Newspapers as we know them are doomed

[Walter Dnes]

Originally Posted by roger1818

I am glad that they aren't buying any of the print media though. That would give Shaw way too much power.

Starting a new thread, because this is off-topic in the Shaw-purchases-Canwest thread. Nobody in their right mind would buy the newspaper chain. Newspapers as we know them are doomed. The internet and the recession are killing them. In "the good old days", the newspaper was "the only game in town" for advertisers. That included not only the big national chains, but also the local company paying for help-wanted ads, as well as Joe Blow trying to sell his sofa because he's moving. Because they were in a near-monopoly position, newspapers could charge extortionate rates for advertising. This supported 30%+ annual ROI. Then bad things happened...

Even before the internet, circulation and ad revenue had peaked. Used car ads were nibbled at by "auto trader" type weeklies. Real estate ads were nibbled at by "MLS Weekly" type papers. Help wanted ads were nibbled at by "Employment Weekly" type papers. Then came the internet

• Craigslist and Kijiji (sp?) destroyed personal want-ad sales
• Monster.com etal destroyed help-wanted listings
• sites like MLS.ca destroyed real-estate listings

And then came the recession. It was the final nail in the coffin.
The main revenue sources for newspapers are...

• ads from car dealers and manufacturers... oops
• ads from companies recruiting new employees... oops
• ads from real-estate agents/companies selling homes... oops

I've downloaded American ad-revenue numbers, and posted them on a file-hosting site as a spreadsheet. The URL is...

http://www.mediafire.com/?sharekey=e...648785df63f216

Graph1 is unadjusted numbers; Graph2 is adjusted for inflation, using constant 1950 dollars. The initial spreadsheet, without the graphs or adjustment for US inflation, can be downloaded from the Newspaper Association of America website at... http://www.naa.org/TrendsandNumbers/...enditures.aspx

Notice the ad-revenue peak in 2005? That was the year Conrad Black sold to the Aspers for $3.2 billion. Notice the powerdive immediately thereafter? Now you know why Canwest went under. Granted, these are American figures, but Canadian figures will be similar, just on a smaller scale.

Newspapers relied on being monopoly gatekeepers for advertisers. The internet sites I mentioned are eating newspapers' lunch. Because they don't have to support an Ottawa bureau, a Washington bureau, or a Baghdad bureau, the websites can undercut newspapers and still make a profit.

Even with an economic recovery, newspaper ad-revenue will not return
anywhere near its former heights...

• the people and companies who have turned to the net for advertising won't come back.
• there are fewer retailers to advertise, many having merged or gone under during the depths of the recession.
• there are a lot fewer car dealers to advertise, especially Chrysler and GMC dealers, after the Chrysler and GMC shut down a whole bunch as part of their bankruptcy/restructuring.

Contrary to my sentiments, Torstar is bidding for Canwest's newspapers. If they "win", I believe that 5 to 10 years from now, we'll be seeing Torstar in trouble, possibly CCRA (Canada's version of Chapter 11). Yes, I'm serious. Shelling out a billion dollars (some combination of cash and debt) will greatly speed up their demise.

• The New York Times shelled out $1.3 billion for the Boston Globe in the 90's and, more recently, $600 million for a brand spanking new corporate headquarters. Then they had to borrow money at 14% (YES!) from Carlos Slim, a Mexican businessman whose ethics they had previously disparaged. They're temporarily liquid, but they have to hope and pray the economy turns around.
• Canwest bought out Conrad Black for $3.2 billion in 2005, and we know what that led to.
• McClatchy purchased the Knight-Ridder chain for $4.1 billion in 2006, and now McClatchy is in trouble.
• Sam Zell purchased "The Tribune" chain for $8.2 billion in 2007 (using mostly OPM, i.e. Other People's Money). The Tribune filed for Chapter 11 bankruptcy a year later, but Zell remains a billionaire.

[hugh]

We've had these conversations before and I think most of us would agree that the newspaper business is on the decline. The loss of classified ads really hurt since it used to make up about 30% of revenues for the industry.

Although the industry is in decline, I'm not sure I would pronounce it doomed. Readership in Canada has held up pretty well in the last 10 years and many Canadians still want the "local rag."

In addition, the NYT and other major papers are finally realizing that putting all their content on the Web for free only drives traffic but not revenue.

My guess is The Toronto Star will still be around in 10 years. We will likely have more "digital editions" and less "dead tree editions" but I think they will adopt a "news everywhere" strategy where readers pay for access regardless of the platform they view it on.

[james99]

Let's see how well they do when the recession ends and ad spending increases.

I have a daily subscription to the SF Chronicle via the Kindle. Just an example of how newspapers can sell their editions in other formats.

[Coasterdon]

I can't be the only person who enjoys reading the local paper over breakfast. When I get an IPad I can see myself subscribing to other papers not available here to read at other times but I prefer reading a my local newspaper over breakfast.

[eljay]

I can't be the only person who enjoys reading the local paper over breakfast.

You're not.

[apn]

Thread seems 5yrs too late. I've never had a newspaper subscription and probably never will. Used to enjoy sitting down with the Sunday Times, but have long since abandoned the habit.

With the boomers expiring, I think commercial television and maybe radio will be next as the younger generations continue to embrace the internet and "I want it now" on-demand mentality sets in.

[hugh]

apn, you admit you were never a customer so they haven't lost you. Basing the future of an industry based on your anecdotal impressions really isn't valid.

[james99]

apn, you do know that the population is aging?

