The post-daily world

To understand what’s next for journalism, let’s put the decline of daily newspapers in context

When I think about the fate of daily newspapers and the future of journalism, I immediately think about the first California Newspaper Publishers Association awards ceremony I attended back in the early 1980s. My paper in Chico had won for Best Weekly Newspaper, so I went down to the Hotel del Coronado in San Diego to accept our award.I was excited.

I’d been publishing alternative newsweeklies in Santa Barbara and Chico for 11 years at that point and knew dozens of alternative-newspaper publishers. But I hadn’t yet met any daily publishers. I had this idea that they would be like modern Renaissance men—skilled at business, but also well-versed in politics and the arts. Mostly, I thought, they’d be passionate about the role their newspapers played in their communities and in the life of the country.

Boy, was I disappointed. The subject that seemed to rivet publishers’ attention most was golf. And when some of them discussed their newspapers’ operations, things got even worse.

On the whole, they seemed to dislike their employees, especially the union representatives. They described their printing presses as “iron” and the papers as “product.” And the remark I was stunned to hear over and over was something like, “Sure, we support our editorial product—we need to put something between the ads.”

The experience brought home to me how leadership must stay aligned with mission or an industry will fail. Publishers of dailies had begun to prioritize profit, not journalism. That’s because economic and political forces had established ground rules that allowed this to occur. Decisions about how many reporters to hire, whether to open a bureau, how many papers to print, which stories to cover—all these choices were made within the context of these forces.

This shouldn’t have come as a shock to me. After all, economic and political influences had shaped how we had been creating alternative newspapers for decades.

It has recently dawned on me that this context has been mostly missing from the current discussion about the future of journalism. As the daily-newspaper industry continues to decline, it’s important to understand that these same forces will determine how journalism will develop as we move into a post-daily world.

There will still be journalism

The purpose, the very essence of journalism is to take information and opinion and make it more valuable by putting it in context, connecting the dots, telling the stories. The human desire for what we call journalism existed long before the daily newspaper, and the overriding need for journalism will continue to exist long after the daily newspaper is gone.

In his brilliant book The Creation of the Media: Political Origins of Modern Communications, Paul Starr writes about the time from the American Revolution to the United States’ entrance into World War II, showing how different economic and political forces—including the U.S. Postal Service—helped shape the development of newspapers, radio, movies and other media, and how those media, in turn, influenced our economic, political and cultural institutions.

This is still true today. I’ve been a firsthand witness to this since it happened to us in the alternative-newspaper realm.

In 1973, I had just finished four years at UC Santa Barbara, and almost completed a degree in sociology, when I joined a group that was publishing one of the first alternative newspapers in the country. We were organized as a collective, and most of us were working for free, or for as little as $100 per month.

Working at this newspaper was wonderful. Reporting was by far the best job I’d ever had, despite the lack of pay. The paper was able to reach thousands of people throughout the community; I found it more powerful and effective than demonstrating or organizing for social change.

But we had a problem—lack of money. Our annual revenue of around $60,000 had to support a staff of 14 people, in addition to paying for rent, printing and other costs. Even in 1973 dollars, that wasn’t enough.

Author Jeff vonKaenel is president and CEO of the News & Review papers in Sacramento, Reno and Chico. He’s been in the alternative-newsweekly business for 30 years. He believes it’s time for citizens to face the sad truth that we will soon have to live without daily newspapers.

Photo By David Jayne

After I ran out of savings, I went back home to San Jose and sold Fuller brushes door to door for a couple of months to earn enough money so I could return and work for free at the Santa Barbara News & Review. That may seem insane now, but honestly, how different is it from current-day bloggers working all those crazy hours without financial reward?

At some point, I realized that, with its current level of revenue, the paper I loved so much was not going to make it. So I switched to the business side and began to scramble to find out how we could get more revenue, just as bloggers and online news sales managers are doing now. We tried to sell more subscriptions, but that didn’t work. We asked for donations. That worked even less. We became desperate.

