Economists on pay-per-view online print news

Tyler Cowen has provided an interesting economist's perspective on the plans of Rupert Murdoch and News Corporation to start charging subscription fees for online news. He doesn't think that it will work, but can recognise that on this occasion the capacity of news proprietors to collude around common business interests will have an impact. He does think that public service media will come into their own as providers of free, quality news content.

This time around plausibly all the major newspapers will follow suit and charge for their content as well. It's like one of those Lester Telser/George Bittlingmayer models except now we are at the point where the major players realize they are all below their average cost curves permanently and they are not willing to incur losses indefinitely. Since we've not yet been in an all-charging equilibrium, we don't know what the price will be. What does the NYT business model look like at $50 a year for access, with price breaks for India?

In that equilibrium does any newspaper gain from defecting and moving back to p = 0? Is there a stable core to the game? Isn't Murdoch simply signaling that all the newspapers ought to collude?

Won't NPR, and NPR.org, be the big winner?

I'm not saying the Murdoch move is going to "work." I am saying that if the game has no core the idea of charging for content will not go away.

Joshua Gans is also thinking about the issue at Core Economics. Key point here is that that "producing news involves high fixed costs and low marginal costs.".

More on Murdoch and pay-per-view news

Roy Greenslade offers this commentary on Rupert Murdoch's announcement that News Corporation news titles will go towards pay-only access to online content:

I have never received so many calls from so many places across the world to talk about the momentous decision by Rupert Murdoch to charge people for access to his newspaper websites.

As so often with statements by the world's most famous media mogul, the announcement is being treated as the word of god. Where Rupert goes, said several TV and radio presenters, others are sure to follow.

Excuse me if I disagree with those slavish reactions, and with Murdoch and, incidentally, with Lionel Barber, the editor of the Financial Times, who also believes that paid-for content is inevitable.

I tend to agree with Jeff Jarvis (Murdoch's move to charge for content opens doors for competitors), Guido Fawkes (Murdoch bucks the market) and John Temple, publisher of the now-defunct Rocky Mountain News (charging for a basic news service is flawed).

But I concede that there are many supporters of Murdoch's move too. The split is both philosophical and practical. There are those (with whom I agree) who believe that the digital media revolution is in the process of transforming journalism and those (such as Murdoch and most traditional newspaper publishers) who believe the net is merely another platform rather than an instrument of transformation.

It follows that if you wish to continue to fund traditional journalism that you require similar revenues, hence the Murdoch charging strategy.

Oddly, there are advocates of Murdoch's approach who believe him to be a journalistic hero and even a revolutionary, as I discovered when taking part yesterday evening in a BBC World Service discussion.

I was taken by surprise by the passionate support for Murdoch offered by by Tim Luckhurst, professor of journalism at Kent University (and a former editor of The Scotsman).

This also from James Harkin, also available (free) from The Guardian:

The cheerleaders of a free, digital utopia want to resurrect the mass market for news by having us chat to each other and our newspapers all day long. But between the fusty old newspapermen who refuse to tweet and the gadgeteers who do little else, there is little evidence that the rest of us have the time to be cogs in an all-purpose electronic machine. Long before the net tore apart its business model, the truth is that many newspapers were looking bloated and fat, as if lifestyle supplements and the advertising which went along with them was all readers wanted.

What they wanted, it turns out, was focused content, written by journalists who know what they're talking about. The freshest news outlets springing up in the US, for instance, are Politico, the magazine aimed at political junkies which broke the scandal of the Washington Post charging companies for access to its reporters, or TMZ, the well-connected celebrity mag which broke the news of Michael Jackson's death.

News organisations will, as a consequence, divide into populist monoliths which try to be all things to all people – witness the growth of news aggregators, for example – or, more promisingly, slim down and concentrate on what they know about.

For those that can hold their ground and know their niche, the good news is that the advertising industry will eventually have to catch up to the fact that the production of news is moving away from national mainstream outlets into a more global patchwork of niches. What matters then is whether newspapers have anything distinctive enough to pay for, or audiences who are interested enough in reading them to see their demographic data sold on to advertisers in tune with their specific interests. In one way or another, Rupert is right and the free-lords are wrong – we'll end up having to pay for the news that we really want.

If I'm going to pay for The Australian, I want better sub-editing than this

If John Hartigan believes that "the willingness of readers to pay for [news] will depend on the quality of the content", he may want to note how his own pieces are sub-edited in his own News Limited papers. Kudos to Tim Burrowes from Mumbrella for spotting this.

The bad sub-editing seems contagious Rod McGuinness spotted this with Christian Kerr's House Rules column online, which has remained untouched for three days.

Aged News?

Jon Stewart's The Daily Show is already writing the obituary for newspapers. Check the question here about whether the New York Times only has "aged news", and the Woodward and Bernstein questions.

