Andreessen’s newspaper advice echoes Grove’s, a decade ago

We’re moving into the endgame for newspapers today, though the industry hasn’t quite reached the Kubler-Rossian stage of acceptance.

Yesterday the venerable Christian Science Monitor announced it was abandoning daily print publication. In Portfolio, Marc Andreessen proposes that other newspapers follow suit and finally give up on print:

If you were running the New York Times, what would you do?

Shut off the print edition right now. You’ve got to play offense. You’ve got to do what Intel did in ’85 when it was getting killed by the Japanese in memory chips, which was its dominant business. And it famously killed the business — shut it off and focused on its much smaller business, microprocessors, because that was going to be the market of the future. And the minute Intel got out of playing defense and into playing offense, its future was secure. The newspaper companies have to do exactly the same thing.

The financial markets have discounted forward to the terminal conclusion for newspapers, which is basically bankruptcy. So at this point, if you’re one of these major newspapers and you shut off the printing press, your stock price would probably go up, despite the fact that you would lose 90 percent of your revenue. Then you play offense. And guess what? You’re an internet company.

The Intel reference here is an oblique reference to Andy Grove’s famous comment to the ASNE that the newspaper industry had three years to adapt or die.

That was in 1999.

Andreessen’s advice makes total sense in many ways — it would be fascinating and worthwhile for at least one major newspaper publisher to try it. This sort of turn-your-company-on-a-dime idea is part of the Silicon Valley ethos. But I just don’t see it happening.

Hard though it no doubt was, it’s still a lot easier for a hardware company like Intel to retool its fabs and its engineers to produce a different kind of chip than for a newspaper company to retool its reporters and editors to produce a different kind of media product.

Shutting off the presses at the New York Times, or any other major newspaper publisher, would make the company an “internet-only company.” But it wouldn’t make it an Internet Company, in the larger sense. You’d still have a newsroom full of people used to doing things a certain way, proud, with good reason, of that way, and suspicious of change. It’s much easier to build a new company from scratch than to transform an existing one into something new.

But the bigger problem isn’t psychological, it’s financial. I base my views on a decade of experience at Salon, trying to support an online-only newsroom with online-only revenues. It turns out that the hardest part of this massive and inevitable industrial transition is not reconstituting high-quality journalism in a new media environment. That’s only mildly hard. Top-notch journalists will always seek to do top-notch work.

The really tough part — the part that to this day remains unsolved — is figuring out how to support those top-notch journalists with the salaries and benefits they are accustomed to, and often deserve. (That’s not even taking into account the loss of jobs on the printing and distribution side. But they are disappearing eventually no matter what.) The problem today is not much easier than it was when we started Salon in 1995: Look at Politico — an online success d’estime that still earns 90 percent of its revenue from a niche print product.

Newspaper companies are clinging to their dwindling print profits because they can’t yet see a way to keep anything close to their current pay scale and benefits in an online-only world. And the hardest pill for the industry to swallow is that there may not be any way to do that.

Internet companies pay top dollar to their engineers, not their “content producers.” There is no shortage of reasonably high quality content on the Web, much of it produced for free or little pay. Of course blogs and “user generated content” can’t replace the collective output of the nation’s journalism professionals today. But they offer plenty of alternatives, and enough occasions on which they surpass the pros (or expose the pros’ failings) to keep readers occupied, and sometimes satisfied.

As Bruce Reed wrote in Slate last year during the Hollywood writer’s strike, “There is no such thing as a writer’s market. With or without subsidy, words are always in surplus, and it’s always a reader’s market.”

No amount of handwringing will change that. If newspapers are really going to take the leap Andreessen proposes, they will have to do it while simultaneously restructuring their deals with their employees and mandating painful cuts that nobody wants to accept. Which is why I don’t think they will do it at all.

Ironically, of course, those jobs will vanish anyway. As I wrote in June, I think the newspaper-company ships are doomed to sink, and individual journalists will have to find their own individual lifeboats and routes to shore. The sooner they start, the better.

ELSEWHERE: Mark Potts thinks “Newspapers haven’t even scratched the surface on potential online advertising revenue” and an exclusively online operation could rake in more money. I don’t know; I’ve been there, done that, and it’s not so easy. Alan Mutter says the magic multiple is 3 – newspapers would have to triple their current online revenue to break even.

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Comments

  1. Rangachari Anand

    I think newspapers will have to move to the NPR model and become non-profit organizations supported by donations.

  2. turph

    I agree that newspapers have not scratched the surface of advertising yet either. We went through a brief period where content was king, but now good content with blended attributes is king.

    Google is printing money serving out loosely targeted ads based on very unstructured content. CTR is ridiculously low when ads are populated next to this unstructured content.

    What leverage/value could publishers gain by “adding value” to their content? Adding contextual relevance to content would only increase CTR, creating premium content, demanding higher CPC which the publisher should be charging for…

  3. Fantastic post. Scott, I’m curious what you think the effect is of the current trend of the medium itself having no value. In the past, if you wanted information, you had to pay for the medium no matter what was on it. We’re seeing the music and the film industry fight with this issue right now in what they call piracy.

