On Newspapers

Several items of note regarding the plight of the newspaper industry have come to my attention of late. This assumes, for instance, that there is such a thing as the "newspaper industry" at this point, disparate from the multimedia conglomerates, and such a thing as a "plight" disparate from the current financial crisis.

In particular, a college friend of mine, who still works in the industry, called my attention to one of many "save the newspaper" causes that have sprung up on various social networking websites. He also pointed out a piece at the Atlantic on the subject. Much of my daily reading is in the online gaming press, and one of the more popular outlets, Kotaku, also has ex-newspaper employees there, and they have mentioned the situation that their local paper is now in (here and here). I felt a need to somehow explain my relative lack of enthusiasm for this concept.

Given my own personal history it is somewhat difficult to come to terms with these events. Since I have not ever worked as a professional journalist and have not worked in publishing of any kind, in any capacity (save several different blogs) for more than a decade, it may be that my thoughts on this subject are outdated, or irrelevant, or that I have insufficient personal investment in the related issues for my opinion to carry much weight.

Nonetheless, newspapers do hold special significance to me. Learning to drink coffee and reading a daily paper, in my case The Boston Globe, formed a rite of passage into what I then considered adulthood. A change of schools and a change of majors in my first year of college landed me in a liberal arts program and on the editorial boards of two publications, a biweekly college paper and a somehwat more irregularly published literary magazine. At the latter, I learned the rudiments of electronic page layout, and at the former I applied them, eliminating the manual typewriter and typesetting system then in use. (This was in 1991, if you can believe that-- the desktop publishing revolution that Apple wrought in the mid-1980s still had not filtered as far as my suburban college's student newspaper six years later, despite the fact that the campus was lousy with Macintosh computers, everywhere except the newspaper office. Meanwhile, thousands were spent each year on typesetting.) That pattern repeated itself in graduate school, and followed me into my first jobs, where I found that being on the technical side of things paid better and better suited my personality. I worked at a local daily for about three years but later moved into doing similar tasks for nonprofit organizations. At that daily I initiated the paper's website, and went on to either establish or modernize sites at other organizations. Perhaps if I'd had more sense (or, rather, less sense and more vision) I'd simply have dropped out of graduate school in 1994 and gone directly into web design after seeing the first versions of NCSA mosaic; instead I mocked it as being silly and slow compared to Gopher.

The mid 1990s were heady days for such technologies. The freedom of the press, we had been taught, truly only belonged to those who owned one. The Internet would allow anyone to own one, which was supposed to bring improvements of all kinds to journalism: more outlets, more transparency, more freedom, more democratization. At the same time, critics complained that all it would really do would be to lower revenues, decrease quality, and create a morass of unreadable content.

Arguably all of those things have happened.

The Business Model

For a number of years, the traditional newspaper business model was looked upon much as a license to print money. The high price of printing presses meant that there was a high barrier to entry by competitors. Emphasis on the longevity of a particular publication, and its close association with the community in which it operated, raised this barrier even higher. Low prices for copies meant that nobody could charge more than you if the expected to have an audience as large or larger than yours, which raised the barrier even higher. In essence, newspapers became indispensible, not only to their readers, but to their advertisers.

Simply put the business models for most forms of media are superficially similar; this holds true for periodicals as well as broadcast radio and television. Content is delivered to the audience either free or for a very minimal fee that is usually used to cover distribution, rather than production of physical or intellectual property, and it is the revenue generated by selling advertising that pays for content to be created. In such a model, it is in the interest of the content creator to maximize the size of the audience, even at the expense of distributing for free, because revenue depends not on the audience but on the advertiser. Magazines and newspapers routinely promoted their "pass on" ratio to advertisers-- the number of people other than the nominal purchaser who consume a piece of content. In other words, readers-- consumers of content-- were of value to you even if they paid you nothing, so as long as newsstand and subscription prices paid for transportation and logistics, everything else was gravy.

