October 04, 2013

Newspapers are like automakers - SUVs and hardcopy editions (updated)

NOTE: I am expanding this into a running post about problems with newspapers, both old and new.

And now, back to the headers.

Mathew Ingram has used this analogy before.

Although I think it's a good one overall, I don't think it's 100 percent right. Even more, to the degree that I do think it's right, it's frustrating that Ingram doesn't extend the analogy.

And I shall now do so.

Where the idea is right is that print newspapers are like full-sized SUVs.

Let's unpack that more.

American automakers got stagnant in the 1960s, other than running away from the big fins of the late 50s. Japanese cars were laughed at. So was the VW Bug. "Snooty" upscale European imports were accepted as a fact of life.

US automakers then had the two Arab/Iranian oil embargos of the 1970s to face. American automakers didn't lear from the first and still had little in the way of small cars, let alone quality ones, ready to compete with Japan, or with expanded offings from VW.

But, along came the 1980s. Then the 1990s. Oil prices not only stabilized, but after a short spike for the Gulf War, went downward, way downward. Down to around $10/bbl.

So, U.S. automakers, also buoyed by the EPA's CAFE standards stagnating, and knowing that the corporate fines for average fleet CAFE falling short of standards, and ignoring ideas of peak oil and the rise of car-driving classes in the developing world, said "What, me worry?" The Chevy Suburban had been around for decades, yes. But, none of the other SUVs had, by and large. So, with a variety of marketing angles, they pitched Americans on a bunch of low-mileage, high profit margin vehicles. (Japan followed suit, yes, but hedged its bets by not making anything as big as the Suburban and by keeping most of its SUVs on car chassis so as to help mileage by 1 or 2 mpg. But  I digress.)

Meanwhile, there's newspapers, with the timetable a decade or two later, but with parallels.

In the 1970s and 80s, TV has achieved near-total saturation of the US. Cable TV has helped make that happen, as well as allow for the rise of the early superstations like WGN and TBS. But, the industry has "held its own," at least in terms of keeping readership constant, although it hasn't quite kept readership percentage.

Then, along comes the Internet. Newspapers start to worry. They invest a lot of money in early websites, early digital baseplates for SLR cameras, and other things, in the early 1990s. However, the Net doesn't take off as fast as expected, so by the late 1990s, they figure why worry? Major media trade groups don't see the storm clouds ahead, like readily available broadband, etc.

Instead, they see the housing bubble inflate their real estate pages (even as Craigslist cuts into classifieds, though that hurts alt-weeklies more), and also their auto pages, as low post-9/11 interest rates combined with home refinancing lead to a spate of new auto purchases. (We even have a tie-in.)

So, the hardcopy newspaper with all the new ads became like the SUV. High-margin, as high of margin as newspapers had been for some time, as more and more big cities lost their second daily newspapers.

But, both sides ignored storm clouds.

For the automakers, it was Peak Oil. (And, for any deniers, King Hubbert wrote about Peak Oil *after* the first fracking for oil had been done. That's part of what figured in to his calculations of difficult-to-get oil. You can sit down again.) They also failed to address climate change concerns, and that that issue, along with newly skyrocketing oil prices, might lead a more liberal presidential administration to to address CAFE standards anew.

For newspapers, it was ignoring that Net 2.0 was on its way, leading to an explosion in company direct marketing, plus many more outlets for web ads. Both would drive online ad rates down even as more people went to the Internet. Ad-blocking technology and other issues would add further headaches.

Some of the two industries' problems overlapped. Despite warning signs, neither newspapers in general (though I'm focusing on US ones, and larger dailies, to be precise) nor automakers braced themselves for the possibility of a housing bubble bursting.

As a result, the Great Recession hit both hard, "demanding" that both turn on a dime, though the bulky SUV can't, and the US automakers' mindset behind it wouldn't easily. Ditto for newspapers. The only answer was to cut, cut, cut jobs in both places. The automakers at least had more reason; people were buying few cars in general, and fewer American cars and SUVs in particular. And, they didn't have fat profit margins tapering down; they had slim profit margins going negative.

In the newspaper world, people were still reading. They were just doing more of it online because it was free there in most cases. In a disaster as big as Detroit ignoring Japan in the 1960s, National Newspaper Association leaders, along with most board members of the Associated Press, etc., assumed a "TV model" would work for online newspapers, and made no backup plans to quickly move away from that if they were proven wrong. As part of this, the AP underpriced its product to news aggregators like Yahoo, followed by Google.

