Some newspapers are failing, but is that a reason to panic?

News that the 150 year old Rocky Mountain News will publish its last edition today is just the latest grim tale about prominent United States newspapers desperately seeking buyers, filing for bankruptcy, or struggling with quarter after quarter of declining revenue.

All of this so unnerved the American Society of Newspaper Editors that it canceled its annual convention saying '"the challenges editors face at their newspapers demand their full attention.”'

The newspaper industry's problems are real, but the causes vary from newspaper to newspaper and so do the implications for the industry's survival.

The closing of the News is likely to be followed by the closing of the Seattle Post-Intelligencer, leaving each of those cities, like most cities in the United States, with a single newspaper. This is sad, but not surprising to economists who have long understood that exempting from anti-trust laws newspapers in Denver, Seattle, and a handful of other cites only delays the inevitable.

The exemptions, called Joint Operating Agreements, are granted by the U.S. justice department if competing newspapers in the same market can prove that one would fail without the agreement. These agreements allow the newspapers to save money by combining sales, production and other business operations, but they must continue operating separate newsrooms.

Newspapers argue that JOAs benefit to their readers by preserving two editorial voices with diverse views and information about the issues of the day. But Robert Picard at The Media Business points out that newspaper companies had other reasons to seek these arrangements:

Joint operating agreements have been seen by many in the industry as a way of keeping two newspapers operating within the same city, but JOAs have been a continual failure since they were authorized in 1970. The biggest problem is that JOAs ignore the basic economics of newspaper publishing and merely provide benefits from a newspaper antitrust exemption that allows collusion on advertising and circulation prices, market division, and other acts prohibited by federal law. Those benefits were never enough to “save” papers in the long run, but allowed publishers to gain a limited period of time to try to squeeze more money out of the operations.

The failure of the News was probably inevitable, and I expect the Post-Intelligencer will soon suffer a similar fate.

The News' demise was certainly hastened by the loss of audience and ad revenue to new forms of media exacerbated by the general economic collapse. But even though the loss is sad, it doesn't have much to teach editors at other newspapers who are staying home this year as they try to sort their way through all of this.

Misunderstanding the market for online news

The number of monthly visitors to major newspaper web sites increased significantly during the recent election, and then appeared to decline according to this chart compiled by the Nieman Foundation, which promotes journalistic excellence.

But by concentrating on newspapers, the chart paints a misleading picture of digital competition to attract audiences interested in news.

The New York Times has the largest number of visitors in the Nieman chart, but its website ranked 5th among Internet news sites in October 2008 behind MSNBC, CNN, Yahoo News and AOL. The Times had about 20.3 million unique visitors that month, barely trailing AOL but far behind the other three sites. Yahoo News was in third place with 37.3 million unique visitors, so the Times would have needed 85 percent more visitors just to catch up.

I don't have access to data for the entire period listed in the Nieman chart, but the October 2008 figures are probably representative of the real online market for news. Large newspaper web sites compete with broadcasters such as Fox, ABC, NPR and the BBC, and with Internet only sites such as Topix, Google and Yahoo news, or the Huffington Post.

There is some evidence of how this really works in the chart, but it's not explained. In July 2007 The Times, NBC, and MSNBC announced a deal to share political coverage on the web. One goal was to increase each company's audience for news.

Apparently, it worked. The Nieman chart shows a sharp increase in visitors to the Times site over the next three months. The increase resulted in a substantial lead over its nearest newspaper rivals that persisted through December of 2008.

Meanwhile, the October 2008 data shows election coverage by two of the Times' longtime print rivals -- The Washington Post and USA Today -- produced substantial increases in visitors to their web sites. But neither came close to matching The Times and its partners on the web.

The chart posted by Nieman reflects a wider mindset in the newspaper part of the journalism industry that just won't go away. The mindset is mistaken -- this is a different market, with different rules and different competitors, and it should always be talked about that way.

Remembering Barry Litman, who died Dec. 26

Prof. Barry Litman used to sit quietly in meetings of my dissertation committee, holding a document I had labored over for days, waiting for his turn. He always began with a few introductory questions to be sure I understood what was coming next -- a single, penetrating query that would send me back to the library to spend hours digging through books and journal articles in search of an answer.

The result was always the same. I learned something, usually more than just one thing, that was important and useful. Barry Litman made my work better. It wasn't just me. He made everyone's understanding of media economics better.

So it came as a shock to hear that Barry, 59, died Dec. 26 after battling cancer.

Barry was one of the first classically trained economists devoted to understanding producers of and audiences for newspapers, television broadcasts, and film. You cannot call yourself a student of media economics if you don't know his work.

