For newspapers the internet revolution brought savage disruption from which there’s been no recovery. The industry that initially downplayed the digital challenge now pays the price as only the NY Times, Washington Post and Wall Street Journal have viable online strategies.
For more than 100 years newspapers were cash cows with revenues from classified ads, subscriptions and advertisements making fortunes for their owners.
With hindsight we can see that the industry’s golden age was the 1980s. Two years into that decade, Gannett CEO Al Neuharth created USA Today, whose blue logo flashed across the sky holding altitude for three decades. USA Today delivered TV-style news to its readers. USAT stories were short, punchy, and colorful, its vending machines resembled TV sets. It beat the competition on sports and weather.
The 1990s internet challenge arrived innocuously, sending up no red flags. Who was threatened by a pesky listserv called Craig’s List? But consumers learned they didn’t have to pay for classified ads. They could go to Craigslist.com, buy and sell for free and get immediacy newspapers couldn’t provide. Then there were aggregators like Yahoo that packaged news from everywhere and gave it away.
The industry’s snail-like response is explained by continued growth in ad revenue, which didn’t peak until 2005, by which time it was very late. The industry’s time-tested business model was failing.
Print circulation peaked in 1984 and then fell steadily. With subscriptions declining ad spending began a slow shift to digital. But arrogance still ran high when in 1993 the New York Times paid $11 billion for the Boston Globe, which it sold 20 years later for $70 million, a 93% loss.
Back in the 1920s there were 2,500 daily newspapers in America. Today there are 1,250. In the past 15 years 20% went out of business. Circulation and ad revenue are both down over 55%. Newsroom employment has shrunk by 50%. Pew Research says 27,000 journalism jobs vanished since 2008 and last year alone 8,600 journos lost their jobs. McClatchy, a chain of 29 papers, went into bankruptcy in February.
Warren Buffett was among the last true believers. His first business was delivering papers and he long argued that local news would save metropolitan dailies. In January he threw in the towel, peddling Berkshire’s stable of 30 papers for $120 million. Newspapers, he conceded, were toast and will disappear.
Gannett and USA Today is another dreary story. Neuharth, who also founded the now closed Newseum in Washington, is long gone. Gannett, still the largest newspaper chain with over 250 publications, is a shadow of what it was. Last year it was sold to Gatehouse for $1.2 billion. Gatehouse, a small market media group, went bankrupt in 2013, was restructured and is now controlled by investment funds.
Gatehouse took the Gannett name and promised to keep its papers alive, but markets are skeptical. Gannett shares trade for about $1.00, down from $25 five years ago. Several papers, including those in Tampa, Detroit, Pittsburgh and Indianapolis, no longer print every day. A much thinner USA Today prioritizes its online presence. With the corona virus reducing ad revenue, some 24,000 Gannett employees are taking pay cuts or unpaid furloughs.
The NY Times, Washington Post and Wall Street Journal are swimming against the tide and winning. All three are again profitable and even expanding. An estimated 20% of all remaining newspaper journos in the US work for entities affiliated with those publications.
Of course, newspapers and journalism aren’t alone in being decimated by internet-based disrupters. Regrettably, they’re barely alive, like a New York cabbie who paid top dollar for a medallion before Uber and Lyft arrived. #