On the Future of Newspapers

The economic difficulties of the newspaper industry are well known. John Lanchester, in an article in the “London Review of Books,” provides us with an update on the status of circulation, revenue, and debt. That is the bad news. What makes the article interesting is that he also provides some potentially good news. A strong hint can be found in the title he chose: Let Us Pay.



Let us first look at the bad news.

“A recent OECD report, The Evolution of News and the Internet, makes the picture clear. Between 2004 and 2009, the US newspaper industry lost 34 per cent of its readers; the UK industry lost 22 per cent. Since then, the speed of the downturn has increased. In the last 12 months alone, seven broadsheet titles in the UK have seen their sales decline by more than 10 per cent. In the US, in the first six months of this year, the Chicago Tribune lost 9.8 per cent of its remaining readers, and the Los Angeles Times 14.7 per cent.”

“The trends in newspaper advertising have, if anything, been even worse. When circulation goes down, ad revenue goes down too, because the ads are reaching fewer readers and are therefore worth less. Compound this effect with a general advertising recession and the numbers are horrible. In the US, advertising revenue declined for six quarters in a row through mid-2009: in fact, it not only declined, but did so at a rate which increased every quarter. Total advertising dollars fell by 19.9 per cent, on a year-to-year basis, in the quarter to March 2009. Even online advertising fell. And things continued to get worse. In the next quarter, advertising fell by another 28 per cent, year-to-year. In the quarter after that, it fell by another 27 per cent. In the quarter after that, by 23.7 per cent. That slowing-down of the rate of the decline, by industry standards, counts as good news.”

“A large part of the decline in these figures is to do with classified advertising. This was for years the secret weapon of the newspaper business. Classifieds are not the most glamorous aspect of the newspaper trade (at least, not for papers other than the LRB). What they are, however, is fabulously lucrative. For decades, whole sections of the newspaper industry were kept afloat by the classifieds….With the arrival of the internet, in the form of both specialist job-search sites and free advertising outlets such as Craigslist, the fountain of classified ad revenue simply stopped.”

“Put these things together, and the reason for the gloom is right there in the figures. The global flagship of serious journalism, the New York Times, lost $74.5 million in the quarter to March 2009, and accepted an injection of $250 million in cash from the Mexican telecoms billionaire Carlos Slim; it emerged that the paper was carrying $1.3 billion in accumulated debt. And it is one of the healthier US newspaper companies: the Tribune group, which owns the Los Angeles Times and the Chicago Tribune, had already gone bankrupt. In the UK, Times Newspapers lost £87.7 million in the year to June 2009, having lost £50.2 million in the previous year. These figures are not, by industry standards, especially bad. It was mayhem out there.”

Newspapers still perform the useful function of providing unbiased investigative reporting that is necessary to keep government and other societal players honest better than any other source. That alone suffices as justification for their continued existence. Proof that there is still a demand for this service lies in the fact readership continues to grow. People want the information. What they don’t want is to have to pay for a subscription to either a full-up paper or a digital version.


This leads to some good news.

“The journalism being produced by newspapers now has more readers than ever before; in some cases, many millions of readers more. They are reading it for free online, of course, but still: it’s hard to be depressed by the thought that your product has a huge new audience. The Guardian, for instance, increased its online readership by 62 per cent during the year to December 2009, with a lot of that growth abroad; it had 37 million readers in the course of the year….”

Magazines have had some success by using online content as a teaser to encourage a subscription to the paper edition. About the only organizations that have been able to make money by charging for online content are those with specialized, and captive, audiences like the “Wall Street Journal” and the “Financial Times.”

“The attempts to get online readers to pay have so far failed. Some papers have tried the model of putting paywalls around bits of their content: the New York Times did that with its op-ed material, but then took the wall down. The apparent reason was that the drop in traffic caused by the paywall was so great that it ended up costing money, because the paper’s internet ads reached so many fewer readers. The new revenue was nowhere near enough to compensate from the ad drop-off. That’s one way of getting it wrong. Some of the other ways of getting it wrong are more straightforward. Newsday on Long Island (which when last I saw it was a pretty good paper) went behind a paywall in October 2009. At that point it was having 2.2 million unique visitors a month. Guess how many people had signed up to pay by January 2010? Thirty-five. A way ahead for the industry, this is not.”

A solution to this problem must be found because maintenance of a printed edition is becoming economically impractical.

“….the cost of printing a typical paper at 28 per cent and the cost of sales and distribution at 24 per cent: so the physical being of the paper absorbs 52 per cent of all costs. (Administration costs another 8 per cent and advertising another 16.) That figure may well be conservative. A persuasive looking analysis in the Business Insider put the cost of printing and distributing the New York Times at $644 million…. the internet can make all those costs go away.”

Lanchester says the solution to survival can be found in the experience of the music industry. He points out that that industry made money in online sales when the price of the product became consistent with the value, and the mechanism for paying for music became easier than stealing it.

“I feel equally certain in saying that what the print media need, more than anything else, is a new payment mechanism for online reading, which lets you read anything you like, wherever it is published, and then charges you on an aggregated basis, either monthly or yearly or whatever. For many people, this would be integrated into an RSS feed, to create what amounts to an individualised newspaper. I would be entirely happy to pay to subscribe to Anthony Lane on movies in the New Yorker, and Patricia Wells on restaurants in the Herald Tribune, and Larry Elliott on economics in the Guardian, and David Pogue on technology in the New York Times, and I also want to feel free to read anything else which catches my eye, whenever I feel like it – I just don’t want to have to think about paying every time I click on the article to read it. I want a monthly or yearly charge, taken off my credit card without my having to think about it.”

“The charging process has to be both invisible and transparent: invisible at the moment of use, and transparent when I want to see what I’ve paid.”

With the huge numbers of current and potential readers the opportunity to keep them is there if the price can be kept low enough that the volume is not adversely affected. The technology for doing this does not seem to be much of a stretch. I agree with Lanchester’s conclusion.

“Let us pay – we’re happy to pay.”

And just think of all the trees that would be saved.