Transforming American Newspapers (Part 2)

(Continued from Part 1)

Violating the Principle of Supply & Demand

If the major reason for the American daily newspaper industry’s demise were its stories contained too many dangling participles, then the industry could more easily comprehend its situation than instead hearing that the reason was it had violated the Principle of Supply & Demand.

The understanding of economics, particularly media economics, has never been its strong suit, except if the topic is how many tons of newsprint to buy, how many points a major stock market dropped, or how cut expenses to match revenues. Most newspaper publishers, editors, or journalists tends to equate economics as solely the science of government financial policy, household spending, Wall Street speculation, and petroleum pricing. They don’t understand or have forgotten that a major branch of it is the behavioral science of Microeconomics – the study of how individuals make decisions to allocate their time and activities.

The main paradigm of microeconomics is known as rational choice theory or rational action theory, which states that individuals choose the best action according to their preferences and what constraints of supply, demand, time, and access face them. In it now lays the demise of American daily newspapers as we know them.

How did the American daily newspaper industry violate the Principle of Supply & Demand by failing to adapt the industry’s core product to a radical change in consumers’ supply of news and information during the past 35 years? To understand how, both start and end at the roots of the newspaper industry.

Start in the European city of Strasbourg during 1605 when the world’s first newspaper began publication. It used a technology developed there 164 years earlier by the metalworker Johannes Gutenberg, who had invented a device for producing innumerable copies of the same text. (Please keep that concept in mind, because it’s now moldering the newspaper industry). The Supply & Demand equation for accessing daily changing information was then quite the opposite it is today: Consumers had little or no supply of daily news until the daily newspaper. So to produce newspapers, this adaption of Gutenberg’s book printing technology spread quickly worldwide.

Some modern critics of newspapers say the industry is leaden and ‘doesn’t think outside the box.’ They probably don’t realize the historical irony that underlay their criticisms. The core of Gutenberg’s technology was a box containing lead type whose impressions could print innumerable copies of the same thing. In that core is the inherent limitation that it produces the same edition for everyone. Although in the 19th Century steam and later electrical power speeded Gutenberg’s technology and the introduction of offset lithography during the middle of the 20th Century eliminated its use of lead, the analog technology used to produce today’s daily newspapers is still Gutenberg’s. Indeed, today’s analog printing technology still has the same limitation that it had in Gutenberg’s days – it produces the same edition for everyone.

That technological limitation delineated the newspaper industry’s editorial and advertising practices during the past four centuries. Because each edition had a finite number of pages and was printed by analog technology had to produce the same for everyone at once, newspaper editors had to select stories according to two criteria:

1. Stories about which the editor thinks everyone should be informed.
2. Stories that might have the greatest common interest.

Some editors may say there is no difference between those criteria. However, the criteria are discernible. The first one is the primary aim of American journalism, and includes the bulletins and investigative stories about which the editors think everyone should be informed. Those stories are a major reason why consumers read newspapers.

However, for reasons I’ll explain below, many, if not most, of the stories that the editors select under this criterion vary greatly in actual relevance for individual readers. (For example, the top headline on the front page of a 120,000 circulation daily published Monday was ‘Builder Gets OK for Road Change’ about an access road bordering one of dozens of shopping plazas in a New York State suburban county with 160 miles of public roads and nearly one million residents.)

Nevertheless, the majority of stories in most daily newspapers are chosen according to the second criterion. These are stories that aren’t bulletins, investigative, or enterprise, but which the editors think might have the greatest common interest among readers. (Some may even be page-fillers around advertisements, such as this example from the same daily: ‘LUKASA (AP): Record cotton harvests have buoyed the Zambian economy.’). These second criterion stories vary even more in relevancy for each individual reader than do the first criterion stories.

Newspaper editors’ use of those two criteria to select stories for publication has become so ingrained after 400 years of analog technology that few editors or newspaper executives are able to fathom any other possible or apt practices for story selection.

Moreover, they came to believe that producing a common edition for everyone is their raison d’être, forgetting it arose as a limitation of their technology. Fitting psychologist Abraham Maslow’s statement that “If the only tool you have is a hammer, you tend to see every problem as a nail,” the editorial production limitation of Gutenberg’s technology has led most newspaper editors to believe that they set the ‘common agenda’ for their community and likewise that their community’s readership is somehow homogenous because it reads the same newspaper edition on any given day.

