This downturn has really had its fair share of victims in the business world. The financial industry, the auto makers, it looks like technology has suffered, but the online media formats continue to grow. This brings us to look at one media industry which might simply never come back; the newspaper industry.
Today I write as the Chicago Sun-Times files for bankruptcy with a Delaware court. Just recently the The Seattle Post-Intelligencer stopped it daily print edition citing the paper failed to find buyer for The Hearst Corporation Owners. Minneapolis’ Star Tribune also filed late last October for chapter 11 bankruptcy as the paper’s new owners, New York-based Avista Capital Partners, had an outstanding 350 million debt they purchased the paper with a few years before.
Just as any industry has reorganized in the past we can list the real suffers of these situations are the journalists and union employees. I am not saying the investors of the paper don’t take a hit as well, but we know if you are living off of investments you are better off than those on a shoestring. Along to the fact most employees of large papers are enrolled in pension, or at least 401K programs that invest in the very same company they work for. All together the situation we are in does not insulate anybody from the effects of cash evaporation.
There are a few people with a ideas about how to solve the dilemma. Senator Benjamin Cardin, D-Md has proposed an idea to allow local and less distributed papers operate as non-profit or tax-exempt entities siting the ad revenue is simply not enough to be taxed. The idea is good, but the question is whether it will be enough to save a single paper. The conglomerates would not be included in the legislation.
Today’s victim holds with it an interesting perspective as this stone simply continues to roll faster and faster. The market doesn’t seem to care about these papers failing, not that it ever did, but we are seeing a nice rise of over 100pts in the DOW as these writers dust off their resumes. Papers like the New York Times are increasing buy-ins from investors, as Carlos Slim bought a 6.4% stake in the company in a ploy to keep operations moving forward.
So, do people actually think there is future for these papers to sell print in a world so engulfed by rich media web applications and readership of younger generations lower than any other demographic. Last time I personally wasted money on a print paper was years ago. This is not to say the content was not valuable or entertaining, yet could I not have simply printed the crossword from homem, sat and occupied my morning coffee.
This chart is not unique as in all the companies are suffering. There is a drive to try and figure what models will work for online media to develop revenue, as the print advertising slowly drys up. One possible solution would be to offer free advertising in print pages with the purchase of contract spots online. And models like the Financial Times who charge for specific content seem to be less apt to suffer, although this model doesn’t seem to hold in general news situations. The other aspect to charging for specific content is that after one person buys the article it gets mashed and redistributed throughout the web. I consistently see article by the FT republished in user blogs, at the violation of copyright.
My favorite solution is to provide all content on line and use the revenue saved by printing to help those without access to high speed internet get up to speed. This would save paper, help energize online income generation ideas, and set the stage for a technological media generation. After-all if the Millenials don’t buy it, its dead in 30 years.
Stay hedged, stay happy,
Margin of Safety