Why is innovation so hard for newspapers?

May 23

Newspapers have struggled to adapt to changing times.  (Justin Lane/EPA)

Nearly fifteen years ago, I participated in a project with a major American newspaper trying to chart its course from print to digital.

The Internet was in the midst of its first rampage through traditional business, with the industries then known as “mass media” directly in its path.

Business as usual wasn’t working.  On the one hand, Time Warner had failed epically with a “portal” that tried to collect all of its unrelated content under one banner known as “Pathfinder.”  Instead, the instant success of Napster (the illegal version) suggested that users wanted something else altogether — access to everything, curated by their peers.  Whether they were willing to pay for it, and how much, was yet to be determined.

During a two-day retreat with the paper’s senior business and editorial staff (a rare event, we were told, when both sides were in the same room), we implored the executive teams to stop thinking of its Web site as a gimmick, and to reorganize its news gathering and production around a digital-first strategy that was agnostic to the technology by which content would be delivered to the paper’s changing audiences.

With all the arrogance of a Silicon Valley tech entrepreneur, I told the executive team that the Internet offered the greatest opportunity since the invention of movable type to advance the paper’s core mission of helping readers become informed citizens.

None of this went down well, and the project fizzled out.  A few months later, a profile of the paper’s publisher appeared in The New Yorker, which mentioned the retreat.  When his wife asked how it had gone, the article reported his reply:  “ ‘Great,’ he said sarcastically, ‘if you don’t mind the message that you can either cannibalize your company or let someone else do it for you.’ ”

The newspaper was the New York Times and the publisher, then and now, was Arthur Sulzberger, Jr., whose family has owned the Times since 1896 and still controls nearly 90 percent of the company’s Class B stock.

I thought again about the retreat last week, when multiple sources (none of them the New York Times) leaked copies of a slick, internal report, titled “Innovation,” that recommended many of the changes we had suggested back in the Stone Age.

The report was prepared by a team led by A.G. Sulzberger, the publisher’s son and one of the paper’s editors.  It is a depressing read.  In a tone that mixes alarm, pride and hurt feelings, the authors describe a new media landscape that has marginalized the traditional model of print journalism that the Times clings to nostalgically.  Readers no longer value the news the way the Times wants to package it, the report concludes, even though they should.

Both the newsroom and the business sides, according to the report, remain focused on print subscribers, who now account “for a small percentage of our readers.”  “Desktop” readers are six times as numerous, yet monthly home page visits plummeted by nearly half between 2011 and 2013, one of several stunningly negative data points the report provides.

“Innovation” urges management to adopt new strategies that can grow readership, strengthen the newsroom, and “map a strategy to make the newsroom a truly digital-first organization.”

Whatever the world looked like in 1999, digital creation and consumption have long since passed the point of being both better and cheaper than print, pushing newspapers and other content industries into the realm of what my co-author Paul Nunes and I call “Big Bang Disruption.”  Once the paper is printed, it’s dead, but digital content can live forever — commented-upon, repurposed, and repackaged at a marginal cost approaching zero.

The Times, of course, is still doing better than many papers, whose numbers continue to shrink drastically in the wake of new media start-ups, social networking and social news sites, and the smartphone revolution. Those forces challenge every aspect of traditional journalism, from reporting to publishing to pricing and advertising.

“Digital first” has been the inevitable truth for newspapers for nearly two decades.  So why are leading publishers such as the Times still gazing at their navels?

Part of the problem is that in the United States the newspaper business has never exactly been run on a profit-maximizing model.  Like the Times, many papers are still family-owned and operated; many lose money for decades.  The publication’s mission — social, political, cultural — often takes precedence over business decisions, even when those decisions might help to advance the mission to a greater audience at a lower price.

That’s because it’s hard to keep the mission in mind when management’s attention (and the balance sheet) are focused on the expensive assets once needed to pursue it: printing presses, satellites, and a vast physical distribution network.

Traditionally, strict policies likewise separated the “news” part of the business (the journalists) from the “paper” part of the business (operations, especially advertising), making a coordinated strategy impossible.   And neither side had much love for innovation. Visit the lobby of the few remaining print publications and you’ll often find altars to obsolete inventions.  Those were the good old days.

Then there’s the problem of the product itself.  The format of the newspaper is hopelessly entangled with its nearly-dead business model.  During the print centuries, the paper represented an uneasy coalition, subsidizing serious (and expensive) news-gathering with classified and other advertising, wrapped around popular features including fashion, food, sports and comics.

As the ads and features were stripped away one-by-one by digital entrepreneurs, the coalition collapsed.  No one ever wanted everything they got in the paper, and once a la carte options became available, consumers quickly jumped to them.

The Times’ “Innovation” report, based almost entirely on interviews with its own employees and other media professionals, doesn’t offer much hope.  The recommendations, though couched in the language of disruptive innovation, are painfully incremental: encourage the newsroom to focus more on audience development, collaborate with business-side departments to whom the “reader experience” was long ago ceded, “create a small strategy team” to advise the masthead editors on “competitors’ strategies, changing technology and shifting reader behaviors.”  (Really?  No one is doing that now?)

There’s still a chance that newspapers can escape the collapsing black hole of their traditional industry structure.  But incumbents such as the Times who led for so long in the last incarnation may have the hardest time finding their place in the new world.  In our research on Big Bang Disruption, we noted that market leaders often nurture a strong culture that holds back disruptive change.

Kodak — a company discussed at length in the Times’ report — just couldn’t shake its heritage as the inventor and leader of film photography.  Even though Kodak had some of the best digital photography patents of anyone, the company ended up in bankruptcy.  Perennial second-place Fujifilm, on the other hand, found new uses for its expertise as a supplier to other industries, including nanotechnology, cosmetics and displays.

Like Kodak, the Times is so wrapped up in the glory it earned in print that it may be doomed to go down with the ship, not so much unable as unwilling to get to a lifeboat, almost as a matter of principle.  The paper may end up a victim of its own powerful brand.

“In the coming years,” the report cleverly concludes, “the New York Times needs to accelerate its transition from a newspaper that also produces a rich and impressive digital report to a digital publication that also produces and rich and impressive newspaper.”  But unless the “coming years” the authors had in mind were the 1990s, it may be too late to accelerate anything.

Downes is co-author with Paul Nunes of “Big Bang Disruption:  Strategy in the Age of Devastating Innovation” (Portfolio 2014).  He is a project director at the Georgetown Center for Business and Public Policy.

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