First came the pandemic. Then the earthquake. It has been a harsh spring for the Salt Lake City Tribune newspaper. Just a week after coronavirus landed on America’s west coast — posing a threat to the 150-year-old newspaper’s commercial future — it was hit by the biggest earthquake in the state since 1992, destroying the newsroom.
When editor Jennifer Napier-Pearce went to assess the damage, her heart sank. Three burst pipes had caused a flood. Glass shards and framed clippings were scattered all over the floor. One of the newsroom’s Pulitzer prizes lay amid the wreckage. The office had literally been shaken to bits just as advertising revenues were collapsing and reporters were working round the clock to cover the biggest story in a generation.
“I walk into the newsroom and see this disaster, and the Pulitzer is on the floor,” says Ms Napier-Pearce. “It’s just a symbolic wound of 2020.”
The Salt Lake City Tribune is the largest Utah newspaper not owned by the Mormon Church and serves a community of some 3.2m people. Its survival tactics in recent years tell the story of the trauma of modern news companies well beyond Utah and the US. With the business of news in relentless decline and the bulk of advertising income hoovered up by Google and Facebook local papers have tried a cocktail of strategies just to keep the lights on. Now coronavirus is testing publishers big and small, digital and those still reliant on ink.
Yet the Tribune has achieved an unlikely feat in American journalism in 2020: so far it has avoided any lay-offs for its 68 staff. In 2016 the newspaper was wrenched from the hands of the hedge fund Alden Capital by Paul Huntsman, scion of the billionaire Mormon family. Two years later it laid off a third of its newsroom, shrank the newspaper, began asking people to pay to read stories online and in April became a non-profit organisation, the first such experiment by a major US newspaper.
Billionaire backers: Paul Huntsman of the Salt Lake City Tribune; Amazon’s Jeff Bezos; Laurene Powell Jobs, who owns a controlling stake in The Atlantic; and the Minneapolis Star Tribune’s Glen Taylor © Bloomberg; Getty Images
In the search for revenue it has launched newsletters and events and received grants from the likes of Facebook, Google and the US government. “We’re really trying anything and everything,” says Ms Napier-Pearce. “But I can’t say that we have it made. Anyone who says that right now is fooling themselves.”
At least 38,000 news company workers from journalists to commercial staff have been furloughed, laid off or taken pay cuts in the US since March, according to FT estimates. State support in Europe has cushioned the blow, but painful choices may just be delayed. Research group Enders Analysis estimates that the revenue crunch puts a third of UK journalism jobs at risk.
The carnage has spread to every corner of the news business, from venture-capital backed upstarts like Vice to century-old local newspapers and magazines. White knight billionaires and a boost to subscriptions from readers hungry for news and analysis on the pandemic have not spared even titles like The Atlantic, which has been praised for its sharp pandemic coverage even as it has cut nearly 20 per cent of its staff.
Ben Lerer, chief executive of GroupNine Media, owner of the Thrillist and Pop Sugar websites, puts it plainly. “We got the crap kicked out of us,” he says. “This sucks. Let’s not sugar coat it. I’m trying to make lemonade out of the heaps of lemons we have here.”
The news industry has been in decline for 30 years. US newspapers have lost almost half their newsroom staff since 2008, according to the Pew Research Center. But the pandemic has exposed the growing divide between a handful of publishers with more than 1m subscribers each, and the rest struggling to make ends meet. In the first quarter of 2020, The New York Times added 587,000 digital subscriptions, more than all of the 100 newspapers owned by Gannett, the largest US print publisher, and more than the paying online readership of the Los Angeles Times and The Boston Globe combined.
The gap in fortunes is stark. The Minneapolis Star Tribune has been at the centre of protests over the police killing of George Floyd. Its reporters have been threatened at gunpoint, burnt by tear gas and shot with rubber bullets. Yet they have also been forced to cut their hours to save costs, with the newspaper, owned by Minnesota billionaire Glen Taylor, losing 40 per cent of its advertising revenues since the crisis began.
“We’ve invested more than others, we have more people than everyone else, and we’re doing a bit better than everyone else,” says Mark Thompson, chief executive of the New York Times. He admits many competitors won’t have the balance sheet to hire, or even maintain staff, during a tough recession.
