Monday, June 14, 2010

Newspapers Getting Healthy by Getting Leaner

An article in The Economist reports that newspapers are doing far better than can be expected. The Newspaper Association of America reported that advertising costs for print and online dropped by 35% since the first quarter of 2008. Newspaper circulation itself took big hits, dropping 10-12% the past year for many major publications (with a few notable exceptions).

However, with the exception of those publications that did close (and they were a small percentage of the total, however significant they were in their respective markets), most newspapers have managed to stay in business. According to The Economist, "some companies are now worth 10 times as much as in the spring of 2009, although they remain far from pre-recession heights."  This despite the fact that their revenues have decreased. Bankruptcy courts have bailed many newspapers out, but the operating costs are now in line.

The Economist points out that some newspapers have increased their cover price, while others have cut their distribution areas (eliminating far ranging customers with little advertising value and high distribution costs). It also states that some groups like McClatchy cut their payroll costs by 25%, and others such as Gannett now carry national and international news from USA Today, or in other cases, the AP wire service, instead of local journalists.

The Economist also points out that paper prices have dropped 40%.

We do not know where newspapers will go. Clearly the decline in circulation will continue, as the population gets older and less and less people depend on newspapers for their news content. The question is how far newspapers will decline. Will they one day become obsolete, or will they remain a viable media. The invention of the radio did not destroy newspapers, though it decreased their impact. Television did not destroy radio. And so far, the internet has not destroyed television.

The younger generation does not like to pay for news from any source. That is a paradigm that has yet to be resolved in any form. It is possible that newspapers will remain viable in their own niche. The news from The Economist at least indicates they will be around for a while longer than many expected.

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