Newspapers' Impending Implosion: A Deeply Troubling Situation, And Amazon's Kindle DX Isn't The Solution

Three things particularly struck me in the vigorous debate that emerged in response to the online publication of my Sirius Satellite Radio critique two months ago…a debate that was reignited a few weeks ago when it appeared in print in abridged form:

• Many of the respondents, who I’m guessing were Sirius shareholders, subscribers or both, were close-minded to alternative perspectives. This particular situation wasn’t new to me; I wrote about it six-plus months ago.
• They showed no compunction about expanding beyond a focused response to the points I made in my writeup and broadly attacking me in both a professional and personal sense, in defense of their stances. This particular situation is also one I’ve recently discussed.
• In attempting to damage my professional credibility, they accused me of being ‘on the take’…either being a short seller of Sirius stock, or financed by one of Sirius’ claimed competitors, such as the NAB or the RIAA. This latter angle is the crux of today’s editorial.

I’m not ‘on the take’, for any of you who might be wondering. When I took this job 12 years and five months ago, I vowed going forward to not make any direct investments in any company associated with the technology sector, in the spirit of journalistic ethics. I intentionally don’t look at the companies my mutual funds invest in, so as to not be influenced (either consciously or subconsciously) by them; the most I know is that my investments are ’socially conscious’. Heck, I even avoid looking at the print version of EDN, because I don’t want to know who does and doesn’t advertise; instead, I peruse the ad-less PDFs on the EDN website.

My stance may seem extreme to some, but from the standpoint of separation between ‘Church and State’ (i.e. editorial and sales), I’d prefer to over-react in the spirit of bolstering my reputation. Unfortunately, as some of the Sirius defenders’ comments suggested and as I already suspected, there’s a notable amount of skepticism in the broad populace regarding the impartiality of the news media…regardless of whether or not such editorial bias actually exists. And as traditional news sources continue to evaporate, rendered extinct by upstart ‘news’ alternatives that have no awareness of the concept of journalistic ethics (far from any actual practice of the concept), public skepticism will understandably grow, information will become steadily less ‘fair and balanced’, and folks will increasingly gravitate towards information sources that confirm their pre-existing conclusions versus those that challenge them to keep an open mind.

As a case study of the overall trend, let’s look at print newspapers. Many of you have probably already heard of the recent shutdowns (and looming demises) of large national news outlets. Close to home, the local Sierra Sun is now down to being print-published twice a week on Wednesdays and Fridays, after dropping to three issues a week just a few months ago and down from five issues a week when I moved up here 1.5 years ago, but page counts are still down on a per-issue basis. Keep in mind that the three fundamental historical sources of revenue for newspapers were:

• Subscriptions and per-issue purchases from readers
• Advertising by local retailers, and
• Classified advertising by individual sellers of goods and services

I’ll tackle these topics one at a time. Beyond the trend that people on average are reading less print material in general (including books and magazines) as time progresses, the Internet as an alternative news source has clobbered print news media. Folks like the Associated Press negotiated content-sharing agreements with sites like Google and Yahoo on ridiculously favorable fiscal terms to the online aggregators, and the AP has now discovered that it didn’t get the referral traffic it was forecasting. Why was that a surprise, in this era of Twitter? Short attention spans and crammed schedules combine to make many folks content with scant information snippets. And in securing deals with Google and its ilk, the AP was ironically competing with its individual newspaper ‘partners’, who I’ll also fault for being overly focused on short-term print revenues and profits to the detriment of building a sustainable long-term online identity and presence.

Local-retailer advertising has been hurt by the Darwinist ascendance of large national (and in some cases, multi-national) retailers like Wal-Mart to the demise of locally owned alternatives, coupled with the tendency of these ‘700 lb. gorillas’ to focus their advertising efforts on nation-wide media such as television (along with the retailers’ own websites). Plus, the negative impact of the notable economic downturn that began last fall cannot be understated. In this respect, to newspapers’ defense, a sort of ‘Perfect Storm’ of factors not completely under their direct influence is in effect. And on the personal advertising level, much of the individual-to-individual selling that used to take place through the newspaper’s classifieds section now instead occurs on Craigslist and Ebay.

Is there hope for newspapers’ resurgence, particularly once the economy inevitably sooner-or-later rebounds? Frankly, I’m highly skeptical, no matter how much it pains me to write those words. Revisiting my Darwinist comment of the previous paragraph, a few large newspapers will probably continue to eke out a print existence in the next decade…the New York Times and Washington Post, for example, and the Wall Street Journal (helped in no small part by the fact that the latter’s timely financial-news focus makes it particularly amenable to paid website subscribers).

