by Goldy, 08/04/2010, 10:42 AM

There has been a lot of talk recently about the future of newspapers, and how the iPad and other tablet computers might prove to be the savior of the legacy press.

Um… I’m not so sure.

No doubt the iPad will prove profitable for some publications, enabling new subscription models neither culturally nor technically well suited to the web, while Apple’s fledgling iAd service and the competitive innovation it will foster offers at least the hope of creating new forms of advertising better suited toward the particular strengths and weaknesses of the medium. As tablet, smartphone and other always-connected handheld mobile computing devices become the dominant tool for news consumption, new business opportunities are being created for advertisers and content providers alike.

But those old media empires looking to newer media for the sustainable business model they failed to find in the not-so-new, continue to ignore perhaps the must transformational aspect of the Internet revolution: the obsolescence of the “newspaper” itself, and with it, the vertically integrated institutional structure of the organizations that publish them.

newspaper (ˈnjuːzˌpeɪpə)
— n
1. A weekly or daily publication consisting of folded sheets and containing articles on the news, features, reviews, and advertisements

A newspaper is, at its essence, nothing more than the aggregated product of various reporters, columnists, photographers, editors, etc., collated together in a relatively easy to distribute and consume bundle of printed pages, a format which may seem obvious or inevitable, but which is largely dictated by two peculiar demands of the medium: the need to print and the need to distribute paper. The capital and operational expense this entails is substantial, but the large, vertically integrated monopolies and duopolies that have come to dominate the newspaper industry are more than just the consequence of the need to achieve economies of scale. Rather, it is the print medium’s physical inability to accommodate a many-to-many distribution model that plays the fundamental role in defining both the daily newspaper, and the institutional structure of the organizations that publish them.

Try to imagine a model in which dozens of local print journalists attempt to publish their daily product independent of each other, and it is easy to see why the newspaper became so necessary. Even if the costs were not prohibitive, print media consumers simply could not or would not endure the chore of browsing and acquiring their daily news from such a multitude of sources, one or two pages at a time. Now imagine disseminating national and international news along such a model, and it is easy to understand why, when print was the dominant or only medium, working journalists had no choice but to publish collectively. Whatever the broader economic factors, the medium itself demands a few-to-many or even one-to-many distribution model.

While there are many additional layers of institutional overhead necessary to publish a daily newspaper — news gathering, editorial, advertising sales, subscription sales, administration, etc. — it was this need to print and distribute paper that created the economic pressures from which this organizational structure evolved, and for which it is uniquely specialized. Born of the industrial age, and organized along its principles, the daily newspaper as an institution was built for print. And that is why the ongoing shift from print to digital presents such an existential crisis, for while the new media paradigm does not necessarily preclude the survival of large, vertically integrated news organizations, neither does it demand it… and there is absolutely no reason to expect that such organizations that do survive will look anything like those that publish the newspapers of today.

The problem for the industry is that, when newspaper executives talk about finding a sustainable new media business model, they are not as focused on the survival of the “newspaper” per se, electronic or otherwise, as they are on the survival of the institutions that publish them. And that is exactly the wrong starting point for re-imagining the future of newspapers in the Internet age.

To understand the profoundly subversive impact the Internet has on the newspaper industry, imagine again a model in which dozens of local journalists attempt to publish their daily product independent of each other, only this time in a market dominated by digital media rather than print. In fact, there’s no need to imagine it, it already exists.

While few working journalists would willingly surrender the comfort and security of a paycheck to pursue the entrepreneurial chaos of your typical full-time blogger, that sort of independence is now at least possible. Gone are the artificial constraints of the print medium: the few-to-many distribution model, and the enormous capital and operational expense. Indeed, these artifacts of the physical world no longer apply in a media universe where, with a click of a button, an independent journalist can post an article to a web site or an iPad app as easily as he might submit it to his editor for final approval. But the new opportunities the Internet makes possible for journalists are nothing compared to the newfound power of digital consumers to instantly search and browse humanity’s collective intellectual product from nearly anywhere in the world. And as for their impact on the future of newspapers, neither development compares to the revolutionary new ability of electronic media to target and distribute advertising in a way that was never imaginable in print.

