Working Title

Newspaper advertising sales dropped in every category last year.

Also declining was online revenue, which had grown for the previous four years, but by only 1.8%. That means online was still up 56% since 2003.

Here are two charts showing print and online ad sales.

U.S. newspaper advertising sales (source:NAA)

It is good to see the growth in online, but note that the declining chart above it is 10 times bigger. Obviously aggregate sales are affected by the availability and supply of media in given markets, but it shows how much space online would have to make up to support similar operations.

By going online, just cutting printing costs won’t make up that difference.

• Newspaper Association of America: Advertising Expenditures

Editorial cartoon about Google news - click on the image to see it in its full size

It was interesting to be in San Francisco recently and read the discussion, overt and snide (see above), in the Chronicle and elsewhere, about how the future of San Fran might play out without a newspaper.

The Chronicle is NoCal’s biggest paper, with a circulation well over 300,000. But last month, the owner — specifically Hearst vice chair and CEO Frank A. Bennack Jr. and president Steven R. Swartz — released a dire statement.

“…without the specific changes we are seeking across the entire Chronicle organization, we will have no choice but to quickly seek a buyer for the Chronicle or, should a buyer not be found, to shut the newspaper down,” they said.

The paper has been losing money every year since 2001, and, like everywhere, 2009 is hardly rosy. (Hearst recently made good on its word elsewhere, turning the Seattle Post-Intelligencer into an online-only shadow of its former self.)

Cartoons like the one above, and supportive letters to the editor filled the Chronicle. The people of San Francisco, surprise surprise, love their paper. I’ll pay more! they chanted, on the letters page. Here’s a selection of letters from today alone.

I have been giving a lot of thought about how to save one of the high points of my day: The Chronicle. … This plan may also have the benefit of encouraging the suburban dailies to devote more of their coverage to their communities, instead of relying so heavily on the Associated Press and other news services to serve their customers, who may not have the advantage of reading a “city paper.”

– How about one giant daily?, David Loberg, March 26

Don’t leave us … we need you desperately!

–Core audience, Daniel B. Rosen, March 26

I have been reading this paper since I was in elementary school in the ’60’s. I even won an elephant shaped key to the San Francisco Zoo information boxes for a painting when kids used to submit their artwork and the pictures were published in the original Green sports pages alongside the comics.

–Santa Cruz View, Susan Schaefer, March 26

 

My heart goes out to these and other newspaper lovers around the world in danger of losing their daily fix, their connection to the world around them. Here’s hoping something valuable and sustainable comes out of their fights.

The difference between a business venture and a not-for-profit is not just that the latter is not intended to make money but that it exists for a different and specific purpose that offers some public or community benefit. These organizations, don’t have anyone who owns them, not shareholders, but they do have members who elect people to run the show. The members may pay a membership fee, but they have no direct pecuniary interest. Their interest should be in the purpose.

For their good works governments offer tax-free status, so these organizations can put all their resources, income, or donations to further their purpose.

Saving that proportion of your income isn’t the only implication of operating as a not-for-profit though. Not-for-profits don’t just have a bigger margin, they also operate differently.

The lack of shareholders means that they do not, they cannot, pay any dividends and don’t have to answer for financial return, nor do they have a stock price to follow. While there may be turnover in the board of directors and swaying opinions among the membership, unlike businesses they do not have to worry about changing ownership. They do still have short term challenges and concerns, but they can operate for the purpose and to principles over the long term.

In times of crisis and when times are tight not-for-profits may similarly have to make cuts like business do to survive. In better times, though, these organizations can invest in the future, not to make money, but to do better.

Many have suggested a not-for-profit structure for news operations. It is worth looking at.

Reporters and editors who work in the news business tend to already know principles of their work: Things like keeping the people informed as a pillar of democracy; Keeping the powerful in check and shining light on corruption; Helping people be connected in their communities; And participating in the public discourse.

Newspapers already serve two masters, the advertisers and the readers, not to mention those who might be public traded and owned by shareholders. As advertising goes down, choosing a not-for-profit structure would eliminate the shareholder influence, reduce the need for higher ad revenue, and allow news operations to focus on their readers and their principles.

