The future of news: rational business decisions

Begin writing the long-term obituary of the American newspaper — at least for the newspaper envisioned by the Founders as a public service and a significant component of the checks and balances that once allowed American democracy to function properly and purposefully.

You think you know the now-familiar story: Advertising revenues are down. Circulation’s declining. Corporate ownership listens to Wall Street instead of Main Street. Newspapers are shedding their older, experienced (read: more expensive to maintain) reporters and other staffers, all in service to the ROI (return on investment) demanded by stockholders of those corporate owners. All to maintain a profit level unmatched by any other American industry.

But that’s not the whole story. Some of that heralded doomsday circulation decline is intentional. The financial rationale behind that self-inflicted injury will have consequences beyond the short-term profitability of print news organizations. It will continue to erode the quality of those corporations’ principal product — journalism. It will taint online news operations — especially those promoted by bloggers as alternatives to mainstream news.

Here’s the epitaph for newspapers as a public service, provided by Colby Atwood, president of Borrell Associates, a media research firm, in a New York Times story about newspapers purposely shedding circulation:

It’s a rational business decision of newspapers focusing on quality circulation rather than quantity, shedding the subscribers who cost more and generate less revenue. [emphasis added]

Didja hear that? A … rationalbusinessdecision?

Says The Times story, written by Richard Perez-Pena:

[N]ewspapers have sharply curtailed their traditional methods of winning customers — advertising, cold-calling people and offering promotional discounts. That strategy was always expensive, and it has become more so with do-not-call laws and the rising number of people who have only cellphones. According to the Newspaper Association of America, the average cost of getting a new subscription order, including discounts, was $68 in 2006, more than twice as much as in 2002.

Newspapers don’t want many of us to subscribe — because we cost too much to service. So, even though I make a decent wage as a professor, the fact that I live in a rural area means that newspapers I want to read won’t deliver to my door. This phenomenon — dropping customers because it might cost up to $5 per edition to deliver to one rural subscriber — has been growing.

So, says The Times:

Some large papers have made conscious decisions to limit their geographic range. The most striking recent example is The Dallas Morning News. Last year, it stopped distribution outside a 200-mile radius, and weekday circulation tumbled 15 percent to a little over 400,000. This year, the paper imposed a 100-mile limit. It expects to show another drop in sales when new figures are reported this month.

Add in the Atlanta Journal-Constitution. It has ended distribution to Alabama, South Carolina and Florida and trimmed in-state circulation to 66 of Georgia’s 145 counties, all surrounding the urban center of Atlanta.

Because newspapers have adopted corporate governance structures, profit rather than service as a public trust has become their organizing mantra. That’s not news, but the nuances are worth repeating. Media economist Robert Picard, writing in Nieman Reports, says:

While newspapers tend to have better-than-average net profits and dividend yields and produce average returns on equity and average price/earnings ratios, they also tend to engage in short-term planning rather than developing longer-term strategic visions and promoting company development. Investors pressure them for short-term returns more than they do other types of companies that are able to articulate a vision of a sustainable future.

But most publicly traded newspaper companies offer no credible plans (or a vision) for anything beyond the delivery of higher-than-average quarterly profits. With this mentality in place, investors pressure boards and managers for high returns so that they can recoup their investments in a shorter period of time. [emphasis added]

Newspapers focus not on improving the product (by sacrificing some of that vaunted profit margin to invest in reportorial capabilities) but on finding a quality circulation. We’re stuck with an attitude represented by Jack Klunder, senior vice president for circulation at The Los Angeles Times:

There is a school of thought these days that you stop actively selling altogether and let the readership seek its natural level. [emphasis added]

What is that “natural level”? What is the “quality” circulation newspapers now want? Well, duh.

Here’s the weekday audience newspapers now have, according to this 2006 readership profile from the Newspaper Association of America:

66 percent of readers are between ages 18 and 54.
51 percent have household incomes over $50,000 (16 percent over $100,000).
53 percent have some college experience or an undergraduate or graduate degree.
36 percent have white-collar occupations.
63 percent are married.
82 percent own a home.
45 percent of those homes are valued at $150,000 or higher.
56 percent have been in the homes they own for more than 10 years.
89 percent are white.

Now newspapers increasingly want even those readers only if they’re closer to home. If you’re not an urban or suburban reader whose subscription payment does not outweigh the cost of delivering the paper to you, then you no longer count as a meaningful demographic to the newspaper — and its advertisers.

Corporate newspaper ownership has surrendered completely to the philosophy of “rational business decisions.” This has consequences beyond the question of whether newspapers survive in their current form. Charles Lewis says it well in the Columbia Journalism Review:

Never has there been a greater need for independent, original, credible information about our complex society and the world at large. Never has technology better enabled the instantaneous global transmission of pictures, sounds, and words to communicate such reporting. But all this is occurring in a time of absentee owners, harvested investments, hollowed-out newsrooms, and thus a diminished capacity to adequately find and tell the stories. [emphasis added]

Oh, newspapers will be around long after I’m gone. They may still be spit off printing presses; they may migrate to the Web; maybe a combination will co-exist.