What was once gravy for the periodicals became poison for music, movies and television with the widespread availability of the technology to make perfect digital copies quickly and easily, and the ubiquitous communications technology able to transmit these copies anywhere. What had been pass-on became piracy. Music and films came to be licensed, rather than sold, much like computer software. The potential for the abuse of technology had been known as long as the technology itself had existed, and these industries were primed to address them. Measures that the film industry began to take when videocassette recorders were introduced, first looked upon as tools of piracy to be fought in court, and then as a method for generating additional revenue in the form of video rentals and then video sales, were later put to good use dealing with Internet piracy-- only the scale of the problem was different. The law itself had failed to predict the degree to which technology would make perfect, ubiquitous digital copies possible. The Home Recording Act defended your rights to make mix tapes and lend them to friends-- because while the industry saw this as a threat, the court and the legislature and the common citizen did not. After all, how many tapes could one make? How many friends could one have? How good could a mix tape be that was made on consumer audio gear, even with the assistance of technologies like Dolby compression and noise reduction? And if no money was being made on the transaction, where were the damages?

All that changed, of course, with the MP3. Now there was no limit to the number of copies you could make. No limit to the number of "friends" you could have, or how many songs you could share with them. The quality of the copies was limited only to the amount of cheap bandwidth you were willing to dedicate to the task and the ingenuity of compression algorithm authors. Just as the pass-on audience for newspapers became lost revenue when combined with perfect digital copies, the fair use of the Home Recording Act became piracy (copyright infringement, not theft) when you added the capability of making an unlimited number of virtually perfect copies and transmitting them almost anywhere, almost instantly.

This technological challenge, has caused problems for all traditional media business models. It is just that the model of the daily newspaper has particular difficulty in adapting to this, for reasons I will look at next.

Internet Killed The Radio Star... Not

The ways in which the music industry have responded to these changes are perhaps the most famous. Discussions have been riotous. Digital copyright infringement causes decreases in CD sales, as people avoid buying music when they can download it for free. Digital copyright infringement causes increases in CD sales, as people can freely sample music that they otherwise might not have heard of, taking advantage of a wider selection of new (and old) content than broadcast radio provides, without the necessary evils of advertisements and disc jockeys.

The industry responded, at various times, with different methods: copy protection to prevent copies from being made, legal action to pursue those downloading music or making music available for download, and finally, official electronic distribution for sale, both with and without copy protection. The progression mirrors the situation with videotapes a decade before; what was originally seen as a deadly threat became a new revenue stream, and eventually the entire argument is just a glorified version of haggling over price. As rancorous as the discussion seems, essentially the problem has solved, and the arguments are now over who gets to control what, especially who gets to set prices. Eventually the industry will settle on distribution partners they can tolerate, at price points they can live with, and accept the fact that at any given price point there will be varying levels of copyright infringement. (It will never be zero. Vendors of physical goods hardly ever experience zero rates of loss and theft, and infringement of intellectual property is far easier than theft of physical property. It stands to reason that the rates will be higher.) Set prices higher and you get more revenue per legitimate copy, but infringement will go up as people who won't pay your price will find illegitimate sources. Set prices lower, and you get less revenue per copy, but more legitimate sales as people find better things to do with their time than search out illegitimate sources when legitimate ones are convenient, accessible, and offer better quality goods, as well as the peace of mind they get from knowing they are respecting the rights of content producers (although that may be the least important variable in the equation for many, if not most, consumers).

Similar solutions apply to the film industry. It is only that both the problem, and the available solutions, lag behind those of music along a curve that is analogous to the increase in available broadband speeds. Download speeds that people will tolerate when downloading illegal copies of films for free will not be tolerated when downloading legal copies for money. When online film rentals and purchase become as obviously reliable, accessible, convenient and high quality as their illegitimate counterparts, that industry too will settle into debates about distribution and pricing, and reach an equilibrium similar to that currently found in music and software, where not every user is legitimate, but legitimate users essentially subsidize illegitimate ones, and illegitimate users are tolerated by content producers because of their role in promoting content. It is not unlike the role played by radio and television in their relation to CD and DVD sales in recent history.

