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25 August 2012

The Decline and Fall of the Newspaper

Tag(s): Business, Politics & Economics

Did you cancel the papers when you went on your summer holiday? Or have you already cancelled the newspapers for good? If so you might be one of many who have done the same in the past few years as the internet has turned the news industry upside down. In most of the developed nations the decline in newspaper circulation is severe and seems inevitable while by contrast newspapers are growing in the emerging or emerged BRICS economies. Between 2005 and 2009 average circulation fell in Australia by 3.8%, Japan 4.2%, France 5.7%, Germany 8.3%, the United States by 13.3% and in Britain by a whopping 15.9%. In contrast over the same period it grew in South Africa by 6.1%, China by 10.4%, Brazil by 20.7% and India by 39.7%.[i]

Commentators have been forecasting the death of the newspaper for some time. Back in 2006 the Economist screamed “WHO KILLED THE newspaper?” Well, the patient is not yet dead but lies dangerously wounded and like the victim in Agatha Christie’s 'Murder on the Orient Express’ there are many suspects. Classified advertising is a major source of revenue for newspapers, particularly regional and local ones, and in America this revenue source has been undermined by the success of Craigslist, a network of classified-advertising websites that is mostly free to use. Craigslist is the ninth most popular website in America and so this stab to the body is particularly grave.

But newspapers have faced technological challenges before and survived. Back in 1833 a new kind of newspaper appeared on sale on the streets of New York. Its publisher Benjamin Day positioned it to appeal to a mass audience offering an unsubtle mix of human interest stories and crime reports for a penny, a whole nickel less than the more serious established publications. By achieving that mass audience Day won the support of advertisers and advertising became his principal source of revenue rather than the cover price. Within two years, the Sun, for that was what he called it, was outselling its principal rival three to one.

Others followed this business model which has largely persisted to this day. Some newspapers are able to sell on a subscription basis which gives them a degree of security but on the whole they rely more on advertising than any other source of revenue. Over time radio, then television, then cable television, with its 24 hour news coverage, all emerged to challenge the dominance of the popular press as a source of news but it has learnt to co-exist. In America newspapers are largely regional or local. There is no really significant national newspaper. Newspaper distribution is essentially limited by the distance that trucks can carry tons of newsprint through the night to be in the kiosks or hands of newspaper boys by early morning. In the UK an efficient rail network in a densely populated island has allowed many newspapers to establish national identities.

Overtime this has produced a quite different result. In local markets in the US competition has been stifled and single regional monopolies have emerged. To maintain circulation these have had to coalesce around a neutral political position. By contrast the TV companies which can achieve national distribution through broadcasting from New York or Los Angeles to local affiliates can take up positions right or left on the political spectrum. We see a quite different picture in the UK where there are sufficient national newspapers to cover a wide range of political opinion but the national news channels tend on the whole to maintain a balanced coverage although people of both right and left persuasion might not agree with that analysis.

I raise this point because the death of the newspaper might have an importance that we would not ascribe to other businesses that are threatened by the internet. Some might argue that capitalism is about creative destruction. Overtime newcomers displace tired companies, even industries with more efficient, lower cost alternatives and this is for the general good. But a newspaper might have a special status in a society that believes in freedom of speech. No doubt much of what passes for journalism is trash, appealing to the lowest common denominator in taste, firmly rooted in the business model established by Benjamin Day all those years ago.  But the fourth estate plays an important role in holding those in positions of power or influence to account. Many scandals, political or financial, have been brought to public attention by painstaking journalism. While television is still the most important source of news it rarely breaks an important news story. It is still the case that newspaper journalists are more likely to do that than anyone else.

Now, of course there is a new kid on the block. Social media are claiming the credit not just for reporting news but even for creating it as with the alleged role of Twitter and Facebook in the Arab Spring. Everyone is a reporter now as we all have a mobile phone with a video camera facility and newscasts often use these amateur videos for their news coverage. These are immediate and provocative and reduce the newspaper to a late arrival. Individuals tweet and blog and tell each other what is happening through their Facebook pages and are less likely to read all about it in a newspaper the following day.

But such individual reporting is almost entirely unedited. We cannot verify its source and do not take it through a well branded intermediary. For me it is impossible to see with clarity what will be the outcome but it is certainly feasible that in this new scenario it will be increasingly difficult to find trustworthy, authoritative sources in news coverage.

In Britain we have a splendid institution called the BBC which many trust and perhaps that gives some assurance. But the BBC has to compete for its audience in the same space as everyone else. It has massive resources which are guaranteed by law. We all have to pay our share of its costs. But it has little time to reflect on events and uses few of its immense resources to do original research. Its documentary coverage has been substantially reduced as its principal TV production budgets chase mass market ratings. It has expanded its radio news coverage in an attempt to keep up with the 24 Hours news services of satellite, cable and online services but little of this is considered analysis. Most of it is somewhat breathless, superficial coverage.

Newspapers have of course attempted to respond to the threat of the internet by embracing it. Most of them, however, made a fatal mistake early on by simply putting their standard editions online at no cost, hoping that over time they would be able to sell advertising on the back of this. Most have failed to do so to any great extent. A few have charged for their content but this is usually only successful if it is of financial importance to an individual or business such as the data and analysis in the Financial Times. Even here the FT is careful and allows limited access to content at no charge and then charges after a certain number of articles. This way it can achieve higher ratings for its advertisers. Some have found new markets overseas. Both the Daily Mail and the Guardian have a surprisingly wide following in the US and have developed unique content for that market. But the majority struggle. Some have belatedly put up pay walls around their content but the levels of subscription achieved to date are low. If one simply plots the trend over time of such titles then it is clear that the circulation of the printed version will not be replaced by the online version and it will not be possible to maintain the same standards of journalism.

Some online channels are much more expensive than one might think. Many of us now buy our Times or Sunday Times on an iPad. The cost of distribution of a printed version is only 5% of the cover price. That is because it is a well-trodden distribution path established over nearly two hundred years. Apple, however, charges around 30% of the subscription price to allow access to its devices, just as it takes similar rents on the data you stream to your mobile devices according to a well-placed contact of mine in the industry. This is all well and good for Apple but appears to me like another deathblow to the dwindling life of the newspaper.

I do not say the newspaper is dead, or even yet dying. But I am not sanguine about a free society with a weak or non-existent press.

[i]‘Special Report The News Industry’ The Economist July 9th 2011

Copyright David C Pearson 2012 All rights reserved


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