What We Know About the Business of Digital Journalism

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The Story So Far: What We Know About the Business of Digital JournalismGiven how low online sales were at the time, Edmonds noted it would take 14years for digital revenue to catch up to that of print. As he wrote, these calculationsprovided “little cause for cheer.” He also noted “there isn’t any reason tobelieve any of these numbers will remain steady state over time.”His disclaimers were lost on many readers. At several conferences later thatyear, participants pointed to the study and cheered one of the presumptions inthe column—that digital revenue would grow by a third every year, as far as theeye could see.For a few years, it seemed as if this scenario might be realistic. Newspapers’online revenue grew by more than 30 percent in both 2005 and 2006. 2 Butgrowth slowed the next year, came to a halt during the recession and still hasn’tfully returned to what it was in 2007. Meanwhile, print revenue hasn’t grown at4 percent a year since 2005; indeed, newspapers’ print revenue in 2010 was lessthan half what it was in 2005.Fifteen years after most news organizations went online, it is clear that old mediabusiness models have been irrevocably disrupted and that the new models arefundamentally different from what they once were. What made traditional mediaso vulnerable to the Web? Or perhaps the better question is this: Why has digitaltechnology, which has been such a powerful force for transmitting news, not yetprovided the same energy for companies to maintain and increase profits?Mainstream news organizations had already started losing audience beforethe Internet became popular. Broadcast network news programs have beensliding steadily since 1980 and now reach slightly over 20 million viewers anight, down more than half in three decades. Newspapers began to experiencesignificant circulation declines decades ago. Total daily newspaper circulationhas fallen by 30 percent in 20 years, from 62.3 million in 1990 to 43.4 millionin 2010, as people found other sources, particularly local television news, to bean adequate substitute. 3Revenue, however, held steady or increased for mainstream news outlets, evenas audiences shrank. This was true in the early days of the Web, too, thanks in partto an advertising bubble spawned by the Internet boom.8
Columbia Journalism School | Tow Center for Digital JournalismTo begin to understand the disruptions of the digital transformation, it is importantto appreciate the circumstances that made the news business—whetherin broadcast, cable, magazines or newspapers—so profitable for so long. Thecommercial heyday that buoyed the fortunes of American newsrooms in the lasthalf-century had its roots in changes that began much earlier.Through the 19th Century, newspapers benefited from economic and demographicshifts that accompanied industrialization—in particular, rapid urbanizationand the attendant rise of the big-city retail economy. The growing advertisingmarket encouraged urban publishers, who had begun to loosen their ties topolitical parties and to think of themselves as independent businesspeople. In theprocess, they realized they could make most of their money from local retailers,rather than from people in the street paying a few pennies to buy their papers.Historians of journalism argue that these economic and political shifts underpinnedan increasingly professionalized and objective journalism that became thenorm in the 1920s and 1930s. The move toward general-interest, advertisingsupportednewspapers aimed at broad audiences also drove a cycle of concentrationand consolidation that would continue for decades.With audiences and ad revenue growing even as competitors disappeared,newsrooms and newspapers swelled in size. An analysis of major metropolitandailies by the American Journalism Review found that between 1965 and 1999,eight of the 10 newspapers studied saw at least one competitor disappear. 4 Duringthe same period, on average, each of the surviving newspapers doubled theamount of news it produced. Even as new or expanded sections—sports, business,lifestyle—claimed a larger share of each edition, the total coverage of local,national and international news continued to increase.The trend of increasing consolidation in a growing advertising market helpedto compensate for declining readership. By the early 1980s, most U.S. cities hadjust one daily newspaper. Or, in markets with two papers, one was clearly dominantand the other was kept afloat by favorable terms negotiated in joint operatingagreements that Congress had created to preserve local journalistic competition.Radio and television newsrooms enjoyed similar access to a lucrativeNews from Everywhere: The Economics of Digital Journalism 9
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