Here in California, there’s probably room for one newspaper in Los Angeles and one in the San Francisco Bay Area…I’m not sure that the market’s big enough for both the San Francisco Chronicle and San Jose Mercury News. I’m similarly skeptical about the Sacramento Bee’s long-term chances, no matter that it’s published in the state’s capital. And to that point, what happens to local and regional news coverage across the country once the media is consolidated in a few high-population hub cities? I could dream that there’s sufficient revenue to sustain small publications like the Sierra Sun, at least online. I could dream…but again, I’m pragmatically doubtful. I hope I’m wrong.

What about electronic media distribution? I admit that I’ve intentionally timed this long-planned treatise to coincide with this morning’s launch of the Amazon Kindle DX.

At 2.5x the total screen area of the Kindle 2 (9.7" diagonal versus 6"), it’s got the hardware chops to render large-format newspapers in a reasonably readable manner. But its $489 price tag (plus media subscriptions!) isn’t amenable to mass adoption, especially in this dismal economy. Admittedly, there’s probably a hefty profit margin built in; iSuppli recently estimated, by means of analogy, that the $359 Kindle 2 has a bill-of-materials cost of a few cents’ beyond $185. But Amazon’s entitled to earn a return on its investments. And unlike with cell phones, I doubt that subscription-bundled deals can sufficiently lower that price tag in a sustainable profitable manner. A recently published study concluded that almost 70% of Kindle owners are 40 or older in age. I don’t see anything in Amazon’s Kindle line or the broader product category that can notably nudge that geriatric needle down where it needs to be.

To my earlier comment about newspapers being ‘overly focused on short-term print revenues and profits to the detriment of building a sustainable long-term online identity and presence’, I’ll close with a case study dig on the Sacrament Bee, symbolizing the issues I raise today. Back in late December, I confessed that I’d recently canceled my Bee print subscription, in no small part because bad seasonal weather conditions made daily distribution a hit-or-miss proposition. The hypocrisy of my move, coming from someone in the print media world, has admittedly haunted me ever since. So a few weeks back, motivated by spring’s snow-free streets and a $2.50-per-week promotion, I resurrected my Bee subscription on a Saturday afternoon.

Sunday’s paper arrived on schedule, and I assumed I’d be good to go from that point forward. On Monday, I got…a repeat copy of Sunday’s paper. Tuesday, Wednesday and Thursday, no papers arrived. Friday’s paper showed up that afternoon. And when I finally got hold of the local distribution contractor, after being provided his cell phone number by the Bee’s customer support reps and leaving several days’ worth of unanswered messages, I wasn’t given an apology but instead lectured to ‘be patient’, because he was having ‘delivery personnel training issues’.

For the next few weeks, things settled down. I still often didn’t get my paper until after 8AM, which would have frustrated anyone who commutes to a place of employment, but as a home-based worker I was only slightly annoyed. However, one day early last week no paper showed up on my driveway. When I again called the Bee’s customer service line, I was informed that the company had decided to suspend distribution to Truckee and other rural communities outside Sacramento, and that a credit (which finally showed up on my card account yesterday), would be forthcoming. I understand the company’s decision, particularly considering fuel and other distribution expenses; Truckee’s a two-hour drive away, even in ideal weather conditions, and the commute can be a severe hassle in winter. But two things bug me about this situation, the latter particularly germane to today’s theme:

• The Bee didn’t proactively notify me that my subscription had been terminated, and
• The rep I spoke with didn’t bother offering to switch me over to an e-edition subscription. At $1 per week, I would have seriously considered it. But now I won’t, purely out of principle.

For now, I’ll keep myself informed via RSS feeds from the Bee, the Sierra Sun and the Reno Journal-Gazette, along with the Sun and Journal-Gazette’s free and excellent e-editions. Ironically, every time I the access the latter, it tells me that it’s free for today only…but I never seem to get directed to the ‘purchase’ screen. Maybe some day that time will come, and I’ll decide whether or not to ‘put my money where my mouth is’. Maybe, instead, the site will completely disappear. That’ll be a sad day.

p.s…sweet irony; today’s Kindle DX intro took place on the site of the New York Times’ former headquarters. Key word: former (i.e. victim of downsizing).