Newspapers Still Keep Shrinking

The recent massive layoffs at the New York Daily News prompted me to revisit the ongoing massacre at American newspapers and other news media. First, here are a couple of articles to quantify the damage.

  • Bureau of Labor Statistics (1990–2016): newspaper employment shrank from 455,000 to 183,200 and books plus periodicals from 232,200 to 155,100, whereas Internet publishing rose from 28,800 to 197,800. All told the shift of text publications to the Internet cost at least 179,900 jobs. (The chart also shows movie/video employment rising from 91,500 to 239,300 but that’s not relevant here.)
  • Pew Research Center (2008–2017): newsroom employment at newspapers shrank from 71k to 39k whereas equivalent “digital-native” jobs only rose from 7k to 13k, with other media stagnant. That’s a net loss of 26k jobs in journalism proper.
  • Media Life (2007–2015): print readership of 51 major newspapers fell from 42.4% to 28.8% among their target markets, even as online readership remained stagnant at 10%.
  • Pew Research Center (01/2017–04/2018): at least 36% of the largest newspapers and 23% of the highest-traffic digital-native news outlets experienced publicly documented layoffs during this period.

Since 1990 two different events affected the industry. The first was the transition from print to Internet distribution which newspapers eventually adopted. The second was the subsequent failure to expand and sufficiently monetize Internet publishing.

Internet: The Unbundling

The most important asset of pre-Internet newspapers was not journalism as such, but rather the fact that newspapers provided rapid widespread dissemination of text. Big newspapers crammed in anything that might interest someone somewhere, including all sorts of entertainment and sports reporting, as well as display advertising by companies and classified advertising by private individuals.

In a sense newspapers were the Internet of their day, so in hindsight it is not at all surprising that the actual Internet would obsolete their business model. Nieman Lab analyzes the “golden age” of US newspapers (1940–1980) when “print media became one of the most profitable businesses in the developed world,” with “average annual returns of 12 percent.”

American mainstream news thrived in the post-war period because of a complex, interlocking set of subsidies. Advertisers subsidized American newspapers to reach the mass market of consumers. By the mid-20th century, advertisements brought in about 80 percent of newspaper revenue. Readers paid the remaining 20 percent, which roughly equaled the cost of delivery.

Readers also subsidized each other. The newspaper offered something for everyone. The reader who disregarded hard news paid for the paper to find out about sports scores, television listings, and job ads. Expensive news, like investigative journalism, was paid for by people who very often didn’t read it.

The Internet decisively ended this golden age, not just because cheap Internet-only news media increased competition but also because the audience was now free to pick and choose individual pieces of entertainment and information, without subsidizing anything else.

Unbundling content has confronted journalists with a hard truth. Most readers did not care about foreign or political news as much as many journalists had imagined. Or at least, those readers did not care enough about that news to pay for it.

Interestingly, this change is reverting newspapers back to where they were before their golden age: specialized information services for a limited audience (financial news come to mind) – and straightforward paid political propaganda. Meanwhile, people revert to sharing news and rumors “independently, without editorial supervision,” on social media and other Internet venues, just as they always did in public spaces. We’ll revisit that aspect in the next section.

Newspapers were invented in the 1500s but only became the main way to consume news in the late 19th century. In between, American newspapers were elite products or subsidized by political parties. Most of the evidence points to newspapers returning to the status they once held before 1900. They will matter — but not to everyone.

Nieman Lab focuses on insufficient revenue caused by a smaller audience as the reason for why quality journalism is disappearing in favor of propaganda, but I think the changed composition of the remaining audience is just as important. Once everyone not much invested in politics has left, the remaining subscribers are likely zealots who want to support the publication’s ideological position.

Honest and objective journalism is now not only too expensive, it’s also quite useless and potentially harmful for keeping this core audience. Much better to let some cheap desperate social science MA crank out yet another hare-brained editorial that conforms to the subscribers’ world view.

As a final note on unbundling, Nick Bilton’s 2017 article on the disruption of Hollywood points out that the pick-and-choose competition created by the Internet hit newspapers much like the music industry, and in both cases to the utter surprise of the affected companies.

In the mid-90s, the first time I downloaded an MP3, I realized that the music industry was in grave trouble. People who were my age (I wasn’t old enough to legally drink yet) didn’t want to spend $20 on a whole compact disc when all we coveted was a single song on the album. Moreover, we wanted our music immediately: we preferred to download it (illegally) from Napster or eventually (legally) from iTunes without the hassle of finding the nearest Sam Goody. It turned out that this proclivity for efficiency—customizing your music and facilitating the point of sale—was far from a generational instinct. It explains why the music industry is roughly half the size it was one decade ago.

