By Paul Gillin | December 20, 2011 - 2:11 pm - Posted in BusinessModel, Circulation, Demographics, Layoffs, Newspapers, OnlineMedia

Building ImplosionThe Annenberg School at the University of Southern California created a stir last week with its prediction that only four US daily newspapers will still be in print in five years. “We believe that the only print newspapers that will survive will be at the extremes of the medium – the largest and the smallest,” said Jeffery I. Cole, the school’s director of the Center for the Digital Future. “It’s likely that only four major daily newspapers will continue in print form: The New York Times, USA Today, the Washington Post, and the Wall Street Journal.  At the other extreme, local weekly newspapers may still survive.”

How could this be? There are still more than 1,400 metro daily newspapers publishing in print in the US. As one tweeter pointed out, dailies would have to perish at the rate of five per week in order to meet USC Annenberg’s forecast.

We think the five-year timeframe is pessimistic, but we certainly believe USC Annenberg’s prediction will come true within a decade. We made precisely the same prediction five years ago – including identifying the same four titles Annenberg did – only we gave the print industry until 2025 to implode. It now appears that we were optimistic.

Here’s why the Annenberg prediction isn’t so far-fetched. American newspapers had a near-death experience three years ago when two venerable dailies – the Seattle Post-Intelligencer and the Rocky Mountain News – closed their doors, each after more than a century of continuous publication. Two other major titles – the San Francisco Chronicle and the Boston Globe – had their own brush with the reaper at the same time. Both were pulled back from the brink only after their unions made massive concessions and hundreds of highly-paid journalists lost their jobs.

Busting the Union

Early 2009 was when publishers broke the back of the Newspaper Guild. At the Globe, the union bargaining position was so weak that the contract that members finally accepted was actually worse than management’s original offer three months earlier. The showdown at the Globe was a turning point for the US newspaper industry. The management victory in the labor negotiations was so complete that publishers across the country were effectively given carte blanche to fire people by the thousands. Which they did. The amazing Erica Smith counted nearly 15,000 newspaper layoffs in 2009 and another 6,700 in the two years since. And her count doesn’t include the many jobs that were eliminated or scaled back without public announcement.

Newspaper publishers basically bought themselves time, and they used it to bring costs in line with revenues. Most newspapers have drastically scaled back the size of their print editions and many have cut back regional distribution. Publishers have raised subscription prices to milk more dollars out of the dwindling cadre of loyalists who are willing to pay for print. Unfortunately, they don’t have much time. The average ago of a daily newspaper reader in the US today is between 56 and 60, depending on whose estimates you believe. That population will shrink more rapidly than any other demographic group over the next 10 or 15 years. Seniors are also the least attractive audience to the advertisers who support print advertising. It’s a bad combination.

For the time being, printed newspapers can survive simply by cutting costs and raising subscription fees, but that strategy invariably turns into a death spiral. At some point publishers will no longer be able to afford to deliver a product that people want to pay to read in print.

Tipping Point

Circulation declines, which have been running about 8% to 10% annually, will accelerate. A tipping point will be reached and the whole print model will fall apart. We don’t know when that threshold will be reached, but demographic trends that indicate it will certainly happen within the next 10 years and will probably hit a lot of titles simultaneously.

The death of the printed daily doesn’t mean the death of print. Many publishers have cut back out unprofitable Saturday and Monday editions as a way to save costs, and more will certainly follow suit. Sunday editions may be around 20 years from now because of the revenue from flyers and coupons. But many newspapers will no longer be able to support a daily publishing schedule within a few years.

That’s the bad news. The good news is that many publishers are beginning to figure out the economics of digital revenues. A milestone was reached just a couple of months ago when the New York Times Co. released its first earnings report since it instituted a paywall early this year. As we reported at the time, Ryan Chitturn of the Columbia Journalism Review estimated that the Times’ digital revenue in the quarter actually exceeded its editorial costs, meaning that the paper could conceivably publish profitably without a print edition. We don’t expect the Times will shut down its presses anytime soon, but publishers across the country should cheer its success at crossing that threshold.