Lacking a more precise vocabulary, we have come to refer to the web and app versions of our familiar dailies as “online-” or “electronic newspapers,” but this is clearly an oxymoron not just from a material perspective (“electronic” negates the need for “paper”), but arguably from an organizational one as well. For without the need to print and distribute physical paper, the newspaper as we know it is no longer necessary. And when the newspaper is no longer necessary, neither is much of the institutional structure of the organizations that publish them.

Coming up in Part II, we will examine the role of other segments of the traditional newspaper’s institutional overhead — editors, advertising, subscription sales, etc. — and explain why these too will wither away in the face of new technologies and changing patterns of media consumption. We will also briefly consider what kind of new institutions might replace the old.

26 Responses to “Seattle End Times, Part I: there is no such thing as an “online newspaper””

1. Odie Cologne spews:

What’s happening to newspapers is what’s known as ‘Marxism’.

Looks like the Blethen’s risked capital and lost — but that’s capitalism.

2. rhp6033 spews:

Good analysis. It is the incredible market entry costs of printing and distributing physical copies of newspapers which has kept competitors at bay, resulting in nearly all cities having only one or two major dailies. Remove that entry cost with distribution over the internet, then you open the floodgates.

But that doesn’t mean that newspapers didn’t serve a purpose, and to some extent continue to do so. Out of the tens of thousands of people writing on the web, how do you find the good ones – the reliable ones who give facts derived from emperical evidence, not ones who pull facts from their nether-regions to support whatever theory or cause they espire? To that extent I consider the paper a bit like “Reader’s Digest” – it’s already gone to the trouble of selecting the articles, books, and even chapters of books which you might like to read. You give up some control, but not completely, as you are free to seek out sources on your own.

More importantly, how does the internet model of many freelance journalists fund extensive investigations involving multiple staff members devoting months to a single story which might – or might not – ever result in a publishable story (like Woodward and Bernstein at the Post)?

Looking forward to the nest installment.

3. Goldy spews:

rhp6033 @2,

As I intend to point out in Part II, there is a difference between the obsolescence of “newspapers” per se, and the obsolescences of news, or news gathering organizations.

As for the editorial function you’re talking about — determining what is news and what is credible — new media open up new ways of playing that editorial role. In a sense, that’s sorta the role I play.

The business model part, well, that’s harder. But I’m guessing new efficiencies in targeting and placing advertising should eventually help close the funding gap.

4. rhp6033 spews:

Just thinking back, on the subject of industries changing with the times….

Consider AOL. In the mid-1990′s there were several ISPs which competed for the infant internet market. AOL was just one of them. Yet over the next few years, it left the others in the dust. Was this because it provided a better product? Better pricing? Nope, lots of people preferred it’s competitors. What it had was a huge amount of financial backing, so it was able to send out disketts (later CD disks), with free trial offers. As internet users expanded by several orders of magnitude, everyone had a free disk to use to set up their accounts rather easily. AOL swallowed up several competitors, and the others (Yahoo) had to look for protection in the arms of other, larger companies. AOL paid a price for that rapid expansion, when it converted to unlimited usage, it found it’s infrastucture inadequate and had to invest heavily to upgrade it’s servers. The grand majority of it’s revenue came from subscription fees, a very small portion came from advertising.

But less than ten years later, AOL was on the ropes, being eclipsed by the technical limitations of the dial-up modem. The big cable and telcom companies were putting it out of business with their own high-speed internet access. Microsoft, and others, were providing it’s own e-mail services free of charge, as long as you already had internet access. Time-Warner, which had already overpaid for it’s acquisition of AOL, was looking at losing millions as it wrote off the purchase on it’s books as a monumental loss.

So AOL could have continued without change, just as a much, much smaller company. It could have kept providing service to people who were happy with dial-up speeds, paying a much smaller subscription fee than those paying the cable and telcom companies for high-speed access. But eventually it would have declined to the point where even at that level it would no longer be viable.

So AOL made a tough decision. It made it’s service essentially free to anyone who already had an internet connection. It still has content on the site which draws lots of viewers daily, much as the morning TV news shows (Today Show, etc.) provide a sprinkling of news along with movie reviews, recipies, home improvement tips, etc. It tends to be somewhat conservative in it’s outlook when reporting news, perhaps reflecting it’s predominately middle-America viewership, or perhaps because it’s headquarters and staff is based in Virginia. Under it’s new model, it’s revenue is almost entirely from advertising, with subscription fees from the relatively few members still needing a dial-up ISP provider still adding a fraction of it’s revenue.