From 1605 through at least the first quarter of the 20th Century, production of the same edition daily for all readers was unquestioningly accepted consumer because they had no other supply of daily changing information. It was the proverbial Hobson’s Choice. But the situation began to change early in the 20th Century and has radically changed during the past 35 years.

A Sudden Evolution in Media Technology

Many media academics say that the inventions of radio and television during the first half of the 20th Century greatly increased people’s access to news and information. That would be true only if you consider the addition of the handful of broadcast stations available within range of any person to be a great increase. The real increase in American’s access to news and information began approximately 35 years ago.

• The 1970s brought cable television (followed in later decades by satellite television). People who had access to only three or four television channels gained access to dozens, and then hundreds. Much like daily newspapers are in print, the original three (ABC, CBS, and NBC) were general-interest TV channels whose programming tried to satisfy all interests. However, the dozens and hundreds of new channels focus on specific topics (history or cartoons or comedy or shopping, etc.). If you’re a fan of tennis and used to read a daily newspaper in hope that it would publish a tennis story that day, you can instead watch several channels each devoted 24 hours per day to sports, including one channel entirely devoted to tennis. Or if you love to cook, why be satisfied with reading a newspaper’s recipe story when you now watch a four or five channels each devoted 24 hours per day to cooking?
• The 1980s brought developments in offset lithography that made publication of ‘niche’ magazines economical. American newsstands that used to sell 20 to 30 titles nowadays sell hundreds of titles, almost all of which are about specific topics. Though these ‘niche’ magazines don’t publish daily, their topical contents are often more satisfying to someone interested in that specific topic than was reading a daily newspaper in hope of seeing a sporadic story about the topic.
• The 1990s brought the Internet access for the public. Ultimately more than 1.4 billion people worldwide, including two-thirds of the 304 million Americans, have gained online access to the Web sites of every of the worlds’ newspaper, magazines, trade journals, TV channels, radio stations, broadcast networks, and more than 100 million other active Web sites about virtually every possible specific topic.
• Our decade has brought to those consumers online access with broadband speeds and mobility, plus access to novel forms of content such as Social Media and the tens of millions of short videos available on YouTube.com. Billions of people worldwide will soon have ambient access to a virtual cornucopia of content that can almost instantly satisfy any of their common or specific interests.

It is almost impossible to overstate how utterly the supply of news and information available to most Americans has changed during the past 35 years. Within a single generation, the Supply & Demand equation has gone from relative scarcity to certain surplus. People now have so much access to information that some are complaining about ‘data smog‘.

I’ve heard many experts say that the evolution in access to media during the past three decades has been the greatest since Gutenberg time. Yet the reality is that it’s much, much greater. The effects this radical increase in the supply of news and information that is readily available to people will have on civilization, nonetheless any one industry, will be much, much larger than anything the invention of the printing press ever wrought.

The immediate effect has been that more than 1.4 billion people – one of every six people worldwide – gravitated online to use this cornucopia of news and information. There are now spending more time using it than they spend reading printed newspapers and magazines. (Although consumers who have online access still spend more time watching television than going online, online video use is growing at geometric rates. For example, Americans watched 12 billion online videos just during May, up 45 percent from the previous May.)

It would be ludicrous to state that the rise of cable and satellite television, topical magazines, and the Internet has not spectacularly altered how individuals choose, according to each’s preferences, which information they consume and how (i.e., rational choice/action in microeconomics).

Likewise, it is equally ludicrous to think that the newspaper industry as it has operated for more than 400 years would not be extremely affected and stressed by those changes in not just how people can now access information but what types of information each person choose to access according to his preferences. This is why newspapers that have reacted merely by putting their printed content online are missing the point of the change.

After I posted the first part of this essay, an impatient reader asked, “Is it the Internet or not [that has caused the demise of the American daily newspaper industry]?” The real answer is more nuanced than either yes or no: The answer is, no, the fact that those daily newspapers’ contents are now available for free on the Internet is not why American daily newspapers are dying. The answer is, yes, the fact that the Internet (aided by topical magazines and topical channels from cable and satellite television) provides any person an extraordinarily better and more articulate way to satisfy his individual interests than any generically-aimed product such as the general-interest newspaper can do is why American daily newspapers are dying.

