A few days ago, I said that I thought that newspapers were entering a death spiral. Dan Gross strongly, strongly disagrees:
At some point in the future, newspapers may disappear. But count me in the later rather than sooner camp. And I can't help but think that many newspaper-doomsayers are conflating hope with analysis. According to many of the digerati, newspapers and other printed matter that people pay for through clunky old distribution systems (the mail, kids on bicycles, vans) can never make money and are bound to fail, while publications distributed online for free are destined to rule the world. (Of course, I could be guilty of the same impulse. I have feet in both worlds and could no more choose between print and the Web than I could choose between my two children.) But I also think this might be a case of making too much of a few numbers and ignoring some important ones.
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Many other components of consumer discretionary spending--hotels, restaurants, air travel--have fallen off significantly. Do we draw a line from trends over the last few years and declare that in 15 years there will be only a handful of hotels? I'm not sure why we would expect consumption of a purely discretionary item that costs a few hundred dollars per year not to fall in the type of macroeconomic climate we've had.
Especially when you consider that rather than discounting the product, many newspapers (and magazines) have been jacking up prices aggressively. For the last few years, the most serious problem facing print has been the sharp drop in advertising revenues. (Many chunks of the media world have been initiated into the 40 percent club.) But newspapers aren't continuing to spend money as if it's 2003 and hoping that Craigslist will disappear. No, they're planning for survival by slashing costs sharply, trying to boost online advertising, and, here's the clincher, making people pay more for the product. Print media is now in the process (belated, in my opinion) of finding a second large, potentially more stable, revenue base in addition to ads: subscriptions. The New York Times and many other papers have increased the price of the paper at the newsstand and for home delivery. When you raise the price of a product, you're likely to lose a portion of your customer base. And while no newspaper likes to shed readers, some of the shrinkage in circulation is by design. If raising subscription costs by 11 percent causes 10 percent of customers to flee, a newspaper will find that its circulation revenues are stable while it saves a lot of money by manufacturing a smaller number of newspapers. (The downside: A smaller paper can't charge as much for ads. But in this environment, ads are being heavily discounted anyway.)
Obviously, newspapers losing circulation is not, by itself, cause for panic. Most businesses lose, well, business during recessions. The problem is, newspapers were losing business before the recession. Newspapers have been losing business for decades. And it's not just a matter of circulation. Have you picked up a New York Times lately? It belongs on one of those very special teen drama episodes about anorexia. No one's buying ads.
Some of that will come back, but a lot won't, because people don't rely on the classifieds to find jobs or apartments, and outside of small towns, they don't rely on the other ads to tell them who's having a sale.
It's true that newspapers are jacking up their subscriber fees. Dan Gross sees this as a positive sign--what's known in the business as improving your circulation quality. In the case of USA Today, I grant you it's probably just as well that they're cutting back on their notorious junk circulation, but for the New York Times? Raising their prices is not a sign of strength; it's a sign that they have no other sources of funds. They can't borrow it, and they certainly can't get it from ads. They're doing the only thing they can do, which is sell stuff and charge subscribers more--and cut their newsroom staff, something that the New York Times has tried harder than most to avoid, because staff cuts mean declining quality.
This is not, however, some form of online triumphalism. Maybe five years ago I'd be crowing about new media. But over the last five years, the online news business has conspicuously failed to develop a robust online ad model that will support something as extensive and deep as the New York Times newsroom. I regard the failure of newspapers as something that hurts my future earning potential, not enhances it.
But the universe is not here to please me. And I just don't think that in ten years, the newspaper business model will be able to support very many newsrooms of any size.
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