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.

Myths muddy media ownership debate

Reprinted in The Tyee. 

“Media myths increasingly surround us in today’s ever more mediated world, few of which have proved more persistent than the well-worn canard about newspapers dying.” 

That’s the way I start the concluding chapter of my forthcoming book Greatly Exaggerated: The Myth of the Death of Newspapers, which is planned for publication next month by Vancouver’s New Star Books. The book is based on financial research I did for an article in the upcoming issue of the Newspaper Research Journal. It shows that none of the eleven publicly-traded newspaper companies in the U.S. or the five in Canada has shown an annual loss on an operating basis going back to 2006.

In fact, most are making double-digit profit margins, or more than twice the historical average of 4.7 percent for a Fortune 500 company. That’s a far cry from the 20-30 percent profit margins newspapers they routinely made before the double whammy of the Great Recession and the Internet reduced their revenues by more than half in the U.S. The decline in revenues in Canada, where the recession was not felt as badly due to more sensible banking regulations, has been about a quarter.

Just as we entered production this week, a deal went down between Postmedia Network and Quebecor Inc., two of Canada’s biggest media companies. It would give Postmedia the Sun Media chain of mostly tabloids, and with it newspaper monopolies in Calgary, Edmonton, and Ottawa, as well two dailies in Winnipeg and in the ultra-competitive Toronto market. I am still crunching the numbers on what this would mean for daily newspaper ownership concentration, but it would have to put Postmedia above 30 percent. Canada has had about the highest level of media ownership concentration in the free world, and this tightens it even further.

The most immediate effect would be to give Postmedia joint operations in four cities – Calgary, Edmonton, Toronto, and Ottawa – including monopolies in three of them. It could combine production, advertising, and circulation operations as it did in Vancouver 57 years ago, while hopefully keeping separate newsrooms. This will be subject to approval by the Competition Bureau, which will examine the extent to which Postmedia will dominate the market for print advertising in Calgary, Edmonton, and Ottawa.

The reaction has been predictably outraged among free press advocates. Some, however, have urged that Postmedia be allowed to swallow Sun Media because it is somehow challenged financially. Foremost in this effort has been Ivor Shapiro, chair of the school of journalism at Ryerson University in Toronto.

“What we’re talking about here is one threatened company . . . buying properties whose future was in doubt,” Shapiro told the Canadian Press when the deal went down last Monday. “That is way better at the end of the day than seeing both of those news organizations close down.” Shapiro repeated his position for the Saturday edition of the Toronto Star.

What we’re talking about here is two organizations that were on a death watch. I’d rather have one news organization that is not on death’s door, than two news organizations that are. Together they are stronger competitors than they were apart. 

No, together they are not competitors. Together they will be able to gouge advertisers and short-change readers in Calgary, Edmonton, and Ottawa, just like they have done in Vancouver for the past 57 years. These two organizations have hardly been “on death’s door,” as Shapiro puts it. They have been earning enviable profit margins. They just want to make more.

Here is a truncated version of my compilation of the financial results since 2010 for all five publicly-traded Canadian newspaper companies, which own about three quarters of newspapers north of the border.

How could the head of one of Canada’s largest journalism schools be so mistaken about the state of health of the country’s newspaper industry? Well, let’s just say that Professor Shapiro isn’t the only one laboring under the illusion that newspapers are on their last legs. That is the whole thrust of my book, and it’s a complicated tale. Ben Bagdikian called it “the myth of newspaper poverty,” and it has been used to advantage for decades by publishers looking to get around anti-trust laws that were designed to prevent anti-competitive behavior. Newspapers, after all, have considerable power over public perceptions, and they have used it to advantage for decades.

One of my favorite studies cited in my book examined how large U.S. dailies covered the short spate of newspaper closures during the Great Recession. It found their coverage contained “over-amped drama” and even “tabloidization,” with more than a quarter of all stories containing death imagery. “Newspaper journalists often fail to contextualize their reports with a comprehensive understanding of the economics of their industry,” noted the study. “They rely too heavily on the views of newspaper publishers and too little on empirical data.”

