How the Newspaper Industry Struck Out at the Plate

All across the country newspapers are cutting staff, reducing delivery schedules and shrinking the product literally and figuratively to save costs and build efficiencies.

As a marketing manager in the newspaper business for 15 years, I know well the frustrations of management grappling with declining revenues, declining readership and declining morale.

8 years ago I joined a bustling newspaper that was named one "10 That Do It Right" by Editor & Publisher Magazine. At the time the newspaper had the highest ratio of editorial staff to circulation in the country. That is no longer the case. The family-owned company has been forced to cut staff and reduce salaries to remain profitable.

Back when I joined the company it was apparent our newspaper was rich in talent and resources but at risk when it came to leveraging that human capital into sustainable profit. Though no financial expert by any means, I suggested that our business model was at risk if we lost any key revenue categories. That observation won no friends, but it proved prophetic.

Profit margins at the time were generally 8-10%. That mean we were running leaner than most newspapers, and our salary and debt load were high. The company had just completed construction on a $52M press facility with a printing capacity of 250,000 papers. Our real circulation at the time was near 150,000.

When the internet began to seriously impact employment revenue in the early 2000s, you could feel the reverberations throughout the company. Hiring freezes were implemented along with a 10% company-wide pay cut. The newspaper industry scrambled to protect its employment advertising revenues by establishing internet job boards, but the response was too little, too late. That was Strike One against newspapers. Other key revenue categories would also soon be threatened.

Top managers at the company convinced themselves the go-go days of the 1980s and 90s would soon return, but they never did. By 2007 the internet and other media had successfully chipped away at every advertising category in the newspaper business, causing annual revenues at our publications company to dip from a high of $108M to $102M. We were not alone in this regard. Even revenue machines like the Tribune Company (that company now faces bankruptcy) began to suffer. Meanwhile, paid circulation was dropping at newspapers across the country. Never before had our newspaper seen a "double-whammy" of lost revenue in advertising and circulation so threatening.

Rather than respond to this threat with a known business plan, the circulation department refused to solidify or market its subscription offerings in a plan that would be consistent, and therefore promotable to all its potential subscribers. The subscription price range told a strange story. New subscribers could often lock in rates of 99¢ per week while long time subscribers paid up to $4.50 per week. This inequity was the dirty little secret that kept circulation from acting on its need to create a subscription plan with parity and marketability. The plain truth is that newspapers needed to increase circulation radically in the early 2000s as a means to increase market share and drive readership. This was needed to stem the rising perception among advertisers that newspapers were no longer relevant.

But rather than go after "real circulation" with paid subscribers, many newspapers began horse-trading subscription numbers by going after a quick fix called "bartered circulation." That meant newspapers were trading values such as free tickets to sports contests in place of revenue, then applying that value against blanket distribution of the product to households in targeted areas. Bartered circulation turned out to be a hollow fix, and unreliable in terms of reaching new customers. The disgusting truth is that the Audit Bureau of Circulation (ABC), an organization responsible for monitoring circulation policy nationwide, tolerated rapid growth of bartered circulation before wising up and placing limits on its use.

This less-than-stellar response to the need for increased circulation was Strike Two for the newspaper industry.

I left the newspaper business a little over a year ago. But looking back, I see that our company made mistakes that many newspapers across the country made. Ironically, one of these key mistakes was not related to revenue or economics, but of identity. Among the most egregious errors is that newspapers missed a key window of opportunity to connect with consumers by initially refusing to let readers interact with the information they get from newspapers in print or online. This was particularly true at the company's web site, where repeated requests by our marketing department to make the newspaper web site interactive for readers were rebuffed as lacking in the seriousness necessary to sustain journalistic integrity on line. This attitude would prove to be deadly for newspapers.

Basically, newspapers missed the whole social media curve. The very few newspapers who early on did experiments in social media got slammed by the industry. At my first newspaper marketing job with a smaller group of newspapers in the Chicago suburbs, the editors came up with an idea for a feature called Sound Off. Readers were allowed to call a hotline and give anonymous opinions about anything under the sun. Some of these calls were irresponsible and inflammatory, but many readers loved Sound Off precisely for its unfiltered content. Despite its obvious journalistic flaws. Sound Off worked because readers, not the editors, owned what was published in that space.

That newspaper suffered negative criticism from community leaders and its competitors who claimed that Sound Off was simply prurient and irresponsible, but its principles for success predicted the success of social media. Sound Off still appears in that newspaper 14 years later, only now you can submit daily opinions via the web.

Bigger newspapers initially wanted nothing to do with publishing anonymous opinions, especially call-ins. Some tried call-in lines where the reader gave their names to be published. These were difficult to police and did not produce the same enthusiasm or frontier feeling as anonymous lines.

The same held true for early attempts by newspapers to offer news on their web sites. Basically these sites exactly replicated the newspaper with no interaction space for readers. The result was that people were all too happy getting their free news off the internet. This was a valuable commodity, but newspapers initially failed to leverage the thousands of people visiting their web sites. Newspapers had "automatic" traffic to their sites and did not figure out what to do with it. This was Strike Three for the newspaper business.

The newspaper industry's journalist pride and tradition blinded it to the potential value of consumer interaction with the information. Turns out all people ever wanted was to talk about the news they read. The meager space allotted on the typical editorial opinion page for Letters to the Editor could not possibly service the pent up need for consumer observation and complaint. Some newspapers have correspondingly increased the scope and size of their print editorial page. Still others don't get it. Life has changed. The opinion of the newspaper is no longer the only one that matters.

It remains to be seen if newspapers will be given another shot at the plate.