“Our thesis is you have to invest in a product to have a chance at the digital media business. [Netflix chief executive] Reed Hastings believes that. What is striking to me is how few people [in news] have tried this. A lot of people are just trying to keep things from falling away.” The New York Times on Tuesday cut 68 jobs, largely in advertising, sparing the newsroom.
‘The industry was so flush’
Industry executives admit that the news business responded disastrously to the advent of the internet. Premium content was given away for free, while the publisher’s role between reader and advertiser was left wide open for others to intermediate, or replace.
“We were extraordinarily naive, because the industry was so flush,” says Terry Egger, a veteran of the news business who recently retired as publisher of the Philadelphia Inquirer. “In the mid-1990s, there was so much profit . . . the internet was a novelty not taken seriously.”
In the first quarter of 2020 The New York Times added 587,000 digital subscriptions © Angela Weiss/AFP/Getty
The subsequent fall in advertising revenue was precipitous. According to figures from GroupM, the WPP-owned media buying agency, newspapers and magazines hosted half of all advertising spending worldwide in 2000. Inside two decades their share of that roughly $530bn market has fallen to less than 10 per cent, with platforms such as Google and Facebook scooping up the bulk of local and classified advertising. Coronavirus is dismantling what was left — some newspapers report that advertising was down between 50 and 90 per cent in April.
Before the crisis some digital publishers were attempting to thrive in the online advertising market, with mixed success. Other old media groups tried over the past decade to draw more money directly from readers, either through subscription paywalls like The Wall Street Journal, or membership models such as that deployed by The Guardian.
A few premium publishers — The New York Times, Wall Street Journal, Washington Post and Financial Times — amassed more than 1m digital subscribers. More niche publications — such as Politico for policy and politics, The Athletic for sport and The Information for technology — have also been able to command a premium to sustain smaller newsroom operations.
The question is how far the subscriber model will stretch and whether it could ever replace the income from advertising. “Subscription revenue is more sustainable, it is recurrent, it has a lot of advantages,” says Kristin Skogen Lund, the chief executive of Schibsted, the biggest publisher in Scandinavia, the region with the world’s highest density of news subscriptions. “The problem . . . is that the revenue base is simply not large enough. You would need to charge so much for a subscription to sustain the entire cost of running a media site.”
Research by Oxford university’s Reuters Institute for the Study of Journalism has shown that even the minority willing to pay for news largely do so for one publication — creating “winner-takes-most” markets. While the audience for online news jumped to new highs during the pandemic, most sites convert fewer than 1 per cent of website visitors into paying readers. Although there are no sector-wide figures, some publishers admit most of those that do pay in America and Europe are older, more wealthy and white.
Newspapers and magazines hosted half of advertising spending in 2000. Their share of that market has fallen to less than 10 per cent as digital platforms such as Google and Facebook have grown © Spencer Platt/Getty
“The big and interesting challenge is not just how the hell we convert . . . this relatively tiny proportion of people willing to pay,” says Tony Haile, the founder of analytics tool Chartbeat and currently chief executive of Scroll, a subscription service offering advertising-free access to news sites. “We have to ask: how zero sum is this for publishers? Is this a war of all against all?”
The danger is a news divide between an elite paying audience, which is well-served but small, and a broader public that relies on publishers who are trying to monetise web traffic, but may struggle to report local news in depth. “A [high] traffic play [relying on] a commoditised advertising dollar has worked in some circumstances, but it hasn’t worked durably, and it hasn’t supported the kind of work the best journalists want to do,” says John Harris, one of the founders of Politico.
Rasmus Kleis Nielsen of the Reuters Institute adds that most subscription-reliant publications will primarily focus on a niche area, “paid for by a highly motivated, often quite partisan and generally quite privileged audience”.
“Very few will focus on the broader public, let alone more marginalised communities,” he says. “What is the price? A lot of journalists will lose their jobs, a lot of communities will lose their local source of news and a lot of stories will not be covered because there will not be anyone to cover them.”
