While Jimmy C‘s away, the mice will play…
I don’t know to what exotic locale vanquished former Star editor turned blogger Jim Fitzpatrick escaped to the past couple weeks. All I know is he wasn’t around to catch this little journalistic diddy that would have been smack up his alley. A column by a gent who goes by Newsosaur, the "Musings (and occasional urgent warnings) of a veteran media executive, who fears our news-gathering companies are stumbling to extinction."
The question at hand: "Will business model stabilize for newspapers?"
The departure point being the disastrous revenue falloff at McClatchy, parent company of the Kansas City Star.
"Quizzed by securities analysts last week about his company’s disappointing financial performance, the best McClatchy boss Gary Pruitt could say was that he hopes the newspaper “business model will stabilize” at some unspecified point in the future. But it will not," Newsosaur begins.
"And it had better not, if Pruitt intends to save what’s left of his newspapers, where relentless cost cutting has halved the headcount of his flagship Sacramento Bee to some 700 increasingly nervous souls in the last three years."
It may feel to Pruitt like the 19th inning of a bad Royals game, but don’t expect to win with a walkoff homer.
"Sorry, folks, but it is unrealistic to think the newspaper business model will stabilize, because we are in the midst of profound and fundamental changes in the way people get information – and marketers connect with them," Newsosaur continues. "The model cannot stabilize, either, because the traditional strengths of the newspaper business have been turned into liabilities in the new order of things.
"If Pruitt and his fellow publishers don’t intelligently de-stabilize their businesses to modernize them, they run the risk of seeing further deterioration of their once-formidable franchises. Like most other publishers, Pruitt already has lost a lot of ground: The market capitalization of his company, which peaked at $3.5 billion in 2006, now is less than $200 million."
Back up, take another look at those numbers, and it puts the tailspin of the last three years into perspective.
Newsosaur’s reasons why the newspaper biz isn’t about to stabilize are threefold.
- "Because people can acquire content from any number of sources on any number of platforms at the time and place they want, there is increasingly less utility in the print product, which necessarily is a static (and often out of date) aggregation of a small subset of all the news, information, entertainment and commercial content available in the ever-expanding digital universe. Despite the diminishing importance of the legacy product among most consumers, the newspaper industry still depends on print circulation and advertising to provide 90% of its revenues."
- "The proprietary production and delivery platforms that previously provided publishers with unrivaled market share and pricing power now represent unavoidably huge fixed costs that put them at a distinct competitive disadvantage to the proliferating digital platforms. Even though roughly 1 out of 3 newsroom jobs has been lost at American newspapers in the last decade, publishers still pay far more to produce content than most digital competitors. Sadly for those of us who treasure quality journalism, the high cost of producing original content has turned the medium’s most cherished competitive advantage into a liability from the standpoint of hard-eyed financial analysis. The same can be said for owning printing presses and large fleets of delivery trucks."
- "While the monopoly or near-monopoly status historically enjoyed by publishers allowed them to charge formidable advertising rates for access to the substantial audiences they aggregated, the increasingly sophisticated digital media make it possible for advertisers to finely target their pitches to specific audiences – and sometimes even individuals – at a fraction of what they have to pay for a newspaper ad. While newspapers depend on selling un-targetable print ads at the rate of $12 (or more) per thousand in order to support their high fixed costs and double-digit profit aspirations, un-targeted banner ads can be bought by the fistful on the web for $1 per thousand – or less. With all due respect to the quality of the typical newspaper ad environment, it is hard to believe this differential pricing can be sustained over the long term."
Newsosaur’s bottom line:
"In light of the above, it is futile to merely ‘hope’ the newspaper business will stabilize. The hopelessness of hope is perhaps best illustrated by the fact that half of the industry’s revenue base vaporized in the last 5½ years while publishers were hoping for a different outcome. Barring a miracle, industry-wide ad sales, which were $49 billion in 2006, are unlikely to top $23 billion in 2011."
There is a way forward for newspapers, Newsosaur says.
Social media concepts, creating new digital products and platforms for delivering it (as opposed to just transferring print content to the Web), cutting back from seven day newspaper deliveries and charging less for ads. But it certainly won’t be easy.