March 26, 2014

Pew’s 11th annual State of the News Media report, out this morning, offers fresh measures of news media revenue and news staffing at digital-only start-ups. Both findings are arresting for those of us in the news-about-news business but also shed light on the well-being of the industry as a whole.

Among the highlights:

  • The Pew research team attempted a revenue estimate for all the branches of the United States news industry it has covered in past reports. The surprising conclusion: Even though newspaper advertising revenue has fallen by half over the last decade, including subscriptions and other revenue, the industry still accounts for $38.6 billion of $63.6 billion in news revenue per year. That is roughly 61 percent of the total.

  • Newsrooms in digital-only startups now provide roughly 5,000 jobs. That compares to about 15,000 lost in newspapers in recent years and additional cuts at news magazines. Though a count of newspaper declines in 2013 is not complete, the Pew figures suggest that the fast growth of sites such as BuzzFeed, Vice, Gawker and Politico, along with smaller not-for-profits, may soon make up for legacy losses in one year — but not for the last decade.

The continued heft of the newspaper industry may surprise those who have bought into the much-repeated dying industry meme. It makes sense, though, when you consider that print advertising is still in the $17 billion to 18 billion range and circulation revenues have held steady at about $10 billion. The 1,400 or so dailies make money in other ways, too, like contract printing or selling digital marketing services to local businesses.

Local television, cable television and network broadcast are collectively a much bigger business. But the Pew analysis attempts to isolate just the news component of each; the much bigger share of subscription and advertising dollars goes to entertainment.

Also, while earlier Pew reports have documented the dominance of giants like Google, Facebook and Yahoo in share of digital advertising, none is considered a news company for purposes of this report.

Pew found that nearly 70 percent of all news revenue comes from advertising, just under a quarter from audience, 7 percent from other and only 1 percent from philanthropy and venture capital. That tiny base of new money from the tech world seems sure to grow in future years, according to Pew.

While the Pew work involved a lot of digging and creative dicing and slicing of consultants’ data, authors Amy Mitchell and Jesse Holcomb acknowledge that some nooks and crannies of the business could not be measured — city and regional magazines, for instance.

I would go a step further and say the methodology probably overstates (but not radically) newspaper dominance in two ways. The list of news outlets that do not fit the Pew definitions is a long one — Fortune, Bloomberg Business Week, New York Magazine, National Journal, CQ/Roll Call and Reuters, among others.  Trade journals and professional information services also are left out.

The analysis treats all the content of newspapers (and hence related advertising) as news. So the weekly food section that draws accompanying ads and grocery store inserts counts toward the total but the Food Network or Bon Appetit do not.

And just being big (remember the dinosaurs) doesn’t automatically equate to a bright future. Newspapers continue to be at pains to shed their legacy cost structure and create successful digital businesses.  The essay’s conclusion captures the status of the old and new:

In the trajectory of economic disruption for the news system, we have reached a point where some newer forms are beginning to have an impact and may contain long-term potential. We have also seen the innovation and dollars for those coming more from individuals or organizations new to news. For now, though, it is still both the traditional sectors and the traditional forms that account for most of the revenue supporting news gathering in the United States.
A next part of the equation to explore is how revenues are being spent today as technology needs within an organization butt up against the costs of journalists on staff. Digital news startups are free of the legacy infrastructure that runs up expenses at print and broadcast outlets. They do not have plants, delivery trucks or broadcast towers and transmitters to consider, or aging real estate. The cost of newsgathering may even be cheaper, too, as non-institutional journalistic activity runs on a mix of professionals (without pensions), freelancers, amateurs, public data and aggregation/curation. Nonetheless, technology can be very expensive, both its purchase and upkeep, as each new iteration often means reprogramming, re-archiving and transitioning to new tools and equipment.

The cost of running a digital-native news organization, as compared to a legacy one, is a question for another report. But as long as journalism remains a profession, it will cost money to produce.

The companion piece on digital news site staffing begins with an estimate that the 30 largest digital-only news organizations, led by Vice and The Huffington Post, account for about 3,000 jobs. Pew figures smaller organizations including the many state and local start-ups for another 2,000.

The essay catalogs the many name journalists like Nate Silver and Ezra Klein who have departed legacy outlets in the last year and quotes BuzzFeed editor Ben Smith saying, “I think it‘s an incredibly competitive landscape and [BuzzFeed] is investing on a scale that‘s very ambitious…It‘s increasingly difficult [for legacy organizations] to compete for talent.”

The report does not attempt to make an extended contrast between what is being covered by the new digital staffs and what smaller legacy staffs have dropped. But Pew director of journalism research  Amy Mitchell told me by phone “both the editorial focus and the format of the coverage are quite different.” Both BuzzFeed and Vice, for example, have been aggressive in establishing international bureaus, she said.

A Pew report on the Washington press corps five years ago noted the same sort of split — far fewer bureau reporters from local papers covering their congressional delegations but an uptick in specialized reporting for business interests  and more representatives of international media.

A number of studies, including a massive one headed by Steven Waldman for the Federal Communications Commission, have concluded that local accountability reporting has declined, displaced by the more eclectic mix of national digital-only sites.

As has often been the case with the State of the News Media report, I think the Pew findings are useful in themselves and even more valuable as a baseline for tracking transformational changes in the media that will likely be continuing for at least another decade.

Disclosure:  I worked on this report as I have on the past 10, reporting the key findings on newspapers and offering editorial suggestions on the revenue essay.  A longer piece on changing newspaper content has been held for later release).

Correction:  An earlier version of this story incorrectly included C-Span and the Associated Press in a list of news outlets Pew did not count in the revenue study.

Related: Amy Mitchell, one of the authors of Pew’s State of the News Media, joins Poynter’s News University on Thursday, April 3, at 2 p.m. ET, for a webinar covering key findings of the report.

More on State of the News Media: Consumption of online news video slows | Is consolidation making local TV news less local?

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
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