Blog No. 9: Toys for rich boys
WASHINGTON, DC --- In Orson Wells’ classic 1941 movie, Citizen Kane, the main character is asked about owning The New York Inquirer newspaper, which is losing money.
In the scene, his business manager reminds Kane that The Observer is losing a million dollars a year. Kane blithely jokes that "at the rate of a million dollars a year, I'll have to close this place - in sixty years."
At its current rate of decline, the newspaper industry in America may be totally gone in five years. Overall newspaper revenues in the United States in 2006 were $62 billion. Today they’re about $21 billion according to the Newspaper Industry Association.
That a 66% revenue decline in 10 years.
Circulation is dwindling. Ad sales are down --- directly corresponding to the surge in social media’s online ad sales. Indeed, Facebook alone has captured about $40 billion in ad sales alone. Young people prefer alternative media to get their news.
Digital sales are up, print sales are down. So, it’s no surprise newspapers are declining.
And yet, some of the richest people in America continue to plow good money into bad newspaper investments.
At the beginning of 2016, Warren Buffett, worth $62 billion according to OxFam, purchased his 32nd newspaper, the Fredericksburg, VA, Freelance-Star. Buffett has owned, through his holding company Berkshire Hathaway, newspapers since 1977 the year he bought his first paper, The Buffalo News. He also owns his hometown paper, The Omaha World-Herald.
In fact, behind Gannett and McClatchy, Buffett may be the third largest owner of newspapers in the United States.
“I love newspapers,” Buffett told USA Today. “I read five a day. And you could sell me a sixth.”
But Buffett also acknowledged that the industry’s inability to move into the digital realm quickly and efficiently has cost it dearly.
“They’ve been slow to make the digital switch. And it shows,” he said.
When Buffett purchased Media General Corporation in 2012, he did it with the caveat that one paper be left out, The Tampa Tribune. Media General, desperate to shuck it’s bleeding newspaper division in favor of its more lucrative TV and digital business, complied, found a separate buyer for The Tampa Tribune, and sold Buffett the balance of its newspapers, including The Richmond News-Dispatch.
As you may know, The Tampa Tribune was subsequently sold to the rival St. Petersburg (nee Tampa) Times and then quickly shut down. My alma mater, the Tampa Tribune is alas, gone.
But, back to the story:
Other rich men (yes, they’re all men) who continue to buy newspapers are:
Jeff Bezos paid $250 million for the Washington Post
John Henry, the owner of the Boston Red Sox, bought the Boston Globe.
Carlos Slim Helu, the richest man in Mexico, is also the largest principal shareholder in The New York Times, with a 17% stake, and he has an option to buy more of the paper as the Sulzberger family’s investment ebbs away.
Aaron Kushner, famed New York Real Estate investor, keeps putting more money into his holding, The Orange County Register.
Rupert Murdoch owns 124 newspapers around the world as part of his Fox media holdings, including The Wall Street Journal.
Mort Zuckerman has owned The New York Daily News since 1984.
And Michael Ferro leads an investment group that owns both Chicago papers, the Sun-Times and the Tribune. Ferro’s Chicago Tribune Company also owns The Baltimore Sun, The Hartford Current, The Fort Lauderdale Sun-Sentinel, The LA Times and The Orlando Sentinel.
That’s a lot of really successful business people, indeed, all billionaires, who continue to invest in what is clearly a dying industry.
The question is why? Or more importantly, what do they know that we don’t?
The answer is quite simple. And no, it isn’t just the tax write off. Or that they’re just good citizens who want to give back to their communities, though in fairness, some are.
No, corporations are more aggressively than ever trying to “manage” the news for you. They want their point of view heard. They want their way of thinking understood. And they want consumers (voters) to line up behind them and their brands.
This isn’t just a right wing plot. Bezos was greatly criticized during the last election for his “liberal” views and “left wing” thinking as the Washington Post continued to ask questions about Donald Trump.
And we don’t have to detail how hated The New York Times is by the political right.
It isn’t just a coincidence that Buffett gets some of the best PR on the planet. You rarely can pick up a story about something bad or negative the “sage of Omaha” has done. You might say he’s a great guy. Could be. But when you own 32 newspapers and counting, well, the old saw about not picking a fight with a guy who buys ink by the barrel, still stands.
