The Biz Blog

My former boss and mentor Andy Barnes had a useful axiom for digesting friendly outside advice on fixing a publication: regard with extreme skepticism any statement that begins, "You could just..."

 

I have had my head down the last couple of weeks, drafting the newspaper chapter of The State of the News Media electronic yearbook, arguably a bit of a wallow in the complexity of current troubles. Looking at the recent torrent of save-the-industry pieces, I see appropriate and welcome alarm about civic life without newspapers, but also a lot of oversimplifying.

 

There is a week's worth of would-be solutions to comment on, but let's start with two of the main things that make newspaper organizations' current business situation not just bad, but bad in a complicated way.

 

Vanishing ads due to Internet competitors or the recession? 

It is clear enough that if you take the classified revenues already seeping away to Internet competitors like Craigslist and Google search, then pile on recession-related reductions in ad spending, you get a double dose of decline. Currently, the rate is running 15 to 20 percent down year-to-year on average, worse at many metro papers.

 

Does it matter how those losses are distributed? To some it's like a frail elderly person with pneumonia -- who cares which is the bigger contributing problem if the patient is deathly ill?

However, in considering potential survival strategies for newspapers, parsing the business reversal does matter.

 

The part that is recession-related will eventually come back (in marketing dollars if not necessarily newspaper print advertising). The secular loss is more likely to continue, perhaps even gain speed in another year or two.

 

My best guess is that more than half of the current losses are the result of the recession. As recently as the first quarter of 2008, total advertising was down only 7 percent year-to-year (and online newspaper advertising was still growing modestly). In the second and third quarters, the economy worsened and the rate of ad losses doubled to around 14 percent; now in the winter of bad times, late 2008 and early 2009, the declines are typically running 20 percent worse than a year ago. 

 

That suggests, as USA Today's now-former editor Ken Paulson said in an interview with Forbes.com, that "the newspaper business is in better shape than it looks." However, fresh uncertainty about the length and depth of the recession may make the getting-through-to-the-other-side part of the problem even more difficult than we already knew. Plus all those promising new revenue streams (mobile, electronic tablets, etc.) may be even slower arriving.

 

Put another way, a transition to robust digital options and aggressive experimentation are still good strategies for newspaper organizations. But I might tap the brakes now and then to be sure the offerings do not get way ahead of readers and advertisers moving on from print.

 

The Two Customers Problem

Speaking of readers and advertisers, it is useful to think of newspaper organizations, unlike many businesses, as serving those two distinct customer groups (a thought from my current boss-of-bosses, Paul Tash, who is Poynter chairman and St. Petersburg Times editor and CEO).

 

Success in the business requires sensitivity to the changing and differing needs of each group. Digital audience and advertising protocols are not the mirror image of print; we have at least learned that.  So the business model question resembles a game of three-dimensional Tic-Tac-Toe. I would argue that even talking about print and online audiences is a false dichotomy; a great many people, probably including virtually all readers of the Biz Blog, use a mix of both, easing gradually higher in preference for digital.

 

So returning to where we started with "you could just..." solutions, newspapers could begin charging for online content, with micropayments or other kind of payments. But the organization would be sacrificing revenue from its current online advertising base and rolling the dice on retaining readers and generating a new income stream from them.

 

More on paid online content in the next article in this series.