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2009 03 16

Jason - By “Pulitzer”, do you mean “Lee”?

Because it’s the debt from the Pulitzer acquisition that’s dragging Lee into the abyss.

2009 03 16

Bobby McObvious - This might seem halfway believable if you didn’t try to jam it all in a 20-month window, but of course you have to if it’s all to happen in the course of the recession. (One would hope it wouldn’t be longer than that, anyway.)

I think we’re more on the order of 20-25 percent death rate by 2015, with another 50 percent or more converting (as the PI and, after a fashion, the RMN) to online-only publication. Clearly these will be smaller, but I could see them topping out at 50-60 percent of current newsroom staffing, depending on how alternate revenue models play out. The print survivors probably would be down to 75-80 percent of current staffing.

A culling to be sure, but not so severe a population bottleneck that the species won’t survive.

2009 03 16

Cheese - Oh, good! Well who the fuck is John Duncan? Has he ever set foot in a newspaper office or looked at a modern newspaper’s books? No! So with little credentials comes little credibility.

Listen, I know you think your habits are reflective of the whole, cool hip world you virtually inhabit, but they don’t represent everybody. In fact, lots of people still want a paper newspaper plopped on their stoop every day. And, advertisers want to reach those people because they have money.

And they’re ALL going to be gone by 2011! Ok! Glad you straightened me out on that one.

Because they’re not. So get over yourself. You’re not the whole planet, so you shouldn’t pretend to think that you are.

2009 03 16

Ron Bartizek - Dear Duncan,
As Mark Twain once famously remarked about reports of his death, the demise of 84 percent of newspapers is exaggerated. Or, as H.L. Mencken once wrote, “For every complex problem there is an answer that is clear, simple - and wrong.”
Yes, papers that are mortgaged to and beyone their ability to pay will fail, although not necessarily disappear. But 85%?

2009 03 17

John Duncan - Thank you for the comments.

1. Jason: Yes, I did mean Lee/Pulitzer. Apologies.

2. Bobby McObvious: I hope you’re right. The problem for me is that the cashflow that is disappearing from newspapers seems unlikely to come back and there are no current new revenue streams to replace it. In that situation newspaper companies will have little choice but to give up. Once they start going they will all go pretty quickly.

3. Cheese. Thanks. When it comes to ill informed idiots I certainly would have to defer to your personal expertise.

4. Ron. Again, I hope you’re right and that I’m wrong. But why do you think I’m wrong? Argue with the math, argue with the logic, argue with anything, but Twain quotes, fantastic as they are, won’t help us any more.  (Twain also said that an optimist was a day-dreamer, more elegantly spelled.)

2009 03 17

Geek Girl - I am curious about the data underlying this forecast. What data did you use? And what trends did you see in the data that led you to this particular forecast of 85 percent dead by 2011? I’d love to see a graph or two showing the trends.

2009 03 17

John Duncan - Hi Geek Girl: Just getting it in a table was tough… but I’ll see what I can do.

I took my data on hits and users from Quantcast, because some sites are directly measured there and so it was slightly easier to make like-for-like guesses on the others from the estimated numbers. The revenue figures are broadly agreed and derived from data released in obscure spots on the web, an interview on Mediabistro here, a calculation from an annual report there. I needed to get the piece out and didn’t link as well as I should. I’ll try and get to that this week.

2009 03 17

John40 - John

This doesn’t make sense to me. You’re explaining why online newspapers cannot survive economically as a reason why hardcopy newspapers will fail. That’s not really a very good model. There’s no doubt that newspapers are in decline, but an institution that has been around for 200 years or more, isn’t going to disappear overnight. For sure, there will be more news like the PI closing. There will be more newspapers converting to web only. But the decline of this institution is going to be a slow one. And there will most likely be a bump that accompanies the emergence from the recession. The newspapers and media that remain will thrive for a time. But eventually they will die out, over several decades.

85% gone in two years? A headline-grabbing assumption meant to draw attention. And it worked. I just wrote a message that took me four minutes and 37 seconds.

2009 03 17

Alexis - Thank you John Duncan for thinking for the media industry! From the core idea, you are right. A change is coming, and it will be no easy road for the media houses. But change does not equal death. Never so in business, never so in Tampa nor elsewhere. Change is constant part of economy, and businesses are in charge to cope with change. There are businesses out there, that were founded 400 years ago. Coca Cola is out there for more than 100 years, still living, but underlived a lot changes. IBM is no longer producing computers, but IBM is still doing business. Second: Your model, “math” you call it, is rubbish, as you mix a lot of key figures. I guess, you have never seen a real budget or business plan of an online venture of a newspaper. Why?

2009 03 17

Alexis - It is all about attention

One page impression does not equal 0,01 $. YOu assume one page impression is one ad impression. Wrong. It might be two, three, four ad impressions, name it… But one page impression is a certain amount of attention. Be it 10 seconds, be it one minute. Attention and time will be the future currency of the web, if we talk about ad-driven business models. Not your blog, not ebay, not google have so long experience, as a Tampa newspaper might have, in catching attention. But they have to rethink - their narrative structures, their ad-selling strategies and their core product. What attributes value to the users?

