Rethinking the news model

"Nothing but a newspaper can drop the same thought into a thousand minds at the same moment … if there were no newspapers there would be no common activity.”
Alexis De Tocqueville, Democracy in America, 1840

That was then, this is now. RSS feeds, Google News, Twitter and Facebook updates are the new common activity, dropping the same idea into thousands of minds simultaneously.

The French political theorist De Tocqueville saw newspapers as the glue that kept society together, providing talking points for discussion and action. In the last few days, with upheavals at Fairfax, and big changes at News, people now realise that the age of the daily newspaper's power and influence is drawing to a close.

With Fairfax shares at an all-time low and sinking, Gina Rinehart could buy it with what's at the bottom of her handbag. Alternatively, staff could take a slice of it. Putting their money where their mouth is would be an interesting test of their commitment to independent journalism.

That doesn't mean the end of newspapers. Some might even find ways to become profitable little businesses. The key word is "little”. A business that once generated $150 million might make $15 million, staffed by 20 to 30 journalists. Foreign correspondents and bureaus will be replaced by stringers, news feeds will generate content, the amount and quality of investigative and local political reporting will be reduced. Newspapers will just be another platform for a reading public that's not getting bigger.

The fundamental problem confronting every newspaper in the world is that the journalism and the business models never fitted. Newspapers never sold news to readers. Subscriptions and circulation contributed a small proportion of the revenue. Most of it came from a now declining pool of advertisers.

The reason The Age and The Sydney Morning Herald flourished in the 1980s was not because of the journalism but because people paid hundreds of millions buying cars and houses from the classifieds. They also found jobs there. Those were the glory years when The Age was making an eye-popping 35 cents on every dollar. As former David Syme managing director Greg Taylor used to say, the challenge was getting enough people to answer phones.

Those days are gone. In the United States, the Pew Centre's Project for Excellence in Journalism estimated that between 2010 and 2012, newspapers lost $7 in print advertising revenue for every $1 gained in digital ads. When you're only getting one-seventh of your revenue, there's less money for staff, including journalists. The handful left will be working harder for a 24-7 news cycle.

Newspaper executives are kidding themselves if they think they're providing the key news platform. People now get it elsewhere.

Fairfax managers claim they are embracing a digital future as they clear out editors, and sideline new ones by creating news directors, topic editors and platform editors for online, print, tablet, mobile phone, online TV and social media. But instead of talking about the new era, they should acknowledge digital news has been around for at least 10 years. They failed to anticipate people abandoning print for online, they failed to create online rivers of gold and they built expensive colour presses in 2003 when consumer trends and circulation were heading the other way, only to close them down a decade later. That was the Fairfax board's Kodak moment.

The papers at Rupert Murdoch's News group are better placed because they did not rely on classifieds, with the exception of the papers in Adelaide and Brisbane, The Advertiser and the Courier Mail. Still, News tabloids and The Australian are under enormous pressure and News is splitting entertainment from publishing. That's a game changer because News Corp's entertainment business accounted for about 75 per cent of the company's revenue in the first three months of the year, newspapers are a shrinking part of the business and they will now stand or fall on their own feet without the support of the cash generated by the film and television operations. The papers are likely to be spun off when 81-year-old Rupert Murdoch is no longer in charge. Job losses are now going on at News. News chief Kim Williams told the ABC's PM program that newspapers will be thriving in 2020 but who knows? Technology has moved faster than media managers expected.

Fairfax and News are putting up paywalls. Paywalls at The New York Times and The Times are reportedly working better than expected but all they might do is bring costs below revenue. It's a survival technique, not a growth strategy. The only way paywalls might work is if Fairfax and News offer content that's unique instead of the same press-release driven material in the paper and online now. Whether they can finance that with falling revenues and when they are shedding staff is another question.

Paywalls suit niche publications like the New Yorker, The Economist and Crikey offering specialised information you can't get anywhere else. Would it work for daily newspapers when you can get the same information from Google News?

That said, there will always be a demand for news and information. Newspapers won't disappear completely. But we are in uncharted waters. Expect to see more experiments. The New York Times has just expanded its digital news offerings to third-party platforms like Flipboard and has also created a Chinese language NYTimes China website, setting up its own account on Sina Weibo, a Chinese equivalent of Twitter. This could become a model for other publishers.

Perhaps single newspapers will have different websites targeting select groups – not that hard to conceive when theage.com.au with its celebrity stories and shock horror tabloid snippets is different from the printed product.

Maybe sites like Google and Facebook will buy newspapers to aggregate information and build traffic. We might see papers like The Age and SMH focusing on news, sport and business, but scrapping advertising driven supplements like EG, Epicure and Green Guide which you can get online.

We could see specialised niche publications. More Crikeys, even an Australian version of something like the Huffington Post. Maybe parts of Fairfax, like The Age and SMH, will be sold off.

No one can predict which management strategies will work. Reinvention of old business models is always chaotic. But it is a process the media needs to go through if it is to survive.

The challenge for newspaper managers will be negotiating the chaos while running smaller businesses in straitened conditions with thin margins, fewer staff and less political clout. Managers are rethinking what it means to be a news organisation. It won't be dull watching what they come up with.