The Times is making the move to digital faster and more effectively than any other daily newspaper. Assuming other publishers follow its lead, we can expect that many major metro dailies will figure out a sustainable digital formula over the next five years. At that point they can begin to wind down their print operations without fear of giving up the farm. This won’t be pretty. Lots of jobs will go away when the presses shut down. However, the brands may survive and even begin to grow again.


Speaking of The New York Times, the parent Times Company is in “advanced talks” to sell off 16 regional newspapers, including titles in Florida, California, North Carolina, and Alabama. The Times Co. will continue to own the Globe and International Herald Tribune. Analysts are saying the move simply removes a headache for the Times, since the regional media were collectively losing money, and the company can now focus on its core business, which is a good thing these days.

Miscellany

We know the U.S. Postal Service is hemorrhaging money and facing criticism that it’s slow, antiquated and inflexible. So in a bold move to remedy its situation, the USPS is responding by becoming slower and less flexible. Read what the recently announced changes in service mean to publishers. We actually don’t want to be too hard on the Post Office, since many of its problems stem from a congressional requirement that it fund retiree health benefits 75 years into the future. That’s not a typo: 75 years.

And Finally…

Craig SilvermanThe holidays bring family, friends, eggnog, and, best of all, the Crunks. Only they’re not called the Crunks any more since our friend Craig Silverman (left) gained the legitimacy of a Poynter affiliation and began publishing his collection of the year’s best media gaffes as “The year in media errors and corrections” on Poynter Online. Thankfully, the content is still the same.

This year’s roundup of the funniest and most outrageous mistakes and corrections is headlined by several major news organizations that confused the President of the United States with the world’s most notorious terrorist and announced the death of “Obama Bin Laden.” One anchorwoman on Canadian television made the mistake three times in just 17 seconds and apparently didn’t even notice.

We like the newspaper headline that reminded readers to “turn your cocks back one hour at 2 a.m. Sunday,” but our favorite is a lengthy correction from The Guardian about this year’s Royal wedding. It includes the passage:

“The piece referred to “damaging stories of royal profligacy past: Charles with his staff of 150, and an aide to squeeze his toothpaste for him”. [The couple’s press secretary] writes, “The Prince of Wales does not employ and has never employed an aide to squeeze his toothpaste for him. This is a myth without any basis in factual accuracy.”

This stuff is too good to be made up. Thank you, Craig.

Comments

comments

This entry was posted on Tuesday, December 20th, 2011 at 2:11 pm and is filed under BusinessModel, Circulation, Demographics, Layoffs, Newspapers, OnlineMedia. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

18 Comments

  1. December 20, 2011 @ 5:23 pm



    Maybe it’s just me, but the Center for the Digital Future’s study seemed to have a couple of problems:

    First of all, and this is from memory last week, the study was based on a survey sample size of only around 2,000 respondents, of age 12 and older, with interviews split between phone and online. Not a crushing condemnation, but it does make it seem thin.

    The actual survey results were also placed behind a paywall which made it very difficult to understand where Cole came up with the predictive five-year number. A lengthy summary provided, written by Justin Pierce, indicated nothing that specific.

    Ryan Chittum at CJR does good work, but calling for all other publishers to implement a copy of the NYT’s paywall model seems misguided. Of the 1400 daily newspapers in the U.S., 1399 are not The New York Times. Each is going to have to find its sustainability model in its own way.

    What also seems to be missing in the discussion is that although we know that typical editorial costs for a newspaper run around 18 percent of total revenue, what’s less clear are the costs for various online revenue streams. One of the things that seems to be going on with Aol’s Patch experiment in local, for example, is that the ad sales people are able to generate revenue at a level to support themselves, but not enough to support news side.

    Posted by Perry Gaskill
  2. December 22, 2011 @ 1:23 pm



    When the end comes, it will swiftly.

    At some point in the very near future, investors will simply look for better opportunities.

    This has nothing to do with the content, the paper, the people at the top or at the bottom.

    It will not be a sustainable way for an investor to make money.

    Posted by msbpodcast
  3. December 22, 2011 @ 1:47 pm



    Good to see you back, MSBPodcast. We missed you :-)

    Posted by paulgillin
  4. December 24, 2011 @ 11:33 am



    [...] 1,400 daily newspapers disappear over 5 [...]

