse any of this, because of a second bad assumption — which is that our faithful online readers would simply start paying us money out of loyalty. This is ludicrous.

My newspaper’s Web site competes with sites of another newspaper and a local television station, both of which are also free. If we started charging money to access our site, within minutes our online readership would plummet as everyone flocked to the free sites. And our online ad revenues, which are still tied to readership would be even smaller than they are now.

No, we won’t rebuild this bubble by returning to print-era thinking. We need something newer.

Half a decade ago, the music industry found itself in a similar bind. Like the newspaper conglomerates, a handful of record companies had a virtual monopoly on how everyone in America bought music — through the CDs that the companies pressed, printed and distributed.

Then came the Internet. And as broadband proliferated, enterprising and morally flexible computer programmers figured out a way to break the hegemony of overpriced CDs: They would give music away online, for free.

The music industry responded in panic, self-righteously hauling into court a 12-year-old girl and any other illegal file-sharers they could find.

Meanwhile, outside the recording industry, self-annointed technology guru Steve Jobs and his cohorts had a better idea. Clearly, millions of people want to get their music over the Internet cheaply, he reasoned. Let’s find a way to meet that enormous demand while making a profit.

Hence, the iPod. And, more precisely, iTunes. Through creating a new product and marketing the snot out of it, Jobs & Co. convinced America that nothing could be cooler than paying a few cents to get music through the Internet and dowloading it to a hand-held doodad with white earbuds. And today, Apple is a huge player in the music industry, and only about eight bomb-shelter-dwelling Americans don’t yet own an iPod.

That’s what we need for the newspaper industry. We need our own iPod moment.

The parallels are inexact, of course. Unlike newspapers, the music industry was always supported by the purchase of the product itself (i.e., music), rather than ad revenues. But the principle is the same: Millions of people have proved they want to get their newspaper stories through the Internet, so let’s find a way to meet that enormous demand while making a profit.

I wish I had the solution already, because there’d be a lot less fretting in my house about our financial situation. But there are at least a few obvious paths forward.

First, we need to create better online advertisements. At this point, they’re nothing more than a nuisance to readers, so it’s no wonder they don’t command more money. But in print, the newspaper industry managed to convince a generation of readers that the ads were the best reason to buy the Sunday paper. (Remember coupons?) Let’s put that same creative marketing energy into new online ads, which have even more potential than print because they can better match the readership and the articles that the ads accompany.

A new business model might also involve new hardware or other new technology, like the iPod was to iTunes. If the newspaper industry can’t afford that kind of investment, it needs to find tech-savvy partners and get hooked up. There’s no reason The New York Times couldn’t have hatched an exclusive deal with Amazon to ship a free online subscription with every Kindle e-reader it sold. (Instead, the Times wants you to pay for that privilege. Marketing genius!)

And while we’re at it, would it kill us to have some halfway decent Web design? (Check out this one-size-fits-all approach to these very different stories on various Tribune papers’ sites.)

It wouldn’t surprise me if, as with the music business, the breakthrough idea comes from outside the newspaper industry. With my job on the line, I had pinned some of those hopes on Sam Zell. That’s not working out so well.

Zell has been excoriated quite a bit for his handling of the Tribune mess, and much of it is deserved. But he was right about at least one thing when he showed up: For years, newspapers have been lazy monopolies. In most cases, we haven’t even bothered to market ourselves, assuming somehow that readers would just keep showing up and paying us to dump a soggy newspaper on their stoops each morning.

That bubble has burst. If we still believe that newspaper-style journalism can help keep officials and companies accountable and, at least occasionally, makes our lives better, we have to do better. Like Apple, we have to get new ideas out there and create new markets — and convince advertisers that newspapers (or whatever they evolve into) are the best way to reach them.

Forget fishwrap and delivery trucks and paperboys. It’s time for a new vision.

This is the first installment of “Swimming in the Press Pool,” but the author has earlier written for Crunchable about his job as a reporter, most notably in (Heart)Breaking News, The Pope, the Dalai Lama, and Me, and Taking Another Whack at Journalism.

Article © 2009 by Michael Duck