Red All Over
Is there any hope for the future of newspapers?
BY STEVEN RATTNER
Monday, February 19, 2007 12:01 a.m. EST
The news about newspapers could hardly be more dismal: falling circulation, repeated rounds of layoffs, disappearing ads and a chain of bad earning reports. It's an unsavory stew of ills, one that shows little prospect of becoming more appetizing.
Many journalists--and having spent the first slice of my career reporting for the New York Times, I still regard myself as one--would prefer to blame the nasty folks in their corporate offices. By this reckoning, it was the layoffs that degraded the quality that cost the readers that led the advertisers to flee that caused more layoffs and so forth.
That smacks of a vicious circle, or perhaps more of a perfect storm that began with the loss of readership. The Washington Post, a model of journalistic excellence, has lost 14% of its circulation since 2000. Across the industry, circulation has been dropping for 20 years, and worse, the pace of decline seems to be accelerating. In the 12 months ending in September of last year, the 50 largest papers lost 3.2% of their daily circulation. Only two newspapers in the top 25--the two New York tabloids--grew circulation during this period, a statement in itself.
Perhaps most worrisome is the loss of young readers, who have drifted away steadily since the early 1970s, long before there was an Internet, when more than 70% of 18- to 34-year-old Americans read a daily newspaper. Last year that figure stood at 35%.
No doubt, the Internet has tempted some, particularly the young, with a free and timelier product. In September, a record 58 million Americans visited a newspaper Web site, and many newspapers are fighting hard for more with interesting new products, such as by emphasizing local news and providing easier ways for readers to share stories and ideas, a version of viral marketing.
Even though most news sites are free, if all that was happening was a shift from print to online, newspapers could imagine a successful transition since nearly all the marketing, production and distribution costs associated with print would vanish with the presses and trucks.
But regrettably, newspapers face more complex, deeper and considerably more intractable challenges than these theories suggest. The time that Americans spend reading newspapers has been dropping steadily (now down to 15 hours a month), with scant evidence that quality Internet time is taking its place. In September, the average visitor to newspaper Web sites spent only 41.5 minutes per month on those sites, up 10% from the previous year but not nearly enough to make up the loss.
And while the use of newspaper Web sites is growing, the vast preponderance of Americans get their online news through the big portals (AOL, Yahoo, etc.), which means that they are mostly consuming a bland porridge of wire service stories.
Most fundamental is whether the public is still interested in news (as opposed to entertainment, gossip or lifestyle info). More than fearing the death of newspapers--they will struggle on--we ought to fear what changing reading and viewing habits are forcing newspapers to think of as news. We shouldn't fault the papers for this, however, any more than we should fault the evening news for going soft or the newsweeklies for their endless lifestyle covers or CNN for its hyperventilating over every weather blip. They're merely providing what their customers are demanding.
We should also bear in mind that for that sliver of America that seeks quality news, it is arguably more available today than ever before: There is this newspaper, now published six days a week; the national edition of the New York Times home-delivered across the country; The Economist (with its U.S. circulation of 600,000); the "NewsHour," the BBC and Charlie Rose on public television; and for the true junkies, C-Span. Not to mention the more rarefied Internet precincts.
But for newspapers, the challenges are mounting, including advertisers fleeing not only to follow lost readers but also because they believe that newer forms of media can be both more cost-effective and just plain more effective. For example, classified ads, which can represent a third of a typical newspaper's revenue, can be delivered online faster (instantaneous), more conveniently (searchable) and cheaper (sometimes free via Craigslist). Not much imagination or boldness is required to predict that classifieds could completely disappear from newspapers.
Display advertising presents another worry. For years, newspaper advertisers soldiered on without any clear metric for value received because they had no viable alternative. Now, thanks to Google, we have "pay per click" ads lined up alongside our search results, allowing an advertiser to know exactly what he is paying each time a surfer lands on his ad. Pay per click has evolved into "pay per lead," in which an advertiser pays based on a viewer filling out a form or making a similar affirmative response, and now even "pay per transaction," in which an advertiser only pays if a sale is made.
In short, it's not the need for profits that's changed--that's older than Adam Smith--it's the ability of newspapers to generate those profits.
If public ownership for newspapers is problematic, then, why not withdraw from the harsh glare of Wall Street altogether? Some trumpet "going private"--replacing pesky public shareholders with private equity. However inviting that may seem to beleaguered managers, this option merely substitutes one rapacious posse of shareholders for another equally fierce brigade of capitalists. The fundamental problem--a declining business--would remain.
Others yearn for the good old days of munificent family ownership. Billionaires are popping up across the country, from Boston to Los Angeles, eager--depending on which story to believe--either to add a trophy property to their mantel or to save an institution important to a free society.
Mogul-in-chief ownership brings its own complications. A new gaggle of Sulzbergers and Grahams could certainly reinject an emphasis on quality journalism. But for every Adolph Ochs, the great patriarch of the Times, there was a William Randolph Hearst. In more recent times, Wendy McCaw bought the Santa Barbara News-Press in 2000 and after six havoc-filled years, the editor and six top colleagues stomped out. Meanwhile, the local group that purchased the Philadelphia Inquirer and its companion Daily News has announced a round of layoffs.
The omnipresent stresses suggest that we can't expect the objectives of enterprises that were organized around a for-profit interest to necessarily intersect with the societal value of quality journalism. So perhaps it's time to think about new models for the news business.
Not-for-profit status might be one possibility. Instead of having billionaire moguls as proprietors, we could try to turn them into philanthropists who found nonprofit organizations to buy and operate their local papers. At least one such example exists: the St. Petersburg Times, owned by the Poynter Foundation as a result of a bequest by Nelson Poynter.
Purchasing major newspapers would be costly and perhaps impractical, so a hybrid model may make more sense. We could create a pool of money (possibly from a license fee similar to how the BBC is funded). News organizations with an expensive but important project in mind could apply for funding, much the way producers in the public television world have for the last 40 years. Philanthropy could also play a role here, as Joan Kroc did when she left NPR a $200 million kitty.
We've had experience in the past--the New York City subways come to mind--with businesses that began as conventional, for-profit corporations, and, for one reason or another, were later rendered unprofitable while still being viewed as essential services. It's time to apply some creative thinking to newspapers and, for that matter, to serious journalism in other media. Then we need to convince Americans that they should pay attention to it--and pay for it.
Mr. Rattner is managing principal at Quadrangle Group, LLC.
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