Is NEWS still a viable business model?

Colorado is an interesting place. It is a large state that consists of one major population center in the Denver-Aurora-Boulder area with about 3 million people. Another 1 million are scattered along the front range from Cheyene to Pueblo. The total front range estimates are 4.1million people, while the total state population is estimated at 4.9 million. 83% of the population is stretched out in 140 mile strip. The rest of the state, by comparison, is empty.

Denver has two major newspapers that basically cover news for the whole state. The Denver Post which has been in existence since 1895 and the Rocky Mountain News who’s first issue was in 1859. These two papers have been the major influence in local news and editorial positions for a 200 mile radius of Denver ever since.

Now, almost 150 years after it’s creation, it looks like the Rocky Mountain News has met it’s demise

The Rocky, Colorado’s oldest newspaper, was put up for sale on Thursday after owner E.W. Scripps Co. said it lost about $11 million on the operation in the first nine months of the year.

Cincinnati-based Scripps said in a news release that if no acceptable offers emerge by mid-January, it will “examine its other options.” It gave no details.

An internal Denver Post memo, authored by publisher Dean Singleton, read in part, “an announced sale is usually the first step leading to a failing newspaper’s closure.”

“Scripps notified MediaNews Group [the owner of the Post] on November 19 that it planned to close the Rocky Mountain News as soon as practical,” the memo said.

I’m not lamenting the loss of the Rocky, honestly I’m not one for major news outlets, and haven’t read either the Rocky or Post in years. What I am interested in is why they are failing. The have a circulation of 210,000/daily and 457,000/weekend and yet they cannot sell adequate advertising to keep the paper going. Why is this?

Boehne says the problem is not getting people to read the paper, it’s that the advertising dollars that aren’t there anymore.

“In the last couple of years it’s gotten tougher. Classified ads have moved from our pages onto our Web site. We still have the classifieds, but it’s not as profitable on the Internet as it is in print,” he said.

Boehne says telling employees at the Rocky the paper doesn’t generate enough costs to support itself was one of the hardest things he had to do.

So classified sales have been hurt, by craigslist I’m sure, as well as their own website, but readership is not the issue?

According to this article Classified advertising currently averages about 28% of a paper’s revenue.

Classified advertising peaked as a percentage of newspaper revenue in the fourth quarter of 1997 at 41.64% vs 28.84% today.

A 13% decrease in overall revenue is going to be tough on anyone. There are two major factors that are going to impact classified advertising. Success and pricing. If items are sold through classifieds they are a success. This is why when promoting classified advertising newspapers will get testimonials like “I sold my mounted and stuffed moosehead in a single day”. This should to translate directly to readership. If people are reading the classifieds, they will buy stuff from there, of course, pricing still has to be low enough that the advertiser can make a profit.

Craigslist has done a great job of creating a high traffic name with low advertising costs (typically free). Everyone goes there, so the chances of success are high – creating an environment where the newspaper can’t compete.

So it looks like classified advertising in print will probably, eventually go away, and newspapers will have to cover nearly half of their annual revenue somewhere else, or they will have to close down like the Rocky Mountain news.

So the ultimate question here is this. Is NEWS still a viable business model? I think most of us would agree that print journalism, when it comes to content, is MUCH better than anything found in mainstream video. If this is the case, why can’t newspapers move to an online format and sell their advertising for enough to cover their costs and make a profit? Do people not value the news? Are there too many news outlets? Are journalists overpaid? What is going to happen once these newspapers go away? Will online content publishers take up the slack?

Will our much touted online revolution into the information age result in the ultimate demise of comprehensive news coverage by multiple sources that we have come to enjoy, leaving us with untalented, overly biased citizen reporters (like me) posting constant nonsense on the Internet?

It’s hard to say…