Sunday, October 21, 2012

Print News Continues Flaming Death Spiral; Will The Guardian Bail Out in Time?

[photo: Stuart Chalmers via Flickr]
We’ve seen stories this week about two print news outlets trending away from print--phasing out a print edition in the case of Newsweek, and potential phase out of print operations in the case of The Guardian.

Newsweek’s print edition will be a thing of the past as of the end of the year. The Guardian is considering a similar move, if off-the-record sources in a Telegraph article are credible.

Ironically, The Guardian’s staff contributor Michael Wolff is doing an annoyingly smug I-told-you-so dance, bashing Newsweek’s editor Tina Brown for bothering to take on Newsweek. At the time the news magazine was sold in 2008, Wolff told one of their staff reporters, “...Newsweek wouldn't be around in five years.”

Let’s hope for Wolff’s sake that The Guardian’s owners are as brave as Tina and as monied as Newsweek’s benefactors in helping the newspaper limp along for another handful of years. The Guardian has been hemorrhaging money to the tune of £44M a year; the parent firm’s owners appear to have discussed soto voce their concerns about the losses with Telegraph’s reporter.

As the New Yorker noted this past spring, “... [The Guardian]  lost roughly $50 million last year, and though it’s subsidized by a nonprofit trust, at that rate it can survive for at most another five years.” Guardian Media Group CEO Alan Miller appeared less optimistic in June 2011, when he indicated “parent company Guardian Media Group could run out of cash in three to five years if the business operations did not change” in a report featured in The Guardian on its “digital-first” strategy.

Fine reading The Telegraph’s article by journalist Katherine Rushton, the sources cited are referred to as “Senior figures at Guardian News & Media“ and “trustees of the Scott Trust, GNM’s ultimate owner.” One might assume on the face of it that these are separate sources--senior figures and trustees being different persons--and that the Telegraph is stringing together lightly sourced gossip about a competitor.

However Rushton may have relied entirely on the reporting of Stephen Foster at More About Advertising, an independent news service focused on business reporting. Rushton links to Foster’s report in her article, in which Foster refers to his sources as “Sources at the Guardian newspaper,” “top levels of Guardian News & Media,” and “trustees of the Scott Trust.” Given Foster’s background in marketing, advertising, and business communications, it’s likely there are both sources within the newspaper as well as at trustee level who are concerned about financial losses and looking at major cost cutting.

The Guardian’s own management decisions have offered enough validation to undermine Alan Rusbridger’s denials about any discussions to leave print. The “digital-first” strategy announced in 2011 along with the move toward open journalism, described by Rusbridger in May this year in an interview with Nieman Labs, positions The Guardian to rely more heavily on breaking news in digital space and publishing there first, before moving the final story to print.

Roy Greenslade, The Guardian’s press blogger, actively countered Rushton’s Telegraph article, implying it was a “flyer”--in colloquial American English, a “trial balloon” or a “stalking horse,” an idea floated to test for or elicit reaction, possibly from competitors or from the newspapers’ constituency. Greenslade says the Telegraph story is false.

But Greenslade doesn’t respond to the original source story at More About Advertising; MAA’s Foster pushes back at Greenslade’s protests, saying, “Our story was well-sourced. It’s certainly what staff on the Guardian newspaper fear is happening...”

Further, Greenslade himself admits,

“Of course, as with every paper in this transitory phase between print and screen, its executives are always doing their sums. At some point the economics may work out in favour of going digital only. At present, that just isn't the case.”

Putting aside all the he-said-she-said parries and feints, the truth is that the economics Greenslade refers to are no longer some point in the future. They’re here and now, and The Guardian is not alone in its desperate need to rejigger its business model to fit them.

A study by the Pew Research Center's Project for Excellence in Journalism [PRCPEJ] reports,

"A new study, based on analysis of private financial data from 38 newspapers and in-depth interviews with senior executives from 13 companies, found that the papers studied are losing seven dollars in print advertising for every one dollar they are gaining in new digital revenue -- a ratio that shows the pace at which newspapers are shrinking."

Print is a losing proposition--that’s the bottom line.

Furthermore, a generation or two are moving away from print as part of a long-term trend. In February 2009, Pew Research Center for People and the Press [PRCPP] reported,

“Overall newspaper readership declined in spite of an increase in the number of people reading online newspapers: 14% of Americans said they read a newspaper online yesterday, up from 9% in 2006. This includes those who said they read only a newspaper online (9% in 2008), as well as those who said they read both print and Web versions of a newspaper (5%). ...”

In September 2010, PRCPP reported,

“...Print newspapers have seen continued decline in their daily readership – in September 2010, 26% of U.S. adults reported reading a print paper on any given day compared with 38% as recently as 2006. The decline spans all age groups. Looking at all Americans under age 50, the share reading a print newspaper on a given day has fallen by nearly half, from 29% in 2006 to 15% today. ...”

PRCPP’s most recent report issued last month notes that television also sees a loss of audience to online news sources:

“The percentage of Americans saying they saw news or news headlines on a social networking site yesterday has doubled – from 9% to 19% – since 2010. Among adults younger than age 30, as many saw news on a social networking site the previous day (33%) as saw any television news (34%), with just 13% having read a newspaper either in print or digital form.”

These are facts; it’s hard, cold data that GMG’s owners and management team cannot ignore and surely must be discussing internally, if not across the entire organization. Even The Guardian’s move to open an American operation will not increase print sales. It finds itself competing in a flailing market that includes Newsweek’s long-form reporting, and Newsweek cannot make a go of it in print.

At this point it’s merely a matter of timing. When does The Guardian--for that matter, any major print-based news organization--move to a different business model relying on digital delivery alone?

A lingering question is digital distribution; paywalls (subscription-based online content) have yet to prove successful although a number of outlets have employed this model for several years. The paywall model assumes that the audience brings their own device and downloads content at will. What if there was another untried model that could offer the portability of a newspaper but at a substantially reduced cost to both the newspaper and reader, while offering a subscription-based plan similar to print newspaper’s business model?

In 2009, Business Insider noted that

“ costs the [The New York] Times about twice as much money to print and deliver the newspaper over a year as it would cost to send each of its subscribers a brand new Amazon Kindle instead.”

BI’s premise at that that time was based on a Kindle device priced at $359. Another source further down in the article indicated that BI was quite low on its estimates of the NYT’s print costs, making the $359 device even more attractive.

But this is now--and today’s lowest price Kindle (without advertising) is $89, 75% cheaper than the 2009 version used in BI’s estimates. Other e-reader and tablet manufacturers have experienced similar price decreases since 2009 as technology matures and economies of scale improve.

The news reading audience is ripe for a mobile e-reader/tablet business model, based on PRCPEJ’s report published this month:

“While most, 55%, of tablet news users say the news they get on their tablet is replacing news they would have gotten in other ways, nearly as many, 43%, say the news they get there is adding to the overall news they consume.  And when we look at those who get news across all four of the platforms we asked about (tablet, smartphone, laptop/desktop and print), a solid majority, 58%, said their tablet news is adding to the overall amount of news they consume.

In addition, almost a third of respondents, 31%, said they are spending more time getting news now that they have a tablet. That is nearly identical to the 30% who responded that way in 2011. Just 12% say they get less news now.

Similarly, 31% say they are getting news from new sources on their tablet. Again, that is nearly identical to 2011, at 33%.”

This is where the growth in news is located, in mobile platforms.

The question isn’t whether The Guardian will ditch print or not, nor who said what to whom and when on this matter. It’s a question of whether The Guardian will get the jump on any other major print news outlet in the new mobile digital news platform.

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