Toronto Star columnist Rosie DiManno also buys into the misconception that Postmedia is “bleeding money, staggering under accumulated debt and struggling to make its payments.” Even the usually-incisive Donald Gutstein bought into the myth that Postmedia is “hemorrhaging money” in his recent dissection of its ownership by U.S. hedge funds. Gutstein reported that the company lost $154 million in 2013, but that included extraordinary charges against income of $100 million for asset impairment, plus $34 million for restructuring costs, which means they laid off a whole bunch of people and had to pay them severance. Asset impairment is a classic “paper loss” that simply means the estimated value of the business went down. That has to come off the balance sheet of assets and liabilities somehow, and it does so in the annual profit and loss statement. Here is Postmedia’s for 2012 and 2013.

Note that interest expense eats up about half of Postmedia’s operating income, but that amount has been going down as the company pays off its debt with its positive cash flow. What I find most interesting, and which I wasn’t able to get into in my book, is that as a result of these financial gyrations it appears Postmedia paid no income tax in either 2012 or 2013. Suggestions for further research?

The Competition Bureau should not allow Postmedia more local monopolies

An edited version of the following appeared in today’s Tyee.

Canada’s three dominant newspaper chains will be reduced to only two if the federal Competition Bureau allows Postmedia Network’s proposed $316 million purchase of the Sun Media chain. The deal would create four more joint publishing operations – in Calgary, Edmonton, Ottawa, and Toronto – between supposedly “competing” dailies, similar to Postmedia’s partnership between the Vancouver Sun and Province. In three of those markets, Postmedia would own both daily newspapers and would thus dominate the market for print advertising as it has in Vancouver. (Toronto has four dailies – the Star, Sun, Globe and Mail and Postmedia’s National Post – although the latter two are published nationally.) In addition to Sun tabloids in five cities, including Winnipeg (where it competes with the Winnipeg Free Press), and the monopoly broadsheet London Free Press, the purchase would include 24 Hours commuter tabloids in Toronto and Vancouver and more than 160 community publications, mostly in Ontario, plus Sun Media’s news website Canoe.ca. 

“This development further reduces competition in both the Canadian print and online worlds which are already among the most heavily concentrated in the world,” noted Vincent Mosco, a Professor Emeritus at Queen’s University and author of The Political Economy of Communication. “A primary reason for the takeover is to entrench Postmedia’s monopoly power. This will slash journalism jobs and reduce the number of voices providing the variety of views essential for a thriving democracy.”

Some academics have argued that concentration of newspaper ownership isn’t a concern in the digital age, because online publications such as The Tyee and even amateur blogs provide more competition than ever for news and opinion. Not so, according to Professor Robert Hackett of Simon Fraser University, co-author of The Missing News. “This merger will mean more cutbacks and resource rationalization, less diversity,” said Hackett. “Unfortunately, volunteer-based citizen journalism probably won’t fill the growing shortfall in original general interest newsgathering.”

The Competition Bureauis only allowed to examine the effect of newspaper mergers and takeovers on the market for advertising, however, not for news and opinion. Its predecessor, the Combines Investigation Branch of the federal Department of Justice, held hearings into the 1957 Pacific Press merger between the Vancouver Sun and Province and found it to be an illegal combination between competitors. The arrangement was allowed to stand on the basis of “economic necessity,” however, after the parties argued that under the prevailing Natural Monopoly Theory of Newspapers eventually only one daily would be left in Vancouver. (A third daily, the News-Herald, was actually published in Vancouver until it was bought and folded by the new Pacific Press partnership.) The Vancouver Sun was then owned by the local Cromie family, while the Province was owned by the Toronto-based Southam chain. The Cromies sold the Sun to FP Publications in 1963, which started a succession of Eastern corporate ownership of Vancouver’s largest newspaper. FP was taken over in 1980 by Thomson Newspapers, owner of the Globe and Mail, which quickly flipped the Sun to Southam, giving it both Vancouver dailies. That day, August 27, 1980, became known as “Black Wednesday” because it also saw the closing of Thomson’s Ottawa Journal and Southam’s Winnipeg Tribune. A Royal Commission on Newspapers was called to investigate the disappearance of newspaper competition in Canada, while criminal charges of conspiracy and monopoly were laid against the chains, which were found not guilty after a trial.

