Twilight of the Newspapers

Today was a big day in the world of media, as the Tribune Company, which owns the Chicago Tribune, the Los Angeles Times, the Baltimore Sun and other properties filed for bankruptcy. Meanwhile, the New York Times staved off Chapter 11 for the moment, at least, by borrowing up to $225 milion against the building that it owns in midtown Manhattan–the company’s one asset that still has undoubted value.

The Times’s own story on the move notes that Standard & Poor’s has lowered its rating on the New York Times Company’s debt “below investment grade,” i.e., in common parlance, to junk. The Times Company’s stock has lost more than half its value this year. Of course, they’re not alone in that regard; if these travails taught the people who run and write for the Times anything about economics, they could be a blessing in disguise. But don’t hold your breath on that one.

Today’s media environment is very strange. “Old media,” especially newspapers, are encountering terrible financial problems. But that’s not because there is no demand for their product. The demand for hard news reporting is probably greater than ever. True, papers like the Times have suffered needlessly because they have degraded their franchise by substituting partisan spin for objective news. But that isn’t their biggest problem: if you count readers on the web, who outnumber print readers for most newspapers, the big, traditional papers are as widely read as always, if not more so.

The main problem is that their cash cow, classified advertising, has pulled up stakes and moved to the internet, and newspapers have not found an adequate alternative source of revenue. The internet advertising market is soft, as we can attest, and it takes enormous numbers of eyeballs to generate substantial revenue. As a result, a lot of the profit has been wrung out of the newspaper business, and the papers’ economic model is broken.

At the moment, there is no clear solution. Internet subscriptions are one possible business model, but the trend has moved in the opposite direction. Most web denizens are now used to getting their news for free, and it won’t be easy for one newspaper, or a group of papers, or even a news-gathering (and, these days, opinion-mongering) organization like the Associated Press to change the paradigm.

So we are still waiting for someone to figure out how to satisfy the world’s demand for hard news gathering at a profit. Until that problem is solved, expect more and more newspapers to go out of business.

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