Downloading Dead Trees

These new challenges have been somewhat more problematic for periodicals, and I think even at this moment not only has the solution not been reached, but I do not think there is concensus about what the solution is, or what range of potential solutions might be workable. Part of the reason is because of the different way these publications have typically been organized, compared to music, television and films.

To oversimplify, newspapers are organized by geography while magazines are organized by topic. There are exceptions, but this rule is perfectly serviceable. There are other differences, in terms of frequency of publication, production value, etc, but this organizational difference is the salient one.

These twin organizational properties led to consolidation in newspapers and magazines similar to that seen in radio and television. A newspaper's distribution radius was comparable to the broadcast radius of a radio or television station. A company able to string together a collection of newspapers or stations in various large markets could present these markets, either separately or together, to advertisers, and maximize revenue while minimizing costs. Much better men than I have been chronicling this trend for decades, perhaps the most prominent among them being Ben Bagdikian. This trend led to increasing uniformity of content, increased dependence on national advertising, and minimal capacity for unique content generation at each point of distribution.

Many will no doubt point to the financial crisis brought about in part by the USA's subprime mortgage fiasco as sounding the death knell for daily papers, but this is largely coincidental. Just as the ubiquitous personal computer and ubiquitous Internet posed a serious challenge to film, music and television, it poses similar challenges to the business models of newspapers and magazines. However, these models have, so far, proven less adaptable.

A Spoonful of Sugar

Another primary metric used when evaluating periodicals is the ratio of advertising to editorial content within their pages. This ratio represents the struggle between the two pillars of any periodical's organization: editorial and management. Both sides want the ratio pulled closer to their concept of the ideal position. Both recognize that it cannot ever swing too far to either side or the organization could not survive. As long as readers bear little or none of the direct costs for creating content, advertisers are a publication's lifeblood.

Those who focused, in the early days of the web, on how the Internet would allow periodicals to save untold millions spent on print production and thus become more efficient were missing the point. At that time, advertisers had no interest in paying for such a product. As such, having a website meant an additional expense, no matter how small, for very little additional revenue, without offering any economies of scale or efficiencies by trimming traditional production costs. Organizations that invested any significant amount into such projects in the early 90s were doing so almost purely based on individual visions and enthusiasm for the technology, rather than any expectations of short-term return on such investments.

In short, the web could let you print a newspaper of arbitrary length for much less money than you could print a daily newspaper, but the paper would have no ads in it and as such would generate no revenue. From the perspective of the newsroom, editorial content was the spoonful of sugar used to entice readers to swallow the essential medicine of advertising. From the perspective of management, those roles were reversed: advertising revenue was the spoonful of sugar that made the investment in generating the medicine of editorial content worthwhile.

Without advertising revenue, an online publication was a bitter pill nobody wanted to swallow. That the technology was in its infancy at that time did not help: primitive web browsers, slow computers with small screens, slow download speeds and high fees.

Great Googly Moogly

The problem is that when advertising on the Internet finally did take off, largely it was in the hands of new players not part of the existing newspaper ecosystem. Online ads today are largely the province of Google, Yahoo and MSN, none of which are part of any existing media conglomerate (although MS does have links to NBC and thus to Westinghouse).

The migration of classified ads from newspapers has been devestating, and the efficiencies and economies of scale permitted by the Internet are practically a magic bullet for solving the problem of how to distribute classified ads. Prior to the ubiquity of the Internet, the best venue for classified advertising was the local newspaper, because it allowed you to maximize your exposure while minimizing your expenses simultaneously. For each market you wished to target there was one or more newspapers. True national publications would be uninteresting to most such advertisers; the additional costs of running ads in markets outside the main ones would not be offset by increasing the audience. The Internet cuts through that Gordian knot because distribution expenses are not as granular for a website as they are for a newspaper.