(continued in next post)

5. rhp6033 spews:

(continued from above)

So, what could the Seattle Times learn from this? Can it quickly change it’s business model so that it accomodates the new realities?

I’ve seen no evidence that the Seattle Times is willing to do so. They are hanging on to their obsolescent position by their fingernails, kicking at all who seek to make them face reality.

They blame Google , apparantly hoping that someone forces Google to pay them money for sending people to the Seattle Times site to read news and articles.

They blame Craigslist for the loss of classified ad revenue, but instead of addressing the obvious fact that online classified ads are obviously more efficient, they try to argue that they should continue in the role of being a censor of those ads, because Craigslist is, well, “too dangerous”.

They point out that internet advertising brings in less money than print advertising, without addressing the possibility that newspaper advertising has been overpriced for years. Print advertising rates rely upon paid subscriptions and the assumption that a reader will read the newspaper that day, read the page where the ad appears, read the ad itself, and then act upon the ad (eventually). But internet advertising can very efficiently monitor actual viewership – it can show how many people actually saw the ad, and how many people clicked on it, and if the advertiser is set up for direct purchases, how many actually bought the product. And, of course, print ad rates take into account the cost of production – printing & distribution – which are zero or nominal in the internet environment.

But what I suspect really sticks in the craw of the publishers of the Seattle Times is that role as the gatekeeper of Seattle politics and opinion is being rapidly diluted. Before, politicians had to line up at the door of their editorial board, begging for endorsements. Politicians or causes favored by the paper received not only endorsements, but favorable newspaper coverage. Those not endorsed may profit just from being considered a “credible candidate”, hence warranting a mention in the stories. Those not considered “credible candidates” are ignored completely – you might first hear of them when you see their names on the ballots. Unless, of course, something about them provides entertainment value and makes the news in that light.

With the decline of the newspaper format, the publishers as the gatekeepers of the consensus of public opinion within their coverage area passes away. The opinion of a Blethen on any issue is no more valid or worthy of attention than that of any other citizen.

6. rhp6033 spews:

Goldy # 3: Sorry, but I was writing and I didn’t see your post until after I had posted.

I may be getting ahead of you, but I find this subject fascinating. As someone who has had their own website for the past decade, the business models are always of interest to me. As the brother of a journalist, the newspaper business has also been of interest to me. And dealing in global logistics and trade, the affect of changes in technology and business models is part of my bread-and-butter.

7. Odie Cologne spews:

Re 6: Do you think that it could be potentially feasible that a parts-buying cooperative of small producers of , say, electric automobiles could equal the purchasing power of a large corporate entity and pull a reverse Ned Ludd on the corporate world?

8. SJ spews:

These problems do not only affect writers. Photojournalism is also in deep despair.

9. tienle spews:

Jeez, Goldy. Sorry buddy, but wow…I barely understood a word you said in your lengthy post about newspapers. I’m not business savvy at all, so if this is directed only at those who are, then I’ll wait for the Reader’s Digest version. Luckily rhp6033′s posts make lots of sense and have specific examples that I could follow. You said this was going to be complicated to explain…you weren’t kidding. I want to understand and am frustrated because I just don’t get it.

10. don spews:

I barely understood a word you said in your lengthy post about newspapers

Your honor, I give you exhibit # 1.

11. rhp6033 spews:

# 9: Gee, thanks, I guess. My posts usually aren’t characterized as “understandable”. In fact, I think the most recent characterization on this board of my posts was that they were “turgid”.

12. Goldy spews:

tienle @9,

Shorter Goldy: the print medium defines the newspaper, and the newspaper defines the structure of the organizations that publish them. Move from print to digital, and you remove justification for much of what newspaper companies do.

Does that make sense?

The reason this post is so complicated is that the thesis is so simple it would appear simplistic without further explication.

