Don't stop the presses just yet.

Photographer: Matthew Staver/Bloomberg

News Is a Tough Business

Justin Fox is a Bloomberg View columnist. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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A major event in the annals of the U.S. news media passed by unnoticed  last fall. Employment in Internet publishing and broadcasting and Web search portals -- digital media, basically  -- surpassed employment in newspaper publishing for the first time.

As you can see from the chart, this trading of places has had more to do with the newspaper industry hemorrhaging jobs than Internet companies adding them. Still, at least since the recession ended, combined employment has increased a bit.

This gain coincided with a sort of springtime for digital media, as a few old-line publishers such as the New York Times and the Financial Times seemed to find sustainable digital business models and digital upstarts such as Buzzfeed and Vox scored major investments.

Since the beginning of this year, though, Al Jazeera has shuttered a big U.S. digital operation, tech-focused Mashable has decided to get out of the news business and it was reported that BuzzFeed missed its internal revenue targets for 2015. Meanwhile, among legacy media, the Guardian is planning big cuts, the New York Times reportedly wants to lay off hundreds and the Financial Times is bracing for “tough times in the months ahead.”
The Fading Newspaper

Springtime is over, and we seem to have skipped summer and fall and headed straight into winter. This turn of events has already spurred more analysis and commentary than a person can possibly keep track of, so I’m not even going to try to summarize it here. I’m also not going to offer my own brilliant predictions (because I don’t have any) of which media enterprises will thrive in the future and how they will do it.

I can, however, offer a look back. Two years ago, for a column in the Atlantic, I spent some time studying the pre-1950 news media landscape -- because I thought it might tell us something about the media’s future.

What did that landscape look like, from a business perspective? Certainly not dismal -- there were media fortunes made and empires built before 1950. But they tended to be fleeting. For most of the news business, for most of its history, just getting by was the norm. “News hasn’t been that lucrative for that long, and the post–World War II period has been very anomalous,” says Richard John, a historian at Columbia Journalism School. It has often taken subsidies, cartels, and other nonmarket means to pay for the news, something today’s enthusiasts and investors should bear in mind.

What happened after 1950? As television rose to dominance and Americans moved to the suburbs (where newsstands hawking multiple papers weren’t really practical), the newspaper business consolidated. More and more cities came to have one dominant paper, and that dominance proved spectacularly lucrative. Daily newspaper circulation in the U.S. pretty much stopped rising in the 1960s,  but advertising revenue -- and, as you can see in the above chart, employment -- kept going up for decades. Employment peaked in 1990, but ad revenue rose through 2000 and held steady for a few years after that. Then it collapsed in the Great Recession, and it has kept falling since.

The Internet deprived newspapers of their monopoly status, undermining their stable, profitable business model where ad sales subsidized news gathering. And while there will surely be successes to come in the news business, they won’t be able to count on monopoly profits. The closest thing to monopoly profits in today’s news business, in fact, are those enjoyed by Facebook and Google, the distributors. From a recent article in the New York Times:

In the first quarter of 2016, 85 cents of every new dollar spent in online advertising will go to Google or Facebook, said Brian Nowak, a Morgan Stanley analyst.

Hey, guys! That doesn’t leave much for everybody else!  Which means that for everybody else, surviving in the news business will involve scrambling  a lot -- not turning on an advertising spigot and letting it gush, as newspapers did for a half-century. 

  1. At least, I haven’t been able to find evidence that anybody noticed it. If you did, let me know!

  2. A full description of the category is here. As best I can tell (the Bureau of Labor Statistics doesn’t comment on individual employers) it includes Google and Facebook as well as enterprises that are more explicitly part of the media/publishing industry. It doesn't for the most part include digital-focused employees of legacy media organizations.

  3. It actually didn’t peak until 1984, at 63.3 million, but that was only modestly higher than 1968’s 62.5 million. Sunday newspaper circulation followed a different trajectory, continuing to grow in the 1970s and 1980s and finally peaking (at 62.6 million) in 1990.

  4. For a wonderful little case study of what that scrambling can look like, I recommend Dylan Matthews’ recent Vox account of the success of Jacobin, a Brooklyn-based magazine of socialist opinion that brings in about $500,000 a year, mostly from print subscriptions. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Justin Fox at justinfox@bloomberg.net

To contact the editor responsible for this story:
James Greiff at jgreiff@bloomberg.net