At Jim Collins‘ event for his new book at BusinessWeek last night, a former journalist turned business exec asked why no one was snapping up newspapers now that their market caps are worth practically nothing. They have powerful local brands, don’t they? he asked. Don’t they?
The first reason no one wants to buy the trouble of newspaper, I suggested, is that it brings not only current loss but also huge shut-down cost and liability. But then, with more and more newspaper owners going bankrupt, they have an escape hatch from the contracts that cause that risk.
Right, the exec said, so what about that trusted local brand? Well, I replied, there have been too many surveys showing declining trust in newspapers by readers. I know folks in a few markets who’ve done research to test attitudes about a paper disappearing and what they got from readers and advertisers was shrugs. Newspapers spent years acting as local monopolies, charging high rates, and now that buzzard is coming home to roost.
Yet hope springs daily, if not eternal. In today’s WashingtonPost, business columnist Steven Pearlstein writes an open letter to Buffett proposing that he buy up not just one but lots of papers:
For close to nothing, investors can pick up some of the most respected regional brands in the news business, along with their (shrinking) lists of advertisers and subscribers. They can obtain modern printing presses for a fraction of their original cost. And they are able to hire from a deep pool of talented journalists, pressmen, salesmen and circulation experts desperate for jobs.
But presses are now a cost burden when your competitors get theirs for free. See above and trust. See above on buying losses and liabilities.
Nonetheless, Pearlstein has a plan. He says a strategic buyer “could assemble a national syndicate with millions of readers capable of achieving the economies of scale that have, for the most part, eluded our badly fragmented industry.” He has a point. The newspaper industry has never been able to cooperate – they all think they’re special.
What would such a consortium create under one roof? Pearlstein suggests a high-priced daily tabloid (“a daily newsstand price roughly equal to that of a small coffee at Starbucks” – which is to say the price of the NY Times or WSJ) aimed at “serious news consumers” with “high-quality local, national and international news and opinion… Local pages would be produced by a modest local news staff, with national and international pages from the syndicate.” If that’s an hour read, there’d also be the 20-minute read: another free tab like Metro. And then “a partly free, partly paid Web site that carries the local banner with a full offering of local content and advertising but operates from a single national platform.”
Nice try. But he has basically described Tribune Company.
Yesterday, I spoke in Miami for the International Newspaper Marketing Association. On my way down, I twittered about it, using the economy of speaking in Tweetlish and abbreviating Assn. A twitter wag asked whether that was short for assassin. Duck, he advised. Turns out that this group, from many countries, is as was advertised to me: open and eager for change. Still, the moderator played devil’s advocate (I think) and pushed what we often hear here: The paper still brings in cash, so maximize that (charge; charge more….).
I argued that if legacy news organizations have any hope, they have to rethink themselves from scratch, not trying to protect what used to be. I assured them that there were entrepreneurs in garages – well, meeting rooms – planning new news structures from scratch, with none of the advantages-turned-burdens of their companies.
And there’s the point: Owning a paper is not an advantage. It is now a burden to overcome. So wishing that someone would just swoop in and buy them, now that they’re worth practically nothing, is just that: a wish.
Pearlstein says he has the back of an envelope with numbers on it; I’ve asked him to blog it or send it along for discussion in the New Business Models for News Project. Maybe he can convince Buffett or someone to buy up the newspaper industry. But I think I’ll pass.