Could the LA Times Turn Off Its Presses?

David Westphal reports an important and historic crossing of the Rubicon for a major newspaper, recounting a discussion with LA Times editor Russ Stanton at USC: “Stanton said the Times’ Web site revenue now exceeds its editorial payroll costs.”

I’ve long been asked by newspaper people - as a challenge - when the web will cover the costs of the newsroom as it exists. I’ve said it won’t, that the scale of the business is just different.

But if what Westphal reports is true - and I confirmed via email that I was reading him correctly (and it does make sense since both edit costs and web revenue run at about 10-15% of newspaper budgets) - then it means the Times could support its newsroom as it stands - after cutbacks aplenty - from the web. That’s momentous.

So why not go ahead and turn off the presses and the trucks and turn the Times into a pure news enterprise, disaggregated from its production and distribution businesses?

Now factor into the post-paper newsroom budget the elimination of many tasks - print production, design, editing. Step back from that knife, Mr. Zell. Rather than eliminating those positions, they must be converted to enabling local networks of partners - freelancers, bloggers, citizens - to expand the journalistic reach of the paper into the community.

And now add in the rumor that the LA Times might get rid of its national - that is, Washington - and international coverage and hand it - or its readers - over to the Washington Post (WPO). I’ve been arguing for some time that the national papers - especially the Post but also the NY Times (NYT), the Wall Street Journal (NWS), and perhaps USA Today (GCI) - could become the Washington bureau to the nation’s papers, saving them all money, giving them all the flexibility to redirect staff (reporters and editors) to local coverage, and giving their readers the best coverage. It’s reverse syndication.

The LA Times could play this same role with other papers if it provided the very best coverage of Hollywood and entertainment to them, in return for links and new audience and traffic. News becomes a network of links made by those who do what they do best and link to the rest.

Clearly, by getting rid of print production and distribution, the LA Times not only gets rid of huge costs - which usually amount to at least half a newspaper’s budget - it also loses both circulation revenue and advertising revenue, which is much higher than digital revenue. As Westphal pointed out in our email exchange, some digital advertising is tied in bundles to print advertising and so the risk is that getting rid of print would hurt digital. But I suspect the opposite would happen: Some of that print advertising will now be forced online. Indeed, I’ve long argued that newspapers should force both readers and advertisers to online - to the future - and turning off the presses would do that.

There’s no question that the scale of the business would be smaller, much smaller. But with only edit and advertising sales costs (I’d market only during the transition) it could be a profitable business - a profitable digital journalistic business. That is the promised land. Welcome to the future.

Note well that bankruptcy makes it easier for a paper the size of the LA Times to consider such a radical move because it resets labor and vendor contracts and relationships with creditors. That size has become a disadvantage for legacy players (and it is why I’ve thought that new players will enter and start to take over these markets). But what if, once past bankruptcy and the cost of shutting down print operations, the LA Times as a news service could be profitable and grow? Yes, grow. News is a growth industry today; newspapers aren’t. But they could be again.

If they do it right, the papers shifts from relentless shrinkage back to practically limitless growth. If they create good hyperlocal networks, they can offer new content at much lower cost and risk (that is, through partnership rather than staffing) and attract new readers at a very local level (while also attracting new readers internationally with that Hollywood coverage). They can create new means to serve an entirely new and very large population of smaller local advertisers who could never afford to use the LA Times before. They could create new services and platforms and find new lines of business.

It almost makes me wonder whether bankruptcy was always part of Sam Zell’s strategy (but I never assume any company or mogul thinks that far ahead). He might lose his investment but if he comes away with the ability to shed huge cost and emerge with profitable, growing enterprises, he could well more than make up for that with future value and even take Tribune Company public again.

All this is why I got a grant from the McCormick Foundation to create a New Business Models for News Project as part of the Center for Journalistic Innovation at CUNY. I plan to work with business students (volunteers?) to play out this model among many others. The time for speculation is over. The time for rebuilding is here.

