Newspapers Sinking
Newspapers are in big trouble. They're losing classified ad revenues, and they no longer control their rate card (without a monopoly, they can't control ad prices any more). Traditionally, newspapers have used the rate card to eliminate competitors. Now the game is reversed. Link. Excerpt:
Google and its brethren are attacking their classified and display advertising franchises across a very broad front. In-market competition is back, and so are "two newspaper" town economics. But unfortunately for newspapers, these Internet companies are presenting a competitive profile that is much more threatening than just having another local newspaper to contend with. Google et al. have dramatically lower cost structures. They have larger and more attractive audiences. Their pricing models are more advertiser-friendly--selling qualified leads, not just space. And, they have nicer dispositions.
This dynamic, as it accelerates, will present a serious threat to the viability of a number of newspapers. Given the enormous cost structures attendant to newspaper publishing, from buying newsprint and operating printing presses to paying the salaries of editors and reporters, these companies can sustain price destruction for only so long. In the old days of two newspaper towns, once one got a significant upper hand in the rate card battle, it started pushing the other in a downward profit spiral that ended with either the shutting down of the weaker newspaper, or its consolidation into a government-sanctioned joint operating agreement with certain shared services. There have been few other outcomes. It didn't matter how popular the newspaper was with its readers. It was all about advertising.
That is what newspapers are facing today. The swarms of Internet competitors are creating the effect of a second newspaper when it comes to capturing local ad dollars.
We can't cry for the newspapers. They've been ruthless with their rate card. A few years ago, for instance, our town's local newspaper was sold to a congolomerate. The conglomerate approached our friend, who owned a small shopper's guide publication, and made him a reasonable but low offer. He called a shopper's guide proprietor in another town who had dealt with the same conglomerate. The other proprietor told him (in effect): "After they bought the local newspaper, they approached me, but I declined their offer. They then slashed ad rates to the point I couldn't compete. My paper's advertising revenue dropped drastically. After a few yeas of this torture, I went and told them I wanted to sell. They gave me a fraction of what they'd offered previously."
No, we can't cry for the newspapers.