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
End Times
thedailyshow.com
Daily Show Full Episodes Political Humor Newt Gingrich Unedited Interview

News goes for The Punch

News Limited went public on Monday June 1 with its new online site The Punch.

According to editor David Penberthy (former editor of the Sydney Daily Telegraph):

The Punch is a new opinion website aimed at every Australian with a love of ideas, discussion and debate.

It’s not a fancy, la-di-dah site aimed at people with three university degrees, nor is it a site for yobbos who want to engage in mindless abuse.

It’s a place for spirited, sleeves-up, energetic, engaging commentary, written by people who enjoy writing, for people who enjoy reading.

It has a full-time team of four writers (Penberthy, Tory Maguire, Leo Shanahan and Paul Colgan), and an eclectic group of signed on occasional contributors:

Our political contributors include Mike Rann, Maxine McKew, Anthony Albanese, Joe Hockey, Mark Arbib, Nick Xenophon, Barnaby Joyce, Jason Clare, Scott Morrison, John Cobb, Jamie Briggs, George Brandis, Chris Pyne, Michael Costa, Bronwyn Bishop and Peter Dutton, as well as Mark Textor, Peter Lewis, David Gazard and Tim Gartrell.

Our sportswriters include Kate Ellis, Ben Buckley, Anthony Sharwood and Luke Foley, on business and economics we have Clive Mathieson, Steve Keen, Frank Zumbo and Cameron England, and a broad suite of writers including Catharine Lumby, Tracey Spicer, Fergus Linehan, Ed Charles, Clive Small, Matt Kirkegaard and Nedahl Stelio covering entertainment, technology, food, fashion, crime, movies, music and trends.

The Punch will also include exclusive original content from established and emerging News Limited journalists including Joe Hildebrand, Dennis Atkins, Di Butler, Alan Howe, Alex Dickerson, Tory Shepherd, as well as journos from other outlets including Leigh Sales from the ABC and Fiona Connolly from ACP.

Much of our content will be News Limited content. But it will also come from people at independent news sites, from people who aren’t in journalism but are great writers, from people at rival news organisations whose work on The Punch opens them, and us, up to new audiences. And every morning we will link through to content on sites which we own, but also on sites which we don’t own, to give you the most enjoyable reading experience.

Suggesting that Penberthy may be reading this blog, he notes:

Against this backdrop, our hope for the site is this: at a time when every tenured communications academic on the planet is sending tiny urls via twitter, linking you through to wrist-slashing stories about the apparent death of journalism, we want to demonstrate that journalism is alive and well.

Commentary on The Punch can be found online at Larvatus Prodeo, Club Troppo and Public Opinion. Not surprisingly, the blogosphere is not enthised by News's entry into their patch.

Two lines of cricicism have been most common. The first is whether you can make a site of this nature work without some commitment to quality writing, even if that means writing for "people with three university degrees". Hell, I will have five by year's end (six if you see Honours as a separate year!), and my own suspicion is that it is a lot more common than David Penberthy may be allowing for to find people who regualrly read and post to blogs having above-average levels of educational qualification (and don;t interpret that as saying they are smarter, just sayin' ...).

The second is that it is opinion, not journalism, and that most of the contributions come at no cost. All true, and it may be causing some ructions wihtin News, particularly for those who get paid to write opinion, and now face also having to write for The Punch, or perhaps having their work replaced by material sourced from The Punch. This may indeed come to pass - I first became aware of the site by reading Penberthy's piece on Australians abroad on The Australian online - but it does seem odd for bloggers to be criticising other media outlets for drawing on crowdsourced free labour as an alternative to paid professional journalism. Isn't that what many have been arguing is the future?

At any rate, the fact that News has gone for The Punch indicates above all else that the Crikey model (and that of other sites such as On Line Opinion) is getting audiences and commerical traction, and that going head-to-head with them is a sure sign that this is being acknowledged. That siad, we'll know whether this site is getting readers in a way that matters when we see regular postings from the likes of Mike Rann, Anthony Albanese, Barnaby Joyce and Chris Pyne.

New York Times Creates Social Media Editor

Jennifer Preston, the former editor of the New York Times regional sections, has been appointed as the paper’s first social media editor. Preston will not be handling a new section. The job, which entails coordinating the newsroom’s use of social media, sounds similar to the one Shirley Brady was hired to do when BusinessWeek Online tapped her as its first engagement editor last year. Among other things, Brady has helped the edit staff become more conversant with using Twitter and blogging, as well as working with readers on blog posts for the site. (On Twitter, Brady also pointed to other social media editors, such as LATimes.com’s Andrew Nystrom and Mathew Ingram, who is the communities editor at The Globe and Mail, as other examples of how pubs have been carving out new newsroom duties.)