Comments

[Jack K:]

Living in NH I have never read the LA times, but if it like many other newspapers, which spout liberal rhetoric, then I hope it folds, and those liberal writers get laid off.

2008 Dec 20 05:51 PM

[lcs:]

Yeah, I agree. I don't want to hear ANYTHING but conservative rhetoric, since we all know that it is correct and liberal rhetoric is incorrect. Why, its obvious.

2008 Dec 20 06:48 PM

[Willie Loeb:]

Oh, that's a good idea! Hope all the liberals everywhere get laid off. Why should anyone who disagrees with Jack get to punch a clock? Let 'em draw unemployment and then go on welfare, supported by, uh -- oh, I guess that would be by hardworking guys like Jack. Huh. Well, anyway, they deserve it. Let's hope that everyone Jack disagrees with get laid off in time for Christmas so he can support them in 2008.

"God bless us, every one!"


On Dec 20 05:51 PM Jack K wrote:

> Living in NH I have never read the LA times, but if it like many
> other newspapers, which spout liberal rhetoric, then I hope it folds,
> and those liberal writers get laid off.

2008 Dec 20 06:48 PM

[Steven Hansen:]

jeff, i agree that if a print paper does not exist - advertising is forced to the web. LA is unique as it is more difficult for the free newspapers to take hold (unlike nyc, sf, chicago, etc) as it is not centralized.

anyway, good thoughts.

2008 Dec 20 08:07 PM

[Eric Moritz:]

That's right, turn off the presses. Printing a paper is a massive, expensive operation. I don't doubt that online only local news can support itself.

Legacy, tradition and lack of guts is preventing the current newspapers from turning off the presses. I'm waiting for the first big paper to turn off the press and show that it's possible to survive without killing trees.

2008 Dec 20 11:27 PM

[DaveBrit:]

Its a scary thought, to hand over Washington coverage to the Wall Street Journal and its right wing editorial machine which supported everything which has now gotten us into all this mess. The LA Times has a nice center viewpoint suited to us Californians. No thanks WSJ!!

2008 Dec 21 01:10 AM

[DaveBrit:]

Its a scary thought, to hand over Washington coverage to the Wall Street Journal and its right wing machine which feverishly supported everything which has gotten us into all this mess. No thanks Murdoch, the LA Times with its center viewpoint suits us Californians just fine.

2008 Dec 21 01:13 AM

[k9s-4-k8:]

This guy's headline made my heart go pitter patter. I'm giddy about the idea of the L.A. Times shutting down their presses. Here in So Cal, the L.A. Times has for years been the only newspaper that offered a decent sports page and a bit more international coverage, but their stubborn determined will to editorialize so many stories makes their paper one of indoctrination of the leftist viewpoint. They just can't seem to understand that people don't want to know their views and dislike them attempting to cast their view as part of the news. For this reason alone, I will be applauding their demise. Shutting their printers is the end game for the L.A. times because their influence online is minimal and will remain minimal as they continue to scale back to nothing at all.

2008 Dec 21 04:14 AM

[Duude:]

On Dec 21 01:13 AM davebrit wrote:

> Its a scary thought, to hand over Washington coverage to the Wall
> Street Journal and its right wing machine which feverishly supported
> everything which has gotten us into all this mess. No thanks Murdoch,
> the LA Times with its center viewpoint suits us Californians just
> fine.

The LA times has a centerviewpoint? What? Are you kidding me? You must have San Francisco roots. The LA times is one of the most left wing rags in America! As for it suiting Californians just fine, we need look no further than plummeting circulation, revenues, and a continuation of lay offs. They are gone and buried within 5 years all due to all that Californian lovin' population.

2008 Dec 21 04:25 AM

[bluesmoke:]

Consolidation and reverse syndication goes both ways. Look at what happened to the music business. For many years 3 companies controlled most of the music content. If it wasn't for Apple and the internet, those three companies would have an iron grip monopoly.

The same thing would happen with the news feeds. In so doing they would control and spoon feed whatever "news" they wanted to deliver.

No thanks. Let them burn.

