Newspaper Zombies

NEWSPAPER ZOMBIES by Charlie Martin

Here’s something to think about. Go to your local news stand and look around at the magazines. Five years from now, eight out of ten of those magazines will be gone. As will, most probably, the news stand too.

I don’t get any pleasure out of saying this. When other boys were discovering girls and school dances, I was discovering books, and magazines, libraries . . . and wishing I was discovering girls, but that’s another story. But the fact is that the economics of media are changing so radically that print periodicals as we know them — magazines and newspapers — are doomed. And it’s the Internet, and particularly Craigslist, that have done it.

As often happens, you can best understand why by crunching some numbers. I looked at the New York Times 10-K for 2008, and here’s what I learned: it costs the New York Times Company about $1.3 billion to produce the physical newspapers for all the papers it publishes for a total circulation of around 2 million. Or, in other words, it costs about $650 per year to print and distribute a year’s worth of copies to a single theoretical reader.

Once upon a time, this was a good deal.  Even today, the Times takes in about $1500 in revenue for that year’s worth of copies. Not in subscription costs, of course, but from advertising. Journalism professors may talk about all the noble goals of journalism, but the business is printing and distributing pieces of paper bearing advertising. The content is just the bait — and even with Thomas Friedman’s unlimited expense account and Maureen Dowd’s spa trips, the actual costs of writing and editing the content pales next to the cost of printing the papers.

Then along came the Internet.

Let’s crunch the numbers again, for the Web. I did this several years ago for Roger Simon before he started Pajamas Media — but several of my assumptions then were different, so let’s just look at it in terms of my own little blog Explorations.

Hosting my blog costs me approximately $100 a year, and my hosting company handled the load when I was picked up by some big sites during the election season for the Palin Rumors list.

At the peak, I was getting about 40,000 unique visits a day, which I’ll take for this argument as my hypothetical circulation: 40,000 “copies” every day all year. So, how much would it cost me for one view a day for the year? Do the division: you’ll see its about $0.0025 per year. Not a quarter of a dollar per year, a quarter of a cent per year. Which means that a print newspaper is about 260,000 times more expensive to publish.

It’s taken a while for the implications of this to work through the system. When web advertising got started, the prices were set with print advertising in mind; it was easy to undercut print advertising by a good bit and still make plenty of money. But some people noticed that it was so cheap and easy to set up a web site, Craig Newmark being one of them, that you could throw out the old business model entirely. His craigslist offered free classified advertising, and still managed to make money.

Rather a lot of money.

Needless to say, this drove the cost of web advertising down. Way down.  When your competition can give products away and still make money, you have a serious problem on your hands. This new reality really hit the newspaper business, because try as they might, it would still cost a newspaper 260,000 times more to publish the same classified ad, or for that matter display ad, as on-line media. That’s not just competition among newspapers, that’s a quantum leap, a phase change, a whole new ball game. One the newspapers will inevitably lose.

The results of this are beginning to show. Time and Newsweek are radically changing their models, with fewer pages and less concentration on “news”, and more on “commentary.” They’ve got to do that: when Time arrives in a physical mailbox, the content is already days old, stale. Smaller, regional newspapers are shutting down, and bigger newspaper chains are feeling the heat as well, with, for example, the Tribune chain filing for bankruptcy (in that case helped along by some over-enthusiastic acquisitions a couple of years ago.) But the writing is on the wall for all of them; nobody can successfully compete with competition that is a quarter of a million times cheaper.

Or, at least, no one can compete fairly. In the last few weeks, there have been two bits of news slipping in under the radar.  First is an increase in the number of calls for a government subsidy of news reporting.  Second, more and more elected officials are suggesting a return of the Fairness Doctrine, or something similar. The combination of the two could extend the life of newspapers, at least for a while — i.e., use tax money to support them, use Henry Waxman’s idea of “fairness” to control the content and the content producers, so that what Congress thinks is news is what gets subsidized. Maybe that can keep the newspaper, in its inky, pulpy glory, alive for a while longer.

If you can still call that a newspaper.