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If you remember, last week’s blog in my sometimes-series on “How To Save The Newspaper Industry,” revealed the startling development that the Indianapolis Star has started doing what I have been recommending for the last two years, namely placing promo spots in their web site (where they give the news away free) urging viewers to check their print edition (where they charge for subscriptions). Check for yourself. This Sunday you will find a block headed: “SUNDAY EXCLUSIVE” followed by leading features that can be found only in the print edition. Brilliant, eh?

But enough self-congratulations (as if anybody cares).

This week, we’ll skim some highlights from the cover story in the current Atlantic Monthly that is the most comprehensive review of the same situation. It is titled, “How The Save The News.” Please note the similarity, and the difference. It’s written by James Fallows, one of the best investigative writers in the business, for whom I have great respect. Except that it reminds me of men I’ve known who can describe women with impeccable integrity – until they fall in love with one of them. James Fallows has fallen in love with Google.

Fallows starts his 13-page piece with the provocative sentence: “Everyone knows that Google is killing the news business.” The second sentence attempts to refute what he has just said: “Few people know how hard Google is trying to bring it back to life, or what the company now considers journalism’s survival crucial to its own prospects.” Those two sentences pretty well sum up the theme of his article. What he is saying is that Google has decided that it needs a healthy business originating the news to provide the fodder for its
own high-level machinations. Notice, as in the article’s title, he believes Google is trying to “Save The News” – not “Save The Newspapers.”

Google Sets Its Goal

Google’s “ultimate ambition,” he asserts, “is in line with what most of today’s reporters, editors, and publishers are hoping for – which is what, in my view, most citizens should also support. That goal is a reinvented business model to sustain professional news-gathering.”

Then Fallows recites a familiar litany of downward trends, beginning with the loss of most classified ads, due to alternatives such as Craigs List. To this he adds “the relentless decline of circulation.” To which he attributes “the consequent defection of advertisers from the lucrative ‘display’ category – the big ads for cars, banks, airlines.” Well, yes, there has been a shrinkage of these categories but they have not disappeared entirely – check any newspaper. And it’s probably not because of the “relentless decline of circulation,” which has been going on for 50 years – as I used to point out in comparison ads between our free circulation paper and the local daily newspaper. Unfortunately, that decline didn’t seem to bother advertisers as long as the daily paper was seen as the dominant force in the market.

Finally, Fallows gets onto solid ground in analyzing what is currently happening, which might be described as production cost differences. He starts by pointing out what we all know, that a newspaper costs much more to print and deliver than a subscriber pays and that 80% of the typical paper’s total revenue comes from ads. Then he takes a rare jump into the obvious (rarely heard among news professionals): “In hopes of preserving that advertising model, newspapers have decided to defend their hold on the public’s attention by giving away, online, the very information they were trying to sell in print. However…it has created a rising generation of ‘customers’ who are out of the habit of reading on paper and are conditioned to think that information should be free.” Pretty obvious, eh? So why has it taken so long for the experts to come out and say it?

Is The Printed Paper Doomed?

Well, why are they doing it – chasing their paying customers over to their free web site? Here again, we are up against a widespread industry dogma (which they don’t want to admit): They have given up on the printed newspaper! Surprisingly, this is not an irrational conviction on their part. It is based on some solid facts, some powerful comparisons. Fallows calls it a flawed business model. One of the Googlites he interviewed declared: “If you were starting from scratch, you could never possibly justify this business model,” he said. He explained: “Grow trees – then grind them up, and truck big rolls of paper down from Canada? Then run them through enormously expensive machinery, hand-deliver them overnight to thousands of doorsteps, and leave more on news stands, where the surplus is out of date immediately and must be thrown away? Who would say that made sense?” To simplify the comparison even more, consider this. Obtaining, writing and editing the news costs about the same, regardless of whether it goes into a printed newspaper or on the web. If it is printed on paper, it must then go through those expensive presses and be delivered at high cost. If you want to put the same news on the web, all you have to do is press a button. The difference in savings is enormous. That is what is driving the industry away from the printed newspaper.

