Will Newspapers Be Able To Survive The Economic Downturn?

One of the common topics these days, especially across political blogs, is whether or not the newspaper industry will survive its current troubles (and whether or not it deserves to). I think everyone has heard a thousand times since last year how much the news industry is struggling, how no-one reads anymore, and how the internet is making everyone ADD. But what’s actually going on inside the industry?

Truth be told, things are fairly bad on average, but the spread of the troubles is very stilted. Even with how much papers like the New York Times are fretting, they still stand a good chance to weather the recession well. The trouble is with smaller news papers, as illustrated by this helpful graphic from the New York Times in early March (the article was free to access by the way, irony?).

NYT

A lot of these newspapers were only barely making a profit before the bust. The current economic crisis has only revealed the underlying problems in the mainstream news industry. Two important points need to be established though:

  1. Many of these newspapers collapsed because of over-leveraging, that great plague that swept the nation until everyone realized there was nothing holding up anything. New management approaches for one, attempted to increase profits by growing these papers more than they could handle. The prime example is actually the New York Times, which is still one of the most profitable papers in America. The problem the New York Times has is that it acted like it wasn’t a newspaper, as illustrated by the fact that in 2007 it bought a brand-new building it didn’t need. A building from which it now rents out office space.
  2. Really, no one reads these papers anyway. That’s not to say readership isn’t going down across the industry, but readership for local papers is falling faster than that of trans-regional ones. The fact is, most of their news is purchased from Reuters, The New York Times, and The Wall Street Journal. The only thing they’re good for is the occasionally significant local event, which are more quickly reported on by specialized online media anyway.
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That still doesn’t address what the long-term prospects are for the industry, or what they’re doing about it. The New York Times is refinancing it’s debt, so it should be alright, and while many (including myself) have lamented Rupert Murdoch’s takeover of The Wall Street Journal, one thing we can be sure of is that he’ll bring in outside money to keep it afloat if anything should happen, keeping it alive for now. Still, those only deal with the now, and it remains that readership is turning more and more towards online news sources, and exclusively online. I, for one, never pick up a physical newspaper anymore, and rarely a magazine. Hell, I don’t even watch cable news, and there are more and more people like me every day. That scares the pants of editors everywhere.

Where do we turn? What is this online news source? I think you all know: news aggregators! Blogs and sites like The Huffington Post are increasingly becoming important parts of the info stream. That doesn’t mean people don’t go to The New York Times website. Many people turn from the physical edition of papers to the online edition, when available. The only problem is, all of these things are free.

Websites like that of the Financial Times have tried to fight this by erecting very, very irritating pay walls. The thing is, it doesn’t seem like this really solves the problem. Yes, it solves the problem somewhat for major news sources like the Financial Times, news sources that get viewed and linked constantly, but this strategy might actually kill the smaller news paper sites.

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Just from personal experience, I can say that I have enough trouble dealing with the concept that I should abruptly stop to give my money, even on a news site I frequently view articles from. How can some site expect me to sign up for even a single week, just to view the only article I will probably ever read from it? The open linking across the net has made us used to just flowing through articles, directly to the sources, and on and on. Anything that breaks this instantly becomes and irritant at best, and something to be fought at worst. Some sites have tried to solve this by creating a micro-payment system, but they are largely under-developed and ridiculously priced, not to mention inconstant – many times I’ve been asked at The New York Times’ website to sign up in order to view an article, just to go to the main page and search for the article myself, reading it for free.

Ultimately, it isn’t even as simple as finding a way to monetize online news. The newspaper industry has been cutting back for a while now, resorting more and more to companies like Reuters to do their reporting for them. This has cut the quality of the coverage in newspapers quite obviously, and this includes The New York Times. Many people who read news blogs exclusively do so with a sort of militancy, and this again, includes me. The fact is, if their good is news, and their good sucks, why would we want to buy it?

But I’m a bit ahead of myself. I haven’t even gotten to what structures could possibly replace the new model. That will be next.

  • hmmm again nice read… but what's more important is to make a simple analysis and then ask ourselves how will newspapers, or to be more specific, if the newspapers in today's form will be able to fit in the digital era.

    We're not that far away from people reading their favorite newspaper online… Given the widely spread internet connections and the continuously increasing speeds of those connections, that is no longer one thing on our ” Geek WishList ” but a reality!

    Many of them, mostly the major ones, have already realized that and by now they already feature an online edition. Some require a paid subscription and some don't. And here, i feel that it is essential to point out that money generated from subscriptions is not that much of a big part of those major newspapers budget. So my prediction is that due to the enormous amount of advertising that can go into the online editions of those newspapers, we're also not that far away from the major newspapers being absolutely free for everyone to read on the online edition.

    But what about smaller newspapers? Well if they want to survive they will also have to adapt to today's reality. And that can be easily done. But let's just stay focused for a minute on the need to make that change. Given the fact that smaller newspapers get to host less advertising in the paper edition – small number of readers, limited range of news mostly based in local/county news etc – and given the fact that their investments capital is not only low but cannot always be placed and managed in a profitable way, they tend to rely more on the income which comes out of the paid subscriptions. Given that in the near future no one will be willing to pay to get the news – because there will be a lot of free and good news feeders out there – makes it essential for them to come up with an online edition of the paper – which not only will lower the cost but will most likely attract a bit more advertising thus more income – but to also keep it free of charge. For example, 5 years from now a Minnesota town resident will not be willing to pay 20-30$ per month to stay informed on his town hall new decisions about the new park benches or anything like that… but he will be more than happy to read online about news in his hometown for free… that will widen the public reading that small town's newspaper, thus attracting more advertising and combined with the low cost of an online edition, it will end up increasing that small newspaper's profits. This is in my opinion the only way for those small newspapers to stay alive in the digital era.

    Anyway, i hope all this made sense to you guys ;) Pardon me for any grammatical or syntax errors but keep in mind that i am not neither English nor American :)

  • I think I get what you're trying to say. I don't know if the newspapers themselves agree with you. A lot of them are talking about how things like CraigsList are taking away their ad revinue. Newspapers are too general, and that doesn't fly in the hyper-specialized information age. It's true, simple ad revenue can be one way for them to finance themselves, if they completely convert to digital, specialize, and are smart about the ways they advertise. Google has been a big proponent of that model. I didn't mention it because it sort of goes without saying at this point. Also, part of the problem is that online ads are less effective – or, more accurately, they're just as ineffective as physical ads, but now the ad buyers have concrete statistics to see it. This has dropped the price of online ads over the past year, and some are worrying that an ad model won't be able to make up the lost revenue, because the ads will be worth less than they were in the old, physical days. As a result, most think that ads will have to be paired with another system anyway. (Check out the Aspen Ideas Festival: http://www.aifestival.org/audio-video-library.p… . They have good talks on this subject.)


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