The New York Times Co. (NYSE: NYT) flagship is full of very active Twitter users. Interestingly enough, the news of Preston’s appointment was first publicly conveyed by NYT deputy managing editor Jon Landman on Twitter. Incidentally, Valleywag pointed out that Preston’s own Twitter updates are private.

I spoke to Landman briefly, and he denied Valleywag’s speculation that Preston’s role will be to clamp down on the newsroom’s after several reporters revealed the details of an editorial meeting a few weeks ago using the microblogging site.

“This isn’t about policing, although that is a small function [of the social editor’s role], but as only as a matter of making things consistent. It’s not the main purpose at all,” Landman told paidContent. “It’s really just the opposite of policing. it’s about helping everybody figure out how to use social media as a tool for journalists. A number of people have discovered social media a form for marketing and promotion, but it’s also got explicitly journalistic uses. Some people in our newsroom know and use it to their advantage. Some don’t and could use that know-how.” (Landman’s staff memo on Preston’s promotion is here, via Nieman Labs)

Preston, a reporter and editor for New York newspapers for close to 25 years, is charged with developing new initiatives for the reporters to use, in terms of sharing information and reporting it. This comes as the NYT has been ramping up its social media offerings for its readers, such as the Times Wire, which provides links to the paper’s online articles and blog posts in a headline-based reverse chronological feed that updates every minute, and the second version of its Times Reader e-paper.

Link here. Thanks to Anna Daniel for pointing this out to me.

The Economist on the future of news media

Good analysis from The Economist about the future of news media:

The internet is killing newspapers and giving birth to a new sort of news business

THE race is crowded, but San Francisco stands a fair chance of becoming the first major American city without a daily newspaper. The San Francisco Chronicle, founded in 1865, is trimming its already pared-down staff in an attempt to avoid closure. And if it does disappear? “People under 30 won’t even notice,” says Gavin Newsom, the city’s mayor.

Most industries are suffering at present, but few are doing as badly as the news business. Things are worst in America, where many papers used to enjoy comfortable local monopolies, but in Britain around 70 local papers have shut down since the beginning of 2008. Among the survivors, advertising is dwindling, editorial is thinning and journalists are being laid off. The crisis is most advanced in the Anglo-Saxon countries, but it is happening all over the rich world: the impact of the internet, exacerbated by the advertising slump, is killing the daily newspaper.

Does that matter? Technological change has destroyed all sorts of once-popular products, from the handloom to the Walkman, and the world has mostly been better for it. But news is not just a product: the press is the fourth estate, a pillar of the polity. Journalists investigate and criticise governments, thus helping voters decide whether to keep them or sack them. Autocracies can function perfectly well without news, but democracies cannot. Will the death of the daily newspaper—the main source of information for most educated people for at least the past century, the scourge of corrupt politicians, the conscience of nations—damage democracy?

Picked apart

A newspaper is a package of content—politics, sport, share prices, weather and so forth—which exists to attract eyeballs to advertisements. Unfortunately for newspapers, the internet is better at delivering some of that than paper is. It is easier to search through job and property listings on the web, so classified advertising and its associated revenue is migrating onto the internet. Some content, too, works better on the internet—news and share prices can be more frequently updated, weather can be more geographically specific—so readers are migrating too. The package is thus being picked apart.

The newspaper’s decline is both cause and effect of the worrying finding by the Pew Centre that the number of Americans aged 18-24 who got any news at all the previous day has dropped from 34% to 25% over the past ten years. But that figure may be less troubling than it looks. Because newspapers pack together all sorts of different content, many of those who claimed in the past to have seen some news probably did so for a few seconds before turning the page to the sports scores. Acquaintance as shallow as that with the news is probably no great loss to society; Pew surveys of general knowledge suggest that young people are about as well (or badly) informed as they used to be.

And the newspaper companies’ tribulations do not necessarily presage the demise of the news business, for they stem in part from the tumultuous and expensive transition from paper to electronic distribution. News organisations are currently bearing two sets of costs—those of printing and distributing their product for the old world, and providing digital versions for the new—even though they have yet to find a business model that works online.

Up to now, most have been offering their content free online, but that is unsustainable, because there isn’t enough advertising revenue online to pay for it. So either the amount of news produced must shrink, or readers must pay more. Some publications, such as the Financial Times and the Wall Street Journal, which has more than 1m online subscribers and has just promised to develop a new system of micropayments for articles, already charge for content. Others will follow: Rupert Murdoch, the Journal’s owner, has said he expects his other titles to start charging too. With news available free on Google and Yahoo!, readers may, of course, not be prepared to pay even for deeper or more specialised stuff; but since they do in the paper world, where free-sheets and paid-for publications coexist, there seems no reason why they wouldn’t online.

