When Newspapers Make the Daily Show Punch line...

I wrote this post then caught the Daily Show on Tuesday night.  As anyone who watches Stewart regularly knows, being the butt of a joke there is no laughing matter.  Anyway, I show it here to drive home the point that it's common sense now that newspapers are considered past tense.

The tighter the vice grip of bad economic times combined with new technology disruption of traditional media markets, the fiercer the response.  Although, these days the teeth are missing.

Newspapers have a history of trying to stomp out new technology competition before it can grow.  It hasn't worked.

Let's take a trip down memory lane to 1929—1935.  In 1929 before the stock market crash and the Great Depression, newspaper revenues were $800 million.  (As a troubling side note for newspapers, that equates to $107 billion in 2007 dollars as relative share of GDP, which is more than double actual revenue in 2007.  That in turn signals a decline of more than 50% in economic power for newspapers.)  Radio revenue in 1929 was $40 million, which had grown ten-fold in only two years.  (By 2007 radio had grown to four times it's economic power based on relative share of GDP.)

Newspapers didn't like that.

During the depression newspaper revenues dropped 45% and conversely radio revenue doubled by 1933.

Newspapers really didn't like that.

After the 1932 elections, newspapers fought back any further attempts by AP, UP and INS to sell news to radio.  It threatened their control on scarcity of news channeled through their newspapers.  In other words, they arranged an embargo on news content in radio until after it was first published in newspapers, thus an attempt to ensure newspaper-first readership.

It failed.  Of course as one might expect, radio responded by creating their own news gathering force.  A lot of negotiations took place to reach a compromise to reduce competition for newspapers and lower news cost for radio.  Ultimately radio, fueled by attracting national ad sales, developed their own programming and news operations (although many smaller, local stations still just read the newspaper on the air).

The corollary to this is that information technology fuels the next wave without regard for the sanctity of the preceding form.  Newspapers profited from any number of innovations throughout a several hundred year history.  This most recent wave of progress for information technology pushes newspapers and magazines into the marginal zone.  Peter Drucker in 1973 predicted the eventual demise of newspapers by 2010 based on technology before the desktop PC and the internet.  Here's what he said about what happens when a business becomes marginalized.

"A marginal business always goes down disproportionately more whenever the economy goes down, and it comes up disproportionately less whenever the economy comes up.  With every turn of the business cycle, it becomes weaker.

And once a business has become marginal, it is exceedingly difficult to reverse in this downward drift; in fact, it is almost impossible."

It's time for newspapers to stop wasting resources on ways to stop or slow the digital progress.  It's inevitable.  Most newspapers have at least realized this, but are still fumbling around with new models too modestly.  As news organizations, newspapers can reform and emerge as part of the new landscape or they can go away.  The redundancy of news presentations based on controlled scarcity plus the fundamental change of advertising has sealed the fate of traditional media, and newspapers are first in line to gradually disappear.

I've argued in another post that newspapers have to right-size (get much smaller) intentionally with an eye toward the next 2-3 years and reap whatever profits they can and wring needed cash to remake themselves.  Gotta hurry.  The market will not wait.

Here's an excerpt from a Mckinsey Quarterly interview with Richard Foster on the creative destruction that's occurring:

Richard Foster: Let’s start by looking back. In the 1970s, we had the “Nifty 50”—invulnerable companies that couldn’t possibly lose, and of course they all did. It will be the same today; there will be surprising losers, and survival will come down to simple things, like cash and margins. If you’re a low-margin company without a lot of cash or perhaps with too much leverage, you will not make it. Someone will figure out how to do better.

Comments

[Jon Sinton]

This is well conceived and reported. The other thing that happens in media evolution is that the new technology always sucks the content out of the old technology. Motion pictures killed Vaudeville. TV nearly killed radio until it discovered it could survive on music and news. The Internet will kill the daily paper.