From the turn of the 20th Century through to the beginning of the 21st Century, the production of news in media was remarkably consistent — newspapers produced nearly all the news. Then, along came TV and radio, and they for the most part pivoted off the newspapers’ reporting.
Sure, there were those rare occasions in which local television did some in-depth journalism — where the station would follow some slob local government employee around for sweeps week. The worker would get suspended, and the rest was left to the guys who bought ink by the barrel and the big spools of paper.
Please save the emails from the journalism historians and romantics that want to talk about impact of FDR speeches on the radio or brilliant broadcast journalists like Edward R. Murrow. Yes, those occurred.
But here is reality: for more than a century, 95% of the original local news was produced by newspapers and those newspapers in places like Boise, Cleveland and all across America often functioned as patriarchal monopolies. Business was good for these families that owned them. They controlled the news, opinion and advertising. You could not buy around local newspapers in most markets. And in 2000, the U.S. newspapers hit their peak in advertising revenue at $65.8 billion.
But boom. It is all over. In 2013, newspaper print advertising revenue dropped to $17.3 billion. Meanwhile, the cost of trucks, newsprint, production, Teamsters, newsrooms, etc. did not decrease by the same corresponding 72%.
We are now in one of those eras in business where chaos, disruption and innovation are the norm. The legacy news media business as we have known it is completely and utterly broken as an operable model at a time when folks seek more information than ever before.
Innovation and Decline
Innovators in media are popping up everywhere, but some of the biggest and best-funded are crashing into the rocks. AOL’s Patch sold earlier this year to a work-out group, Daily Voice filed for bankruptcy protection last year before emerging on the other side, and now billionaire Pierre Omidyar’s New Look, to which he had pledged $250 million to foster digital journalism, has already lost rock star journalist Matt Taibbi and shuttered the nascent site Racket. Combined, these three ventures have had, at best, chaotic results so far — while New Look has not spent all of its pledged dollars, these three ventures total just shy of $600 million in investment.
Innovation is taking place at two levels: national digital news media and local/hyperlocal ventures. To date, the investments and the claims of success seem more clustered at the national level. Failure and scorn has transpired at the local and hyperlocal play. But there are successes and failure at both.
Vox Media just scored $46.5 million in venture capital, at a valuation of $380 million, according to the Washington Post. BuzzFeed, which is reportedly profitable, raised $50 million from Andreessen Horowitz at a reported $850 million valuation. Reddit also closed $50 million at a $500 million valuation. These three valuations are all a lot better than that of the Providence Journal, which has with $90 million in revenue, $11 million in positive EBITDA, and just sold for (a shockingly overpriced) $46 million.
Meanwhile, local newspapers are shrinking and consolidating into one another. Some legacy news companies are claiming to be working to reinvent into a digital first strategy, but anyone working in a newsroom has heard that for years (and has likely been through many rounds of layoffs and buyouts).
One newspaper company has bet the proverbial ranch on a race to digital. The New York Times has sold all their assets and have reinvested every drop of cash into a re-invention strategy. According to the company’s 3rd quarter report, the Times “had an operating loss of $9.0 million in the third quarter of 2014 compared with an operating profit of $12.9 million in the same period of 2013.” Now, the Times is cutting more and buying out more.
Here are five trends to watch:
1) Consumers love media personalities, but digital media must create its own brands. New cash rich media companies may be seduced to pay big name big salaries, but while hiring one Ezra Klein is smart business, but 10 Klein salaries may be unsustainable.
2) Digital can be profitable — from BuzzFeed to GoLocal24, at some point revenue and profitability matters. You can’t fundraise against “average time on site” forever.
3) Social matters more than media understands — it is now the distribution system as much as a kid walking down the street was throwing a newspaper on a porch a quarter century ago.
4) Newspapers are already dead — it’s just that no one told them to stop printing. Wait until the retailers find out and pull their Sunday inserts.
5) Local TV may be next — auto is beginning the process of leaving local news for digital. The decline of local TV news will be as brutal as the local newspaper, but will happen faster.
Purists will claim that today’s Kim Kardashian celebrity social-media-driven consumption coupled with BuzzFeed’s quizzes about which reality show host are you most like dumbs down society compared to the foregone era of Woodward and Bernstein. Yes, journalism matters — and companies like Vox are scoring points, readership and loyalty due to their content. GoLocal is extremely proud to have won three major media awards for our coverage of issues of diversity and in equality including the NAACP’s chapter in Providence.
In periods of great change the metamorphosis is neither predictable or clean. The mapping and building of the American railroad system was not designed by an engineer at a finite point — the maturation of the industry was often chaos.
These days we are no longer going to shoot ink onto giant spools of paper and deliver it in trucks when 75% of the people are walking around with computers that allow them to read, watch and share the content in real-time. They pick up these devices more that 125 times per day, and the fourth most active function is using them as phones.
The entire process will not be finite, fast or absolute. The transformation of the newspaper industry took from 1770 to 1900 to redefine the news business — and then it was a functionally stagnant model for a century.
Make no mistake about it‚ billions will be made and lost. After all, it is the golden era.
Josh Fenton is the co-founder of GoLocal24, a digital news company focused on local media in midsized markets.