The future?

Both industries are likely to make future mistakes, as I see it.

Even though a 20-cent/gallon fluctuation is no more than 2 cents a gallon just before the first oil embargo, Americans, between expecting cheap gasoline as a God-given American exceptionalism birthright and seeing gas price signage every day (or being alerted by places such as Gas Buddy), are extremely sensitive to gas prices in the short term. And, since President Obama allowed loopholes for E-85 vehicles and other things (even though nobody will run them on E-85 and we can't afford to make that much ethanol anyway), and didn't seriously raise the penalties for failure to meet corporate CAFE, Detroit will follow suit on such sensitivities, while Japan and Europe will carefully hedge their bets. (Speaking of those two areas, why, why, why, won't somebody combine the best of both and bring a diesel-hybrid to market? Ford actually built a nice concept version, but won't sell it.)

For newspapers, it will be the belief that the bottoming out of online ad rates, like Herbert Hoover's expected economic recovery, is just around the corner. That will combine with a belief that ad dollars from mobile devices are part of the salvation, even though, as I have blogged before, digital dimes are likely to face an undercut replacement in mobile nickles. Smartphones aren't big enough to do a lot for either ad display or news story reading. And, the idea of creating two different versions of mobile-land, one for smartphones and one for tablets, surely makes newspapers, ad designers, web designers and others all cringe.

So, are we headed to Bezos' point of hardcopy newspapers being dead in 20 years? With rare exceptions of truly national papers like the New York Times, Wall Street Journal and maybe USA Today, I say yes. (USA Today, despite whatever hopes Gannett has for it, is a different kettle of fish. It's not a newspaper of news or financial record and most of its content is wire copy. That said, for older readers who see their  local daily go online-only in another decade or two, and want to hold a hardcopy paper in their hands, it will still have an audience of sorts.)

On the flip side, there is some truth to how going online only, and totally, not a hybrid like Advance Publications is doing with its major papers, frees up a lot of overhead. (And I'm talking about online-only as Net-HTML style only; no "e-editions" of PDFs of hardcopy newspaper pages.)

Obviously, pagination copy editors are gone. A small portion of them will be kept around for line-type copy editing, though I don't think it will be many; even larger newspapers will be cheap here. (And, with Adobe going to the cloud, on a subscription basis, including forced buys for updates, you escape having to have so many copies of InDesign, unless, of course, you dodge that by going back to Quark.)

As for a website? Teach the managing editor, sports editor and other guys who now paginate how to use Wordpress (the website version, not the blogging one). That way, you also dump TownNews or whoever else is providing your web services and likely overcharging you.

Printing press? If you're a daily of any size, you own your own. Well, now you don't have to pay pressmen, or press maintenance, or buy upgrades.

Those savings are known by all pundits. But, don't forget others.

You no longer need your contract carriers and paying all of them. Related to that, your circulation department gets whacked; assuming you have a paywall, you train a small bit of your old circ folks in the IT basics to manage online subscriptions. And, if you're a non-daily, and you go by mail? Going online avoids the overhead of the Postal Service, along with its increasing deterioration in and cutbacks of service. (That said, the old, largely white small town folks are the ones still most wedded to hardcopy newspapers, and with lesser rates of Internet access, let alone use, then the nation as a whole, so it may well be more than 20 years before the community non-daily paper in hardcopy is dead. But, given the rapidity of change, it may not be.)

And, per an end-of-October mass email by the National Newspaper Association, here's another reason for non-daily as well as daily newspapers to be thinking about an online-only future at some date:
On Capitol Hill, NNA opposes proposals by Sen. Tom Coburn, R-OK, to hand over authority to USPS—to set rates and to change service levels without—pre-review by the Postal Regulatory Commission. Coburn’s proposals are included in a the Postal Reform Act of 2013, jointly proposed by Coburn and Sen. Thomas Carper, D-DE, chairman of the Senate Committee on Homeland Security and Governmental Affairs. NNA believes handing unfettered authority over the government monopoly’s services and rates to the USPS Board of Governors would result in higher rates for Periodicals and more attempts at promoting selected direct mail products over newspaper advertising.
Oh, I'm sure this is a possible outcome.

So, get ready to go online only. And, if this drives the cost of other second-class mail higher yet, and threatens the solvency of the Postal Service? Well, this is just like the situation with the AP. Newspapers as a business don't exist to keep the Postal Service in business.

