The New York Times announced a $62M loss for Q1 2009. It would have been much worse had they not already cut costs by 9.5%. The Boston Globe (owned by the NYT) lost $50M last year and is expected to lose $85M this year. Newspapers are in deep trouble. The Boston Globe and Chicago Sun Times could shut down this year.
The Boston Globe will be shut down unless the unions agree to $20M in cost cuts. The Chicago Sun-Times and 58 other newspapers owned by the holding company filed for bankruptcy last week. The Los Angeles Times and Chicago Tribune are also in bankruptcy. The Washington Post and New York Times have announced lay-offs and cost cutting measures. The San Francisco Chronicle lost $50M last year and just last month their unions agreed to cut 150 jobs and other cost cuts.
It could have been different – The Boston Globe’s Rob Weisman reported that Jeff Taylor, founder of Monster.com, went to the Globe in 1995 to propose that they buy a piece of Monster and partner on help wanted ads.
Taylor sat across the table from a team of Globe executives, including members of an unrelated Taylor family, the one that had run and held a controlling interest in New England's dominant newspaper for more than a century before selling it to The New York Times Co. in 1993.
He described Monster Board, his fledgling venture in Maynard that sold help-wanted ads online. Jeff Taylor proposed the Globe put up $1 million for an ownership stake that would give the paper a chance to put its lucrative classified advertising business on the Web - a step that might have cut into its revenue in the short term, but offered a chance to take the franchise national.
The answer was no. Sharing the newspaper's nearly $100 million a year in help-wanted advertising didn't make sense. "Our grandfathers would roll over in their graves," Jeff Taylor recalled being told. Soon after, he sold his business to the advertising giant TMP Worldwide. It expanded into Monster.com, a website that in 2000 generated more than $500 million, marking the beginning of the end of newspapers' near-monopoly on classified ads.
Newspapers were victims of The Innovators Dilemma popularized by Clayton Christensen of Harvard Business school. The dilemma is that the new innovation will compete with, and perhaps kill, your existing business model. So, they tend to stick with their existing business until the bitter end…when the upstart innovator overtakes them. We are seeing it before our eyes. Monster.com has taken a huge chunk of the help wanted ads, and craigslist has taken most of the classified ads.
Classified Ads are very profitable – Again, from the Boston Globe story;
During the boom years of the 1980s and 1990s, classified accounted for about half of all Globe advertising, and help wanted about half of classified ads, Taylor recalled. "On peak weekends, there were help-wanted sections that were over 100 pages at $40,000 to $50,000 a page," he said. "We're talking $5 million newspapers for those Sundays. These were big, healthy newspapers."
The rollicking success of the Globe and other newspapers in the first years of the Internet age made it harder to anticipate the threat from upstart websites like Monster.com, Craigslist, and Google, which links advertising to its popular search engine. The Globe's annual profits reached about $100 million for several years in the late 1990s, according to a former executive. Among their best-paying advertising customers until the Internet bubble burst in 2001, ironically, were dot-com start-ups buying brand advertising to raise their profile.
Newspaper businesses today need to employ multiple business models and pricing plans. In the old days you could make all customers fit into one model. Not anymore. Every business needs to understand what customers want and how they are willing to consume the product/service and pay for it. National news, business news, and sports news is freely available on many Internet web sites. Local news, hyper-local content, is what people are willing to pay for…and where the advertising rates are FAR higher. Newspapers need to figure out how segment the market and optimize their revenue opportunities. Resistance is futile…and time is short.
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