Bezos is experimenting with cross selling and cross-marketing his Amazon marketplace to Washington Post readers. A blurring of the two can’t be too far in the distant future. Indeed, banner ads for Amazon have already creeped onto the WaPo’s website. Cookies are helping collect data on WaPo users as retailers and marketing folks are further targeting products to push onto WaPo readers.
Bezos is using the Post as a lab for testing new marketing techniques and technologies.
The Wall Street Journal is pushing more and more of its reporters in front of cameras to help reinforce --- some would say save --- its news brand. Watch CNN, MSNBC and Fox over the next two months closely. You’ll see more and more of its “talent”, previously called reporters, land on various news panels as talking heads. It’s a way to keep print brands alive in the new media landscape.
Here’s what Forbes magazine wrote on the subject:
Warren Buffett is hardly a naif, and he bought up his newspapers with his eyes open. The "code" that he likes to allude to involves figuring out how to make much more digital revenue, "blending the digital and print model," as Buffett puts it. What concerns Buffett is that "it's three years later and we're still figuring out a solution."
He adds, "I've got to see the answer. Wishful thinking won't do a thing."
As for the future, he says, "In most cases there are some years left to crack the code. But we haven't done it. Maybe (the industry) started too late."
Despite the newspaper industry’s malaise, Buffett says he’s going to stay in the business. “We would never sell a newspaper… I want to be the last guy standing.”
He may very well be.
As the newspaper industry hunts for the last best efforts to save it, time is not on its side. Its attempts at converting to an online-only solution are not working. Neither is the subscription or paid model. Once folks get free news, it’s hard to make them pay for it. There are some exceptions, but they are few and far between.
Indeed, Media General sold its newspapers to move more fully into television, radio and web/digital formats.
Job boards for the industry are now laden with openings for videographers, web content developers and programmers, field producers, graphics experts and film editors.
Technology, an inherent part of journalism, continues to evolve faster than the business itself. The technological evolution from the printing press and typewriter to today’s mobile Internet devices is nothing short of a revolution in itself.
Nostalgia aside, most people don’t really care much about by-lines and newspaper banners any more. They want their information and they want it fast. Twitter, Facebook, Snapchat and Instagram are now so ubiquitous they dwarf old media’s ability to reach readers.
Old media’s solution was to put out multiple editions of the newspaper daily, to catch changes in the news cycle as they occurred. At one time, the Chicago Tribune would publish five or six editions on an important news day. Today it’s website simply “refreshes” with new stories as they occur. The paper is down to two editions daily, the “national” edition, and a later “local”, requiring only minor and subtle plate changes to its printing process.
To some, it might seem almost surreal to think that your smart phone will eventually replace The Nightly News or The New York Times. But in reality, it already has.
Today’s reader would much rather “watch” video than read a book.
Today’s reader would rather chat on an interactive site, than take on one-way push print product like Vanity Fair or Sports Illustrated.
Today’s reader would rather get updates via their phone, than wait for long view stories and detailed written accounts.
It’s an attention span thing. And a generational thing. And its not just limited to print.
In the 500-channel cable universe, keeping viewers on one site is becoming increasingly difficult. Indeed, cable programmers are now struggling with “old” brands like ESPN and CNN. Viewership isn’t just down; it’s just been fragmented across multiple channels. More people are watching, they’re just doing it across a broader spectrum of choices.
On the Amtrak train from Washington to New York last week, and then the return trip that afternoon, I walked three cars from my seat to the bar car to get coffee.
That’s six train cars in the course of a single day, filled to the brim with politicians, business people, tourists and, well, regular people; and not a single person was reading a newspaper. Plenty were using their laptops, Ipads, smart phones on the Wi-Fi capable train. But nobody, and I mean nobody, had a newspaper.
In short, technology is allowing humans to gather and disseminate information at ever-increasing rates. The amount of data and information we are taking in daily continues to increase. Indeed, these new technologies will continue to be faster, louder and enhanced with more color and detail.
The Internet has changed us. It will continue to do so. Reaching directly into a person’s home has now transcended into reaching directly into their heads, no matter where they may be, anywhere on the planet.
It’s another way for billionaires, business people, politicians and corporations to talk directly to you. It’s why this shifting media universe will continue to evolve.
In five more years, newspapers will be gone. Seems almost unimaginable.
Or does it?
And, what do you think Citizen Kane would say?
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