A different angle

In a comment, Lex Alexander looks at my rant about journalistic quality v. profits from a different perspective:

Having read the piece, I'm not at all sure that Gold really is "accepting quality journalism as the ill because cutting newsroom heads is the putative cure." I thought that he was saying something quite different: Unrealistically high profit margins, not quality journalism, are killing newspapers. After all, those margins came to be accepted as "normal" in an era of one-newspaper markets with no serious competition from the Internet. In other words, they're the product of a particular set of conditions that didn't exist until relatively recently, no longer exist and aren't going to return. Of course, I could be missing something.

I don't think Gold is personally accepting that quality journalism is the problem, but he is buying into the party line that you can't make big bank doing good journalism.

Maybe I've been on the business side for too long, but my point is this:

There are ways to pull high 20% profit margins without rolling heads in the newsroom. Those heads aren't the problem.

Here's a challenge for all you business-finance types with access to the financials of a mid-to-large market daily newspaper:

1. Cut your printing cost out of the equation. Simultaneously cut all your distribution costs. This includes the overhead related to these functions.
2. Find a metric other than circulation to use in pricing advertising. Make sure the new scheme leverages the newspaper's traditional advantage of timeliness, now heightened online. Make sure it makes sense for smaller business down the Long Tail.
3. Cut your ad revenues by half. Do it again.
4. Eliminate your subscription revenue. Eliminate 90% of your subscription marketing costs. That should be roughly a wash.
5. Increase your junior reporter ranks by 50%. Keep the number of editors static.
6. If you aren't the NY Times, the Washington Post or the LA Times, bring almost everyone you've got in a bureau home. Put them to work inside your city.

I'll guess that you're looking at a profit margin higher than you had at the beginning.

Now, here's the hard part:

1. Accept that the above solution is the way the world is moving.
2. Accept that you can't just flip the switch and make it so.
3. Start a transition plan.
4. Failing the ability to do number three, because you can't risk your margin today, wait for a startup to do it instead.

All a long, rambling way of making this point:

For the industry to right itself, some short-term margin sacrifices need to be made. But unless your plan includes a path to long-term margin growth, no one with the power to do anything about it is going to listen. It's against human nature. And, when sacrifices are being made, look to dismantle presses before cutting reporters. The former is harder to do in the short term, but the latter are more necessary for the long haul.

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UPDATE 4:46 PM: Mark Cuban's eerily similar post on the demise of CDs hits the same issue in a different industry. The death of CDs, or any manufactured physical product that carries information, should be looked upon by the industry as an opportunity, not a problem.

When it happens, the music industry will EXPLODE and sales and profits will go through the roof.

Why ? Because stores can be smaller, physical inventories minimal to non existent, and an entire segment of middle infrastructure on both the label and retailer side for ordering, delivering, warehousing, duplicating, returning, and forecasting of product can be eliminated.

Most importantly. that money can be spent to develop, market and promote music so that more and more people can experience it, and also, just in case hell freezes over, be used to lower the price of music to consumers.

In parallel words, kill the presses and the paper, and make room for more journalists. And watch the profits roll in.

Comments

[Lex]

Without access to hard numbers, I obviously have no way of knowing whether you're right. But your approach seems *plausible* as a means toward continued profitability, if not the same profit levels the industry has enjoyed the past couple of decades. And it's not unlike what I'm envisioning when I say that the newspaper business can either manage a graceful decline in its profit margins (on the way to long-term stability and profitability), as opposed to propping those margins up until everything crashes.