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Paul Gillin's Blog - Social Media and the Open Enterprise

Friday, December 15, 2006

Marketers react to newspaper death-spiral proposal

BtoB magazine published my monthly column under the provocative title “Newspaper death spiral has begun” this week and linked to a 3,500-word manifesto that I assembled to further argue my point. If you read this blog regularly, you’ve already read the salient points, but the essay on the BtoB site packages everything up neatly.

I’ve received a handful of e-mails from BtoB readers about the column and not a single one has disagreed with my position. Perhaps my argument isn’t as far-fetched as it sounds. One writer asked whether I thought magazines were going to suffer the same fate as newspapers. My position on that is that magazines are a different issue entirely and it really depends on the type of magazine. High-end, lifestyle mags will be just fine (Cigar Aficionado, Golf, Travel & Leisure). News magazines have been in trouble for a long time and I think their situation will worsen. Trade magazines will be a mixed bag. I expect very few computer magazines to survive, for example, but CFO magazine or vertical journals in non-tech areas may see little change.

The economic model of magazines is very different from that of newspapers. Newspapers have huge fixed costs for production and delivery and that's why they're so vulnerable. Once they cover their fixed costs, the margins are great, but if they ever become unprofitable, the whole model starts to fall apart. They don't scale down very well. That's why I believe the collapse of newspapers will be so rapid. Remember that in many markets, newspapers operate as essentially legal monopolies. If they can’t make money operating from that position of strength, their situation is very dire indeed.

Another writer asked about the prospects for community newspapers. In fact, I believe those publications have a bright future. My expanded essay refers to resurgence in community publishing enabled by cheaper production costs. Small-town and community newspapers are well positioned to take advantage of the trend toward more localized publishing. They are the least likely to be marginalized by online competition.

In short, I think the rapid collapse scenario will be limited to metropolitan dailies. National papers will probably be okay and community papers could actually get stronger. But I’d hate to be the Detroit Free Press right now.

Labels: journalism, mainstream_media

¶ 5:38 PM

Comments:

I find it interesting that the publications who, for years, have done such a good job of covering the "connected community" growth may become the victims. It appears they read their own material while cloaked in denial.
This also points out the dangers of being that "legal monopoly". It only means you're wearing a bigger target than the rest of us.

# posted by

Anonymous : 9:43 AM

I found much to agree with in your essay. I'd like to see you address a point you gloss over when you say, "Digg.com, with less than 20 employees, has more Web traffic than The New York Times, according to Alexa.com." That's like saying porn sites get more traffic than digital camera review sites; it means very little. And it most certainly does not mean that digital camera sites need to wrap their sites in pornography.

It's important to remember that raw numbers are only part of the equation and that audience demographics are also of enormous importance in the eyes of advertisers. Does Digg know the demographics of its audience? It may know what its audience wants to read, but does it know anything about them? The great advantage of a print publication is that it can draw certain assumptions about its readers based on, for example, its circulation penetration in key Zip codes. That data helps ad sales target advertisers. You have predicted a collapse and rebirth of the newspaper business model; can you address the issue of audience demographics?

# posted by

Anonymous : 10:13 AM

At the end of the death spiral, the bloggers (and tv-stations) have nothing to write about or to steal content from. The death of newspapers will also put an end to blogging and tagging reliable news sources. What is left to blog and talk about with no reporters delivering documented and independent content?. In this scenario, the independent and authoritative newsprovider will be replaced by governmental og corporate spin. We will all be babbling in the dark! I'm afraid mr. Gillin is right, but there is no reason to celebrate..

# posted by

Anonymous : 6:01 PM

It's true the Digg and sites like it don't know their reader demographics, but that data will take shape over time through surveys and independent analyses. You're right that it's not just a numbers game, but in Digg's case, the audience is going there for the same reason that they'd go to a mainstream media site. The demographics may not be as high-quality as those of a newspaper audience, but Digg's costs are perhaps 98% less. They can sell advertising far cheaper than a newspaper can. It's still too early to determine whether they can deliver enough value on the ad dollar, but their economic model is a big advantage.

In Craigslist's case, I'd argue that every one of its 5 billion monthly page views is a lost newspaper reader. That site is doing incalculable damage to the newspaper industry by attacking its most profitable franchise.

To Jack's point, the fact that newspapers operate as legal monopolies in many markets only makes them less well-equipped to respond. They've been fat and happy with 10% net margins for years. Now they're under siege, and the people running them are not trained to handle crisis. It's a disaster unfolding before us.

# posted by

Paul Gillin : 7:34 AM

Lars: Don't celebrate, but don't mourn, either. The death of newspapers is necessary for a new kind of journalism to arise. Personally, I think it'll be a fresh, inventive and energetic approach. It'll be plenty controversial but it will also challengs us to think differently.

About the last third of my online manifesto at BtoB magazine is devoted to a prediction of what this new journalism will look like. Society needs mainstream media. It just may not need newspapers any more. But something else will replace them and it will be very good.

# posted by

Paul Gillin : 7:40 AM

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