Saving the News

Behind the endless proclamations of a brilliant new Information Age, a dark reality is also taking hold, with critical implications for the future of democracy.

The rise of the Internet – which itself generates very little of the reporting vital to an informed society – has brought the American news industry to the verge of imminent collapse.

The nationwide circulation of U.S. newspapers has plummeted to less than half the per capita figures of the 1950s. Among Americans under the age of 40, the figure is perilously close to zero.

The news can still be saved, and under the right circumstances a genuine Information Age may one day emerge. But the time frame for salvation is narrowing by the day, as catastrophic losses swamp what was once the largest and most comprehensive media infrastructure in history.

In 1950, the United States boasted more than 1,800 dailies, competing furiously for readers. As recently as 1990, there were more than 1,600. They were the key source of primary reporting, the fact machines behind much of television and radio news – and later, the principal conduits of most national and international news posted on the web.

Abroad, half a dozen national dailies per country were the norm, often tied to political parties and staffed largely by pundits. But Americans were served by a vast legion of independent journalists, hard-nosed editors and ambitious publishers. Together, they pioneered the investigative reporting, professional standards and expansive scope that distinguished the U.S. press at its best.

What fuelled it was a powerful chemistry bonding news producers, advertisers and consumers. Advertising-driven operations kept the consumer cost of newspapers extremely low – less than 50 percent of the average news stand price in continental Europe. The arrangement insured that up-to-date news would be available to Americans at every income level, based on the first hand experience of reliable professional journalists. It was a complete and exceptionally functional system.

Today, that system is at the end of its life. Local coverage has been trimmed repeatedly, while national and foreign reporting is in danger of vanishing from all but a few elite papers.

THE PROBLEM: SUPPLY
The demand side of the market equation is doing fine. There is and always will be a broad need – in business circles, in government, in the general public – for dependable reporting from the field. Indeed, demand is likely to rise as the current economic crisis deepens, and as our globalized world grows ever more complex.

The problem lies on the supply side, in the instruments that pay for reporting. The operative chemistry has changed forever. A simple question illustrates the change: Why would anyone look to the press for consumer ads?

The answer just a few years ago was a de facto monopoly. Classified and display advertising in newspapers provided the sole permanent showcase for products and services in specific markets – “permanent” in the sense that (unlike broadcast advertising), it could be surveyed by consumers at any time of their choosing.

The answer today is “no reason at all.”

The monopoly has been decisively broken. On the Internet, there is no longer a natural bond linking consumers, the press and advertisers who once pumped cash into the system.

Craig’s List and eBay have obliterated the classified pages, long the most profitable item on the newspaper bottom line. Every conceivable product category can be examined at the home or office computer at any hour, on customized websites that offer extensive details on brands, performance reviews and price comparisons.

THE SCALE OF COLLAPSE
Advertising in the conventional news industry is priced according to measurable impact: the number of consumers it reaches. As readers migrate to the Internet, the enormous drop in print circulation translates into a deadly reduction in what newspapers can charge for the ads that remain on board.

In a single quarter of 2008, notes media analyst Alan Mutter, overall advertising sales in newspapers fell by more than 18 percent, revenues from classified advertising by 31 percent, job recruitment ads by 43.6 percent, real estate ads by 38.6 percent, automotive sales ads by 29.2 percent. Online advertising sales dropped by 3 percent in the same period.

For a time, the hope was that a new online ad chemistry would providentially develop, and a brief period of sharply rising Internet revenues bolstered newspaper confidence. But the revenues soon levelled out at a tiny fraction of what print ads generated, and in some cases are now shrinking.

Hence the massive haemorrhaging of budgets and staffs over the past few years, with the most drastic cuts made in reporting – newspapers’ principal, and in classic economic terms, most intrinsically valuable asset.

Even with lower production costs, on the inevitable day that online editions entirely replace conventional newspapers (along with printing plants, fleets of delivery trucks and distribution networks), the budget shortfall will be crushing.

Web revenues will grow again, when the recession comes to an end, and their role in general operations will solidify. But they will never be sufficient to rebuild the reporting infrastructure that free Internet news sites have destroyed.

THE SOLE ALTERNATIVE
Overwhelming evidence suggests that the news industry’s market leverage, which once argued so convincingly for an advertising-driven press, has shifted to a fee-for-service structure – in short, to online subscriptions.

At the very least, the crisis argues for serious consideration of subscription-led financing. Yet to date, this step has been dismissed out of hand. The general objection takes two forms: It has been tried and failed, or it is unworkable.

In fact, as pertains to reporting, user fees have not been fully tested. The New York Times’ failed experiment with online fees is universally cited as “proof” that Internet readers will not pay for news. But the Times placed only op-ed columnists in the doomed subscription corral, while continuing to offer reporting stories for free.

The Times had it exactly backwards. Opinion and analysis are the weak links on the demand side, faced with huge competition from blogs and commentary sites. Reporting, the news industry’s most costly and marketable product, has scant online-sourced competition.

Three other significant media broadband experiments were underway when the Times threw in the towel. All three of them of them charge for their output, and today all three are prospering:
• The Wall Street Journal requires a $100 annual subscription for full access to its business reporting, and is faring remarkably well as hundreds of other dailies struggle with bankruptcy.
• At the onset of the Internet era, academic research studies were also freely available on the web. In the past five years, almost all have been moved into fee-for-use online libraries, with only brief abstracts available to non-subscribers.
• Consumers readily pay for supplementary features, such as sports coverage and Home Box Office films, offered by their cable or ADSL providers – the same providers whose broadband signals deliver Internet news websites.

These are the workable business models that can save the news, if only the nation’s leading press barons can be persuaded to collaborate – to confront their industry’s fatal decline together, and act decisively to stem it.

A NEWS CONSORTIUM
In the curious logic of the marketplace, the chief supply weakness in the media industry – a spectacular drop in the number of reporters and stories – is also its chief tactical strength. The number of newspapers generating original, comprehensive national and international coverage has dwindled to a small handful of the 1,200 or so that remain in precarious operation.

Their strength is that this handful of publications now accounts for nearly all such reporting on the web, as well in print. The demand is constant and they provide the supply.

The mandate is for their executives to acknowledge that the free Internet posting of news was an enormous error in judgement. The survival of news itself – the reliable, institutionalized and fact-based information system that is essential at every level of economic and political life in a democracy – depends upon its reversal.

The necessary starting point is an agreement among leading media companies to create a “News Consortium,” a collective umbrella over new funding instruments for reporting.

Access to more than the headlines and opening sentences of Consortium members’ news reports would require a paid per-household subscription. These are the terms that prevailed in the news industry until less than a decade ago, when the Internet became a common feature of American life.

The subscription, permitting full access to all member websites, could be as low as $10 per month, roughly the same as the current Wall Street Journal online subscription alone.

If a third of American households, roughly 30 million-strong, joined the ranks of Consortium subscribers, an annual $3 billion would be available to finance reporting. The kitty could be divided according to a negotiated formula, based on the number of user visits to individual websites or syndicated articles.

Non-reporting operating costs at member institutions could be covered by residual advertising income. The Consortium would exercise no restraints over their editorial freedom.

A $3 billion fund is enough to meet the salaries, benefits and expenses of roughly 20,000 reporters and editors: a solid professional workforce to haul the news back from the brink.

The stakes could not be greater. As Apple Computer founder Steve Jobs recently warned, if the newspaper industry dies, Internet news will die with it. There is nothing on the horizon to replace it.

Frank Viviano – barganews staff reporter – World View CBS5