The Industry

The Crisis Facing American Journalism Did Not Start With the Internet

For decades, newspaper conglomerates lapped up profits and failed to adapt. Our communities are worse off for their folly.

TYSONS CORNER, VA - APRIL 25:  A sign in front of Gannett Co Inc, headquarters is shown, on April 25, 2016 in Tysons Corner, Virginia. The Gannett Company has offered to buy Tribune Publishing Co in a deal valued at about $815 million.  (Photo by Mark Wilson/Getty Images)
Newspapers have had a long winter.
Marc Antoine Baudoux/AFP/Getty Images

A recent study by researchers at the University of North Carolina sounded the alarm about a growing problem for American democracy: the number of cities in the U.S. that could be classified as “news deserts” without local news to hold powerful people accountable. We have lost about 20 percent of local newspapers in the United States since 2004, and at least 900 communities now are without any local news source in that same time frame.

The problem is in full focus this week after news of layoffs at three major media companies. While a lot of the attention is focused on national players HuffPost and BuzzFeed, the cuts at Gannett are the most worrisome, because it is one of the last big newspaper chains that has properties in markets of all size.

That the Gannett news is not a red-alert story in the U.S. reflects a misunderstanding of the major problems facing American newspaper companies, an economic story that goes back further than the advent of the public internet in the 1990s. But it’s a story Americans need to know and understand better, because the news crisis you keep hearing about is a local problem. If you think there’s corruption in D.C., what’s happening at City Hall is often worse—and in more and more places, there’s no longer anyone paid to root it out.

People want to blame the internet for the news industry’s troubles, but the seeds go back to the 1980s. To understand this moment and how to fix it, it means understanding three key forces creating this slow-motion disaster.

The first is a string of bad business decisions that left news companies burdened under mountains of debt even as they avoided investing in newsrooms.

Owning a printing press really used to be a license to print money—there’s a reason that became a cliché. Independent and family-owned newspapers began merging into larger companies and conglomerates by the mid-20th century, and those companies were enormously profitable (to the tune of 30 percent margins) in the 1970s and ’80s even though readership declines began at the start of that run.

Everyone wanted to own newspapers, and so the publicly traded newspaper chains borrowed money and went on buying sprees because the upside in that economy outweighed the risk. But big profit margins create expectations, and during the 1980s investment strategies were not built around innovation but rather keeping profits high for shareholders.

The second force at work was the cratering of news revenues in the middle of the past decade as a quarter-to-quarter focus—and investors’ expectation of hefty profits—came back to bite the industry.

News companies severely misjudged what the internet was. For all our noble beliefs about journalism and democracy, newspapers exist as businesses to create audiences for advertisers that wanted to reach those people, and publications historically built these audiences by helping people meet information needs they have as members of communities or societies. We focus on the “news” in newspaper, but those needs included things like TV guides, birth and death announcements, and calendars of community events. In the pre-internet world, papers functioned as pseudo-monopolies based on the limits of technology and the radius a delivery truck could travel. Online publishing, with its low cost and global reach, changed everything. Those information needs could be met by a wider, more global array of choices. The newspaper was not the only game in town.

Newspapers that once lacked competitors were competing with everyone, and they were unprepared after decades of scant investment. The tragic mistake these companies made was not that they gave away content for free, as one argument goes, but rather that they took too long to realize the internet had destroyed their local monopoly on meeting citizen’s information needs. They should have safeguarded their connection to this community of readers who were their advertising golden goose. Instead, they hunkered down and treated the internet as just another place to publish, and they paid dearly for it.

This new media landscape was awash with competitors taking chunks of revenue from newspapers that once enjoyed a type of monopoly. Upstart publishers cut into ad revenue that was the lifeblood of these publications. Craigslist came along and the news industry’s boondoggle classified-ads revenue stream rapidly vanished.

This did not happen overnight, but as technology companies slowly replaced the curatorial role of newspapers—for news, yes, but also for those day-to-day human connections we used to rely on old media to make—the revenue began to tumble until it fell off a cliff during the Great Recession. Between 2000 and 2008, newspaper ad revenue dropped more than 60 percent. Companies increasingly diverted money into digital media companies that could deliver the audiences once reserved for newspaper oligopolies but on a global scale. If that sounds familiar, it’s because that’s essentially what Google and Facebook do, and it’s no surprise that they are the big winners in this new environment. Google’s parent company Alphabet is the world’s biggest media company in terms of revenue; 21 years ago, Google did not exist.

The third force was how these companies reacted to the effects of those first two factors—devastating cuts to news resources that only accelerated the problem.

Producing news is expensive, but pinned down by the reality of audience and revenue loss against debt obligations, news companies cut resources to newsrooms. That included the human reporters who did the work that made them valuable. What happened next was entirely predictable, what Phil Meyer at the University of North Carolina famously called the “death spiral” of news. Cuts led to loss of quality, which drove away readers. Fewer readers meant fewer sales and subscriptions, which led to less ad revenue and thus more newsroom cuts. It’s the story of the past three decades of news.

So the internet is just one part of the story. Decades of sparse investment and enormous debt service left these companies exposed and hamstrung at a time when investment was needed, when mobile devices were changing the field at breakneck speed. The cost to the public is enormous. Newspapers watch city government, keeping an eye on deals and tax expenditures as representatives of the public interest. When that sentinel—imperfect as it can be sometimes—is gone, who will hold powerful interests accountable?

There has been a big push in supporting national media like the New York Times or Washington Post, and you’re never going to hear me argue against paying for news. But the crisis is local, which means we also need to be thinking about acting and spending locally. Most of the small and midsize papers burdened with debt might be too late to save. Something will spring up in their place, perhaps similar to some of the promising independent sites built on crowdfunding or foundation support such as ProPublica, the Nevada Independent, or the Texas Tribune.

The old way isn’t coming back. Putting up paywalls at a local level to try to recreate the audience monopoly is unrealistic and will just accelerate the demise. But rebuilding community over the unique things journalism still does better than anyone—and only that—offers a way through. As New York University media professor Clay Shirky once noted, “Nothing will work, but everything might.” News organizations need to reflect a sense of trial and error in chasing innovation, but the media world where good ideas and models will likely scale is over. What works for the New York Times will probably not scale to the news organization in a one-stoplight town in rural America.

BuzzFeed and HuffPost are still innovative companies; their headline-grabbing layoffs might be a sign of doom—or simply a blip as learn they how to build that audience with an eye on experimentation. Time will tell. But these companies have more runway to figure this out than local newspapers, which have been cut to the bone so many times that the next round of layoffs might be their deathblow.

As citizens, we need to realize our local civic life is fragile if it is not guarded. We can’t leave it up to shortsighted news organizations anymore; it’s on us as citizens to make sure that powerful interests have independent actors who verify what they hear before they report. We may not be able to save newspapers, but we need to ensure that what replaces them reflects the values that make journalism valuable and distinct in a world awash with media choice. The health of our democracy depends on it.