Advertisement

News

Paper chase

Can Rupert Murdoch save the newspaper industry by making people pay to read the news online? More importantly, does the newspaper industry as a whole need to be saved, or is this largely an American problem?[rssbreak]

The “Dirty Digger” declared last week that he would start charging for the online content of all his newspapers, including the New York Post and the Times and the Sun in London, before next June.

In the U.S., where many big-city dailies are in a financial “death spiral,” even his competitors hope he can make it work. But past experience says he won’t.

When the first newspapers began putting their content online 15 years ago, they made it available free in the belief that the Net version would supplement, not replace, their highly lucrative print editions, and in the hope that eventually online ads would provide a new stream of revenue.

But the online versions did cut into the print readership, and online advertising rates never rose to match those of the print editions. In the past couple of years, online revenues have ceased to grow entirely.

So when the recession came along, most newspapers were already in a vulnerable position, and now many are at death’s door. I’m getting used to lawyers’ letters from U.S. dailies explaining they’re now in Chapter 11 (bankruptcy protection) and so I can forget about what they owe me as I am not a secured creditor.

Now, here’s the odd thing. Large numbers of journalists have also been laid off by their papers in other countries, because ad revenues and the physical size of most papers both shrink in a recession. But this column runs in papers in almost 50 nations, on every continent, and not one outside the U.S. has declared bankruptcy.

You can’t explain it by saying that Internet use has been lower in all of those countries. In fact, the U.S. has only recently caught up with most other developed countries in terms of Net use. A likelier explanation is what happened to the U.S. newspaper industry in the 1980s and 90s.

It was a time of “greed is good” in American capitalism. The old family owners were bought out by chains that sought returns of 10 to 15 per cent a year, far more than the former owners had ever expected. The new owners’ priority was to keep the share price up, so they had to keep profits high. They started cutting costs – and the biggest cost in running a newspaper is the journalists.

In effect, the new owners and managers gutted content in order to maintain high profit margins. Now most of them are out on golf courses, and their newspapers are on the rocks.

Since many U.S. newspapers are also saddled with huge debts because of those takeover deals, the papers were in no shape to withstand the cash famine of the recession.

Murdoch is right in thinking the competition will follow his lead. But for many U.S. papers, it’s now too late.

Where does the news biz go from here? Blogs and “citizen journalism” are not the answer: serious news gathering costs serious money, and there has to be a business model that supports it. But we may have to wait a while. As Net guru Clay Shirky said recently, the immediate future may consist of “decades of random experimentation, much of which will fail.”

Gwynne Dyer’s latest book, Climate Wars, was published last year in Canada by Random House.

news@nowtoronto.com

Canada’s different – sort of

“There are structural differences between Canada and the U.S. that have made things a little easier for our newspaper industry. U.S. companies expanded quickly, and they are debt-laden, which Canadian ones aren’t. U.S. papers are also much more dependent on classified ad revenue than we are, and the growth of Craigslist has impacted them more. Our newspaper market was always very competitive. Every major Canadian city has at least two papers, and in the U.S. there was often only one, so our papers got good at competing. And we have higher readership levels to begin with. There’s huge competition online, but Canadian readership levels have held up, unlike in the U.S., where they’ve really plummeted. We have a more newspaper-based culture. This is a regional country, with strong local identities, so regional papers have done well. Newspapers are the most popular online sites in Canada.”

JOHN HINDS, president and CEO, Canadian Newspaper Association

Advertisement

Exclusive content and events straight to your inbox

Subscribe to our Newsletter

This field is for validation purposes and should be left unchanged.

By signing up, I agree to receive emails from Now Toronto and to the Privacy Policy and Terms & Conditions.

Recently Posted