  5. December 26, 2011 @ 9:54 am



    This scenario make no economic and business sense because it ignores the fact that the average newspaper is 38,000 circulation, has no local competition, and made an average PROFIT of 13 percent on sales last year. No publisher is going to kill a paper making an operating profit regardless of what is happening to circulation.

    Using Seattle and Denver as examples of a dying industry is wrongheaded because PI and RMN were secondary papers in joint operating agreements. They had to be “failing newspapers” to get the antitrust exemption.

    While it is true that digital revenues are and will continue to rise, they are not yet at the place where they can replace print revenues. And no digital newspaper operation is making money when full cost accounting for facilities, equipment, services, content, and brand use are made.

    Newspapers are not going to to die at a rate of 300 a year in the next 5 years and certainly not non-metro papers. Over time they experience more difficulties but they will be with us for more than 5 years.

    Posted by Robert G. Picard
  6. December 26, 2011 @ 10:47 am



    I agree five years is a pessimistic scenario, but when you consider that 2006 was the industry’s best year ever in revenues and profits it’s evident that a lot can happen in five years.

    As the post notes, it’s unlikely that 1,400 printed newspapers will vanish over the next five, 10 or even 20 years, but the economics of daily frequency will become increasingly unattractive. We may have hundreds of publishing newspapers a decade from now, but I doubt there will be many dailies.

    Posted by Paul Gillin
  7. December 26, 2011 @ 4:10 pm



    1400? Well, considering it made about as much revenue as a Tijuana consignment shop, we can say Patch.com is on the way out. The impending death of all 800 of Patch.com’s local ‘papers’ will get us over halfway there. Go hyperlocal news! Great idea, AOL, as usual.

    Posted by Stephen
  8. December 27, 2011 @ 3:13 pm



    Well, 1400 seems a bit steep, but lets keep in mind that the profit that many newspapers operate on is from the trimming of expenses, not an increase in revenue. Is is, therefore, illusionary, and not remotely sustainable.

    While it may not ne a loss of 1400 papers, but make no mistake, in 5 years the newspaper landscape will be vastly different.

    Posted by Marc
  9. December 27, 2011 @ 10:07 pm



    In reality, print revenue declines still haven’t stopped, and the last figures I saw indicated they actually increased each quarter of this year so far. I think the five year guess is probably accurate, and I suspect it may even be sooner. I think we’re only about one more technical development away from a decoupling of advertising and content, and when that happens, revenues will fall off a cliff very quickly for newspapers. I can also see that taking a chunk out of paper websites as well. I would not be surprised to see 1,000 papers or so go belly up over a 12 to 18 month span. To me, news websites are still very much business as usual, and that industry segment is really going to have to totally reinvent itself rather than replicate the past processes online. If ad revenue dries up, paywalls won’t be able to handle the load alone, and it could get very ugly very quickly. Newspapers have been living off of cutbacks for the past three years, with revenues still falling consistently. Any stability they believe they’ve found, even The NY Times, is largely an illusion.

    Posted by Dan Meadows
  10. December 28, 2011 @ 1:15 pm



    As I pointed out on my blog last week, distribution costs will be the end of the printed newspaper business model. As circulation sinks, the cost to deliver a single newspaper to a given area increases. The exact amount of the increase is also affected by gas prices and the minimum wage for delivery drivers. I’d say they only have a couple of years left. Also, as newspapers decrease the days that they deliver to homes the newspapers reduce the viability of the brand.

    Posted by Marc Swank
  11. December 28, 2011 @ 6:34 pm



    ” it’s possible that 8 of the nation’s 50 largest daily newspapers could cease publication in the next 18 months.”- Time Magazine, 2009
    http://www.time.com/time/business/article/0,8599,1883785,00.html

    In fact, none of the top fifty went out of business. Bold predictions are sweet to make, but it also seems that people don’t mind looking stupid anymore.