2008 Dec 21 08:06 AM

[User 323675:]

The key is to not keep completely drop the print edition, but make sure that print revenue gets put against print costs, and the web costs get put against the web income.

Part of the reason the websites of newspapers are so dominant is because the print editions promote the web relentlessly. What if LA Times was a niche product for those who WANTED a printed package of news, and the papers got away from trying to be all things to all people.

2008 Dec 21 11:38 AM

[Sean in CA:]

Interesting article and follow-up comments. Does anyone here know the breakdown of print newspaper ad revenue? Specifically, I'd like to know just how big of a role/percentage of revenue real estate ads plays in the average newspaper's income stream.

2008 Dec 21 12:35 PM

[Robert Ivan:]

"Some of that print advertising will now be forced online."

some, maybe? But there is more compelling evidence that businesses are finding better ways to connect with potential customers.

A company website featured in FREE listing sites like Yahoo local and Google maps is a hard price to beat. Advertising is a necessary evil and if businesses can do it better, cheaper and faster, they will do it, outside the scope of a general information newspaper site.

2008 Dec 21 01:02 PM

[BerkeleyBob:]

I am a paying subscriber to the Sacramento Bee's website on a trial basis. I prefer ink and paper, but the Bee discontinued distribution to the Bay Area. The LA Times continues to distribute locally, but does so a day late. I haven't made up my mind about the electronic version but the local major newspaper (SF Chronicle) is becoming increasingly ungood. The joker in the deck is that consumers of web content are pretty allergic to advertising in any form... so electronic delivery may not be viable in the long run.

2008 Dec 21 05:06 PM

[kurt walter:]

The LA Times, a Tribune company, has become more and more liberal over the years. I canceled by subscription 4 months ago. I half expected someone from the circulation dept. to call or write me to try to get me to re-up. My phone has never rung and my mailbox is empty. They made no effort to keep me. This is an ESOP company, too. The employees have a giant stake in the LA Times. It is no wonder the Tribune Company filed bankruptcy.

2008 Dec 21 07:37 PM

[Midwest:]

I don't care about a liberal/conservative bend to any newspaper. That's a different argument altogether.

The amount of money that comes in from print advertising dwarfs web advertising. For most publishers, it is well under 10%. Yes, it is growing but website advertising provides measurable returns and the returns aren't looking so good.

CPM are still used by providers because they know that form of measurement obscures the difficult truth of website advertising- It may be cheap but users ignore it at a staggering level. "Hey, they saw your ad. Gimme .006 cents..." Sorry, but the click rate numbers don't add up very well.

If the LA times shuts its presses down, then I wish it good luck and I project that it will make a fraction of its former revenue levels. Website advertising is the Holy Grail of marketers, advertisers and web site owners but it is a barren wasteland. Users regularly ignore the ads and the click through rates prove that. As a result, CPMs are a useless measurement.

Meanwhile, advertisers continue to salivate over the cheap price of web based advertising but they rarely divide cost into click through into action into realized revenue.

Why? Because their corporation's web officer doesn't want the truth revealed. They know the numbers are horrible but no one really wants to know about how bad they really are. If they admit how useless online advertising is, the entire house of cards falls and advertisers find out they're throwing money out the window. Nobody wants to point out the elephant in the room.

Online advertising will not provide as much revenue as print for the foreseeable future. In fact, those that go all digital will never see revenue levels like they had in decent economic times.

Shutting down print has been a decade long promise of the web and its proponents but we've seen only an inkling of that actually happening. Why? Because there's still plenty of money to be made in print and substantial internet revenues are the things of search engines and online auction sites. Everybody else will be looking for scraps.

2008 Dec 21 09:01 PM

[User 324295:]

Jeff:
You are correct that papers like the Times could get rid of many of their variable costs (newsprint, circulation payroll) by going online only. But what about their fixed costs? The Times is probably still paying off the cost of its printing presses. These legacy costs would probably make an online only Times unprofitable.

2008 Dec 22 01:46 PM