But they won’t be newspapers any more. That transition from public-service (and make money) to protect the profit margin as the prime directive has been accelerating for nearly 50 years as Wall Street recognized newspapers as profitable cash cows for investors.

If the principal function of newspapers has become to sell to core advertisers a Caucasian, home-owning, upper-middle class (and up), well-paid, college-educated, urban audience, then what can be expected of the journalism those papers produce?

Good journalism may still occur. But what will those stories be about? If these rational business decisions have created newspapers that have abandoned subscribers who are not college-educated, not Caucasian, not well off, not upper-middle class, not urban or suburban, then why will corporate-owned newspapers be motivated (or have the resources) to produce quality news stories about and for an audience their advertisers do not wish to reach?

Pulitzers will still be won. But trends suggest that they’ll be increasingly won by only the four or five national newspapers that have retained the resources to produce such stories.

I can hear my friends still in the news biz screaming now.

Hey, we in the newsroom make our story decisions without regard to who advertises in the paper or who owns the paper. That’s not the point. Corporate ownership has quietly stripped the newsroom of its ability to make meaningful news decisions. If a newsroom is given fewer resources, then it has fewer options. Remember, this emasculation of the newsroom has been under way for nearly half a century.

Hey, I get a chance to do good stories. But as often as 20 years ago? Even five years ago? How often do you get a few weeks, even one week, to work only on a significant investigative piece? How often does the paper pay for you to attend conferences and seminars to improve your skills? When the last buyouts or layoffs hit, did you end up writing more but shorter stories with fewer sources because you had to do more of them?

Hey, I can do any damn story I want. Oh, really? You never shaded a story idea one way or another because of how it might be perceived by corporate? Or government at any level? Self-censorship never happened to you? You were never told that a story idea you floated was not a good idea because it wasn’t worth the time?

And I can hear the bloggers nodding knowingly, thinking, We’ll take over. We’ll do the quality journalism. We’ll save democracy.

Read The New York Times story about the hiring of the CBSNews.com general manager to become the new chief executive of The Huffington Post, which now has financial banking from (surprise!) venture capital firms Softbank Capital and Greycroft Partners. Buried near the end of the story is this:

Mr. [HP acting chief executive Kenneth] Lerer said the audience was mainly urban and affluent and thus desirable to what he called a growing list of advertisers. These include other media outlets, including The New York Times, as well as automakers and cellphone services. The ultimate goal of the site, Mr. Lerer said, is to “do for Internet news what CNN did for TV news.” [emphasis added]

The world of online news on the Web is not immune from the corporate rational business decisions that have transformed journalism over several decades from a journalism without fear or favor to one that principally strives to fulfill the needs of an affluent, urban audience — and the advertisers that desire access to that audience. That corporate influence will erode the ability of online news operations to do such journalism as well.

There’s no immediate escape on the horizon from that business model. Meanwhile, stories that need to be found and told … are not.

12 comments on “The future of news: rational business decisions

  1. Denny,

    When you say that the online media news sources are not immune from said rational business decisions, you were right in ways you don’t even know. Check out this Ad Age article about Morgan’s hiring: http://adage.com/mediaworks/article?article_id=120941

    <>

    That’s the new financial model. Paper-pushers like Lerer will collect an undoubtedly hefty salary from all that advertising revenue they crave, but the actual writers–the people that do the work–are supposed to be satisfied with the psuedo-celebrity trappings of Internet fame.

    No wonder newspapers are embracing online content–they’ve realized that since bloggers generally work for free or part-time, they see no reason to alter that model.

    Meet the new boss, same as the old boss.

  2. Ack, the quote didn’t come through. Here’s what Lerer actually said:
    “It also helped everyone forget Lerer’s astonishing statement in USA Today, just days earlier, that HuffPo has no plans to ever pay its bloggers. “That’s not our financial model,” he told the paper. “We offer them visibility, promotion and distribution with a great company.”

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  4. It looks this way to me, Denny: the right to news and information used to be considered a right, even if in practice it was sometimes treated as a privilege.

    Now, thanks to corporatization, it’s openly deemed a privilege to be an informed citizen.

    Dire times, indeed, Denny….

  5. Excellent analysis, Denny. I know you have reservations about my “interpretive journalism” thinking, but it’s hard to argue the point about the legacy press shooting itself in the foot. With a bunker buster.

  6. Well, if major newspapers are creating a vacuum, something will happen to fill it. I don’t know what this will be, but it should be interesting.

  7. Whether I have reservations about “interpretative” journalism no longer matters, Sam. Swap it in for “objective” journalism and what would it matter? In a world of “rational business decisions,” I cannot see a substantially different newspaper.

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