Tabloids soon replaced the closed dailies in Ottawa and Winnipeg, however, modeled after the Toronto Sun that arose from the ashes of the folded Toronto Telegram in 1971. Sun tabloids proved so successful across Canada that Southam converted its Vancouver Province to tabloid format in 1983, which revived the flagging daily because it attracted a younger readership prized by advertisers. Southam was taken over in 1996 by Conrad Black, who sold it in 2000 to Canwest Global Communications, which renamed Pacific Press the Pacific Newspaper Group. The Sun Media chain was taken over in 1998 by Quebecor, which also publishes the French-language tabloids Le Journal de Montreal and Le Journal de Quebec.

The Competition Bureau held hearings into the acquisition by Southam in the late 1980s of most of the Lower Mainland’s community newspapers, including the North Shore News, Vancouver Courier and Now newspapers. It ordered the sale of some that competed with the Pacific Press dailies for advertising, but Southam successfully appealed the ruling to the Supreme Court of Canada. With the 2000 sale of Southam to Canwest, which owned BCTV, Vancouver came to have possibly the highest level of media ownership concentration in the free world. This eased considerably with Canwest’s 2009 bankruptcy, after which its newspapers and Global Television network were sold off separately. Its newspapers were bought by a consortium of their creditors headed by U.S.-basedhedge funds. That put Postmedia over the foreign ownership limit for newspapers set by the federal government, which the company got around by creating two classes of shares that ensured voting control would remain with Canadian shareholders. Postmedia sold its Lower Mainland community newspapers and the daily Victoria Times Colonist to Vancouver-based Glacier Media in 2011, further easing newspaper ownership concentration on the West Coast.

Postmedia’s purchase of Sun Media would raise the national level of newspaper ownership concentration considerably, however. The Canadian newspaper industry has been dominated recently by Quebecor, Postmedia and Torstar, publisher of the Toronto Star, the Metro chain of commuters tabloids in seven Canadian cities, plus three dailies and more than 100 community newspapers in Ontario. Each controlled about 20 percent of Canadian dailies, but adding the Sun Media chain would give Postmedia well over a third of the industry and create local monopolies in Calgary, Edmonton, and Ottawa. Postmedia claims the purchase would provide “cost synergies” of up to $10 million a year, which means that it plans to combine operations where it publishes more than one daily and to cut jobs and production costs by sharing office space and printing presses. For that, however, it would need Competition Bureau approval but could rely on the Pacific Press partnership as a precedent. It might argue that one of the newspapers in each market would fail unless it is allowed to go into business with the other and carve up the local market for print advertising. That would undoubtedly see advertising rates go up, however, to the detriment of advertisers and consumers. The Competition Bureau should look askance at that argument, as the success of tabloids has proved that a second newspaper that appeals to a different demographic can be financially viable. This has effectively repealed the Natural Monopoly Theory of Newspapers upon which the Pacific Press monopoly was allowed to stand more than a half century ago, to the everlasting detriment of Vancouverites. Postmedia executives did not immediately respond to requests for comment on this story.

U.S. hedge funds behind Postmedia squeezing PNG

The following was published on The Tyee.

Faceless foreign ownership is behind newspaper publisher Postmedia’s push to cut costs at Vancouver’s duopoly dailies, according to the head of the union that represents workers at the Sun and Province. “One of the big problems with Postmedia is it’s controlled by U.S. hedge funds,” said Mike Bocking, president of Unifor Local 2000. The latest move to trim expenses came with last week’s announcement that Postmedia will sell its Surrey printing plant and either contract out printing of the dailies or build a more efficient plant that would cost 70-75 percent less to operate. “The essential promise of hedge funds to their investors is better-than-market returns,” noted Bocking. “Many hedge funds are not really creators of value, but extractors of value.”

