Media Companies Have Only Themselves to Blame

Instead of embracing Web-based distribution, old media artificially propped up the unscalable and inefficient model of shipping content on sheets of dead tree pulp.
Posted December 11, 2008

Mike Elgan

Mike Elgan

The recession is hitting everyone. But print media companies -- newspapers, books and magazines -- are getting hit harder and sooner than most.

It's their own damned fault. Like the US automakers and the music industry, print media companies squandered most of their time and money during boom times clinging to the past rather than preparing for the future. And now they're left totally unprepared for the bust.

How bad is it? It's bad.

The Tribune Company filed for bankruptcy Monday. The company publishes the Los Angeles Times, the Chicago Tribune and other daily newspapers. The New York Times Co. intends to pawn its shiny new Manhattan building to borrow a quarter of a billion dollars just to stop the bleeding. Other major dailies are either for sale, or rumored to be so, including the Rocky Mountain News, the Miami Herald and others. The Cox newspaper group is closing its Washington bureau. Most newspapers have announced layoffs, or will do so soon.

Magazines are faring a little better than newspapers. But the industry is all doom-and-gloom, and everyone is predicting a bloodbath in 2009. Newsweek has reportedly lost between half a million to a million subscribers from its 2.6 million rate base and has announced layoffs. TIME layoffs may total 600. National Geographic, The Economist Group and Doubledown Media are all laying off staffers.

Even books are suffering. Simon & Schuster has laid off 35 people. Random House, Inc. killed its Bantam and Doubleday divisions. Houghton Mifflin Harcourt announced that it would not take on any new authors.

What's going on?

There are three basic reasons why newspapers are suffering: 1) the economy is cratering, and advertising and subscriptions are dropping; 2) most major publishing companies borrowed massively in recent years to make unwise acquisitions of smaller newspaper companies; and 3) newspapers are starting to lose the competition for both advertisers and readers to online media.

Do you see the link between items 2 and 3? Newspapers hawked their future in order to invest in the past. Those acquisitions were all about buying up antiquated companies who viewed their industry as a machine that converted trees into money, rather than as creator of content.

Every major newspaper you can think of has been dragged kicking and screaming into the digital age. All have Web sites. Some even have RSS feeds and podcasts. But all this digital activity is mere tokenism. Anyone could have predicted an eventual shift to electronic distribution of news content ten, twenty or even fifty years ago. Why didn't they prepare themselves?

Since newspaper companies went on a borrowing spree a few years ago, why didn't they borrow money to develop online sources of revenue, streamline their organizations for electronic media and actively push for both advertisers and readers to move to electronic media? Where's the massive effort behind developing Kindle and other e-book sales, and pushing forward e-Book advertising? All the newspaper companies have been able to muster is grudging acceptance for electronic publishing. Where's the advocacy?

Like the newspaper industry, the magazine world has focused almost all its efforts in recent years in saving the doomed print model. And, like newspapers, most magazines have Web sites, and many have podcasts and other me-too electronic products. But magazines have been lackluster in driving initiatives for the future of publishing. In the US alone, there are some 10,000 magazines, and about 2,000 of them have large circulations. Yet a full year after the Amazon Kindle shipped, there are to date only 18 magazines available -- and none of them has a real advertising model for the Kindle.

The book industry should be sitting pretty. Unlike newspapers and magazines, books don't have to rely on advertising revenue. But, once again, the industry has demonstrated a complete lack of vision.

The "digital age" has been coming into existence for 50 years. Everyone could see it coming. And it divides all businesses into two kinds: Those that can distribute products electronically, and those that cannot. For example, there's no such thing as digital cars, digital food or digital clothing.

For these unfortunate non-digital industries, a doubling of unit sales means a doubling of costs.

But companies that sell newspapers, magazines and books should have realized long ago that they're sitting on the golden opportunity of the millennium. They can sell their valuable products without significant manufacturing or distribution costs. Like software, that model is infinitely scalable. In other words, it should cost about the same, theoretically, to distribute a billion digital copies of a book as it costs to sell a thousand copies.

But instead of pouring their energies into the development of electronic distribution, all these industries invested most of their resources into artificially propping up the costly, unscalable and hideously inefficient distribution model of physically shipping content on sheets of dead tree pulp.

The result? They're totally unprepared for a wide range of predictable events, including the current recession, the past and future rises in oil prices and the migration of eyeballs from print to online.

Marshall McLuhan famously said that "the medium is the message," by which he meant that particular attributes of specific media (books, TV, etc.), not the content, reflects and affects culture.

The traditional print-media companies seem to have confused this adage with "the medium is the business." It's not. And because they believe they're in the paper business, rather than the content business, they will fail.

Tags: Amazon, software, economy, advertising, media

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