Now that two billionaires – Jeff Bezos and John Henry – bought The Washington Post and Boston Globe within days of each other, I wonder how many newspaper gravediggers are suddenly thinking that the industry can be taken off life support.
Personally, as an old-school journalist, I never gave newspapers their last rites.
Neither did stockholders, who enjoyed 40% gains this year on The New York Times Company (NYT) – a move Wall Street Daily’s Louis Basenese referred to as a “resurrection.”
If you’re not a believer yet, here are three reasons you should be…
~Reason # 1: Buffett’s Buying Rampage
Four years ago, Warren Buffett saw the industry going down the tubes and vowed never to buy a newspaper again. He had to eat crow, however, after he acquired the Omaha World-Herald in 2011, a paper he grew up reading. Then he added 25 more in the next two years, spending one-third of a billion dollars on the expansion.
Of course, the $333-million question is, why?
Beyond what he calls an “unnatural love of newspapers,” the truth is, he believes that good hometown news sells – and that the right online subscription model can add a healthy stream of income.
Metropolitan publications that report news from all corners of the world don’t fit his investable profile. That’s the stuff you can always get from the TV. Smaller newspapers like the Tulsa World and Greensboro News & Record, his two most recent acquisitions, actually visit neighborhoods and city festivals.
Buffett believes that people want to read about what’s going on in their own backyards – and they’re willing to pay for it. In that sense, newspapers have a monopoly on quality, local content.
No matter how great their content is, though, if newspapers use a losing business model, they will fail. That’s precisely what newspapers did (and some are still doing) for years. Slow to make changes to their business models after digital news spread like wildfire, they offered printed content online at no cost.
As the saying goes, “Why buy the cow when you can get the milk for free?” Subscriptions sank – and so did advertisers’ dollars, to the tune of 50% since 2005.
Buffett has no intention of giving away a cup, quart, or gallon. That’s where the paywall comes in…
~Reason # 2: Paywalls Lead to Paydirt
Surely, you’ve hit one by now. After reading several articles on a site, a message pops up, warning that you’ve reached your quota of 20 or so free articles, and you must now become a paid subscriber.
The Wall Street Journal implemented a paywall way back in 1997, leading to a 200,000 gain in subscribers in a little over a year. Today, 898,012 pay for online access – a 62.6% leap since March 2012.
It took 14 long years before The New York Times would follow The Wall Street Journal’s lead. Online subscriptions grew to 500,000 after just two years of charging.
Paywalls have finally become standard procedure. In 2012, 350 newspapers used them. And Borrell Associates, an advertising tracking firm, predicts 500 will adopt the practice over the next few months.
And Borrell confirms that advertising isn’t suffering as a result. If you think about it, there’s little difference from the late 1960s when people rejected the idea of paying for TV and eventually gave in to cable.
Typically, traffic lightens right after the paywall goes up, but within 12 to 15 months, it picks back up.
At $3 to $6 per month for customers, paywalls are expected to bring in a few hundred million dollars or so annually, or 2% of the industry’s total circulation fees. Not a fortune by any stretch of the imagination, but it does provide a steady avenue for growth.
~Reason # 3: Bezos is the Man for the Job
Maybe Bezos can be a superhero and “save the decade” for newspapers. What the industry needs more than anything is a monetizing of new and old, with respect to technology and people.
Market research firm Scarborough reports that 59% of people aged 18 to 24 read some form of the newspaper every week… That’s 18 million people, according to the U.S. Census Bureau. And the number of mobile-exclusive readers increased 83% in 2012 compared to 2011.
Sounds like a growing market in need of some serious tapping.
No doubt Bezos knows how to engage online audiences and make lots of money doing it. His ingenuity may make The Washington Post a poster child for 22nd Century newspapers.
Perhaps Tom Rosenstiel of the American Press Institute said it best in an interview with PBS Newshour: “So, someone like Bezos, who is now thinking about his legacy – he’s reached a certain age, one of the richest, most successful businessmen in America – is probably thinking about, how do I save an institution and be known for something more than just being rich?”
I hope he has the answer.
Ahead of the tape,
Karen Canella
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Original Article: Three Reasons to Say “I Believe” to Newspapers