Hedge funds that specialize in buying up the debt of distressed companies at pennies on the dollar jumped into the newspaper business in a big way during the recent recession. A pair of American hedge funds are now major owners of the former Southam newspaper chain, which was sold at auction to a group of its creditors in 2010 following the bankruptcy of Canwest Global Communications. The new company’s share structure had to be altered to stay within Canada’s foreign ownership limits by giving the U.S. hedge funds shares with less voting control. Golden Tree Asset Management and Alden Global Capital both have directors on the Postmedia board, but Postmedia’s new head man in Vancouver insists their influence is not what is behind the company’s downsizing. “I don’t take instructions from Golden Tree or Alden,” said Gordon Fisher, president of the Postmedia subsidiary Pacific Newspaper Group. “They are investors. They are in for the long haul.”

Instead, Fisher says the problem at PNG is a cost structure that is out of line with other Postmedia newspapers, along with declining revenues from print advertising. “We have to cut our costs where we can,” he said. “I think our employees understand that reality.” Fisher was sent to Vancouver in January from Postmedia headquarters near Toronto, where he was president of the flagship National Post, with an apparent mandate to cut costs. He should be familiar with the labor situation at the former PacificPress dailies, because he spent some time at the Sun in the 1970s and ’80s, rising to managing editor. Fisher shocked PNG workers shortly after his return to Vancouver with what the HuffingtonPost described as “one of the bluntest newsroom memos ever seen.” Fisher told PNG staff that “if we don't find ways to dramatically reduce costs, the answer is clear. The business is unsustainable.” The alarming memo was quickly leaked and posted online. “We are all fighting not only for the future of the Vancouver Sun and the Province but for the lives and well-being of our families,” it concluded. 

The first result of the cost-cutting program was the departure of about 110 employees through buyouts and early retirement. In June, PNG put two entire floors of the Granville Square office tower it leases up for sublet at below market rates. Then in July, the company announced stiff hikes in subscription rates. Fisher cited “significant declines in advertising revenues” in a full-page letter to readers explaining the increase, yet promised them“we will be investing in and improving all our news platforms.” That appeared at odds with the wholesale departures, including high-profile columnists like David Baines and Jonathan Manthorpe, but Fisher said that only about 15 of the severed staff came from Sun and Province newsrooms. “We didn’t lose a lot of producing, creative, hard-nosed reporters. We had a couple of high-profile columnists who decided to retire. We’ve always had really good people come and then decide it was time to retire. There was nothing we could have done about that anyways.” A paywall erected around Sun and Province online content that was announced at the same time has been a huge success so far, according to Fisher. “We are exceeding our targets significantly,” he said.

According to John Miller, the author of Yesterday's New: Why Canada's Daily Newspapers are Failing Us, Fisher “has a reputation as a corporate hatchet man, having presided over many staff-reduction programs starting with the mass firing he carried out as new publisher of the Kingston Whig-Standard in 1994.” Fisher defended those cuts as necessary, as were subsequent staff reductions he made at the National Post and the recent downsizing at PNG. “The restructuring we have done has taken out of the newsrooms production work,” he said. “It’s not work that journalists do. There’s a digital evolution under way, and we’d be crazy to ignore it.” He insisted that both the Sun and Province will continue to publish in print and added there are no plans to close one newspaper or to merge them into one publication. “I didn’t come here to do that,” he said.

            

While hard times have definitely visited the newspaper business with the advent of the Internet and the recent recession, there’s only one small problem with Postmedia pleading poverty. It is actually making very healthy profits. Its latest quarterly report shows that it made $32.8 million in its third quarter on $191.8 million in revenues, for a tidy profit margin of 17 percent. It’s right there on page 2. That’s an enviable rate of return, given that the average profit margin of a Fortune 500 company is 4.7 percent. But it’s not quite as good as Postmedia did last year, when its return on revenue was 17.3 percent, and not nearly as good as in 2011, when it raked in profits at a rate of 19.7 percent. Postmedia reported that it suffered an operating loss of $95 million last quarter, but that figure is only arrived at by subtracting from its earnings some extraordinary and even imaginary expenses. Restructuring costs of $16.8 million included severance packages incurred in jettisoning staff, which will save the company money in the long term.  Most of Postmedia’s supposed operating loss, however, comes from a $93.9 million “impairment” charge that resulted from a reduced valuation of the company’s worth. Far from bleeding red ink, the company turns out to be well into the black, just not farenough for some. 

