Most people believe that dying traditional newspapers got that way because of the internet. Before people started using the web in the mid-1990s, traditional newspapers were thriving, we think. This assumption may well be a myth.
Professor Matthew Gentzkow, from the University of Chicago Booth School of Business, conducted a study which found that journalism’s assumptions are based on three fallacies.
Prof. Gentzkow’s study, “Trading Dollars for Dollars: The Price of Attention Online and Offline,” has been published in the journal American Economic Review.
The three fallacies
- Ad revenues – most people think traditional newspapers must now adopt a less profitable business model because online adverts bring in lower revenues compared to print ads. With less money traditional media cannot afford the salaries of real journalists.
- More competition – it is widely believed that the advertising market has become more competitive because of the web. Advertising rates have been pushed down, and consequently revenues.
- Internet’s fault – Gentzkow describes it as a “misconception” that the Internet is responsible for the death of the newspaper industry.
Cannot compare apples to oranges
Professor Gentzkow says:
“This perception that online ads are cheaper to buy is all about people quoting things in units that are not comparable to each other—doing apples-to-oranges comparisons.”
Online advertising rates, he explains, are generally discussed in terms of “number of unique monthly visitors” the ad gets, while in traditional print newspaper circulation numbers determine ad prices.
A number of different studies have already demonstrated that the average person spends longer reading printed news than the average monthly visitor online, “which makes looking at these rates as analogous incorrect.”
Price of attention higher online
When you compare how long people actually see an advertisement, the price of attention for similar consumers is in fact higher online, Gentzkow points out.
Newspapers’ earnings per hour of attention in 2008 were (according to Gentzkow’s calculation):
- Print: $2.78,
- Online: $3.79.
Four years later (2012) the price of attention in print had declined to $1.57, while online it had risen to $4.24.
Dying traditional newspapers had already been declining
The popularity of newspapers was already in decline well before the advent of the Internet, Gentzkow adds. Between 1980 and 1995 newspapers’ popularity had diminished considerably.
Since 1995, more or less when people started looking things up online, the popularity of newspapers has continued to fall at approximately the same rate.
Gentzkow notes:
“People have not stopped reading newspapers because of the Internet.”
Increased digital advertising, direct marketing and other sources brought in higher revenues in 2013, while income from traditional print advertising fell, said the Newspaper Association of America. “This trend reflects an industry evolving its business model in a significant way, taking advantage of developments in technology, consumer behavior, and advertiser interest, to grow audience and diversify its revenue stream,” it added.
2013 a bad year for newspapers
Newspapers’ overall revenue in the US in 2013 fell by 2.6% to $37.6 billion, despite an increase in circulation revenue, the Newspaper Association of America reported. Circulation income rose to $10.9 billion.
Below is a breakdown of different types of revenue fluctuations in 2013:
- Digital-only circulation revenue: +47%,
- Bundled print-plus-digital circulation revenue: +108%,
- Print-only circulation revenue from home deliveries plus single-copy sales revenue: (minus) -20%.
Advertising revenue in 2013 fell by 65% to $23 billion.
In August 2013, The Boston Globe was sold for a mere $70 million dollars. The New York Times had pain $1.1 billion for it twenty years ago. The Boston Globe, which has been publishing for 142 years, was sold to John W. Henry, owner of Liverpool Football Club (soccer) and the Boston Red Sox (baseball).
In August 2013, founder and CEO of Amazon.com, Jeffrey P. Bezos, bought the Washington Post for $250 million.