TA: I live in D.C. and yesterday (Inauguration Day) was like “Newsies” back in the day, you know “Extra! Extra!” People were hawking the newspapers and the Post actually charged readers two bucks a copy.
AM: You know I think that’s not wrong. I think newspapers should be charging more for their product because it doesn’t come even close to paying for itself and it’s a great service. It’s delivered to your house, packaged in a plastic bag, not in the bushes, on time. People used to have milkmen and guys who’d come and sharpen knives, all that’s gone. The only people who still have on your doorstep customer service day in and day out are newspapers.
Hey, if people can spend two bucks to have somebody squirt some hot water and foam in a cup, they can pay two bucks to have a newspaper delivered on their porch every morning. I think newspapers should be raising their prices through the roof. And you know what? If that cuts into circulation, fine. Let’s separate the men from the boys and you can go to the advertisers with a straight face and say “These are core readers who are serious about our newspaper.”
TA: Where do you come down on the question of should papers charge on the Web or not?
AM: My view is they should find products they can charge for on the Web, however, it’s too late to charge for generic coverage. The New York Times went through this whole thing of selling TimesSelect, which was an idea, although I’m not sure that was the right thing to sell…
TA: They should have sold news instead of opinion. They went ass backward on it.
AM: I actually think you’re right. The way The Wall Street Journal does it is make the first couple of paragraphs freely available and hope that you just keeping stumbling into those things so many times that, by golly, you’ll have to subscribe. I think that’s the right thing to do.
The other thing newspapers can do is create subscription content that’s unique to the Web. There are all kinds of newsletters out there that people pay a lot of money for.
TA: This is probably a dumb question—I don’t know anything about the ad side—but if demand for my product is decreasing, I have to moderate my price increases or put it on sale. So if demand for advertising in newspapers has decreased so much, why not reduce rates until you have enough critical mass to make it go?
AM: Oh, that’s a really good question. The fact is that newspapers have extraordinarily expensive infrastructures. The presses, the building, the really large staffs. That investment was made on the presumption that they could generate certain revenue levels.
Newspapers, now more than ever, do a ferocious amount of discounting. What you’re saying is let’s keep dropping the price of advertising until most people are wanting to advertise. But the market point for the case of most want-ads in almost every market in the country on Craigslist is zero. The market point for a real estate ad on Zillow is just about zero. Selling a car? Craigslist, zero. Cars.com, $26 or something.
TA: But you have to assume that classified advertising is just about gone.
AM: That’s fine, but if you looked at the classic newspaper model five years ago, say, 40 percent of newspaper advertising was from the classifieds. [The] industry had record high revenues in all categories in 2005 with $49.5 billion. By the end of this year, we will be down about 22 to 25 percent. I can show you where it went, it was mostly classifieds.
Now wait, it gets worse, because now the retail industry has completely collapsed. What happened last Friday? Circuit City went out of business. Linens-N-Things is out of business. Mervyn’s went out of business. Multi-store retailers like crazy are just vanishing from the scene. If the last two or three years were the years of want-ads going up in smoke, this is the year of retail ads going up in smoke.
Newspapers because of their high infrastructure costs can never drop their rates low enough to match the rate of the competing media like Craigslist at free or Google at five bucks a click. Newspapers have to have a different reason for people to buy than price. Has to be the quality of the audience that we attract.
TA: Basically you have this cyclical decline on top of this secular (structural) decline…
AM: The problem is the cyclical decline in this case, given the negative momentum we had going into it, may be so severe that some newspapers don’t come out the other side.