‘State of News Media’ Signals that Insubstantial Newspapers Require Reinvestment as Revenue Returns

After seven years of co-authoring the newspaper chapter of the "State of the News Media" report, I have maxed out on death and dying as a frame of reference.  So I led the latest treatment of newspapers with this variation:
"Poynter Institute ethicist Kelly McBride was visiting former colleagues at the Spokane Spokesman-Review last summer, when the conversation slid into the "how-bad-is-it?" mode. It has gotten so bad, one journalist said, that the independent contractors who deliver the paper complain that the Monday edition doesn't have enough throw-weight to get all the way up the porch.
"That's our metaphor for the state of the industry early in 2010. Newspapers, contrary to what is frequently alleged, are not dying in droves.
"But far too many American papers are at risk of becoming insubstantial. They lack the heft to be thrown up the front porch or to satisfy those readers still willing to pay for a good print newspaper.
"As they shed circulation at an accelerating pace, they lose value to advertisers.  Worst case, the industry could simply keep shrinking, stall out as a business and be left without resources to reinvent itself."
Though the remaining 40 pages of the chapter are loaded with statistics, my thesis is a tough one to prove definitively. But I keep gathering supporting opinions.
Well-traveled associates bring back impressions of newspapers that are "just terrible" or a shadow of their former self.
An editor of a chain-owned small-city newspaper, which has been through cutbacks and price increases (and remains highly profitable), confesses that he is "worried as hell we're not going to have enough news in the newspaper to make it worth picking up for 50 cents, let alone 75 cents."
Nonetheless, the latter part of 2010 will begin a window of opportunity for improvement. Already share prices have recovered from the rock-bottom lows of a year ago. At least a few buyers are emerging for papers up for sale. Nearly every paper is operating profitably -- and within hailing distance of seeing revenues increase, too.
But there is a longtime dilemma lingering unresolved. The future is clearly digital, but for now 90 percent of the revenue remains stubbornly stuck in print. So there is every reason to look at developing online advertising with better targeting and a smarter sales approach and to move fast on new revenue opportunities like mobile or tablet editions. But newspaper organizations need to  have one eye on keeping the old cash cow healthy too -- and satisfying shareholders, lenders and private owners while they are at it.
So after the recession is good and done, I see a tricky rebuilding challenge, summarized in my portion of the PEJ report:
"We may soon see the return of an old choice. Do papers extract most of the returning ad revenue in higher profits? Or will they recognize the damage done by the financial hurricane that swept through the industry and apply some substantial investment to developing new lines of business and rebuilding skimpy news reports in print and online?"
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The math has always been tantalizing. If newsroom expense is typically 10 percent of revenues, it only takes sacrificing one point of profit margin to raise news investment 10 percent. But I'm not banking on those newspaper execs who have a short-term focus on the bottom line to see it just that way.


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