Dead Tree Outfits and Online
October 25, 2008
Reflections of a Newsosaur snagged my attention on October 24, 2005. The article “Voodoo Newspaper Economics” here struck a chord. I have been thinking about the plight of companies whose business model is under siege. Companies don’t have a super hero to rescue them. Even if they did, that super hero would probably get news on a mobile device. I don’t think there is a super hero able to come to the rescue of what I call “dead tree outfits.” The Newsosaur must have been on my wavelength. You must read the Newsosaur’s analysis. For me, the most compelling point in the write up was:
For the record, the secular forces dragging down newspapers are: Declining readership, shrinking advertising, high fixed costs and growing online competition that makes it increasingly difficult to charge the premium ad rates that were possible prior to the Internet.
None of these points shouts, “Digital.” But in my opinion, these “secular forces” are subject to some painful economic realities. For example, declining readership is a function of demographics. This means that those who are fond of print newspapers are a declining species. Without eyeballs, ad revenue flags. The online competition may be surprised to find itself as a cause of traditional publishing’s problems. Today’s online ecosystem flourished around the dead tree outfits, swarming over the traditional publishers’ online efforts like kudzu. So now we have citizen Web log writers with audiences larger than some daily newspapers. The torch has been passed, and its sparks are setting the dead tree outfits on fire. To put out the blaze, the dead tree outfits pour red ink on the blaze. Not surprisingly, the consequences are unpleasant.One other point in the Newsosaur’s article warrants highlighting; to wit:
If the company abandoned print but were able to double its online sales to $20 million, it would lose $14 million in a year, for an operating margin of a negative 70%. To break even, the prototypical publication would have to more than triple its sales from the current levels. To make a profit of 15%, the company would have to quadruple it sales.
When I read these words, the conclusion seems obvious. Dead tree outfits will fall in the forest. Will anyone hear? Will anyone care? I like traditional newspapers. In a few years, folks like me will be playing bingo in the retirement village. The demographics, not the economics, put the final nails in some traditional publishing companies’ coffins.Stephen Arnold, October 25, 2008
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