Justin Fox

Why newspapers are vulnerable, Ctd

ᔥ Harvard Business Review Blog

Justin Fox is looking at the failing model of major newspapers and reasoning that they were doomed all along:

Over the decades, the monopoly dailies saw some signs of trouble: newspaper readership kept declining, and new retailing giants such as Wal-mart often bypassed the papers in delivering ad messages into homes. When the Internet came along in the 1990s, though, they were still big and profitable — and, it turns out, profoundly vulnerable. As the account above should make clear, the challenges that the Internet posed to these newspapers had much less to do with new sources ofnews than new channels of advertising.

If the newspaper companies had been nimble, well-managed organizations (news alert: monopolies usually aren’t) trying to follow Clay Christensen’s playbook for dealing with disruptive innovation, they would have set up separate ventures aimed at exploiting new digital advertising opportunities. Norway’s Schibsted did just that in 1999, and has remained a classified-advertising power. In the U.S., two newspaper chains bought the job site CareerBuilder in 2000 (a third joined them in 2002), and have built it into a successful online/print hybrid.

Not surprisingly, though, the biggest digital advertising successes have been claimed by baggage-free newcomers such as Craigslist and Google. And these digital natives have seen no reason to attach expensive news-gathering operations to their efforts. The Internet has unbundled the various businesses that made up a metro daily newspaper, and there’s no putting them back together again. And since selling news never was a profit center for metro dailies, there’s been no great surge of well-funded digital upstarts clamoring to take over their editorial tasks.

Why newspapers are vulnerable

ᔥ Harvard Business Review Blog

Justin Fox thinks newspapers were doomed all along:

The business model that the owners of the metro dailies gravitated toward in the decades after World War II was this: 1) establish monopoly, 2) milk that monopoly. The monopoly was on the delivery of printed advertising messages into homes in a given city or (better) metropolitan area: department store ads, supermarket ads, car dealer ads, and, most of all, classifieds.

Notice that I didn’t mention news. That’s because, once a monopoly was established, the editorial content of a newspaper had no detectable impact on its financial success. News gave a paper legitimacy, and some protection from antitrust laws (in the form of the joint operating agreements that the Justice Department allowed newspapers to set up to maintain editorial competition while consolidating business operations). Big news, especially sports news, even sold some extra papers from time to time. But even that didn’t really matter, since circulation wasn’t a profit center. The business of the metro monopoly papers simply wasn’t about news.