That could prove problematic in convincing Sun and Province press operators to make the kinds of concessions PNG is apparently looking for. The company has given Unifor, the new union created by the recent merger of the Communication, Energy and Paperworkers Union and the Canadian Auto Workers, until November 18 to come up with agreement that would see construction of a new, more efficient printing plant that reduces costs by up to three quarters. The company has already entered into a contract with an outside company to print the Sun and Province starting in early 2015, but it will not go into effect if the company and union reach a deal.

Press operators once had one of the most militant of the unions at the dailies, which were shut down by strikes and lockouts seven times between 1967 and 1994. Restrictive manning clauses often required staffing levels on the presses that were well above what were required by advances in printing technology. The multitude of powerful unions at the Sun and Province were consolidated into one as the result of a company initiative in 1996. Work stoppages have been infrequent ever since, perhaps because a large, diverse union tends to be less militant than a small one with greater solidarity. It looks like Unifor might get its first big test fighting for the jobs of its 260 press operators at PNG.

Paywalls paying off

The following was published on The Tyee.

Shannon Rupp and I are usually of a mind on most things media, which is why I was surprised by her latest offering, “Paywall Woes.” By most reports, the paywall introduced by the New York Times two years ago has been a huge success and has provided hope for many newspapers that have been flailing about for years in search of an online strategy. Whether that hope is justified or not is another matter. Just because readers will buck up to read the digital edition of the esteemed Times doesn’t necessarily mean they will part with hard-earned coin to read just any old rag online.

But according to the just-released State of the News Media report, which is published annually by the Pew Research Center, digital pay plans for online  access have “caught fire” in the past year. The largest U.S. newspaper chain, Gannett, followed the Times’ lead and erected paywalls at almost all of its dailies in 2012. Together with print price increases, noted the report, Gannett recently told investors it expected the changes to generate $100 million in additional earnings annually starting this year.

When Gannett reported in early 2013 that its digital revenue projections were on track, it seemed to signal that such initiatives could work at papers of varying sizes, not just The New York Times. Other chains also have embraced digital pay: Lee’s 47 papers, beginning in the second half of 2011; McClatchy’s 30 in 2012, and E.W. Scripps’ 14 early this year.

In Canada, paywalls are also going up at dailies across the country. The Globe and Mail started charging for its digital content in October and has 80,000 subscribers already, although many may be on discounted trials or enjoy free access as print subscribers. Sun Media and Postmedia newspapers have been disappearing behind paywalls for more than a year, and the Toronto Star plans one for this fall.    

Print price increases are the other strategy newspapers are relying on to help make up the deficit they are suffering in advertising revenues, which in the U.S. have fallen by more than half since 2007. (The decrease has only been about 25 percent in Canada due to our healthier economy.) Advertisers contributed much more to newspaper revenues in North America than in other countries until recently. At one count a few years ago, it was a whopping 87 percent in the U.S., while Canada was next at 77 percent. In Europe, the split is closer to 50/50. In Japan, advertising accounts for only about 35 percent of newspaper revenues.  Media economists have long noted the “inelasticity” of demand for newspapers, which means that readers will pay more for them. Publishers here wanted to keep their circulation numbers up as high as possible to inflate advertising rates, however, so they kept cover prices artificially low. Now that ads are dwindling, readers are finding they have to pay closer to their fair share. I was gobsmacked last Friday when I had to fork out $1.75 for a copy of the Vancouver Sun.

