When did the newspaper bubble start to burst?

On Reuters, Jack Shafer ponders the question of who was the first company to abandon ship when the newspaper industry first began to founder. As far back as 1991, Warren Buffett had warned that newspapers were no longer the value proposition they had been, and he would not be buying any more of them. But all through the ‘90s and the early ‘00s, companies continued snapping up newspapers, and newspaper companies continued expanding their facilities.

For there to be buyers, of course, there have to be sellers, but Shafer doesn’t think any of those sellers were looking ahead to the crash of the newspaper in the Internet age—rather, their owners were just tired of being in the newspaper business and wanted some fast cash. The first ones with the foresight to get out were some small newspaper owners, but more notably the Thomson family, who owned over 140 papers in the mid ‘90s but had exited the market by 2000, investing in electronic information instead and, in 2007, buying Reuters.

Thomson had seen its profit margins fall from 33.9% in 1987 to 17.6% in 1997, and saw the writing on the wall. Others didn’t—and between news readers’ migration to the Internet and the recession that arrived in 2007, newspaper advertising revenues have fallen from their early-2000s peak to levels not seen since the 1950s.

Unlike the tech bubble, the newspaper bubble won’t come back because it can’t. Many of the businesses that once supported newspapers with ads don’t exist on the same level anymore (such as competing department stores and grocery stores) or have found better places to put their ad dollars (the Web, television and Craigslist) or have discovered that they don’t need to spend ad dollars anymore to sell their goods and services (Craigslist again).

As I blogged the other day, newspapers’ monopoly on advertising is gone and never coming back. That makes continued survival a problem.

Shafer notes a current theory that suggests small-town newspapers and national dailies will survive, but major regional dailies could be dead within 5 years as the current generation of print newspaper readers is not being replaced.

Isn’t it amazing how quickly newspapers are imploding? Here we have a national, or even international institution whose foundations were at one time considered bedrock solid, part of the very fabric of society itself. Now in just the space of a decade or so they’re struggling for survival as people find they can replace them in their lives with something better.

Sort of makes you wonder if print book publishers might see their future written there as well. Well, actually it’s pretty clear they do, and that’s why they’re fighting Amazon so hard.

4 Comments on When did the newspaper bubble start to burst?

  1. When an industry refuses to recognise the realities of disruptive technology, this is what happens.
    The newspaper business has steadfastly refused to face up to their comprehensive failure to monetise their product on the internet. How long can it go on ? And in my view this is essentially because they have insisted on going it alone and have been deceptively seduced by the individual online prescription method.
    What matters on the net is scale, and customers are used to demanding ease of use and good value. None of the online newspaper subscription system offer these two solutions because of their go it alone policy.
    There is clear and evident market demand, imho, for news and that will never disappear. Newspaper organisations are the best people to deliver it. But they will implode unless they get together and form a JV with someone like Skype or Paypal to establish a global micropayment system where readers can visit a whole range of newspapers and automatically clocked 2-9c per visit or article in a painless and seamless way. In my view this is the ultimate and only solution to the newspaper industry.

  2. Clytie Siddall // June 17, 2012 at 4:27 am //

    I agree with Howard about scale, access and micropayment. I also think niche publications will survive via subscriptions: in Australia, Crikey and The King’s Tribune (both independent and quirky news/views sites) do well that way. People will pay for news and good writing.

  3. As a media buyer specializing in print classifieds, I have a lot of daily papers make bad decisions in their classified departments that cost them business. A lot of metro and larger daily papers that print daily no longer print classified sections every day of the week. When we have a client that needs to run ads ASAP, they sometimes have to wait multiple days before they can go to press. Maybe I’m mistaken, but classified ad pages should be pure income for the publications, what would make them cut back on an income source at this day and age.

    The second problem that I find in the classified departments is that many of the papers are inflating their rates and forcing classified advertisers to run online in conjunction with print. Many advertisers who are on a budget are being forced to choose other outlets for their ads.

    Editorial departments haven’t done as much as they could to compete with online news sources either. They have become lazy and over dependent on wire stories to fill their pages. The only way they are going to keep their subscriptions up is to do their own local stories. Running AP stories that you can find with a quick “Google” online is not going to sell papers!

    Long story, short… Newspapers have been their own worst enemy in business. It’s not too late to save them, but they are going to have to make major changes to their business models if they are to compete and be profitable!

  4. Leigh – I believe you make a lot of good sense there. There is a long history in businesses that are suffering sinking sales, to keep high prices because of their mistaken logic that they need to earn X amount from it so when numbers fall they keep prices high or increase them. I see it a lot in other sectors.
    I also agree you are abs right about story development. I know it is expensive to employ full time reporters but newspapers must differentiate themselves from online news if they are to stay alive. I believe readers in towns and cities have a hunger to read original reporting on local issues and this is not something that is dealt with well by the big media outlets.

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