Are newspapers run by a pack of wolves?

The short answer is no. Despite occasional frustration with a lack of constructive criticism, I don't actually believe that newspaper CEO's are a bad lot. Everything they are doing, and have done is completely rational. However, that's a great part of the problem.

Lets take a step back and look at the industry 20-30 years ago. The year is 1985, and things are fantastic for newspapers. They have been able to raise rates on advertising year after year, and they still are the gold standard for journalism. Why?

To use Porter, they have a near perfect situation of the five forces. There is a very big barrier to entry, as both printing presses and the journalists to create news are very expensive. They have immense supplier power over their advertisers, who have very few outlets to reach as many people. They have very limited rivalry, as even in competitive markets published rates are just that, published. They have created local monopolies or duopolies and are generating fantastic returns. They only have a minor substitution effect from the emergence of cable and the existence of TV.

Newspaper publishers were always pretty big deals in town, but now they were becoming amazingly more wealthy as well. Struggling with where to spend their windfalls, they bought up lesser newspapers. Some they shuttered, while others kept publishing. Other companies bought related, but somewhat different endeavors, TV stations, educational publishing, real estate. Many went public, while creating a protected class of shares for themselves so they could rarely, if ever, be ousted from the companies they helm.

Monopolies rarely try to improve themselves, as there is little to no incentive. Profits are more or less assured, and the best way to improve them is to cut costs. Prices can continue to rise until the point of marginal returns is reached. Revenue maximization becomes the focus, and costs are viewed as almost unrelated.

Let's fast forward to the current day. Most, if not all, of the leadership has grown up with the notion that revenue maximization is the mantra. The secondary goal is to reduce costs wherever possible. The strategy is simple: sell more, spend less. If you listen to conference calls, the constant word that will be used as a measure of success is revenue growth.

Simply stated, management is continuing to use many of the same metrics even after the world has changed. The dashboard hasn't changed even though the car has. They didn't need things like ROI, NPV or any other fancy acronym. After using metrics that worked and frankly drove great triumphs in years past makes it that much more difficult to change for the future.

The hardest part of making this change is realizing that the newspaper isn't a monopoly anymore. However, in most cases there is only one newspaper in any particular town so its very difficult to believe that statement. It isn't a monopoly because the market isn't about a printed product, it is about access by advertisers to an engaged and interested audience. It is about attention, permission and value.

The greatest measure of the difficulty of the newspaper media is measured with the rarest commodity of all: time. No matter how rich a person is, there are only 24 hours in a day. The latest data from VSS showed that people are now spending more time on the internet than reading a newspaper. Time with the medium is the most important metric, simply because it is a measure of engagment. Reach is not enough. You can say hi to 1000 people walking down the street, it doesn't mean even a single one will remember you.