If you have a favorite journalist in your life, think about dropping off some chicken soup — the industry is suffering from a collective case of the cold shivers. It’s a chronic illness, but the shuddering was especially bad on Monday when the Daily News in New York, the nation’s ninth-largest newspaper, announced that it would be laying off half its staff.
The story is by now familiar: A daily newspaper is bought — in the case of the money-losing Daily News, purchased by the Tronc publishing company 10 months ago for a reported one dollar — and then the layoffs start. Quality declines and the paper becomes less attractive to readers and advertisers, eventually prompting more layoffs.
When this happens, journalists complain about heartlessness and short-sightedness. “In any other industry,” said a writer to Brian Stelter’s newsletter, “deliberately making a product worse and then asking consumers to pay more for it would rightly be seen as a stupid long-term move. In journalism, it’s been the strategy for years.”
True on both counts. Unfortunately, journalism has worse problems than heartless, feckless owners. The really bad news is that from the perspective of the shareholders, this is probably the right move.
In 1970, Bruce Henderson, the founder of the Boston Consulting Group, developed a model that came to be known as the “BCG Matrix” to help firms assess the profit potential of their product lines. The matrix has two axes, growth rate and market share, dividing products into one of four quadrants.
Each of these quadrants suggests a different strategy:
- Cash cows should be milked for their profits, without necessarily getting a lot of new investment.
- Stars — think the iPhone in 2008 — should be given a lot of new investment to maximize their potential.
- Question marks might eventually be big winners, but at the moment mostly soak up a lot of cash without delivering much return. Companies need to carefully decide whether to invest in these products or dump them.
- Dogs should be given as little investment as possible, if not jettisoned entirely.
The sad truth about daily newspapers is that these days they’re often in the lower left quadrant. Readership is declining and, more important for revenue forecasts, they’re losing the advertising market to Google and Facebook.
Why would anyone buy one of those papers, even for a dollar? The answer is that you may be able to wring some profit out even of a dog by turning it into a feast for vultures. That’s essentially what’s happened at the Denver Post, which ran an editorial in April calling out its ownership for “a cynical strategy of constantly reducing the amount and quality of its offerings, while steadily increasing its subscription rates.”
In the long term this practice will certainly hasten the paper’s death. But in the short term it may enhance profitability because the market for newspaper subscriptions seems to be extraordinarily inelastic: Younger people won’t subscribe to a daily paper at any price, but older people will keep paying for that subscription no matter what, because they can’t imagine life without their daily newspaper. There’s no point in trying to put out a great product to entice new readers; you maximize profits by charging existing customers as much as you can get away with, while giving them as little as possible.
There’s a part of me that admires the roguish genius of it, the way one admires reports of a particularly daring con. Then there’s the part of me that wonders how people with this sort of genius manage to look at themselves in the mirror long enough to brush their teeth.
But then, it’s unsurprising that journalists hate owners like this. Our best interests are served by having newspapers around as long as possible, to keep paying our salaries and, not incidentally, to continue contributing to the health of the democracy by informing the citizenry. It’s also not very surprising that the ownership pays little attention to journalists’ cries, because the owners’ best interests are served by maximizing the total profits they take out of their asset, even if that shortens its lifespan.
And if we journalists are honest with ourselves, we’ll admit that what the owners are doing is less like murder most foul than the assisted suicide of a terminal patient. By now, the rot is far too advanced to think that the problems with newspapers can be solved with more competent, creative or idealistic management. Outside of a few big cities where newspapers can reap economies of scale by turning themselves into national subscription services, there simply isn’t a viable business model.
What can be done? Start figuring out how to make journalism work as a philanthropic enterprise. If you’re a journalist at one of the countless struggling papers, get together with other journalists and start feeling out philanthropists. Make the case that local journalism’s traditional mission — poking around in the details of city budgets, monitoring what the school board is getting up to, investigating self-dealing politicians — benefits the community and is worthy of their involvement. Who knows, maybe a few subscribers will turn up when they see the local paper as a philanthropy instead of as vulture bait.