And, per this post, re Adobe's future plans for cloud-based software, going digital-only lets one cut other overhead, too.

As for places like New Orleans, who saw the loss of a daily print newspaper as a blow to status? Well, if Advance didn't have such crappy websites, this could be spun into entering a brave new world and offering the best in all-digital daily coverage.

That then gets me back to Jeff Bezos.

The Newhouse kiddos at Advance, I think, simply want their "cut" from their family's legacy with the chain. (Having worked at a paper in the Freedom chain when it went into bankruptcy and then came out, I've seen the dynamic at play.)

Bezos has no such attachments, nor does he have such a chain of newspapers to work with. It's just the Washington Post and some Beltway outliers.

Now that a basic paywall is in place, I don't think he plans any major changes for, say, 3-5 years. Rather, he's going to do a LOT of brain work, and when he's ready, he'll make changes so wholesale, all at once, that Advance will look like pikers in contrast.

How well other papers will then emulate him remains to be seen.

To wrap up, here's why I say that the analogy isn't perfect.

Newspapers, at least theoretically, have more of this issue under their control on their side of the street. Detroit can't do anything about Peak Oil. It can appreciate the car market in developing countries, but it has to accept that a thin sliver of that, except in a country both totalitarian and inegalitarian like China, is for SUVs. Barring massive lobbying, it can't undo Obama's CAFE standards tightening, or block higher gas taxes in Europe, etc.

Newspapers? They can accept that Bezos' 20-year deadline is real, especially if they see him treat it as real at the Post. They can ignore people like Ingram and other Gnu Media gurus when they oppose paywalls. If the print paper doesn't quite totally die within 20 years, they can price it like an SUV.

And, Advance, while doing it the wrong way, is still better in some ways than other stopgap measures. From what I've read, pagination hubs in general are a nightmare. (The only way they might work is if more newspaper chains had developed better local or close-area regional hubs in general.) CNHI, now near the end of its fifth full year of a mandatory week of furlough every quarter, continues to blacken its own name and foul its own sheets.

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Meanwhile, I'm looking at "house" ads for National Newspaper Week from the Newspaper Association of America.

Two of them specifically talk about the sports section, which is arguably one of the more problematic spots in hardcopy in daily papers, especially larger ones. There's that massive amount of space demanded for agate for box scores. Then, most papers continue to have a page 2 box that lists sports on TV and radio, something that's not done for science programs, either classical or modern music programs or anything else. And, the biggest dailies, like the Dallas Morning News, have dumped almost all of their high school stuff on paywalled websites now, for that reason, on issue No. 1.

It's also funny in another way, and sad in yet another.

Funny? All the ads that show a newspaper still show the old hardcopy; not a one has a person at a computer, tablet, etc.

Sad? All the ones that have people in them? All white folks.

But, wait. Besides this misplaced nostalgia in ink, there are multiple op-ed columns. Some of them talk about online newspapers, even while ignoring most of the financial issues involved, or else engaging in major spinning. That's OK. National Newspaper Week is about what newspapers do right — local news, sports, features, holding governments to account ....

And, speaking of ...

The columns and op-eds?

Lamar Alexander? Puhleese. ANY U.S. elected official who has not robustly opposed the Patriot Act, NSA spying, etc., has no fucking business writing a column for this.

I am officially disgusted, and appalled that the National Newspaper Association gave him this platform. And, I counted at least halfway to 10, then emailed relevant officials. (And have yet to hear back.)

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Editor and Publisher now has a piece about newspapers and newspaper related companies with new effort to add value to their products.

It's kind of laughable.

One of the five listed companies is AdBlock, which is adding value by floating the idea of an individual user creating a whitelist of certain companies' ads to allow, as long as they'll agree to certain standards. AdBlock's whitelist could ding online advertising even more than the use of it already does. (Speaking of, if you're a user of AdBlock Plus, it now has an extension specifically for Facebook blocking needs.)

Two others are Gatehouse Media and Digital First Media. They both seem to be touting their own versions of something like product-placement-based advertorial content that I can find for free elsewhere. Given that Gatehouse just filed Chapter 11 and portions of Digital First have done so in the past, why does this not surprise me? Also given that a lot of DFM's products are cheap, and that CEO John Paton is a paywall-hater, his advertorial content is likely to be cheap, anyway.

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And, see this new post of mine for how expecting video, "2.0" ideas, or going down the Buzzfeed route, let alone the Daily Mail route, isn't likely to bring serious new money in the traditional newspaper coffers.

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