Last week someone asked me to go on TV to talk about the future of newspapers based on my comment on how to save the Boston Globe. It's clear to me that there are many people who like to read a newspaper with their morning coffee. 50 years ago, there were plenty of people who used to read that newspaper with a coffee and a cigarette. Today, fewer people take all three at breakfast time. (In 1944, 41% of Americans polled were smokers, 21% were in 2007). Will dead-tree-news (DTN) go the way of the cigarette? In some ways, yes.
Cigarettes and DTN are different. When cigarettes are used as directed they kill their users. When DTN is printed and distributed, it kills its owners -- or to be more precise, it loses money which is increasingly forcing its owners to choose between closing DTN down or absorbing its losses. Another difference is that the generation that's addicted to DTN will not keep reading forever; whereas cigarette makers are skilled at recruiting new addicts to replace the ones it kills.
But cigarettes and DTN also will likely have something in common. As the number of smokers has steadily declined in the U.S., the cigarette makers have skillfully raised prices to cover the higher unit costs and profit expectations. In 1960, a pack of cigarettes went for $0.35, today the price is up as high as $9. As I posted, DTN is clearly a money loser so its owners are going to have to raise its price if they hope to at least cover the costs of printing and distributing it to people.
For some, that higher price will cause them to switch to a less expensive news source -- the Internet. And once DTN is gone, I think people will get used to paying for Internet-delivered unique, local news, entertainment, or investigative reporting. The key for providers will be to focus on content that is valuable to the people in their region and that competitors can't copy -- and to hire the most skilled reporters in that content area.
As the number of people willing to pay the ever-rising price of supporting the cost of DTN declines, it will make sense for the legacy assets for producing and delivering DTN to get consolidated into a far smaller number of large producers who can achieve economies of scale so they can earn a positive return on an ever dwindling customer base. After all, it is unlikely that teenagers who have grown up using a smart phone are going to become addicted to DTN.
50 years from now, people are probably going to just have coffee with breakfast -- the newspaper and cigarettes will have largely disappeared.
Update. Today's Boston Globe includes a fascinating article which reported that in 1995 its owners turned down a chance to buy a $1 million stake in Monster.com which ended up growing large -- $500 million in 2000 revenues -- by grabbing classified advertising revenue from newspapers like The Boston Globe (it had $100 million in help-wanted ads back then). Monster, which sold itself to an advertising agency instead, is having its own problems since Craiglist lets people place classified ads for free.
Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College. His eighth book is You Can't Order Change: Lessons from Jim McNerney's Turnaround at Boeing.
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Reader Comments (Page 1 of 1)
4-11-2009 @ 6:57PM
Bernie said...
I find your use of the phrase "dead tree news" to be excessive and stupid.
You have an overwhelmingly pessimistic view as to the amount of younger people who want to pick up and read newspapers. Just last Thursday I watched the expression of excitement on the face of one of my friends from school (I'm a freshman in college) over the fact that our dorm gets different newspapers than the cafeteria.
I do agree that there will need to be a price increase to sustain papers. We may simply see local papers start to cost as much as the NY Times ($1.00-ish) instead of 50 cents.
4-11-2009 @ 8:53PM
John said...
I have to agree with Bernie. There is Chicago tribune and a Chicago Sun Times paper box , outside my office window. I often watch the steady stream of people stopping to buy papers. It seems just as many people in their 20's and 30's are buying papers as those in their 50's or 60's. We also have the Red Eye that is geared to younger people. I think the papers are here to stay. It seems AOL has a negitive outlook on many ndustries.
4-12-2009 @ 2:30AM
Lou said...
>As the number of smokers has steadily declined in the U.S., the cigarette makers have skillfully raised prices to cover the higher unit costs and profit expectations. In 1960, a pack of cigarettes went for $0.35, today the price is up as high as $9.
Get your facts straight. The vast majority of the cost of a pack of cigarettes goes to taxes put in place by blood sucking democraps like Obama. Go to a red state (Gary, IN) get a pack of premium brand cigarettes for $5 with tax. Go next door to Obama's home blue state (Chicago, IL) and a pack of cigarettes will cost you over $10 with tax. I live in Chicago and hop the border to Indiana all the time to buy cigarettes and fill up on gas (gas is also heavily taxed in IL).
The small price increases made by the tobacco companies were justified and forced due to our socialist/communist government allowing any greedy anti-American a-hole to sue the tobacco company for getting lung cancer. Same government who let some b***h sue McDonad's because her coffee was too hot! (She was expecting ice coffee?) Coffee is supoosed to be served hot! Thanks to her, every place I go serves me luke warm coffee.
Peter Cohan, it is better to keep your mouth shut and let people think you are stupid than to open your mouth and remove all doubts.
4-12-2009 @ 7:31PM
Eyeroller said...
"When cigarettes are used as directed they kill their users."
Where exactly are the directions on a pack of cigarettes?
As stated above, most of the cost of cigarettes is tax. Newspapers are losing business because they no longer print news. The are now nothing more than vehicles for social engineering press releases.
The smallest whiff of (anything) will give you (cancer, heart disease, baldness) so we must support (banning it, massive tax increases.) All without checking a single fact.
Woodward and Bernstein are dead, and this story reminds me never to break a firm rule again: NEVER click on any link on AOL "news."
4-12-2009 @ 8:45PM
lonewolf said...
i find it most interesting that the goverment keeps raising tobacco taxes to pay for the extra costs of tobacco related illness so does that mean when i get lung cancer it entitles me to the very best healthcare because im the one paying the tobacco tax or is it just another way for you people to charge some one else who you dont agree with and try to control
7-02-2009 @ 7:15AM
vicki jeffries said...
There is another issue that needs to be addressed. Banks like Chase are not increasing the minimum payment from 2% to 5%. What that means is that a $500 payment is now $1,250. This type of incease is going to force people into default. But first, people will not be able to make the monthly payments and will give the banks an opportunity to increase the interest rates. This will push us further into debt and force people to default on their credit card debt. Please warn people to carefully monitor their bank notices so and seek to modify their debt if they can. Legislators should be made aware of these issues so that they can stop this type of greed by the banks. Contracts that were entered into with the understanding that the monthly payment would be 2% should not have their payments increased by 150%. How many people can affort another $750 per month in their budget when they have not done anything to increase their debt.
VJ