When I started out in the business, nobody in my circle really considered it a business. Frankly, many of us weren't all that sure how an actual business worked. We were above all that profit and loss stuff. Unfortunately, so were many of the folks who actually ran the place. This week's painful rounds of layoffs at the New Orleans Times-Picayune and Birmingham News have prompted the predictable soul-searching about what could have been. But Justin Fox, editorial director of the Harvard Business Review Group, suggests that what happened in New Orleans - and what's certain to happen in other cities - could have been predicted long ago.
The business model that the owners of the metro dailies gravitated toward in the decades after World War II was this: 1) establish monopoly, 2) milk that monopoly. The monopoly was on the delivery of printed advertising messages into homes in a given city or (better) metropolitan area: department store ads, supermarket ads, car dealer ads, and, most of all, classifieds. Notice that I didn't mention news. That's because, once a monopoly was established, the editorial content of a newspaper had no detectable impact on its financial success. News gave a paper legitimacy, and some protection from antitrust laws (in the form of the joint operating agreements that the Justice Department allowed newspapers to set up to maintain editorial competition while consolidating business operations). Big news, especially sports news, even sold some extra papers from time to time. But even that didn't really matter, since circulation wasn't a profit center. The business of the metro monopoly papers simply wasn't about news.
The biggest digital advertising successes have been claimed by baggage-free newcomers such as Craigslist and Google. And these digital natives have seen no reason to attach expensive news-gathering operations to their efforts. The Internet has unbundled the various businesses that made up a metro daily newspaper, and there's no putting them back together again. And since selling news never was a profit center for metro dailies, there's been no great surge of well-funded digital upstarts clamoring to take over their editorial tasks. In Birmingham the main online competitor to the News has three full-time editorial staffers.
The most charitable way to look at the Newhouse moves is as an attempt to get ahead of the collapse, and do it in a decisive, all-the-bad-news-at-once sort of way that's got to be less cruel (to those who were fired) and less demoralizing (to those who remain) than endless smaller rounds of layoffs. By getting out of the daily newspaper business in Alabama and Louisiana, Newhouse also appears to get out from under current restrictions on joint ownership of local TV and newspapers, opening the way for a more multimedia approach. But the current state of the papers' online alter egos, nola.com and al.com, the fact that Alabama and Louisiana aren't exactly teeming with digital early adopters, the huge cutbacks in editorial staff, and the basic truth that the papers will never reestablish online the monopoly position they once held off makes it hard to get too excited about their prospects. This may be one business where the only real Innovator's Solution was to get out a decade ago.