Except it doesn’t work – yet. Was it about 20 years ago that Ted Turner, founder of CNN, predicted that all news soon would be online and printed newspapers would be gone within five years? Ted Turner was merely ahead of his time, maybe. Newspaper traditionalists hooted at him for the next ten years while they were still riding high. Now that the industry has tanked (almost), they are not hooting as much. Google is moving into the breech. How are they doing it? Their leading assault weapon (in addition to being electronic) is called “unbundling,” and as Fallows declares, “Google has been the most powerful unbundling agent of all.” This device, he explains, “lets users find the one article they re looking for, rather than making them buy the entire paper that paid the reporter.” That last part is why newspapers dislike Google. With all their web-search magic, Google can “unbundle” the whole newspaper and siphon-out all the articles anywhere in the world about any topic. So if all you want to know today is everything about left-handed wrenches, they can find it and give it to you. In other words, you don’t have to buy a newspaper to look for the latest on left-handed wrenches. But wait a minute? Is that all you want to know today? Is that why you have been buying a newspaper? Do you like to sit in the morning with your coffee and read only about left-handed wrenches? I don’t think so. You want to know “what’s going on?” You have other interests, especially about your hometown, and also state, national and world news, human interest features – and other things you haven’t even thought of. Television has got partway there with their news programs, but only with a smattering of top stories, and rarely does it give good coverage to your hometown news (as in Richmond, etc.) The electronic geniuses haven’t yet found a way to obtain all the news you want and present it in an easy-to-read way – yet. They may get there, but not yet. And that’s why you still like your hometown newspaper.

Web Ads Are Not As Effective

Still, newspapers and their new-found buddy, Google, are betting on the come. As Fallow puts it: “Publishers would be overjoyed to stop buying newsprint – if the new readers they are gaining for their online editions were worth as much to advertisers as the previous ones they’re losing in print.” Remember, newspaper ads pay for about 80% of their costs and so far web ads are coughing up only about 7-8%. In other words, web ads are not worth as much to advertisers as print ads, and so far the electronic geniuses have not found a way to make them as attractive or a way to satisfy potential customer with sitting down and watching a web screen the way they’ve always done to peruse a newspaper. Not yet. Here’s Fallow’s take on this shortcoming: He says that the crucial part of the Google analysis is that eventually the publishers will find a way to make their online editions worth as much to advertisers. Maybe. He continues: “The news business…is passing through an agonizing transition – bad enough, but different from dying. The difference lies in the assumption that soon readers will again pay for subscriptions. And online display ads will become valuable.” Maybe.

But why wait? Why not find solutions now to preserving the printed paper and prepare for the sweet bye and bye when the web takes over everything – if it does?

New Research Is Revealing

Before offering our final answer, let’s take a short detour to check-out the research that has just appeared in the latest issue of the newspaper industry’s “bible,” the Editor & Publisher magazine. It’s the first research of this kind I’ve seen. Martin Langeveld, who has spent 30 years in newspaper management, reports on an analysis published at Harvard’s Nieman Journalism Lab. In just one excerpt from his article, he reports that “consumers spend an ever-increasing amount of time online (more than 200 million Americans currently are on the Web about 37 hours a month), newspapers have failed – after a decade and a half of trying – to figure out how to follow, or lead, their readership into the digital realm.” That pretty well mirrors what we’ve just been talking about doesn’t it? And he bases his conclusion on the latest research. Laneveld follows his general conclusion with what I consider are some pretty startling research (not cited by Fallows and never seen in newspapers). These are known as “page views” of all newspapers and the data are supplied by Nielson Online. Of the combined print and online page views, just 4.57% were online and 95.43% were in print. However, the current wisdom is that page views are not nearly as important as “engagement,” or time spent with content. Looking at the time metric for newspaper content, the comparison was 3.13% on the Web and 96.87% on print. I would not have guessed that the difference would have been that overwhelming. Now, can you see why the advertising world is not clasping online advertising to its corporate bosum? Langeveld’s conclusion is: “So while newspapers continue to lose readership on the print side, that disappearing audience is not showing up at their Web sites.” He throws in a final opinion: “Meanwhile, much effort and dialogue continues to focus on getting readers to pay for content and battling aggregators (like Google) – energy that might better be spent figuring out how not to lose the sizeable remaining audience for newspaper content…”

Which leads us back to Fallows and his soul-mate Google to highlight what they consider the two most distracting obstacles between now and the Great Come and Get It Day when everybody reads everything on the Web.

