[Re-] establishing the relevance of legacy news organizations

Legacy news organizations (newspapers, magazines, and broadcasters) are confronting three critical relevance challenges as the digital world matures: Changing business configurations and characteristics, declining value of traditional news and informational content, and unhealthy attitudes toward audiences. These challenges will need significant attention if they are to be successful in the new information environment. 

During the twentieth century news products were widely used, fast-moving consumer goods. Because media operated in relatively inefficient markets, news organizations were cash-producing investments with high cash flows that yielded high profits. Newspapers had asset-heavy balance sheets and excellent equity positions.

The business drivers of the legacy news industry in the latter half of the twentieth century were growing consumption in absolute audience sizes (but declining penetration that most executives ignored). Companies changed high prices for advertising and set low prices (or no price) for consumers. They had the ability to self-finance operations and growth, carried relatively low debt loads (with the exception of a few firms during acquisition binges in the late 1990s and first decade of the millennium), and their shares were highly desired by investors.

Those conditions have changed markedly. The emergent business characteristics are that news is a low-demand consumer good with niche audiences, producing low cash flow, requiring asset-light balance sheets, and producing normal rather than excess profits.

Today there is diminishing consumption of news in traditional forms by audiences and advertisers, increasing prices for audience consumption and decreasing prices for advertising in many media. Low debt loads have become a necessity and most news organizations are no longer attractive investments. These changing characteristics and business factors are not a short-term problem, but represent a comprehensive transformation of the industry.

Compounding these business challenges is the reduced value of news and information content provided by most news organizations. Fifty years ago, you had to read a newspaper if you wanted to know what the weather was going to be, whether your favorite team won the match last night, whether share prices of your investments were up or down, what was happening in the school your children attended, whether the government was planning to increase taxes, whether the conflicts in other parts of the world were going to affect you, and what commentators were saying about public affairs.

Today, we have enormously increased amounts of news and information available from a wide variety of paid and free sources. At the better end of the spectrum is expert journalism in which economists, scientists, bankers, and other cover many topics of interest and specialized independent journalists and news organizations that are covering military affairs, social benefits, and corruption. Unfortunately, the overall trend is toward a narrower form of news and information, with reduced focus on issues, oversight, and analysis, and an inordinant supply of celebrity, sports, and entertainment news.

If legacy news providers are to overcome the content challenges, they will need to rethink and improve the value of content on all their platforms and strive to make their news and information unique. The content of news organizations will need to be reconceptualized and can’t just be moved across platforms because each is a different product, used in different ways by consumers, and needs different types of news and information to be prominent and presented in different forms.

Of equal importance, news organizations and journalists will need to interact with audiences in new ways that are outside their comfort zones. This is problematic because journalism has traditionally had highly paternalistic role definitions, seeing its functions as educating the rabble, guiding thought and opinion, protecting social order, and comforting the people. These definitions combine with professional values promoting wariness of social alliances and distrust of sources of information to make most journalists stand separate from the society and people they cover.

Those attitudes create significance relevance problems in the digital world because it is networked and collective, based on relationships and collaboration, and relies on connections built on shared values and interests, acceptance, transactions, reciprocity, acceptance, and trust. The public is increasingly adopting values and norms of the digital world and this is creating many conflicts with journalism.

Journalism remains firmly rooted in the material world which is based on structured relationships, privacy and concealment, property, hierarchy, control, and formality. But the digital world is based on more amorphous relationships, revelation and transparency, sharing, collaboration, empowerment, and informality. Consequently many news organizations have difficulties relating to the public in the digital world and are struggling to adapt.

For news organizations, adjusting to the new world is not simply a matter of finding new revenue, moving content to new platforms, and maintaining existing relationships with the public. It will require a complete rethinking of the roles and functions of news media, how they fit into peoples’ lives, and where they are positioned in the new information environment. These are enormous challenges and need to receive increased attention.

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Many journalists can't provide the value-added journalism that is needed today

Journalists pretend they spend their time investigating the intricacies of international affairs, covering the inner workings of the economic system, and exposing abuses of political and economic power. Although many aspire to do so (and occasionally do with great effect), the reality is far from the imagined sense of self.

Most journalists spend the majority of their time reporting what a mayor said in a prepared statement, writing stories about how parents can save money for university tuition, covering the release of the latest versions of popular electronic devices, or finding out if a sports figure’s injury will affect performance in the next match.

Most cover news in a fairly formulaic way, reformatting information released by others: the agenda for the next town council meeting, the half dozen most interesting items from the daily police reports, what performances will take place this weekend, and the quarterly financial results of a local employer. These standard stories are merely aggregations of information supplied by others.

At one time these standard stories served useful purposes because newspapers were the primary information hubs of the community. Today such routine information has little economic value because the original providers are now directly feeding that information to the interested public through their own websites, blogs, and Twitter feeds. Additionally, specialist topic digital operators are now aggregating and organizing that information for easy accessibility.

