How to Cut Production Costs: Newspapers and the Internet
Print publishing in the sense of having a physical piece of paper in front of you is going the way fo the dinosaur. I know that that sounds like a wildly rash statement, and I know that I'm someone who has a vested interest in perpetuating the belief, but the Economic Policy Institute can back me up on this one. According to them, the non-internet publishing industry lost 91,000 jobs in 2006, "in part due to internet competition." The point is that if publishers want to make money through advertising, they need to cut physical infrastructure, both in terms of facilities and products.
So what's the source of all this? Well, in a word: infrastructure. As Froosh over at HipMojo explains:
The problem with newspapers is not in the revenue line, but rather, the cost. The cost structure of old media newspapers is simply a result of decades, lest a century, of inflationary wages and associated spikes in advertising revenue. Online, talent is cheap, people are hungry to work twice as hard and the ad model is nascent, so ad rates are lower.
A newspaper, in my humble opinion, can simply shut down / scale its offices down, reduce overhead, and have writers and columnists work from home. Sales people? Who needs a desk?
It sounds crazy, but trust me, it’s not far-fetched. [...]
While digital’s cumulative revenues will continue to rise, the individual share going to any one player amongst publishers will not be anywhere near as what newspapers hope it will be, that means that to be profitable, the solution lies in cutting costs.
You see, the reason that user-generated-content is to mainstream media what the printing press was to the church is that it is dissolving a monopoly over one facet of human interaction: mass communication. In a lot of respects, many of us just don't need to be be somewhere specific to get our jobs done, and the companies that realize that first are going to stomp their competition.
Newspapers are just the first to face this squeeze. They have to face competition from online content producers who (1) offer free content, (2) can update in real time, and most importantly, (3) hardly have any overhead.
Newspapers, however, have an additional vulnerability: they still work on the assumption that information is a physical product. Basically, the cost of having to actually print and then distribute something is going to be debilitating in the not-so-distant future markets. Granted, most of us still enjoy having something physical in our hand that we can actually touch while we read it during the morning commute. This might always obtain for something as comprehensive and lengthy as a book (and maybe not even), but blogs and news style have similar length constraints, which means that information of this nature is something that users are becoming more accustomed to consuming online.
Besides, think of younger generations. Sure, you and I might enjoy having an inky piece of paper to read during the commute to work, but what about those teens that are hard-wired to their iPods and mobiles? What are they going to demand as full-grown consumers in a decade? Given their already developed preferences and the rapid pace at which tech-gadgets are progressing, do you really think that they are going to consume their morning news when it's 12-hours-stale and off of a piece of paper? I doubt it. They'll be reading it in real-time and off of a personal device.
In a word, then, or at least a few, Froosh is probably right: Newspapers need to start cutting infrastructure. For starters, they need to be looking at dissolving their physical facilities that are superfluous -- i.e. desk space for writer, editors, etc. More to the point, though, they need to start planning ways to phase out their print editions at a rate that approximates the consumption habits in information markets. The best way to be do this would probably involve really pushing their online editions through their print editions. There's just more of a future of advertising revenues there for them.
