The entirety of U.S. history tells us that it’s a question of when, not if, the next recession will hit. With a 10-year stretch in the 1990s as the only exception, we’ve never gone longer than eight years without one. And it’s been nine and a half years since the last recession.
It’s a precarious situation for the news business. A decade of economic growth and prosperity, in theory, would allow industries to invest in new lines of business, research and development. At a minimum, less or no damage would be done to their core product in the good times.
But newspapers have shrunk during this period of prosperity. With a few exceptions—such as the Washington Post under Amazon’s Jeff Bezos—investment in the future has been lost in a scramble for survival. And vulture capital hedge funds have rolled up ownership of hundreds of daily newspapers in the U.S. in a strategy of selling off real estate and deeply cutting operating expenses for short-term profit.
If many newspapers experienced double-digit annual loss in ad revenue during the good times, what will happen during bad economic times? If the product has already been cut below a point of minimum viability, where will they find the expense cuts to offset deeper revenue decline?
If our last recession is any guide, publishers should be on alert about any revenue category that’s at risk of being disrupted by technology. They should see flashing red lights around the preprint category, for example. It’s the only thing keeping some small daily newspapers in business. Its fate is in the hands of a relatively small number of major retailers. Once a few of them decide to get out of the preprint business, there’s a chance the others will rapidly follow. And poor economic conditions will likely force change in a big budget line that seems overdue for a more digital approach. Something will do to preprints what Craigslist did to classifieds.
So obviously, the more diverse the revenue mix, the more likely a news organization is to survive.
Newspapers’ recent push into digital subscriptions and other forms of reader revenue have to be part of that solution. But publishers need a gut check on whether there’s enough product left, and a deep enough relationship with readers, to make the case.
Relationships, above all, could be the answer. Not just with readers, but local advertisers and other community stakeholders.
What if news organizations entered a recession asking, “How can we help the community and local businesses survive?”
When the real estate market collapsed in 2008, I was publisher of a small daily newspaper that suffered badly from a corresponding drop in advertising. After talking to real estate agents about their pain, we came up with an advertising deal that would allow them to promote a specific home for sale at a flat, one-time price until the house was sold. It eliminated their risk in an uncertain market. It shook loose real estate revenue for us that had almost completely dried up. And when market conditions improved, they remembered how we had helped them solve a problem during tough times.
Advertisers might value those kinds of local relationships more than ever. In 2008 and its aftermath, online platforms such as Craigslist, followed by a revolution in ad tech and the dominance of Google and Facebook, vacuumed up or eliminated the need for local advertising dollars that used to go to newspapers.
But after repeated scandals relating to ad tech fraud, privacy invasion, misinformation and manipulation of the big platforms, 2019 could be a year of backlash that could benefit trusted local media outlets that are deeply connected to local audiences.
If all else fails, or maybe as a natural progression of these strategies, news organizations could turn to partnerships or a mission-driven, nonprofit conversion for survival.
But there will be little chance of success if publishers don’t plan now for the inevitable “rainy day,” and start to build a model for survival.
Matt DeRienzo is vice president of news and digital content for Hearst's newspapers and websites in Connecticut. He has worked in journalism as a reporter, editor, publisher, corporate director of news for 25 years, including serving as the first full-time executive director of LION Publishers, a national nonprofit that supports the publishers of local independent online news organizations.