13. Forever Young spews:

Here’s guessing it didn’t take Goldy very long to put this one together SINCE it is the same ol’ same ol’ that bloggers have been spewing from their keyboards for, what, the past 10 years? Gimme a break, it’s Internet mediocre writing that is going south, and thankfully the fruit is falling from those weary branches.

No mention of the fact that the losses have stabilized for most major newspapers is not a surprise. Hell, the Times is in its strongest position in years but the Ass blog won’t tell us that. Nope, it ain’t in the best interest of the boogers, er bloggers, to TELL THE FREAKIN TRUTH now is it.

Newspapers have changed, have taken hits and the glory days are long gone … but they’ll survive. Blogging, on the other hand, is the CB radio of communication good buddy.

Thanks, Goldy, but we prefer credibility.

Yours truly,

Frank

14. tienle spews:

I tried to give myself a crash course on vertical integrated monopolies http://en.wikipedia.org/wiki/Vertical_integration and just went glassy-eyed. I’m guessing this means the newspapers own the forests where the trees are grown and the pulp mills where the paper is made, but I don’t know. Too Industrial Age?

I think I get that the concept of PAPER as a delivery system for the various goods and services a newspaper offers people is losing steam as a sustainable business model. I think I grasp that the institution that supports all this might be on life support. Frankly, I don’t know anything about that institution, but I guess it’s not keeping up with the rapid changes. I should imagine it’s a giant power struggle and the newspaper industry has grown complacent and is probably run by people who aren’t exactly flexible. They’re busy trying to preserve their institutions when they need to be busy finding new ways to survive. I think that’s what you’re getting at.

15. Goldy spews:

tienle @14,

That’s somewhat what I’m getting at, and will get at more specifically in the coming post. I just wanted to emphasize that this is more than an efficiency of scale thing… that newspapers evolve to meet the specific demands of the medium… demands that don’t exist online.

16. Paddy Mac spews:

“A newspaper is, at its essence, nothing more than the aggregated product of various reporters, columnists, photographers, editors, etc…..”

True.

However, a business model consisting of enterprise journalism (a.k.a. NOT rip-and-read or rip-and-spin) without subscription revenue is unsustainable.

I believe that we will be buried deep in the wreckage of web presses before that is commonly understood.

Paper is the “billing device” of journalism

17. Goldy spews:

Paddy Mac @16,

I don’t know that that’s true. Imagine a total rethinking of the Seattle Times: no presses, no delivery trucks, no honor boxes, no subscription sales department, and for the most part (I’ll get there in the next post), no advertising sales. Imagine the enormous cost savings if all the overhead that evolved due to the demands of print, are eliminated.

I mean, it’s often said that the subscription price doesn’t cover the cost of printing and delivering the paper…

18. rhp6033 spews:

# 16: You have a point, that the hard-copy newspaper is a “point of sale”. You don’t pay for the paper, you don’t get it.

But the early days of the internet have made it almost impossible to sustain a subscription model to online news. Early web viewers realized that the cost of delivery was almost nill, and weren’t prepared to pay any significant additional cost for something they could get elsewhere for free (if nowhere else, then as part of their subscription ISP service). There was also a strong “the internet should be free” philosophy among early internet users and developers. This has made it almost impossible for newspapers to successfully build a subscription-based online model.

Not that a number of newspapers haven’t tried it – I still encounter some, mostly small papers in the middle of the country and the south, which have insisted on blocking online access unless you subscribe to the print edition. Some experimented with allowing access to their current edition, but any news stories in their archives could be accessed only after paying a fee. I had to chuckle at one small paper, they wanted to charge $15.00 bucks to access a obituary from a year ago, but they didn’t have credit card processing on the websight – they wanted you to mail them a check, and then they would mail you back a password allowing you to access the article. I doubt they generate much revenue that way. But the number of papers trying this tactic have dropped off considerably over the past two or three years.

So the most promising revenue model for newspapers on the internet seems to be, like AOL, television, and radio, based upon advertising. Newspaper publishers complain that it’s not as much as they are accustomed to receiving for print ads, but as I argued above, the costs are dramatically cheaper, and the print ads were probably overpriced anyway. As the migration from print to internet continues, I expect internet advertising revenues to rise.