Fallows cites the “two broad initiatives” Google is pursuing to overcome these obstacles, which he says are “the two biggest business emergencies today’s news companies face: they can no longer make enough money on display ads, and they can no longer get readers to pay. According to the Google view, these are serious situations, but temporary.” Interviewing a Google executive, he reports that the Google conclusion is that: “Online display ads my not be so valuable now…but that is because we’re still in the drawn-out ‘transition’ period. Sooner or later – maybe in two years, certainly in 10 – display ads will, per eyeball, be worth more online than they were in print.” Maybe.

On the subject of overcoming the obstacle of getting people to pay for the news so they can watch both news and ads online, the recent history of remedies is so full of pet projects, weird guesses and cockamamie conjectures that they boggle the mind. One of the electronic geniuses may think of a winner some day, but so far no one has – except for the Wall Street Journal’s special web site which is built around “need to know” news that some people are willing to pay for.

‘Discovered In Plain Sight’

So here we are at the end of the tortuous trail “In Search Of The Answer To The Newspaper Dilemma.” With more bravado than credibility, I am willing to offer The Final (Temporary) Answer, which I believe has already been “discovered in plain sight.” It’s not my personal answer; rather it’s one that has been tried and found successful – and has been described in this space about a year ago.

Some 3-4 years ago, Walter Hussman Jr., owner-publisher of the Little Rock, Ark., Democrat-Gazette, decided he was tired of giving away everything on his free web site, so he conjured a scheme for charging for both his printed newspaper and web site. Readers got both for about the same price (package deal). They didn’t get either one without paying, but for one price they could choose to use one or the other. It’s interesting to know that about 90% of people in his area chose the printed newspaper. You know, it’s like the old (now unobserved) ditty, “Love and Marriage, You Don’t Get One Without The Other.” Did people drop their subscriptions? No, his circulation went up – the only newspaper in his area to do so, while other newspapers in the same trading area that were giving away their web site all have declined in circulation.

Now (finally) how does Hussman’s idea apply to other cities, other newspapers? I’d say it applies to any size newspaper, but especially to small and medium-sized papers that serve smaller towns and cities. Why small and medium-size? Because local news means more to readers the smaller the community. But it can apply to all size communities under the right system. The key move is to combine the newspaper and the local web site and sell it as a package. Newspapers have lost most of their former monopoly status for local news and advertising, but they are still the dominant force in any community. Sure, they may now have competition from a rival local web site. But with all their resources – already in place – for acquiring both news and ads, why can’t they compete with anyone who wants to challenge them on their home turf?

Here’s How To Do It

The basic package is simple. All a local newspaper has to do is establish two web sites. Site A has only headlines and snippets of the day’s news and features, along with plenty of promo blocs saying something like: “If You Want The Complete Stories and Features, You’ll Find Them All In The Newspaper or in Web Site B” (as the Indianapolis Star has just started to do). When people call to subscribe, they are given a choice of either the printed newspaper or Web Site B – which has everything that appears in the newspaper.

Some industry die-hards may say, “Why keep those expensive presses going? It’s all going over to the web eventually.” Maybe. Google says two to ten years. Right now, they might as well use those presses, since most of them are fully amortized anyway. If they put the print and web together now, they can save the hometown newspaper in whatever form it eventually takes. And who knows what that form will be? Are they waiting for all of us old-fashioned people to die off, because we have said (by continuing to buy the newspaper) that we do NOT want to sit all day in front of a computer? Do they then intend trying to sell only to the young web surfers who have become accustomed to not buying any news at all? Or, if they change their attitude, they can solve their problem and their future by starting new ways of selling both print and web as a package.

Meanwhile, I’m going to get a cup of coffee and settle back (in any place and at any time I choose) to read the daily newspaper that has everything that’s going on today.

–Vic Jose

Vic Jose :: Jun.05.2010 :: Uncategorized ::

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