Virus could devastate news media industry
Ad revenue plummets as businesses shutter
For the Portland Mercury, the early warning of impending disaster came from its sister paper in the Pacific Northwest.
The Stranger, which was distributed for free every other week in Seattle, was at ground zero of the first fullblown U.S. coronavirus outbreak. Almost overnight, the community paper’s advertising business collapsed as the pandemic emptied movie theaters, music clubs, concert halls and arts venues.
“That’s when we knew we were in trouble and that we had to make moves fast. We knew it was coming to Portland,” Portland Mercury editor in chief Wm. Steven Humphrey told USA TODAY. “We took drastic measures right away to stay in business and hopefully ride it out.”
Jessica Guynn and Michael Braga
“Clearly this is going to be an extinction event for some news publishers.” Ken Doctor Industry analyst with Newsonomics
Nearly every advertiser that might place an ad and every spot readers might pick up a copy – bars, restaurants or theaters – had gone dark. The small but feisty paper, which for two decades had been distributed as reliably as the Oregon rain, stopped publishing its print edition. The final gut punch for Humphrey was letting go 10 of 18 staffers as the ban on public gatherings choked advertising sales.
During the nation’s life-or-death struggle with the coronavirus, the outlook for news organizations – whether legacy newspapers with robust online operations or digital-only outlets – is precarious.
Last week, in a bid to avoid layoffs, BuzzFeed said it would cut employees’ pay by as much as 25% and CEO Jonah Peretti would forgo pay during the coronavirus crisis.
“We don’t know how long this will last but we want to move quickly to make sure our business remains sustainable,” he wrote in a memo to staff.
Staffers appeared supportive under the circumstances. “Personally, I’d rather lose money than lose colleagues,” Jane Lytvynenko, senior reporter at BuzzFeed News, tweeted.
On Monday, Gannett, which owns USA TODAY and more than 250 local papers, told employees it would institute a series of immediate cost reductions, including a furlough program in its news division in April, May and June, as a result the economic pressures brought on by the pandemic. Other departments are taking separate cost-saving measures.
CEO Paul Bascobert told employ
ees: “I will not be taking any pay until these furloughs and pay reductions have been reversed.”
McClatchy, one of the largest U.S. news publishers, is in bankruptcy. Chains like Gannett, Lee Enterprises and Tribune also are deeply in debt.
The pain is being felt across the industry. The Tampa Bay Times, Florida’s biggest newspaper, will deliver only twice a week, on Wednesdays and Sundays, starting next week – a move that should help it to offset a 50% drop in advertising, according to publisher Paul Tash.
“In the last two weeks, retailers have canceled more than $1 million in advertising they had already scheduled,” Tash said in a statement. “Until ad revenues recover, we must sharply reduce the costs of producing and delivering an edition in print.”
Tash said in an interview Monday that he belongs to a generation that loves to feel the printed page with his first cup of coffee. But with thousands now turning to the web for updates on the coronavirus, the crisis offers an opportunity to help readers get comfortable with online version of the newspaper as well.
“This isn’t the new and permanent normal,” Tash said. “But we hope people will find it an acceptable substitute.”
When the coronavirus outbreak struck, the news industry was still suffering the lingering effects from the Great Recession, the unrelenting march of readers from print to online and the precipitous decline of print advertising dollars flowing to newspapers.
Now, newsrooms and news markets across the country are bracing for a sudden and potentially devastating broadside that could shutter or significantly hobble publications just as communities stricken by the coronavirus need them most.
For newspapers in major metro markets to small-town news outlets, the extent of the pandemic’s economic toll is not yet known, but it is already drawing comparisons to the 2008 financial crisis – only this time it could be worse, with even more dire consequences for the industry, analysts say.
The response from news organizations covering one of the world’s biggest news events while watching the lifeblood of their businesses drain with each store closure and each shelter-inplace order has been has been swift and painful.
Print editions have been canceled. Journalists have been laid off. And some papers have thrown in the towel, the preexisting challenges to their businesses turning the coronavirus into a crisis they simply don’t think they can survive.
Emergency measures are desperately needed to stop the bleeding, such as tapping federal bailout money and ramping up appeals to potential subscribers, as Americans are glued to the news during the pandemic, according to Ken Doctor, a news industry analyst with Newsonomics.
Craig Aaron, president and co-CEO of Free Press, a group advocating for media transformation, last week proposed doubling federal funds for public media and establishing a “First Amendment Fund” in an article in the Columbia Journalism Review titled “Journalism Needs a Stimulus. Here’s What it Should Look Like.”
Steven Waldman, co-founder of Report for America, and Charles Sennott, CEO of the GroundTruth Project, wrote a piece, “The Coronavirus Is Killing Local News,” in which they called for news organizations to be considered in future stimulus packages, such as placing public health ads in local media outlets.
Analysts anticipate that newspapers may shrink the size of daily editions, reduce the number of print editions or stop printing altogether. Other ideas being floated include asking foundations to subsidize coverage of the coronavirus crisis or offering employees extended unpaid time off.
Some help is coming from a major internet player. Facebook announced Monday it would give $25 million in grants to local news outlets and spend $75 million on a marketing initiative for the news industry.
