A brutal round of layoffs just broadsided some of the brightest lights of the digital news media. What’s a newly troubled industry to do?
The answer may be the same one that other, far larger businesses have long chosen: mergers and consolidation, with the many joining forces to become a larger, more financially stable few.
In a matter of hours last week, several of the nation’s most promising digital operations announced deep cuts to their newsgathering staffs. BuzzFeed axed about 215 people, or 15 percent of its operation; HuffPost, Yahoo and AOL each endured a 7 percent cut that wiped out the livelihoods of another 800 people. The multiple blows, said one journalist who lost her job, suggest “the salad days are over” for the digital news media.
The news came on top of more bad news at newspapers, which have been beset by shrinking prospects for many years. Gannett Co., the nation’s largest newspaper owner, shed an additional 400 employees at daily newspapers in such cities as Indianapolis, Phoenix and Rochester, N.Y. The casualties included a Pulitzer Prize-winning cartoonist and reporters with decades of experience.
The news about BuzzFeed and its digital brethren was a shock because of expectations that they would be the innovators and survivors, the Internet-age successors to the “legacy” operations (print, radio and television) that have dominated the dissemination of news in America for generations. Instead, digital “native” stars such as BuzzFeed, Vice, Vox, Business Insider, Refinery29 and the Daily Beast, among others, have grown rapidly but have produced little in the way of consistent profits or even any at all. BuzzFeed, with $300 million in revenue last year, acknowledged that it had no profit to show for its dramatic growth.
This has prompted discussion in media circles of a reckoning — a wave of mergers that will shrink the industry but place it on a more profitable and sustainable path.
People close to BuzzFeed confirmed on Tuesday that the company is continuing to talk with two peers, Refinery29 and Group Nine Media, about combining some of their editorial operations. Refinery29 produces news and information aimed at young women; Group Nine owns four multimedia brands, including NowThis News, which distributes video news via social media. Group Nine had no comment. Refinery29 did not respond to requests for comment.
Consolidation is hardly a new strategy among digital operations, despite a strong entrepreneurial heritage. HuffPost, AOL and Yahoo all began as independent operations, but are now jointly owned by Verizon Media Group, a subsidiary of the giant telecommunications company, Verizon Communications.
But a reckoning of sorts could be in store, particularly because digital news companies seem to be encountering the sort of turbulence that has bedeviled newspapers. Verizon, for example, said on Tuesday that revenue in its digital media business fell nearly 6 percent to $2.1 billion last quarter. Privately held companies such as Vice and Vox have acknowledged recently that they would fail to meet revenue targets, leading both to economize .
“Color me an outlier,” says VandeHei, Axios’s chief executive, who worked at The Washington Post before Politico. “I think this sky-is-falling for digital media is nonsense, at least for national news. This is actually how a competitive market works: Some companies rise, some fall, some take too much, some make bad bets. Others thrive.”
While not minimizing the pain of layoffs or the “authentic crisis” in local news, VandeHei said, “there is an oversupply problem in national media. Too many [are] writing the same story. The survivors will offer unique coverage readers find indispensable. The market will weed out those who don’t.”
The industry’s layoffs elicited self-reflection and funereal commentary among journalists, as well as cheering and derision from those who mistrust the mainstream press, including President Trump. Pouring acid on the fresh wound, Trump tweeted on Saturday, “Fake news and bad journalism have caused a big downturn. Sadly, many others will follow. The people want the Truth!”
There’s little evidence (and Trump supplied none) that the news media’s travails have anything to do with producing “fake news.” Publications and media outlets that are supportive of the president haven’t bucked the same economic forces. Nor have those forces affected all equally; the leading cable and broadcast networks (often the source of Trump’s “enemy of the people” taunts) remain among the most profitable entities in the mediasphere.
Still, “for the news industry, last week was like getting hit in the face with brutal January wind chills,” said Tim Franklin, a former newspaper editor who is a professor at the Medill School of Journalism at Northwestern University. “But unfortunately, there’s no warm shelter to seek refuge in journalism right now.”
First, the New York-based company informed those being let go in three waves, with some employees learning their fate on Friday while others had to wait until Monday and Tuesday, a lag time one employee described as “excruciating” (a BuzzFeed spokesman said legal and logistical issues prevented it from informing all workers at once). Second, the company initially insisted that it wouldn’t pay laid-off workers accrued deferred compensation, such as paid time off. However, by Monday afternoon, presented with a petition signed by dozens of employees, chief executive Jonah Peretti relented and agreed to the compensation.
Franklin and others note an omnipresent fact: that newspapers and digital-news companies operate in the shadow of two giants, Google and Facebook. Combined, the two companies collected about 57 percent of all digital-advertising revenue in the United States last year, about $61 billion, according to eMarketer, a research firm. Other fast-rising players in the ad market include Facebook-owned Instagram, Amazon (whose founder and chief executive is Washington Post owner Jeffrey P. Bezos), Snapchat and Twitter, none of which are primarily news organizations but all sell ads.
That dominance leaves thousands of news companies to fight for the scraps and crumbs. Last week’s layoffs reflected “the harsh reality” that a digital advertising model for news has limitations, Franklin said. After Facebook and Google, “what’s left [of the ad market] is not enough to support many newsrooms at their past staffing levels.”
In addition to gobbling up advertising, Google and Facebook exercise power over the vast flows of Internet readership through their algorithms, the computerized set of instructions that determines what information is shown on their platforms based on factors such as user demographics. Periodic changes in the algorithms can make or break a news organization by boosting or diminishing its news stories before a mass audience. Web traffic driven by Facebook has dropped precipitously at many news organizations over the past year.
But if the outlook for digital news is uncertain, the prospects for newspapers remain downright appalling.
Gannett’s latest round of layoffs was largely overlooked in the news about BuzzFeed and Yahoo, but its impact was probably greater. Given years of layoffs at newspapers, each new round of belt-tightening has a disproportionately negative effect on local news coverage.
Unlike HuffPost or BuzzFeed News, which largely focus on national news that is vigorously covered by other news sources, local newspapers are often the only ones reporting on a community’s institutions. That means there’s no one to replace the reporter who covered the school beat or the police blotter once his or her newspaper hands out pink slips.
The long, grinding hollowing-out of newspapers — the industry lost just over half its workforce from 2006 through 2016 — has led to intra-industry and academic discussion about “news deserts,” areas in which there is little or no media coverage at all.
Some 1,800 newspapers, primarily weeklies, have disappeared since 2004, according to a study released in October by the University of North Carolina’s School of Media and Journalism. The trend has left 171 counties in the United States without a paper, typically the largest source of community news; roughly half of the 3,143 counties in the country have only one newspaper, usually a small weekly.