Changing the ownership of American daily newspapers from primarily publicly-held companies to not-for-profit organizations won’t save this industry so long as it continues to keep producing a general-interest product. Nor will purchases of publicly-held daily newspaper companies by tycoons (Tierney, Zell, Burkle, Geffen, et. al.) who are infatuated with this business save the industry so long as it continues to keep producing a general-interest product. Nor will adding multimedia or interactivity so long as the industry keep’s producing a general-interest product. The industry’s problem isn’t its ownership, the Internet, or lacks of multimedia or interactivity. The problem is its general-interest product has become obsolete.

Why More than 1.4 Billion People Gravitated Online

Why did more than 1.4 billion people gravitate online during the past 16 years? That simply question is rarely considered by newspaper executives, even by some of in charge with running newspaper Web sites.

Most newspaper executives assume that people want to consume the same types of news and information that people had consumed in print except that people now want to consume that content online. This dangerous assumption is the basis of most newspapers’ attempts to transplant their printed edition’s content and editorial practices into their Web sites – the so-called shovelware strategy.

History, consumer behavior, and data about usage contradict that faulty assumption:

• The consumers, not media companies, led adoption of Internet. During the 1990s, media companies followed millions of consumers onto the Internet. No media companies invented the Internet as a medium. Most media companies were surprised that millions of consumers were using it. Almost all media companies were reluctant to put their content onto the Internet (a situation that’s still true in the magazine and broadcast industries). Most media company executives don’t ask themselves why hundreds of millions of consumers who already had access to Mass Media in traditional offline formats gravitated to online? Those consumers have gone online primarily to access content that they cannot get from traditional Mass Media packages.
• Many newspaper executives who cling to the assumption that people want to consume the same types of news and information online was in print think that a major reason why people are abandoning print and going online is because online is a form of traditional print on electronic steroids. Contents can be updated more quickly online than in print and the Web can provide multimedia combinations of texts and video that neither paper nor television alone can. These executives assume that hundreds of millions of people are simply shifting their traditional reading habits from paper to online because online can be more up-to-date and offer multimedia. However, the consumers disagree with that assumption. The vast majority tell surveys that newspapers and magazines are still much more convenient and easier to read in printed format than online (and that video is more convenient and easier to watch on television sets than on computer monitor screens). Few, if any, consumers who would have read all of a newspaper’s printed pages ever read all of the newspaper Web site’s pages. That’s not because the site’s navigation doesn’t allow them to do so, but because they choose not to do so.
• The data about usage clearly indicates that people don’t go online primarily to consume Mass Media. Last month was typical: only three Mass Media organizations’ sites ranked among the world’s top 100 most visited Web sites [http://www.alexa.com/site/ds/top_sites?ts_mode=global]: the BBC (#46), CNN (#50), and The New York Times (#97). Moreover, the average user of the average American newspaper’s Web sites visits it only 2 to 6 times per month, seeing only 2 to 4 story pages per visit, compared with the average newspaper’s newsprint edition reader reading all pages and doing so 17 to 20 times per month (i.e., 4 to 5 days per week). Consumers don’t use online they way they used print.

The clear reason why people go online is to find whatever mix of content satisfies their own individual mix of interests but that they aren’t getting from Mass Media. This is why four of the world’s top five most visited Web sites are Google, Yahoo!, and other search engines (YouTube.com is the fifth site) and why those same search engines in languages other than English constitute 24 of the world’s 100 most visited sites. The majority of Web users visit newspaper sites only a few times per month but visit a search engine multiple times per day.

Newspapers or other Mass Media companies that each produce a common product for all users direly need to understand that people are not going online to receive a common package (even one with multimedia added to it). They are going online to search and find the contents that the common package does not regularly give them. This is why most of the 1.4 billion people online primarily use search engines and to find content other than Mass Media content, rather than going online to use Mass Media online.

