Newspaper Business Model: Unsustainable in Any Form

U.S. newspapers as we know them will be extinct by 2017.

So says Ross Dawson, a self-proclaimed “futurist” from Australia who released a global newspaper extinction time line in October. Dawson’s latest time line makes country-by-country predictions based on factors including a nation’s demographics, consumer behaviors and technological capacities. Unsurprisingly, the U.S. newspaper empire is predicted to crumble first, given Americans’ widespread adoption of handheld technology and the declining state of the nation’s newspaper industry. The newspaper will apparently endure a slow and painful death around the globe, spanning from 2017 to 2040—and, perhaps, beyond. (He predicted that Australian newspapers would meet their demise by 2022.)

The “newspapers are dying” story line is hardly novel. Most media gurus agree that the paper-and-ink newspaper is on the decline and will eventually become a relic. Yet many, including Dawson, believe that the news organizations themselves will survive in some transformed state. Forbes’ media columnist Dirk Smilie, for instance, is another one who argues that newspapers will stage a comeback after widespread efforts to cut costs and staff. In some cases, he expects that new management will provide much-needed energy to the dying organizations.

The rationale: people have to get their news from somewhere, right? If a market for news content still exists, it’s believed, newspaper organizations will just have to adapt their methods of delivery. Specifically, they’ll have to abandon newsstands and paperboys in favor of Web sites, blogs and mobile apps.

But this confidence in the newspaper industry’s ability to adapt is misplaced. The newspaper business model is simply not flexible enough to undergo such a dramatic transformation—especially given the increasingly competitive online news industry.

One example is The Huffington Post, which now trails only The New York Times in monthly Web traffic. Some reports note that it regularly outperforms other major dailies like USA Today, The Los Angeles Times and The Washington Post. Yes, The Huffington Post is primarily an aggregator. It produces little original content and certainly nothing on the scale of a major daily’s investigative reporting. But the growing Web site maintains a full-time staff of approximately 185 employees. More importantly, after struggling to monetize its popularity for the past several years, Forbes magazine expects HuffPo to triple its revenues in 2010.
If—or, according to Dawson, when—The  New York Times stops printing newspapers, it will be able to eliminate an incredible amount in overhead costs: no more paper, no more ink, no more delivery trucks, no more production staff. Yet even a streamlined, paperless New York Times will have operating costs that are simply unsustainable. In particular, it’s difficult to envision how the organization—which had 1,332 newsroom employees alone in 2008—will ever be able to operate on a shoestring staff of 200.

And HuffPo is only the tip of the iceberg of competition. National newspapers once dominant in niche areas no longer enjoy monopolies. For example, Politico’s coverage has forced The Washington Post to fight for its once faithful political audience. In-depth investigative reporting is increasingly being performed by nonprofit organizations.

Even regional dailies’ classic areas of coverage are in jeopardy. ESPN.com, for instance, has launched a series of Web sites providing localized coverage in regional sports markets.

A lot can happen in the next seven years. New technologies could present entirely new challenges to newspapers and their upstart competitors. Creative solutions could emerge. But today it seems unrealistic to expect that newspaper organizations will be able find a profitable business model to support the type of dramatic transformation that is necessary to compete.

The newspaper business model appears financially unsustainable, both in its current form and any conceivable future variation. From a business perspective, 2017 may be too generous a prediction.

Jeff Mascott is managing director of Adfero Group, a Washington, D.C.-based public affairs firm. He can be reached at jmascott@adfero.com.