Better mobile devices may encourage them to do so. Apple’s iPhone is the first reader-friendly mobile phone, and the latest update to its software, due shortly, will enable news providers that currently give away content on the iPhone to start charging for it. Amazon has just unveiled a new, larger version of the Kindle, its e-book reader, better suited to displaying newspapers. Similar devices are available from other firms, with many more on the way. Better technology coupled with new payment systems will not solve the acute problems faced by newspapers today, but should eventually provide new models to enable news to flourish in the digital age.

And already, there are signs that it will (see article). New sources of news are proliferating online. Many, it is true, are unreliable. Most are badly funded. Some are the rantings of deranged extremists. But some—like Muckety, an American site which enriches news stories with interactive maps of the protagonists’ networks of influence, and NightJack, the revealing and depressing blog of an anonymous British policeman, which won the Orwell prize last month—enhance society’s understanding of itself, and could not have existed in the old world.

But the only certainty about the future of news is that it will be different from the past. It will no longer be dominated by a few big titles whose front pages determine the story of the day. Public opinion will, rather, be shaped by thousands of different voices, with as many different focuses and points of view. As a result, people will have less in common to chat about around the water-cooler. Those who are not interested in political or economic news will be less likely to come across it; but those who are will be better equipped to hold their rulers to account. Which is, after all, what society needs news for.

Note: they don't think pay-per-view news will work. At all. Interestingly, they find evidence that partisanship does work commercially, at least on the short term.

For more see here.

Declining classified advertising for Fairfax mastheads

Report from Eric Beecher on Crikey about classified advertising decines at Fairfax. I doubt if the problem is largely cyclical.

Here's a story you won't read in The Age or The Sydney Morning Herald tomorrow:

This newspaper is publishing 50 fewer classified advertising pages each week than it was a year ago, according to the latest research by Goldman Sachs JB Were. This reduction in advertising translates into at least $1 million off this newspaper's profits every week compared to a year ago.

That is the picture that emerges from the latest Goldman Sachs JB Were page-count statistics of Fairfax's major newspapers, released today. They present difficult reading for anyone who cares about the future of newspapers, and raise further doubts about the competence of the Fairfax management and board as trustworthy custodians of Australia's two greatest newspaper mastheads.

According to Fairfax CEO Brian McCarthy, speaking three months ago, the problems afflicting newspapers are purely cyclical.

"I have been around long enough to know this is only a short-term thing," he said.

"The law of economics will take place ... It's just a matter of working through the cycle."

He also argued that Australian newspapers are not affected by the same structural problems afflicting US and UK newspapers because Australian newspapers are better managed.

Today's page-count numbers -- continuing a trend that has been unfolding throughout this year -- show that average classified advertising pages in The Age, SMH and Financial Review were down 55% year-on-year in April, following declines of 47% in March, 41% in February and 40% in January. At the SMH, employment ads fell 60%, real estate 50% and autos 80%. At The Age, employment and auto ad pages declined by around 65% in April, while the decline in real estate pages fell 65% compared to last year. At the AFR, display classified property ads fell 62% and employment fell 49% on a year ago.

Another alarming trend to emerge from today's Goldman Sachs research is a large reduction in the total pages being published by the three Fairfax flagship newspapers. Each paper is running around 100 fewer pages each week than it did a year ago -- supporting the anecdotal evidence that as well as lopping off pages they no longer fill with ads, The SMH, Age and AFR are cutting hard into editorial pages to save costs (and deprive readers).

Every stakeholder in Fairfax -- readers, staff, shareholders and Australians who value their newspaper institutions -- should be praying that the company's CEO is correct in his thoughtfully historic analysis that the collapse in profits at his flagships "is only a short-term thing". And that he is also right about his contention that great management will save Australian newspapers from the maelstrom that is decimating the American press.

They should also be praying that Rupert Murdoch was wrong in his prognosis of newspapers last week:

There is no doubt the traditional newspaper business model has to change, even though the present situation I think has been greatly exaggerated by the current recession ... classified revenues are undoubtedly migrating to the web, probably not to return.

If Murdoch is right about classifieds never returning to newspapers, the $100 million+ that has evaporated from the annualised profits of The Age and SMH will also never return -- and that would raise a troubling question about the viability of the two newspapers that used to be the best in Australia.

Pressure on the Presses

An interactive guide from the Wall Street Journal on the sustained crisis that has been facing U.S. newspapers from 2006 to the present.

This is from the Asian edition. Not sure of there is the same enthusiasm for reporing on these development in the U.S. edition.

News Corporation's financial result

As was predicted on this blog (!!!!), Rupert Murdoch's News Corporation announced a dramatic fall in earnings in the second quarter of the 2008-9 financial year i.e. the period that the economic crisis hit from October-December 2008, with an operating loss of $US7.6 billion ($A11.6bn).