Barry and a doctoral student completed the first study linking the quality of news to the financial performance of newspapers.¹ He later helped update the fundamental model of newspaper competition developed in the 1970s to reflect three decades of changing technology and markets.² He then took an overused, ill-defined buzzword -- convergence -- and gave it meaning by showing how people select news from different media based on differences in characteristics like speed of delivery, convenience, and quality.³

Barry developed a model predicting what will happen if people can't get reliable information from the media about urgent topics like birth control, showing they will instead assemble an understanding from whatever sources they can find.⁴

He identified a major flaw in the long line of studies examining diversity or its absence in media content, refuting the underlying assumption that there is an unlimited demand for diversity.⁵ Barry offered a more realistic model showing that the desire for diversity is balanced against the desire for other characteristics of content, always within the limits of available time for reading, watching and listening.

Barry helped examine the creation of the Fox network, showing how a confluence of regulatory and economic factors made possible the enormous gamble for News Corp.⁶ The study is a valuable reminder that what now looks like a taken-for-granted success was anything but that at the time. In another study, Barry and his co-authors showed why networks prefer programs that are predictable, making truly innovative television the exception, a finding that holds up well in the cable universe.⁷

Barry was a professor at Michigan State University for more than 30 years, one of a handful of faculty who made the College of Communication Arts & Sciences the center of gravity for understanding media economics.

This spring, as always, I will teach a graduate course where Barry's work appears multiple times. I like to quote Barry because it always makes me sound smart. This semester won't be nearly so much fun. Mostly, I'm going to think about what we've all lost.

Barry's obituary is available here, and an announcement from the college can be read here. A Facebook page to post memories of Barry can be found here.


¹Litman, B. R., & Bridges, J. (1986). An economic analysis of American newspapers. Newspaper Research Journal, 7(3 spring), 9-26.

² Bridges, J. A., Litman, B. R., & Bridges, L. W. (2002). Rosse's model revisited: Moving to concentric circles to explain newspaper competition. Journal of Media Economics, 15(1), 3-19.

³ Litman, B.R. (2006). The convergent society and the media industries. In Bridges, J. Litman B. R., &Bridges, L.W. (Eds.), Newspaper competition in the millennium (pp.23-32). New York, Nova Science Publishers.

⁴ Litman, B. & Bain, E. (1987). Information search and banned product advertising: An indifference curve approach. Current Issues and Research in Advertising, 39-59.

⁵ Litman, B. R. (February 1992). Economic aspects of program quality: The case for diversity. Studies of Broadcasting, 121-56.

⁶ Thomas, L., & Litman, B. R. (Spring 1991). Fox Broadcasting Company, why now? An economic study of the rise of the fourth broadcast "network." Journal of Broadcasting and Electronic Media, 35(2), 139-158.

⁷ Litman, B. R., Shirkhande, S., & Ahn, H. (2000). A portfolio theory approach to network program selection. The Journal of Media Economics, 13(2), 57-79.

Building A Newspaper’s Online Audience

By Stephen Lacy
Professor, Department of Communication and School of Journalism
Michigan State University

Newspapers are struggling with how to attract online visitors. This reflects the need to replace readers who are leaving the print newspaper, but more importantly, increasing online visitors will be essential for attracting advertisers to newspaper Web sites. Traditionally, advertisers follow audience and not the other way around.

As a result, how newspapers can gain online visitors remains the primary issue deciding the future of newspapers. A one-size-fits-all solution is unlikely to emerge. The key to attracting visitors will vary from market to market and from demographic group to demographic group.

However, general observations serve as a guide for managerial decisions. This commentary offers some of those general observations about how news organizations can make the transition from the current upheaval to a more stable time.

Reasons to experiment

* The high profit margins that news organizations have enjoyed during the last 40 to 50 years cannot be maintained when advertisers can go straight to consumers rather than using media, and when competition for people’s time has become so intense. Companies will have to adjust profit goals or they will cease to exist. In times of industry restructuring, potential profit margins shrink and surviving restructuring requires higher levels of investment.

* Although businesses can bypass news media to reach customers, the Internet is a medium where people must purposefully seek information, and even then, it is not always easy to search efficiently and effectively. Therefore, businesses still need to create awareness of their presence in a market and develop a brand in people’s minds. News organizations need to generate large local audiences and effectively segment them to generate advertising support. Advertisers will still need to reach buyers through media, but the need will not be as great before the Web developed.

* News organizations will need to create multiple forms of financial support. This can range from e-commercial to selling specialized information to small audience segments. The exact form of new revenue sources will vary from market to market and will need to be determined through experimentation.

* The digital media distributed through the Internet does four things well: 1. It provides depth of news and information at low cost. 2. It delivers news and information quickly. 3. It is multimedia. 4. It is interactive. Newspapers will need to use all of these Internet strengths when generating content on their sites.

* The ways news organization can best use the Web’s strengths for delivering journalism and attracting audiences remain unclear. The immediate future will require news organizations to experiment with a variety of content to discover how to best serve their audiences.