I went to car dealers, clothing shops, head shops, bookstores, grocery stores, department stores and restaurants, hunting for somebody, anybody, who would place ads with us. Most businesses wouldn’t even consider it, partly because we wrote controversial stories that were critical of the local police department, bashed President Richard Nixon and the Vietnam War, and were supportive of the environmental movement. As everybody in advertising knows, given a choice between placing an ad in a controversial medium vs. a mainstream, “safe” medium, a prospective client will choose a safe medium almost every time.

Finally, we got a big break when we started to get record shops and bars to run ads. We quickly increased our entertainment coverage, listings and music reviews, which led to more music-related ads. This led to more music-oriented readers, which led to more coverage and more ads. While this cycle was happening, we also attracted more general readers. As you can see, the economic forces had changed at least one aspect of our journalism.

And since it worked, we kept doing it.

My point is that the convergence of many circumstances—a large baby boomer population, a relatively easy entry into publishing because of changes in the printing technology, and the willingness of the music industry to advertise because they recognized that our papers were attracting young readers—all led to success for a certain kind of weekly newspaper that you now find in nearly every major city and university town in the country.

If any one of these things had been different, another kind of journalism would have developed.

The case of the dailies

The alternative-newspaper industry is tiny compared to the daily-newspaper business—its national revenues make up only about 1 percent of what the dailies bring in. So it’s even more important, in the scheme of things, to acknowledge that daily newspapers were fashioned in response to economic and political forces.

Starr writes that before World War II most towns in America had competing daily newspapers that received much of their revenue from circulation. After the war, with the economy booming, manufacturers were suddenly willing to provide cooperative advertising to retailers. The postwar boom in retail sales and advertising meant there was a need for stores to find new places to put all those dollars so as to attract even more customers.

Guess what? Local newspapers had a perfect place to put that advertising. So this created a massive increase in newspaper revenue. As advertising represented a greater percentage of revenue, circulation started to represent a smaller percentage.

Soon, since retailers preferred to put their ads into one paper instead of two, advertisers started opting for the paper with the larger circulation. This caused daily newspapers in the post-World War II era to become embroiled in battles to the death with other dailies.

The conventional wisdom was that the first paper that reached 60 percent circulation in the marketplace won. Then it was only matter of time before the smaller paper went belly up. So it made economic sense for publishers to increase their editorial staffs.

Publishers poured tons of money into editorial, even funding foreign bureaus and wire services, all in hopes that it would increase circulation. In nearly every market in the country, the newspaper wars ended only when there was a single survivor in the market. By 1992, only 37 cities had competing dailies.

The next period—from 1970 to 2004—became one of monopoly dominance and super profits for daily newspapers. Sixty-eight percent of dailies were independent in 1960. That fell to 30 percent by 1986. And by 2000 most papers were owned by large, shareholder-driven newspaper companies such as Gannett, MediaNews Group and Knight Ridder that had been willing to pay premium prices to buy up daily newspapers.

In a 1996 cover story, “Newspapers R.I.P.,” vonKaenel made the prediction that within 10 years The Sacramento Bee and most other daily newspapers would be out of existence. Back then, few in the newspaper industry gave his prediction the time of day. Now, though the recognition is late by a few years, the truth of the dailies’ decline is irrefutable.

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Owning a daily newspaper was like printing money. Into the mid-1990s, daily newspapers delivered anywhere from 20 percent to 40 percent profit margins. Some changes reduced these margins, but in 2007, newspapers’ profits still averaged 19.3 percent—more than twice the average for the Fortune 500.

Unfortunately, it didn’t take long before most daily publishers realized that the lack of competition meant they could make even more money by capitalizing on their monopoly-market position, while cutting back the quality of their product. Since they had no competition, they could now slash editorial content while raising ad rates. They did both. And they made out like bandits.

For a while.