Media houses will need to rethink their jobs, they will have to refocus on their key strengths, they will have to kick out some “nice to haves”, and will have to integrate new features, which people now find somewhere else. Search is at Google’s, Short messages at Facebook’s, selling at Amazon’s. But Duncan, media houses will win back space, if they want to. And there are thousands of examples. The fact, that online business models of media houses do not finance journalism, does not proove, it is impossible, but more the fact, that there is plenty of unoccupied space left.
Looking forward to your full story!

2009 03 17

Henry Scott - What this ignores is that most newspapers—virtually all newspapers—in the United States are profitable. Perhaps they no longer have 25% margins, but they have 10% margins —still damned good for any company.

The problem is that the parent companies of many of them—the companies whose managers over-leveraged themselves to acquire freestanding newspapers from local owners —can’t meet the payments on the debt. Take a look, for example, at Journal Register Communications, which has filed for bankruptcy protection even as its newspapers continue to make money. Look at Gatehouse, which faces a similar problem.

People looking at the industry confuse the plight of the parent companies (which are in roughly the same situation that the junk-bond funded conglomerates of a couple of decades ago were in) with the situation at the operating units they own.

2009 03 17

Henry Scott - There’s also a fundamental misunderstanding about online advertising. While it is perfect for any sort of search or transaction-related business (booking travel, finding jobs, finding real estate, finding a car), it simply doesn’t work for the regular retail and brand advertising that newspapers continue to get and that online hasn’t made a dent in. That advertising has gone away for the moment because of the recession. But that’s a situational change, not a secular one.

The loss of the above-mentioned search and transaction advertising (auto, real estate, etc.) has been horrible for newspapers, because it constituted their extremely profitable classified advertising. But it hasn’t killed them. The newspapers that are going out of business or about to have other problems —bad union contracts and heavy fixed expenses (SF Chronicle) and multiple competitors in the market (Rocky Mountain News, Seattle PI).

Indeed, no one who really knows this business can believe the PI and the RM News are still in business anyway. Most expected them to fold more than a decade ago with the demise of second newspapers in a market. JOAs propped them up long past their natural life span. The same is true of the Chicago Sun-Times, which will fail sooner than later, and not because of the web. All that keeps the New York Post alive is Rupert Murdoch’s ego.

2009 03 19

John Duncan - Thanks for the comments…

John40: There isn’t any actual reason why an institution that has been around for 200 years can’t collapse or at least be vastly diminished in 18 months. The steel industry did. Coal in the UK (don’t know about here). The problems of having an economic model that has worked for a long time destroyed by competition from cheaper more efficient rivals is as old as time. The problem for newspapers is that this decline isn’t cyclical. Take a look at the share prices of every major newspaper group compared to where they were 2 years ago. Gannett? $55.95 in March 07; $2.46 today. McClatchy? March 07 $33.61. Today? 59c. There’s a point where they can’t go on. And as another commenter points out - debt is killing them at the same time as the property, motors and help wanted markets have disappeared forever.

But as Part 3 should show, in some ways I agree with you. The survivors will be okay, even in print. My argument is that the decline in print revenue will stop newspapers from subsidizing the web operations but the web operation won’t sustain itself and thus they will die. I stand by that view.

2009 03 19

John Duncan - Alexis: Newspapers are already actually dying. All I am saying is that this process is going to gather pace in the next two years. The industry will not die (see posts 2 and 3) but the finances of the newspaper industry simply will not add up and however much we want to ignore that and hope it will go away, the most likely scenario is that companies who print newspapers and are losing money and see no prospect of making money will close those newspapers. I don’t hear anything in what you say that makes me think differently.

2009 03 19

John Duncan - Henry: Thanks for an excellent contribution.

You’re absolutely right about the debt situation. And the operating profits at many newspapers. But that is rapidly disappearing too and there isn’t a great deal of hope that these profits are coming back. The real estate and jobs advertising disappeared for cyclical and competitive reasons and it’s probably not coming back. My prognosis really assumes that 85% of newspapers will cease to be profitable in print and stay that way.

Your point about distinguishing between the parents and the operating companies is valid too. But the debt isn’t disappearing any time soon and there is not sufficient cash to pay for it any more. So what happens? The parents cut as deep as they dare and hope against hope that things will turn around.

My Part 3 post is arguing that the larger newspapers will survive in print for at least 15 years and so will the smaller most local operators. But the middle metro papers will be losing money without hope of getting it back this year, there are no buyers, no credit to buy with and the newspapers will probably have to close down.

2009 03 19

Henry Scott - John:

What’s happening is that chains are selling off their newspapers to local owners who can operate them profitably. The bankrupt Journal Register Communications company has sold its Bristol (CT) Press and New Britain (CT) Herald to Mike Schroeder, a former Newsday exec; Tribune has sold Newsday to the very well capitalized Cablevision Co; Copley just sold the San Diego Union-Tribune to a California investment group, etc. Look for a sale of the Miami Herald sooner rather than later, and of many if not all of the properties of GateHouse and Journal Register.

I agree that classified advertising (real estate, auto, recruitment) isn’t coming back. But newspapers are profitable without that advertising, whose disappearance predates this recession.

The papers that are closing now are the second paper in two-newspaper markets. They never had a chance, even without Google, et al.

So I think your prediction is premature