Tuesday, January 20, 2009

Newspapers won't be saved by Google

Google announced today that it is phasing out PrintAds, with all operations discontinued by March 31. Its CEO’s promise last June to help save newspapers apparently was only valid for one year or the next bad quarterly earnings report, whichever came first.

The move has been interpreted as a cost-cutting move, but in many ways the upside was more important for the newspapers than it ever was for Google. In fact, with PrintAds gone, Google will continue to help destroy the once-omnipotent local media monopolies, by commoditizing them. Now, the newspapers have one less hope for survival and the bad news will keep on coming. (PaidContent notes that the competing Yahoo Newspaper Consortium will continue).

Tuesday also included ominous news from America’s premier newspaper property, the New York Times Company. The parent of the NY Times announced it sold $250 million in convertible debt to the world’s largest man, a politically-connected monopolist, who Time dubbed “an investigative reporter’s dream”: 

Did the New York Times Company have any choice over who put money into the firm? Probably very little. The newspaper industry is viewed as a poor investment. Several newspaper chains are already in the process of liquidation, particularly Journal Register and Gatehouse. The third largest newspaper company, McClatchy (MNI) is in deep trouble. A number of the nation's largest dailies, including the Rocky Mountain News, are for sale and some will be closed if they do not find buyers.
NYTco shareholders were apparently not thrilled at the prospective dilution (or perhaps the terms of the debt), pushing the “A” shares down 7.8% or $72m. (The family-owned class B shares aren’t publicly traded.)

PaidContent notes that the alternatives — dumping distressed properties at depressed prices — were even worse. Of course, pouring money to keep the existing businesses alive assumes that current valuations are near the bottom of a notoriously cyclical industry, rather than a mere waypoint in an irreversible slide towards oblivion. Right now, the trendline clearly supports the latter interpretation.

By coincidence, on Seeking Alpha today Jeff Jarvis offered an imaginative (and relatively complete) list of alternative revenue models for newspapers.

Newspapers have known for years that they will have to make the transition from paper to an online-only business. The imperative is to use their existing revenue streams and (most importantly) supply of unique content to establish a new sustainable revenue model before the printed paper goes away. Otherwise, they will just be one voice in a more crowded, democratic and commoditized 21st century media market — and one with a demoralized workforce trapped by memories of 20th (or 19th) century industry paradigms.

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