Digital Journalism: Another Failed Business Model?

H. Iris Chyi.
University of Texas media researcher H. Iris Chyi says heavy shift to digital news was a mistake. Chyi photo.

By Casey Bukro

Here’s an interesting idea: The rush of newspaper management from print to digital journalism was a terrible mistake.

Cyber media was supposed to be the next big thing, the answer to plummeting circulation, advertising and readership. Soon it became clear that digital journalism got off on the wrong foot with a “bad business model,” this new way to get the news for free. That set an expectation of reluctance to pay for it.

“What if almost the entire newspaper industry got it wrong?” asks Jack Shafer on Politico.com.  He is Politico’s senior media writer.

“What if, in the mad dash two decades ago to repurpose and extend editorial content onto the web, editors and publishers made a colossal business blunder that wasted hundreds of millions of dollars? What if the industry should have stuck with its strengths–the print editions where the vast majority of their readers still reside and where the overwhelming majority of advertising and subscription revenue come from–instead of chasing the online chimera?”

Fascinating speculation, and Shafer admits it’s a contrarian viewpoint, but he bases it on a study of 51 U.S. newspapers by two University of Texas researchers, H. Iris Chyi and Ori Tenenboim. They published a paper in Journalism Practice, an academic journal.

That paper, said Shafer, “cracks open the watchwords of the newspaper industry to make a convincing case that the tech-heavy web strategy pursued by most papers has been a bust.” That strategy, Shafer adds, “has been a losing proposition for most newspapers.”

Come to think of it, history shows an “all eggs in one basket” strategy can lead to disappointment. The U.S. economy’s reliance on petroleum led to high costs and disruptions by unreliable sources. The electric power industry relied heavily on coal until air pollution and other problems forced the industry to turn to alternative and cleaner energy sources, like solar power. Nuclear power was heralded as the technology that would turn deserts green, but safety concerns derailed some of those hopes.

The nation becomes enchanted with new technology, and throws a lot of money at them. Of course, some technologies are life-changing, like the auto, flight, computers and air conditioning.

So what did Chyi and Tenenboim have in mind? Chyi is an associate professor and new media researcher at the University of Texas, Austin. Tenenboim is her graduate research assistant.

They studied 51 “larger” local daily newspapers, not nationally circulated publications like the Wall Street Journal or the New York Times.

Titled “Reality Check,” their paper concluded: “Results indicated that the (supposedly dying) print product still reaches far more readers than the (supposedly promising) digital product in these newspapers’ home markets, and this holds true across all age groups.” The quote includes the parenthetical comments.

“In addition, these major newspapers’ online readership has shown little or no growth since 2007, and more than half of them have seen a decline since 2011,” the authors state. “The online edition contributes a relatively small number of online-only users to the combined readership in these newspapers’ home markets. These findings raise questions about U.S. newspapers’ technology-driven strategy and call for a critical reexamination of unchecked assumptions about the future of newspapers.”

Borrowing a quote, the authors said the transition from print to online is, in the business sense, “spending analog dollars to get digital pennies.”

Chyi wrote a 2013 book, in which she states that readers avoid online newspapers because “they’re an inferior good” compared with print versions. Also, online editions tend to be perceived as inferior, she believes, because they’re free. They’re also cluttered with intrusive ads.

The book, titled “Trial and Error: U.S. Newspapers’ Digital Struggles Toward Inferiority,” contends that during 20 years of digital trial and error, bad decisions were made, unwise strategies were adopted, audiences were misunderstood and product quality deteriorated.

In her interview with Shafer, Chyi offered an analogy to illustrate the current online crisis newspapers are facing.

“Newspapers had been running the equivalent of a very nice high-end steakhouse,” she told Shafer. Then McDonald’s moved to town and sold a lot of cheap hamburgers. Newspapers decided, in the metaphorical sense, to compete by dropping steak and selling hamburgers, although they had no expertise in selling hamburgers.

“What they should have done is improve the steak product,” Chyi told Shafer. Later, she added, “It’s not too late. There’s some hope if they rethink their strategies.”

Chyi and Tenenboim noted a mass migration of news consumers to the web, but said that most readers go to news aggregators, like Yahoo News and Google News.

