In 2010, in the fairly early days of Twitter as a tool for news organizations, ProPublica received a tweet saying “this is a depressing, but excellent site.” It is in that spirit (I hope) that I offer my prediction amid the joy of the holidays.
The economy seems finally to be shifting into a higher gear. Job creation is way up, oil prices are way down, GDP is projected to grow robustly in the near term, the deficit is shrinking, and the health care cost curve continues to bend down a bit.
In other words, legacy publishers may be about to make a(nother) big mistake.
An improving economy should improve publishing results. Advertising, which remains a fundamentally cyclical business, may recover a bit (although the secular trends of reallocating ad dollars away from legacy publishing will also continue). Circulation revenue may benefit from loosening wallets, especially digitally and among younger consumers. So far, of course, so good.
But there will be a strong temptation at newspapers and magazines to see this as a respite after ten long years of pain — to pay dividends, perhaps, or re-inflate profit margins somewhat. And that would be a tragic error.
Legacy publishing remains in secular decline. And precisely because advertising is a cyclical business, the worst of that decline probably remains ahead. GDP has now been expanding for 23 consecutive quarters, while the length of the median postwar expansion is just 17 quarters. In other words, historically, we’re already about a year and a half overdue for a recession.
Whenever that recession comes — and it now seems likely it won’t be too soon — advertising will take a sharp dive, and the reallocation of ads away from print (and broadcast TV) will accelerate. One lesson of the period since 2009 is that the advertising lost in the next recession won’t return to legacy publishers in the subsequent recovery.
Until that happens, in anticipation of it happening, legacy publishers should use the breathing space of the coming moment to increase their investments in transforming their products, quickening the pace of change at their publications, doubling down on truly distinctive content and services, developing or expanding new revenue streams (including events and perhaps services that can gain leverage from a particular traditional brand), becoming “digital first” in more than just rhetoric. Resisting the temptation to greater profit now could go some ways to mitigating loss later.