Town councils place their agendas and voting reports on their own websites, many police and fire departments operate continuously updated blogs and twitter feeds that provide basic emergency reports and what is being entered in their blotters and logs, performance centers and concert promoters offer websites and digital notifications of upcoming activities and events, and companies and business information media offer direct distribution of financial reports and news releases to the public. All of these are stripping the value from newspaper redistribution of those kinds of information and making people less willing to pay for provision of that news.

To survive, news organizations need to move away from information that is readily available elsewhere; they need to use journalists’ time to seek out the kinds of information less available and to spend time writing stories that put events into context, explain how and why they happened, and prepare the public for future developments.  These value-added journalism approaches are critical to the economic future of news organizations and journalists themselves.

Unfortunately, many journalists do not evidence the skills, critical analytical capacity, or inclination to carry out value-added journalism. News organizations have to start asking themselves whether it is because are hiring the wrong journalists or whether their company practices are inhibiting journalists’ abilities to do so.

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Changing frequency of newspaper publication is not a sign of the apocalypse

The number of newspapers that have reduced their publication frequency in response to market changes and economic conditions continues to rise.

This year the Times-Herald in Newnan, Georgia shifted from 7 days a week to 5 days per week. The New Orleans Times-Picayune moved to 3-day per week schedule, as has The Patriot-News in Harrisburg, Pa., and many papers in the Advance Publications group.

In doing so, the papers are bolstering their digital publications and producing in physical form only on days that most interest retail advertisers. From the financial standpoint, these moves make a great deal of sense.

Reactions to the changes have ranged from disbelief to resignation in the journalism community. Many have bemoaned the loss of dailies and argued non-dailies cannot possibly serve their communities as well. That argument is problematic, of course, because there have typically been 3-4 times more weeklies than dailies in the U.S. and many have done far better jobs covering towns and neighbourhoods than dailies.

The assumption that 7-day per week publication is, and has been, the norm is another example of ahistorical and baseless views spread about the industry these days. In 1950 less than one-third of newspapers (549 papers) published a Sunday edition and the number with Sunday editions peaked at 917 in 2000, being published by just two-thirds of all papers. Saturday editions were not the norm until well after mid-twentieth century. The appearance of high frequency daily publication was fueled by the demands of advertisers.

If one considers the definitions of daily publication one finds that it is nowhere near 7 days per week. The internationally accepted definition of a daily newspaper is a paper published only 4 days per week.

This is not to say that the industry is without problems. The changes in publication frequency do reveal how the inordinate dependence on advertising revenue has shaped the industry and how wealth continues to be stripped from newspapers.

The changing frequency should be seen as part of the evolutionary shift toward digital only publication--a shift that is occurring at a varying pace in different types of papers and markets. But it does not mean that journalism in print, in print and digital combinations, and in digital-only forms cannot serve community needs.

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Digital journalism reaches sustainability, but transitional business problems interfere

The income streams of digital news providers continue to grow and many have now reached the point of sustainability. Fundamental financial and business problems, however, are keeping publishers from moving out of print and becoming digital-only operators.

This leads many publishers and journalists to continue bemoaning the fact that digital media do not provide as much income as print and many still argue that organized, regular newsgathering and distribution cannot survive in a digital-only environment. They point to the fact that digital advertising produces only about 15 percent the income of print advertising—largely because it does not appeal to retail, display advertisers--and that paid circulation for digital products is growing slowly.

Their analysis is flawed, however, because publishers do not require as much revenue online as offline because the costs of digital operation are so different.

Editorial operations account for only about 10-15 percent of total costs of operation of print newspapers, but they are the primary cost for digital operations. About half of the costs of print are taking up by printing and expenses for getting papers to readers; when the costs of paying for and maintaining buildings and land used to house presses and circulation equipment are factored in, those costs rise to about 60 percent of total costs. Expenses to maintain the large advertising operations found in print newspapers add another 10 percent to overall costs and the managerial costs due to the large number of personnel and functions in non-editorial activities add about another 5 percent. Thus, switching to digital operations can take out at least three-quarters of the costs of print newspaper operation, making the lower revenue of digital operation sustainable.

A growing number of newspaper companies are already generating 15-20 percent of their total revenue from digital operations, making nearly enough money to sustain the kinds of journalism practiced by legacy news media. So why does negativity about the future of journalism remain so high and why are newspapers not yet moving to digital-only operation?

There are three primary reasons:

1. Print newspapers still continue producing above average returns compared to all industries. No publisher is willing to throw away those operating profits even if the costs of print operation are higher than digital.
2. Retail advertisers get more return on investment from newspaper advertising than any other form of advertising, including digital. As long as they remain willing to advertise in newspapers, no publisher is willing to give up the revenue stream and operating profits that they now provide.
3. Owners of print newspapers have a great deal of capital tied up in facilities, printing and distribution equipment that cannot be withdrawn because few buyers want to acquire the used equipment today.

The fundamental challenge today isn’t that digital journalism has not reached sustainability; its how does a publisher transition from the print to digital-only operation in a way that is financially feasible and desirable.

The transition is critical for society because it will bring with it the reportorial strength and organization that exists in newspapers. That is something that digital startups do not provide because they generally lack the capital to build and sustain staffs as large as those of print newspapers and because they lack the reputations and brand identity of established papers.

