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The New York Times and People Magazine Aren’t As Different As You Think

2012 June 21
by Eric Horowitz

Justin Fox’s article on the structure and goals of newspapers throughout their history is full of good points, but it earns a special place in my heart for busting the myth that newspapers are some kind of benevolent do-gooders out to educate people about what’s happening in the world.

The business model that the owners of the metro dailies gravitated toward in the decades after World War II was this: 1) establish monopoly, 2) milk that monopoly. The monopoly was on the delivery of printed advertising messages into homes in a given city or (better) metropolitan area: department store ads, supermarket ads, car dealer ads, and, most of all, classifieds.

Notice that I didn’t mention news. That’s because, once a monopoly was established, the editorial content of a newspaper had no detectable impact on its financial success. News gave a paper legitimacy, and some protection from antitrust laws (in the form of the joint operating agreements that the Justice Department allowed newspapers to set up to maintain editorial competition while consolidating business operations). Big news, especially sports news, even sold some extra papers from time to time. But even that didn’t really matter, since circulation wasn’t a profit center. The business of the metro monopoly papers simply wasn’t about news.

I would add that in addition to having a monopoly on printed advertising, newspapers also joined television and radio stations as an oligopoly selling low-cost, low-commitment entertainment. Newspapers were built on advertising, but the only reason they could charge for advertisements is that people actually read them.

Understanding the business models on which newspapers have historically been built leads to two key conclusions. First, the public trust in newspapers is completely misplaced. At their core they are for-profit entertainment companies like MTV, the History Channel, or any celebrity gossip magazine. There is still plenty of news and high-value investigative journalism left over from the good old days, but there’s nothing stopping those pieces from being altered, warped, or eliminated to stave off financial ruin.

As the headline of Fox’s article suggests, newspapers are also absolutely, positively, definitely doomed. They were built on the idea that they could sell advertising and entertainment. Now people can get better versions of those things for free. That’s why I think that when Fox talks about what newspaper companies could have done, he still doesn’t provide a path for how newspapers themselves could have survived.

If the newspaper companies had been nimble, well-managed organizations (news alert: monopolies usually aren’t) trying to follow Clay Christensen’s playbook for dealing with disruptive innovation, they would have set up separate ventures aimed at exploiting new digital advertising opportunities. Norway’s Schibsted did just that in 1999, and has remained a classified-advertising power. In the U.S., two newspaper chains bought the job site CareerBuilder in 2000 (a third joined them in 2002), and have built it into a successful online/print hybrid.

There’s no doubt that newspaper companies could have used their infrastructure and legitimacy to build successful digital advertising businesses, but without providing entertainment value, newspapers as we know them were always going to die. Perhaps the parent company of the Birmingham News could have owned Craigslist, but that wouldn’t have saved the actual newspaper from becoming a financial sinkhole.

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