Umair Haque / Bubblegeneration
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Design principles for 21st century companies, markets, and economies. Foreword by Gary Hamel. Coming January 4th. Pre-order at Amazon.

Tuesday, May 08, 2007

Industry Note: What Newspapers Need

Why can't more newspapers think strategically about news? Because they're trapped in a value chasm.

If that's obtuse, think about why strategic renewal for newspapers means surrendering a decaying business model - a bitter pill to swallow - via this example:

"...All of this would be fine if newspapers generated lots of additional revenues from offering free news. But the fact is newspapers generate most of their online revenues from classified advertising, not from news…."

Bolding's mine.

For now, let's totally ignore the fact that the most elementary financial analysis will reveal that the average (regional/national scale) paper can reap significantly greater returns by getting open than by staying closed.

Let's just deal with the argument and assumptions behind the quote - that newspapers generated most of their revenues from classifieds.

Of course newspapers did generate most of their revenues from classifieds - at least until Craigslist came along.

Strategies decay. Business model fall apart. Especially when tectonic economic shifts hit entire industries.

The simple fact is that unbundled classifieds are economically hyperefficient. One Craigslist beats 10,000 fragmented classifieds.

That's the hard economic truth - and newspapers should have moved before Craig to seize the opportunity.

Or, at least, it almost is. If newspapers had more (any) strategic imagination, they would fast realize that Craigslist only solves a single, relatively simple, type of classified problem. There are still ample opportunities to capture value even here with newer, better kinds of classifieds.

The author then goes on to lament the fact that the "quality" of journalism will suffer.

This is (yet) another enormous area of strategy decay for newspapers. They haven't bothered to invest in human capital for decades. To be fair, unions have had a hand in this perversion of value creation.

But when my local blogger is more educated, funnier, and more up to speed than, say David Broder, well...what do you expect? And that holds true, sadly, across verticals.

The point is that the state of newspaper today is the outcome of a set of strategic choices.

It wasn't inevitable. And renewal isn't impossible.

But it will take fresh DNA.

For example: there was a reason most newspapers were set up last century not strictly as striaghtforward corporations, but embedded in various kinds of protective legal structures (ie, nonvoting shares, trusts, etc).

Wow - there's a striking economic resemblance there to the way that Craig vehemently denies near-term greedhead profitability, isn't there?

That's fresh DNA.

That's what newspapers need - not dinosaur editors telling us to pay up, or the (largely nonexistent) fourth estate will vanish (and we'll all be sorry).

-- umair // 9:10 PM // 0 comments

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