November 17, 2011

What went wrong at the Mercury News?

An early online innovator. Great reporting by the likes of Gary Webb (before the Merc threw him under the bus). A booming market. Mediocre papers in San Francisco.

So, what went wrong? That's the theme of this in-depth piece by Columbia Journalism Review. (H/t to my friend Leo Lincourt.)

My reaction? It nails the main points of what went wrong not just at the Merc, but to some degree, the industry in general:

First, I didn't realize that the Merc had, at the start, "paywalled" its website, only to abandon it later. Related to that, as Leo notes, is its failure to find "niche" reporting worthy of being paywalled, or to realize what it had in Silicon Valley. Especially after Steve Jobs' return to Apple, the Merc, even with national media "discovering" Silicon Valley, could have had the angle on premium, paywalled content. The WSJ is partially paywalled even with the New York Times in its backyard, after all.

Second, specific to the Merc, Dean Singleton is an idiot, and certainly had a hand in the Merc's demise, as he has in the AP focusing first on news aggregators and many other things that have hurt the industry. The story doesn't at all look at him, but it's too bad it didn't. (That said, Deano's injuriousness to the industry, while being Example No. 1 of not "getting" the online newspaper world, could make a separate story of equal length all by itself.

Third, per many other observers, we see the problems with newspapers trading on the NYSE and focusing on short-term profits. The stock-zooming 1990s has had its payback, with newspapers doubling down on new purchases while ignoring the destructiveness of the Net:
(General manager Dan) Finnigan explained that either they were going to cannibalize their own businesses or someone else would. 
This was at a meeting of Knight-Ridder publishers, where he tried to get them on board with investing in ...

CareerBuilder! (K-R/The Merc also took a whiff at buying into eBay.)

This was even as people were warning that newspapers should accept lower profit margins and maybe even initial losses for investments in some new technology, websites, etc.

In that way, newspapers (those publicly traded and especially those, like Knight-Ridder but unlike the NYT, with one-level stock structure) are emblematic of what's wrong with hypercapitalist America today.

That said, one commenter there, who holds up the nonprofit Poynter Institute, with its ownership of the St. Petersberg Times as a model? Dunno about Poynter or that paper, but, in the UK the Stott Foundation has admitted that, over the past several years, it's hemorrhaged hundreds of millions of dollars/pounds on The Guardian's highly touted but non-paywalled website.

The St. Pete Times also has no paywall, which leads me to say, nonprofit ownership guarantees nothing in the modern newspaper industry, especially if you have a stupid business model.

The "cannibalization" is also another argument for paywalls. Especially at smaller, more regional papers, paywalls not only are a way to make more money off of online operations, but keep people from leaving hardcopy and its ads, which are still the largest revenue producer.

Related to that, how many industries bemoan making "only" a 9 percent profit? As noted, the Merc's margin had fallen to 9 percent by 2006. Even today, if you throw out debt service (mainly from the buying-up binges of 1995-2005) papers are still profitable; just not at 20-plus percent.

In the story, Tony Ridder comes off as a bean-counter, but one who honestly was doing so within "old newspaper" mentality.

One complaint, though. The story throws Gary Webb and his well-known reporting on the Nicaraguan Contras-cocaine-CIA connection kind of, or more than kind of, under the bus, at least by implication. On the purely editorial side, I'd have to agree with one commenter that slicing and dicing Webb was far more egregious than any of the business/editorial/Internet inter-departmental screw-ups.

Anyway, give the whole thing a read.

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