Everybody doesn’t have the same interests

The average supermarket in America contains 45,000 different types of items (meat, produce, canned or bottled goods, etc.). However, imagine that you instead walked into a 400-year old market where the clerks hand you and every other customer an identical bag containing exactly the same mix of some 50 items and they tell you it contains what the supermarket’s manager thought you and everyone else should or would like to eat. Despite its venerable history, would you shop at this market again?

If you had access to another source, even multiple sources, that could readily supply you with your own choice of the unique mix of items that match your individual needs, interests, and tastes, would you continue to use a 400 year-old source that continued to give everyone a generic mix of things? No, and that answer is the same when the items are the news as it is with supermarket items. With today’s cornucopia of access to news and information, few Americans are patronizing newspapers anymore, particularly the young adults and young people who have grown up feasting on that cornucopia.

More than 1.4 billion people have gravitated online because they are using access to it – plus older portions of the cornucopia such as ‘niche’ magazines topical television channels, and even now cherry-picking parts of newspapers’ Web sites – to satisfy their own uniquely individual mixes of common, group, and specific interests better than can any newspaper editors’ guesses of what interest them can.

Why shouldn’t they now that they can? People will naturally gravitate towards whatever medium, or mix of media, can best match their own individual mixes of interests. They didn’t have many choices to do it 30 years ago, but they surely do now. Though those billions of consumer may have to hunt and gather from many sites to get the contents that match their individual mixes of interests, this is what billions of them are now doing. They are abandoning traditional media that deliver the same content to all of them – and no medium does that more than does newspapers.

It is foolish nowadays to base an industry on the assumption that a common package of content will satisfy people who now have a cornucopia of more specific supplies from which they can more articulately and precisely satisfy their interests. Any assumption that producing a common package of content will satisfy all people is a form of the Emperor’s New Clothes:

• All people share few common interests. What topic could possible interest everyone? There are very few such topics. The weather? Perhaps a national, regional, or local disaster? People share remarkably few common interests. (How few will vary by country and language: The 5.5 million citizens of Lithuania likely share a higher number of common interests than do the 5.5 million citizens of the multiracial and multi-ethnic American state of Missouri.)
• Some people share group interests – people who live in a municipal district, parents who live in a school district, fans of a sports team, people who play golf, etc.
• Each person possesses myriad specific interests, such as a hobby, favorite author, favorite actor, favorite places, an activity, a type of food, musical band or recordings, etc.
• And each and every one of us is a unique mix of common, group, and specific interests. That mix is what makes us individuals. Gather ten people and you’ll probably find hundreds of specific interests, only some of which some of those people share and very few of which they all share.
• Moreover, the true relevance of any topic can only be judged by the individual and according to his own unique mix of interests, not by an editor who thinks he’s choosing what’s relevant to that individual’s or everyone’s interest.

It is unnatural to expect that the same package of content will satisfy all or even most of them on any day (even if those individuals are from the same country, region, or town).

Traditional data about newspaper usage supports this. Thirty years ago, surveys showed that the average reader of an American newspaper containing 30 to 100 stories would read only five to eight stories. The plurality of those five to eight stories, perhaps three or four, will be the bulletin stories or other stories about the few common interests. One or two might be stories that match that reader’s group interests (such as a sports team or school lunch menu). The reader might also be lucky enough to find a story that matches one or two of his specific interests. Those numbers haven’t significantly changed despite efforts by a generation of newspaper editors; the only difference today is that there are fewer and fewer average readers.

That is another indication that the limitation of Gutenberg’s technology – producing the same edition at once for everyone – is a fundamental problem that cannot be incrementally solved by subscription price incentives, more stylish typography, or shorter stories. Neither can it be solved by shoveling it online

A Massive News Distribution Problem

What makes the limitation of Gutenberg’s technology and the editorial practices it engendered all the more disastrous this century is that specific stories which match any individual’s interests might exist but may simply not be delivered.

For example, I am a soccer fan who subscribes to The New York Times, but that newspaper hardly ever publishes stories about soccer unless a story has political implications or occurs during the immediate days leading to the World Cup championship or immediate weeks leading to an Olympics. Nevertheless, I know The New York Times newsroom has plenty of soccer stories. Years ago, I was the executive who sold it the Reuters soccer wire at the request of that newsroom, which probably also receives the Associated Press’s and Agence France-Press’ equivalent soccer wires. That newspaper receives dozens of major soccer stories every day; it even has stories about the Turkish Third Division, Swiss inter-cantonal matches, and the Korean intercity leagues. The problem is that The New York Times prints only one edition at once for everyone, which means its sports editors choose stories according to the greatest common interest in New York, which this time of year means baseball, tennis, and golf stories.

