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Newspapers disappearing

Updated 14 April 07:45  Lake Geneva region, Switzerland (GenevaLunch) – Everyone knows banks are in desperate shape. Curiously, few people seem to realize that the newspapers bringing them this news are in equally dire straits. And it’s not just newspapers: it’s the news industry.

The Boston Globe is the latest US newspaper in the hangman’s noose, with staff told at the start of April that it is likely to lose $89 million in 2009. Its owner, the New York Times, can no longer afford to keep it alive, given the New York paper’s own $57.8 million deficit at the end of 2008. Other city newspapers in the US are lining up on the scaffold. Already hung: the Seattle Intelligencer and the Rocky Mountain News, two of the nation’s oldest papers, both now closed and others such as the Minneapolis Star Tribune, filing for bankrupty.

The US debate over the real impact of the Internet on print media

The closings and threatened ones are sparking a lively debate over the need for newspapers and the media in general in an Internet age, and where the news industry is headed. The problem isn’t just the Internet: US newspapers’ advertising revenue fell 16.6 percent in 2008.

Arianna Huffington of The Huffington Post jumped in this week over plans announced by Associated Press (which is owned by its member newspapers) for an industry initiative to protect online news. For Huffington, the argument is about whether journalists “embrace and adapt to the radical changes brought about by the Internet or pretend that we can somehow hop into a journalistic Way Back Machine and return to a past that no longer exists and can’t be resurrected.”

It’s a debate that is beginning to reach Switzerland but here, for now the discussion appears to be more about media surviving commercially by developing non-news business while still offering journalism. This is not a new debate – think of the media owners in the US who’ve had baseball teams – but in a small country with little competition, the changing role of the media bears examination.

To pay or not to pay, that is one of the questions

A question that keeps cropping up, given the number of failing newspapers and a 16.6 percent decline in ad revenue for US papers in 2008, is the issue of free online news and how media can cover the cost of producing it. In February a Time Magazine article by a former managing editor argued that readers should be willing to pay and not continue to expect free news online. That prompted heated rebuttals from several writers, including Internet watcher Stow Boyd and Matthew Ingram at the Nieman Journalism Lab.

The New York Times, which announced an across-the-board pay cut in March and laid off 100 commercial staff as part of belt-tightening measures, earlier tried a pay-subscription model that was a failure, before returning to offering free Internet access. The company’s path has taken another turn, with the new joint New York Times/International Herald Tribune web site, which once again gives only limited access unless users register – for free, for now. The New York Times has hinted loudly that it will likely charge once again for its content. The media company notes, nevertheless, that the Financial Times web site had a million subscribers when it was free, and that number dropped to 50,000 a year after it began to charge (author’s note: I was one of those they lost). It has since risen, but only to 100,000 or so.

Switzerland’s media: not strong but not in imminent danger

In Switzerland the situation is not as dire as in the US, but the media industry is not as healthy as it likes to say it is: 2008 figures released in March by WEMF, the media industry’s research arm, show newspapers losing ground and advertising revenue falling. Free newspaper continue to grow in circulation, although at a slower pace than in the previous two years. The country’s two top intellectual papers, NZZ in Zurich and Le Temps in Geneva, are holding steady, with very small drops in readership (204,598 for NZZ Folio and 45,103 for Le Temps), but all the French language newspapers saw their readership slip, as have regional newspapers.

Advertisers, the main source of revenue, are spending less money: January 2009 figures were down by 8.7 percent compared to a year earlier. Internet advertising is touted as the saviour of the industry, but it accounts for only 1 percent of the CHF5.9 billion Swiss ad market, with print media continuing to take nearly half of the market in 2007. In the US and the UK, arguably hit harder by the global financial crisis, Internet advertising flattened for the first time early in 2009, the New York Times reported.

Two of the three big media companies announced that revenue was down for their international dailies in 2008, a 4.8 percent drop to CHF30.5 million in the case of Lausanne-based Edipresse, which says in its 2008 financial report that its newspaper  segment nevertheless remained profitable thanks to Internet operations – but not Internet news operations. Profits were up by 1.2 percent, thanks to JobsUp, an online employment site and HomeGate, a real estate site.

Tamedia, which is buying out Edipresse’s Swiss operations, 8 April published its results, showing a 30 percent fall in profits, to CHF105.8m, noting that while regional newspapers are losing ground, the commuter paper 20 Minutes contributed to profits.

Ringier’s 2008 report is not yet out.

The impact of the sharp decline in advertising on all three, and smaller media players, will become apparent only later this year.

Swiss media are playing a game similar to the one played by US media a decade or two earlier, of trying to ensure survival by getting bigger in order to fight off non-Swiss competition. Part of the strategy is to continue expanding outside Switzerland, the source of approximately half their revenues. Curiously, some of which is listed as Swiss business: Edipresse’s Swiss segment includes its operations in France, for example.

A point in the favour of Swiss media for the time being:  they are not taking on the same level of debt as US companies. That implies that debt must lead to failure and profits will help ensure good quality reporting, however, two points that Michael McFaul of the Carnegie Endowment for Peace argued against in 2001 in “Russia’s 12 myths about the US media.”

The get-bigger formula has not worked well in the US, nevertheless, largely because companies borrowed too much to expand, and now  falling ad sales make it impossible to pay back their debts.

Swiss media are counting on the Internet for their future success, but their own successful models to date, employment and real estate sites, do not now integrate news and it is hard to find models that make it clear this will work. Their news sites have made attempts, with blogs, polls and comments, to become more interactive and thus compete with social networks, but traffic has not risen dramatically as a result. Martin Kall of Tamedia, one of the Swiss big three media companies, says foreign competition comes from the likes of Facebook and a German real estate company. This is competition for advertising revenue primarily from and for non-news sites.

The shift in focus raises two questions: at what point does a media company cease being a journalism provider? At what point does journalism begin to primarily serve the commercial needs of the larger company?

The Tamedia/Edipresse joint venture will change the landscape

Le Temps 13 April carries a lengthy interview with Kall, CEO of Tamedia, which has agreed to buy Edipresse’s Swiss operation if the competition commission approves the deal. Edipresse publishes three of the four main dailies in French-speaking Switzerland and jointly publishes the fourth, Le Temps, with Ringier. Tamedia’s Kall believes the 10 percent of revenue the company currently earns from Internet ad sales can be increased significantly by improving the quality of the news coverage – and charging more for advertising because advertisers will be convinced by the larger numbers of readers online than for print.

Swiss media, and the advertising industry that relies on media for the bulk of its products, are watching the proposed venture closely because of concerns, for better or worse that it will change the media landscape. Bilan, owned by Edipresse, argued in March that it will clearly change the scene, for several reasons. Among these: the the impact on the advertising market of Switzerland having only two major media companies in the future and the ownership of Le Temps, whose two owners will be based in Zurich even though it is a key French language media.

Not long ago, 24 Heures/ATS reported that the  Swiss have lost their faith in religion and the Swiss Army, but their faith in media ranks even lower, based on an EPFZ (Zurich’s polytechnic institute) poll. It remains to be seen whether or not this faith can be revived by the increasing concentration of Swiss media, their focus on Internet activities that are not journalism and other changes in the media’s traditional role of serving to inform.

Related:

Clay Shirky, “Newspapers and thinking the unthinkable,” 13 March 2009

Claudia Ricci, “No pay to write?”, 2 March 2009, Huffington Post