    Posted by Stephen
  12. January 3, 2012 @ 12:45 pm



    For publicly traded companies, the profit margin for newspapers is not attractive, but that does not mean they do not or can not make money. If newspapers did a better job of reporting the news, their sales would increase. Mostly reporters today write from a perspective that the story has all ready been beaten to death on TV, which is rarely true. TV is big on image, audio, and lots of smoke-screen and predominately op-ed remarks. If a story takes 10 minutes to read, talking heads on TV can’t read it faster than you can. Basically, news coverage on TV, radio and internet video is shallow and factually deficient, as are attempts to emulate them, such as USA Today. The industry leaders are actively trying to discredit the text-based medium’s future for their own preferred managerial predilections, usually involving employing as few people as possible. In reality, text-based media is the only way to report facts in depth at the current time. In this information age, information will triumph; if the newspapers all commit suicide then ultimately some kind of large format kindle and/or nook hardware will replace it.

    Posted by hansen
  13. January 3, 2012 @ 1:08 pm



    USA Today recently went from a home page of headlines and 10 minutes of video and audio commercials, front page advertising, and come-ons to encourage – to – and this seems schizophrenic – a dead-end paywall page. Expect to see their profits go increasingly south. Washington Post offers a free newspaper, The Express, a tabloid, to Metro commuters and pedestrians in the city. Large newspapers could for example, capitalize on some news coverage that everyone is going to get anyway, and sell print and online versions (like Express) free of charge, using that platform to engage the reader to subscribe. Why should paying subscribers tolerate being treated unfairly? If you pay, you should get in-depth coverage both print and online for the same cost, or however you want it. Discounting the online edition, as at NYT, makes little marketing sense because the ad revenue does not pay for the online edition. They rob one budget to pay for the other, it is still not unlike free online news in that it is not economically self-supporting. If publishers had an iota of respect for the readers, they could see their way out of this. For newspapers to ever have published in HTML by which all their content can easily by cut and pasted is still a mystery. Other text-based online technology has always existed, i think the industry just acted out of a knee-jerk reaction by creating the WWW versions rather than the PDF versions that are now proving to be successful. Live and learn? Maybe, maybe not. Someone will still be doing business however.

    Posted by hansen
  14. January 3, 2012 @ 1:20 pm



    Once again, i have to argue this point. Home delivery is cheaper in most markets than bulk mail. Yet i get 3 packages per week of inserts-sans-newspaper IN THE MAIL. That is 3 deliveries per week that newspapers have chosen not to compete for. This is sheer laziness. The fact that publishers prefer to view a product as an avoidable expense rather than a point of contact with a paying customer is where their downfall really lies. They really need to take the attitude that they represent a service to the community and to fulfill that service is their primary job. Too few publishers seem to appreciate that fact. The idea that they have a job beyond “journalism” is lost on them.

    Posted by hansen
  15. January 5, 2012 @ 3:22 pm



    I think the key to all this is the average age of the readers. If the estimate given is accurate, those 56-60-year-olds will soon rapidly lose purchasing power, which means that the papers will have to reduce the rates for their ads as the bulk of their readers have moved into a new “demographic”. Couple this with the fact (ask a few of them if you don’t believe me) that most 12-17-year-olds (who will be young adults in five years) have NEVER read a newspaper and don’t see the use for them. You have to come to the conclusion that the end for most print editions cannot be far off. Maybe five years is a little pessimistic, but i think ten years would be a little optimistic.

    Posted by Pete Gilio
  16. January 15, 2012 @ 3:43 pm



    [...] Paul Gillin on December 11, 2011: “Early 2009 was when publishers broke the back of the Newspaper Guild. At the Globe, the [...]

  17. January 27, 2012 @ 11:54 am



    If the definition of a print daily is one that prints 7 days a week, USA Today (4-5 times per week) and Wall Street Journal (5-6 times a week) already don’t qualify. If they do qualify, then some of those on your death list are still print dailies.

    I don’t know why the Washington Post is considered a likely daily print survivor, since its print edition has lost money for years and has been subsidized by the money-making components of the Washington Post Company. That subsidy can’t continue indefinitely.

    Posted by Ricktd
  18. February 10, 2012 @ 9:23 am



    [...] 1,400 daily newspapers die in five [...]