Then came Craigslist. The advent of free online classifieds devoured newspaper’s classified-ad sections—which used to make up something like 30 percent of daily-newspaper revenues—to devastating effect. It wiped out the daily newspaper in its current economic model.

Who has the future advantage?

If it is no longer economically feasible to have a daily newspaper, then shouldn’t the dailies reinvent themselves so they can compete in the new online world?

Most people in the newspaper business think the answer is yes. That must be why most dailies have been attempting to right the sinking ship by offsetting decreasing print-version revenues and steadily increasing online revenues. The idea is that the daily newspaper, over time, can become an online newspaper.

Clearly, daily newspapers have certain advantages going into the online journalism world. They have great branding as feet-on-the-street news sources in their communities, and they have many employees with important skills that would be useful for an online news organization.

But they also have many disadvantages. I believe these far outweigh the advantages.

The question isn’t whether a daily newspaper can make the transition from print to the online medium—of course it can. The question, instead, is whether a daily newspaper’s current staffing, branding and infrastructure would operate with an advantage compared to someone starting an online news organization from scratch.

One of the key differences has to do with costs. First, establishing an online daily takes far less money than establishing a traditional daily (with its high printing and distribution costs).

Next, the dailies would be at an immediate and severe disadvantage because of overpaid executive teams. For example, last year, McClatchy’s Gary Pruitt earned $4.6 million and Craig Dubow of Gannett earned $7.5 million. Ironically, the first, most important step a daily newspaper could take to become competitive online would be to fire its own management.

Add up what the top four highest-paid executives at McClatchy make. If you fired those four, you could hire 125 reporters!

Another major difficulty would be staffing. Around 80 percent of a daily’s workforce—print-shop employees, distribution services and much of the sales force—would no longer be necessary. Though layoffs and buyouts can cause workers to disappear, many of their costs—including pensions and termination costs—would linger.

Next, consider the wasted capital costs—delivery trucks, printing presses and a large building designed to house a giant newspaper staff. Much of that would be of little worth.

If there is a single thing that has broken the backs of dailies economically, it’s the advent of free online classified-ad services such as Craigslist, which have devasted a section of newspapers that once generated 30 percent of revenues.

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Finally, the supposed advantage of having an experienced workforce may not prove to be much of an advantage after all. Most of a daily’s advertising workforce would have a hard time adjusting to the online world. They certainly have had difficulties so far. And while an experienced editorial staff could be very useful to an online newspaper, in many places mass layoffs have left the remaining editorial staffers feeling abandoned and angry at their employers.

My guess is that a new online newspaper with some money in the bank could open in a community, recruit an ex-daily editorial staff and quickly be in a great position to compete against a monopoly daily newspaper that has moved online.

The matter of culture clash

I’ve spent three decades competing against daily newspapers, so I’ve become a student of them. And while I can’t say the executives at the chains I’ve competed against (McClatchy, Gannett, Donrey and MediaNews) are on my Christmas card list, I can honestly say I admire their employees.

I especially admire the daily reporters, who as a whole are funny, smart, curious, well-read, hardworking and extremely interesting. Most of them care deeply about their mission as journalists and about the stories they produce.

On the other hand, if daily newspaper publishers were asked to choose between 1) a reporter’s in-depth investigation that could help create a better community, but might end up costing a small percentage of advertising revenue, and 2) an article that was mind-numbingly boring but didn’t hurt advertising, I know which option most of the publishers would choose.

They’d choose the story that didn’t cost them advertising.

In classic economic theory, monopoly organizations seek to maintain the status quo for as long as possible. Innovation usually will make changes that diminish the value of the old institution. Why would a monopoly want to innovate when it already owns the market?

This economic love of the status quo is difficult for journalists who are trained to ask questions, look under rocks, peer behind curtains. It sets up a kind of culture clash at dailies, where a group of independent-thinking journalists are housed inside a large conservative corporation that wants to maintain the status quo.