Take, for example, a company that offers classified advertising in two daily papers it owns, one in New York and another in Los Angeles. If you do business in only one of those markets, you'll buy advertising only in the paper that covers that market. The conglomerate that owns the papers might offer you a column-inch discount for buying ads in both papers, but there will still be some cost increase to you, and if there is no potential benefit then you won't do it.

Enter the Internet. A site like monster.com or craigslist has no geographical focus or organization except the arbitrary one imposed by the designer. There's no particular reason to make geographical restrictions part of the business model, since it has no impact on distribution costs. For a web server sitting, say, in Denver, it doesn't cost any more to deliver content to readers in New York than it does to deliver it to readers in Los Angeles. You can arbitrarily divide your site into subsites for the convenience of the audience, but the database is truly geography-agnostic. You can charge a single fee for what is essentially a worldwide ad, and let the audience self-organize.

Newspaper conglomerates, for all their efforts to maximize reach while minimizing costs, were not set up to take advantage of this, and in my opinion have never recovered. Creating web versions of themselves has done little to stem the tide. As they are still organized by geography, geography still imposes limits on the size of their potential audience. Even if statistics were not available to substantiate the number of online readers they have on a day by day, if not hour by hour or even minute by minute basis, one could always develop one's own back-of-the-cocktail napkin, ideal market size by looking at market demographics: how many people in a given market with a computer and Internet access. Even taking into account the number of expatriates who might live elsewhere but choose to view content may not help, as there is no guarantee that their interest in editorial content from home while they live elsewhere also makes them of interest to local advertisers at home, unless the advertisers are themselves delivering services through the Internet.

So, one of the pillars of the newspaper's business model, classified advertising, has effectively been centralized completely outside the control of the newspapers because of a break in the parallel between online and offline distribution costs. Printing more papers and distributing them wider costs more, so advertising costs increase with the size of the area covered, and newspapers choose the size and location of market they serve. On the Internet, distribution costs are unrelated to potential reach, and the audience self-selects a relevant geographical area, if any, unrelated to the costs of advertising.

We Can Copy-Paste It For You Wholesale

Added to that, these new technologies pose challenges to newspapers similar to those of music and film, but without analogous solutions. Text from a website can be copied perfectly and easily, with or without attribution, and be distributed digitally, separate from its advertising content, to a nearly infinite audience, with almost no control from the publisher. For television, this has required the application of significant technical resources, to allow live television to be recorded, digitized, the advertising content removed, and then the resulting files made available to the public at large, for free, without the publisher's knowledge or consent. Such files are large, the distribution costs can be significant. Compared to that, the technological challenge of copy-pasting a newspaper article, while avoiding advertising content, is so trivial that not only is it not worth discussing but it is not worth even attempting to prevent. Even the traditional model was not set up to treat this as a problem or cope with it as such. Music vendors were used to dealing with piracy in the form of counterfeit media. Newspapers and magazines had little experience with such issues. Book publishers, especially textbook publishers, did, in terms of dealing with abuses of fair use by students and teachers, but that situation was hardly comparable. What was a good thing, the pass-on ratio for newspapers, was bad for the Internet, because the latter allowed for the easy separation of editorial and advertising content, whereas the former did not (except by the liberal use of a pair of scissors, at least).

Likewise the solutions that applied to music and films did not apply to newspapers. Copy protection? The very foundation of the technologies that underlie the Internet in general and the World Wide Web in specific were at odds with any convenient implementation of copy protection for the web, and the nature of the content itself, text, made it impossible. You can password-protect your website, but then your audience goes down and you'd have to chase users for sharing passwords. Again, what used to be a positive in the form of pass-on would now be a negative.