In an earlier Politico story, which Shafer called his “valentine to newsprint,” titled “Why Print News Still Rules,” the reporter pointed out that “the newspaper has refined its user interface for more than two centuries” in thousands of newspapers over hundreds of millions editions.

“Reading a newspaper is a contemplative exercise that can’t be matched by a screen,” he insists. By contrast, “As bad as they are, news websites are getting worse and have been getting worse since the commercial web took off in late 1995 and mid-1996, and sites like Salon, Slate, Feed and others started experimenting with the form.”

Those are opinions. Hard numbers offer no solace.

Columbia Journalism Review reports that journalism jobs at newspapers continue to disappear. “But in a disturbing development, digital news jobs that had been replacing some of the legacy positions appear to have hit a plateau.”

According to Bureau of Labor Statistics Occupational Employment Statistics, since 2005, newspapers laid off about 25,000 journalists and digital publishers hired about 7,000 journalists.

“While the growth of digital-only publishers has created jobs for thousands of journalists, it has not offset steep job losses at newspapers,” said the CJR report by Alex T. Williams.

“Indeed, the combined number of journalists at newspapers or digital-only publishers has declined sharply in the past decade,” CJR reports. “In 2005, there were 69,900 journalists employed in these two industries. In 2015, there were 51,980, a decline of 26 percent. As a result, Americans have fewer journalists to provide news information.”

The Wall Street Journal looked at these trends another way.

Rapid drops in print advertising, already under stress, is forcing some publishers to consider significant cost cuts and dramatic changes to their print and digital products, according to the Journal article by Suzanne Vranica and Jack Marshall.

Global spending on newspaper print ads is expected to drop 8.7 percent to $52.6 billion in 2016, said the Journal. That would be the biggest drop since the recession, when world-wide spending fell 13.7 percent.

“Newspapers have been in a race against time to grow their digital revenues to make up for the collapse of print advertising,” said the Journal. “They have made strides, but face challenges on that front, including the dominance of Facebook and Google in the digital market and difficulty making money on mobile products.

“During the past decade, marketers have fled newspapers for a variety of reasons, including declining circulation, aging readership and the need to fund their digital initiatives.”

Chyi and Tenenboim probably would argue that strategy continues the trend of feeding digital and starving print. They are voices in the wilderness.

I’m going to resist that cliche: Time will tell.

Something like 20 years has passed, long enough to gain some insight. In a world still battered by an economic recession, maybe expectations were too high for a digital rescue. Maybe fat and happy newspaper managers waited too long to respond to needs to change a money-guzzling industry dependent on heavy machinery and a cumbersome delivery system. Maybe they were too eager to grab anything that looked like a rescue. Few newspaper leaders twenty years ago understood how computers worked. They were flying blind.

The Chicago Tribune, where I worked, hired a computer consultant to build a custom-made system, named the Edit Five, that was supposed to serve the editorial department and the accounting department. It was buggy and overloaded almost immediately, so the editorial department got full use of the computer system and the Tribune bought another number-crunching system for accounting. An all-purpose computer system seemed to make sense at first, but experience showed that systems should be designed for specific tasks.

To be fair, the Chicago Tribune was a huge editorial operation, and there were not a lot of computer options then for large newspapers in the late 1970s and early 1980s. Digital publishing in library databases dates to 1985. The Tribune expanded to AOL in 1992 and the web in 1996.

That early computer consultant retired to a home in Maine overlooking the ocean. But he was the only person who understood the Tribune’s computer system. So when there was a serious computer problem, he was summoned from Maine.

I was working in the Tribune newsroom as all this was happening. An incoming CEO pledged to replace the custom system with off-the-shelf computer equipment that could be serviced in-house. He did.

The CEO sat two executives side-by-side on a couch in his office and told them before the meeting was over, one of them would be fired. After questioning them, he fired the man he considered most responsible for buying a computer system that only one man fully understood.

Digital technology can backfire in strange ways.

Edited by Stephen Rynkiewicz. Comment below in the “Leave a Reply” box. For advice from our ethics advisers, submit a question.

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