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Last week, we set the stage for a solution with the article here titled, “New Struggles for Newspaper Industry.” (Can be accessed in Archives.) I won’t repeat all the details, but the basic theme might be described as: The newspaper industry has been bad-mouthing their own business so much that everybody thinks they are all failing. They are not; they are just making less money, and (in my opinion) trying to save their industry in the wrong way.

Now for solutions.

To find solutions for anything, you have to go back to root causes. In the case of newspapers, the root causes of their decline are several, such as: Their local advertising base is eroding, people are buying more on the internet, young people are not reading newspapers as much as they once did, and some specific causes such as big chains overloading themselves with debt they can’t support now. Most of these can be overcome, at least partially.

What has been the response of the industry? Why, just move everybody over to the net, because it’s cheaper for us and the big trend is toward the web anyway! Beautiful, except it hasn’t worked. It’s almost as if they are trying to put their print editions out of business by telling everyone: You can have a printed edition of our newspaper if you pay us, or you can go to our web site and get it all free. You don’t even have to be a student in Business 101 to know that is a bad business model – unless you are trying to get rid of your print edition.

Why The Web Is Cheaper

Why did they do it? They yielded to the Siren Song that everybody will be reading everything on the web and we can make it up by selling ads on our web site. (Remember that 20% of the average newspaper’s revenue comes from subscriptions and 80% from ads.) The trouble with the Big Move was – it didn’t work. The average newspaper is only getting 7-8% now from their web ads. The other side of the siren song is that production costs of their web are only a fraction of those for a printed paper. Up-front costs in preparation of the ads and acquiring of the news are the same for print or web, but after that, a printed paper must pay for newsprint, mechanical makeup costs, printing and delivery – all substantial costs. With a web site, when the prep costs are covered, all you have to do is press a button and out goes all the stuff to everybody’s computer. Ah yes – what a deal!

Except it doesn’t work. Everybody doesn’t want to sit in front of a computer reading the daily newspaper or getting all news (especially local) over an iPod or whatever those hand-held things are. Also, the web ads are not the same as printed ads; they are mostly reminders, not the illustrated product & price ads you find in local newspapers.

However, the basic error was that the industry created an impossible business plan – giving away free on one side of your business what you re trying to sell on the other. The only explanation vehemently denied) is that they are trying to kill their print edition, but the facts are otherwise: 1) Thinking they can sell enough ads to makeup the difference (proven false), and 2) That other Siren Song of saving all the printing costs and just pressing that web button to send it all out free.

Few Solutions Have Worked

So what’s the solution? A lot have been tried, few have worked. Some of you may know that the Wall Street journal successfully charges for its web site, but even the New York Times and the Washington Post have tried – and failed. The difference is that there is a difference between “Need To Know” news and “Nice To Know” news. The Wall Street Journal has the only collection of the first kind that people are willing to pay for. Many people will pay for the first kind for local news in their hometown paper, but they wont if they get it free on the local web site. Many daily newspapers have been looking for what they call a “pay-wall” between their paid and free. To paraphrase Robert Frost, “Good Fences Make Good Profits.” In trying to make customers pay for their web sites, they have ignored the obvious (in my opinion). Let me cite one success story.

Three years ago, Walter Hussman Jr., publisher of the Arkansas Democrat-Gazette, described his plan in a Wall Street Journal opinion piece. Hussman is an interesting guy. He is the only independent publisher in a major city (Little Rock) who ever ran Gannett out of town (telling this is what got me in trouble). Hussman started out giving all his news away free on the web – until his friends began thanking him for it and telling him that’s why they didn’t subscribe to his paper anymore. He made a simple change; in Little Rock you had to subscribe to the newspaper, and if you did, you got free access to the web. It works. Only 1 per cent of his subscribers chose the web over the printed newspaper. It reminds one of the old song, “Love and Marriage” – Love and Marriage…..you don’t get one without the other. (That IS an old song, isn’t it?) What was the reaction of other publishers? They ignored him. And they are still ignoring him. It seems as if they are still betting on the come, in the sweet bye and bye when they can stop printing their newspapers and save newsprint and production costs.

How It Can Work

To sum up, here is what I propose as The Solution for the survival of daily newspapers in cities of small and medium size (about like Richmond:

1) Keep printing your hometown newspaper as if you believed in its future.
2) Set up two web sites (A & B). Site A has only headlines and promotional items telling viewers how they can get ALL the news stories and special features in the newspapers, plus coupons, etc. Site B has everything found in the printed newspapers.
3) Sell both print and web sites as a package. Web site A is free. Subscribers get both the printed paper and web site B for a single price – take your choice.

So there it is – The Solution that the newspaper industry ignores. And you re entitled to ignore it, too. Or is it possible that you are smarter (in my opinion) than the publishers?

–Vic Jose

Vic Jose :: Feb.14.2010 :: Uncategorized ::

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