It gives no joy at all to foresee significant job losses at Rupert Murdoch's Australian newspapers. But I always had a sense, during the reporting of Fairfax's difficulties last year, of misplaced schadenfreude among News journalists. Moreover, a mindset of Murdoch good/Fairfax bad seemed to take hold, particularly at last year's Walkley awards, with Rupert Murdoch repeatedly hailed as the last, best hope for journalism.

Just as demonisation of Rupert Murdoch as the media antichrist was always misplaced, so too was his championing by the MEAA and others. At the time, it struck me that "I'll give this six months", as there was no apparent reason why the same forces hitting Fairfax newspapers (plummeting classifieds revenues, recession-hit advertising, declining newspaper sales, online competition for news) would hit the News stable.

As Matthew Ricketson notes, much of this commentary came from the pages of The Australian, where it was argued that News had invested in 'real' journalism, whereas Fairfax had succumbed to the dark side of online and celebrity fluff. What is not clear at News is the extent to which The Australian is insulated from the quite substantial cuts now coming to the rest of the News publications.

There is appeal to a 'flagship' publication, and the economics of online news do point to an opportunity here (e.g. The Economist, The Guardian, and Murdoch's recently acquired Wall Stret Journal), but the extent to which investors are pressuring media businesses that have a strong stake in newspapers or advertiser-financed television also cannot be underestimated.

Which way for News Corp in 2009?

There has been a lot of discussion about staff layoffs and alleged "dumbing down" of Fairfax newspapers in recent months, with a good deal of the discussion led by News Corp's national flagship newspaper The Australian.

This week sees the announcement of News Corporation's quarterly results for end-2008, and it could have considerable implications for News's Australian newspaper operations for 2009 and beyond. Note the view in this SMH article that investors increasingly view newspapers as a "legacy asset".

When the economy cratered last September, News Corp Chief Executive Rupert Murdoch quickly told investors his media empire would feel the pain.

After that, silence. With a week to go until quarterly results, investors wonder how bad things will be and are girding for sharper-than-expected profit declines, asset writedowns and perhaps more severe job cuts.

Punishing drops in the stock market, coupled with a slump in advertising spending, make it likely that News Corp will join peers such as Time Warner Inc and CBS Corp forced to revalue the assets on their books, analysts say.

So far, Murdoch has resisted big cuts for his 60,000-plus employees: News Corp has made limited cuts, including several hundred jobs at Fox Interactive Media, home of the MySpace social network. Media reports say more are on the way at The Wall Street Journal and New York Post newspapers, while Australian newspapers are also trimming staff numbers.

If Murdoch wants to keep the business healthy, it is time to make "hard decisions" and prune older media like papers, Pali Capital analyst Rich Greenfield said.

"We are concerned that the News Corp growth story, propelled by cable networks and Sky Italia, will be far less exciting over the next few years," Pali Capital analyst Rich Greenfield wrote in a note.

"It just feels like the legacy assets are weighing too heavily," Greenfield added in an interview. "I think they've been the most aggressive in trying to develop businesses with long-term returns on capital...where others initially didn't believe or thought the start-up costs were too high."

Journal cuts

One unit seen ripe for a writedown is Journal parent Dow Jones, which News Corp bought in 2007 for $US5.6 billion ($8.8 billion), or a 65% premium to its market value then. More recently, News Corp has been trying to cut costs at Dow Jones, including freezing employees' salaries this year.

US newspaper publishers have seen their shares lose half to nearly all their value in the past 12 months, prompting some to write down 20% or more of their assets.

Besides The Wall Street Journal, which has typically performed better than other newspapers, Dow Jones also counts local US papers, the Dow Jones Newswires, the Barron's financial weekly among its assets. News Corp also owns The Sun and Times of London and The Australian.

UBS analyst Michael Morris pointed to a $US25 billion writedown at Time Warner and a $US14 billion one at CBS. Assuming News Corp writes off a similar percentage, he estimated that it could write down $US10 billion, or about a sixth of its assets.

"In particular, we see possible issues at the broadcasting and publishing businesses, including Dow Jones," he said.

A writedown would not affect News Corp's daily performance, but it would be an admission the company paid more for acquisitions than it should have. That in turn could weigh on the stock price.

Bad news

News Corp's shares have fallen 67% in the past 12 months, underperforming peers such as Time Warner, Viacom Inc and Walt Disney Co.

Murdoch in recent months managed down shareholder expectations. In a statement in November, he said operating income would fall in the low to mid teens percentage points, instead of rising 4% to 6%.

He also warned that weaker overseas currencies, particularly the euro and pound, could hurt the New York-based News Corp. A little more than half its fiscal 2008 revenue came from North America and about a third came from Europe.

Many media companies have warned of more advertising sales declines. Magazine publisher and broadcaster Meredith Corp said automotive ad sale pacings are down 70% this quarter - a dire sign for companies such as News Corp.

