The newspaper industry in the US is suffering from enormous losses in revenue. Fewer reporters are employed by these papers, and a greater reliance on content from wire services is more commonplace. This means that newspapers are no longer focusing on investigative reporting on a local level as they once did. Sports reporting is one of the rare exceptions in which newspapers continue to invest because of intense local interest in such news. Many daily newspapers, most recently The Cleveland Plain Dealer, have cut back on the number of days they are offering their newspapers in print format. The economic pressures are hitting every major newspaper in America.
How did this happen? While it did not occur overnight, the Internet and other alternative sources of news have caused a sea change in the industry. Newspapers have continued to suffer reduced readership and losses, largely as a result of a failure to adapt to the challenges posed by the Internet. Daily newspapers, which have always relied on a revenue stream comprised of subscriptions and advertising, have seen substantial losses in both areas. Particularly acute have been the losses in revenue from classified advertising (which has been significantly impacted by sites such as Craig’s List and eBay) and print subscriptions (which have been impacted by readily available and constantly updated news on the Internet).
Some newspapers have reacted by making their websites and special digital content not in the print versions of their papers accessible only to those who pay a subscription fee. There are three ways of doing so that are in common practice. The first is a “hard paywall” that restricts all access to all parts of a site unless a person has a subscription. This is rarely done. A more common form of the hard paywall allows access only to the front page or a select few articles with access to other content limited to subscribers. The third and most commonly implemented way is the “metered paywall” that allows a website visitor to access a limited number of articles for free each month, with a subscription required for access beyond that set limit.
Adopting a subscription model, however, can be problematic. Advertising rates for websites are based on the number of visitors to a website, calculated on a CPM–or cost per thousand impressions –basis. Impressions are the number of times an advertisement is served (i.e., appears) on a website. When newspapers charge for access to the electronic versions of their publications, they may generate revenue from subscriptions, but they also tend to lose site visitors, especially when a hard paywall is implemented. As a result, the advertising rates that they can charge to advertisers on the site drop as a result of reduced site traffic. Newspapers are struggling with this delicate balancing act as they seek to create new revenue streams and to reinvent themselves as format-neutral content providers.
How bad are things in the industry right now? The New York Times Company, owner of both The New York Times and The Boston Globe recently sold the Globe to hedge fund manager and Boston Red Sox owner, John Henry, for the paltry sum of $70 million. They paid $1.1 billion for the paper 20 years ago.
This week, it was announced that Jeff Bezos, the billionaire founder of Amazon.com, agreed to purchase The Washington Post newspaper, the flagship publication of The Washington Post Company, for the sum of $250 million. The Graham family, which had owned the newspaper for generations, had seen enough losses and felt it was time to sell. It is ironic that the founder of Amazon, which has had a leading role in the creation of and advocacy for electronic books and publications, will now try to improve the financial fortunes of The Washington Post.
Other major papers are up for sale. Several are owned by The Tribune Company, which recently emerged from bankruptcy protection. While The Tribune Company has stated that it wants to retain its valuable television station properties, it has indicated that it wants to sell its newspapers. Among them are some of the largest daily newspapers in America: The Los Angeles Times, The Chicago Tribune and The Baltimore Sun. Given the recent sale prices for The Washington Post and especially The Boston Globe, the sale prices of the Tribune papers are likely to be quite low.
More and more, major American newspapers are being sold to “non-newspaper” people. Only time will tell what impact all of this will have on daily newspapers and on journalism as we know it.
