In the e-book Why American Newspapers Gave Away The Future (2012), prominent newspaper executive Richard J. Tofel takes a detailed look at the series of strategic mistakes, coupled with new technologies that led to the decline, and in some cases the collapse, of American newspapers.

Tofel brings a particularly relevant perspective to the discussion. He was the founding general manager and is now president of ProPublica, an independent, non-profit newsroom that produces investigative journalism in the public interest. He’s no stranger to corporate media having served previously as assistant publisher of The Wall Street Journal. ProPublica was the first online-only news site to earn a Pulitizer prize, first in 2010 for its reporting on the aftermath of Hurricane Katrina, and then in 2012 for its reporting on Wall Street and the financial crisis.

Tofel points out, somewhat ironically, that, “The year the Internet stock bubble burst, 2000, was also the year of newspaper peak profitability” (p. 103). Tofel also notes that, “On the day when the Los Angeles Times’s parent company filed for bankruptcy, the Times enjoyed a larger audience for its news than ever before” (p. 18).

In his book, Tofel examines how the emergence of the Internet led inexorably to massive drops in advertising revenue that in turn led to cuts in reporting and a decline in quality journalism. Advertising was the “engine of newspaper profitability” while circulation revenue was not as important. Yet despite early hopes that newspapers could use digital ad revenues to boost their profitability and usher in a grand new era of journalism, the opposite came to pass.

So what caused the collapse of Internet advertising in the online editions of U.S. newspapers? As Tofel explains, in “about 2005, a number of phenomena, including higher broadband penetration, the ubiquity of search, the beginning of the rise of social media, the proliferation of blogs, and easier-to-use web publishing tools all combined to create an explosion in the quantity of pages on which web advertising could be placed” (p.103).

After the initial novelty of online advertising, during which impressions were valued and click through rates were high, revenue for online newspapers plummeted. At the same time, newspaper sites had massive quantities of unsold advertising space while print circulation rates dropped in the face of increased competition for readers’ attention. This, writes Tofel, “was when the newspaper business model broke for good” (p. 109).

Tofel paints a compelling picture of an industry in disarray during this period, with timid executive, often under the command of family-led ownership, afraid to tackle the unavoidable impacts of new technology. He highlights the large disconnect between the “East Coast” media elites and the “West Coast” technology upstarts.

One strong example of this was classified ads. He points out that several newspaper-owned career and classified ad sites actually beat the site Craigslist to the web in 1995, yet, despite their (relatively) vast resources and brand equity, could not compete with “a single geek working out of his apartment” (p. 194).  In less than 15 years, online advertising spending grew from almost nothing to more than all the ad spending in all the newspapers.

Tofel’s central argument points to a massive strategic error made by newspaper publishers – offering their content for free in their earliest online offerings, with an eye to capturing the then all-important “eyeballs.” (With the notable exception of The Wall Street Journal, which charged for access almost from the beginning.)

He traces that decision to the writings of Stewart Brand, a “hippie technologist” who hung out with LSD advocate Timothy Leary and was the creator of Whole Earth Catalog.  In his book about his time at MIT’s Media Lab (The Media Lab: Inventing the Future at MIT), Brand wrote that, “Information wants to be free because it has become so cheap to distribute, copy, and recombine – too cheap to meter. It also wants to be expensive because it can be immeasurably valuable to the recipient. That tension will not go away.”

Yet despite the nuance of Brand’s argument, over the following years the phrase “information wants to be free” assumed “totemic importance” in Silicon Valley and beyond, and Brand’s sophisticated argument was all but lost. Information wants to be free became the gospel for the digital era. The second half of his argument disappeared.

Embracing that gospel was a tragic mistake for newspapers, according to Tofel. He writes that “the newspaper business was led – led itself – into fundamental error, the error of giving away its content, what some have termed the ‘original sin’ of digital publishing” (p. 292).

He paints a future in which online newspapers can not only survive but prosper. He writes that, “the economic future of newspapers depends on their maintaining a near-monopoly on high-quality local news and on achieving a substantial level of circulation revenues, ideally online” (p. 311).

Or, as Brand himself once wrote, “People won’t pay for quality of information, because the valuing is retroactive, but they will pay for quality of source, because the constancy (reliability) of source makes value somewhat predictable” (P. 248).

As a journalist, Tofel places a high value on the role of journalism in our society. He notes that, “journalism retains its critical role in our society as no less than the essential enable of democratic self-government.” That is a valid argument, of course, but not entirely bullet proof. It speaks perhaps more to Tofel’s hope for journalism than any realistic future.

For instance, it assumes that “mainstream media” continues to speak truth to power. That isn’t always the case as we saw with the New York Times and what some might call its cheerleading for the Iraq War and supporting coverage of the alleged Iraqi “Weapons of Mass Destruction” which, as it turned out, never actually existed. Or even how the U.K.’s Guardian is waging a lonely battle exposing American spying. It seems unlikely that CNN or the Washington Post would have done something as explosively challenging to the status quo.

Tofel also does not address the role of non-traditional actors in enabling democratic self-government. How do the Occupy or Anonymous movement actually achieve some of the very noble intentions that Tofel assigns to the media? This goes un-discussed in his book.

Still, Tofel makes a valuable contribution to understanding how the newspaper business has irrevocably changed, and why it happened. His description of the “original sin” of digital publishing is borne out by the changing business models of today. With most large dailies moving from “information wants to be free” to some form of paywall system, newspapers are making a limited comeback, perhaps prefacing an evolution to something more durable, and still important to the effective functioning of our democracy.

References

Tofel, R. (2012). Why American Newspapers Gave Away The Future. (Kindle version). Retrieved from Amazon.com