If the digital revolution has done nothing else, it has exposed the extent to which American newspapers have relied on their quasi-monopolistic control over local advertising markets to fund news operations.
CW Anderson, Emily Bell, and Clay Shirky, in their valuable report last year, called it a “subsidy,” and that’s a provocative way to put it.
Here are the report’s five core points, all worth pondering (emphasis in the original):
Journalism has always been subsidized.
The Internet wrecks the advertising subsidy.
Restructuring is therefore a forced move.
There are many opportunity for doing good work in new ways.
Whether you buy the concept of subsidy or not, and I’m not sure I do entirely (more on this in another post), it’s painfully clear by now that there’s something to it. Much of the ad revenue flowing to newspapers in years past had nothing whatever to do with the news, and the same is true with the money flowing away lately. Some journalists (like me) find this hard to accept, but the numbers don’t lie.
Now, as everyone recognizes, newspapers don’t have a lock on the local car dealer, grocery store, and regular Joe with a parakeet for sale who needed to reach the local market.
So, the subsidy is going away, if it’s not gone already, and increasingly news operations are required to pay their own way. This isn’t about paywalls necessarily. But somehow, some way, they’ve got to find a way to earn the attention and trust of enough readers to make the cash register ring, either through clicks, subscriptions, conferences, memberships, or something else.
At this point, it’s pretty much about the news.
And that’s why defunding the newsroom now is patently the wrong strategy any way you slice it. And if it has to be done—and of course sometimes it does—it should be the very, very last resort. Literally, as a news organization, what else now do you have to sell?
I’m a contributor for a local news site in Providence called GoLocalProv. Last week, I wrote about the slow-motion train wreck that is the Providence Journal, my old paper, where in the last year or so, the paper’s parent, AH Belo Corp., has been extracting $1.2 million in concessions from unionized and other employees, resulting in demands for 53 job cuts from the editorial and sales sides. John Hill, president of the local Guild, says membership is off more than two-thirds from a peak of more than 500 to about 160 or less now. The figure includes both editorial and advertising personnel, typically about 60 percent editorial. This is beyond fat, and well into bone. Really, we may already be getting past the point of no return.
The paper, as I wrote, used to have nine—count them, nine—local bureaus (updating to add “local”; not counting the statehouse) covering that tiny state. I used to work in the Pawtucket bureau, all of five miles from the Journal newsroom. A fast bicyclist makes the trip in 15 minutes.
Today the number of Journal bureaus is exactly zero. As I said, the point isn’t that there should be nine bureaus, or any bureaus. The point is that the Journal’s omnipresence—every Rhode Islander over 6 years old was probably interviewed by the Projo at some point—created the kind of intimacy that, we are learning today, creates real value. Loved and hated, often by the same people, the Projo was the hub of the community. True, it wasn’t interactive or even particularly responsive, and that’s not good. But that emotional and intellectual connection, which was taken for granted at the time, is what the Journal now has for sale. That, and little else.
Executive compensation is an opaque area, deliberately so, believe me. Aficionados can do their own arithmetic by downloading the company latest proxy filing
here. By my reckoning, the estimate is conservative, if long-term stock awards and other perks are included.
In a proxy statement, the company justifies the bonuses this way:
The newspaper industry continues to experience substantial change caused by the effect of the Internet and other transformational technologies on consumers and advertisers and the rapid ascent of new media businesses. From an executive compensation perspective, this business environment underscores the importance of attracting and retaining both experienced and high-potential executives, and rewarding superior individual performance that may not presently be reflected in the Company’s stock price, revenues or operating profit.
But granting executive bonuses—while cutting product quality—is exactly the wrong response to “substantial change caused by the effect of the Internet and other transformational technologies.”