Wachovia analyst John Janedis expects a 26% drop in operating income for fiscal 2009, which ends on June 30. Greenfield forecast a 30% drop, along with an 80% decline in TV profits.

Barclays analyst Anthony DiClemente forecast a 35% drop in revenue for News Corp's Fox TV stations in the second half of fiscal 2009.

In recent years, investors tolerated Murdoch's love of newspapers because his cable, satellite and interactive businesses were growing.

But MySpace competitor Facebook is grabbing more share of the Internet social media space. And Sky Italia's satellite business could suffer because of the weaker euro and a troubled Italian economy.

As if that were not enough, MySpace's $US900 million Internet search advertising deal with Google Inc expires in 2010, about the time economists expect the markets to recover.

"We do not believe a new Google search deal is likely to be as favorable," DiClemente said.

What will happen to the New York Times?

Michael Hirschorn in The Atlantic speculates about what could well be an impending crisis for the New York Times, which may come as early as May this year, and what it means for newspapers and journalism more generally.

Virtually all the predictions about the death of old media have assumed a comfortingly long time frame for the end of print—the moment when, amid a panoply of flashing lights, press conferences, and elegiac reminiscences, the newspaper presses stop rolling and news goes entirely digital. Most of these scenarios assume a gradual crossing-over, almost like the migration of dunes, as behaviors change, paradigms shift, and the digital future heaves fully into view. The thinking goes that the existing brands—The New York Times, The Washington Post, The Wall Street Journal—will be the ones making that transition, challenged but still dominant as sources of original reporting.

But what if the old media dies much more quickly? What if a hurricane comes along and obliterates the dunes entirely? Specifically, what if The New York Times goes out of business—like, this May?

It’s certainly plausible. Earnings reports released by the New York Times Company in October indicate that drastic measures will have to be taken over the next five months or the paper will default on some $400million in debt. With more than $1billion in debt already on the books, only $46million in cash reserves as of October, and no clear way to tap into the capital markets (the company’s debt was recently reduced to junk status), the paper’s future doesn’t look good.

...

Regardless of what happens over the next few months, The Times is destined for significant and traumatic change. At some point soon—sooner than most of us think—the print edition, and with it The Times as we know it, will no longer exist. And it will likely have plenty of company. In December, the Fitch Ratings service, which monitors the health of media companies, predicted a widespread newspaper die-off: “Fitch believes more newspapers and news­paper groups will default, be shut down and be liquidated in 2009 and several cities could go without a daily print newspaper by 2010.”

The collapse of daily print journalism will mean many things. For those of us old enough to still care about going out on a Sunday morning for our doorstop edition of The Times, it will mean the end of a certain kind of civilized ritual that has defined most of our adult lives. It will also mean the end of a certain kind of quasi-bohemian urban existence for the thousands of smart middle-class writers, journalists, and public intellectuals who have, until now, lived semi-charmed kinds of lives of the mind. And it will seriously damage the press’s ability to serve as a bulwark of democracy. Internet purists may maintain that the Web will throw up a new pro-am class of citizen journalists to fill the void, but for now, at least, there’s no online substitute for institutions that can marshal years of well-developed sourcing and reporting experience—not to mention the resources to, say, send journalists leapfrogging between Mumbai and Islamabad to decode the complexities of the India-Pakistan conflict.

Most likely, the interim step for The Times and other newspapers will be to move to digital-only distribution (perhaps preserving the more profitable Sunday editions). Already, most readers of The Times are consuming it online. The Web site, nytimes.com, boasted an impressive 20 million unique users for the month of October, making it the fifth-ranked news site on the Internet in terms of total visitors. (The October numbers were boosted by interest in the election, but still …) The print product, meanwhile, is sold to a mere million readers a day and dropping, and the Sunday print edition to 1.4 million (and also dropping). Print and Web metrics are not apples-to-apples, but it’s intuitively the case that the Web has extended The Times’ reach many times over.

The conundrum, of course, is that those 1 million print readers, who pay actual cash money for the privilege of consuming the paper, and who are worth about five figures a page to advertisers, are far more profitable than the 20 million unique Web users, who don’t and aren’t. Common estimates suggest that a Web-driven product could support only 20 percent of the current staff; such a drop in personnel would (in the short run) devastate The Times’ news-gathering capacity.

Also see:

"End Times: A Response"

A letter from The New York Times Company

Clay Shirky on Media in 2009

Digital media futurist Clay Shirky in conversation with The Guardian on what can be expected with newspapers, books, magazines and television in 2009:

Newspapers

The great misfortune of newspapers in this era is that they were such a good idea for such a long time that people felt the newspaper business model was part of a deep truth about the world, rather than just the way things happened to be. It's like the fall of communism, where a lot of the eastern European satellite states had an easier time because there were still people alive who remembered life before the Soviet Union - nobody in Russia remembered it. Newspaper people are like Russians, in a way.

