Going From Buggy Whips to Carburators

There's been a lot of news lately about newspaper business failures. It's dire though not unexpected; dead-tree publications have been in a steady decline for years, ever since the web came into its own in the 1990s. Many top-tier dailies are bleeding money. This is certainly not sustainable and it isn't likely to reverse. It's a textbook example of secular change, in contrast to the ebb and flow of the business cycle you find in sectors like commodities. All that's different now is that when the economy is weak the weakest companies are doomed; and that describes newspapers very well indeed.

Does it have to end this way? Perhaps it doesn't but there are reasons why it is going to be difficult for newspapers to find a new and effective business model. First they need to accept that the newspaper business is dying. Then they need to take a good, close look at their assets and decide on a better way of making a new business out of those assets. It isn't easy. For one thing, the persistence of corporate culture that makes it difficult to accept that the old ways no longer work. Their revenue sources are drying up: subscribers are moving to the web where news is more timely, more diverse, and cheaper, and advertisers are following since they must go to where an audience can be found.

Newspaper have some important assets, including brand, news gathering and reporting, and local presence. They also do not have the assets they need, including effective web presence and marketing. Tactics which are proven to fail, such as online pay walls and delaying or abbreviating articles, only serve to encourage people to look elsewhere for their news. This diminishes the value of their brand, which could otherwise serve to preserve customer loyalty.

None of these facts is new, so I'm sure you've heard it all before. Let me suggest some reasons why they find this change so difficult. I don't know if I'm entirely right, though I do believe I can capture some elements of the truth.

• Advertising Charges: Newspaper ad rates are based on circulation (potential audience size), audience locale (people geographically near to the business), placement (front page, back page, placement near relevant content, etc.), size and colour, among other factors. With newspapers, these factors don't change much over time, so businesses tend to be regular advertisers and can track the effectiveness of their ads. In contrast, on the web this model doesn't work. The audience is less predictable: they are less local, averse to annoying ad placement, and transitory. Audience value is determined by unfamiliar metrics such as impressions and click-throughs. In contrast to the newspaper business, everything changes, and keeps changing, every day. There's a lot more to establishing a profitable web presence than hiring a web site development shop and subscribing to a ad delivery service.
• Unique Content: Before the web, newspapers had a near-monopoly on news: the trivial and the in-depth, and local and global, except for the breaking news phenomenon handled better by radio and television. The industry learned to share national and global news sources through article syndication from consortiums like the Associated Press and among the multiple newspapers owned by conglomerates. This lowered the cost of story production, and thus increased profits. It didn't matter to subscribers that much of the content of the newspaper was identical to that in newspapers elsewhere. With the web, all of this matters. AP is desperately trying to control how their stories are distributed, and paid for, while the online properties of conglomerates like Canwest all look much alike. It is apparent to everyone that the amount of unique content per newspaper web site is small. Aggregators like Google are a better fit to the web by making it easy to find a broad diversity of articles related to any given event, even those of mainly local significance. There isn't much that's unique to newspapers that enables them to carve out a loyal audience. If they resort to news aggregation, they find that the competition is fierce.
• Legacy Overhang: Unlike web-only properties, newspapers have to support two distinct and even competing properties: online and paper. Many periodicals have taken the plunge to scrap their printed editions to go web-only, ejecting the dying model and leaping into the unknown. Newspapers fear, and probably for good reason, that if they do that their audience will not follow, for the aforementioned reasons. Instead they plod along with dual products that have no clear distinction, except the artificial ones such as delaying news to the online property and restricting access to news archives. For them, the newspaper business continues to decline (and suffering financial losses) while the online business really isn't a business at all, but a holding space for...something, if they ever figure out what.

Newspapers will eventually have to decide once and for all what business they are in, then focus and execute aggressively. Sitting on the fence, teetering back and forth in response to crosswinds, can only be temporary. Like the old joke about transitioning from driving on the left to driving on the right, you have to do it all at once or chaos ensues. Buggy whip makers never did transition to making auto parts, and perhaps that is the fate of newspapers.