[JugglingReferee]

Just as the population grows, companies need to grow their business as well.

Perhaps apn entered the stage in life where he would be a customer, but never did sign up. He's not a lost customer, he's a lost new customer.

So him not subscribing, imho, still hits at the industry.

On a side not, I like the ads that I hear about on radio (paraphrased): "You can read about history tomorrow, or know about it today - as it happens."

[ScaryBob]

I read somewhere that newspaper circulation is also down dramatically in the past year. At one time, pre-internet, it made a lot of sense to buy the newspaper. It virtually paid for itself many times over because newspapers had a monopoly on weekly fliers and sales ads. These days, it's just more stuff to recycle and weekly fliers are delivered separately. The local newspaper here went into decline many years ago. It became noticeable in the 1990s when many small businesses closed, local reporting was cut back and it was sold. Now it is printed in Toronto and doesn't even arrive some days when the weather is bad.

[hugh]

Again, because you don't get your paper some days is not proof that an entire industry is doomed and will be gone in 5 to 10 years!

We all agree its in decline but they also said Radio would be gone when TV was invented so I wouldn't write Newspapers off just yet.

And on an anecdotal notice, my newspaper and the delivery has actually improved in the last few years but that doesn't affect how I think the industry will change in the coming 5 to 10 years.

[asd]

Hugh is absolutely correct. This topic has been beaten to death. The alleged death of one medium by a newer one is over-hyped, and to date inaccurate.

If newspapers should suffer extinction, though, we will be the lesser for it. There needs to be a medium of information that at least tries to lead an audience to knowledge by going beyond so many bits and bytes per minute.

Wisdom, might even be granted newspaper readers who live long enough.

Convenience doesn't always lead to smart.

BTW, "Boomer" includes those as young as 45, according to demographers. So it's going to be a long wait for those readers to expire.

[ScaryBob]

I never meant to imply that one newspaper applied to the entire industry but simply offered it as an example. Newspapers may survive even if newsprint does not. Newspapers started to decline many years ago, even if revenues and profits did not. A similar thing happened to magazines, an industry with a similar business model to newspapers. Some have survived by making a transition to a combined print and internet based business model while many have failed. Newspapers face a similar hurdle. The challenge is to create a new revenue stream as newsprint revenues decline. So far, most newspapers are giving their electronic product away on the internet. They need figure out how to make the internet/electronic publication profitable.

[Walter Dnes]

Originally Posted by ScaryBob

Some have survived by making a transition to a combined print and internet based business model while many have failed. Newspapers face a similar hurdle. The challenge is to create a new revenue stream as newsprint revenues decline. So far, most newspapers are giving their electronic product away on the internet. They need figure out how to make the internet/electronic publication profitable.

First of all, let's eliminate what's NOT going to save newspapers-on-the-web

• 
  Myth #1 If newspapers could only collude to keep their content off the free web, and behind paywalls, they'd be rolling in dough from subacriptions. Wrong. Subscriptions almost never pay anywhere near the cost of a newspaper. It'always been advertising. Consumer Reports, the poster boy for subscription-supported, is a monthly magazine. A better comparison are the stock market newsletters from highly paid advisors. These weekly or daily newsletters cost thousands of dollars per year. And the newsletters do not have to pay the costs of foreign correspondents scattered all over the planet. And while we're at it, forget about the Kindle. It doesn't change the economics of lost ad revenue, Besides which, Amazon takes a 70% cut of each subscription.
• 
  Myth #2 Alright, let's sell lots of web ads, and we'll be rolling in dough. Wrong. There is a near-monopoly on newspapers. The barriers to entry (multi-million dollar printing presses, etc) are very high. Meanwhile, on the web, a newspaper is just another website. Any smart guy with an idea and lots of drive can start a successful site. And because there are so many sites taking ads, the individual ad is much lower priced for the same number of readers, compared to newspapers. Otherwise, Hugh would be retired to a Caribbean island by now

To summarize...
The web is taking away so much advertising from print, that subscriptions would have to go sky high to make up for it. Switching to web-only means dropping 50% of a newspaper's regular expenses (printing and delivery), but also dropping 90% of ad revenue, due to much lower "per-eyeball" add rates.

[apn]

Originally Posted by hugh

apn, you admit you were never a customer so they haven't lost you. Basing the future of an industry based on your anecdotal impressions really isn't valid.

My comments are not entirely based on my own situation or anecdotal extrapolations thereof, but on the many stories I've read in the news media that support the argument.

As AD points out in his most recent post (above) the cost of printing and distributing newspapers is very high. These costs are only partially recouped from subscriptions, with the balance recouped and hopefully a profit earned from advertising revenues.

People migrating to the web for their newsfeed is driving down subscription rates (did anyone notice newspapers failing and industry consolidation happening over the last few years?), which in turn will drive down advertising rates and thus compounding the problem.

The way I see it, this industry is exactly mirroring what's happening in TV; costs are rising, consumer behaviour is shifting, businesses are failing and the industry is consolidating as it tries to figure out how to react.

Perhaps the industry CAN react in time and save itself, but time's running out. Anyone remember the days of home milk delivery?

PS: thanks for the newsflash, James99, but every day I look in the mirror, I seem to be getting younger What I was really referring to (and didn't articulate well) was the recent revelation that the key advertising demographic of 18-35yr old males is shifting away from TV to the internet. I'd bet there aren't too many in that demo that subscribe to a daily rag (my retired InLaws are the only people I know that do).