Paper Pusher

It takes a brave soul to write a book today about the state of newspapers in North America.

The pace of change in both media industries and technology is such that no matter what the content, the book is bound to be at least partly out of date by the time it is published.

Marc Edge has been able to mitigate that somewhat in Greatly Exaggerated: The Myth of the Death of Newspapers by looking backward at the newspaper business rather than forward. He describes what has happened to newspapers primarily in the United States (with a couple of nods to Canada) focusing mostly on the past decade and a half. His argument that newspapers are far from dead is counterintuitive. It flies in the face of non-stop predictions over the past half a dozen years that their time is up. The doomsayers are led by those he describes as the Future of News consensus—digital evangelists such as Clay Shirky, Jeff Jarvis and Jay Rosen—all based in journalism schools in New York City. They argue that digital is steamrollering print and the organizations that publish newspapers, replacing them with new media and online information networks.

But Edge is correct in his description of what has happened. Greatly Exaggerated is a well-researched and well-explained story of how the newspaper business changed in the second half of the 20th and into the 21st century. Publicly traded corporations in the United States (and Canwest Global in Canada) led by financial engineers replaced family and private owners of newspapers and newspaper chains. They were interested not primarily in journalism but in how much money could be extracted from an industry that was traditionally extraordinarily profitable. They did it all by borrowing other people’s money to engage in consolidation and restructuring. It seemed like a brilliant strategy for a while. Then along came the economic meltdown of 2008.

Newspapers in the United States were already facing steady and sometimes steep circulation declines as the popularity of the internet grew. An equally sharp double-digit annual drop in advertising revenue began after 2008. The situation in Canada was somewhat less dramatic. Circulation fell more slowly as did advertising revenue, as Canada experienced less post-2008 economic turmoil than the United States did. There, key newspaper advertisers—automobiles, real estate, retailing and financial services—were all on the ropes. They stopped spending on ads. That spending recovered with time, but advertiser spending shifted away from print.

That has gone for good and it is an enormous problem for North American newspapers. They have traditionally relied on advertising for about 80 percent of their revenue. The speed of the collapse in print advertising is extraordinary. For example, the Newspaper Association of America reports print advertising revenue fell to $17.3 billion in 2013 from $47.7 billion in 2005. Newspapers had thought print advertising would simply shift online and their websites would be the beneficiaries. They were wrong. The Pew Research Center has estimated that for every $1 in revenue newspapers receive for digital advertising, they lose $16 in print advertising.

Newspaper chains responded with cutbacks and closures, while still pretending they were covering as much as before. Slashing costs through widespread layoffs of journalists eased some of the problem but those interest payments on the money borrowed by the engineers were too large for some papers to absorb. That led to a series of closures reducing some communities to one-paper monopolies. It was also the impetus for the predictions from the Future of News consensus that the end for newspapers was nigh. Digital would quickly triumph.

Well … maybe. But that robustness is a product of those steep cuts in reporting and editing staff and reductions in the breadth of their coverage. The impact of these changes gets very short shrift in the book, yet both the quality and content of the newspaper are damaged when there are fewer reporters covering less. Readers notice. That shows up in continuing declines in circulation and advertising, forcing more cuts to try to maintain a much narrower operating profit than in the past. It is actually more of a vicious circle than a robust business model.

Edge’s conclusion relies on the assumption that what happened in the past is a good predictor of what will happen in the future.

“One reason newspapers continue to survive,” he states, “is because they continue to have a local readership that is highly prized by advertisers because it is educated, affluent and engaged. Print also continues to enjoy significant ergonomic advantages over currently available electronic alternatives.”

There are four reasons to question that ­conclusion.

First, it is true that radio and then television were each going to kill newspapers. The threat of the internet, though, is different. Unlike the previous new technologies, the internet has adopted the format of newspapers, telling stories primarily in text. But it is much more than that. News organizations and journalists can now tell stories online by combining text, video, audio, photos, slides, graphics and data, using the most appropriate format for each part of the story. Doing so animates and brings storytelling to life in a way text on a printed page simply cannot match.

Second, the advertising upheaval shows no sign of slowing down. In recent quarters, both the Toronto Star (Canada’s largest newspaper by circulation) and Postmedia (which owns the daily newspapers in many of Canada’s major cities) have seen drops of 20 percent or more in their advertising revenue from the same quarter a year ago. Advertisers no longer need to use the media when they can reach audiences directly online. Look at the websites operated by car makers. There, new and used car buyers can comparison shop, build and price their vehicle at home, then head down to the showroom and buy it. It means much less need for traditional advertising. And that is happening across a wide range of consumer goods.

