How Newspaper Publishers Are Missing the Point

Washington Post columnist Steven Pearlstein has a good primer today on the challenges facing newspapers. It’s topic we’ve been following on this site, and fellow Little Rock blogger Blake Rutherford has weighed in on it as well in comments and on his blog.

Pearlstein does a pretty good job summing up The Story Thus Far on how newspapers are struggling with a business model that’s quickly becoming obsolete:

The basic story here is that an industry that was based, largely, on highly profitable local monopolies suddenly has discovered that it has competitors using new technologies to deliver news and advertising at significantly lower cost. This competition has not only eroded operating profit margins that routinely exceeded 20 percent but called into question a business model in which the cost of gathering the news was financed by advertisers who had no choice but to pay the price and pass it on to their customers.

The lack of vigorous competition slowed the pace of innovation and allowed publishers and editors to make decisions about what readers wanted and needed without listening carefully to the readers themselves. Readership and “penetration rates” began to fall in many markets even before the emergence of the Internet, particularly in newer and fast-growing exurban communities and among younger readers. That process has accelerated with the emergence of credible and convenient online alternatives.

Pearlstein takes three lessons from all this: 1) Gone are the days of the 20 percent profit margins, and publisher should not expect to see them again, 2) Consolidation “is not only necessary but desirable,” and 3) Any gains in efficiency from consolidation must be invested “into new technology, top talent and product improvement.”

To the latter point, the rash of buyouts and layouts we’re seeing (we’ve recently noted some examples of that in our daily link roundups here and here) might be a quick and easy way to improve the bottom line, but in the long run Pearlstein says it will hamstring newspapers from producing the kind of quality content it ultimately needs to survive.

That, and other food for thought, here:

Steven Pearlstein – Newspaper Publishers Chasing the Wrong Story – washingtonpost.com

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