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Here’s “The Rest of the Story” sequel to last week’s description of the national decline in the fortunes of the daily newspaper industry.

What follows are both fact and opinion. The facts of decline are obvious. My opinion is that the unprecedented freefall can be traced to the industry’s obsession that they could and should maintain their monopoly in every town in which they operate. Eventually, this has – and is – leading to their own downfall. In search of answers, they’ve been going at it backwards.

The obsession has led to the industry determination to build their own web site so that it helps dominate information and advertising in league with the newspaper. The problem is that these extensions of “the franchise” are losers, or at least have shown they bring in so little advertising revenue that it is not replacing – and will not replace – enough revenue to support daily newspapers as we have known them. Remember, newspapers have derived 80% of their revenue from print advertising. Typically, advertising from newspaper-owned web sites is yielding about 8%.

Here’s where it hits the fan. Facing the problem of maintaining their own web sites in spite of small (and declining) ad revenue from these sites, what do they do? Their answer is to push readers even harder into the web sites. It’s like the old definition of a zealot — one who, when he loses sight of his goal, redoubles his effort.

Virtually every daily newspaper nowadays encourages its reader to go to the newspaper web site. You can read it every day in our local paper: “For more details on this subject, see our web site.” “For more photos on this event, see our web site.” They keep chasing readers away from the newspaper into the web. Newspaper circulation keeps dropping because readers are told there’s more on the web – and it’s free! How do you sell any product (like a newspaper) when you tell customers (subscribers) they can get it all for free somewhere else?

Back to the obsession — that they have to “protect the franchise” (meaning local dominance). O.K., let’s concede that they need their own web site, but – as a simple business proposition – do they need to keep pushing their paid readers over to their freebies? That doesn’t make a lot of business sense, does it? As I said, the industry has done it all backwards. Web sites are best for immediacy, like breaking news. And they should be used as a “feeder,” moving viewers back to the newspaper, where they can learn more about any topic. The sites should be confined, generally speaking, to headlines and a brief summary. Then, at the end of every item, should appear a notice: “For more on this, see the newspaper.” Web surfers should be constantly reminded that if they want more than the headlines, if they want all the details, if they want opinions and comments from readers – they will find them only in the newspaper. How can a business do otherwise?

We are seeing the penalty of taking the road built on the industry satisfaction with its (formerly) monopoly position – that they must be the “Big Doggy” in each town by having the most complete web site – and convinced that the web is the “future.” Maybe it is, maybe not. But it isn’t now, because the industry hasn’t found a way to raise enough revenue from their web ads to pay for all that free stuff they provide. This gaping gap in projected income ran head-on into the double whammy of their eroding customer base and the sudden super recession. Hardest hit are the big chains that took on a heavy debt load to buy other papers (telling themselves, “The market value is going to keep going up” – just like the over-leveraged home buyers). Socko! The party’s over! An unavoidable down-slide is now taking place (we can see it locally), and the only industry strategy is: Cut Expenses. Since personnel and newsprint are, by far, the largest expenses for a newspaper, the short-term cure is fewer pages and fewer employees – a national trend we can also see locally.

It’s sad. But (in my opinion) they’ve brought it on themselves – doing it all backwards. They’re hoist by their own petard. I hope they can find answers, because we need local newspapers.

–Vic Jose

Vic Jose :: Mar.09.2009 :: Uncategorized ::

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