Facing up to life after print for newspapers

There are many unsettling parallels between newspapers and General Motors, the iconic American corporation struggling to regain its financial health and vigor as a consumer brand.

But there is a major difference between the opportunity that lies ahead for publishers and the continuing challenges facing America’s No. 1 disgraced automaker. Publishers have a far better chance at re-inventing their businesses than GM – but only if they act quickly and wisely.

GM recently joined Chrysler in filing for Chapter 11 to restructure a company burdened not only with insurmountable debt, an uneconomic manufacturing infrastructure and unsustainable union obligations but also a revenue crisis caused by a long-running slump in customer confidence aggravated by a precipitous collapse in the economy.

That sounds a lot like newspapers, especially the several who in recent months sought bankruptcy protection from debts that, in retrospect, they shouldn’t have incurred and now can’t handle. But here’s the difference:

Unless GM goes into some entirely different business, it always will be a capital-intensive, 19th Century-style manufacturing company. GM never can escape the need to operate big-ticket, dedicated manufacturing facilities that cost as much to own if the company builds a thousand cars as if it builds millions.

While your heart wants to wish GM well in the effort, your head says the company seems fated to creak and groan and struggle and shrink until there’s nothing left but a black hole in the federal budget.

The story could be pretty much the same for newspapers, minus the federal bailout. But the outcome could be significantly brighter for publishers, if they are quick, creative and bold enough to reposition their businesses for the modern, interactive world.

Unlike GM, publishers are approaching the day when they will have the opportunity – and perhaps no other choice – to exit the anachronistic manufacturing business that is eating most of them alive.

Between 60% and 70% of the cost structure of newspaper companies is consumed by the production and distribution of the print product that for years has been falling out of favor among readers and advertisers alike.

To be sure, most newspaper publishers will be required to be in the printing business in the immediate future, because roughly 90% of their sales are generated from ads and circulation fees for the physical product. Stop the presses tomorrow and you will kill the businesses before they can effectively transition to the future.

But the days of print newspapers are numbered. As the last generation of newspaper readers fades away (the trend is indisputable in the chart below), the demand for the print product will continue to shrivel among consumers and marketers.

Like it or not, it’s only a matter of time before it will not be economically feasible in most markets to print newspapers seven days a week.

If manufacturing newspapers were all that newspaper companies could do, then that would be the end of them. But newspaper companies, unlike GM, have options.

While printing and delivering newspapers certainly ranks among the core competencies of the industry today, newspaper companies possess many of competencies requisite for success in the Information Age. They are:

:: Enormous brand recognition and a high degree of credibility in their markets.

:: The largest, best-equipped staffs of content creators in the communities they serve.

:: The marketing power and know-how to attract large and desirable audiences.

:: The largest and best-connected advertising sales staffs in their individual markets.

Not even the strongest online competitors have those capabilities.

To gain full advantage of the resources remaining at newspapers after the recent years of extreme cost cutting, many publishers are going to have to face the emotionally difficult decision to cut back on their daily print schedules.

By producing a limited number of premium-priced, niche publications on only the days when it is profitable to do so, publishers can begin to focus more of their attention and resources on creating the wide array of tightly targeted Internet and mobile products that represent the future for their franchises.

Freed of the requirement to produce enormous quantities of newspapers every day of the week to support an increasingly challenging business model, publishers could get out from under the high costs of their production infrastructure by shuttering their dedicated production plants, selling off their fleets and outsourcing to lower-cost vendors the strategically immaterial chores of production and distribution.

This step is difficult to contemplate for those of us who get goose bumps watching the presses roll and enjoy burrowing into the pages of a crisp, new paper.

It is particularly painful to contemplate the enormous dislocation that would befall the pressmen, mailroom staffs, circulation crews and other dedicated workers whose jobs would go away. I was in Chicago when we moved from hot metal to computer composition in the 1970s. It was awful watching the proud and skillful members of the typographers union consigned to history.

But there was no denying the wisdom of that business decision. Today, the time for more tough decisions is upon us.

Publishers must do everything they can to save what’s left of the press, even if it means eliminating the presses.