It's Time to Build the Bloody Wall
August 2009

It's one minute to midnight for journalism in the United States.

Never have so many people had access to so much news. Yet, the bottom line, the resources to pay the people who produce these stories is dropping nearly to zero.

For a long time, newspapers and magazines were among the most profitable businesses. At newspapers, those margins were in the 20 to 30 percent range. As of two or three years ago, some of the bigger newspapers boasted of having as much as 45 percent profits. The only business that had higher profit ratios was drug trafficking.

But suddenly that rosy picture changed.

Newspapers had a very simple model. Subscriptions or newsstand sales would pay for the printing and distribution of the paper. Profit came from circulation, which is what the publication offered as a base to its advertisers, whose ads paid for the costs of newsgathering. Without Macy's or any other advertiser knowing it, their advertising paid the salary of the guy reporting from Tehran. It was not Macy's intent, but that is the way it worked out.

Newspapers based ad rates, the money they charged for an ad, on formulas that had to do with available space on a page, what, where and how they would place an advertisement, and how big the ad would be once it appeared on the page.

Along came the Internet and in the last few years, a new dynamic in advertising turned that formula on its head.

Most of the problem stems from the failure of publishers to appreciate the true value of the Web version of the print product. What they originally put on the Web was an afterthought. Advertising on the Web was essentially a giveaway, an additional placement on the Web for print advertisers but seemingly without much thought.

However, readership was changing dramatically. Young people in general simply had been raised without the print habit. Older readers were dying. Circulation, and its underlying value to advertisers, was no longer worth what it once represented.

The main asset of a newspaper or magazine lies in its "goodwill": what it means to its readers. The cost of producing that product is in the property, presses, newsprint, distribution and finally the newsroom itself. However, of the entire cost, the latter item represents only about 10 percent of the budget. Yet, the only area management can control is that newsroom. Publishers do that by laying off editors, reporters and photographers.

Can the online edition pay the cost of the newsroom? Maybe, but only if those who own the paper cut the other 80 percent of the cost used to gather and circulate the news. What this means is that the hemorrhaging must end. Eliminating the print product may wind up being the only way to do this and survive.

Publishers now understand this grim reality. That is why newspapers such as the Rocky Mountain News and the Seattle Post-Intelligencer closed this year. It is why the Tribune Company is in bankruptcy, endangering the future of the Chicago Tribune, the Los Angeles Times, the Orlando Sentinel, The Baltimore Sun and the Hartford Courant. It is also why The New York Times is blitzing TV sets with a special offer for home delivery of the paper on Friday, Saturday and Sunday only.

In countless surveys, viewers on the Web demand that news be free because for them everything else on the Internet is free. Almost no Web sites require a 1,400-person newsroom and bureaus around the world as does The New York Times. The Washington Post also uses a large staff for its extensive coverage of the government and events from world capitols unlike The Huffington Post, which depends on the handful of paid editors. And keep in mind The Huffington Post usually pays none of its contributors.

But how are we to break through the accepted free platform model?

In a recent issue of "The Columbia Journalism Review," David Simon calls on Arthur Sulzberger Jr. of The New York Times and Katharine Weymouth of The Washington Post, the newspaper publishers who "can rescue this imploding industry and thereby achieve an essential civic good for the nation."

The calculation behind Simon's proposal rests on the unique value of these two newspapers. The depth of their content – Times staff reporters write more than 90 percent of the stories published in that paper – is considered essential to its readers. The convenience of getting this content at any time, wherever it may be, is in Simon's mind worth paying a subscription price.

This is not a novel idea. The Wall Street Journal has been charging for its online edition for years. Nobody complains, and circulation continues to grow. The reason Simon calls on both publishers to come to the same decision to go to a pay wall is that, if one does it, and the other does not, the former is going to be ruined.

This is now not an academic argument. The Times has already mortgaged its new building to help make its payroll each week. Those reporters and editors need to be paid. Otherwise, the news that we take for granted will simply stop.

Let us build that wall before it is too late.

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