America’s Newspaper Industry: Is the print format dead?

225 years after the Pennsylvania Evening Post became the first American daily in 1783, the American newspaper industry is facing its biggest crisis ever. Is the end of the US newspaper industry near?  

Take a look at some of the below-mentioned quotes which appeared recently on some of the prominent US-based Websites:

“Could newspapers soon be a thing of the past?”  

- CBNNews.com

“The US Newspaper industry is in dire straits…”

- Thestandard.com

“The presses need to stop forever, with the delivery trucks shunted off to the scrapyard.”

- Rick Wartzman (Director, Drucker Institute, Claremont Graduate University) in Businessweek.com

“Newspapers continue to struggle with the paradox of skyrocketing popularity of their product while their business model crumbles.”

- Newspaperdeathwatch.com

Even as the corporate America got ready to bid adieu to the financial year 2008-09, perhaps the worst one in many decades, Sun-Times Media Group became the latest newspaper publisher to file for bankruptcy (on March 31, 2009). Sun-Times Media Group which owns and publishes The Chicago Sun-Times joins a growing list of newspaper publishers, which include big names such as The Tribune Company (owner of The Chicago Tribune, The Los Angeles Times); Philadelphia Newspapers; and, Journal Register Company, which have filed for bankruptcy in the recent times. Indeed, stories abound about the layoffs, press closures, indebtedness, and even sell-offs. What is behind the unprecedented crisis at the US newspaper publishing houses?

Though it is true that the trouble at the American newspaper industry has been in the making for the last few years, it has only been hastened by the financial crisis that surfaced in the summer of 2008. Two major forces namely, dwindling ad revenues and fast depleting subscriber base have combined to push the newspaper industry where it is now. According to the industry experts, the circulation at almost all the top 25 newspapers has been in sharp decline for the last few years. As per some rough estimates, top 25 newspapers in 1998 had 18 million readers. In 2008, they had only 14 million readers.

As young and suave urban readers increasingly find it convenient to access news on the Internet, the World Wide Web has proved to be the industry’s biggest threat. The Tribune Group, which publishes dailies like Los Angeles Times (America’s 4^th biggest newspaper) and Chicago Tribune became the first leading newspaper publisher to admit of being hit by the growing trend of shift of readers to Internet news sites and also that of advertisers (advertising revenue accounts for almost 75-80% of a newspaper’s income). However, Knight Ridder’s, the second largest newspaper in the US, was not so lucky and was forced to be sold off by its shareholders. And now there are reports about financial crisis deepening at some of the other leading publishers such as New York Times. The NY Times, one of the well-known newspapers in the US, said that its fourth quarter profits for FY’08 almost halved (down 48%) to $27.6 million, due mainly to lower ad sales, including digital ads, which fell 18%. The group’s online venture About.com and other online properties too suffered a 2.9% decline in revenue in the said quarter. In the meanwhile, the Christian Science Monitor, one of the most revered newspapers in the US has said that beginning April’09 it is shifting completely to the Internet. The group, which publishes the paper from Monday to Friday and comes out with a weekly edition on Sundays and depends on financial support from the Christian Science Church, had projected a loss of $18.9 million in the FY’09 ending April 30^th. The Monitor’s circulation now stands at a paltry 52,000 subscribers, down drastically from 220,000 during the 1970s. To cut costs the publisher is looking at adopting a new ‘Multi-platform’ strategy that includes augmenting content on CSMonitor.com, launch of a weekly print and daily e-mail editions. All these will be subscription-based only. The Monitor group has a distinct advantage over traditional newspapers in the sense that its focus is more on analysis rather than news. This in turn means it does not have to rely on newswires which form a major chunk of the cost of most of the newspapers.

In fact, already eight newspaper publishers in Ohio have said that they would set up their own cooperative to share articles and other features in order to do away with the service of a newswire. Many other publishers including the biggies like The Tribune too have said of contemplating measures to either reduce their dependence or totally do away with the newswire services. 

According to a report in NY Times, it costs “more than $80,000 a year” for a newspaper to source breaking news, articles, photographs etc from the Associated Press (A.P.), the world’s largest news gathering organization that was founded in America by a group of newspaper publishers 163 years ago. This not-for-profit newswire service has been an integral part of American journalism ever since it came into existence more than a century-and-a-half ago. But as the economic recession deepens worsening the finances of most of the newspaper groups, the voices of protest against newswire services is only growing. “We pay in excess of $1 million a year to the A.P., which is equal to 10 to 12 reporters in the newsroom,” said Ms. Nancy Barnes, the editor of The Star Tribune, in an interview to the NY Times. Quoting a host of other editors and publishers, the NY Times said, “It (A.P.) charges more than they can afford, delivers too little of what they need and…is sometimes acting as their competitor in the Internet.” The A.P. has retorted back by saying that the rebellion is confined to only a few financially-troubled publishers and that the protests stem from “some element of misunderstanding about what A.P. is trying to do,” Kathlene Carroll, Executive Editor of The A.P. was quoted as saying by the NY TImes. The A.P. has more than 3,000 journalists in about 100 countries. Some of the other newswire service companies include Thomson Reuters, Bloomberg etc.

Hope floats!

While some newspapers have tried to charge for some of their premium contents, they have found it hard to find enough subscription to sustain their cost. For example, the NY Times had to abandon its subscription services in 2007 after it could sign only 227,000 users in two years of its launch. The only successful example is the WSJ, which continues to charge for most of its contents on its Website. The scenario remains bleak on online advertising revenue front as well, which many experts say may not be sufficient enough to support the industry. “One reason is that online advertising is priced cheaply, because there is so much competition. The way the online model is now, it will never be able to support the journalism that is the lifeblood of what newspapers do,” said John Morton of the research firm, Morton Research Inc. 

However, it may not be all over for the American newspaper industry, which can look at their counterparts on the other side of the Atlantic to draw some valuable lessons. Far away in Germany, Axel Springer, the owner of Bild, Europe’s largest newspaper, said that its 2008 profits were highest in its 62- year old history. Mathias Döpfner, Springer’s Chief Executive, said, “I don’t believe in the end of journalism.” “On the contrary,” he added, “I think the crisis can have a positive impact. The number of players will diminish, but the strong players may be stabler after the crisis.” While situation may not be as encouraging at other publishers in other parts of the Europe such as France (where government subsidies support newspapers) and UK, where local newspapers are fast disappearing whereas national-level players are facing much hardship, yet “there are signs of journalistic life in Europe,” says Eric Pfanner in his article, “European Newspapers Find Creative Ways to Thrive in the Internet Age.” He cites the example of another successful player, VG Nett, a Web site loosely affiliated with Verdens Gang, a tabloid newspaper. VG Nett has been charging money from users. “VG Nett recently started charging up to 780 crowns a year for live streams of soccer matches. And a social network connected with VG Nett charges users to upgrade their profiles,” writes Pfanner. One common suggestion that a majority of the experts seem to agree on is to find a way to protect copyrights which can allow online newspapers to stay competitive. For example, according to Pfanner, two years ago a group of newspapers in Belgium won a court ruling in their favor which required Google to remove their content from its Google News service, which summarizes newspaper articles and provides links to their Web sites; an appeal is pending. 

In Denmark, Google was not allowed to offer its News services amid strong protests from local publishers who insisted on Google taking prior permission from them. Margaret Boribon, Secretary General of Copiepresse, newspaper trade organization in Belgium said, “The main issue for us is not having giants killing us.” While options may be limited for the US newspaper industry, the time is fast running out for them. Its time now to act fast, and decisively.

Source: http://www.oecd.org/dataoecd/30/24/45559596.pdf