Newspaper Decline

Excerpts taken from the Week Magazine Briefing 1/12/07, pp. 11.
Readership is down, advertising revenue is falling, and news staffs are shrinking. Twenty years ago, total daily newspaper circulation in the U.S. was 60 million. Today, it is 43.7 million. Since 1996, the daily circulation of The Washington Post has dropped by 16.8 percent. The Los Angeles Times has lost nearly 25 percent of its readers, while the Chicago Tribune has dropped 15.3 percent. Many newspapers in smaller communities have gone under or been absorbed by their competitors. In 1985, some 140 towns and cities in the U.S. had more than one local paper. By 1995, that figure had dropped to 62. The Pew Research Center found that only 23 percent of people under age 30 read a newspaper daily compared to 60 percent of older people. “Newspaper readers are dying off faster than they can be replaced,” says industry analyst John Morton.

One in three Americans now regularly turn to the Internet to get their news, up from one in 50 just 10 years ago. It’s easy to see why: The Web offers a seemingly endless supply of searchable information and specialized sites, many of them free. Newspapers are good at bundling news, opinion, and service features into one package, notes media writer Jack Shafer in Slate.com. But much of what’s in the paper is “detritus,” Shafer says, and gets tossed out unread. On the Internet, of course, readers can home in on precisely what they want, whether it’s sports, recipes, or political news by bloggers or professional commentators who share their biases and values. For many people, the notion of a “one-size-fits-all” repository of what some anonymous editor considers important or interesting seems increasingly obsolete. So does the very way newspapers are produced and distributed.

As Michael Kinsley put it in The Washington Post: “As we live through the second industrial revolution, your daily newspaper remains a tribute to the wonders of the first one.” Trees must be cut down, hauled to factories in trucks, and pulped into rolls of paper, which themselves must be transported to other factories, where they are chopped up, covered in ink, folded, stacked, and loaded onto a third set of trucks. These trucks then fan out across the region, dropping bundles at distribution points, to be transported yet again to stores and homes. It’s an enormously expensive process, constituting as much as 40 percent of newspapers’ costs. In our high-tech Information Age, says Kinsley, “it is hard to believe that there will be room in the economy for delivering news by this Rube Goldberg process.”

Newspapers are desperately trying to stake out their own territory on the Web. Their advertisers are already migrating there, from car dealers who use specialty sites for generating leads to real estate agents who post online “tours” of homes. By building a Web audience, newspapers hope to attract some of their lost advertising dollars to their online sites. But it’s tricky, because by doing so, they’re helping to accelerate the decline of their print product. Most publishers now give away information online that they charge for in print, hoping no one notices.

Is that strategy succeeding? To a degree, but not enough to save the industry. Newspaper publishers now earn some $2 billion a year from online advertising, about 10 percent of their total ad revenue. Many companies have developed rich online offerings, with breaking news, blogs, and video feeds. Of course, readers who spend a lot of time on these sites have less reason to buy newspapers. Meanwhile, shrinking readership and ad dollars have put newspapers on a downward spiral. Managers have been laying off reporters and editors by the droves; the total number of newspaper employees is down 20 percent since 1990. These cutbacks result in a thinner, more generic product, with less original reporting—sending even more readers to the exits.

So are newspapers going broke? Far from it, actually. The profit margins of the newspaper industry continue to exceed those of many other industries. McClatchy Newspapers, for instance, reported an operating margin of 28 percent in 2005, compared with ExxonMobil’s 16 percent. Just a few decades ago, when most papers were owned by civic-minded families with deep community ties, even modest profits sufficed. But now, most major newspapers are part of huge chains, and pressure from investors to produce ever-greater profits is colliding with the realities of a medium that has passed its peak.

There is no shortage of ideas for turning things around. Gannett announced recently that USA Today and its other 89 newspapers would allow amateurs to work alongside professionals to produce stories—an idea the publisher calls “citizen journalism.” Publishers are experimenting with generating several versions of the paper to target various market segments, such as young people. Some may start giving away their papers free, relying entirely on advertising revenue. One school of thought is that newspapers should become “hyper-local,” focusing intensely on community news not available on the Web or TV. But most industry experts believe that the era of print newspapers is nearing its end. Newspapers, says media analyst Ken Marlin, “have to either adapt to the new economics, or die.”

The Troubled Times: Nothing is more emblematic of the state of the newspaper industry than the current woes at the venerable New York Times. The company, still considered among the nation’s most prestigious journalism operations, lost more than half of its market value in the past four years. The Times has been touting the growth of its online offerings, including its for-pay TimesSelect service, which has generated $8.5 million in revenue since its 2005 launch. But investors have been underwhelmed, and the value of its shares fell 11.5 percent in 2006—more than triple the industry average. As a result, pressure has been growing on the company, which has a dual stock structure guaranteeing the Ochs-Sulzberger family 88 percent control, to allow for more outside input. In April, Morgan Stanley, which owns more than 5 percent of the company’s shares, withheld its votes for the board of directors to protest the setup. So far, the owners insist they’re not going to dilute their control. But analysts say the Times may need to join a larger media company to survive. “The Gray Lady needs to get hitched soon,” said Paul La Monica in CNNmoney.com, “or else she might wind up an old maid.”