Opinion

Paul Smalera

The recession killed journalism – and saved it

April 2, 2012

Over the last few years, thanks to the global economic crisis – encapsulating everything from the 2008 housing crash to today’s ongoing euro zone sovereign-debt debacle – much ink has been spilled about the reshaping of the world’s economy, especially about the domestic job market.

Actually, scratch part of that last sentence, because less ink has been spilled, at least according to the results of a recent report by LinkedIn. The media business has been in overdrive, especially during this 2012 election season, but it’s now pushing pixels, not paper.

According to the data studied by LinkedIn, the professional social network, the newspaper industry experienced a 28.4 percent shrink rate between 2007 and 2011. The death of newspapers is not exactly a new phenomenon, so I’ll spare you yet another detailed recap of the print and economic climate that led to this broadsheet apocalypse.

But contrast newspapers’ huge drop with the gain experienced in the second-fastest-growing industry, according to the same LinkedIn data: online publishing. New-media companies posted a staggering 24.3 percent gain, coming in only behind the “Internet” overall. Look at the chart below and compare the green online publishing dot with the red newspaper dot.

In other words, reports of the media’s death are premature, at best. But more important, it’s unfair for any old-media advocate to say that the revenue model for media (or any industry moving toward digital) is broken. Yes, the companies and publications that power media look quite different than they used to, but these news organizations are still reporting the news.

And that truism is at the crux of why newspapers are in a bad spot. They have been trapped in a terrible mindset that they are in the business of selling newspapers. The leap from paper to digital may be vast, but to newspaper publishers, it seemed like vaulting to a different business entirely, one they were loathe to get into. No matter what kind of lip service newspapers paid to the digital transformation, the most prominent paywall model out there, that of the New York Times, still protects print subscriptions with a tiered digital pricing strategy – one so annoying that it motivated its former digital design director to complain publicly about the entire signup process.

The lesson online media companies have taken from newspapers’ slow, public death is to move beyond the idea of selling the product. Online sites are selling their audience. It’s a simple twist of the equation, but one that changes everything about how a media company is run. A CEO who has realized that her audience – her customers – is the most important thing the company has will stop at nothing to give those customers what they want. Anything to make them feel as if they’re getting value from the company. And although she’ll monetize their aggregate value with advertisers and marketers, she’ll also protect them from underhanded sales pitches or confusing pricing strategies that infuriate the web-savvy.

All this means that the information an audience wants is now a company’s most important asset and the one that needs the most investment and care. In other words, the fear that the online media represent the death knell of serious reporting is 180 degrees from reality. Online media companies (including my own, though it falls into a different LinkedIn industry category) have been investing serious cash in upgrading the quality of their reporting and have made no secret of gunning for their print counterparts when it comes to journalism awards, including the granddaddy of them all, the Pulitzer.

What has changed about journalism in the digital era is the near-instant feedback the best-of-breed companies have regarding whether their audience is actually paying attention. All online media companies invest in real-time analytics; the best online media companies crunch the hell out of the numbers to understand their audience. Some print nostalgics treat the mere existence of this data as a mortal sin that eventually warps all journalists into pageview chasing producers of bikini slideshows.

But when reporters do groundbreaking journalism, they get email and comments from readers and interested parties. When their work is very good it often becomes the basis for documentaries or books. Newspapers have benefited from this halo effect for years – they just haven’t quantified it. Leave it to an industry of sentence writers to be afraid of attaching numbers to their feedback.

These numbers provide the sharp picture that marketing and circulation departments have been after for years. But because they have often been lower than anticipated, especially before mass quantities of Americans came online, they scared publishers into girding their print products at the expense of the digital innovations. Meanwhile Yelp, Facebook, Google and, yes, LinkedIn had room to grow into multibillion-dollar forces of online media and advertising.

In a different world, the two dots at the top and bottom of the LinkedIn chart wouldn’t exist. Instead you’d see one dot in the middle, as newspapers shifted more resources and employees toward their digital efforts. But companies don’t often work that way – they get caught in the Valley of Death – the one Harvard business professor and Silicon Valley guru Clayton Christensen has written about in countless books and articles. Instead of innovating for the next business cycle, these companies die crossing the Valley, wringing every last drop of cash out of the last cycle, leaving holes in the economy that startups try to fill. And there’s just no reason to think newspapers as they exist today can reverse course or buck that trend.

