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Nov. 10, 2011, 11 a.m.

The newsonomics of Anton Chekhov

Glorying in the past, hating the present, and fearing the future: Why are newspaper companies’ attitudes the inverse of Silicon Valley’s?

Three Sisters,” like most of Anton Chekhov’s plays, smells of decline. His works, set in the decaying Russia of the late 19th century, offer an odd resonance to our time, a time of doubt, loss, and pessimism. Watching “Three Sisters,” performed locally last weekend, inevitably invited thoughts of the struggling news industry — as too many things do.

I was first struck by this Chekhov quotation in the theater program: “Russians glory in the past, hate the present, and fear the future.” It’s not easy to find that exact quote on the web, but it certainly sums up much of the playwright’s work and his assessment of the national character into which he was born in 1860.

That thought also seems to say too something about news industry today. Those halcyon days of monopoly dailies weren’t as wonderful as the rose-colored rearview memories recall. The present is an unending struggle — the near future, at least, looking as bad or worse than today.

2012 budgeting, still in full swing at many newspaper companies, is too much like a medical examiner’s exercise. What I hear: Dailies are budgeting down from mid-single digits to as high as low double-digits in print advertising for 2012, compared to 2011. That would compare to how much they’ve already lost this year, compared to last year. Those are brutal numbers.

Last week, one news exec told me about the gap between his advertising department’s projections — more shades of down — and the news operation’s need for increased funding in the once-in-every-four years cycle of a presidential election and the Olympics. The chasm is widening.

Even execs as veteran as Belo CEO Robert Decherd, are moved to incredulity to describe where we stand. As reported by Ted Nesi, for Providence’s WPRI:

Decherd said he expects the multiyear drop in revenue at The [Providence] Journal and its California sister paper The Press-Enterprise will end soon, if only because it’s hard to imagine how it can continue for much longer. The Providence paper’s revenue plunged 40% between 2005 and 2010.

“I think you can expect some modest stability in those markets, because they just cannot continue to decline at the rates they have,” Decherd said. “That’s what we’re counting on. There has to be a stabilization there.” He said “everybody in the industry was surprised” by how weak advertising sales were this spring and summer.

They just cannot continue to decline at the rates they have. That’s our update on the popular newspaper CEO outlook of 2006-2009: We have limited visibility about the future.

It is hard to imagine more decline. It may be harder, though, not to imagine it:

  • Europe faces double-dip recession head-on. The U.S.’s economy is still gurgling.
  • Print advertising continues its five-year decline, with trend lines still headed south.
  • Print circulation continues to decline, with its own five-year-plus trajectory. Digital circulation strategies are nascent, with some hope of providing a significant new revenue stream, but offer too few dollars, euros, or pounds to make a 2012 difference for the vast majority of publishers.
  • Digital advertising is poised to become the second largest category of advertising in the U.S. this year, already second in the UK and Japan. It’s projected, compounded three-year growth rate through 2013: 14.6 percent. The top five digital ad revenue companies — Google, Yahoo, Microsoft, AOL, and Facebook — now command 67.7 percent of all digital revenue in the U.S., and their projected take is 72 percent next year.

There are indeed reasons to see a stronger future, but we’d have to look beyond 2012. There is a vast world between the poles of the news debate we often hear, as in the latest iteration, Dean Starkman skewering the “future of news crowd” in CJR. That world combines the best of professional, community journalism and built-out networks of engaged community contributors. That world combines substantial revenue able to sustain independent, authoritative journalism and enables unprecedented digital access and debate.

We’re just not there yet, and it’s still unclear — some tablet innovation aside — how we’re going to get there from here. Some of us, maybe the congenital optimists, our beliefs leavened by years of newsroom skepticism, think we can create that future.

For those with their heads down, focused on the 2012 budget, it requires a short-term imagination of making it through the next year. Recent results make that 2012 process even more nervous-making. They force the renewed question: How many more jobs, newsroom and others, will be cut soon, anticipating the year ahead?

The Washington Post, with great penetration of its local market and above-average digital products, just reported a third-quarter loss. Its newspaper publishing division reported an operating loss of $9.9 million in the third quarter of 2011, compared to $1.7 million last year.

Lee’s operating income totaled just $5 million for its just-completed fiscal year, compared with $22.6 million a year ago. Operating income margin was 2.7 percent in the current year quarter.

McClatchy’s net income is $12 million for the first nine months of the year, due to rigorous cost-cutting.

Media General is at just $5.7 million in net income for the third quarter.

And those are the most positive numbers you can assemble; some companies swung to loss territory when you take into account goodwill and other write-downs.

Newspapers are on the thin edge of profitability. Yet lenders’ and investors’ demands remain. The few financial analysts look at newspaper numbers and cry “sell,” as Kevin Cohen did in assessing A.H. Belo’s results: “”You look at the portfolio and there’s clearly a real franchise in The Dallas Morning News. You look at the other two newspapers, and I don’t think anyone would disagree that they’re not nearly as compelling of a value proposition. Is there any reason to continue to own those?”

But to whom?

Alden Global Capital, perhaps. It’s hard to assess where Alden plays on our Chekhovian scale. Its Digital First CEO, John Paton, is a hard-nosed realist. He is trying to dismantle the old world of bricks and iron, slaying the production god, and cutting the legacy model costs.

His plan appears to be the fastest-moving one. Of course, it’s easier for him to forsake the bottom-of-the-barrel past of the Journal Register Company than it is for others. And for all the directionally smart moves Paton and his team make, it’s still not clear — the company releases only selective snippets of data indicating progress — that a new sustainable model of substantial journalism is being born.

If not Alden, then whom?

Who, perhaps in a willing sense of disbelief, would dare to relish the present and savor the future? Maybe only those who have a stake in the value of the journalism itself?

One editor of a chain-owned, smaller daily shared his fantasy recently. “If Alden [invested strongly in his company as it is in a number of chains] ever wants to sell, I think I can put together a group of 40 families willing to step and invest. They wouldn’t do it to make a big profit, though maybe they could make some, but they’d do it maintain a community voice.”

A family-owned (or families-owned) newspaper future? Back to a future?

Our editor can keep his model safely tucked in his desk drawer for now. We need several things to happen to test the idea: (a) willing sellers; (b) models of community investment and ownership, which could be adapted from other enterprises; (c) a taste of Silicon Valley fervor.

Consider that fervor for a moment. It’s basically the inverse image of the Chekhov’s (and maybe today’s?) Russians: The future is glorious (check back with me, post IPO). The present is at worst a workable grind. The past is so yesterday, to update Hemingway.

There’s a kind of relentlessness, associated in previous cultures with despots and cultists, that drives companies like Groupon, LinkedIn, and Yelp through to IPOs.

Our editor’s dream may seem far-fetched today, but it is no more far-fetched than to believe that in 2016 the current newspaper industry will look anything like it does today. Of course, that dream is just one of many ways that the local news industry could re-fashion itself. Some companies, driven by future-grabbing leaders, will make the transition, while others will not.

So we are back to a 2012 gut-check and our Anton Chekhov scale.

How would you answer with one word these questions:

  • Past:
  • Present:
  • Future:

And how would your company?

POSTED     Nov. 10, 2011, 11 a.m.
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