This can create some problems.

In fairness, I concede that daily publishers are correct in believing that controversial stories hurt advertising sales. I know they’ve hurt us. We have lost millions of dollars in advertising because of our controversial stories over the years and for taking non-status-quo positions—like opposing the war in Iraq before it was popular or supporting gay rights from the start.

In fact, that’s become something we take pride in as a company.

Ultimately, though, all newspapers operate in an environment that is defined by economics and politics. Consciously or unconsciously, structures get set up that support the status quo, and this has an impact on coverage—what stories get vetted, who gets chosen to be editors, etc. The end result is that the public debate can be shaped by this, often becoming more narrowly focused. It’s safer to make an outrageous statement about Saddam Hussein than to make a mild criticism of a local car dealer.

It’s something newspapers don’t like to admit. It has always mattered who pays the bills.

What will fill the vacuum?

Just as in nature when a disease wipes out a species, the collapse of daily newspapers will leave a gigantic hole in the landscape of journalism as we’ve come to know it. In most American cities, local newspapers are still doing the lion’s share of original reporting. In fact, the way things are now, it’s hard to imagine any city having an effective community debate on virtually any topic without the reporting of its daily newspaper.

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So what will fill the vacuum left by the imploding daily newspapers?

Capitalism, like nature, does not tolerate vacuums. While I am not certain what will develop, I am positive that the journalism that rushes in to fill that vacuum will operate under different economic and political forces than those that created the daily.

This will result in very different media.

While I had become comfortable with the old configuration—running an alternative newspaper competing with the dailies in Chico, Sacramento and Reno—my new challenge will be different. I’ll have to survive the current economic crisis, while positioning our company to succeed after the collapse and/or implosion of the daily newspaper.

I wish I could tell you what the future is going to be. It would certainly make it easier for me to sleep at night if I knew. But I can only make educated guesses.

First, the Web has clearly been a deal changer and has dramatically changed the economics of transmitting information and stories. However, an effective way to fund journalism online has yet to be found. While this can yet happen, the immediate future probably will be a hybrid of print and online journalism.

This would be good news for us weeklies because, unlike dailies, which have the tremendous expense of delivering newspapers to every neighborhood every day, free weeklies have a much more affordable distribution model.

My guess—my hope—is that the print version of a weekly newspaper, with vastly lower costs than the giant dailies and providing a better advertising vehicle than an online news site, can remain a viable economic model. We would continue to meet the needs of our readers through the weekly product in hybrid with a regularly updated Web site.

Second, National Public Radio, which has gotten stronger and better over recent years, provides a natural model of how nonprofits, corporations and individual citizens can jointly support very good journalism. I believe that without daily newspapers, there will be more willingness and, certainly, more need to support such models.

Third, online media will create a different style of journalism. Though some believe next-generation journalism will be “hyperlocal,” my guess is that it will be less locally based.

Heretofore, local advertisers have wanted and demanded that daily newspapers reach as many households as possible in a given community, so there has been an increased emphasis on local coverage that pleases as many people as possible while offending as few as possible.

But that’s no longer going to be the model for media.

In other countries, there are larger numbers of national newspapers with stronger political viewpoints. That might be what American journalism will look like in the future. Imagine online news sources with immediacy, lower costs and greater impact. They might be aimed at a more targeted demographic that reflects specific interests and political views instead of the one-size-fits-all type of approach used before.

Generally, I think journalism in the future will tend to be more cutting-edge, more controversial, than have been media financed solely by advertising. Compare HBO to network television. On the whole, advertisers do not like controversy. And “interesting” and “controversy” go hand in hand.

Things are going to be different.

As we prepare for this new, different journalism, we should embrace the fact that we’re in an evolving process and that change comes in context. And we should remember that scene in movies when the king has just kicked the bucket, and the peasants start chanting, “The king is dead! Long live the king!”

How can we have a democracy without daily newspapers?

Let’s get ready to find out.