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Chapter%204%20-%20Lecture%204 - PART II. MEDIA CHAPTER FOUR...

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Unformatted text preview: PART II. MEDIA CHAPTER FOUR Newspapers "Everyone thinks they can fix newspapers," sighs one Wall Streeter. "No one has found the magic bullet." BusinessWeek, 2/11/08, p. 81. Snapshot of the newspaper industry in 2010: +Most news stories originate in newspapers; stories first reported in newspapers filter down to other news media. +Newspaper circulation and advertising revenues provide predictable cash flows for publishers. + Newspaper managers routinely exert discipline in matters of capital expenditures and operating costs. Total newspaperindustry revenue declined during the past two years due largely to classified advertising lost to online competitors (e.g., Craigslist). During that same period, the rise in the price of: newsprint increased the cost of producing newspapers gasoline and diesel fuel increased the cost of distributing newspapers. Where things stand today In 2010, 19 of the top 50 U.S. newspapers are losing money. Overall, the three national newspapers and the many small market papers are performing better than bigcity dailies. Tribune Co. (Chicago Tribune, Los Angeles Times, Baltimore Sun, and others), the Minneapolis Star Tribune (15th largest daily), the Philadelphia Inquirer, and the Chicago Sun Times are among the major newspaper publishers that filed for bankruptcy protection in 2009. Among old media, the metro daily newspaper appears to be next in line (after recorded music) for a significant change in its fundamental business model--change brought about by new media. Daily newspapers that printed final editions in 2009 Rocky Mountain News (Denver, 149 years) Seattle PostIntelligencer (146 years; switched to webonly with 40 employees) Ann Arbor News (175 years; switched to web site and twice monthly paper titled Ann Arbor.com; staff of 316 reduced to 60) Nevertheless . . . Something fulfilling the functions of a community newspaper will probably continue to exist indefinitely. People have been writing obituaries for American newspapers since 1920. The emergence of a new technology (Internet) for distributing a fundamental type of content (news) rarely results in the death of experienced and established content providers (newspaper publishers). Instead, existing content providers adapt and change (newspaper publishers emphasize news content rather than paper distribution). Throughout the history of our country, newspapers have characteristically provided content that: is diverse is timely is conveniently packaged emphasizes local events (the handful of national papers are exceptions) is a "first draft" of the historical record serves the watchdog function of journalism (more on this later in the course) The evolution of the American newspaper begins with three early periods during which publications were aimed at small audiences 1. Colonial period single entrepreneurs often combined roles of printer, seller of coffee and imported books, and postmaster British law required licensure 2. Revolutionary War period When supplies of raw materials from England became scarce and expensive, the newspaper business divided into specialized sources of human and financial resources. publishers provided money editors provided content printers produced the finished product 3. Political, partisan, or party press period Many newspapers were published by two opposing political groups: Federalists AntiFederalists Press freedom was codified in the First Amendment to the U.S. Constitution. The golden age of newspapers: 18301930 Bookends: began with the penny papers of New York City in the 1830s ended as radio networks diffused nationwide in the 1930s The shift from elite to mass audiences began with the Penny Press (18331860), our first truly "mass" medium. The Penny Press emerged in New York City in the 1830s for numerous reasons including: technological innovation (steampowered printing presses) literacy (most people could read) emerging egalitarian perspective (ordinary Americans began to be recognized as important political and economic forces; "Jacksonian Democracy") Major players of the Penny Press Benjamin Day (New York Sun; first to be successful with a onepenny paper) James Gordon Bennett, Sr. (New York Herald; first to actively gather news) Horace Greeley (New York Tribune; first to have a national voice via a weekly edition) Henry Raymond (first publisher of the New York Times) Principal changes in American newspapers during the Penny Press period economic support (from prepaid subscriptions, to advertising) distribution (from the U.S. mail, to street sales) news values (from content of interest to those in commerce or politics, to content of interest to general readers) techniques of news reporting (from passive collectors, to active gatherers) The Penny Press period ended as our country entered the Civil War The war brought about additional changes in American newspapers. headlines crafted from telegraphic dispatches author bylines invertedpyramid style of writing illustrations in the form of elaborate woodcuts The next major period of American newspapers was the "New Journalism" of the 1880s. New Journalism was a formula for urban newspapers that emphasized two types of content: sensationalism focused on sex, crime, and dishonor crusading editorials focused on improving conditions of the poor The most prominent publishers of the New Journalism period: Joseph Pulitzer William Randolph Hearst During the 1890s Pulitzer and Hearst waged a circulation battle in New York City that became known as the period of Yellow Journalism. Pulitzer and Hearst tried to "outsensationalize" each other in order to sell the most newspapers each day (advertising rates were based on circulation). Yellow journalism contributed to the outbreak of the Spanish American War. Although yellow journalism was described by some as the "New Journalism without a soul," the period produced positive outcomes: aggressive reporting techniques (e.g., Nellie Bly) wide exposure to prominent authors (e.g., Mark Twain) innovation in layout and display devices (e.g., color printing) Two other major players during the time of Pulitzer and Hearst E. W. Scripps formed the first newspaper chain Adolph Ochs built the modern New York Times Newspaper ownership consolidation About 500 U.S. cities had competing daily newspapers in 1923. That number began to decline for two main reasons: Increasingly expensive printing equipment and raw materials caused some publishers to sell or merge. Advertisers viewed all newspapers as functional equivalents. Hence, in any given city, it made sense for advertisers to insert ads in only the one or two newspapers with the largest circulations. Jazz journalism (1920s) During the "roaring 20s," Americans embraced a third wave of sensationalism similar to the penny papers of the 1830s and the yellow journalism of the 1890s. Jazz journalism was characterized by: tabloid format for newspapers