Jeff Jarvis said it beautifully: "If you can't imagine anyone linking to what you're about to write, don't write it." The things that the Huffington Post or the Daily Beast have are good storytelling and low costs. Newspapers are going to get more elitist and less elitist. The elitist argument is: "Be the Economist or New Yorker, a small, niche publication that says: 'We're only opening our mouths when what we say is demonstrably superior to anything else on the subject.'" The populist model is: "We're going to take all the news pieces we get and have an enormous amount of commentary. It's whatever readers want to talk about." Finding the working business model between them in that expanded range is the new challenge.

Why pay for it at all? The steady loss of advertising revenue, accelerated by the recession, has normalised the idea that it's acceptable to move to the web. Even if we have the shallowest recession and advertising comes back as it inevitably does, more of it will go to the web. I think that's it for newspapers. What we saw happen to the Christian Science Monitor [the international paper shifted its daily news operation online] is going to happen three or four dozen times (globally) in the next year. The 500-year-old accident of economics occasioned by the printing press - high upfront cost and filtering happening at the source of publication - is over. But will the New York Times still exist on paper? Of course, because people will hit the print button.

Books and magazines

If you pick a magazine at random, it will not interest you. For people who care about quality, it's easier to find it online. If it's a highly qualified niche magazine, something aimed at surgeons or firefighters, it's going online. There's no reason those things should exist.

The great advantage magazines have is glossy pictures. It's better to read on paper than on the web but it's much better to look at pictures on paper than on the net. Brides magazine is going to be the last one standing.

The book world is more secure. I think the big revolution is going to be print on demand. Imagine only having one browsing copy of every book in a bookstore. You could say "Malcolm Gladwell's Outliers looks good", and out pops a brand new copy. Why does a bookstore or a publisher have to be in the shipping and warehousing business?

TV

The big fight will be between passion and mass appeal but I don't think it's a question of who will win. It's not a transition from A to B, it's one to many. The question is who figures out the business model that says it's better to have 6 million passionate fans than 7 million bored ones? That is going to be the transformation because what you see with these user groups, whether it's for reality TV or science fiction, is that people love the conversation around the shows. The renaissance of quality television is an indicator of what an increased number of distribution channels can do. It is no accident that this started with cable.

And the BBC iPlayer? That's a debacle. The digital rights management thing ...let's just pretend that it was a dream like on Dallas and start from scratch. The iPlayer is a back-to-the-future business model. It's a total subversion of Reithian values in favour of trying to create what had been an accidental monopoly as a kind of robust business model. The idea that the old geographical segmenting of terrestrial broadcasts is recreatable is a fantasy and a waste of time.

What does the next decade hold? Mobile tools will certainly change the landscape, open spectrum will unleash the kind of creativity we've seen on the wired internet, and of course there will be many more YouTube/Facebook-class applications. But the underlying change was the basic tools of the internet. The job of the next decade is mostly going to be taking the raw revolutionary capability that's now apparent and really seeing what we can do with it.

More media trouble: Tribune and Fairfax

This item from Tuesday's Wall Street Journal via The Australian:

TRIBUNE Company has filed for bankruptcy protection, in a sign of worsening trouble for the newspaper industry.

In recent days, as Chicago-based Tribune continued talks with lenders to restructure its debt, the newspaper-and-television concern hired investment bank Lazard as its financial adviser and law firm Sidley Austin to advise the company on a possible trip through Chapter 11 bankruptcy, people familiar with the matter say.

Tribune owns eight major daily newspapers, including the Los Angeles Times, Chicago Tribune and Baltimore Sun, plus a string of local TV stations.

A Tribune spokesman said the company doesn't comment on rumours or speculation. A spokeswoman for Lazard didn't respond to requests for comment. Representatives of Sidley Austin couldn't be reached for comment.

Tribune's latest actions underscore the deepening distress enveloping Tribune and other newspaper publishers. Their businesses are being battered by dwindling advertising sales, and many are carrying debt loads that are unmanageable in current market conditions. Industry insiders expect some papers will need to fold in coming months or seek protection from creditors to reorganise.

Tribune has been on wobbly footing since last December, when real-estate mogul Samuel Zell led a debt-backed deal to take the company private. Tribune has stayed ahead of its $US12 billion ($18 billion) in borrowings with the help of asset sales. Now, however, shrinking profits are tightening the noose.

The company's cash flow may not be enough to cover nearly $US1 billion in interest payments due this year, and Tribune owes a $US512 million debt payment in June.

One of Tribune's most pressing concerns: The company is likely to be in violation of debt terms that limit borrowings at the end of the year to nine times its adjusted profits. The ratio stood at 8.3 at the end of the second quarter, before Tribune reported an 83 per cent decline in operating profit for the three months ended September 28.

