Publisher sees failed business model
Posted on Saturday, September 20, 2008
The newspaper industry’s approach of giving content away on the Internet is a failed business model, Arkansas Democrat-Gazette Publisher Walter E. Hussman Jr. said Friday.
Hussman said a opinion piece he wrote for The Wall Street Journal in May 2007 might have been better titled “How to Sink a Newspaper Industry,” instead of “How to Sink a Newspaper.”
“It’s been really phenomenal what’s happened in the last year or year and a half,” Hussman said. “Many of the newspaper stocks are down 80 percent and 90 percent from their highs... the investing public has pretty much lost all faith in newspapers as an investment.”
He was speaking about the future of the newspaper industry as well as media credibility in the Little Rock Peabody hotel at the 62 nd annual National Conference of Editorial Writers.
Hussman said he would continue the Democrat-Gazette’s approach of charging for most online content.
“That’s really contrary to what most people in the industry are doing,” he said. “They’re putting all their content out there thinking they’re going to reap some great bonanza by doing it.”
Hussman compared the weekday circulation trends of the Democrat-Gazette, which has grown by about 7, 500 copies in the past 10 years, to those of the Austin American-Statesman, which has dropped by about 17, 300 and the San Diego Union-Tribune, which has dropped by about 97, 300.
The Austin and San Diego newspapers are for sale, he said.
“These are the kind of newspapers that five years ago would have been a dream for someone to even bid on — both great, great markets,” he said.
Hussman thinks Democrat-Gazette circulation is up mostly because people must buy the newspaper for most content.
“I mean, I know that sounds really simple,” but it makes sense, Hussman said, a line that drew laughter from the audience.
Expansion in Northwest Arkansas is another reason why circulation is up, he said. He said the newspaper will remain viable and useful for advertisers as long as circulation and readership remain large.
Hussman said the newspaper has lost some penetration in the past decade in its city zone, which is essentially Pulaski County.
“It’s because all of this free news that’s everywhere,” he said. “People used to buy a newspaper to get our national news and to get our international news, and now it’s just a commodity. You can get it anywhere.
“ It’s hurt us, but it hasn’t hurt us nearly as much as it’s hurt these other newspapers.”
Online advertising for newspapers, he said, has turned out to be “a flop.” It typically is focused on pop-up ads and banner ads, as opposed to the “search” ads that have been profitable for companies such as Google, he said.
“Anybody in this room ever gone out and bought something from reading a pop-up ad or a banner ad ? I’ve never bought anything.”
Hussman also said it was misguided for newspapers to shrink coverage of international and national news.
“When the federal budget deficit is projected to double, that’s news, that’s stuff that’s important to people in Arkansas,” he said.
Hussman also presented details from a recent Pew Charitable Trust study on media credibility.
In print, The Wall Street Journal has the highest credibility, with about 25 percent believing all or most of what it says, but that number has dropped from 41 percent in 1998, he said. The number of people who believe all or most of what their daily newspapers say has dropped from 29 percent to 22 percent in the same period, he said. And the number of people who believe all or most of what The Associated Press says has dropped from 18 percent to 16 percent.
“What’s so discouraging about these ratings is, No. 1, that they’re so low. And No. 2, that they’ve declined so much over the years,” Hussman said.
Carol Hunter, a Des Moines Register editor, asked about Democrat-Gazette readership among young people.
Hussman said young readership is good for the industry, but “still not good enough.”
Rather than risk alienating other readers, the newspaper has catered to younger readers by launching the free weekly Sync publication.
“It’s doing pretty well,” he said. “It’s not making a lot of money, but it makes money some months and some months it doesn’t.”
John Morton, a Marylandbased newspaper analyst who has done consulting work in the past for Hussman, said in a telephone interview that he didn’t know whether charging for most online content is helping keep circulation up at the Democrat-Gazette.
He said the amount of money Hussman spends on the newsgathering side of the newspaper could be another reason for the strength of the circulation.
Hussman is “sort of a lone voice in the wilderness in that most of the industry has adopted the free [online ] model, for better or worse,” Morton said. “Whether that has contributed to the [nationwide ] circulation decline, it’s hard to say. There were a lot of things driving down circulation even before there was the Internet. Young people not taking up newspaper reading — that’s been going on since the late ’ 80 s.”
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