⇥ Journalism by proxy

Newspapers are dying—and most web commentators have no idea why.It is no secret that the newspaper industry (and its closely related industry, the magazine industry) is very rapidly going down the drain. There is a lot of confusion, however, on why this is happening and what can be done to fix it.

The primary problem with newspaper companies isn’t their revenue. It’s the size and scope of their operations. Again I say: mammals and dinosaurs. Simon, along with everyone else who thinks online subscription fees can save the newspaper industry, is effectively arguing that the world will change to support newspapers. The truth is that newspapers must change to adapt to the world. Just because the extinction of newspapers would be a tragic loss doesn’t mean it won’t happen.

There are a number of issues with this assessment. First, if you read through these blog posts, you will notice that John tends to compare his brand of content to that of journalists—if he, and so many other organizations, are capable of making money by offering their content for free and getting paid from the advertising, so should newspapers.

But newspapers and the John Grubers of the Internet are two very different beasts. John doesn’t engage in journalism—but, rather, in what could be better terms as meta-journalism. What people value in his articles is not the news he reports, but rather his spin on it. His ability to opine on the news, therefore, is based on someone else’s ability to report them in the first place.

True reporting is very expensive. Journalists—real journalists who actually research their articles properly and only publish information that they have been able to confirm—spend a long time putting together all but the most trivial of news reports. Investigative journalism, in particular, requires a lot of time and resources and is the most expensive of all. The simple reality is, you just don’t do good reporting by sitting at a desk and reading your news feed; it takes time, money and often luck to compile a truly great news story.

Because true reporting is so expensive, it shows up as a big, blotchy red line in the P/L of any newspaper or magazine. What’s worse, it doesn’t have any corresponding revenue: to a traditional newspaper, content is nothing but a black (well, red, if you prefer) hole that sucks in money and never puts out anything—as John also points out, newspapers and magazines make their money from advertising, and not from selling you and me content. Thus, in many ways, a newspaper is actually two products: a source of content whose sales are barely (if at all) enough recoup the costs of production, and a marketplace for adverts where the real profit comes from.

And, if you cut your own reporting out of the budget, what are you left with? Why, wire services, of course. On the surface, they are a great solution to a significant problem: the newspaper gets content at a fraction of the price, thus making the advertisement that much more profitable. Unfortunately, this business strategy is very vulnerable to attack, because it is essentially predicated on price and, therefore, it can be beaten on price.

That’s why newspapers are dying: because they no longer have any distinguishing characteristics. If I can get the same value out of my local newspaper—which I have to pay $1 for—that I can get from an ad-funded website (which, by the way, gets me the news where and when I want), why would I pay the money? In the words of Seth Godin, newspapers have become average products for average people—and thus they no longer appeal to anybody.

A closely-related point that John makes is the fact that classifieds, long a major boon for newspapers, are being eaten away by sites like Craigslist. I agree with this, but I disagree that this is because CL is free. CL works well because it offers extraordinary value for what it provides: a wider audience, minimal moderation (which is probably its greatest selling point), and a global marketplace.

CL is also mostly free and, while that certainly contributes to its success, I don’t think that it is the primary determinant of its popularity. If it were, companies like eBay could simply run Craigslist into the ground by taking a longer-term view and beating them on price (because even free can be beaten—for example with better service). I use Craigslist, for example, because despite the fact that its website is, well, butt-ugly, it works extremely well—I can find whatever it is that I’m looking for within a handful of clicks. The search function of eBay, on the other hand, is barely usable and seems to never, ever return the information I’m looking for. Why would I spend money on something when I can get a better something for free?

At the end of the day, many newspapers and magazines will die, simply because they are ancient behemoth that refuse to bite the bullet and face reality. Many newspapers are entirely unionized, and that, more than anything else, is going to spell their doom. The largest ones have been caught up in a wave of consolidation for years—in the US, 9 companies already controlled a majority of all media as early as 1999. Consolidation will only take them so far, however—it is but prolonging the inevitable.

The only way to survive—and thrive—in this environment is to transform, and the first thing that needs to go is the print side of the business. I can tell you from personal experience that publishing is not an easy business to be in; even on a small size like mine, your entire model can go to hell in a basket practically overnight. To give you an example, this past July our shipping costs shot up 105% in the span of two weeks (and, when you’re dealing with a yearly business cycle, that is, in fact, overnight). It took a last-minute miracle on Arbi’s part to find an alternate solution that wouldn’t break the bank. Distribution channels are run by companies that are, effectively, doing their best to run themselves out of business and, all too often, the publisher is left holding the bag. Getting rid of paper would be a good first step—it would not just eliminate huge costs, but also unpredictable costs.

Next, focus on the things that these companies do well: produce great journalism. Use the wires if you must, but only as filler, and as little of it as possible. Attract great minds and give them the opportunity to shine—and, on the online side, tighten your processes and technology to the point where the cost of delivering a page of content becomes predictable and inexpensive.

In other words, magazines and newspapers need to go back to being great products for great people. It’s not going to be easy, but the current model is simply unsustainable.