3.23.2009

Another Newspaper Morphs
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Thrilla in Manila

The print news media has another casualty: the 174-year old Ann Arbor News in naturally, Ann Arbor, MI. Unable to save the print operation after years and years of increasing losses, a triage team will end the open-heart surgery and instead deliver a new organizational baby, annarbor.com which will be a 'social' news website. As long as I can recall, newspapers have been a declining industry. Long before the AOL/Time Warner merger, the 'Thrilla in Manilla' of mega-mergers which announced that digital businesses could go toe-to-toe with traditional media and occasionally deliver a KO punch, newspapers were on the wane.

Outside of niche publications and aggregation-plays that hid the underlying cracks in the foundations of individual entities, it appears that newspapers might not have been as good a business as they appeared. The basic business model is arbitrage. First, build an audience, one way or another - then convince customers, the potential advertiser that control of the audience's hearts and minds really is in hand, and that there is no better way to open a dialog with them than to pay for space in the newspaper.

Measurement of absolute performance is very ineffectual...outside of a raw number called "circulation" which may be manipulated in various ways. There is virtually no way to gauge delivered impressions other than pure estimation. Paying for such advertising would seem ill-advised. With online media, this issue is not entirely solved, but much more detail is visible and resulting transparency asserts that performance claims were vastly overrated and advertising rates far too high. The decline of the classified ad and the expansion of free online alternatives in every medium and large market added further revenue pressure. Every year print audience and revenue shrinks, while the Internet grows - in particular online games, which might be considered as two trains moving in opposite direction - one into the past, and other rolling towards a golden future.

However, other opportunities to develop online newspapers may be invigorated by print media moving fully into online coverage as the major effort. Can they beat blogs and fledgling sites without the high cost structures involved in running editorial, production, and sales functions?

Looking purely at audience behavior, there is no dividend or benefit in having a high production cost vs. a lower cost structure. For example, many blogs have higher audiences than the online divisions of major media organizations, which typically may have 20x-30x the staff and budgets (if not higher) of sites and blogs. Up until now, "brand power" of a well known name has translated into footholds for large media companies in establishing online ventures, a trend that extends back into the murky past to 1995 or so.


big media

It appears that just as the media companies are molting, which will cost time, money, and staff to execute successfully, new entrants will be given an adrenaline shot by the further disruption in the media market, which may accelerate if the capital markets open up once again, letting financiers place bets with a hope of a reasonable return. Creative destruction will lead to a genesis of novelty.

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