Advertisers also gain some specific advantages online compared to print. It is much cheaper and easier to target audiences, delivering a message to those most likely to be interested based on their geographic location and past browsing habits. Using IP addresses allows micro-targeting those living in a specific neighbourhood, eliminating the advantage that newspapers used to have in delivering local audiences to local advertisers. Feedback from clicks also lets advertisers instantly quantify the response they are getting. In some cases advertisers pay only based on the number of clicks on their ads. Newspaper websites are getting some of the online ad revenue, but they find themselves competing for advertising dollars with the likes of Facebook, YouTube and other social media sites. In addition to getting much less money for online ads than for their print predecessors, the ads on news organizations’ websites are now frequently sold by Google or other online marketers. They are taking some of the cash that used to come to the paper through their advertising sales departments.

The third problem is the disappearing audience. Circulation is falling because newspapers do not know what their readers want. For example, newspapers now think their readers want lots of local news, but that revelation has come only after years of cutting local content to save money.

Reader interests did not matter much when advertisers were covering almost all the costs of the paper, but it makes a big difference when readers are asked to pay more either per paper or through paywalls for online newspaper sites.

Added to that, newspapers (and television newscasts for that matter) can no longer predict what their readers know about the stories in the paper when they pick it up on their doorsteps in the morning. Some know a lot from following news online. Some know nothing and the content of the morning paper is literally news to them. That makes it very difficult for a newspaper’s editors to figure out what stories to cover and what angle to take on them to appeal to the broadest cross-section of its readership at a time when they need more money from readers to replace lost advertising. If people are not interested in the content of a newspaper or think they have already seen it somewhere, they will not buy it.

There is also no prospect for significant growth in print readership. Young people get lots of news but not from newspapers. They do not read them. The old argument that they would come to rely on newspapers as they got older, as happened with previous generations, is not going to happen this time. Newspapers historically benefitted from a limited range of alternative news sources. The internet means that is no longer the case.

It is one example of how those under 30 are undermining media assumptions. They do not have cable or satellite television either. They cannot afford both TV and internet service, yet they get all the video they want online. It is hard to imagine that as they get older they will conclude it is essential to start paying $80 or so a month for cable service. Likewise there is no reason to think they will turn to print.

The fourth and perhaps most important reason is the massive growth in the use of mobile devices across almost all age groups. Smartphones and tablets undermine newspapers but could also be the salvation for the news media. Ride a bus, stand in an ATM lineup, sit at a coffee shop and what are many people doing? Getting news and information on their smartphones. Mobile devices are simply a different way to deliver information to audiences, but they require stories and information be told and presented in a different way than is done either on a computer screen or in print. Tablets require a different storytelling format and approach even from smartphones.

Postmedia has recognized that. Starting with the Ottawa Citizen, it is slowly redesigning all its newspapers to deliver information in separate ways for print, computer screens, smartphones and tablets.

Another example is the Toronto Star, which is making a major commitment to tablet journalism. It will abandon its online paywall in September when it introduces a new tablet publication based on the success La Presse has enjoyed with its tablet edition. The Star is redesigning its newsroom production processes and how its reporters tell stories, specifically for the tablet. The hope is advertisers will find the tablet edition more attractive than newspapers for precisely the range of presentation options that only online provides.

Mobile also creates the opportunity to capture that younger generation who will not read papers. They are already engaged online and that is where they find news. The question is whether the existing news organizations can provide them with news in formats that will attract and keep their attention.

It is a challenge as producing news for mobile devices needs more, not fewer, people per story yet there is no guarantee a tablet or smartphone app will generate enough advertising revenue to cover its production costs. The Star may charge for its tablet edition at some future point but it is not starting out there.

It is one example, though, of how newspapers are in fact evolving away from being papers. Some will not survive. Others will make the transition to being news organizations delivering information in different ways to different audiences. In doing that they will rely on their print reputation as trusted sources for accuracy in the chaos of the internet, where fiction too often becomes facts through repetition. Some readers will continue to receive their news in print for a while but annually there will be fewer and fewer of them. At some point it will be just too costly to deliver a paper to too small an audience and the print editions will die.

Greatly Exaggerated offers a good history of how the newspaper industry has come to this crossroads. Edge is correct that newspapers have survived and, despite the predictions of their imminent demise, have made a profit on their operations. So runs the story up to this point, although that hardly guarantees them a long future.

Complacently extending Edge’s story into the near future is a recipe for disillusionment. In fact, what is greatly exaggerated is just the short time frame for the death of newspapers, not the end result.