American journalists are not a happy lot presently. Hedge funds, even that dread private equity, is buying up the remains of that dead dead tree industry. The reason we’re hearing so much screaming about it is because it’s all happening to those who scream for a living. Further, given that all the people doing the screaming got their educations in journalism schools – where you’re taught the difference between xe and xir but not how to count – their understanding of the process is markedly frail.
As the pandemic recedes in the United States, few businesses may emerge so transformed as local and regional newspapers.
More than 70 local newsrooms have closed over the past 15 months, with hundreds of media jobs lost, as the already difficult financial conditions in the industry intensified during the crisis. By some estimates, a staggering 2,100 local newspapers, or one in four, have closed in the US since 2005.
But into the carnage a new breed of owner has emerged: one that has industry veterans and media observers deeply worried about the future of journalism in America and its ability to act as part of a functioning democracy.
According to a recent analysis, hedge funds or private equity firms now control half of US daily newspapers, including some of the largest newspaper groups in the country: Tribune, McClatchy and MediaNews Group.
People with money are buying businesses, terrible, hunh?
The bit that is getting missed is that the private equity, the hedge funds, they’re an outcome of the process, not a cause of it. Yes, they are the folks who try to wring the last few pennies out of a dying business. But it’s the reason that the business is dying which is important, not the turning up of the vultures to feast upon the corpse.
That cause being this ‘ere internet.
America’s a big place. Really big. It’s about the size of Europe in fact. As such newspapers grew up as they did in Europe. Yes, OK, so here we’ve language differences and so on. But the same underlying economics still hold – or held. No one did print, on those dead trees, in Paris for the mass market in London. Nor, more obviously, in Warsaw for Rome. Transport simply meant that it would be two day olds by the time it got there, not news.
Geography was a limitation upon the area that any one daily title could cover. Yes, obviously, transport links could change this. The expansion of the railways in the UK made it a single newspaper market – more or less at least – by 1900, perhaps 1910. Allied with a bit of cleverness in printing, the copies coming off the press at 7 pm were for Scotland, those at 3 am for London – for a London based press that is.
America’s size – and rather the lack of a passenger rail network – meant this just didn’t work. As a Warsaw to Rome one wouldn’t have done even without language or political differences.
The US thus ended up with a patchwork of regional papers. Which, each in its own area, tended toward monopoly. Revenues were roughly tripartite. Classifieds, display advertising and circulation revenue. As with the British papers circulation roughly enough covered the costs of dead tree printing and distribution. The truly profitable part was classifieds, these will tend to monopoly in any one area. You advertise there because that’s where all the people searching are, people search there because that’s where all the ads are for that geographic area. Which, given that near all goods and services were geographically tied makes sense. It’s our old friend network effects in action.
As monopolies are this structure was wondrously profitable. Which led – as monopolies tend to do – to overstaffing and high pay. And layer upon layer of bureaucracy along with a monopoly of viewpoint as well. Seriously, you’ve never seen how bad groupthink and monothinking can become in a grossly overstaffed environment until you’ve tried working with an American newspaper editing department.
Worth noting that the British national papers always depended very much less upon classifieds than the local papers for this very same geographical reason.
OK, now add the internet. We’ve just killed that geographic exclusivity. The first things to disappear were the classifieds revenues. They’re at e-Bay, Monster.com and Craigslist. The loss of display to Facebook and Google is secondary to these first two – geography and classifieds.
The old structure of the business, Big City newspapers and every Big City having the one dominant one, they’re now dead. As is also true of the smaller and more local ones. The restriction upon competition imposed by geography simply isn’t there any more.
Shrug. By the time this is all over they’ll have a newspaper market much like the British one has been for near a century now and for the same reasons. Some half to a full dozen of national papers. Which differentiate themselves by their approach – flavour perhaps, target market certainly – to matters political and social. There will be a diversity of viewpoint rather than the geographical source of the same view.
The hedge funds and private equity are a symptom of this, not a cause. They’re carrion eaters clearing up the mess, not the reason the thing is happening.
And the reason we hear so much about this is because we’ve a grossly overstaffed – and becoming rapidly less so – industry that buys ink by the barrel. Lots of which they’re splashing around on the woe is us bemoanings without bothering to note why it’s all happening.