Are Newspapers Totally Screwed

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Are Newspapers Totally Screwed?

By: Mathew Ingram
2007-08-14

Henry Blodget, who used to be a Wall Street analyst and now runs a content hub called Silicon Alley Insider recently wrote...

...a provocative analysis of the online newspaper business entitled Running the Numbers: Why Newspapers Are Screwed, which ran at the Insider as well as Blodgets personal blog, Internet Outsider (I guess hes an insider and an outsider).

Henrys point is a relatively simple one: publishing content online costs a lot less than publishing it on paper, and therefore newspapers can save a lot of money by running their stuff online. Unfortunately, online content also generates a lot less revenue than printed content does, so newspapers actually wind up worse off if they move online.

To justify this line of argument, Henry looks at the New York Times " presumably because if the New York Times cant make the math work, no one can. Using (for the sake of argument) the idea that the Times immediately stops publishing in print and moves entirely online, heres what Blodget says would happen to the companys bottom line:

Revenue drops by more than half, 40%-50% of employees get fired, and the company still loses money. Using the NYTs Q2 numbers and these assumptions, for example, revenue would have dropped from $789 million to $285 million.

More importantly, EBITDA (earnings before interest, taxes, depreciation, and amortization) would have dropped from $118 million to -$64 million.

Not a great picture, is it? But there are a number of problems with Henrys analysis, as several people " including my friend Mark Evans, who has posted some thoughts on the subject, and Seamus McCauley of Virtual Economics. Seamus in particular takes issue with many of Blodgets assumptions.

Among other things, Seamus makes the point that a proliferation of online content actually makes certain kinds of content more valuable " particuarly content that has been verified by trusted sources, which he believes is the true core competency of mainstream media organizations (Jack Trout has some ideas about what makes newspapers valuable here, while others think a papers most valuable asset is its useability).

Are Blodgets projections unrealistic? Pretty much, yes. Obviously, printed newspapers arent going to vanish overnight, nor is online advertising going to remain static. But thinking about what might happen if they did is definitely a worthwhile exercise.

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About the Author:
Mathew Ingram is a technology writer and blogger for the Globe and Mail, a national newspaper based in Toronto, and also writes about the Web and media at www.mathewingram.com/work and www.mathewingram.com/media.


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