Every day from 1971, when I moved to Hermosa Beach, until about a year ago, I bought the Daily Breeze. After reading it, I’d share it with the other reporters in the office. About two years ago, I noticed the other reporters were reading the Breeze on the internet. So I stopped sharing my copy with them. But I kept buying it from Ashley’s Deli next door. It’s only 25 cents. Then, about a year ago, one of the reporters showed me Google Alerts. Type in key words on any subject that interests you and Google Alerts send you an email with an aggregation of all the stories that contain your key words. Google Alerts is free.
I typed in Hermosa Beach, Manhattan Beach, Redondo Beach and surfing. Now, every morning Google Alerts sends me an email with a link to every Daily Breeze story that mentions the beach cities or surfing. I no longer buy the Daily Breeze at Ashley’s Deli.
In recent years, the Daily Breeze’s circulation has plummeted from nearly 90,000 to approximately 60,000. Because ad revenue is based on circulation, its ad revenue has mirrored that decline.
Easy Reader is caught in the same whirlpool. Even though Easy Reader is free, we’ve cut circulation from 70,000 to 50,000 and not raised advertising rates since the aerospace recession wiped out 100,000 Southern California jobs in the early 1990s.
Meanwhile, China, over which local newspapers have little control, has driven newsprint costs up nearly 100 percent in the past few years. Printing, which was 25 percent of Easy Reader’s costs, is now 40 percent.
So why not stop printing and start posting? Remember the railroads, who thought they were in the railroad business, when their business really was transportation? Newspapers are in the news business, not the newsprint business.
Migrating from newsprint to a news website, sounds sensible. Unfortunately, it hasn’t worked.
The latest, most ambitious effort is AOL’s Patch.
In the January 24 New Yorker, Ken Auletta described the AOL model: “There are now seven hundred Patch sites operating in nineteen states and the District of Columbia. AOL chooses new locations based on an algorithm that examines fifty-nine factors, including potential advertising revenue, income, voter turnout and retail spending. Each Patch site is run by a journalist, who earns between forty and fifty thousand dollars a year. There are no offices; reporters live in the area they cover. Because there are no newsprint or shipping costs, AOL publishes news, [CEO Tim] Armstrong says, at approximately four percent of what it costs a traditional local newspaper to do so. Still, the sites are not making money, yet.”
Not surprisingly, given AOL’s algorithm, AOL planted Patches in each of the three beach cities. If, as I suspect, most people reading this article have never visited these sites, then you understand just one of the hurdles the sites face.
According to a recent New York Times article, the average Patch story attracts 100 views “and they consider 500 page views a wild success.” That’s not a newspaper. That’s a newsletter.
Here’s another problem. Each editor is expected to post five to 10 stories a day, according to Patch’s business plan, titled “The AOL Way: Contact, Product, Media Engineering, and Revenue Management.”
The new news business model, as described in the 58-page “The AOL Way,” is a “content farm” supplied by pieceworkers, who are paid $50 per piece. Like any efficiency driven system, the optimum quality is “just good enough.”
A good newspaper reporter writes about five stories a week. The story you are reading now, whatever its merits, took three long days to write.
But setting aside issues of quality and newsworthiness, the problem with AOL’s Patch is that it’s not financially viable.
Assume, in time, everyone in the three beach cities were to visit one of the three beach city Patch sites at least once a week.
The AOL/Patch business model, like that of newspapers, is based on advertising revenue, which is based on eyeballs.
There are approximately 50,000 households in the three beach cities. Once a week visits to one of the three sites by every household would amount to 200,000 visits a month. Assume each visitor views five pages. That’s a potential one million page views a month. Web site advertising rates are about $5/1000 page views/month. AOL would be able to charge $5,000 a month for an ad appearing on all three beach city sites. With the standard three ads per page layout, Patch’s ad potential is $15,000 per month, or $180,000 per year. That covers the cost of the three editors and the $50 per story paid to freelancers. But it leaves nothing for sales, tech support, AOL corporate, and Adrianna Huffington. This month, AOL agreed to pay the news site diva a $4 million annual salary, on top of $315 million for her HuffingtonPost.com, whose use of unpaid commentators and stories aggregated from newspapers “would shame an antebellum plantation,” Los Angeles Times columnist Tim Rutten wrote.
I take no satisfaction in concluding AOL’s Patch is not viable. The same calculations apply to EasyReaderNews.com.
The reason migrating to the internet won’t save newspapers is because rising newsprint costs aren’t the problem. If it were, newspapers would do what they did in the past – raise advertising rates. Young people preferring to get their news online isn’t the problem, either. Newspapers have been available on line for over a decade. The current recession is a problem, but presumably, it’s a temporary problem.
The media part of the news media business model is not what’s broken. What’s broken is the advertiser-supported part of the business model.
Dating back to the penny papers of the mid-1800s and continuing through the radio, television and now the internet age, the news has been essentially free to the public. Newsstand and subscription revenue doesn’t even cover newsprint and delivery costs.
