J.P. Morgan: “Significant headwinds” for newspapers
I’m not sure how much J.P. Morgan likes their brokerage research reports making their way out into the world through document-sharing sites such as Scribd, but the firm’s investment overview for 2009 — entitled “Nothing But Net” — is available (for now) through that service, and it has some sobering things to say about the newspaper industry. This isn’t news to anyone who has been following the business of late, but seeing it described so bluntly is still a bit of a shock. Here’s the important chunk:
“In our opinion, newspapers face a significant number of headwinds that will likely contribute to this decline. First, we believe consumer news consumption behavior is changing.
Magazines and newspapers usually have a significant lag time between the news occurrence and its publication, as the process of writing, printing, and distribution is complex. Therefore, instead of reading newspapers, consumers are becoming more dependent on the Internet for breaking news. Secondly, we think newspapers have failed to manage their cost structure. In our view, they try to be the source for all news, and we think this model is unsustainable.
We think recent layoffs will hinder newspapers from broadly covering all news and will thus make them even more irrelevant to the hyper-local or vertical-specific blogs and postings on the Internet. Instead, we think newspapers need to allocate more resources to investigative journalism. This would enable newspaper companies to provide exclusive content and more in-depth opinions that could be difficult to glean from citizen journalists.
Finally, blogs have existed long enough that they are becoming mainstream, with some bloggers making their living off the blogs. As a result, we think some bloggers and publications have become as trusted a news source and opinion provider as traditional media. Thus, we think that when the economy recovers, newspaper dollar losses will go to the Internet.”
All in all, not a bad analysis, I think.
Seems kind of…obvious? I mean, this report could have been written a few years ago.
Agreed, Jeff — that’s why I noted that it isn’t exactly news. I think it’s still useful to hear it stated so baldly, however.
There’s some simplification there, I think. The unsustainability they mention really derives from the big demographic shift — not all consumers are becoming dependent on the Internet for news, that’s heavily skewed toward the younger side; only older folks are reading news on newsprint; the average age of a newspaper reader is 60 and growing. That’s what makes it unsustainable.
Also, I’m not sure I agree with their suggestion that more resources devoted to investigative journalism would fix things. Why would that attract any more paying subscribers or advertisers?
Definitely some simplification there, Martin — that’s what brokerage firms do :-) And I guess as far as the investigative suggestion goes, the theory is that if news and even opinion are commodities that any blog can replicate, then what’s left? Long-form investigative stories, presumably. Whether people will pay anything for them or not remains to be seen, however.
I’m completely baffled by this line, “we think newspapers need to allocate more resources to investigative journalism”.
Really? How the hell are news sites supposed to become economically sustainable by producing such content? They can’t. It’s impossible. The monopoly is over.
Profitable content now is videogame reviews and DVD player reviews and top ten lists and fashion posts… If you can kick ass doing these things, then yeah, maybe you can afford to do investigative journalism.
Investigative journalism is expensive and does not lend itself to easy monetization… can a site effectively sell mattresses better next to a site post on mattress ratings or a ten page piece on Ron Blogoyovich, Blogjogohvich, Bloyjovovich… you get the point.
Newspapers today are a massive rudderless ship. If NYT and WPO can’t make money doing investigative journalism, how can anyone? What an awful statement from JP Morgan. Figuring out sustainable revenue streams needs to be priority number one. What is the need you are fulfilling and what is the value of that need? End of story.