Newspapers Are Broken

Across the country, newspapers are going out of business, folding, being absorbed into other media, or just bitching about how much money they're losing. How did this happen? Well, it happened by way of the first mechanism of brokenness I'll be discussing this week.

Monetization is decoupled from service. In other words, what you do is separate from what you get paid to do.

Let's take a look at the business model for most newspapers. They have three revenue streams: selling subscriptions to readers, selling professional ads from businesses, selling classified ads. Subscriptions alone don't cover the costs, even for a major newspaper like, say, the New York Times, so they rely heavily on classified ads to bring in money. The problem is that someone paying for a classified ad is paying for the classified service, not for a newspaper. In short, the problem is that what they get specialize in is not what they get paid to do.

They specialize in reporting the news. They get paid to run classifieds. This means that they have doubled they're vulnerabilities. If something comes along that does a better job of reporting news, they're sunk. If something comes along that gives people a better price to run classified ads, they're sunk. They're in trouble now because both have happened.

Blogs and Twitter and cable networks may not deliver higher quality or more reliable news than newspapers, but they tend to deliver it more quickly, and in the world of up-to-the-minute information, "faster" means "better", regardless of quality. So fewer and fewer people are reading newspapers. Then you have a service like Craigslist that runs classified ads for free. No wonder newsprint is in jeopardy.

Many ad-based business models run up against this problem, and it manifests itself in different ways. Movie theaters are selling a "theatrical experience" and make the lion's share of their profits from the concessions stand, but as they put more and more ads and trailers in front of movies, they cheapen that experience, and people will stay home. Television has taken a hit too now that people are used to watching their favorite shows on DVD, without commercials. And don't even get me started on radio.

But getting back on topic, what are they newspapers to do? Well, they can't scoop Twitter. It just can't be done. They might alter their angle from news reporting to news analysis (Slate is essentially a Zine that does just that), and there will probably have to be some consolidation such that a single large paper works on national news and has local bureaus that focus on integrating local events into that. But we'll see.

The big thing, obviously, is to get away from a model in which they are paid to do one thing but they actually do something else. Or at least move their monetization model towards something that no one else is doing for free.

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