The business of news

I’m often asked: How’s the newspaper doing?

My stock answer for the last dozen years has been that it’s a challenging time, but an exciting time.

Challenging because, in this digital age, the print business model has been disrupted.

Exciting because those currently working in print journalism must, for the first time ever, reinvent the product. Think about that. We’ve been putting ink on paper for 250 years and it’s worked … really well. The print industry weathered the advent of radio and then television, both of which were deemed to be the death of newspapers. It didn’t happen.

But things are different in the digital realm. Over the last 15 years, more than 1,400 cities and towns across the U.S. have lost their community newspapers, abandoned by readers and advertisers who have moved online. They’re called news deserts — locales where the local daily or weekly newspaper no longer exists.

The print industry has followed this trend by “going digital.” And by all accounts, a newspaper’s audience is today larger than ever.

So why is the digital environment so difficult to navigate financially?

It’s complex with many nuances. Let’s boil it down.

Newspapers operate on two streams of revenue: Circulation (the money you pay to buy our product either via subscription or at a newsstand) and Advertising (the money advertisers pay to put a commercial message in front of the newspaper reader).

The rule of thumb has been that Advertising brought in about two-thirds of a newspaper’s revenue while Circulation brought in a third.

To spur sales and increase readership, publishers kept subscription prices artificially low. The resulting increase in readership could then be reflected in higher prices for advertising.

The strategy worked beautifully for generations.

But the digital revolution has disrupted that business model.

It’s likely your parents and their parents and their parents understood the value of news and were willing to pay for it. For many in the digital age, “news is free.” Rather than building a relationship with a trusted news source — such as a community paper — readers troll the myriad websites and social media posts for information, suspect as it might be.

That leaves news outlets with the daunting task of relying solely on advertising to offset the costs of generating news.

Can advertising alone pay the bills? Many are trying. Few are succeeding.

There are an estimated 547,000 websites created globally each day, many ready to capture advertising at the lowest price. Supply and demand forces the price down, making it difficult to sustain a news operation on advertising revenue alone.

To complicate matters, of the $100 billion-plus being spent on digital advertising in the U.S., the duopoly of Google and Facebook takes a 60% bite.

I once had a friend tell me he loved Google News, read it every morning and didn’t understand how we (newspapers) could compete with Google’s robust report. I responded by asking him if he knew how many journalists Google employed to compile that report. The answer was zero. Google created none of the content, but simply aggregated the works of major media outlets around the world.

Facebook does the same thing when anyone shares a news post. They didn’t pay a reporter to dig up the facts, or a photographer to shoot the video. Yet they sell advertising around that shanghaied content.

The impact is evident in all media. Pew Research Center reports that a mere 6% of a local TV station’s ad revenue is attributable to its digital products, the remaining 94% coming from its legacy over-the-air broadcast programming.

Digital-native news outlets also struggle, with Buzzfeed, Quartz, Vice — once the digital darlings of news — recently undergoing layoffs, furloughs and buyouts.

So how does journalism — in any medium — survive in an environment where news has been devalued and much of the advertising pie is being gobbled up by two internet giants? The future lies with our readers. Remember that 66% to 33% Advertising/Circulation split? That’s going to have to flip. If journalism and the value it brings are to survive, the consumer must once again recognize the value of credible reporting and be willing to pay for it.

We still feel a newspaper delivered to your home five days a week, plus full digital access, remains one of the world’s great bargains: As low as 30 cents a day. Compare that to a small Starbucks coffee at $1.92. And, by the way, the price of that coffee doesn’t include delivery to your home.

If you feel it’s important to know how your child’s school is being run, if you want to know that a Walmart is planned the next block over from your home, if you cheer for your local high school football team, if you want to know about the newest restaurants in town, if you believe that what goes on in council chambers should be shared with the citizenry, if you care about tax rates on your property and how public officials are spending your money, if you fear crime, if you care about the health and safety of your neighbors, in short, if you hold dear those who are born and live and die in your community, you’ll want your local newspaper to continue its work.

We encourage you to help us do so by subscribing.

To subscribe, visit myganews.com. Offers include combinations of digitaland-print or digital-only.