Newspaper owners, publishers, and journalists then need to stop decrying the digital revenue problem and start focusing on solutions to the business challenges of when and how to realistically reduce and end the print operations. It will happen at some point in the future; the problem is how to plan and manage the switchover.

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Is the future of digital journalism an outside job?

Making small digital news providers sustainable has become the holy grail of journalists and the search continues for workable business models and revenue streams.

Advertising may produce some revenue, but it will never generate sufficient resources to support digital journalism because so little advertising money is available for sites with small audiences. About three-quarters of all online advertising goes to the top 10 sites and Google, Facebook, Microsoft, and Yahoo account for about 60 percent of all online revenue. This leaves very little advertising expenditures to be contested among all other players--of which news providers are only a small fraction. At the same time, the prices paid for online advertising are falling because there are so many sites offering advertising, the advertising inventory is nearly infinite, and audiences continue fragmenting.

This means the majority of funding for start-up digital journalism must come from elsewhere and online news sites—especially start-ups—are having mixed success trying to construct multiple revenue streams from philanthropy, memberships, events, consulting services, and payment systems. Both large legacy news organizations that dominate provision of news in the digital space and free automated aggregators are hampering efforts of small sites to develop audiences. The primary successes that can be observed have been for start-ups carrying out special forms of journalism or concentrating on highly specific topics.

The answer to sustainability may not lie in the business creation and business operational approach. The key to making emergent digital news providers sustainable may lie in the 18th and 19th century approaches to journalism, in which journalism was an avocation and not a profession (or at least only a part-time profession).

If one reviews the history of newspaper start-ups around the world, one finds that the bases of journalistic compensation were not journalism itself. It many cases it was funded by public employment—serving as postmasters, teachers, or other civil servants—or by operating commercial endeavours—such as printing firms, taverns, and retail shops (Even brothels funded the costs of newspapers in some towns in the Western U.S. during the nineteenth century).

The current inability to effectively fund small-scale digital journalism means that we all need to be thinking more broadly about how we can support the functions and people involved in them. If the past is a guide, we may need to return to provision of local journalism as community activism, political activity, or business support service—all of which played significant roles in establishment of news provision in years past.

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What Makes Good Journalism?

Journalists and others concerned about the status of the news industry in North America and Europe keep arguing that we are getting poorer journalism because of the economic state of the industry. But when you ask them “what makes good journalism?” they find it nearly impossible to articulate the concept.

Those trying to articulate the elements good journalism tend to use comforting and immeasurable platitudes and to describe it through attributes based on professional practices: pursuit of truth, fairness, completeness, accuracy, verification, and coherence. These are not a definition of quality, but a listing of contributors to or elements of quality practices. Each attribute alone is not sufficient for good journalism and degree to which each contributes is unclear.

In practice, most of us settle on identifying journalistic quality by its absence or by its comparison to poor or average quality journalism. Thus we know it when we don’t see it or we describe by giving examples of excellent journalism.

Other industries are far better in establishing their definitions of quality. If you ask what is quality in washing machines, the answer is that it quality machines clean clothing more effectively, operate quietly, are safe, and are durable and reliable. All of those can be measured by specific indicators of dirt and stain removal, water and energy use, noise decibels generate, user injury rates, and breakdown rates. A quality manufacturer strives for better performance on those measures, provides effective support and service, handles feedback and complaints well, and strives for high customer satisfaction.

The reason quality journalism is difficult to describe is because it involves a body of practices and the mental activity that goes into those practices. Good journalism results from the information gathering and processing activities, PLUS the knowledge and mental processes applied to it.

It is thus labor intensive; it involves collecting, analysing, structuring and presenting information. The best journalism comes from knowledgeable and critical individuals determining what information is significant, backgrounding and contextualizing it, and thinking about and explaining its meaning. It is a creative and cognitive activity. It is difficult to articulate what makes good creative and cognitive activity and nearly impossible to measure these mental processes. Thus, we are forced to use surrogate measures of quality journalism.

Good journalism involves engaging language and fluid prose, but it is not merely a well written and good story; it is not necessarily evident in stories that make the most popular list of stories or are most shared on social media. Good journalism involves stories that have import, impact, and elements of exclusivity and uniqueness; it wrestles with issues of the day, elucidates social conditions, facilitates society in finding solutions to challenges, and is independent of all forms of power. Good journalism is rational and critical; it is infused with scepticism, but not cynicism.

Although it is difficult to effectively measure such attributes of quality journalism, it should be much easier to define and identify quality journalism providers. There are some surrogate and attribute measures available to rate them, such as the percentage of total costs devoted to editorial costs, the amount of serious news content, the percentage of content originated rather than acquired, the amount and handling of errors, levels of reader satisfaction, and brand reputation.

In the end, however, the question of what makes good journalism has to be answered by answering the queries: Good or valuable to WHOM? Good or valuable for WHAT? Only then can one begin to establish direct measures that determine the effectiveness of journalism in achieving those objectives.

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