In addition, now the content had competition. On any issue not positively tied to geography, any other newspaper or news outlet with its own website was competing with your local newspaper for attention. Before, you could get people to read national and international news on the front page of a local paper because they needed to buy it to get the school lunch menus. Now the school lunch menu was available from the school's website. It didn't need to be included on the paper's website, and people interested in national and international affairs would probably be better off reading that content from an outlet devoted to it. The geographical agnosticism of the Internet has struck perhaps a fatal blow to the business model of the newspaper, which has been based on geography and almost nothing else. Once geography no longer binds your audience together, there is nothing to hold onto. You're left with the least sexy portions of your content portfolio: the police blotter, the obituaries (of non-celebrities or regional celebrities), town council meetings, obligatory notices. The parts of newspapers generally given over to the most junior reporters and editors, and allotted the least space and the smallest type. Many of these were the things people were buying your newspaper for (along with the aforementioned school lunch menu) but hardly anyone liked to admit this. This content certainly wasn't put on the front page very often. And again-- when the funeral home can post its own obituaries, and the school can post its own lunch menu, and the town council can post its own minutes and meeting schedules, and the police department can post its own blotter, what role is there for the newspaper in these things?

One might be tempted to say that the newspaper's essential place in the transaction was to provide not just a distribution channel, but a level of trust. After all, can you trust the town council to tell you what happens at a meeting, if you weren't there? Maybe not-- perhaps someone there has an interest that is better served by you not knowing. However, if the local paper has a reporter there, there's no hiding it. Nevermind if it was the most junior reporter, keen on leaving as soon as possible, getting promoted to a different beat as soon as possible, and like as not to take whatever information given to him on faith in the interest of expediency. Most of the other forms of information here-- the blotter, the obituaries, the lunch menus-- are taken verbatim from their sources with no fact-checking or editorial input from the newspaper whatsoever. For these, the only value the newspaper organization brought to the table was distribution, and in that area they've had their legs cut out from underneath them by the Internet.

An aside: I am reminded of exercises in journalism school where we were taught that copyeditors were not just supposed to fix bad grammar and cut articles to fit, but were to fact-check everything, extending even to looking in the local phone book to check the spelling of last names in the obituaries. After all, poor widow Snodgrass has suffered enough, and doesn't need the indignity of seeing an obituary for her late husband, Mr. Snadgross. As a paginator (someone doing electronic page layout) at a local paper right out of graduate school, I was sometimes asked to do copyediting of local or wire service content when editors were busy and I was otherwise unoccupied. On one of the first such occasions I asked for a phonebook, and when I said what it was for, my editor looked at me like I had three heads. "We don't fact check things like that," they said. My newsroom experience does not extend much beyond the three years I spent there but I am given to understand this is fairly typical; I will humbly accept correction from readers if this is not the case.

All these challenges are much less problematic for magazines, which are already organized (generally) by topic, and not geography. They publish less often, focus more narrowly, derive more of their revenue (proportionally) from their readers and, usually because of higher production value, get more revenue per column-inch of advertising space. Their business model is also much more directly translatable to the Internet, where there is no particular reason to think that their audience, held together as they are by common interest, rather than geography, will not remain a coherent unit. Magazines needed only to survive the uncomfortable chicken-and-egg stage with regard to advertising, during which it would make little sense to invest in online distribution until advertisers were willing to buy online ad space, and without online content there'd be no readers, and without online readers there would be no online ads, and so on. Publications able to subsidize their online presences out of this catch-22 and into a virtuous cycle could transition from print to the web, and even now some are doing it: PC magazine is dropping its print version and going online-only. While this is a transition that makes many afraid, it is a transition that no newspaper could ever hope to make, organized as they are.

