Internet

Chart of the Day, Newspaper Ad Revenue Edition

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Care of The Atlantic's Derek Thompson, graphical representation of what happens when technology-enabled consumers can escape monopolies:

Sad-face for some people

As I wrote last year,

With each passing year, the golden era of modern newspapers—roughly the four decades from 1960 to 2000—is coming to resemble the kingdom of Hungary during the dual-monarchy's salad days of 1867-1914. What once looked like a permanent empire is now revealed as an ahistorical lucky streak undermined by overreach and the desire among captive citizens to be free.

Gone, daddy gone

But that late '80s dip makes me want to revise the time band. It's a flip guess, but I'd bet that the pre-Internet contraction reflected the 1980s rise in desktop publishing (an underappreciated yet crucial development that gave birth to the newsletter industry and all kinds of niche publishing), plus the post-Fairness Doctrine explosion of AM talk radio and cable news. Which, combined with the mostly forgotten recession under George H.W. Bush, forced newspapers to think competitively for the first time since the wave of consolidation during the Mad Men era.

The result was a new wave of professionalization and profit-maximizing on the business side of the Chinese Wall, which (along with an improving economy, and improving cities) produced that last-gap '90s boom. When the Internet offered consumers a better place to get their classifieds and information, and the newspaper companies mostly failed to adapt their fattened operations to the new, rapidly-changing environment, thus began the vicious cycle of cutbacks and customer-squeezing. That's my best guess, anyway.

Thompson makes a good point here:

You sometimes hear it said that newspapers are dead. Now, $20 billion is the kind of "dead" most people would trade their lives for. You never hear anybody say "bars and nightclubs are dead!" when in fact that industry's current revenue amounts to an identical $20 billion.

So the reason newspapers are in trouble isn't that they aren't making lots of money—they still are; advertising is a huge, huge business, as any app developer will try to tell you—but that their business models and payroll depend on so much more money. The U.S. newspaper industry was built to support $50 billion to $60 billion in total advertising with the kind of staffs that a $50 billion industry can abide. The layoffs, buyouts, and bankruptcies you hear about are the result of this massive correction in the face of falling revenue.

The structural transformation of the newspaper business has produced any number of just terrible public policy ideas; I talk about some of them here. And read Nick Gillespie and I on a similar story: "Learning From Kodak's Demise."

NEXT: Is It Mitt Romney's Problem that Mormons Posthumously Baptize Dead People?

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  1. Davy Jones of the Monkees, dead at 66, heart attack.

  2. So what you’re saying is that journalism needs a government subsidy?

  3. It is clear, the government must bail them out.

  4. OMFG!!!!

    Deflationary death spiral!!!!!

    AAAAAAAAAHHHHHHHHHHHHHHHHHHHHHHHHH!!!!!!!!!!!!!!!

    …or not.

  5. If that chart isn’t inflation-corrected, the ’50s and ’60s were the days of the gravy train.

    1. Ooops.
      Just saw the “2011 dollars”

      1. If you look at the dates, you’ll notice they coincide nicely with when your morning paper started including more and more circulars, until the ad/newspaper ratio was somewhere around 2:1.

  6. Maybe some sort of tax credit is in order.

  7. I you hang around musicians you will hear a lot of people say, “bars and night clubs are dead.” They are victims of nanny state drunk driving laws.

  8. And read Nick Gillespie and I on a similar story…

    me and Nick Gillespie”

    1. My daughter writes a blog and while she overall is a good writer, I have to correct her on stuff like this occasionally. Welch, however,should know better.

  9. For some time newspapers in some cities could at least count on certain types of classified ads that either need to appear on a specific day (real estate open houses) or to meet legal requirements (legal notices). Smart phone Aps are replacing the former.

  10. I haven’t read a newspaper in years, but my father in law just started living with us and we get the San Jose Merc every morning. It is the size of a ham radio club newsletter. I was astonished when I first saw it, it has shrunk to a third or fourht of what it used to be. It’s days are numbered. Old people read the paper and watch network news, as they die so will these media.

    1. So what you’re saying is, you want your father-in-law dead?

  11. I’d like to see that chart in inflation dollars.

    It’s important to note that before 1990 or so the bulk of ad dollars came from retail display. Newspapers had not yet learned to squeeze high dollars from recruitment, real estate and auto categories. That became a necessity as Walmart changed the local retail landscape. Newspapers had to get creative with classifieds. Of course that made them more susceptible to craigslist and such disrupters.

    There are plenty of historical trends going back to the 50s and further that have set newspapers up for a fall.

  12. I’d like to see that chart 50 years wider and $10 billion taller. The next up cycle (they’ve always happened in the past!) could take ad revenue back to the high 30s or low 40s.

    Or not. Between 2006 and now the extinction event may have occurred. Outside a public library I see nobody reading a paper. The last person I knew who bragged about a breakfast-table newspaper habit no longer gets the paper. The last time I heard of a run on papers was when black L.A. allegedly turned out in droves to buy the collectible Obama-wins edition of the L.A.T. in 2008 ? and that was at least a century ago.

    Secular/cyclical decline suggests one more return to a high point below the previous peak, and probably a few more, before the line reaches zero. But maybe it’s freefall from here on in. Either way I’ll be laughing/crying on the inside/outside, though I’m not sure in what combination.

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