Path to sustainability
In the hunt for alternative revenue streams publishers had turned to events, ecommerce and even travel experiences — businesses that have been badly hit by the pandemic. For a more lasting solution, some in the industry are looking to deep-pocketed potential supporters: benevolent billionaires, tech platforms and, if necessary, governments. But none are straightforward options.
Former CNN anchor Campbell Brown, who now works for Facebook, says the pandemic is a ‘make or break moment’ for local news © Michael Loccisano/Peabody/Getty
One particularly seductive idea has been for wealthy benefactors to swoop in and backstop news organisations against losses. The trend has gained more attention since Amazon founder Jeff Bezos — the world’s richest person — in 2013 bought the Washington Post for $250m.
But even when the independence of news output is protected, recent examples have revealed the shortcomings of such a business plan. Mr Taylor is worth an estimated $3.5bn, but that did not stop the Minneapolis Star Tribune from asking reporters to take unpaid leave this year. “The billionaire ownership model doesn’t mean that billionaires want to lose money on their newspapers,” says Michael Klingensmith, the newspaper’s publisher.
The brutal cuts at The Atlantic, despite a big jump in subscriptions, surprised many in the industry. But the Salt Lake Tribune’s Ms Pearce was not one of them. She has spent the past few years in discussions with Mr Huntsman about the future of the newspaper, after the sizeable lay-offs in 2018 provided what she calls a “wake-up call”.
“[Huntsman] was like: what if my kids don’t want the paper? What if I get hit by a bus?”, says Ms Pearce. These talks led to the conversion of the newspaper into a non-profit [organisation] that can draw donations directly from the community.
Reporters from the Minneapolis Star Tribune have been at the centre of the protests over George Floyd’s killing. Yet they have been forced to cut their hours to save costs © AFP/Getty
News via social media
Some bigger news organisations have their eyes on Facebook and Google, which, after years of resisting, are stepping in with larger grants and direct payments to news groups for their content. This is particularly vital for digital publishers such as Huffington Post and BuzzFeed, struggling businesses once heralded as the future of journalism.
Campbell Brown, a former CNN anchor was hired by Facebook to mend relations with the industry. She says the pandemic is a “make or break moment” for local news. “When the virus was spreading across the country, we were all desperately turning to local news. And at that exact moment . . . local news was facing a financial crisis akin to nothing they have faced before,” she says. “It was just so stark”.
In recent years Facebook and Google have each committed $300m to support US news publishers. As the pandemic shattered the economy, Facebook said it would expedite $25m in emergency grants to struggling local news groups.
Ms Brown has worked with industry leaders like Mr Thompson at The New York Times to develop a revamped Facebook News section which aggregates stories from outlets including the Wall Street Journal and Business Insider — and pays some US news groups millions of dollars for participating. Google is also in talks to pay publishers to include their stories in an upcoming news product.
The Minneapolis Star Tribune has lost 40 per cent of its advertising revenues since the coronavirus crisis began © Star Tribune/Getty
Facebook’s relationship with publishers has “improved”, says Ms Brown. But the charm offensive has not won over everyone. “For them to step in with $50,000 grants or $100,000 grants . . . that’s not going to fix a newsroom,” says Nancy Dubuc, chief executive of Vice Media. “The scale of these platforms were built on other peoples’ brands. Facebook walled [in] those audiences. [The platforms] are going to emerge only stronger [from this crisis]. And at the expense of what?”
State intervention is the final potential saviour. European governments have propped up some businesses through the crisis, through funds or advertising purchases. But for subsidy-wary US publications, more interesting are the moves in France and Australia to force big platforms to pay publishers for their content, a notion which Facebook last week rejected, telling the Australian government that news content is “highly substitutable”.
Some media executives warn that relying on Big Tech has dangers, especially if publishers want to develop new products for subscribers. “The problem going through the platforms is that very often you are almost cut off from your own data,” says Ms Skogen Lund. “And that is almost like being cut off from your money, because it makes you blind to your own product.”
If the industry does make yet another calamitous mistake over its business model, some veteran executives wonder whether it might be caused by too much hand-wringing over Big Tech.
“[News companies] could be crying too much of a victim rather than becoming entrepreneurial enough to figure out what else we might do,” says Mr Egger. “That is what I worry about. If too much of our energy is put into reparation rather than reinvention, that would be a concern.”