Why not stop the presses?

Noting that newspapers are losing money on their print editions — and that many observers believe that print will eventually die — Alan Jacobs poses what seems to be the obvious question:

But if print is a money-loser — and I keep hearing that is is, for newspaper after newspaper — why not end it now, today, and go purely digital? Why shouldn’t newspapers around the world, or at least in the most internet-saturated parts of the world, just stop the presses — especially if they know they’ll have to do it anyway, and in the meantime the cash is draining away? What are the restraining factors? Habit and tradition? Powerful executives who have known the print world for so long that they can’t imagine life without it? The half-conscious feeling that paper and ink are real in ways that pixels and bits are not, and that if you only have pixels and bits you might as well be just a blogger, without a saleable product you can hold in your hand? This inquiring mind really, really wants to know.

Let me take a crack at the answer. There are a couple of fallacies underlying Jacobs’s question. First, the problem newspapers face is not that “print is a money loser”; it’s that the entire operation is a money-loser — ie, the costs are higher than the revenues. Second, from a production standpoint, you can’t easily separate the “print side” from the “online side.” You can, to a fair degree, separate print revenues (ads and subscriptions) from online revenues (ads and paywall fees); what you can’t separate are the costs. The major cost in a newspaper business is not the cost of printing and distributing the print edition; it’s the cost of producing content — the labor cost that goes into staff reporters, editors, photographers, etc., plus the cost of purchasing content from outside suppliers — and that content-production cost is largely shared between the print and online sides. So if you were to simply discontinue the print edition, you would end up destroying what is still your major source of revenues (print ads and subscriptions), but you wouldn’t do much to reduce your major source of costs. You’d end up sacrificing more revenues than costs, and your financial situation would go from bad to worse. The “cash drain” would turn into a flood. To put it another way: the print edition may well be losing money, but the cash it generates continues to subsidize the production of content for the online side.

So if you stop the presses, you have to do one of two things to avoid financial disaster: (a) figure out a way to make a whole lot more money from the online side or (b) fire a whole lot of people. And since nobody yet knows how to do (a), that means your only option is (b). And then, once you eviscerate your newsroom, you face a new conundrum: you’ve just destroyed your ability to produce good, distinctive content for your online edition. You’re hosed. That, as I see it, is why newspapers continue to be printed.

Discussions about the shift from print to online in the news business tend to focus on the demand side (new patterns of consumption) because that’s where the fun stuff is happening. But, as I’ve argued in the past — here and here — the problem newspapers face lies more on the supply side (old patterns of production). Until the supply problem is resolved at both the macro level (industrywide overcapacity in production) and the micro level (costs outpacing revenues in individual firms), the industry will struggle. And stopping the presses, at this point, will just compound the problem.

5 thoughts on “Why not stop the presses?

  1. John Frederick Kaufman

    And somehow, isn’t print more essentially trustworthy? “All the news that’s fit to print”– would we trust a totally digital journalism? So easy to erase and change. Perhaps we need print for both its sense of traditional permanence and its sense of speaking truth in black and white.

  2. Frank Scavo

    Nick, I almost always agree with you. But in this post, you are making no sense whatsoever. On the one hand you write that the print side has more revenue than costs. On the other hand you write that the print side is losing money.

    So, which is it?

  3. Chris Nahr

    Print does appear to have a future as a revenue generator. Last month Frédéric Filloux wrote on a Simon-Kucher study of newspaper pricing that concluded: “The print business is not your legacy, it’s your bank.” They believe most price-sensitive readers that are willing to move to the web have already done so, and the remaining loyal readership would likely pay higher print prices.


  4. Nick Post author

    Frank: The print side is losing money, but it is also generating the most revenues for the overall operation. By discontinuing it right now, you sacrifice those revenues, but because most of the operation’s costs are shared costs (ie, you still need the staff to produce the digital content), you don’t drastically reduce the operation’s overall costs. Does that make sense? The point is that, because of shared costs, ending the print operation makes you lose even more money – you reduce revenues more than you reduce costs.

    More generally: It’s not unusual, in a multiline business, to have a legacy business that, while unprofitable, nevertheless generates the cash required to subsidize new businesses.

    Carl: Newsweek is a magazine, not a newspaper, but, yeah, it’s going (b). That’s made easier, I would guess, by the fact that, in its current shape, the operation was created through the merger of an existing print operation (Newsweek) and an existing online operation (Daily Beast). The two halves of the business are more clearly delineated, on the content-creation side, than is the case for print publications that expand into online publication.

    Chris: Yes, I think the number of newspapers publishing print editions will continue to fall, but I think print will continue to be a major part of the business for the big survivors.

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