Comments
6 comments so far | RSS Comments RSS

There are so many ways to describe this phenomenon … My own bias is that consumer appetites for news didn’t change, and that conflating the death spiral of newspapers with less rigorous sources of online news was simply bad reporting for the past, oh, decade or so.

There is a hunger for news, and for convenience. The latter is what the digital revolution is all about: we haven’t turned our backs on journalism, we just want it in a different format. This is the sadly simple truth that many newspapers (just about all of which are, by definition local, with an obvious market/constituency) were just to imperious to act upon.

The bifurcation of news (some entities gather, but others distribute) could be trouble. But it also results in some very creative leavening, like Flipboard and even Google News.

That said, some trees will die to make room for new seedlings. But the forest will be just fine, thank you very much.

Posted by johncabell | Report as abusive
 

“They have been trapped in a terrible mindset that they are in the business of selling newspapers.”

I always understood newspapers to be in the business of bringing buyers and sellers together. The depth and quality of news, from hard to features, determined the size and quality of the audience and, therefore, the revenues that could be generated.

The Digital Age has shown that buyers and sellers will come to specialized websites without no news, damaging that model, especially for the lucrative little classified ads that Pulitzer called “mustard.”

Posted by DavidCayJ | Report as abusive
 

Newspaper sites have big leads in all their respective cities when it comes to online traffic. The loss of classifieds is what really killed their business models, not this writer’s tsk-tsk “they didn’t understand their marketplace, didn’t understand digital” pro forma dogma that is so tired to read now.
There was no way a newspaper was ever going to compete with “totally free” when it came to people wanting to place an ad to sell their couch or advertise for a job.
That is not their fault. They are trying to overcome that loss of revenue with new things, but, yes, the legacy costs of their business are making that hard to do and make a pure profit. But many are getting there. Newspaper websites are some of the most innovative around IMO, which is why their traffic numbers are growing, not shrinking.
If the writer of the piece (whose company only makes profit because of a small niche of Wall Street/business subscription model that most companies do just out of rote “because we think we have to” compel) had done more homework, he’d know that newspapers were some of the first “companies” to go online.
There will be other smart guys who come along and kill the Reuters of the world too. But until then, by all means keep that smug worldview of the newspaper business intact.

Posted by ariznem | Report as abusive
 

Another bright side. Newspapers still own (or at least have a relationship with) the paying customer base – the local businesses – and they have no clue about social marketing. Yelp, FB, Groupon and Google Adwords are still way beyond the comprehension of most small business (with more on the doorstep – Foursquare, Trip Advisor, etc.). That’s where Hearst Media Services, Gannett Local and other media marketing bureaus come into play.

Posted by pkitano | Report as abusive
 

Come on now, who are we kidding here? The people that sit on the media boards today are the same people sitting on the oil and pharmaceutical boards. They are the same people who organize political fund raisers.

Instead of investigative reporting we get pathetic drivel such as this entire article. ‘Journalism’ died because journalism died. The author of this article does nothing but hammer the point home.

Posted by stambo2001 | Report as abusive
 

“The lesson online media companies have taken from newspapers’ slow, public death is to move beyond the idea of selling the product. Online sites are selling their audience. It’s a simple twist of the equation, but one that changes everything about how a media company is run.”

Huh? This makes absolutely no sense. Newspapers never sold their product and always sold their audience. The price of the paper doesn’t begin to pay for the cost of producing it. They sold a huge audience to advertisers — and still make 90 percent of their remaining revenues this way. If online advertising revenue would pay for “investing serious cash” in better reporting, newspapers would have dumped the print product long ago. I know not a single newspaper reporter who cares much about whether their words are read in print or online, and I would challenge the assertion the “online media” — whatever that is, since “newspapers” still dominate online news audiences to a great degree — have made serious investments in reporting, under any revenue model, for-profit or nonprofit. Purely online outlets are struggling — a handful of national outlets and a smaller number of local ones stand out from the pack; most add little but noise to the conversation; many are simply unread. Meanwhile, especially in local and regional journalism, even “dying” newspapers continue to field vastly more journalists, with far more talent and experience, than any other alternative in broadcast or online. Newspapers have taken a beating, sure, and have failed to respond well to crisis. But for most cities, the notion that any serious alternative has taken their place is pure fiction. And no one has yet come up with a reliable and sustainable model to finance online-only news.

Posted by writereditor | Report as abusive
 

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