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As the Internet Grows Up, the News Industry Is Forever Changed

By Patricia Sullivan
Washington Post Staff Writer
Monday, June 19, 2006 12:00 AM

The news industry, congenitally nervous about its future, looks at the Web this spring and sees cause for panic.

Advertisers are rushing to the Internet. Readers, even of the best newspapers and magazines, are abandoning print, while network television news shows have been losing viewers faster than you can say "CNN, MSNBC or Fox?" Wall Street money managers, fed up with slowing growth of what are still immensely profitable news companies, just forced the second-largest newspaper chain in the land to sell itself off. The American Journalism Review's current cover story is headlined "Adapt or Die."

Some news organizations surely will die as the Internet disrupts and remakes the century-plus-old newspaper and half-century-old television industries. But overlooked in this massive transformation are some underlying insights that should give pause to those who would put a gravestone on the mainstream media.

News consumption has fractured and fragmented in the United States over the past 30 years, but the demand for news is strong. Network morning, evening and news magazine shows, cable news and public broadcasting audiences, combined with the explosion of growth in the digital media, are bathing consumers in more news and information than ever before.

While it's true that fewer newspapers roll off the presses than a generation ago, that only half as many people watch the nightly network news as did 25 years ago, and that news magazines do not carry the authority of the past, new sources of news abound. The Internet has largely replaced the immediacy of radio and television for breaking news. Blogs of every conceivable perspective offer free opinions and arm-chair analysis. Community listservs supplement neighborhood newsletters. Videologs and RSS feeds target specific interests. Talk radio, despite its all-too-common bombast and vitriol, fulfills a demand to discuss issues that affect a community -- one of the most basic definitions of news.

Readers are mixing and matching and have far more choices in how they get their news than ever before. Whether more people are consuming more news is not yet known because industry research organizations are only beginning to study the question.

Mainstream news organizations, shaken by the erosion of their viewers, readers and advertisers, and only hesitantly embracing the new media, still have significant strengths in the digital journalism world. Though their economic situation is serious, and perhaps critical, it's not over yet. What is over is the era of the well-staffed, single-medium newsroom with once-a-day or even once- an-hour deadlines.

First, The Bad News

That's a hard conclusion for many in the news business to handle. Newspapers, the biggest and oldest segment of the mainstream media, are built on the work of creative, contentious and quick-witted people, but also of curmudgeons who resist change.

Newsrooms shrunk by layoffs and battered by bloggers, are seeing their traditional audiences shrink. Daily newspapers lost 1.2 million readers in the six months that ended in March, down to 45.5 million. Online newspaper readership grew to 56 million.

Television, a newer medium built on newer technology, has its own blind spots. In 1980, when CNN started its 24-hour news operation, few in network television expected it to last. Few people had cable, and little evidence existed that anyone wanted more news than was already available nightly for free. But while the network nightly news audience has dropped from 53 million to 27 million in the past 25 years, overall viewership of cable news grew to about 160 million.

Why should the entrenched media change? The introduction of radio, network television and cable did not destroy the news franchise, so why should the Internet? Despite declining circulation, newspapers are still among the most profitable corporations in America, with an average profit last year of 21 percent, Merrill Lynch analyst Lauren Rich Fine noted recently, almost twice what the average Fortune 500 corporation earns.

But those profits are dropping and may hit the 14 percent range within five years, Fine predicts. Profits at the 13 publicly traded newspaper companies fell an average of 20 percent in 2005, another industry survey reports.

As media managers scramble to maintain those high profit margins, layoffs and buyouts have shaken the newspaper ranks. So far this decade, some 2,800 full-time newspaper jobs have been lost, according to a comprehensive annual report on journalism, The State of the News Media 2006, published by the Project for Excellence in Journalism. Large-scale layoffs have also hit major publishers of news magazines in 2005 and 2006, and magazine publisher Gruner and Jahr sold its properties and left the U.S. market.

Radio news, what there is of it, has changed from what once was heavily local and widely available to a much smaller set of choices: news and talk stations, public broadcasting or, very recently, satellite and high-definition radio. Although its audience is steady, the radio industry's top 25 radio groups aren't expected to post revenue increases above 2.3 percent this year, according to a report released earlier this month by BIA Financial Network.

Magazines, which are extremely market-sensitive, also struggle. Ad pages for major news weeklies are essentially flat, even in this relatively strong economy. Time, Newsweek and U.S. News are losing circulation. But The Economist and the New Yorker's circulations are rising, as is The Week, a five-year-old magazine that, like online news aggregators, culls news from other publications.

Enter the Web

In 1989, Tim Berners-Lee invented the World Wide Web and created the first browser. While most in the media were discussing the impact of cable tv, and a few dabbled in learning about the geeky bulletin board systems, newsgroups and proprietary online networks, like AOL and Compuserve, most never suspected that digital media could converge and threaten to overturn the multi-billion-dollar news industry.

But the Internet offered would-be news entrepreneurs lower costs of entry: You didn't need printing presses, paper or delivery trucks. You didn't need a government license and broadcast towers. You didn't even need a staff. Anyone with a computer and Internet connection, the story went, could compete with the corporate media. Of course, no one could figure out how to make money either, but with the blind courage of true believers and a startup stake from venture capitalists, online news was born.

In the early Internet, during the pre-Web days, scientists, educators and government workers simply traded text reports of niche news over their 1200-to-2400 baud modems.

It took the Web, with its addition of graphics and easy navigability, to begin to attract the established news media. The technology world took to it first, of course, and the most interesting action centered on the West Coast. CNET, perhaps the most successful technology site, tried to marry television to the Internet, and innovated with interactivity before the more mass-market MSNBC came along. Wired magazine went online, covering the culture of technology. Salon, a startup partly funded by Apple Computer, began as a Web publication, soon to be challenged by Microsoft-funded Slate. Many more niche publications started, and folded, and started over.

