Paper Cuts

October 13, 2005

A thick cloud has settled over the U.S. newspaper business. Journalism students back from their summer internships no longer speak glowingly about the intoxicating thrill of a city room on deadline. Instead the newsroom veterans told them to go to law school.

That was before the latest wave of job cuts. Last month, seven major papers — The New York Times, Boston Globe, Philadelphia Inquirer, Philadelphia Daily News, San Jose Mercury News, Newsday and the San Francisco Chronicle — announced they were eliminating newsroom slots, some 450 in all.

Those aren’t big numbers in an economy that measures job losses in the thousands. The Times is shedding 45 editorial employees out of 1,200. It’ll manage.

Elsewhere the cuts will hurt. Without reporters things go unreported. The Philly papers and San Jose will lose 15 percent of their journalists. That’s huge.

The implications of the cuts are huge too.

First, those papers  except the Chronicle  are strong operations. They are extremely profitable, some making well above the industrywide average of nearly 21 percent. They long ago tightened up and recalibrated through zoned editions, scaled-back distribution, themed sections, shrunken paper sizes, custom publishing  the whole serving tray of ginned-up profitability tonics peddled by biz school whiz kids.

Second, with their print circulation steadily dropping, they know they must parlay their informational strengths across a full range of technological platforms. They need to be on radio and the Internet, have TV strategic alliances  to be fully “converged,” in the language of the business  and they are.

So they’re doing what they’re supposed to do. And the result? Slumping share prices, declining readership, demoralized employees and a steady retreat from the musty idea that they have a special duty to a self-governing people.

Instead, we get layoffs from the country’s best news organizations at the very moment when the public’s need for strong, aggressive reporting about a perplexing and increasingly perilous world has never been greater.

Explanations abound. Some blame greed, and declare that owners ought to simply spend more on news and accept lower profits. Others blame the Internet. Some say the younger generation never picked up the newspaper habit; maybe publishers will find them online. Others say the whole mission of the metro paper is archaic; the public is fragmented, and no longer seeks a daily ritual of communitywide discourse.

But maybe the problem is more basic: the business model of commercial media. Maybe advertising-supported media don’t make sense anymore.

The model has never been all that rational. First, the market value of content is defined solely by its usefulness in drawing a crowd that somebody else wants to sell things to. Demography is destiny.

Second, the advertiser pays to reach people who may not look at their ads and may never be potential customers. Meanwhile, it’s the real customers of the advertised products whose purchases pay for the media, even if they themselves never open a paper or watch the particular TV show.

Worst, beyond its usefulness as a delivery vehicle for ads, content is nothing but cost. As a media executive once told me, after inspecting a new magazine I helped created: “This is fine, but remember, it’s only the envelope.” His point: I was in the packaging business.

In news and entertainment, ad support is now an issue. Advertisers themselves want to target messages with precision and measure effectiveness. Some are storming the fence between content and commercials; others are finding dedicated advertising channels  from Craig’s List to the Home Shopping Network  cheaper and more effective than traditional media.

Could news survive without advertising? Actually, your subscription check is already enough, all by itself, to pay for the news you buy this paper for  18 percent of revenues to cover 11 percent of costs. In an online world, the advertiser could go the way of paper and ink.

Nobody knows how much of the erosion in the news audience is due to the steady corruption of news into dumb, inconsequential forms fashioned to grab readers for the sake of marketers. But just as HBO has shown how the noncommercial, subscription model can re-energize entertainment programming, we’re approaching the moment when the news business may have no choice but to remodel itself.

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