But newspapers have been slow to catch on the advantages offered by internet delivery, and use them to maximize their revenue. (continued in next post)

19. rhp6033 spews:

(continued from above)

In maximizing revenue from interenet advertising, the first thing you have to know is that the revenue usually comes in three different models:

The first is “pay to display”, where the advertisor pays a one-time fee to display their add in a specific location for a specific time period. This is something newspapers understand easily, as it is the basic concept of advertising in print media.

The second is “Screen Views”, where the advertisor pays a tiny amount for each time the ad shows up on a viewers screen. This is safer for the advertisor, in that it ensures he is only paying if someone actually has a chance to see the ad. But it requires a good IT department, or third-party software, or an outside service to track and bill for those screen views. Some newspapers are reluctant to make that investment, or don’t understand it’s advantages, or prefer to re-direct their advertisers back to the original “Pay to Display” model.

The third revenue model is “Pay to Click”. This is where the newspaper (or any website) gets paid if the customer actually clicks on the ad for more information or to make a purchase. Advertisors, especially small businesses, love this form because they know that they are only paying for real sales leads.

The fourth type is “Pay for Sale”. This is found in many affilite programs where a webmaster posts a link or ad on their site, and receives a commission for the sale. Usually this requires a third-party monitoring and payment service for everyone to trust the process, although Amazon has done well on it’s own (it was one of the early pioneers of this type of advertising). But it is dependent upon the customer purchasing online so it can be tracked – it doesn’t work for customers walking into a a brick-and-morter store.

An online newspaper doesn’t have to choose between these revenue models. It can use a combination of all of them. But once it’s revenue is tied directly to the revenue of the customer, it has to be a lot smarter about making sure it’s ads are delivered effectively. It’s no longer just an ad-delivery vehicle, it’s a salesman. So it needs to have both automated and manual systems in place to ensure that the ads which appear along with each article are most likely to appeal to the reader of the article.

Of course, newspapers have been doing that forever, to some extent. Funeral home advertisements appear near the obituaries, and car ads appear in the automotive section. But the internet allows a lot more discrimination in picking the ad to be displayed. For example, an article about the new Mercedes might be accompanied by ads by Mercedes dealerships, but it might also include ads by it’s competitors which specifically target those who are considering that general class of cars. “I wish I had bought a Volvo instead of a Mercedes” the ad headline might read, imposed above the face of a remourseful buyer.

One of the advantages newspapers have is that it’s articles provide content, and on the internet “content is king”. The content can last long beyond it’s original publication date, as internet searches (or bookmarks or links) can lead viewers to articles written weeks or months or even years ago, long after the print version has been discarded in the recycling bin. A smart nespaper can make sure that current advertising appears along with the article which is relevent to the content.

Of course, the Blethens seem to think that Google is their enemy, when they should look at it as a role model and take advantage of the lessons it provided. Google earns money on several different levels. It makes money from display advertising. It also makes money from “pay to click” advertising, which appears on search engine results under the Google Adwords program.

But the real marketing genius of Google was in it’s Google AdSense program, whereby it pays webmasters for posting Google links or ads on their own sites. So everytime you click on a google link appearing on a website, the website owner makes a few pennies, and the advertisor sponsoring the link gets charged several times that amount. This is what allowed Google revenue to expand dramatically, as every website owner was able to make at least a little money without having to hit the streets selling ad space.

20. rhp6033 spews:

The role of Ad Agencies

I should also mention that one of the obsticles to newspapers moving over more rapidly to the internet format is the advertising agencies.

Advertising agencies are given a budget by their clients. The advertising agencies then make their money two ways. First, they charge the client a percentage of the total budget. Second, they get substantial kickbacks from the media, depending upon the amount of business they deliver to them. Some agencies credit their client’s budget back for the kickbacks, but most don’t. So their primary goal is to convince the client to increase the budget, and a secondary goal is to negotiate the best kickback deals possible from the media outlets.

Providing effective advertising for the customer helps it achieve the first goal, but only indirectly – a really good advertising agent can convince a client that his agency’s advertising is effective, even without any real evidence to support that assertion.

Getting a few awards for creative and memorable advertising certainly helps a sales presentation to the ad agency’s customer, but it doesn’t necessarily sell more product. A famous example of that was the “Mama Mia, that’s a Spicy Meatball” commercial from the 1970′s. Consumers loved the commercial, but testing later showed that few remembered it was an advertisement for an antacid tablet, most thought it was for some spagetti sauce.

