When you hear analysts explain what's killing the newspaper business, the answer invariably boils down to two words: “The Internet” or even one: “Craigslist.” A recent CNET story, “Pew Center illustrates how Craigslist is killing newspapers” is typical.
The use of online classifieds sites, such as Craigslist, has more than doubled in the past four years, according to a study published Friday by the Pew Research Center. At the same time that Web classifies are on the rise, the classifieds business that newspapers once depended on has collapsed
So it was interesting to hear David Simon interviewed on Bill Moyers Journal. He was on the show back in April, thought I listened to it only this week, through the miracle of podcasting. Simon is famous for creating “The Wire,” the HBO series that many critics think is the greatest television show of all time (see, for example, here, here, and here). But before that, he was a reporter for the Baltimore Sun for more than decade, and he had some interesting things to say about newspapers and the Internet:
Yes, we were doing our job. Making the world safe for democracy. And all of a sudden, terra firma shifted, new technology. Who knew that the Internet was going to overwhelm us? I would buy that if I wasn't in journalism for the years that immediately preceded the Internet because I took the third buyout from the "Baltimore Sun." I was about reporter number 80 or 90 who left, in 1995. Long before the Internet had had its impact. I left at a time-- those buyouts happened when the "Baltimore Sun" was earning 37 percent profits.
You know, we now know this because it's in bankruptcy and the books are open. 37 percent profits. All that R&D money that was supposed to go in to make newspapers more essential, more viable, more able to explain the complexities of the world. It went to shareholders in the Tribune Company. Or the L.A. Times Mirror Company before that. And ultimately, when the Internet did hit, they had an inferior product-- that was not essential enough that they could charge online for it.
I mean, the guys who are running newspapers, over the last 20 or 30 years, have to be singular in the manner in which they destroyed their own industry. It-- it's even more profound than Detroit making Chevy Vegas and Pacers and Gremlins and believing that no self-respecting American would buy a Japanese car in 1973. That-- it's analogous up to a point, except it's not analogous in that a Nissan is a pretty good car, and a Toyota is a pretty good car. The Internet, while it's great for commentary and froth doesn't do very much first generation reporting at all. And it can't sustain that. The economic model can't sustain that kind of reporting. And to lose to that, because you didn't - they had contempt for their own product, these people. I mean, how do-
BILL MOYERS: The publishers. The owners.
DAVID SIMON: Yes, how do you give it away for free? You know, but for 20 years, they looked upon the copy as being the stuff that went around the ads. The ads were the God. And then all of a sudden the ads were not there, and the copy, they had had contempt for. And they had-- they had actually marginalized themselves.
By the time the Internet had its way, I mean, they're down to 180 now. You don't cover the City of Baltimore and a region like Central Maryland with 180 people. You don't cover it well.
The problem doesn't stop at newspapers. (The irony of viewing the entire Moyers show online for free - and reading a free full transcript of it - almost goes without saying.)
Back in March, eMarketer had a rather terrifying article about the magazine business.
It reported that in the U.S. alone, “525 magazines were shut down in 2008” and that “consumer magazine print ad spending in 2008 was down 7.1%.”
And yet, eMarketer's formula is what David Simon might call the same trip down the rabbit hole:
The big move in publishing, however, is online. But the transition may be coming too late for many titles. “While there are pockets of innovation, many print brands have fallen far short of the mark when it comes to their online presence,” says Ms. Krol. “Given the state of the business, publishers need to act quickly to capitalize on brand assets and provide accessible, compelling content to readers-who already have access to a wealth of content online.”
“You have to get your brand online-95% of the magazines out there haven't really done that,” Jim Spanfeller, CEO of Forbes.com, tells eMarketer. “They're not putting out a product that is compelling for an online audience.”
Digital ad revenues for consumer magazines averaged 6.4% in 2008, according to an analysis of 11 major magazine group publishers by Advertising Age, suggesting the publishers have a long way to go in building their digital businesses.
I imagine David Simon summing it up this way: In other words, publishers should put even more of their eggs in the anemic on-line ad-revenue basket.
And it's not as if Forbes is immune. Far from it.
As it happens, also in March, 24/7Wall Street had a remarkable and depressing analysis of the business prospectes for the business weeklies, “The Sun Sets On BusinessWeek, Forbes, And Fortune.”