You better start swimming
In the course of my writing this article, Paul Hennessey parked his maroon Maserati in front of the Easy Reader office. He was on his way to the Hennessey’s Tavern on Pier Plaza to check on its new menu. Hennessey has five taverns in the three beach cities.
He still advertises in Easy Reader, just not as much as he used to.
Instead, he told me, he gives each of his waitresses a few minutes each evening to post Hennessey’s daily specials on his tavern’s Facebook pages.
“I don’t really understand how it works,” he acknowledged, “but it does, and it’s free.”
The relationship between newspapers and advertisers has always been contentious because advertisers cancel their ads when newspapers print stories advertisers don’t like.
In the past, because traditional media had a near monopoly on economical mass marketing, it could afford to offend advertisers.
In 1986, the Wall Street Journal printed an article about Mobil Oil’s president setting up his son in a shipping company with ties to dad’s company. Mobil responded by cancelling its Wall Street Journal advertising. The Journal wasn’t hurt. Standard, Chevron, Shell, Union 76 — there were plenty of other oil companies to sell ads to. Not any more, not in this age of consolidation.
In 2005, when Los Angeles Times’ 2004 Pulitzer Prize winning auto critic Dan Neil described GM’s Pontiac G6 GT, as “entirely adequate,” “thrashy and unrefined,” with handling “pushier than a mortgage-refinance telemarketer,” General Motors canceled its $10 million Times advertising contract. General Motors said it was because of (unspecified) “factual errors and misrepresentations.” Or maybe it was because Neil also wrote that the car was “the best case for a putsch in GM’s Renaissance Center” headquarters. Shares of Time’s owner Tribune Company fell to a near 52 week low the following day.
Ever wonder why Easy Reader has so few real estate ads? So do I.
But, in fairness to advertisers, why should they advertise in newspapers they believe hurt their businesses? A free press isn’t their responsibility anymore than freedom of religion is.
A few years ago, Easy Reader reporter Sam Enriquez left for the Los Angeles Times, where he became an assistant city editor. (Today he is the Wall Street Journal’s national news editors). One of Enriquez’s reporters was Manhattan Beach resident Terry McDermott. Following September 11, McDermott spent three years traveling throughout the Middle East and Europe, reporting on the hijackers’ backgrounds. Those three years resulted in four, award winning stories for the Times, which he expanded into a book with the controversial title Perfect Soldiers.
Had the Times not paid McDermott to write those stories, we would never have learned that the hijackers were not the impoverished, disenfranchised, religious fanatics they were popularly assumed to be. They were middle class, well educated, average Mohammeds.
During one of the many talks McDermott gave following publication of the stories, a business executive asked him how the September 11 stories “costed out.”
That is not a question veteran newspaper reporters were accustomed to being asked.
During the 1960s and 1970s, under revered publisher Otis Chandler, the Times was known as affectionaltely the “velvet coffin” because of its generous support of reporters, who were allowed adequate time to research and write about the pressing issues of the day. And without regards to the sensitivities of advertisers.
A lengthy Times story on newspapers by its media critic David Shaw quoted the Times own advertising director as saying that after he opened the newspaper each morning he threw up because invariably some article gored the ox of one of his advertisers. (Shaw won a Pulitzer in 2001 for his four part series examining the media’s coverage of the McMartin Preschool case.)
But as another great newspaperman Mark Twain observed, “A Christian is a man holding four aces.”
The hand newspapers hold today is more like a pair of threes, with maybe a jack to boot. With every deal, their once sizeable pile of chips gets smaller. Newspaper advertising revenue fell 44 percent between 2006 and 2009. One quarter of all newsroom employees were laid off during those four years.
The end of the rainbow
On February 2, during a press conference at New York’s Guggenheim Museum, Rupert Murdoch announced the launch of The Daily. Murdoch’s News Corp. empire includes the Wall Street Journal, the New York Post and Fox News. The Daily is a subscriber-supported news service that is available only on Apple’s iPad. (Murdoch wanted to call it The Daily Planet, but Marvel Comics wouldn’t let him.)
The Daily costs 99 cents a week, or $39.99 a year, payable through your iTunes account.
The Oracle of Australia has been saying for years that free to the user, advertising supported newspaper websites are not financially viable. “The old business model based on advertising-only is dead…Critics say people won’t pay, but I say they will,” he told the Washington Post last year. A decade of money losing, newspaper web sites supports the first half of his argument. But it’s the latter part that’s truly important to the future of news.
Murdoch’s subscription model is appealing to newspapers not only for the obvious reason that it eliminates newsprint, which, in good times, accounts for 25 percent of a newspaper’s costs. That’s an estimated $300 million the Los Angeles Times could spend on additional reporting, and a somewhat smaller, but still significant amount to Easy Reader.
But The Daily’s far more significant promise to the public as well as newspaper people, is that it would free the news media from financial dependency on advertisers.
In an efficient economy, the consumer, not a middleman pays for the product. Murdoch’s model is efficient in this way. Given enough subscribers, an editor and readers might even agree that two years spent on a single story that helps us understand September 11 “costs out.”
