Newspapers are the only Industry Sector run worse than the Automakers

As I mentioned in my posts earlier this month, the news media is really the biggest obstacle to GM’s success, not the debt holders or the unions. 

The media has been relentlessly bashing GM with negative front page headlines for almost two decades now.  Newspaper writers across the country have criticized GM for failing to react to changing market conditions with innovative new products; failing to create enough value to attract financing from private capital sources; and failing to overcome its challenges with labor unions and infrastructure overcapacity.  My response to this is “Hello? Newspaper editors– look in the mirror!”  If there is any industry that is run more poorly that the US automotive sector has been in recent years it is the newspaper business!

There is a great article on Wikipedia that summarizes many of the challenges experienced by newspapers in the US during the past few years.  Consider the following examples:

Ceased Operations Entirely

  • Rocky Mountain News
  • Tucson Citizen

Filed for Bankruptcy

  • Tribune Company
  • Minneapolis Star Tribune
  • Philadelphia Newspapers LLC
  • Sun Times Media Group
  • Journal Register Company

Reduced Delivery Options

  • Detroit Free Press – 3 days per week
  • Detroit News – 3 days per week

On Life Support

  • San Francisco Chronicle – Barely avoided closure recently
  • Seattle Post Intelligencer – Devolved to an Internet only model

Significant Market Devaluations

  • San Diego Union Tribune – Sold to private equity for $50M declining from $1B 2004 market value
  • McClatchy Company – Stock has lost 90+% ofits value since buying Knight-Ridder
  • New York Times Company – Low stock prices in the $5 range and suspended dividend

The situation in the industry has progressively worsened to the point that a bill was introduced to the US Senate entitled the Newspaper Revitalization Act introduced, which would allow newspapers to restructure as non-profit corporations and to enjoy significant tax breaks.

rocky-mountain-news

The root cause of the industry’s collapse has been the advent of the Internet.  In about 10 years, the web has been able to capture significant market share of both advertising and readership from the subscriber base newspapers took hundreds of years to build.  Another irony of the newspaper industry’s struggles is that their product, information, could not be more in demand.  Consumers, investors and businesses alike are all seeking ways to find more information in faster time frames.  Despite the surge in demand, the owners of media conglomerates and smaller papers have been unable to transform their business models to capitalize on the opportunity.  With the exception of the Wall Street Journal, almost all the national newspapers in the US have resorted to giving away their on-line content for free.  And there is little evidence to suggest that the online forums are generating an adequate return from advertising revenues.

So why do we not see stories about struggling media companies on the headlines of newspapers? Is it because the newspaper industry is not as interesting to the general public as the automotive sector?  Is it because the newspaper industry is so complex that people would not understand it?  Or perhaps, is it because writing negative stories about the newspapers decline would conflict with the publisher’s goal of increasing circulation? 

Think about it.  Imagine if you opened up your newspaper every morning to read about how millions of people across the country were canceling home delivery of their local papers to instead get the same information for free from the TV or Internet.  Would this encourage you to subscribe to a second paper?  Would this encourage you to renew your subscription when the time comes? 

I wonder why fewer people are buying cars these days when they are constantly bombarded with stories about:

  • How consumer credit and financing is not widely available for buyers
  • How the quality of many vehicles does not justify the price
  • How it is risky to buy a warranty from a manufacturer that may not be in business in a few months

Car manufacturers and dealers – It is time to wise up and stop funding your biggest opponents!

There are a few lessons that marketing professionals can learn from the newspaper industry:

  • Offers an excellent example of how disruptive technologies such as the Internet significantly transform industries.
  • Potential conflicts of interest exist even in the media.  Who writes news about the newspaper industry?  Apparently, no one.
  • And most important the influence of the media is waning in the web 2.0 world.  There is an alternative for marketing investments.

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