So the question becomes how Shannon could have got it so wrong, and therein lies a tale. Being as media savvy as she is, you would think that she would be more skeptical of online information.  But she saw the Forbes logo – “business advice for the rich and richer,” as she put it – and figured it had to be reliable. Instead it turns out that Forbes is a tad promiscuous online. More than a tad, actually. Not only does it allow advertisers into its bed, it’ll have almost anybody. Greg Satell may be a “contributor” to the Forbes website, but he’s never written a word for the magazine, from what I can tell. He is instead part of the Forbes legion of bloggers . . . er, contributors who post their online ramblings on the magazine’s website. He is a media consultant who calls his own blog Digital Tonto after the Lone Ranger joke that ends: “What do you mean ‘we,’ white man?” Satell commits numerous crimes against logic in railing against “Print Media’s Digital Malpractice,” on his blog, and before you know it he’s “reporting” for Forbes. He starts by conflating newspapers and magazines, which operate in quite different markets, then he lapses into the kind of media consultantspeak we heard at the height of misguided enthusiasm for convergence a dozen years ago.

The strength of a business isn’t determined by how you hit internal targets, but how you compete in the marketplace. While print publishers have chosen to focus on signing up subscribers, digital media is booming, creating transformative business models and new media lifestyles.  Incumbent media businesses, as a whole, are falling behind.  To survive, they will need to shift paradigms.

There’s only one small problem with his analysis. There seems to still be plenty of money in signing up subscribers, while there is little to none in digital . . . er, booming. There’s even still lots of money in newspaper advertising, as I keep trying to tell people. There was almost $20 billion in the U.S. last year, and more than $2 billion in Canada. That’s hardly chump change, which is exactly what you can charge for online advertising nowadays. Newspaper revenues from online advertising have flat-lined over the past few years as rates have fallen through the floor. Publishers now talk of print dollars versus “digital dimes.” It is slowly dawning on people that the business model for online media (infinite supply) isn’t quite as lucrative as it is for newspapers (monopoly). Under the first law of economics – supply and demand – prices keep going down in the first case, but they stay strong in the second. The “subscription trap” that Satell warns publishers they are walking into is instead their overdue realization that, if there’s no money in online advertising, they might as well start charging readers for online access. His “golden rule” – marketers will pay more for consumers than consumers will pay for content – has long since been repealed by the fact that marketers can find scads of eyeballs online for a pittance. Advertisers who want to reach an engaged and contemplative audience that is wealthy enough (and wise enough) to pay for a newspaper subscription online, however, will have access to a prized demographic. But Satell keeps singing the same song that media consultants have been chanting since the 1970s, when they kept saying newspapers had to become more like their new media competition – television.

Instead of fretting about lost distribution revenues that were never really there, publishers should attack the TV market.  Online video is a promising business that is growing like wildfire and fits nicely with existing print brands (magazines especially). 

Media consultants always urge, in essence, that newspapers should try to become more like the new medium that is disrupting their industry instead of playing to their own strengths and allowing the new medium to discover its limitations the hard way. In the 1970s and ’80s that gave us fluffy “disco” journalism and USA Today. Now it’s all about Tweeting and Facebooking at the speed of light and giving it away for free online. By the end of Satell’s screed, the old newspaper person in me wants to scream loudly enough to drown out the sound of fingernails on chalk board that is his digital zeal.

At the root of the problem is that many publishers seem confused about what business they’re in.  After all, the function of media is not to build a subscriber base, but to spread ideas. In that sense, there is no digital threat, only enormous opportunity.

Some ideas, it turns out, are worth more than others. Which brings us to the problem of how we got here in the first place. How did Greg Satell, media consultant, get a platform on Forbes.com to spread his ill-conceived ramblings about media business models? In their haste to open their bottomless webpages to unpaid content from “citizen” journalists, media consultants, and even advertisers, publishers like Forbes have sullied their brands by lending their names to content that would never pass muster with their editors. After all, editors prefer to check facts before they publish them, not to mention correct annoying grammatical errors such as Satell continually commits. This is the downside of the online revolution, where even Conrad Black can be a columnist for the Huffington Post. As long as he’s prepared to do so for free, of course.

There is an old saying to the effect that you get what you pay for. It seems to apply here.