Abstract
If you had long ago given up hope of a future for printed newspapers, you possibly stopped paying attention around 2010. Even then you should probably have listened more carefully. So concludes Marc Edge, a long-time Canadian reporter, editor, and scholar. Many analysts and scholars, overwhelmed by dramatic closures, cut-backs, losses, and the juggernaut of online news did not notice that the closures were mainly unsustainable second-place dailies, expenditure cuts really did ensure continuing profitability (even as profit rates returned to historically “normal” levels), and losses were more on paper than brick. Chapter 11 bankruptcies were not so dire. Bankrupt companies still made money. Lenders took a haircut, maybe lost some ownership. Yet new owners arrived and most papers survived. Profit at debt-laden chains like McClatchy dipped from the mid-20% range to 19.1% in 2008 but was up to 27% in 2010.
Few doomsayers appreciated the significance of giveaways or the later runaway success of metered paywalls. They were too much distracted by the ballyhoo about newspaper–television “convergence,” web-based metrics, and the annihilation of already-torn Chinese walls. Newspapers did not die; newspaper competition did. Closures of metropolitan dailies have been almost entirely offset by new suburban and satellite city dailies. Some large papers are now not so large; small papers are often more profitable than large (the smaller the market, the better a newspaper’s prospects).
The basic problem was not lack of operational profitability but excessive debt needed to pay for “exuberant” acquisitions in the 1980s to 2000s. Even debt became an object of investment in an industry that enjoyed generous regulatory exemptions and tax benefits. The Internet was not so revolutionary; political economists should have better recalled how newspapers adapted to television. No major North American newspaper exited print publication after the Rocky Mountain News and Seattle Post-Intelligencer in 2009. The Ann Arbor News folded as a printed daily, but the University of Michigan’s Michigan Daily continued a roaring trade. In 2010, the Honolulu Advertiser merged with its joint operating partner, the Star-Bulletin, which had been on life support for years.
After 2009, profit levels of most newspapers remained in the double digits, and some even topped 20%—a good deal better than the Fortune 500 average of 4.7%. The business model for print advertising, even at lower levels of revenue, was more profitable than the business model for online news media. Apparently huge losses were often merely an expression of an estimated decrease in the value of the business. Declining circulations proved a boon, encouraging papers to move away from casual subscribers with the biggest “churn” and instead focusing more on a reliable core—the better educated, more affluent readers who are best able to support paywalls.
The newspaper crisis, predating the Internet, was manifest by the 1990s. Circulations leveled off and declined. The number of cities with competing newspapers shrank. Ownership by investors whose main interest was inflation of stock prices, produced a more market-driven profession, its managers sidetracked by stock options, profit-tied bonuses, and ruthless cost-cutting. Major advertisers such as department stores were put out of business by discount retailers who preferred direct mail. Niche publications undermined classified revenues.
The industry made matters worse in sometimes foolish reaction, proving unfit for successful collaborations yet mired in group-think slavery to the maxim of free online content even as business was further threatened by giveaways (these would be hit hardest by the downturn in advertising) and by the Associated Press (AP), whose directors voted in 1998 to sell AP content to Yahoo! By 2005, only 44 online newspapers charged a subscription fee. Gradually, newspapers discovered the advantages of customer registration, which generated loyalty. Enough core advertising remained to sustain monopoly newspapers, and most local merchants appreciated that printed newspapers were still their most effective route to customers. Affluent readers, paying closer attention to their communities, were also of greatest interest to advertisers, and prepared to pay higher cover prices in return for online access. Metered paywalls offered free access for some stories, increasing access for premium content, most likely to be paid for by affluent subscribers. Papers that profited most from paywalls were often based in smaller markets where newspapers had less competition and covered news of great interest to local residents, the kind that other media were most likely to ignore. Readers began to indicate willingness to pay for online access to local reporting, but not only local. By mid-2014, the New York Times had 831,000 digital subscribers and, as with many other papers, revenues went a long way to offset losses from print advertising. New revenue sources helped fill the gap—including digital marketing services to local businesses, wine clubs, and sponsored content.
Edge’s book is timely, particularly for those whose understanding of the digital threat remains stuck in the 2000s. He demonstrates ample awareness and critique of the dangers to good journalism of excessive profit orientation from both before and after the 2000s’ recession. There was scope for a more thorough accounting of the damage inflicted by the crisis both on citizenship staples of local/state government and court reporting, and on journalists’ hopes for meaningful careers and satisfactory remuneration.