Soccer is the world’s most popular sport and there probably are hundreds of thousands of soccer fans living in the 17 million population New York City metropolitan area. Indeed, there are probably more soccer fans living in New York City than the total populations of some European countries’ capitals. But those New Yorkers won’t see soccer stories in The New York Times because of the limitations of that newspaper’s editorial and production practice. The same is true with almost every other American newspaper.

At root, this is a massive distribution problem. Stories about which specific people may be interested exist, but aren’t being distributed to them by newspapers due to the limitations of a technology that was invented when horses were the only form of transportation on our streets — Gutenberg’s analog press technology. That limitation is proving to be the Achille’s Heel of the daily newspaper industry. It might not have been a problem when the newspaper industry was the world’s only supplier of daily changing news in text formats, but it’s a massive problem today.

The American newspaper industry has failed to adapt its technologies, products, and practices in an era during which consumers have an overabundance of both of other suppliers and supply of daily changing content. The industry has failed to change when consumers’ supply did. It violated basics of the Principle of Supply & Demand. The industry itself is now failing because of that error and inertia.

Corollary Effects
Compounding that major failing are several corollary effects of the Principle of Supply & Demand:

• One of the most obvious corollary effects when the Supply & Demand equation switches from scarcity to surplus is the value that people give and the price that they are willing to pay for declines. Today’s cornucopia of supply has forced the value of the most common forms of news and information to plummet to values and prices so low that it’s no longer even economical for newspapers to charge consumers for it anymore. Some publishers claim that consumers have simply become habituated to not paying for content. Those publishers are ignorant about economics. The consumer might have paid half a dollar for a printed newspaper years ago when it was his only source of daily changing information in text format, but simply won’t give it that value and pay anywhere near that much now that he has online access to every newspaper and other news source in the world.
• Another obvious corollary is that control shifts. During a scarcity, the seller of information controls the transaction, but the buyer controls during a surplus. Control is no longer solely in the hands of publishers; it is now shared by the consumers and the publishers. There are still some publishers who claim that content is ‘king’, but we now live in digital republics.
• The overabundance of suppliers of news and information, nonetheless the supply, leads to another corollary, one that might seem to be counter-intuitive: the ‘good enough’ beats perfect. The overabundance of suppliers leads to competition that actually lowers the threshold of acceptable quality. When there were few suppliers, they used higher quality content (i.e., ‘high production values’) as a competitive weapon against each other. But now that there is an overabundance of suppliers, their competition levers towards being the first to produce content that is at least of acceptable quality. Millions of videos are viewed billions of times each month on sites such as YouTube.com (+3 billion per month) not because of high production values, but because the videos are at least ‘good enough’ to watch. The production of higher quality delays distribution and widespread usage. This corollary runs against the grain of traditional Mass Media organizations, which tend to delay release of their content until it is perfect, but the effect of this corollary is an observable phenomenon.
• • A related corollary is that, much like high production quality, completeness is no longer necessary. The competition among an overabundance of supplier means that withholding a story until it is editorial complete can become counterproductive; the first to release even the partial story wins play and the traffic. A partially complete story that informs the public now is more valuable than a complete story later. Similarly, stories that may never be complete and hadn’t had value in earlier times now may have value. For example, a half dozen police cars and a police helicopter surrounded the post office across my street for a quarter hour and then departed. There wasn’t any story about this subsequently in my local newspaper, not even when the paper published the daily police log. When I asked the editor why, he told me, “It didn’t develop into anything, so it wasn’t news.” I disagree. It certainly was news to anyone within earshot of all those police cars and the police helicopter circling the building. In my city, that’s probably one or two thousand people who wondered what it was about. Years ago, they and I would have probably shrugged our shoulders, resigned to never knowing what that turmoil was about because if the newspaper wouldn’t publish the answer then no one would. Instead, we visited local bloggers’ sites for the answer (i.e., a false report of a hostage taking) because the bloggers, unlike most newspaper editors, know that people nowadays expect to have access to even information that is incomplete.
