The Newspaper Under Attack

A US report released last Friday by Merrill Lynch spells out some compelling reasons for newspapers to reinvent themselves online. The paper, with the prejudicial title “Deep Depressing Dive”, suggests that Merrill Lynch analysts are taking an “increasingly sober” outlook for the newspaper industry, lowering estimates once again for newspaper ad spending. “We remain concerned regarding the newspaper industry’s outlook as the dual impact of changing media consumption habits and the migration of highly lucrative classified ads to the Internet are squeezing margins and hampering growth.”

The report goes on to acknowledge that newspaper publishers are changing their business models, including a push toward greater online distribution. However, the analysts expressed concern that newspapers are “being too aggressive with their online pricing as these new competitors are either not charging or charging lower prices as they seem more motivated to use the traffic being generated by the listings to offer other wraparound services.”

However, don’t sound the death knell of newspapers just yet. Not all papers are wilting under the online onslaught. When the Bakersfield Californian, an independent, family-owned paper in central California, heard that free classified site Craigslist was coming to town last year, they decided to launch their own classified Web site — and make it free. The radical strategy turned out to have an unexpected benefit. As local musicians began using the free site to find band members and equipment, or to advertise gigs, the site attracted a younger crowd that hadn’t advertised in the newspaper before and didn’t appear to be cannibalizing the newspaper’s paid classifieds. The Californian doesn’t make money on the Web site now, but plans to start running paid ads from businesses on the site later this year.

As Gary Pruitt, chairman and CEO of the McClatchy Company (which signed a deal in March to acquire US newspaper chain Knight-Ridder) commented at the time of the acquisition: “Last year, the world celebrated the 400th birthday of the newspaper. Those of us in the business also recognized it as the 399th anniversary of the first prediction of our demise. Speaking as someone whose company is writing a US$6.5 billion cheque to triple its newspaper holdings, I beg to differ.

“To many, ink spread across newsprint pages seems old-fashioned and destined to disappear. This conventional wisdom has become so pervasive that you can buy the nation’s second-largest newspaper group, Knight-Ridder, for a price that would have seemed an unimaginable bargain only a few years ago. But while that kind of thinking might be good for our company — we were the buyer, after all — it’s wrong. The fact is, newspapers are still among the best media businesses – and the most important.

“Even the biggest bears among newspaper analysts acknowledge that the companies still make good money. Their rap is that we’re losing readers so fast that the good times can’t last. But are we in a precipitous decline? The answer is no. Certainly, we’ve seen a gradual decline in the number of newspapers sold over a 40- or 50-year time-frame. More recently, circulation began dropping at a rate of 1% every year from 1990 to 2002. Certainly as a percentage of households, newspaper readership has fallen considerably. Meantime, total newspaper advertising volume peaked in 2000 and has slipped 4%, according to the Newspaper Association of America.

“However, no competitor in local markets has held onto audience as well as newspapers have. Others proliferate — more TV channels, more radio stations, infinitely more Web sites — but the number of daily papers stays steady. While we rarely face direct competition, our competitors see more all the time.

“Surveys show 54% of [US] adults read a newspaper yesterday. On an average Sunday, the number is closer to 60%. Even among young people, supposedly lost to newspapers forever, 39% read weekday papers and 49% read on Sunday. But what about the future? While it may seem counterintuitive to suppose that a company founded before the advent of electric lights would be a media leader in the age of blogs, podcasts and text messaging, that’s exactly what has happened. We certainly have competition from Google and others. But in each of the communities where we compete, almost every newspaper has the largest news staff, largest sales force, biggest audience and greatest share of advertising in its market. Whether it’s on the Internet or off the presses, we are capturing that business.

“Adding the unduplicated reach of newspaper Web sites to newspaper readership shows that, far from shrinking, our audiences are growing steadily. Simply put,more people want our products today than wanted them yesterday; this is hardly the profile of a dying industry. But of course our products have changed as we have all been forced to adapt. Today’s daily newspaper is the engine driving a multimedia company that includes popular Web sites, foreign language publications, direct marketing initiatives and much more. Replacing the notion of “readers” with “audiences,” we’re fast becoming multi-platform, 24/7 news companies — and it’s working.

People in the newspaper industry have a lot riding on this – our jobs and reputations, for starters; but the stakes for society are far higher. Self-government depends on continuous civic conversation, which in turn depends on people having a common vocabulary. Without a shared sense of what the problems are, there’s little hope of finding solutions. That shared middle — a place where people basically agree about the facts and the issues, even if they differ over what to do about them — is where we believe our responsibilities as newspaper owners lie. And it is under assault by spinmeisters, partisans and ideologues. They all have their place in a democracy — but it is not in the centre. Our place is.

“Employing the extraordinary tools of the digital, interactive era means we can get better at this: more transparent, better listeners, open to hear more voices.Of course we have to change, but changing is a fundamental part of our heritage, the result of a 400-year evolution that has weeded out the brittle and the rigid no less ruthlessly than Mother Nature. We survivors are evolving still and employing new tools to leapfrog forward. Yet we still hear voices prophesying our impending doom. A favourite cartoon of mine shows a character explaining why: ‘I’ve been forecasting the demise of newspapers for 30 years,” he says. “If I change now I’ll lose all credibility.’

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