Newspaper and digital outlet advertising dollars for years have migrated to major internet players such as Facebook and Google.
American newspapers have lost more than 70% of their advertising dollars since 2006, according to Doctor. The hit has come largely in print. Although online advertising and digital subscriptions have grown across much of the industry, those gains have not offset the print advertising losses.
In March, advertising revenues will be off 10% to 25%, Doctor says. And he’s forecasting a 30% to 50% drop in the second quarter. And things will only get worse if stores and other businesses remain closed, layoffs continue to mount and purse strings cinch tighter.
“Clearly this is going to be an extinction event for some news publishers,” Doctor said.
The fallout from the crisis will hit publishers unevenly, but the most vulnerable will be those that have not weaned themselves off a near total dependence on advertising, Doctor says.
“It is an acceleration of trends that we have already seen,” he says. “Those companies that are most reliant on advertising as a way to operate their businesses have been in free fall for 12 years now.”
Few local and regional newspapers have attracted enough digital subscriptions to make up for the print subscriptions they’ve shed. Even when online readership shoots up during major news events, digital advertising has not filled the coffers the way print ads did.
With coronavirus dominating every home page and headline, some advertisers are recoiling. They don’t want their brands appearing alongside sickness and death, even if that’s what people are obsessively reading. And with many businesses shutting down as Americans hunker down in their homes, demand for advertising has fallen as have advertising rates.
Advertising budgets are shrinking “both because advertisers are trying to stay away from the content and because of what’s likely to be relative weakness in the overall advertising industry,” said Brian Wieser, president of business intelligence for GroupM, the media buying arm of advertising giant WPP Plc.
Demand for news, on the other hand, is surging. Web traffic was up about 23% at top news sites the week of March 9 from the previous week and up 31% from the week of January 6, according to Comscore, an advertising and audience measurement firm. Digital subscriptions are soaring and fewer subscribers are canceling as reader loyalty increases during the crisis, industry analysts say.
At the Portland Mercury, online traffic rose nearly 45% in March. Readers devoured breaking news, in-depth coverage of bleak conditions for the homeless and helpful tips such as how to make face masks for health care workers on the front lines.
Donations rolled in, too, along with notes of appreciation. Portland Mercury publisher Rob Thompson says nearly 1,900 readers so far have chipped in anywhere from $5 to several hundred dollars apiece.
The Portland Mercury also has had some success selling web banners, social posts and dedicated emails for restaurants offering take-out and delivery as well as cannabis dispensaries offering delivery and curbside pick-up. And the community paper is taking some live events online, charging admission to a streaming cannabis film festival.
None of these small wins can make up for the massive plunge in revenue. The coronavirus has wiped out nearly all – some 90% – of revenue from advertising, ticketing fees and events, Thompson says.
Major national newspapers with bigger audiences and more diverse revenue streams may be better positioned to ride out the turbulence, but they are not immune, analysts say. The New York
Times said on March 2 it expected total advertising revenues to decline by a rate in the mid-teens in the current quarter, with digital ad revenues expected to decline 10%.
Nancy Lane, CEO of the Local Media Association, which represents a broad range of newspapers, digital publishers and broadcasters, says “it’s devastating given the state of industry to have this hit right now.”
Some newspapers had zero ads last week, she said. The publisher of an African-American newspaper told her it collected $330 dollars in revenue this week. She’s banking on philanthropic funding to help news organizations hang on. Newspapers also will have a shot at a cash infusion from the $2 trillion federal stimulus package signed into law last week but any aid they can secure may come too late for some.
“If we can keep doors open through summer, I think we can come out of this,” Lane says. “Some will make it; ones that were teetering to begin with are not going to get through this.”
Joshua Benton, director of the Nieman Journalism Lab, predicts unemployment in the U.S. could reach as high as 30% before the crisis subsides and newspapers could be looking at three to six months of hardship.
“This will be the event where they ask: Is this sustainable?” Benton said.
Voice Media Group, which owns six alternative weeklies in major metro areas from Denver to Miami, also implemented a 25% across the board pay cut.
The Riverfront Times in St. Louis says it laid off nearly its entire staff “with the hope that if we act now, we can rebuild and bring them back later,” the weekly paper reported on March 18. “One day, you’re a profitable newspaper, doing better every year; the next, almost all of your ad revenue is wiped out with no clear sign of when it will return.”
In New Orleans, with coronavirus fears just beginning to take hold during Mardi Gras celebrations in late February, Judi Terzotis was quick to start planning for what southern Louisiana has become quite used to: disaster.
Terzotis, publisher at the Times Picayune/New Orleans Advocate, cut back on newsprint, furloughed 40 of 400 employees across the chain’s three daily and 16 weekly newspapers, and asked remaining employees to take a temporary 20% pay cut.
She believes these steps will get her company through the crisis, and she is cautiously optimistic that business will rebound by May or June.
Doctor isn’t as confident.
“If we return to normal life in a couple of months and sustain six weeks of damage that’s one thing,” he said. “But if it lasts three to six months, then all bets are off.”