The Primer

They don’t just make buggy whips.

Traditional newspapers make two products, and they are very different.

  • Product 1:  information for and about the communities the newspaper serves (news)
  • Product 2:  a medium businesses can use to reach potential customers (ad space)

The quality of the first product dictates the success of the second. A newspaper that produces high quality, comprehensive news can expect its subscription base to grow. The more subscribers the newspaper reaches, the more the newspaper can charge businesses for ad space to reach all of those potential customers.

The third piece of the traditional newspaper model is a high barrier to entry — the production and distribution system. A potential competitor has to invest in a press and then cover the daily cost of newsprint, ink, and a seven-day-a-week distribution system. It’s not easy or cheap to go toe to toe with a well-established daily.

The beauty of the business model is (now, was?) that a publisher can make a handsome income while also serving the public by providing watchdog journalism. While citizens go about their daily business, the local newspaper watches town hall and other government agencies and offices. Thanks to the advertising revenue the paper earns, its subscribers pay a fraction of the cost of that news coverage.

It is (was?) a heck of a business model.

What’s gone wrong?

Technology gaveth, and technology taketh away.

Technology has given us our own presses (that printer on your desk at home) and a distribution system (that internet connection you pay for each month). Now, we can all publish and send our content around the world at low cost.

Yes, if you want to produce a traditional newspaper, you still have to invest in a press, paper, ink, trucks and carriers. If you only publish online, though, your production and distribution costs are next to nothing. The high barrier to entry of the traditional newspaper business model has come crashing down.

Technology has taketh advertising revenue away from print newspapers. Most newspaper revenue, about 80 percent, is from ad-space sales (the rest comes from subscriptions). Free sites such as craigslist have sucked classified advertising away from newspapers, and retailers who used to buy display-ad space in their local daily now use their own websites and email to communicate directly with their customers.

Let us admit, too, that we’ve changed our habits. We don’t buy from the local bookstore anymore. Instead we go to the web, that vast digital auction network, to find the lowest price for the book we want, and we’ll use our mobile phone to conduct our search and make the buy.

No newspaper — or local retailer — required. Ouch!

Why bother?

When I began this blog, I sent the link to a few folks whose opinions I value, asking for their critical review.

The most experienced journalist among them declared my effort commendable, but added that “it’s like pissing up a downspout.”

“Printed newspapers have been declining for more than 20 years,” she pointed out, “and there’s no end in sight. … the problems are so overwhelming, from the internet, expensive factories and delivery systems to changing demographics.”

Point taken. (She does have a way with words.)

In September 1996, nearly 20 years ago, I was hired by one of the first ad-serving networks on the internet. Our sister companies included a search engine, a website hosting platform, a customized-news-feed site, and a business that sought to deliver ads to viewers anywhere on the web when they were reading content related to the products the ads sought to sell.

I was surrounded by very smart people who were defining the leading edge of the online world we live in today.

They taught me. They taught me that the internet was going to turn nearly every product and service into a commodity. That the lowest price would govern. That geographic connections between customer and retailer would be broken. That, eventually, many bricks-and-mortar stores would fail because their local customers would buy from online retailers instead.

I concluded that the newspaper business model might be destined for failure, too. Without its advertising base, where would the local daily get enough revenue to survive?

I’ve been worrying about it for 20 years, and now, here we are.

Why bother? Because we must.

I don’t want to preserve print dailies because of some romantic attachment to the past. I want to preserve the benefits they provided — by any means that works.


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