So be aware if you try to buy advertising space in major newspapers, radio, or television, you are going to get the “public” rate. The ad agencies get the “discount” rate, which is the public rate minus kickbacks. Some entreprenours figured this out quite some time ago and found ways around it. Residents of the Seattle area for many years might remember Jack Roberts, who made very cheesy appliance commercials with his wife. He had his own ad agency located in Bothel, so he could save on the commissions and get the kickbacks as well.

Anway, it’s in the best interest of these ad agencies to keep the customers advertising budget as large as possible, with trackable results being avoided. So they favor print and television media, insisting to their clients that their own emperical studies prove them to be the most effective. They talk down internet advertising, arguing that it’s not effective. Some even have the gall to argue that the low rates for interenet advertising prove that it’s not effective, which is at best circular reasoning.

Mail-order merchants have long ago realized that print advertising rates are unreastically high. They crafted their advertisements so that the results are easily tracked, sometimes using PO Box numbers with extra digets added after the dash so they could tell which ad to which the customer was responding. The same with telephone sales, they would use multiple extension numbers so they could track the ad which was the original source of the call (who answered the call was irrelevent). In the internet age, they can easily track results online to specific links and sites which forwarded the sale to them. They have been very reluctant to pay for print advertising’s basic rates, realizing that they aren’t cost effective.

So you currently have big advertising agencies continuing to peddle suspect or outdated data arguing that newspaper advertising, with price variations based only on size, location, and subscriber numbers, is a reliable and cost-effective advertising technique. But the smaller competitors who HAVE to have effective advertising to compete with the larger retailers are realizing that print advertising isn’t as effective, and are moving toward interent advertising instead.

This is a basic problem which the Seattle Times can’t avoid.

21. SJ spews:

best thread ever on ha!

One quick comment ..

For personal reasons, I have done some research into the economic1s of this sissue and have three suggestions to make:

While Goldy is right about the evolution of newsPAPER, I do not think he is right about the current issues of cost.

I think there are two major costs in running newspaper.

*talent .. editors, writers, etc.
*leverage capital.

I think the latter is the biggest impediment to evolving a new model. Most of the old media is heavily leveraged. Moreover it was built on the capital gains model, that model is based on our tax code and drives businesses to increase their stock price rather than their profit margin. Perennial losers .. radio stations, athletic teams, get to deduct their operating losses while making a huge profit on the capital value of their endeavors. One extreme version of this is the real estate bubble.

The problem for something with real operating costs occurs when the capital value does not grow fast enough to justify the leverage .. eg to pay of the investors either as interest or dividends. If it is clear that the investors will no longer make money, then they will want to move their investments.

2. Real operating costs. One evening at DL, Joel and I did a back of the envelop calculation of what ti would cost to run the PI as a non-profit and with NO printing costs. The minimum estimate we came up with was $4million/year!

I know this seems high but the reason its is high is that to be effective a new-website in Seattle would need:

writers, editors, photographers, investigative reporters. This includes categories of specialist that may not be all that interesting to Goldy … local sports, local business, the UW and local social scene are EXPEN$IVE to cover.

PAID access to national/international newsfeeds.

Remote bureaus .. these seem like a luxury but certainly there is a need for someone to cover DC?

Now, unlike bloggers, a professional website would likely ALSO need copyeditors and researchers. Moreover, asa business, you need to support many of these people with support staff … HR, secretaries, security, etc.

Finally, as a business you need to add in business folks .. accountants, ad salespoeple, etc.

ALL of this is before you cut down a single tree!
*************************

So, a successful e-newsmedia is going to need to either emerge from bankruptcy or be new so it does not to cover old investments.

Even then, I suspect that there is a huge need for efficiencies that get around the business model above.