Duncan Day-Myron of The Ontarian at the University of Guelph quoted Magda in his article on the changing news business.

Here is an excerpt that includes Magda’s quotations.

Magda Konieczna is a freelance writer and award-winning journalist currently working out of Poland, but who spent time working as the Guelph Mercury’s municipal affairs reporter. She is in the process of researching PhD work looking at alternative business cases for publishing news with the Waterloo Region Record’s Ryan Chen-Wing.

“We’re focusing on four models: not for profit, which is already prolific, with examples including the Guardian, the Christian Science Monitor and, closer to home, the Walrus; crowdfunding, of which I know only one good example, at spot.us; foundation-funded, such as ProPublica; and government-funded, like the CBC,” she said of her research, although her findings “haven’t yet come across any organizations that actually changed their business model from the standard, for-profit one to something else.”
[...]
The cost, or lack thereof, of news online isn’t the only issue. Konieczna identifies another factor that she feels has contributed to how the Internet changed the news industry.

“I think what there’s been little recognition of until very recently is that the proliferation of news sources has changed the business model for news,” she said. “The problem isn’t strictly that of giving news away free; it’s that, given so many alternatives, the traditional funding for newspapers is fragmented so much so that it can’t support the number of newspapers it once did.”
– The Times… they are a-changing The Ontarian 5 Mar 2009

It is interesting that a student newspaper is looking at this issue. In general university newspapers are not-for-profits that are, in part, supported by a student fee levy. Models like that have been proposed for the wider newsmedia.

• Student media wades in 3 Mar 2009

I first read the suggestion of an anti-trust exemption for newspapers to jointly agree to start charging for content in DeLong’s piece in the American magazine.

He wrote: “The LA Times talked of the need for an antitrust exemption so newspapers can jointly agree to stop giving away the product, and several columnists have chimed in about the need for monetization.”

Anti-trust was an issue back in 1970, when the Newspaper Preservation Act allowed newspapers to enter joint operating agreements.

The Newspaper Preservation Act of 1970 was an Act of the United States Congress, signed by President Richard Nixon, that authorized the formation of joint operating agreements among separate competing newspaper operations within the same market area. The act was designed to exempt newspaper from antitrust laws to allow the survival of multiple daily newspapers in a given urban market in the face of declining circulation. This exemption stemmed from the fact that the alternative is usually for at least one of the newspapers, generally the one published in the evening, to cease operations altogether.
– Newspaper Preservation Act of 1970

So now faced with declining newspapers Tim Rutten of the Los Angeles Times is suggesting a new anti-trust exemption.

Two major newspapers — the Wall Street Journal and the Financial Times — charge readers tiered fees to view their online journalism. The rest of the industry has decided there’s more money to be made in charging advertisers for the larger audiences that free content attracts than in selling online subscriptions.

That’s wrong, in my view, but it’s hard to argue with as long as some major newspapers are giving their online journalism away; until they stop, nobody can risk charging for theirs. That’s where the antitrust exemption would come in: It would allow all U.S. newspaper companies — and others in the English-speaking world, as well as popular broadcast-based sites such as CNN.com — to sit down and negotiate an agreement on how to scale prices and, then, to begin imposing them simultaneously.
– Newspapers need an antitrust exemption 4 Feb 2009

The American magazine has a great analysis piece by James V. DeLong about the decline of the newspaper and the possibilities the future holds. In the end, he essentially advocates for a model where newspapers assert their rights over the intellectual property they produce and require payment for it.