The only ones that even hint at making such an effort have been special in some way: the New York Times, seeing itself as it does as the "newspaper of record" not just for New York, or even the USA, but of the world, and the Wall Street Journal, which despite its physical characteristics is more like a magazine in its focus on a single topic: business. Neither have these organizations been entirely sucessful in their attempts. The ubiquity of free newspaper websites has engendered expectations of free content. Here the previous consolidation actively works against newspapers, regardless of size. Whereas the local paper with access to wire services could combine local and syndicated content into a package that represented significant value for an insignificant price, subsidized by advertisers who wanted access to the publications' large audience, the value the content of a local paper's website offers is limited only to their unique content; everything else is available somewhere else, and probably for free. If a paper wants to restrict access in some way in order to generate subscriber revenue, it can do so only on the strength of the content that it has and no one else has-- and that is the very capability of newspapers that the past decades of consolidation has severely reduced as they became more and more dependent on wire content.

Shave The Whales

In the face of all this, plus the financial crisis, comes calls to "save newspapers", precipitated by the shaky condition of some of the nation's venerable old dailies. I'm still not sure, to be completely honest, what this means. Should newspapers get a bailout? I would say no. I generally subscribe to the meme that if it's too big to be allowed to fail, it's too big to be allowed to exist, and that the proper role of government in regulating markets is before the crisis, not afterwards. If institutions and industries like newspapers and automakers are so essential, so vital, so strategic that they cannot be permitted to fail because of the disastrous consequences, then the proper action to take is to regulate this industry such that no one set of circumstances can negatively affect these sectors so drastically, and that no single institutional failure can so cripple the sector as a whole. Markets and proponents of free markets are all for letting the market solve its own problems when customers are suffering at the hands of monopolists and cartels-- are we to honestly believe that the CEOs of these same conglomerates are pleading for federal money on behalf of their employees and customers, and not strictly for themselves? No, it strains credulity.

If not a bailout, then what? Is this a call for lapsed subscribers to call up their local paper and reinstate delivery? That won't help. Subscription fees still don't pay for content, only for distribution, and there's little or no data to suggest that a subscription fee that would cover such costs would be borne by the market. People have gotten used to low newsstand prices and even lower subscription prices, since advertisers covered the burden of newsroom expenses. How much would that paper cost if subscriptions had to cover not just distribution, but printing and newsgathering? Would anyone pay it? Would it be worth paying for? Does it make sense for dozens of big city newspapers across the country to pay for wire service content that they then separately and independently edit for space around the same advertisements? Without the arbitrary restrictions of finite newsprint containing a given amount of ads, isn't it better just to run all the wire content, unedited? If so, then what's the difference between a paper in Los Angeles and one in New York? Why would I choose one over the other? Common sense would indicate that I'd choose the cheaper one, which means that any organization that sticks its neck out to try and do business without advertisers, and have subscribers directly bear the burden of production and newsgathering, will lose out to the ones that keep that content for free-- even if it means it eventually kills the business model and the sector as a whole.

In a world where $40 buys unlimited access to the Internet, and all the legitimate (and illegitimate) sources of content that entails, and another $40 buys 24 hour television and radio broadcasts, and another $40 or so buys a satellite radio subscription, what is the value proposition for the consumer here? A month's worth of daily papers at newsstand price is still, typically, less than $20. Factor in the more expensive Sunday editions and perhaps you hit $30. Papers typically offer discounts to subscribers, though, so slash that down a bit. Even so, what are you getting for this fee that you can't get somewhere else for free?

It is the opinion of many who work in the newspaper industry, as well as many who support it and continue to purchase its product, that it fulfills an important, almost sacred role, in America's democracy-- the role of the fifth estate. This is the lynch pin in the arguments that newspapers cannot be allowed to die, that the market cannot be trusted to replace them, and that newspapers need to be saved-- whatever that means, since as of yet I have not seen a clearly stated method for saving them.

I have slightly more faith, unjustified as it might seem in the current climate, in the ingenuity of humans and the efficiency of markets. Newspapers might have fulfilled that vital role, but not because they were designed for the purpose, but because the market gave them an incentive to do it. As long as that incentive exists, there will be an entity or entities to take advantage of it. If that incentive does not exist, then no amount of effort on our part will "save newspapers" to fulfill it, since it is something that no one actually wants or is willing to pay for, no matter how much lip service is paid to it.