Tuesday, December 14, 2004

Why buy the cow when the milk is free?

When radio was invented way back when (well before my time, I hasten to add), the first response of most newspaper publishers was to ignore the subject in their pages, hoping it would go away. When publishers realized radio was here to stay, they ran out and started radio stations, eventually doing quite well, thank you very much.

When TV arrived, newspapers at first refused to print program listings, hoping vainly once again that this nuisance would go away. When publishers realized that wasn't going to happen, they ran out and started TV stations, doing even better than they did with radio, thank you very, very much.

Fast forward half a century to the Internet era. When the arrival of the Internet could no longer be denied, publishers (with the notable exception of the Wall Street Journal) responded to the new medium by endowing New Media Divisions with absolute fortunes so they could put online -- for free, for heaven's sake -- the entire contents of their newspapers. This saved bathrobe-clad readers the trouble of groping under their dew-drenched yews for a sodden copy of the Daily World Journal Chronicle Herald Times News Tribune.

But, apart from cutting down complaints to the circulation department, this actually was not good for business. This accelerated the decline of newspaper circulation, which already was shrinking for any number of well documented sociological, demographic, cultural and competitive reasons. That is to say, kids, instead of reading the newspaper, would rather watch TV, chat on IM, text message via cell, listen to their iPODs or make their own movies. The newspaper habit is dying off even faster than the bifocal-dependent devotees who still read them. Even geezers are finding it faster and more satisfying to visit newspaper websites than wrestling a broadsheet -- or a broad, for that matter -- into submission.

Declining circulation is not trivial, because circulation, contrary to what editors will tell you about the quality of their work, is the only thing a newspaper has to sell. Like any media company, a newspaper has to draw a crowd it can sell for money. If it gives away its costly and valuable product for free on the Internet, a newspaper may win friends and influence people in cyberspace, but it won't gladden the advertisers who pay the freight back here on Mother Earth. If circulation declined too much, a newspaper might even be tempted to fudge its numbers. Come to think if it, that's just what happened at my alma mater, the Chicago Sun-Times, and such other trusty titles as Newsday and the Dallas Morning News.

Not only must newspapers contend with an absolute drop in circulation, but they also face shrinking market share, as advertisers migrate to the targeted and interactive media -- search-engine ads, cable, Internet, podcasts, SMS messaging, blogs, etc. -- that deliver the right buyer to the right place at the right time.

As the media audience fragments and the number of eyeballs declines, advertisers will have diminishing regard for such traditional mass media as newspapers and network TV. Not only will they demand lower CPMs, but they will spend fewer absolute dollars on these media.

Big retailers like Wal-Mart already have no use for newspapers. This is not an isolated data point but a rapidly advancing structural trend, which will accelerate as Wal-Mart's aggressive merchandising wipes out the Mom-and-Pop stores that clasically do -- err, did -- advertise in newspapers.

Although the gentlefolk who run most newspapers have been heading down the wrong path for a decade by pretending they are living in the 1950s, there still is time (albeit a steadily diminishing amount of it) for them to leverage their brands, newsgathering organizations and powerful local market relationships to create new media products that combine their core stengths with the exciting potential of everything from paid online content to email newsletters to blogs to cell phones to iPODS to PDAs to digital photography and home-brewed audio and video. Here's a radical idea: Why not partner with some of the online guys who are eating your lunch?

Normally, those who do not learn the lessons of history are condemned to repeat them. In this case, newspapers won't get the chance. History simply will obliterate them.

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