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Jeremy Littau
For those who aren’t quite sure why these media layoffs keep happening, or think “it’s the internet!” or “people don’t pay to subscribe,” there’s a lot more going on. Though that is part of that. Here’s a cliffs notes version - not exhaustive but it hits the highlights:
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Jeremy Littau Jan 24
Replying to @JeremyLittau
1. What is considered The Golden Age of Newspapers ended around the late ‘80s. Subscriptions began dropping in the ‘70s year over year, but not enough to show cracks.
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Jeremy Littau Jan 24
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Newspapers spent most of the 20th century consolidating into chains, but in the latter half of the century they became part of conglomerates and were publicly traded. Profit margins for companies like Gannett and Knight Ridder were commonly around 30-40%.
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Jeremy Littau Jan 24
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That’s an insane margin. For comparison, your local supermarket (which arguably is more necessary for you to live) is lucky to clear in the low single digits. Anyhow, most of those profits went to shareholders, who came to expect them over time.
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Jeremy Littau Jan 24
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Because of that, newspapers became, as the joke goes, a license to print money. So chains started gobbling up papers all over the country in the ‘80s and ‘90s. They took on debt to do this because with 40% margins, there wasn’t much downside in that model.
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Jeremy Littau Jan 24
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Then the Internet came along and the bill for shortsighted, quarter-to-quarter thinking came due. During the golden era, newsrooms didn’t invest in innovating their news product very much. They invested in technology to make it easier and require less hands.
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Jeremy Littau Jan 24
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So they were caught flat-footed. But not immediately. I remember as a college student in the ‘90s attending a journalism conference and hearing publishers boast that newspapers were here to stay. They believed their product (not the news, the physical object) was essential.
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Jeremy Littau Jan 24
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So by the mid-‘90s you had chains saddled with MASSIVE debt and already had readership shrinking year over year. Easy self-publishing on the Internet took a bit to come to fruition and required technical skill. Blogger was invented in the late ‘90s and that was your sea change.
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Jeremy Littau Jan 24
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Suddenly, publishers who weren’t used to competition and didn’t invest in innovation were competing with more than their crosstown newspaper rival (if they had one anymore …. consolidations and mergers killed those too).
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Jeremy Littau Jan 24
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Circulation levels continue to drop, and the trend accelerated in the early part of last decade. With less readership and huge debt service commitments, it became a vicious spiral that required more cuts to meet debt goals and satisfy shareholders who were used to big profits.
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Jeremy Littau Jan 24
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And less quality meant less people found value in the product, and so they subscribed less. This is what Phil Meyer famously called the Death Spiral. Newspapers ate their own seed corn during bumper crop days and then had no resources when it got tough.
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Jeremy Littau Jan 24
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Less subscribers didn’t just mean less subscription money. By early 2000 about 75-80% of a typical newspaper’s revenue came from display and classified ads. And while subscriptions only account for 10-15% of revenue, a loss of subscribers mean less ad revenue.
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Jeremy Littau Jan 24
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Basically, advertisers will pay a lot if you deliver them a lot of eyeballs, and they’ll pay less if you deliver them less. Loss in subscriptions and rack sales were a double whammy.
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Jeremy Littau Jan 24
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And then came free classified ads on Craigislist (among others). People have said Craig Newmark killed newspapers, but that is nonsense. I’m surprised it took people that long to invent free classifieds, tbh. SOMEBODY was going to do it. At least Newmark cares about news.
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Jeremy Littau Jan 24
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Classified ads were a damn boondoggle. $500 in a mid-metro to place a car ad. The more expensive your item, the more you got charged. No wonder people rebelled the minute they were offered the ability to do it for free. Newmark didn’t kill classifieds; news publisher greed did.
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Jeremy Littau Jan 24
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Anyhow, by 2006 the storms were gathered. Readership dropping, which meant less subscription/sale revenue and less display ads, classified ads as a business was decimated. And all the while, that debt service from the buying spree years was hanging like the Sword of Damocles.
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Jeremy Littau Jan 24
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This is a great illustration of it. I call it the Oh My God graphic in my intro course.
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Jeremy Littau Jan 24
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So within 10 years, the industry lost about 2/3 of its revenue. And so that Death Spiral accelerated. More cuts, less quality, less readers, more cuts, less quality, etc. ...
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Jeremy Littau Jan 24
Replying to @JeremyLittau
But advertisers weren’t spending less. They were redirecting it. The hope was they’d invest in digital, specifically newspaper websites. And while that did happen to some extent, the numbers never came close to matching display ads because how we get news online is way different.
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Jeremy Littau Jan 24
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First, social media changed distribution. A print newspaper controlled content and the way you got that content because it controlled distribution. You were basically paying it to point you to the best news. If that sounds familiar, that’s because it’s what Google and FB do now.
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