The May 11 issue of Fortune Magazine is a perfect demonstration of what the three largest business magazines have done for decades. Its cover story, “How Bernie Did It' is the culmination of a four-month investigation into the details of Bernie Madoff's life and business operations written and reported by three of Fortune's best editorial staff members, one of whom is a Pulitzer Prize winner. This issue of Fortune is also an example of why the magazine and its competitors Forbes and BusinessWeek, will soon no longer be able to publish these kinds of stories. The May 11 issue has 92 printed pages and covers. There are only 21 pages of paid advertising compared with more than a hundred pages in a spring issue 20 years ago.
According to the article, “All three of these magazines lost money in the first quarter” although actual numbers are unavailable because Fortune and BusinessWeek are part of larger media organizations and Forbes is privately owned. The article says Business Week “is in the worst shape of the three” and cites industry experts as saying it “has lost money for two years and will lose over $20 million this year if its advertising continues to move down at its current rate and the operation does not make large cost reductions.”
Its advertising pages fell 16% in 2008, according to data from industry research letter MIN. The magazine's ad pages are down 38% this year through the end of April, and in the most recent issue, the drop was an extraordinary 63%. The magazine has more than 220 editorial, support, and management personnel based on the BusinessWeek masthead. This does not include ad sales, production, or circulation staffs. That is a large number of people to put out a magazine that often has fewer than 60 editorial pages and a website with less traffic than TheStreet.com based on March figures from online audience research firm comScore. BusinessWeek online had 3.3 million unique visitors and 18 million pageviews. TheStreet.com, which has a larger monthly audience, had advertising sales of only $30 million in 2008, based on its 10-K, and that number certainly dropped in the first quarter of this year. That is probably a good benchmark for what BuinessWeek brings in for online advertising.
The article concludes “BusinessWeek will not be a weekly magazine with over 200 employees and a rate base of 900,000 at the end of the year. BusinessWeek will have to become a much, much smaller operation.”
As for Fortune, the article says, “management has said that the magazine still makes money, but based on most definitions of profit that is almost certainly not true.” After looking at its large staff and modest Web revenues, the article says “It will have to cut costs and its choices are similar to BusinessWeek's.”
Things are only a little better at Forbes: “Ad pages at Forbes were down 17% last year and are down 19% year-to-date. The most recent issue's ad pages were 33% lower than they were in the same issue last year.” The good and bad news is that staff has already been cut-and not just on the print side:
Forbes has a financial advantage over its two competitors. It has already gone through two large staff layoffs which totaled about 70 people, about 15% of the staff who worked at Forbes and Forbes.com.
24/7WallStreet notes, though, that Forbes has a strong Website, just as Forbes.com CEO Spanfeller bragged to eMarketer:
The print business at Forbes is doing as poorly as it is at BusinessWeek and Fortune. Forbes has the advantage of a much larger audience online. In the US, it has almost 5.6 million unique visitors and 66 million pageviews. Revenue from the Forbes online business is between $70 million and $80 million, but is not growing. Forbes management might say that its online operations are profitable and that its print business loses money. It is convenient to separate the two businesses, but they share so many resources, that this is not a realistic description of the Forbes overall business.
If we want investigative journalism-whether it's of the local politics in Baltimore, or business scandals like Madoff's twenty-year Ponzi scheme, we have to be willing to pay for it. So far, the reading and voting public has shown no appetite for doing so. We're right now dismantling journalistic enterprises that took decades to build.
One is reminded of New York's glorious Pennsylvania Station, part pink granite Doric columns, part iron art deco archways. When it was thoughtlessly torn down in 1963, the loss was so mourned that it led to the National Historic Preservation Act of 1966 and its National Register of Historic Places Program.
The equivalent losses have already been felt, and then some: The 146-year old Seattle Post-Intelligencer, the Rocky Mountain News (140), Tucson Citizen (138), the Cincinnati Post (128), but, as you can imagine, David Simon has a theory why there will be no national historic preservation act for investigative journalism. In his interview, Bill Moyers paraphrased something Simon had said in an earlier interview: "Oh, to be a state or local official in America... without newspapers. It's got to be one of the great dreams in the history of American corruption."
As the printing presses of these journalistic giants grind to a halt, they of course leave websites, ones about as nondescript as the current Penn Station, but woefully understaffed and far less useful. And like the old Penn Station, they won't be rebuilt. Nor will the great magazines whose demise will surely follow.