The Newspaper Game

Managing Lahaina.com, we follow the state of the newspaper industry very closely. Readers are moving from reading print publishing to online content. Many think newspapers will soon cease to exist altogether. Others think they can survive among minor setbacks. There are arguments for both and the end result will surely be somewhere in between.

Newspaper Business Plan

The newspaper business plan needs to change. Many of these bigger newspapers need to fail (similar to other industries currently), and others need to completely restructure their operating model. In larger cities, the smaller newspapers that operate more efficiently may survive and prevail. In smaller, single-paper cities, some of the newspapers will fail, some will prosper.

Their debts need to disappear. The large conglomerate structures need to be reduced and optimized. Unions need to lose their power.  Journalism needs to be rewarded for its following (via ads, subscription, or micro-payment) and not supported by another part of the paper (classifieds).

The newspapers also must move online. That does not mean copy-and-pasting their print articles on their fancy new web site. That means completely redefining themselves as the local forum, creating coverage-wide social networks, creating coverage-wide directories with user feedback, partnering with industry competitors such as Craigslist, and investing a lot of time in truly understanding how to use the new web tools (SEO, Twitter, Facebook, Flickr, Yelp, etc.).

The next generation of newspapers will be built more for the community. Currently newspapers like to promote themselves being for the community, yet, besides classified ads, they rarely offer the opportunity for the community to truly interact with them or each other. These forum-like features will thrive in the new newspaper business plans.

Newspaper Misconception

The fact is, most publishers could survive right now if it weren’t for their outstanding debt. Profits are shrinking quickly as ad revenue decreases and circulation drops. Yet, most still make money on a day to day operating expense basis.

Also, many analysts argue that a major city newspaper going under would be “a terrible thing because that’s who does the bulk of the serious reporting.” I disagree with this view. The trained journalists will not disappear, they will merely move to a new publisher or go freelance. The terrible thing will be if the readers cannot continue to find those journalists when they move on. That becomes the responsibility of the next publisher, who hopefully would be aware enough to promote their hiring of the cities top journalists and editors.

Newspapers are not going to die. They are just going to take another form.

Newspaper Competition

The race is on to create the next great newspaper. Print Newspapers, Online newspapers, and Geodomains all have a chance at winning out.

Current print newspapers have the journalist personnel, the sales and marketing infrastructure, and the experience behind them. They also have the debt weighing them down and the large corporation structure slowing them down. It will take a major change in the print newspaper structure for some of these to not only survive, but to dominate the market.

Online newspapers, anything from Google News to CNN.com to Drudge Report to local news sites or blogs, are making huge strides in creating the next newspaper business model. They have online advertising and online user growth on their side, as well as smart technology and the ability to be nimble. Many also have financing on their side. However, they each have their own problems, be it funding, difficulty in branding (building a brand name from scratch is tough), or under-distribution of work due to a small employee base.

Lastly, we have Geodomains. Self-explanatory companies such as LosAngeles.com, Chicago.com or even PalmSprings.com. These companies sit on the virtual real estate with most potential to brand themselves to readers. They also have other advantages similar to online newspapers in that they can be nimble and high-tech and have Internet user and advertising growth on their side. Perhaps most importantly, while separate businesses, they have a common bond in their status and have formed a trade association to help coordinate growth amongst them all.

That said, geodomains as a whole are currently a notch below many online newspapers. Most do not have or use the technology that many online newspapers are using. They are content with the default visitors to their brand rather than attacking to steal the print or online newspapers customers. Most importantly, they lack the journalistic content that print and other online newspapers are thriving on.

Newspaper Future

Looking at the status of each competitor, there are two ways I believe this could play out.

1. Geodomains poach the newly unemployed journalists and editors and grow their content to be on par with other online newspaper competitors. The geodomain industry will also need to unite their infrastructure much more so than presently if they are to withstand the attack from other online newspapers. Chances of happening: 20%
2. Geodomains are unable to grow fast enough. A new form of online newspaper is able to attract top journalistic talent on top of acquiring the best technology resources available. Microsoft and Yahoo have already created “Local” products. Imagine if Google took their Google Maps technology, purchased Yelp and Craigslist, and dropped those products on top of their news feed to start with. Then they hire local journalists nationwide to write original content and report news. Or, perhaps a venture capital firm invests in all of the newly available journalistic talent by hiring them and leasing them out to developed publishers. The potential for something like this to happen is there, it is just not yet clear how it will all develop. Chances of happening: 80%
3. The third option is that print newspapers survive and win out. The only chance of this happening is if the government steps in and bails out the industry. Unfortunately for everyone, our embarrassment of a House Speaker, Nancy Pelosi, is giving that a chance of happening. It will merely delay the inevitable. Even with a bailout, I think there is zero chance of the current newspapers winning out locally .
4. (There is a fourth option here where the newspapers buy the geodomains. The Boston Herald has done this and is thriving on Boston.com. From my understanding of current geodomain owners, I find it very unlikely that any more premium geodomains are sold, especially to the papers.)

The most important thing to note is that, while having a lower chances of success, I believe the ball is still in the Geodomains court. I do not think this opportunity will last long. The faster the print newspapers fail and thus the faster we move into the next era of newspapers, the quicker the online newspapers will attack to become the next generation of newspapers.

It is also important to mention that newspapers will not go completely online. I think it is important that the online newspapers also have print versions. Print is shrinking, but it will not evaporate altogether. Rather, the next generation of print newspapers will be small departments of the online version.

Newspaper Assets

The core theme to my argument here is that the newspapers best assets – primarily journalistic talent, but also print infrastructure – are slowly going up for grabs. Journalism and news will not die, it will merely relocate. The most logical primary acquirers of these assets will initially be other newspapers. But in the long run, the winners will be some form of online content provider.

The assets will become available within the next 18 months. Some cities will take longer as they merge two papers into one before succumbing to the inevitable reconstruction. There will not be a blatant yardsale, but a gradual dismantling.

As a member of the geodomain community and an active entrepreneur, we will be aggressively looking to acquire these assets if possible. If we are not able to, we will look to quickly hedge our bets and invest in the next online content provider. The worlds news content is at stake. An industry battle and shakeup of epic proportions is knocking on our door.

*image source: nytimes.com , thenewspaperworks.com

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