Classified information: why newsprint doesn’t pay in the USA
June 7th, 2009 by Andrew Walkingshaw | Published in Business, Economics | 1 Comment
When the news itself — or, at least, the way news gets to people — is itself one of the biggest stories out there, you know that you’re in strange times.
The graph above is annual print advertising revenue, sourced from the Newspaper Association of America. The post-9/11 advertising downturn was a shock: the current collapse is more than that. As Clay Shirky wrote in his recent essay, “Newspapers and Thinking the Unthinkable”, the fundamental business model of American newspapers is under threat:
In craigslist’s gradual shift from ‘interesting if minor’ to ‘essential and transformative’, there is one possible answer to the question “If the old model (ed: of the US newspaper industry) is broken, what will work in its place?” The answer is: Nothing will work, but everything might. Now is the time for experiments, lots and lots of experiments, each of which will seem as minor at launch as craigslist did, as Wikipedia did, as octavo volumes did.
Newspapers largely make money from two things: sales of newspapers and advertising, and the Internet’s hit both of these. However, it’s not hit every advertising sector equally; breaking down the NAA data and plotting it by sector:
There’s been a downturn in advertising in all the three major sectors — local retail advertising, national advertising, and classified ads — but it’s the last of these which is the most significant. As Shirky argues, it’s craigslist and eBay which have undermined newspaper business models, and the data absolutely bears this analysis out.
At its peak around the turn of the decade, classified ads were responsible for fully 40% of papers’ advertising income.
It’s under 30% now, and it’s falling off a cliff. The single biggest asset of newspapers, economically, was that they were the cheapest and best way of reaching local customers. Against this, local newspapers couldn’t get to readers outside their local market; although the Web’s enabled that, and as a reader it’s great to be able to get articles from the San Francisco Chronicle or Boston Globe, online advertising revenue is nowhere near making up the difference.
It’s difficult not to feel uneasy when you look at data like this. We need a vigorous fourth estate, which means we need some way of paying for it. However, wishful thinking doesn’t change the facts: the historical accident which gave rise to the status quo has been made obsolete, and no-one is quite sure what will replace it.