    Now, there isn’t as much alternative content in music and film as there is for printed materials, but do you see a crossover symptom with the lowered costs of the medium itself?

  4. As someone who has just started a newspaper subsite, which pays contributors insultingly little, I have a lot of sympathy with this argument but I can’t believe it represents the only future. Newspapers which deliver news that people need to make decisions from — eg the Financial Times — will continue to be profitable, I think, and to be able to charge.

    In the meantime, what papers need to do is to put huge resources into comment moderation. Because, while comments are free, the toxic ones are fantastically expensive in terms of opportunities foregone, and fastidious or even literate readers driven away. ON a purely self-interested argument the papers are pissing away the kind of readers to whom advertisers might be attracted.

  5. We get a 10% CTR on ads that are geotargeted to appear alongside news that happens near our advertisers’ stores.

    It took us a day to write the code to make this work, and we sell the ads for well over the standard $10 cpm.

    Clearly there are unexplored strategies out there that could make online more lucrative.

    There’s also thousands of newspapers out there that still publish “websites” consisting of jpegs of their print pages.

    The issue isn’t lack of options, it’s lack of a clue.

  6. J. Todd Foster

    Not all newspapers will be dying such quick deaths. Community papers will be around for decades because most of our readers prefer ink on paper, not computer screens. And most of the advertising dollars out there are national ads, not local ones in small markets where much of the population is not wired.

  7. Scott Rosenberg

    But will “most of your readers” prefer ink “for decades”? Really? Even as the grandparents pass away and the kids weaned on the Web and iPhones grow up?

    I don’t know. Here in the Bay Area the community papers are already in trouble; this is an early-adopter kind of community, but it seems to me that the rest of the nation isn’t likely to be too far behind…

  8. sophie jensen

    Andrew Brown: what you said! Those toxic comments do drive away readers. Of course we know we can not read them but they have a hypnotic effect and once in a while there’s a gem like yours.
    Without moderation many sites will become Idiocracy attracting only the sub-literate– probably not what advertisers want.

  9. Walter Abbott

    Newspapers never were producers of a product. ‘News’ isn’t a product, it’s merely distributed information and newspapers are just one of the distribution systems.

    The worth to advertisers was the monopoly that newspapers had on distribution via a durable media. Newspaper could always tell advertisers that unlike electronic broadcast distribution, paper ads were semi-permanent.

    That’s gone now. The internet is a technologically superior method of information distribution and can more efficiently deliver advertising to potential customers.

    There’s nothing anyone can do. It’s progress.

  10. It’s true there are a lot of community papers out there that have some life left in them. They’re making money while most of top metro papers are not.

    The Monitor is stopping its print edition, but will keep some kind of weekly magazine. Politico, as pointed out, stays afloat via their print side. The Times, if they put a yardstick to it (which they surely do), probably loses money on most weekdays and rakes in cash on Sundays.

    This points to a transitional model that’s a digital/print hybrid which could take many forms in different places. To do this, however, newspapers first have to turn their heads around and decide, finally, that they are digital businesses, focused on publishing online content and creating online communities, 24/7. No US newspaper organization, including the Times, has truly done this—they continue to be organized around that evening deadline for the print product, and everything else is secondary. And their reporters and salespeople continue to carry business cards with the prominent name and logo of the printed paper, not that of their web site.

    Andreessen’s solution is radical, and he probably knows it’s not going to happen, not right now. But the Times and all other daily newspapers could, and should, consider the radical-enough solution of going digital by dropping everything except a profitable, ad- and feature-laden Sunday package (and probably switching that to Saturday publication). Cutting out six mostly break-even distribution days a week would be a lot smarter than cutting out 40 percent of their news staffs.

  11. Scott Rosenberg

    I’m with you on most of that. I just doubt newspapers will make these hard choices until it’s much too late. Too much pride, too much head-in-the-sand thinking, too much unwillingness to give up on an outmoded but still partially lucrative business model, too much confusion between the “product” (paper goods) and the service-that’s-valued (providing news and information).

    In other words — yes, they’d have to “turn their heads around” and no, I don’t think they will.

  12. tjm

    Russ Stanton, the latest LAT editor, said in a radio interview early this year that the LAT web revenue was at or near the break even point of editorial costs, meaning that assuming continued modest growth since, it could support the newsroom right now. The problem many newspapers have been having is not that the web isn’t profitable, it’s that it isn’t profitable enough to sustain their owners at the levels to which they had become accustomed. Or, as in the case of the LAT and Tribune, not profitable enough to support Sam Zell’s debt. The great irony is that the traditional newsprint product, over the decline of which so much angst is being spent, is still a cash-flow powerhouse. People won’t get rid of it because it’s too profitable.

    If I owned a newspaper, I’d get rid of the trucks and the trees tomorrow, give every subscriber a custom Kindle or netbook-type device, in-home training in how to use it and make myself into a media, database and internet-training company. I would consider partnerships to build out civic WiFi infrastructure and paper (sic) the circulation area with video readerboards of the newspaper’s content.

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