Members of My Online Journalism Seminar
Back (L to R), Kristin Nehls, Tricia Flickinger, Alyse Kordenbrock, Jeremy Bookmyer, Ryan Lytle.
Front, Jordan Valinsky, Erica Nunez.
Thursday, May 6, 2010
Wednesday, May 5, 2010
Thoughts on the proposed sale of Newsweek and what it means
The Washington Post Co., a bastion of journalistic excellence, wants to sell Newsweek because the magazine keeps losing money.
This development illustrates why some proposals for preserving first-class newspapers and magazines are unlikely to succeed.
The company has owned Newsweek since 1961. The company's record of journalistic excellence rests on reporting in both the Washington Post newspaper and in Newsweek. Despite this fact, the Post Co. has for years not relied on either publication to ensure its economic survival.
The majority of revenue at the Post Co. comes from the educational testing giant Kaplan. The long-term decline in print advertising revenues has forced the company to use Kaplan's earnings to offset losses from the continued operation of Newsweek and the Post newspaper. This could not be sustained, so the Post is now forced to try and sell Newsweek.
What does this mean for other journalistic organizations?
First, Newsweek has tried to adapt to the digital world where a week's delay publishing news or commentary is far too long to satisfy audiences. This report says Newsweek's "digital side" generated just $8 million last year, too little to pay for the magazine's production.
The cost of producing print newspapers and magazines is relatively high. But advertising revenue per reader in print is also relatively high. The cost of producing digital news is much lower, but ad revenue per reader is much, much smaller than print revenue. Print journalism organizations face the problem of transitioning from high-cost high-revenue markets where audiences are still sizable, but stagnant, to low-revenue markets where audiences are growing.
Newsweek probably had unusual support for making this transition because the Post Co. is controlled by the Graham family, which has a commitment to journalism. The family was probably more willing than other Post Co. stockholders to subsidize losses at Newsweek while trying to make the transition work.
But in the end, no company can afford to keep losing money in one division and subsidize the losses with profits from another division. At some point, the company's ability sustain itself will be questioned.
So the second lesson is that suggestions for subsidizing journalism -- with profit-making parts of a company, with donors or endowments, or with government funds -- ignore a fundamental economic reality. Journalism that cannot sustain itself economically will always be at risk of economic failure.
This development illustrates why some proposals for preserving first-class newspapers and magazines are unlikely to succeed.
The company has owned Newsweek since 1961. The company's record of journalistic excellence rests on reporting in both the Washington Post newspaper and in Newsweek. Despite this fact, the Post Co. has for years not relied on either publication to ensure its economic survival.
The majority of revenue at the Post Co. comes from the educational testing giant Kaplan. The long-term decline in print advertising revenues has forced the company to use Kaplan's earnings to offset losses from the continued operation of Newsweek and the Post newspaper. This could not be sustained, so the Post is now forced to try and sell Newsweek.
What does this mean for other journalistic organizations?
First, Newsweek has tried to adapt to the digital world where a week's delay publishing news or commentary is far too long to satisfy audiences. This report says Newsweek's "digital side" generated just $8 million last year, too little to pay for the magazine's production.
The cost of producing print newspapers and magazines is relatively high. But advertising revenue per reader in print is also relatively high. The cost of producing digital news is much lower, but ad revenue per reader is much, much smaller than print revenue. Print journalism organizations face the problem of transitioning from high-cost high-revenue markets where audiences are still sizable, but stagnant, to low-revenue markets where audiences are growing.
Newsweek probably had unusual support for making this transition because the Post Co. is controlled by the Graham family, which has a commitment to journalism. The family was probably more willing than other Post Co. stockholders to subsidize losses at Newsweek while trying to make the transition work.
But in the end, no company can afford to keep losing money in one division and subsidize the losses with profits from another division. At some point, the company's ability sustain itself will be questioned.
So the second lesson is that suggestions for subsidizing journalism -- with profit-making parts of a company, with donors or endowments, or with government funds -- ignore a fundamental economic reality. Journalism that cannot sustain itself economically will always be at risk of economic failure.
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