The same technology advances that have given us Media 3.0 have been near-catastrophic, at least in a financial sense, for what we now think of as the journalism industry—the collection of powerful corporate producers of journalism that emerged in the second half of the 20th century. Especially in the past decade, reality has collided—hard—with the news business. Publications and broadcasts are hollowed-out shells of their former selves.
What happened? The easy answer is that advertising disappeared. True, but too easy. Let’s look a little more deeply.
The seeds were planted decades ago, when it became clear that newspapers and local television stations were becoming licenses to print money. The reason: The barrier to entry—the cost of presses and broadcast licenses, among other things potential competitors would need to enter those marketplaces—was too high. In the daily newspaper business competition was narrowing dramatically; by the latter part of the last century communities of any size with more than one newspaper were rare. So newspapers were monopolies, and local TV stations were oligopolies.
Monopoly meant charging ever-higher prices, not so much to subscribers, but to the advertisers who had nowhere else to turn in their communities if they had something they wanted to sell to the widest possible customer base. Nowhere were profit margins higher than in classified ads, those one- or two-line notices that filled page after page in most papers. In fact, for most newspapers classifieds provided the number one source of profits.
Wall Street loved the newspaper corporations, because monopolies are great fun for owners while they last; you can keep raising prices and no one can stop you. So when newspaper companies sold shares to the public, often to raise capital so they could buy up more papers, investors bid up the prices of the companies. The companies bought more and more papers: Profit margins kept soaring, and so did stock prices.
As Wall Street and private owners alike demanded higher returns, in many (if not most) markets monopoly newspaper managers became complacent and arrogant, to varying degrees—it’s what monopolists tend to do. Rarely did managers care all that much about their communities; they were really just visiting on their way up the corporate ladders. The chief way they could please their bosses was to pull more profits from the local communities, by not just charging more for ad space, but also trimming back the budgets for journalism.
One thing they trimmed was journalism that aimed to serve people on the lower demographic rungs. Over time, most large daily papers increasingly aimed their coverage almost solely at the top 40 percent or so of the communities they served, in terms of household income—because those were the people the advertisers wanted to target. So newspapers were losing touch with their communities as they chased profits.
The Internet brought competition for the advertising dollars, as sites like eBay, Monster (jobs), craigslist and others gave advertisers a much lower price for a much better service. It didn’t take long for the classified advertising business to melt, and with it the main source of profits at most papers. It will never come back.
Display advertising, meanwhile, was going through its own evolution. Newspapers depended mostly on big local merchants, notably department stores, for display ads. But economic forces led to consolidation of the retail marketplace—among other industries that tended to use newspaper ads heavily to reach consumers—and bang, another revenue source was gone for good.
Television’s unwinding happened in different ways and at a different pace. TV is still a hugely popular medium and will remain so for decades to come, but the rise of cable and satellite gave viewers and advertisers more choices. These shifts were part of an upheaval for local TV, which at one time boasted profit margins that would make the greediest newspaper executive jealous. The effect of competition—and, I’m convinced, a relentless dumbing down of television journalism to the point that it was pure info-tainment—pushed audiences away.
And as all these financial storms were brewing, mass media audiences were joining advertisers in exploring the Internet’s vast and diverse possibilities.