Opinion: Newspapers squandered monopoly-era profits and now blame Google and Facebook
Three decades ago, when local American newspapers were at their peak, I attended an editors’ dinner for a mid-sized chain. After dinner, the president rose to speak and asked everyone to applaud for a publisher whose newspaper had exceeded a 50% profit margin the previous month.
With a 50% margin, half of every dollar from subscribers and advertisers went straight to the bottom line. Certainly, there were depreciations to take into account and taxes to pay, but overall it is a level of profitability to make a pharmaceutical company blush.
Profits are not a bad thing if they are invested in building the business. Pharmaceutical companies typically invest in drug discovery, which is a costly and risky process. But newspapers typically invested in share buybacks, which rewarded shareholders but starved the company.
In the heyday of high margins, newspapers experimented with publishing online, but it was always with pennies on a dollar of profit. Internet publishing was tolerated, but the emphasis was still on print publishing.
No media group has leaned in and “bet the farm” on a large-scale transition to the Internet. Few executives or owners have seen – or perhaps admitted – that the future may not include print newspapers.
Today, many of those newspapers are suing Google and Facebook, claiming that these innovative companies that were barely startups 20 years ago have stolen the newspaper industry. the class action lawsuit including more than 200 newspapersIts been consolidated with other antitrust lawsuits against the two big Internet media companies in a federal court in New York.
The trial involves most local newspapers smaller, but the bigger ones supported a bill in the Senate which, paradoxically, exempt newspapers from antitrust laws so that they can band together to extract money from Internet companies. That’s what we call Journalism Competition and Preservation Act, 2021.
Newspapers seem to view Google and Facebook as thieves stealing advertising profits from the industry, but it’s important to understand that the industry has gone out of their way to open the door and invite these so-called thieves inside. Year after year, for decades, the industry has increased advertising rates, even as circulation has stagnated and fallen as a percentage of the population.
The investment in extremely expensive printing presses – $ 100 million for a regional newspaper like the San Diego Union-Tribune – effectively created monopolies on newspapers. They could charge whatever they wanted because it was so expensive to compete. Until suddenly it wasn’t.
It was first craigslist, then Google and finally Facebook. Advertisers realized something that many readers already knew. The Internet was a much faster, easier, and cheaper way to get information or advertise a product. Who needed 12 hour old news delivered on environmentally unsustainable newsprint?
Such a transformation is not unique to newspapers. New technologies and new ideas are constantly reshaping business. Manufacturers of horses and buggies did not survive the introduction of the automobile. Large liners have given way to jet planes. Companies like Uber, Robinhood, Netflix, and Airbnb are shaking up established industries.
Newspapers like to think they are special – an inseparable part of a democratic society. It’s a role in years gone by that they can be rightly proud of. But times and technology have inexorably changed.
Today, online news sites are popping up everywhere, competing with newspapers and, more importantly, engaging younger audiences. the Local Independent Online News Editors trade group now represents more than 300 sites, more than the number of newspapers suing Google and Facebook.
We can certainly nostalgia for the heyday of newspapers, and hope that they will eventually succeed on the Internet, but their setbacks are not the fault of Google and Facebook.
Chris Jennewein is editor and publisher of The Times of San Diego. He worked in six news companies before focusing his career on Internet startups.