The newsies must have had a Come-To-Jesus session recently, or perhaps Come-To-Darwin, because suddenly the Internet is full of rumbling about the need to find a monetization model. The editor of the New York Times just “challenged the belief among some of the digerati that ‘information wants to be free,’ saying ‘a lot of people in the news business, myself included, don’t buy as a matter of theology that information “wants to be free.” Really good information, often extracted from reluctant sources, truth-tested, organized, and explained—that stuff wants to be paid for.’” The LA Times talked of the need for an antitrust exemption so newspapers can jointly agree to stop giving away the product, and several columnists have chimed in about the need for monetization.
[...]
So the Netizens will fight the news industry on this right up to the point of mutual destruction, and then all bets are off because it is impossible to begin to imagine the shape of an Internet deprived of the material produced by the newspapers and wire services. At that point, the options change to government bailouts of the news business, or endowments for wire services, or beneficent foundations.
– Preparing the Obituary 3 Mar 2009

In DeLong’s view the newspapers have been devaluing their own expensively-created content by giving it away. Now they have to face the deficit between the value they create and that which they capture. At some point news will have to be paid for or not be created.

I got an email today from the Ontarion, the student newspaper at the University of Guelph, asking for an interview on the future of print. It’s perhaps a testament to the community in Guelph and the university that their paper spends so much time covering the city, instead of just focusing on issues directly perceived as impacting students.

Here’s what the reporter wrote:  

I’m writing a piece about the future of print media, especially local papers, in light of the economic downturn and recent layoffs at both the Mercury and the Kitchener Record. Would you be available to answer questions any time between now and Wednesday noon-time?

I’m curious to see what the student newspaper take will be on the situation. (Last week, 13 people were laid off at the Mercury, 21 at the Record. The visible html tags in the story about the layoffs bode poorly for the future of the paper, I’d say.) Many university papers already operate as not-for-profits — I wonder whether this will colour their perspective.

Jacob Weisberg argues in this week’s Newsweek that there has never been a single business case for news, and that it’s unlikely one will emerge. He makes the important point that news has never been strictly about delivering profits, as evidenced by the fact, he argues, that newspapers do things that are expensive and not directly linked to profit. (I differ somewhat, by the way, on this point: while it’s difficult to quantify, I’m certain that things such as six month investigations build readership, which is of course linked to profit.)

What this debate misses, however, is that, unlike most businesses, serious journalism has seldom been about the straightforward pursuit of profit. Nearly all of the most important journalistic institutions in the free world are hybrids of one form or another—for-profit, but underwritten by generous owners or other profitable businesses; not-for-profit, yet entrepreneurial; cooperative, or government-subsidized.

[...]

The great newspaper companies got away with not maximizing their profits either by being privately held or by setting up two classes of stock, which insulated them from shareholder pressure. When the families sold out, it was usually to less sentimental concerns such as Gannett, Knight-Ridder and the Tribune, which sought higher profit margins. But these chains were more efficient and sometimes significantly improved the quality of the papers they bought. Even rapacious media barons and public companies can protect journalistic values when motivated. Rupert Murdoch, for example, has consistently lost money maintaining quality at The Times of London. Out of some combination of vanity, competitive rage and sheer love of the newspaper business, he now looks poised to do the same with The Wall Street Journal. Many serious-minded magazines—The Atlantic, The New Republic, The Nation, The Weekly Standard—have similarly survived on the mixed motives of wealthy individuals.
–Dubious new models for news

 His argument is an interesting one, but I believe he fails to acknowledge that the most popular, mainstream model depending on a mix of ad money and circulation revenue is dead, and while different hybrids will exist, it needs replacing, badly. So I wrote a letter to the editor.

Dear Editor:
Re: Dubious new models for news, March 2
Jacob Weisberg makes a compelling argument against a new holy grail of a business model for news in the post-Internet era. He neglects to mention, however, that while different models exist, the most prolific one, relying on a combination of advertising and circulation revenue, was effectively killed off when no one seemed to be watching. Free sites like Craigslist encroach on paid classified advertisements; cheap google ads threaten large so-called display ads by the major telecom companies; news available free when you want it and where you want it means trouble for circulation revenue.
Newspapers — and, to a lesser extent perhaps, other news media — were slow to act when the Internet came along, and slower to realize that it’s their business model, not just their editorial model, that’s in trouble. Now with the global economic downturn pushing them against the wall, a new model is needed, and fast. If not, we look forward to a future where local news will be written by the mayor’s PR folks.
Magda Konieczna

I’ll let you know if it’s published.