Most everyone understands these days that print media is in its death throes. (Future grandchild: “What did you say, Gramps? You got big chunks of dead trees delivered to your house every morning with words stamped on them that told you what happened the day before? Gramps, stop telling lies!”)
I recently came across a particularly illuminating example of this trend in my own family’s media consumption habits. Understand, I’ve always been a news junkie. I’ve read or at least glanced at the Wall Street Journal, the New York Times and Le Monde most every day ever since college. But I transitioned from the dead tree to the web versions at the first opportunity — in the mid 1990s in the case of the Journal and the Times, more recently for Le Monde (which, it will come as no surprise, had to be dragged kicking and screaming into the digital era).
However, about a year and a half ago, my aged father and his wife came to live with us. She in particular wasn’t happy reading on a computer screen. So we got her a home delivery subscription to the print New York Times on weekdays, skipping the Saturday and Sunday editions because she said she felt like taking a break on weekends. As of a few months ago this gentle lady no longer resides with us. So my wife suggested we cancel the Times subscription. She read it herself occasionally, but being a confirmed penny-pincher that wasn’t enough in her eyes to justify $7.70 per week. It made no difference to me, since I was a digital only reader.
But lo and behold, when I went to the Times web site to cancel home delivery, I found that it would actually cost more to switch to a purely online subscription. You see, if I pay $7.70 per week for home delivery (weekdays only), the Times throws in unlimited digital access on all my devices (laptop, iPad, iPhone). But if I cancel the dead tree component, the Times will charge me $8.75 per week for digital only. In other words, if I buy the online version of the paper, they are willing to pay me $54.60 per year to take their weekday dead tree edition as well. Always pragmatic, my wife said, “well then, keep the home delivery.” She now thumbs through the paper once or twice a week at best, and throws away the unopened copies that pile up the other days.
Needless to say, subsidizing the old and penalizing the new in this fashion is not a cost-efficient or sustainable business model. So why does the Times do it? In the old Warren Buffett model of the newspaper business, a paper that dominated its local market was an unregulated monopoly like a toll bridge. This model had the very desirable feature of driving up the price of print advertising far beyond what it would have been in a competitive market. Since there was only one “information bridge” in town, advertisers who wanted to reach that local audience had to pay the toll, or else. It was nice work for those (mostly the idle rich descendants of dynastic founders) who could get it*.
But the web destroys the toll bridge monopoly. In the old model the high fixed costs of printing newspapers and building a home delivery channel provided steep barriers to entry. A typical city offered the reader only one or two choices, while out-of-town newspapers were an expensive luxury. Now things are different. Readers enjoy a fire hose of news from sources all over the world, pumped into their homes and mobile devices every minute of the day and night, usually at no cost other than Internet connection fees. True, a handful of established print brands can charge for online access, as we’ve seen in the case of the Times. But readers who decline to pay for the big brands are in no danger of going uninformed. They might miss a few op-eds from popular (or not-so-popular) pundits, but no quantum of actual hard news need escape them. Moreover, the paywalls of the big brands are porous by design — casual readers are invited to sneak in for free from time to time. And anyway, when really big news breaks, we can all get real-time updates from Twitter much faster than from any official media organization.
The inevitable consequence of this brutal elimination of previously high barriers to entry in the news delivery business has been an equally brutal decline in the price advertisers must pay to reach readers. The typical CPM or “cost per mille” (i.e. cost to reach one thousand readers) has dropped by an order of magnitude, falling from over $100 for papers like the Times or the Journal to just a few dollars for many leading blogs or aggregation sites.
Does this mean that old guard print media is doomed? Yes and no. Yes, in its current form. Print media is consolidating at a rapid pace, and things are only going to get worse. In fact, things are already far worse than most people realize. According to shocking numbers published by the Newspaper Association of America and graphed by economist Mark J. Perry, print ad revenue over the past decade has literally imploded, falling from more than $60 billion in 2000 to $20 billion in 2011. Adjusted for inflation, the 2011 revenue number is no higher than it was in 1950, when the U.S. population was less than half of what it is today. In short, the writing is on the wall: news staffs and circulations will continue to shrink, fewer physical pages will be printed, ad revenues will continue to decline, and weaker brands will be swallowed up into stronger brands or simply cease to exist.
But also no — the big media brands will not die out entirely. Their power to differentiate through higher quality, albeit diminished, is not gone. Many (though not all) New York Times editors and reporters may be shameless partisans when it comes to framing the debate between Romney-Ryan and Obama-Biden. But their average editorial product is still of noticeably higher quality than the routine wire service output of the APs and Reuters of the world.
Big media will survive on the web even as its ancient print incarnation wastes away. But it will have to get used to a world of shrunken valuations and leaner living. Editors will no longer let writers squander 4,000 words to say what could be said in 1,000. The longer word lengths and corresponding New York Times “bury the lede” style were simply consequences of the requirement to fill the vast spaces between sprawling full page display ads, a genre that will soon be obsolete.
To our friends in big media, we of the online world say this: Welcome to the free market! Life can be rough here, but it’s always exhilarating. Get used to
*In practice local newspaper monopolies weren’t always unregulated. 20th century politicians seeking to appease powerful unions and influential editors often authorized competing news rags to flout antitrust laws by pooling their print and distribution costs.