The Search for Revenue

As the established news industry began creaking into action in the mid-1990s, some tried to charge users for reading their content, just as they did for print subscribers. Others only allowed online access to those who bought a print subscription. The San Jose Mercury News, where I worked online for five years, was at the time the leading purveyor of subscription-required access to the daily paper, although other content was free. But the Merc, in the heart of Silicon Valley full of computer engineers and early adopters of technology, was unable to attract more than 10,000 paying users before it abandoned that business model.

Within the news industry, the drumbeat for charging for online content is steady, but online readers are unwilling in large numbers to pay. With a few exceptions -- the Wall Street Journal, Consumer Reports, opinion columns at the New York Times, news archives and scientific journals -- the subscription model for online news has been discarded.

The next-best hope for income was micropayments, where a user would digitally drop pennies into an online site's account to read an article or gain access to certain data. Technology hadn't quite matured enough for everyone to be able to use micropayments easily, and the revenue was, well, micro.

The now-defunct business technology magazine, The Industry Standard, experimented with selling news-related research reports on the Internet economy through its Web site, where I was the executive online editor in 2000. The sales made money, the related conferences made money, but the magazine didn't and went bankrupt in 2001.

So, barring a genius who creates a new revenue stream, the online news business is left to rely on advertising.

Advertising, which provides about 75 percent of the revenue of American newspapers, and 100 percent for television networks, is going online in a big way. Total Internet advertising spending in 2005, the Interactive Advertising Bureau and Pricewaterhouse Coopers reported, rose 30 percent, to $12.5 billion, and in the first quarter of 2006 reached a record $3.9 billion.

While print advertising revenue is nearly flat, advertising spending for newspapers' online editions in the same time frame shot up 35 percent. The actual revenue, at $613 million, is just a fraction of what the print version collects, but that fraction has been increasing steadily over time.

The news media's advantage in advertising is that it's a mass medium, but online users may gravitate to online-only sites for autos, real estate or jobs. Craigslist, Monster or eBay, among others, offer free listings or make comparison shopping much easier.

The competition between old-media and new-media companies for advertising dollars is not a foregone conclusion. Craigslist.com is estimated to have cost the San Francisco Chronicle $50 million in lost classified revenue in 2004. But the biggest information provider in almost every market is the newspaper, and the second biggest is the newspaper's Web site.

Readers clearly are headed online, in some cases replacing both print and television with the Internet as their main source of news.

Michael Dimock, associate director of the Pew Research Center for the People and the Press, said nobody knows yet whether the Internet simply replaces old media or creates another robust medium that could result in a larger audience.

"We've certainly tracked the traditional decline of [the audience for] newspapers, television, magazines and radio," he said. "Whether there's been a relocation of news for news, or whether the Internet creates another draw -- we don't know yet... We're trying to triangulate this year how much the Internet compensates" for the decline in traditional news media consumption. That report is due out next month, he said.

Unable to wait, the established news media are funneling money into their online sites.

News organizations are experimenting with combining print, electronic and online newsrooms with print media trying television and television newsrooms posting blogs.

NBC Nightly News is now available on the Net and on iPods. Viewers of ABC News can watch an evening newscast from that network online three and a half hours before one is broadcast on television. CBS News is posting both live video streams and archives online. CNN's Web site is among the most popular news sites online, but so is Yahoo News, which primarily republishes the work of others. The accelerating adoption of broadband Internet access, which hampered online video for years, is making it easier for television to stream its signature work to consumers.

It's working so well that more and more adults who are already online say they prefer the Internet to television screens or newsprint. Thirty percent of Americans say they are spending less time with newspapers and magazines because of the time they're spending online; 13 percent watch less TV and 19 percent listen to less radio. A year-old report from JupiterResearch says that more than 26 percent of online adults turn to the Web for national and international news, up from 19 percent in 2001.

The Future

There's no question that the Internet has changed the news industry in the past decade. Old media has learned that simply shoveling content from one medium to the Web doesn't work, any more than reading a newspaper into a TV camera capitalizes on the strength of that medium.

Technology has driven behavioral changes, as reporters, producers, photographers and editors learn that interactivity in the form of e-mail, blogs, polls, hyperlinks, Videologs, podcasts and news delivered via cell phones can open their work up to a newer and bigger audience, for better or worse. It's far easier for a reader to find a reporter now than it was in the past; it's also easier for a story published overseas or in a local or regional outlet to have a bigger impact. No longer are readers or viewers bound by network broadcast schedules, the delivery of a newspaper or magazine or the top-of-the-hour radio headlines.

What worries professional journalists above all else is whether what replaces the newsroom of today will support the journalism of tomorrow.

"The question no longer is whether the newspaper will endure, but whether the kind of news that is essential to a functioning democracy will survive," says Melvin Mencher in the current Nieman Reports, one of many places where journalists are worrying over the future of their profession.

That news, the kind that reveals secret prisons in Eastern Europe or government eavesdropping on telephone calls or the danger of badly built levees in a hurricane-prone area, is expensive, takes time and causes trouble. The audience for it is sometimes small and it's not easy to sell to advertisers. Right now, almost no online news sites invest in original, in-depth and scrupulously edited news reporting.

For now, newsrooms are trying to find the ideal balance between providing the instant and interactive news that readers clearly crave and the serious, in-depth journalism that makes a difference in society. Business managers are trying to increase online advertising revenue without cannibalizing the ad income for the original publication. Executives are trying to foresee the shape of the industry and calculate how to beat everyone else there. And consumers, for the moment, have the best of all worlds.

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