* This experimentation must be combined with formal and informal evaluation of reader feedback. Newspaper companies need to conduct periodic market research about the news and information their audiences need and want, the best ways to present that news and information, and types of interactivity their audience members want and need. But the companies also need a continuing, formal system for acquiring feedback from a wide range of audience members.

One newspaper's response

Uncertainty is the biggest problem underlying this transition from print domination to more online distribution. The appropriate response to uncertainty is experimentation with a variety of content based on research. But what does it mean to experiment with content on news Web sites?

There are more than a few sites that are trying to figure out what will and will not work, but one that is seriously experimenting with content is the Web site of the Las Vegas Sun.

The Greenspun family, which has owned the Sun since its inception in 1950, has committed itself to extensive investment in its Web site. Under the leadership of Rob Curley and Josh Williams, with whom I discussed the Sun’s online future in May, the Sun’s revitalized Web site is founded on a tradition of strong local news coverage with a commitment to developing new ways for expressing that coverage.

Experimenting with multimedia

If you visit the Lasvegassun.com, you will find news stories, blogs, photographs, and video about events and issues that concern the city of Las Vegas and surrounding areas, just as you will you will on any modern newspaper web site. The more experimental work can be found on the multimedia page.

The Sun Web team is emphasizing news video that provides background about important issues, multimedia presentations that deal with history and the nature of the community, and databases that allow visitors to customize the information they want.

Examples of the Sun’s video include interviews with families of some of the nine workers who died on Strip construction sites during a 16-month period. The video, titled “Cost of Expansion,” fits well with the Sun’s traditional investigative story about these deaths.

The Sun also includes an interview with two Iraq War veterans who have very different opinions about the war. The sharp contrast between their views seems to summarize the national debate that has occupied us for the last few years.

The Sun also emphasizes “evergreen” content about the city. This includes a video history of Las Vegas and interactive maps of downtown Las Vegas, the Strip, and the Valley. The maps allow you to see what the city was like at various times, along with important events and entertainers from that time. The map includes icons representing important buildings. If you click on an icon, a popup will reveal information about the location, size, and history of the building. In some cases, you can see video of the building’s implosion.

The interactive maps are really databases presented in a graphic form, and the Sun offers others. The site has a Flight Delay Generator , which allows a visitor to enter a flight number and find out how late it will be. An interactive map allows you to go to various airports around the nation and find out the percentage of flights from that airport that arrive late at Las Vegas McCarran Airport. The site has a variety of other data about air travel to Las Vegas.

Another interactive map was developed to go with a story about prescription drug abuse, and it allows a visitor to examine state by state use of six prescription drugs over a decade. These interactive maps are experiments in the user friendly, interactive presentation of databases.

Curley, president and executive editor of Greenspun Interactive, recently wrote about plans and some of the developments at the Sun in his blog.

Take risks, don't be defensive

This is not to say that the Lasvegassun.com has found the solutions to the problems confronting news organizations, nor that the content it produces is perfect. As with all news, errors are inevitable. The point is that the Sun is currently doing what all news organizations need to do--experimenting with ways to build its audience. Many news organizations have taken defensive approaches to the Web, but the Sun management seems to think that the best defense is a good offense.

Out of fairness, it should be mentioned that Lasvegassun.com has some advantages not enjoyed by all news organizations. In addition to the Web site, Greenspun Media includes the Las Vegas Sun, seven weekly newspapers in the Hometown Community News group, several local magazines, such as Las Vegas Magazine and In Business Las Vegas, and a low-power TV station. These media provide a wide range of community content that can be leveraged online.

Of course, having access to content does not guarantee its effective use. The long-term goal of the Lasvegassun.com management team is to take advantage of these content sources to create a Web site that will dominate the local Web market.

In addition to the commitment to experimentation, the Lasvegassun.com approach incorporates all of the Web’s strengths into the site—depth, speed, multimedia and interactivity. Many newspapers have not yet committed to exploiting all of these strengths.

Although the nature of newspaper Web sites will vary from market to market in meeting community needs, this does not mean each newspaper site will be unique. Few ideas are totally new. Newspapers’ experimentations should “borrow” ideas, content forms and presentation from any place they can find them. Lasvegassun.com is one. It would help newspapers to share as many experiments as possible.

Philly paper clarifies its plans for print vs. online

Executives at the Philadelphia Inquirer have issued a second memo clarifying plans to restrict online publication of some expensive or exclusive stories, apparently in response to a barrage of often ill-informed criticism.

Yesterday, I argued the paper's plan to delay online publication of some stories makes economic sense because revenue per reader is still very small online. The paper did not say it would never publish the stories on its website, just wait until the stories had a chance to circulate in print.

