Tuesday, May 5, 2015

My reply to Christopher Waddell

The Literary Review of Canada has published a review by Carleton University professor Christopher Waddell of my book that is complimentary but disagrees with my conclusion that newspapers will survive their current downsizing. “Greatly Exaggerated is a well-researched and well-explained story of how the newspaper business changed in the second half of the 20th and into the 21st century,” he writes. “Edge is correct that newspapers have survived and, despite the predictions of their imminent demise, have made a profit on their operations.” While agreeing with my findings of fact, however, Waddell comes to the opposite conclusion. Their ability to consistently generate profits despite plummeting revenues, he writes, does not necessarily ensure the survival of newspapers.
That hardly guarantees them a long future. Complacently extending Edge’s story into the near future is a recipe for disillusionment. In fact, what is greatly exaggerated is just the short time frame for the death of newspapers, not the end result.
While Waddell’s review, which is the LRC’s cover story for its May issue, is available on its website, the reply its editor Mark Lovewell invited me to write is not. [Edit: It now is.] That’s why I am posting it on this blog.
The past, as Christopher Waddell observes, is an imperfect guide to the future. Understanding what happened in the past and why, however, is the best guide we have to what will happen in the future, because it aids in understanding the present and the processes that shaped it and will likely continue to shape the future. The economics of newspapers, which are incredibly arcane, must also be understood before their fate can be foreseen. Because of their unique “dual market” nature, they sell their product to consumers at a fraction of its cost to produce, which is subsidized by advertisers. With the enormous post-war bubble in advertising, newspapers came to rely disproportionately on advertising revenue, which by the recent financial crisis comprised 87 percent of their total revenues in the U.S. and 77 percent in Canada. As newspapers rearrange their business model, readers are finding they now have to pay higher hard copy prices and increasingly also have to pay for online access. 
Professor Waddell argues that recent job cuts have led to an emaciated print product for which many do not care to pay more. A vicious circle caused by cuts, he argues, leads to defections by both readers and advertisers. This seems a chicken-egg argument, as it was the defection of readers and advertisers that first prompted cuts. Their demonstrated ability to downsize, however, is one of the things that will save newspapers. In the lingo of techies, they are scalable, or easily made larger or smaller. Luckily, as Professor Waddell notes, newspapers seem to have finally caught on to what it is that readers want and cannot get elsewhere, which is local news coverage. 
His other argument is that young people don’t read newspapers and have found other online sources of news, so the supply of newspaper readers will eventually dry up. Young people have never taken much interest in the news, however, at least not in the type of news that newspapers tend to cover. It is only when they grow up, get married, take out mortgages, and start families that they start to wonder about things like schools, taxes, politics, and the economy. Newspapers are still by far the largest newsgathering organizations in their communities. The widespread implementation of paywalls, which is the other thing that will save newspapers, means that if people want the news that newspapers provide (and they do), they will have to pay for it, one way or the other.

Tuesday, February 3, 2015

From two newspapers to none in Vancouver?

Reprinted in The Tyee.

Paul Willcocks takes issue with my prognosis for the continued survival of newspapers and thinks Vancouver is on its way from two dailies to none. “What will life in Vancouver be like without a daily local newspaper?” asks Willcocks in today’s Tyee. “It’s an important question, given the gloomy outlook for Postmedia.” The headline, which Willcocks doubtless did not write, was even more alarmist: “As Postmedia Withers, Is a Newspaper-less Vancouver Imminent?”