22. rhp6033 spews:

SJ: You might be surprised that the $4 mil. per year budget figure doesn’t seem that big to me. I’m wondering if you are including real estate in that number (leasehold on office space). I think there are ways around the remote bureaus, newspapers have been cutting them out anyway for a long time. Perhaps a cooperative among web-based newspapers which competes with AP? That kind of puts newspapers back to their roots, as they were in Franklin’s day. The P.I. and Times are already moving in the direction of using freelancers instead of full-time paid staffers as they incorporates “neighborhood blogs” and special-interest blogs in their websites. But some paid staffers will always be needed (editors, webmasters, advertising, managerial, etc.).

I can’t even begin to guess how the P.I. is faring in terms of revenue right now from it’s online-only operations. I wish I knew.

And yes, the current debt level of the Seattle Times is a big part of their problem, as was reported last year. They made some extraordinarily bad investments in buying the New-England newspapers, overpaying for them by any evaluation and purchasing just as the big drop in newspaper fortunes hit.

But I don’t think the Blethens really have to answer to investors (which may be part of the problem). I’m not sure who funded their acquisitions, but I believe it’s in the form of debt, not capital investment. As long as the bankers get their payments of principle and interest on time, they don’t care whether the profit picture allows for dividend payments or capital appreciation. Adn as long as the Blethens keep enough revenue going through the system to pay their working family members a substantial salary, and the rest of the family lives off the proceeds of the substantial salaries and dividends they received in the past, it doesn’t matter to them that the net value of their company is close to zero. (Well, of course it MATTERS to them, in that they care about it, but not enough that they are forced to make significant changes to change the situation). What really matters to them is the potential loss of prestige and influence which would accompany shutting down the Times as the daily paper for Seattle.

But I think we will eventually see the Seattle Times in Chapter 11 whether it migrates succesfully to the web or not – there is no way the current newspaper economic environment is going to allow it to pay off the current debt, and it’s not going to get any better. The best it can hope for is to keep making payments on that debt over the next decade or so, putting off the day of reconning as long as possible. The real question is whether it can ever emerge from Chapter 11 as a viable news organization. The longer they put off making needed changes, the more difficult their problems down the road.

23. rhp6033 spews:

Note regarding # 19: My post started by saying their are three different advertising paying models, then I went on to list four. I really should write these posts in MSWord and edit them carefully before posting, but usually when I do that the subject has long moved on to other topics before I put that much effort into writing the post.

In the meantime, I feel like the brother in the “Home Alone” movies, which tries to list things using numbers and letters out of sequence.

24. Paddy Mac spews:

Goldy, no, it’s not a cost model. It’s a revenue model. Advertising alone won’t support the intensity of editorial that occurs in daily newspapers and on-line media can’t support the number or display advertisers paper can. Without circulation revenue, you simply cannot support an enterprising journalism effort. It’s just too expensive. No disrespect, but HA is a really good example of that.

Every newspaper in the world thinks it loses money on circulation, but that’s only because of the way costs are structured between advertising and circulation. And there are lots of reasons for that. If costs are allocated appropriately, circulation is more of a money maker than most publishers are willing to admit.

But what I’m saying — and have been saying — is that AP is essentially right. The newspaper journalists are the horse that way, WAY too many people are riding. That’s the crisis in journalism today. That’s the ONLY crisis in journalism today.

NOBODY WANTS TO PAY FOR THE REPORTING…

And there doesn’t seem to be a viable way to develop circulation revenue on line (or over the cable or airwaves for that matter)

25. SJ spews:

@19 RHP

Is 4 million a lot?

Your question about real estate is reasonable, though I suspect the kind of space needed for a 4 million/yr budget would not be all that expensive.

My main point is that the minimum cost of running a real online newspaper is very high. I think this is Goldy’s real point. Once you dispense with the scarce resource of a printing press and paper, it may also be true that you no longer need a single news gathering operation that covers everything from cotillions and college sports to the stock market and senate.

The new media may emerge as a consolidator or websites that are like newspaper sections but each is self financing. Things like sports and society probably can pay for themselves.

The bigger issue is how to support investigative journalism and p[olitical opinion?

26. Bruce spews:

Maybe I’m an optimist, but I think people will pay for value. Why won’t people pay for quality news reporting, opinions, etc. online? We rarely do now because we don’t have to — we can get almost everything they want for free. If providers stopped giving away their product — and I think they’ll have to eventually — I think people would be willing to pay for it, especially since the cost will be far less than they’re now paying for the paper version.