Industry Assumptions
May 25, 2009
Research compiled by Clyde Bentley
One of the oft-irritating but occasionally refreshing functions of media research is to tell us that what we thought was true simply is not. The current "crisis" for newspapers has put our assumptions about the industry under the microscope.
Heal thyself: I had the great fortune of joining a unique forum this week that drew some of the top media researchers from both academia and the newspaper industry. How Newspapers Could Have Saved Themselves and Some Still Can was sponsored by the Reynolds Journalism Institute here at the University of Missouri. It was billed as a small but intensive seminar designed to deeply probe the financial challenges of newspapers - and to suggest help. There was no audio/video record of the gathering, but a play-by-play set of headlines was posted on a live blog.
For the record: The newspaper industry is not failing. Gary Kromer put the kybosh on that popular perception that we in the newspaper industry seem to go out of our way to promote. Kromer might seem an unlikely herald of that finding, as the McClatchy budget ax cut him from his long-held position as research chief for the ForFot Worth Star-Telegram. But like most newspapers, the Star-Telegram is still doing OK - double-digit margins, at that.
Researchers noted that, except in a few cases, the profit margins for newspapers have been and still are among the highest in the business world – at least the legal part of the business world.
The exceptions are the big papers that tried to buy other papers, most of the researchers noted. The University of North Carolina's Phil Meyers explained that newspaper chains searched for higher corporate profit margins by purchasing profitable newspapers. However, borrowing money to make those purchases left the chains with a debt load that outstripped the expected profit margins.
That profit change did not translate well in the news. The key financial factor most media misreport, Kromer said, is that rather than actually losing money, newspapers are making less profit. Profits have dropped from about 25% to 5-15%, he said. You do the math.
Smell the coffee: Kromer's view doesn't mean all is rosy for newspapers, however. Print circulation is down and online is not producing much revenue.
And then there is the economy. Murali Mantrala, the Sam M. Walton Distinguished Professor of Marketing at the University of Missouri, said that the down economy is pinching many businesses besides newspapers. But the press itself so frequently talks of the "unusual" financial threat to newspapers that it has become a "mainstream" belief. That said, the meltdown of the newspaper industry during a recession is not so different than the earlier meltdowns of the major retail industry or the automobile industry. Both of those survived, albeit changed. The difference with newspapers?
"My guess is that it is happening to news people for the first time," Mantrala said.
Kill the messenger: Those surprised news people are also not making the logical decisions most managers would, according to researcher Elina Tang from the University of Missouri.
Tang conducted an empirical study of the impact of cutting expenses for circulation departments, ad sales forces and newsrooms. While newsrooms have suffered a major portion of the reductions recently, the research shows that laying off journalists has more than twice the impact on profit than chopping ad reps or distribution workers. Take heart, brave scribes.
Does it click? The blame for the woes of the newspaper industry most often fall on the Internet and many journalists say their only future is there. But the researchers suggested we look at the numbers first. Frank Denton, VP for Journalism for Morris Communications, editor of the Florida Times-Union/jacksonville.com and a Wisconsin Ph.D. to boot, offered his expert Denton noted that nearly a quarter of Americans still don't go online. The biggest demographic bubble is still the Baby Boomers. He said the Boomers may be aging, but their impact is formidable: "While we are waiting to die, we want our damned paper."
Overall readership of Web newspapers is up, but Hugh Martin of the University of Georgia found that a handful big newspaper sites account for most of the visits. Michigan State's Hari Sridhar said that actual page views - people reading more than a headline - are 10 times higher in print editions than in online editions.
Noodle this: The best analysis of print vs. online may have come from Iris Chyi from the University of Texas. Online editions are the ramen noodles of the newspaper world. In economic terms, online (like ramen) is an "inferior good" product that does not have the core qualities of a bona fide good product. But inferior good products often off convenience, low cost and usefulness still make them very popular. Chyi said readers like the Web, but don't give it the time and depth that they do print. One result is that online newspapers for metros reach only 15% of the local Internet users each month. Her research also shows that as income increases, consumption of online news decreases.
Her advice to newspapers? "You can't market ramen as steak. Don't give up on print too soon."
So much for research - The gathered experts may not have solved newspapers' problems, but they did illustrate that the perceptions within the industry often do not match the research. Little wonder, Kromer said: "Most academic research is useless to most newspapers." By the time it makes it through the review process of scholarly journals, it is too old. And scholars tend to dwell on ethereal topics rather than practical problems.
Simple solutions: The other disappointment with academics is that they too often point out problems without offering realistic solutions. But this combined group of practitioners and academics concluded that the best help for newspapers is in simplifying the challenge. First, clarify which measures are aimed at saving journalism and which are more narrowly targeted at newspapers. Next, conduct thorough research to determine the differing values of the platforms newspapers use to deliver information. Print, online and mobile have different values to both readers and advertisers.
But perhaps the best suggestion from the group was to devise a simple tool kit for newspapers - a "cheat sheet" that allows newspaper managers to compare their operations with the best practices and standards that researchers have verified. But keep it clear and keep it simple. After all, it has to make it through the news desk.
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E-mail - bentleycl@missouri.edu Twitter: http://twitter.com/MizzouBentley