• Another counter-intuitive corollary is that the overabundance of suppliers means that establish brands are less of a defense. Unlike traditional forms of media, the Web’s lower costs of entry and its worldwide reach means that any small company – even a start-up – can trump an established brand. I’ve heard many traditional media company executives say that their traditional brands will ensure their company’s place online among Google, Yahoo!, eBay, and YouTube. They forgetting the irony that all those brands are startups that are trouncing traditional media brands. A more specific example for newspapers may be The Guardian apparently has eclipsed The New York Times, Washington Post, and The Boston Globe as what most American liberals online read each day. Although that British daily circulates a negligible number of printed copies in America and was unknown to most Americans ten years ago, 59 percent of The Guardian Web site’s 20 million users are outside the UK and the overwhelming majority of those are from the U.S. The number of that newspaper’s online readers who are Americans likely equals, and now probably exceeds, the number of The New York Times Web site’s readers who are.
• Another corollary is that consumer’s cornucopia of access to news and information means that brands functionally stop being ‘silos’, and despite their owners’ wishes. Traditional newspaper publishers want their publication to be their readers’ sole source, want their readers to use only that brand. However, the more than one billion people who are online are readily mixing brands. They are hunting and gathering stories content from multiple brands, simply because they have access to all brands online. The user of the average American newspaper’s Web site, who visits that site only once every four to 15 days and sees only one or two pages per visit, isn’t visiting a Web site only once every four to 15 days and seeing only one or two Web pages on that day. Data from the same firms that track American newspaper Web sites’ traffic (Nielsen and ComScore) show that this average visitor uses the Web daily and will visit half a dozen or more Web sites on any given day.
• Likewise, and this is the most important corollary effect upon daily newspapers, any newspaper’s traditional packaging of content automatically unpackages when placed online. The average newspaper online becomes reduced to only its core competency – which means local news. The print edition of a daily newspaper traditionally contains international, national, regional, and local news about government, politics, sports, and business. A person might read, for example, the printed edition of the Willimantic Chronicle for that package of news. However, the same person is very unlikely to visit that newspaper’s Web site to look at international, national, or even regional news. Not if that person has ready online access to every other newspaper in the world. Instead, he’ll most likely visit NYTimes.com or CNN.com for international and national news about government and politics, ESPN.com for international and national news about sports, WSJ.com for international and national news about business, and the Web site of a regional newspaper for regional news. He’ll likely theChronicle.com only to read local news, something which no other source produces. The same is true with most other American daily newspapers’ Web sites. More than 1,200 of the 1,439 dailies have less than 50,000 weekday circulation in print. Unlike the national or even regional dailies, their core competency is local news, and it is overwhelming for that people use their Web sites. The effect of this corollary begs the question of why the majority of American newspapers bother to put international and national news (almost all of which is from the Associated Press) onto their Web sites, and it brings into question the future of the AP’s business model.

The reason why that ‘unpackaging’ corollary is particularly important for American daily newspapers is that most of them have deviated far from their core competency of reporting local news. That is the second of the two fundamental causes of American daily newspapers’ decline and potential demise. It will be the subject of the next part of this essay later this week.

Why America is the Epicenter of the Daily Newspaper Industry’s Decline

By the way, why has America become the epicenter for the demise of daily newspapers in post-Industrial countries? Its sheer scale and technological advancement are why. During the past 30 years, more supply of news and information has risen there than anywhere else in the world.

Among the post-Industrial countries, America is the most populous and linguistically homogenous. It contains more people than the next three largest post-Industrial countries (Japan, Germany, and France) plus Sweden, Switzerland, Norway, and Denmark combined. Although India and China are each more populous, neither is post-Industrial; the majority of Indians and Chinese do not have access to Internet or to anywhere near as many channels of television as Americans do (2,218 broadcast stations and more than 150 broadcast and cable networks. It’s been estimated that approximately one-half of the world’s more than 175 million active Web sites are in America.

Nowhere in the world have more consumers gained more access to a supply of daily changing news and information in a common language than in the United States. The country’s advancement and homogeneity aids its newspaper industry’s undoing.