emphasis on sex and crime heavy use of photography (photojournalism) The golden age of American newspapers ended around 1930. First, radio stations and networks: emerged as competitors for advertising dollars during the 1930s replaced the role of the newspaper "extra edition." Then, television stations and networks: emerged as competitors for advertising dollars during the 1950s replaced newspapers as Americans' primary source of news by the early 1960s. As the number of competing metro dailies shrank, Congress passed the Newspaper Preservation Act (1970) Joint Operating Agreements (JOAs) 28 in 1970; 8 today Paper A Paper B News/editorial News/editorial Papers A and B Advertising Production Distribution Major characteristics of community newspapers in 2010 heavy concentration of chain ownership (the 21 largest group owners account for 68% of U.S. daily newspaper circulation) geographic monopolies (99% of daily newspapers in the U.S. are the only daily newspapers in their markets; only 12 U.S. cities have competing newspapers) Basic media ownership patterns: monopoly, oligopoly, competition With only a few exceptions, the world's largest media companies (largely entertainment companies) do not own newspapers. The newspaper culture that places a premium on public service to local communities is not well understood by owners and managers of media companies that produce entertainment. Chain ownership of newspapers + Chain newspapers benefit from economies of scale in the acquisition of raw materials (e.g., bulk purchases of newsprint). + Compared with managers of independently owned newspapers, managers of chain newspapers in communities dominated by a single industry or advertiser are not as easily threatened by loss of advertising support. Publicly owned chains are under pressure to produce profits. Managers of chain papers sometimes replace local reporting with content produced at the chain's other papers. Disconnection between local media and local communities occurs when employees at smaller chain newspapers move to bigger papers in the chain. Categories of print newspapers in 2010 National papers (a Wall Street analyst recently suggested that no market exists for the emergence of another national newspaper) Other dailies (published at minimum 5 days a week) large metropolitan suburban smalltown Print weeklies Specialservice newspapers defined audience (e.g., AfricanAmerican, Spanish language) defined content (e.g., college, alternative) Digital newspapers in 2010 Online editions with different layouts from the print version no newshole limitations continual updating interactive content Replica editions with the same Web layout as the printed page cheap to produce (because pages are already assembled on computer screens) counts as part of the newspaper's circulation Access to digital newspapers paid (exclusive at only about 24 newspapers nationwide, but many papers sell access to back issues) registration (personal information sold to advertisers) free (most common model in 2010), but . . . Some speculate that the Internet is evolving into a distribution system for paid content, or perhaps a hybrid mix of free and paid. Advantage of a paid system to content producers: Data from paid users' browsing habits can form the basis of targeted advertising sold at a high price. Last week the New York Times announced a plan to charge for full access to its Web site starting next year. Inside a modern newspaper Three major divisions: news (local, national, international) and editorial (opinion) business (sale of space to advertisers, general administration) production (composition, printing, and distribution of physical copies delivered to places; electronic information delivered to people) Content: advertising vs. newseditorial Newspapers consist mostly of advertising. Typically, about 60 percent of a newspaper's content is advertising. About 40 percent is newseditorial content. Revenue: Advertising vs. circulation 80percent from the sale of advertising: local (retail) displays classifieds national displays delivery of preprints online (almost all banner and display ads are sold in combination with print counterparts) The remaining 20percent from circulation (the sale of copies): includes subscriptions and singlecopy sales distribution costs about equal revenues from circulation Revenue: Print vs. online In 2008, the big newspaper companies reported 92% of total revenue from print operations 8% of total revenue from online operations Expenses The cost of creating newseditorial content (i.e., paying reporters, writers, editors) represents a fixed cost for newspaper publishers. About 35 percent of the cost of producing a newspaper goes into the actual creation of news. Variable costs include all functions that fluctuate with circulation: paper, printing, delivery. About 65 percent of the cost of producing a newspaper goes into printing and distribution. For most publishers, the cost of newsprint alone accounts for 25 to 30 cents of every dollar spent. The aging newspaper audience The number of people who read a daily newspaper continues to decline, both overall and within demographic segments that are desirable to advertisers. The amount of time spent by people who do read newspapers also is declining. Reasons include: increased mobility of Americans increased costs of subscriptions and single copies decreased literacy among young people decreased time available for reading (time once spent reading newspapers has been displaced by time spent using newer media) little brand loyalty for breaking news Feedback: How do we know characteristics of newspaper readers? The Audit Bureau of Circulations estimates two audience metrics: circulation via correspondence and field audits readership via surveys. Several "circulation irregularities" emerged in 2004. Ways publishers have tried to reach young readers who are desirable to advertisers increasing entertainment content increasing sports content distributing free copies of daily newsdigest papers in the hope of fostering the "newspaper habit" Ways newspaper publishers are reacting to the recession combining MondayTuesday (low ad content) and SaturdaySunday (weekend) editions smaller tabloid format (uses less newsprint than a broadsheet) Downside of such changes loss of daily continuity with readers driving audience to online media (which does not provide the ad revenue of print) Regardless of how bleak the newspaper business appears in 2010, daily community newspapers remain the best source of local news coverage medium preferred by local advertisers due to flexibility that includes color, coupons, ads of various sizes, special sections such as automotive and real estate, and targeted editions by zip code What might happen Some speculate that Congress will allow newspaper publishers to reorganize on a notforprofit basis (akin to churches and universities). If so, newspaper editors might lose some of their editorial independence. CAREER OUTLOOK Go to www.bls.gov for current employment data! ...
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