Should Newspapers Stop Being Newspapers?

Forget the bailout. I have a great new business model for Detroit automakers. Sell Toyotas (TM) and Hondas (HMC). Detroit already has the dealer networks. There’s great demand for Japanese cars. In fact, Detroit could retool all of their manufacturing plants to make Toyotas and Hondas.

That proposal is similar to one put forth for newspaper companies by API’s Newspaper Next project. Says managing director Stephen Gray:

[Newspapers] should become the leading local Internet ad agency, which goes against ancient newspaper instinct of not ever helping anyone who is your competitor. But the fact is that audiences have split in a million directions, so here we are in a local market and our job is to help businesses in our local market succeed. If that means we are placing ads on Google (GOOG) and Facebook for local businesses, so what? That’s what it takes to succeed and ad agencies have been making a living off doing that for some time.

It’s actually not a bad idea (and I’ve seen some newspapers do it successfully). Except it seems to be tantamount to recommending that newspapers get out of the newspaper business. And if they become ad agencies, then newspapers really aren’t newspapers anymore, are they? And then there isn’t really a need for all that expensive journalism anymore, is there?

This is the problem with the idea of coming up with a “new business model” for newspapers. If you have a new business model, then you’re not in the same business anymore. But you hear it discussed as if newspapers and journalism can remain fundamentally what they are, just with a new “business model” plugged in. Like a toy car that just needs new batteries to keep running.

It’s the same type of thinking that leads to statements like this from the API CEO Summit:

The summit conference was a constructive dialog among senior industry leaders, serving as a catalyst for continuing conversation and efforts at reversing declining revenue and profit trends.

“Reversing declining revenue and profit trends” — I just love that phrase. To continue the car analogy: Is your business going in the wrong direction? Oops, you must have it in the wrong gear. Just throw it into reverse.

Look, I’m not saying that media companies shouldn’t offer marketing services — they’ve been doing so for decades (e.g. custom publishing). And as brands increasingly want to provide content directly to consumers, marketing services may be a big growth area for media companies.

The problem is that once you cross the line to selling other companies’ media because it’s more valuable than your own, then you face a fundamental question about why you’re going to the expense of producing your own.

Follow the logic here:

What’s not being done is realizing that in your community — say, a 50,000 person community, you have 1,500 or 2,000 active advertisers but there are 8,000 businesses that serve consumers in your market. So three-quarters of them are not your customer. The difficult part is helping newspapers understand that if they want new business they need to get a new job done for businesses that they’re not serving.

It’s not that we don’t know what that is. Some of what they want is: a one-to-one relationship with customers; a way to respond to what’s going on in customers’ lives; make sure they hear about me when they make a choice. The traditional product built on that job is the Yellow Pages, but I just read an article saying the Yellow Pages are expected to lose 39% of revenues in the next four years. Increasingly if we want to find something, we don’t go to the Yellow Pages, we go online, and Google doesn’t always work well.

Google isn’t doing it all that well yet, and the Yellow Pages aren’t doing it that well, so we’re saying, ‘Look this is where you [newspapers] should be.’ It’s very hard for ad staffs and management at newspapers to get their minds around the fact that not everyone wants mass reach, and once you understand the needs, you take the technology available today and use them to get the job done.

So newspaper should sell ads on Google because there is more value there for more businesses. That makes sense on the face of it. But what happens when those 1,500-2,000 newspaper advertisers also decide there’s more value on a highly targeted Google search result page then in the mass medium of the newspaper?

Again, I’m not saying that newspaper companies shouldn’t try to transform their businesses — most of them will have to in order to survive. But companies that reinvent their business models typically find themselves in very different businesses, with very different products.

Just look at IBM. They used to sell mainframe computers — big pieces of enterprise hardware. Now they sell “solutions.” IBM transformed itself into a services company. Their business is no longer principally about hardware.

Newspaper companies could conceivably transform into local marketing services companies.

But if that happens, will their business still be principally about newspapers? Will there be a place for journalism in a local ad agency?

Comments

[Mission Imp...:]

I share your fear that API and others are telling newspapers to transform themselves so completely that they’ll be out of the news business.

I recall that in the late 1990s, the Thomson Newspaper Group (which once owned Bridgeport Post in Connecticut) left newspapers completely. Turned out to be an astute move -- they bought Gales Directories and other “information services” companies, and moved data online. The move led to success in the brave new world of information services / online information, and they avoided the downturn that awaited newspapers in the next decade.

But Thomson is not in the news business any more. So as business people, I admire Thomson, but as one who values news, I hate them. They found a way to survive, but they gave up their core mission.

If you read "Good to Great," you'll see other examples of companies that moved out of their original business and became great in new ways and in other competitive arenas. The best example, I think, is Kimberly-Clark; their competitor (Scott Paper) told Jim Collins that they, too, could have succeeded as Kimberly-Clark did -- but they weren't willing to sell their paper mills! (That's exactly the thing that distinguished Kimberly-Clark from Scott, the author points out.)

That story could become the story of the newspaper industry: newspapers could have succeeded in new realms, but we weren't willing to give up our truth-telling mission. (We are willing to give up our presses, I think. We all see digital is better.)

It just seems that the business model for newspapers was designed to support the truth-telling mission of journalism (see "News Values," by Jack Fuller), and a radical change in the business model will clearly undermine the journalistic mission.

So, should newspapers stop being newspapers? I say no, but I don't see any other way to survive. I guess it's time to get our resumes ready, and send them to Thomson . . . . or Kimberly-Clark.

2008 Nov 24 12:25 PM

[News Quest:]

I think the news industry is fogetting weh at htey manufacture, NEWS. They are not in the business of selling papers, that is simply the delivery vehicle.
The news industry needs to produce the best news possible focused at the local market (where in most cases they truly have a monopoly on news content - ever try getting local high scholl sports news from the NY Times or AP or USA Today, etc) The newpapers have a huge moat around that local market. They need to recognize this adn then charge for it - that's right, charge for it because there are few if any alternatives for the consumer to get the product anywhere else adn wehn push comes to shove, they'll pay, jsut as soon as the industry stops givign it awya for free on the internet. The challenge is to build a model that is economically viable adn reasonable priced. If they can strike this balance then journalist will get paid for producing news, the news company can survie adn the ad dollars will continue to be paid because of that local focus that is now broadly purchased.

2008 Dec 01 08:03 AM