An endangered species?
This sort of hysteria was widespread six years ago in the wake of closures of the long-publishing Rocky Mountain News and, closer to home, the Seattle Post-Intelligencer. The American Journalism Review emblazoned “Cities without Newspapers” across its cover in mid-2009. The New York Times, which one study found to be the worst culprit behind the newspapers-are-dying alarmism, quoted one analyst as predicting an imminent extinction.
“In 2009 and 2010, all the two-newspaper markets will become one-newspaper markets, and you will start to see one-newspaper markets become no-newspaper markets,” said Mike Simonton, a senior director at Fitch Ratings, who analyzes the industry.
USA Today printed a short list of cities that were candidates to see their only remaining daily close. “At least one city — possibly San Francisco, Miami, Minneapolis or Cleveland — likely will soon lose its last daily newspaper, analysts say.” Time magazine even handicapped the field, running a list of The 10 Most Endangered Newspapers in America on its website. “It’s possible that eight of the nation’s 50 largest daily newspapers could cease publication in the next 18 months,” writer Douglas McIntyre predicted, citing an analysis of financial and market data. Then-Vanity Fair and now-USA Today columnist Michael Wolff had an even more dire prediction. “About 18 months from now, 80 percent of newspapers will be gone,” he told one of the many panels convened to debate the future of news.

Eighteen months later, all and sundry had egg all over their faces as newspapers stubbornly continued to publish on. The closest thing to the closure of a major daily was the merger in June 2010 by Victoria-based Black Press (no relation to Conrad) of the dominant Honolulu Advertiser and its joint publishing partner, the Star-Bulletin, a struggling tabloid with a circulation of just 37,000. When Advance Publications reduced its New Orleans Times-Picayune to thrice-weekly publication in 2012, it was met with a revolt by both readers and advertisers. After the nearby Baton Rouge Advocate entered the market with a daily New Orleans edition, Advance started a street tabloid to be circulated on the days its Times-Picayune didn’t.

So much for the death of newspapers.

Willcocks, a retired former publisher of newspapers in Red Deer, Saint John, Peterborough and Victoria who now resides in Central America, was one of the first to request a copy of my latest book, Greatly Exaggerated: The Myth of the Death of Newspapers, which was published in November by Vancouver’s New Star Books. He seems to accept its central finding — newspapers are still making money, just not as much as they used to make — but disagrees with my conclusion that newspapers will thus continue to endure. “I am rooting for the newspapers’ reinvention and survival,” he writes, pointing out Postmedia’s plummeting revenues. “But with each quarterly report, that seems less likely.” Sure, Postmedia made $110 million in its last fiscal year, Willcocks admits, but that was down from $190 million a few years ago. “Who really wants to think about owning a business on that trajectory?” He is not optimistic about the future of newspapers. “I’m not hopeful that they will survive in any form,” he writes.

The income they have added from paywalls, he insists, cannot save newspapers. “Postmedia doesn’t share the information, but the actual revenue from online subscriptions is likely to provide about $1.2 million per paper.” Well, that’s $1.2 million more than without paywalls. As the old saying goes, every little bit helps. Newspapers have shown an entrepreneurial spirit in diversifying their revenue streams and now pull in almost as much from events and other income as they do from digital advertising, which stubbornly refuses to grow. But most of all, it is their ability to downsize effectively that will save them. As long as they can keep their expenses below the level of their plummeting revenues, they will remain profitable. Why would anyone close a profitable business? Newspapers started out as small businesses, typically published by a one-man gang of writer/editor/publisher, and they are simply on a trajectory back to that status.

But Willcocks’ dire prediction, or at least one of the comments on it, has forced me to revise a long-standing prediction. For the past 30 years, ever since I was a Province reporter and a member of the Newspaper Guild union executive, I have pooh-poohed any talk of folding one of the Vancouver dailies or of merging them. I predicted that if that happened, presumably closure of the smaller Province, the Sun Media chain would be in Vancouver publishing a tabloid before you could blink. After all, Southam had proved the tabloid format wildly successful with the Province, and that was what Sun Media specialized in. But with the announcement in October, just as my book was going into production, that Postmedia had bought the Sun Media chain from Quebecor, that option is likely off the table. The deal is still subject to approval by the Competition Bureau, but I expect it to be rubber stamped soon. Quebecor still publishes a few tabloids, but now they are confined to Quebec. The country’s other major chain, Torstar, publishes exclusively in Ontario. “With the Postmedia takeover of Sun papers, either Sun or Province will go for sure as there’s no longer competition,” pointed out Tyee commenter Dave Shirlaw. I fear he may be right. After all, as my book chronicles, it has long been shown that one monopoly newspaper can be as profitable, if not more profitable, than two.