An Examination of the Newspaper Industry
It seems that the once-mighty newspaper industry is taking a series of vicious right-hand jabs and roundhouse kicks on a weekly basis. On August 3rd, the New York Times shed the Boston Globe as well as the other components of its New England Media Group. Two days later, the Washington Post was sold to Amazon.com chief executive and founder Jeff Bezos.
Perhaps the newspapers have seen the writing on the wall for a long time. However, the industry’s downward trend is beginning to smash bottom lines in a way that has made the writing on the wall bolder. Certainly, the decline in readership over the past 12 years is a force working against the industry.
As evidenced by the following charts, print advertising has taken a pounding.
Newspaper staffing has taken a hit as well due to the industry’s woes. Last year, the U.S Department of Labor’s Bureau of Labor Statistics reported that the newspaper industry had declined by 40% in the past decade. In 2012, the number of full-time newspaper jobs declined by 2,600 to 38,000 employees. This is the first time that the newspaper industry has had less than 40,000 workers since the dawn of the U.S Census in 1978. This list does not include the 45 staff members that were jettisoned from the Oregonian. Nor does it include the entire member of the photography staff cut from the Chicago Sun-Times. Five days ago, the Journal News laid off twenty-six employees. The Cleveland Plain Dealer cut one-third of it’s news staff on July 31st.
Looking at these layoffs, I’ve reminded of TNA Wrestler Kurt Angle’s favorite line:
Oh it’s real. It’s DAMN REAL.
20 years ago, the New York Times purchased the Boston Globe for $1.1 billion. On August 3rd, the New York Times sold the Globe to Red Sox owner John Henry for a mere $70 million. By comparison, John Henry just gave Red Sox second baseman Dustin Pedroia a $100 million contract extension.
The second-quarter 10-Q by the New York Times paints a picture of the subpar performance of the New England Media Group. So far this year, the New England Media Group’s circulation and advertising totals have declined by 2.1% and 9.8% respectively from 2012. Overall, the New England Media Group’s revenues have declined by 7.1%.
The New York Times can now focus on their own media group and it’s subpar totals. While the NY Times Media Group’s six-month circulation totals increased by 7.4% over the same period in 2012, it was dragged down by an 8.1% decline in print advertising revenue. As it stands, the New York Times Media Group has no material percentage increase or decrease from last year’s totals.
The New York Times Company only owns their flagship newspaper and the International Herald Tribune, which is going to be renamed the International New York Times in four months. It will be very interesting to see how the Times performs the rest of the year. However, it is clear that they are quite vulnerable as well.
In Rocky II, Rocky Balboa was considered down and out against Apollo Creed headed into the twelfth and final round. The end result of that match shows that no man should be counted out until the final bell. While there is enough evidence to suggest that the newspaper industry may be headed towards its inevitable extinction, there is also enough proof to show that newspaper organizations have taken effective steps to counteract the forces working against the industry. Hope may spring eternal.
Digital pay plans have been enacted by nearly 1/3rd of the country’s newspapers. They have become a significant revenue stream that has helped the newspapers shift from its heavy reliance on advertising revenue. Certainly, these plans have played a role in the NY Times’ aforementioned success in terms of circulation revenues. According to the NY Times second-quarter 10-Q, circulation revenues outpace advertising revenues. This was a feat that was not reached until digital pay plans came about for the NY Times. Yet, this milestone was also spurned by increased prices for the NY Times newspaper itself. The Financial Times and the Wall Street Journal were well-ahead of the curve in terms of establishing digital pay plan models.
The major goal of digital pay plans for newspapers is to stimulate potential growth in newspaper print circulation. After all, digital pay plans can include bundled packages. For instance, the New York Times offered free digital access to subscribers if they signed up for a home delivery of their Sunday newspaper. It is quite plausible that an expansion of the digital bundle may lead to a greater retention of print subscribers. Gannett Co. was so optimistic about digital pay plans that it told shareholders that it may help boost the firm’s earnings by $100 million dollars. As it stands, Gannett Co.’s circulation revenue has increased by 17% due to digital pay plan models.
I can safely say that the word “efficiency” will become a common theme for the Washington Post. Bezos drove his Amazon warehouse employees crazy due to his consistent emphasis on efficient operations.
It’s clear that this industry has its shares of bruises, cuts and scars. However, the aforementioned solutions show that this industry has demonstrated increased resilience.