Violations of such debt covenants have become commonplace for newspaper companies as their profits have ebbed. Lenders so far have been willing to give the companies a pass in exchange for higher interest rates and other concessions, but Tribune has little wiggle room. Terms of the company's debt already are so loose and its financial standing so unsteady that a covenant waiver may not help.

Tribune's hiring of Lazard, meanwhile, brings it a firm experienced in debt restructuring, and one that has become a go-to adviser for newspaper companies in financial distress.

Even as its financial performance worsens, Tribune has some options. A sale of its Chicago Cubs baseball team is under way, and Tribune owns valuable stakes in businesses including the cable-TV channel Food Network.

Tribune already has auctioned off pieces of the company, including the Long Island, New York., daily Newsday to raise cash. Now, frozen credit markets have depressed sale prices.

Selling off more newspapers may not be a viable alternative because buyers are scarce and Tribune may be better off holding onto the profits from its papers.

And cost cutting is most likely afoot at Fairfax under new CEO Brian McCarthy:

SPECULATION is growing that likely new Fairfax Media chief executive Brian McCarthy could restructure senior management.

It is likely he will elevate more former key Rural Press executives to top positions in the Fairfax group.

It is understood Mr McCarthy will be formally anointed as CEO of Fairfax at a 9.30am board meeting in Sydney today.

The meeting comes after broking firm Goldman Sachs JBWere revealed last night that Fairfax's weekly page count across its main metropolitan newspapers, The Sydney Morning Herald, The Age and The Australian Financial Review, fell by about 5 per cent. This was led by a 20 per cent fall in classified ad pages across all mastheads.

Today's board meeting will also discuss how it plans to pay down $2.5 billion in debt. It will examine immediate options that include cutting dividends, selling off assets and more cost cuts. Mr McCarthy's former role as CEO of the leanly run Rural Press, taken over by Fairfax last year, is seen as the perfect training for Fairfax's necessary belt-tightening.

Fairfax is moving on from its expansionary phase of recent years -- which saw it clock up debt by making a number of takeovers -- to one of getting the best out of existing assets.

Speculation has centred on the possible elevation to more senior roles of a raft of former colleagues of Mr McCarthy at the regional newspaper group, all schooled in what has been dubbed the Rural Press "School of Cost Management".

As one media analyst at a broking firm put it yesterday: "Some of the Rural Press team have effectively been the shadow cabinet since the merger with Fairfax. But following the landslide election win of Brian McCarthy as Prime Minister of Fairfax, they are now likely to move to the front bench."

Those possibly in line for elevation under such a policy could include: Brian Cassell, currently Fairfax's group finance general manager; Allen Williams, head of community newspapers for the Hunter and Illawarra regions; and Allan Browne, CEO of regional publishing, southern and western.

Mr Cassell is particularly in touch with the McCarthy approach, having been his trusted finance lieutenant as general manager, accounting and finance, for Rural Press, a company famed for its lean approach.

Mr Cassell's current finance role at Fairfax sees him as No2 to the company's current CFO, Sankar Narayan. Mr Narayan was appointed in April 2004, under the former Fairfax regime of Fred Hilmer. Like Mr Hilmer, he had a management consulting background.

Mr Narayan is broadly viewed by analysts as a "strategic" CFO who was appropriate for the company's expansion of recent years. However, as one media boss put it yesterday, Mr Narayan is not regarded "as an operational CEO".

Alternatively, informed sources say, while Mr Cassell is viewed as a "numbers guy, not a strategic CFO", this could be an appropriate choice for the company in the finance area as it moves to a belt-tightening phase under Mr McCarthy.

Already, Mr McCarthy -- who for 20 months has been Fairfax's head of Australian operations -- has had another former Rural Press executive as a key right-hand man, with Lloyd Whish-Wilson CEO of Fairfax's NSW and ACT metropolitan publishing.

There have been suggestions of a restructure of roles at the top of Fairfax under a McCarthy regime. Mr McCarthy may look to restructure national and metropolitan newspapers to break down silos within the business.

One more radical scenario could see a return of Fairfax to a single national management structure, as opposed to the state-based silos now in place.

Late yesterday, it was revealed Fairfax's departed CEO, David Kirk, completed his term still owning a total of 1.97 million of the company's shares.

News/paper

Internet guru Vinton Cerf on the future of newspapers:

Newspapers in the future

"I'd like to suggest to you that the term newspaper should be broken into two parts, news and paper. The paper part needs to be put aside for a moment, as it is only one of many potential distribution methods. The news engine is independent of the delivery mechanism, or it should be…. when you move into the online environment you know that deadline is a bit of a funny word, or at least it should be because it can go as soon as it's editorial accepted. The notion that news is continuous as opposed to an episodic thing has a lot of dramatic effects on the consumers of that information."