What do newspaper companies have in common with railroads?
James Surowiecki, who writes a New Yorker business and finance column, compares the newspaper industry to the railroad industry at the turn of the twentieth century in a new piece called “News You Can Lose.” Some believe that the railroad industry began to have serious problems in the 1900s because it thought it was in the railroad business, rather than a transportation business, and thus was unable to expand to trucking and air transport. Surowiecki writes, “By extension, many argue that if newspapers had understood they were in the information business, rather than the print business, they would have adapted more quickly and more successfully to the Net.”
The bad news for media companies has been in full drive recently, only exacerbated by the financial crisis. Ad revenue has dried up, and online ad revenue hasn’t been nearly as lucrative as print. Big names that used to advertise in papers like the Washington Post or New York Times are now struggling to stay in the black, like real estate companies and big department stores. For journalists coming of age now, it’s hard to believe it, but newspaper companies used to have profit margins that were the envy of other industries. That is, until we became the new railroads?As Surowiecki notes, usually when an industry is in major trouble, it’s usually because people have abandoned its products. But as we wrap up the end of 2008, it’s the opposite for the newspaper industry. People actually read the New York Times more than ever, but are using it in much different ways than they were even just a few years ago.
Monday morning was full of interesting news for the changing industry. Politico and Reuters have forged a distribution alliance, where they will both offer articles to newspapers, and sell advertising space together on the newspaper sites that feature Politico/Reuters articles. Companies can choose up to 10 articles and photographs from Politico/Reuters to use in either print or the web. Simultaneously, Reuters will distribute Politico’s work on its own newswires. This service would be for 6 months, then the partners would charge for Reuters content. Reuters hope that Politico will give them a foot in the door at American news operations– Reuters only has 14 newspaper clients in the U.S, while the Associated Press had 1,400. The current Politico network has 60+ newspapers and 40 broadcasters as clients, which Reuters hopes to tap into.
Jeff Jarvis, a prominent media consultant and blogger, writes on his Buzz Machine blog this morning that “members of the network get high-quality coverage at no cost – with revenue coming their way, even – and the reporters get support for journalism at its source. There are new business models for news.”
Also, the New York Times announced a wage freeze for 2009. According to Forbes, the company said advertising revenue for the group was down 10.6% over last year for a total of some $900 million, and is trying to cut costs aggressively. Earlier in December, the Times said it planned to borrow $225 million against its new headquarters due to problems with their cash flow.