Jeff vonKaenel has spent more than 30 years in alternative weekly publishing and he has some interesting observations about the paradox of publishing success. The CEO of the News & Review newspapers in central California is a student of media history, and he notes that the trend toward consolidation and monopolization that began in the 1970s dumbed down newspapers’ editorial product and set them up for failure when the rules changed.

The real demon was blandness. Alternative weekly publishers know that advertisers don’t like to run next to controversial editorial content. This is one market dynamic that keeps the alternative press small. Monopoly newspaper publishers aren’t small, however. They thrive on big-ticket schedules built on co-op ad dollars from giant national brands. They can’t afford to piss off million-dollar clients, so they intentionally keep the product inoffensive.

“It’s safer to make an outrageous statement about Saddam Hussein than to make a mild criticism of a local car dealer,” vonKaenel writes. “It’s something newspapers don’t like to admit. It has always mattered who pays the bills.” This is true. How many times can you remember the automotive section of your daily newspaper offering advice on how to get a better deal on a used car?

This dilemma creates a scenario that we’ve seen play out again and again: big industries and big companies collapse hard on the heels of their most successful years. That’s because success creates risk-aversion which leads to mediocre products (see General Motors). That strategy works fine until the rules change, and it served newspaper publishers very well for more than 30 years. But, as Bill Wyman pointed out in a recent essay, it also led them to create mediocre, inoffensive and bland products. When a low-cost alternative medium emerged, newspapers were poorly equipped to retain readers because, well, they sucked.

VanKaenel’s essay has one interesting twist: It implies that the current fascination with hyperlocal media could be in for a hard reality check. Noting that alternative weeklies’ coverage of music and nightlife topics has been heavily influenced by the willingness of those kinds of advertisers to run in those papers, he suggests that hyperlocal publishing will by driven by market forces. In other words, don’t expect a lot of critical stories about local merchants if those merchants are paying the bills. This reality actually could drive new-media publishers to broaden their scope. After all, they can’t afford to piss off thousand-dollar clients.

Orange County Register Owner in Bankruptcy

The small print of the bankruptcy filing by Freedom Communications Holdings Inc. contains a startling figure: circulation at the Orange Country Register is off 23% in the past four years. How can any business survive when it’s on a run rate to lose more than half its customers in a decade? The problem is made worse by the fact that the newspaper business model scales down so badly. The Register can’t cut back by 23% on printing or delivery expenses because of the high fixed costs involved. That means that operational expenses must be chopped to a disproportionate degree in order to make up for the shortfall. That comes directly out of the quality of the product, which leads to reader dissatisfaction, which creates bigger circulation declines.

This is why the newspaper industry is in a death spiral. The only way to turn the situation around is to dramatically improve the quality of the product, but economics demand that quality must take the biggest hit in order to keep the operation afloat. And so another noble publishing franchise falls into the hands of its bankers. They are always the owners of last resort for businesses whom, in their misguided greed, they chose to support.

Divide by 2

Did we say spiral? Alan Mutter has some sobering statistics. He projects that US newspaper revenues will fall $10 billion this year, making the industry about half the size it was in 1986. The most devastating collapse has been in classified advertising. For example, recruitment advertising was a billion-dollar quarterly business as recently as 2006. In the most recent quarter, it generated $202 million in revenue. The story is similar in automotive and real-estate advertising. While the recession has hit these categories hard, it’s hard to believe that they will ever again resemble their former size now that the Web provides nearly limitless advertising inventory.

Comments

comments

This entry was posted on Thursday, September 3rd, 2009 at 7:18 am and is filed under Advertising, Business News, BusinessModel, Circulation, Classifieds, Future of Journalism, Journalism, Local news, NewMedia, Newspapers. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

2 Comments

  1. September 3, 2009 @ 1:55 pm



    Thanks for passing along the vonKaenel piece, Paul. This is one of the most perceptive essays I’ve seen coming from a newspaper publisher. What’s also probably telling is that he started out as a grunt reporter and not as a freshly-minted MBA. Although I don’t entirely agree with his conclusions about the future of things, it’s fairly obvious vonKaenel has a deep understanding of the issues. At the risk of a rhetorical question: Why is it that publishers such as vonKaenel seem to be as rare as moon rocks?

    Posted by Perry Gaskill
  2. September 3, 2009 @ 2:57 pm



    Who are the idiots who spent $200M on help-wanted ads in newspapers?
    If I were looking for a job, it would never occur to me to look in the newspaper.
    In 1970, when I graduated from college, it made sense. It does not make any sense now.

    Posted by Dave Barnes