The new memo says these stories will instead "appear online concurrent with print publication." The memo also clarifies the kinds of stories that will be published immediately on the web, such as breaking news or time-sensitive stories that help readers plan for a night out.

The original plan made sense because it tried to separate readers into groups based on the amount of revenue the paper earns. Print readers are far more valuable than readers on the web. Publishing a story in print first might therefore limit the number of readers who abandon print to read the story on the web.

The new plan to publish stories "concurrently' may have a similar effect if some stories don't appear on the web until the paper's print deadlines. Print deadlines are often very late at night, when many readers are either watching television or getting ready for bed.

Meanwhile, columnist Will Bunch at the rival Philadelphia Daily News has a good suggestion for using web videos to promote stories the Inquirer wants to delay publishing online, building anticipation to increase readership once the article finally appears.

Bunch, unlike many others who responded to the original memo without much thought, gets this one. It's all about the revenue, ...

Information may be free, but that doesn't make it cheap

Monday's New York Times took an unjustified swipe at a sister paper for plans to delay web publication of expensive to report or popular to read stories until after those stories appear in print.

Times media columnist David Carr sought out an entirely predictable quote from a former newspaperman turned "Web evangelist" denouncing the Philadelphia Inquirer for delaying online publication.

But the Philadelphia Inquirer's new policy to publish "signature investigative reporting, enterprise, trend stories, news features, and reviews" in print first, and then online, makes good economic sense.

Many newspapers still make startlingly small amounts of revenue on the web. I suspect that is the case at the Inquirer, so delaying publication of their best material is a smart move entirely consistent with the economics of new media.

It's the revenue, ...

A bit of arithmetic using statistics from an industry survey shows some newspaper web sites were earning only $0.33 to $0.83 per visitor for the entire year in 2006.¹

I presented these calculations last week at a conference, and the next day heard an executive at a major metropolitan newspaper cite figures for their current web operations. The paper earns less than $4.00 per visitor each year. Revenue per reader in print is probably much higher at all of these papers.

Publishing a story online probably increases the number of readers compared to a story published only in print. But some print readers will also move online to read the story, reducing the revenues earned in print.²

This means any online gains in readers and revenue have to be large enough to offset losses of print readers and revenue. And the very small online revenue numbers suggest this is unlikely to happen if the story is published both places at the same time.

So the Inquirer is probably doing the right thing economically. Withholding publication of expensive to produce investigative and enterprise stories will limit the immediate loss of print readership. Meanwhile, the paper plans to keep publishing breaking news on its website, which is probably what most online readers are looking for in the first place.

Several newspaper and television employees responsible for publishing online and in mobile media spoke at the conference, and all complained about having small staffs. The majority of journalists at these organizations still work in the print or broadcast part of the operation.

But this is also sensible so long as revenue per reader or viewer is much higher for distribution in print or over the airwaves. Keeping web operations small when online revenues are also small shows these companies are economically rational.

That may not satisfy the naive view that Carr promotes in his column, but it should make everyone at the Inquirer and elsewhere feel a little better about what their bosses are trying to do.

1 Newspaper Association of America: Newspapers Online Operations – Performance Report 2006.

2 Wildman, S.S. (in press). "Interactive channels and the challenge of content budgeting." The International Journal on Media Management.

Mortgage crisis threatens media companies too

The $20 billion deal to sell Clear Channel Communications, which owns hundreds of radio stations across the country, is fading, another potential victim of the mortgage crisis.

The Clear Channel sale was announced months ago, but six banks that agreed to finance the deal are getting cold feet. The banks contend the original terms of the deal would place them in the ranks of lenders who've been bitten in all kinds of unexpected ways by cascading effects from the collapse of the market for subprime mortgages. Bain Capital and THL Partners, the private equity firms buying Clear Channel, are suing to get the financing restored, according to The New York Times.

Newspaper companies are vulnerable

This development also reinforces questions about the sale of several large newspaper companies that left the buyers with large amounts of debt. Ordinarily, these companies might not be affected by the shaky credit markets because their loans would have been for very long periods, with the actual newspapers providing collateral. Advertising revenues shrink whenever the economy turns down, but historically that was a short-term problem for newspapers. Many companies responded by cutting variable costs, like wages and benefits until advertising began to expand again.

But it's likely that long-term declines in newspaper advertising revenues will accelerate in the current slowdown and may not recover. This is not a helpful development given extraordinary levels of concern about the true state of financial markets. The Tribune Co., which was sold in December, has been put on a watch list, meaning its credit rating is under review. The $8.2 billion sale put the company deeply in debt.

Alan Mutter's Newsosaur blog argues credit problems could potentially cause severe damage to newspaper companies already weary from repeated rounds of cost cutting. There is a lot to like about the new technologies and media that are siphoning audiences and advertising from old media like newspapers. But the plight of these once proud companies, the people who work for them, and their readers, is nothing to celebrate.