Business of News: How Do We Stop Newspapers From Fading into Obscurity?

By: Tim Gallagher

At a popular retail corner in the city closest to where I live, once sat a Blockbuster video store. High Noon in the little town of Camarillo, Calif. came the day Hollywood Video leased the storefront directly across the street. Each Friday my wife and I faced the existential question: Which store was more likely to have the new release movie we wanted to rent?

Blockbuster and Hollywood Video are no more, and we no longer worry about when or how we are going to see that new release. We will stream it on any one of several services. The content aspect of the movie business has not changed one bit. In fact, it has multiplied in size—more companies than ever (big ones to tiny independents) are making content that they can deliver to us. All the industry has done is eliminate the cost of making the VHS cassettes, then CDs, then DVDs, then Blu-Ray.

There is a lesson for us in the newspaper business.

We make great content. And while we used to think the big newspaper down the road was the competition, or the free weekly—we were wrong. All along, the competition has been ourselves and our inextricable tether to the cost structure of printing presses and delivery systems. We could afford that cost when we owned 40 percent to 60 percent of the advertising market. It cannot be supported when we own 10 percent of the market and digital gets nearly 40 percent, according to the global management consulting firm McKinsey.

Netflix came along to challenge Blockbuster. It offered home delivery of the DVDs (even if you had to wait your turn). Blockbuster tried to compete until Netflix got rid of delivery cost. It streamed those movies. No waiting.

There are industries that “got it.” Industries that understood technology would consume their model and they had better get used to it. Netflix learned to create content in addition to delivering it.

Around 2005 at the Newspaper Association of America (now the News Media Alliance) convention, an executive at Pac Bell shared they were already planning to abandon their home telephone business and instead were focusing 100 percent on delivering data digitally. (Now this was 2005; YouTube had just been launched.) Many of the publishers were puzzled but PacBell had it right. It recognized that its business was delivering content—be it in voice, which was fading, or in data, which was just starting to rise.

The road is littered with industries that did not get it. Knitting mills. Directory businesses such as the Yellow Pages. The savings and loan industry. Recording studios.

But for every 10 of those that die, there is one that succeeds by shifting away from its roots. (Consider that Ray Kroc never became a billionaire until he stopped worrying about hamburgers and started leasing real estate.)

Kenneth Lerer, the co-founder of Huffington Post and chairman of BuzzFeed, is one of those who’ve said of media leaders, “You have to fix the plane while you’re flying it.”

Notice something. He did not say “fix the airline industry.” He said “fix the plane.” The newspaper industry is not a monolith. Within the business, there are so many models, and some will fail.

I am not the first to claim that the Digital First model of cutting your way to profitability is not going to work, except that it will make some executives very rich and newspaper people very unemployed. You cannot make your product more desirable by making less of it unless you have a corner on the market—and we don’t.

There are ways to fix this. The newspapers that succeed will accept lower profit margins; will shed legacy costs in favor of technology; will focus on building richer and deeper content from journalists who are studious, fair and inventive; and will hire advertising people who sell deep relationships with audiences. Their human resource departments will not oversee employment law compliance; they will seek and hire the smartest and best.

The question is whether you will fly straight into the ground with the airline industry that could not fix itself or be the engineers who fixed your plane.

Remember the old saw: “What got you here, will not get you there.”

Tim Gallagher is president of The 20/20 Network, a public relations and strategic communications firm. He is a former Pulitzer Prize-winning editor and publisher at The Albuquerque Tribune and the Ventura County Star newspapers. Reach him at tim@the2020network.com.

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Published: July 19, 2018

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