Murdoch has been wrong. In 2005, he paid over $300 million for MySpace. This month, four days after launching The Daily, he put MySpace on the market. It’s expected to sell for as little as $50 million. Who could have foreseen that just three years after purchasing the country’s leading social networking site, a web-based scrapbook called Facebook would render MySpace obsolete.
But assume The Daily’s mass subscriber, micro payment news service model is successful.
What happens during the transition, between today and the time when iPads and their equivalents are as prevalent as cell phones.
We already know the answer.
The dark ages
This morning, Sunday, February 6, I picked up the Los Angeles Times from my doorstep. I went through every page looking for news about the war in Afghanistan. There was none. On my desk is last week’s Time magazine. It too makes no mention of the war in Afghanistan.
Am I wrong to think that the war in Afghanistan, whatever its merits, would not be entering its second decade, that Americans would not have invested $375 billion in this war during the worst recession since the 1930s, if they read about the war every morning and saw it on television every night. Where are Afghan War’s David Halberstams, Seymour Hershes, Dan Rathers and Walter Cronkites? I think we know the answer.
Locally, the prospects of an uninformed and disengaged public, are just as dire. This month, the Daily Breeze cut its management’s salaries 10 percent and all other employees’ salaries 5.5 percent. This follows, according to a management memo dated Feb. 2, coincidentally the day Murdoch launched The Daily, “employee furloughs, permanent reductions in force, plant closures, the consolidations of some operations as well as the outsourcing of some work.”
In the good old days, I would have cravenly celebrated my competitor’s misfortune. But this isn’t a zero sum game anymore. It’s game over.
Easy Reader has also reduced staffing, imposed uniform pay cuts and, and as previously mentioned, cut circulation. Only the size of our news staff has been protected. We had five reporters before the recession and before the internet and we have five reporters now.
The newspaper business may impact only a small sector of the economy. But the news impacts everyone. Ask the residents of Bell, Vernon, Compton, Inglewood and other nearby communities that have been bare of newspapers. Sooner or later disaster hits.
Anyone under the illusion that wealthy, well educated communities like ours are immune from major mishaps, might want to review the recent history of Manhattan Beach, the wealthiest, best educated of them all. In the 1980s, the community’s financial elite lost their shirts in a local bank and intertwined country club because of Bernie Madoff-worthy financial shenanigans. Also in the 1980s and continuing into the early 1990s, Manhattan was convulsed by the McMartin Preschool tragedy. In the late 1990s and early 2000s, the Manhattan school board’s mismanagement of school bonds led to a criminal investigation and nearly bankrupt the district. And today, in a story that echoes the 1994 sweetheart severance package for city manager Dave Thompson, the severance package for former city manager Geoff Dolan is the subject of scandal and a lawsuit.
Perhaps, if Easy Reader were a better watchdog, these incidences could have been averted. But what is certain is that after they occurred, the community was given the opportunity to learn from its mistakes. Easy Reader reporter Don Pine spent two years investigating the financial relationship between the Manhattan Country Club and the Bank of Manhattan, which led to the bank’s collapse and club’s bankruptcy. (That bank is no relation to the present Bank of Manhattan). I spent four days a week for two years in the downtown Los Angeles Criminal Courts Building, reporting on the McMartin Preschool trial so parents would know the facts, which were not what they had been led to believe. Easy Reader reporter David Eisenstadt’s reporting on the Manhattan school bond debacle triggered a District Attorney’s investigation and the resignation of the superintendent.
Recent school bond expenditures in all three beach communities have been widely reported on and wisely managed, at least in part because, as CPA Gary Wayland told fellow members of the Hermosa School bond oversight committee, “What happened in Manhattan Beach is not going to happen on my watch.”
Keep on truckin’
Llocally, traditional reporting will continue to be practiced during the transition from advertiser supported newspapers to the hoped for, reader supported electronic news service.
The reason is newsprint is still the most cost effective way for advertisers to reach large numbers of people. The Hermosa Hennessey’s Facebook page has just 355 friends. The Manhattan Hennessey’s has 406 friends and the Redondo Hennessey’s 256. That’s barely 1,000 pairs of eyeballs. If Hennessey needs everyone in the beach cities to know about his Hermosa Tavern’s new menu, Easy Reader’s 50,000 circulation, with delivery to every beach city household, is still the most cost efficient way to do it, at $21/1000 for a full page ad. Sure, Patch is cheaper, and Facebook is free. But is an ad no one sees an ad?
Of course, Hennessey might not appreciate the fact that next to his ad may be a story about the Hermosa council’s recent ban on smoking on restaurant patios. Or maybe he won’t mind.
After California banned indoor smoking at businesses, despite dire predictions about the financial impact on bars, Hennessey was surprised to see his bar sales increase. “Non smokers didn’t want to sit in a smoky bar, and they outnumbered smokers,” he told me.
Even in a business as old as bars, the consequences of change are unpredictable.
Kevin Cody is the editor and publisher of Easy Reader. ER