I also felt the raindrop moment firsthand when I began working at The New York Times, in the early 2000s. Back then, the newspaper’s Web site was treated like a vagrant, banished to a separate building blocks away from the paper’s newsroom on West 43rd Street. Up-and-coming blogs—Gizmodo, Instapundit, and Daily Kos, which were setting the stage for bigger and more advanced entities, such as Business Insider and BuzzFeed—were simultaneously springing up across the country. Yet they were largely ignored by the Times as well as by editors and publishers at other news outlets. More often than not, tech-related advances—including e-readers and free online blogging platforms, such as WordPress and Tumblr—were laughed at as drivel by the entire industry, just as Napster had been years earlier.

Facebook: The Rebundling

That was the initial Internet disruption, but then something happened to those “up-and-coming blogs” themselves. John Herrman’s 2016 article on faltering ad revenue and traffic reports that among other reasons, advertising revenue shrank because website traffic stagnated or fell. Herrman blames the mass transition of online audiences to social media, especially Facebook whose goal is to keep people interacting only within its network rather than follow outside links.

Audiences drove the change, preferring to refresh their social feeds and apps instead of visiting website home pages. As social networks grew, visits to websites in some ways became unnecessary detours, leading to the weakened traffic numbers for news sites. Sales staffs at media companies struggled to explain to clients why they should buy ads for a fragmented audience rather than go to robust social networks instead.

Advertisers adjusted spending accordingly. In the first quarter of 2016, 85 cents of every new dollar spent in online advertising will go to Google or Facebook, said Brian Nowak, a Morgan Stanley analyst.

Despite readers’ reluctance to visit news sites directly, Google and Facebook are so dominant that they deliver the majority of click-throughs that still happen. According to Parse.ly, over 40% of web traffic among tracked news sites came from Facebook alone.

For its part, Facebook offers publishers to host their content directly on its network. Herrman noted growing interest in Facebook’s so-called Instant Articles in 2016. Two years on, however, over half of early Instant Articles partners have abandoned the format. Facebook claims that Instant Articles are still overall growing globally, but there is no sign of this among high-profile US publications.

The biggest reason appears to be monetization, or lack thereof. Publishers feel they get too little money from Facebook compared to direct site visits, so they would rather risk readers not clicking their links than showing an Instant Article instead. Just recently, the Weather Channel came to a similar conclusion and stopped publishing video on Facebook.

“[Facebook video] hasn’t been beneficial,” said Neil Katz, global head of content and engagement at The Weather Channel, during a speech at the Digiday Video Summit in Scottsdale, Arizona. “It has been good for Facebook, but it hasn’t been good for us.”

“We went along for the ride every single step of the way,” Katz said. “But we noticed, over the course of two years, that we were being paid in all types of currencies — followers, shares, views — that did not feel like money.”

Incidentally, Nick Bilton’s article cited above also mentions Facebook as a threat to Hollywood’s expensive productions, among other Internet-related causes.

The company, which has a staggering 1.8 billion monthly active users, literally a quarter of the planet, is eventually going to run out of new people it can add to the service. Perhaps the best way to continue to entice Wall Street investors to buoy the stock—Facebook is currently the world’s seventh-largest company by market valuation—will be to keep eyeballs glued to the platform for longer periods of time. What better way to do that than a two-hour film?

This might begin with Facebook’s V.R. experience. You slip on a pair of Oculus Rift glasses and sit in a virtual movie theater with your friends, who are gathered from all around the world. Facebook could even plop an advertisement next to the film, rather than make users pay for it. When I asked an executive at the company why it has not happened yet, I was told, “Eventually it will.”

The Internet’s removal of physical barriers to information distribution not only destroyed the old oligopolies in that space, it also facilitated a near-global consolidation of a new oligopoly led by Facebook (which also owns Instagram and WhatsApp) and Google (advertising, search, YouTube). These companies control a large share of the Internet’s revenue and audience attention, and are using increasingly aggressive content filtering on the latter.

Nieman Lab’s world of people sharing whatever they like “independently, without editorial supervision,” is already receding. Not that the old newspapers care. Having devolved into mere ideological propaganda outlets after endless cost-cutting, they usually demand and welcome censorship, as long as it hits their ideological opponents rather than themselves. They will not be missed.

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