Dinosaur Newspapers Still Don't Get It

The dying newspaper industry is digging itself a deeper grave, pinning its fading hopes for survival on Apple's IPad. Many, like the dinosaur New York Times, are betting their future on the new gadget. However, like many maneuvers in recent decades, it won't save the industry from burial in the cemetery for businesses that failed to see the future.

There is no question the industry could use a savior. Readership has sunk to new lows. Advertising revenues have tanked. Layoffs are rampant. Many in the industry seem to believe once the economy improves, nirvana will arrive in the form of robust advertising revenues. Industry execs are in denial.

In a sign of how out of touch the execs are with reality, the industry has been practically giddy about what the IPad can do to revitalize their sagging fortunes. But a careful examination of their business model reveals some head-shaking assumptions that are simply out of touch with reality.

First and foremost, the industry has mis-analyzed its problems. Sure, the economy hasn't helped, but newspapers were fading before the recession. Once the economy improves, newspaper will see an uptick in advertising, but nothing like the heyday years. Newspapers just have lost too much ground to the Internet as an advertising medium that delivers not only eyeballs, but is more targeted. The economy's improvement will not change that fact.

The other trend working against newspapers is that more people are turning to the Internet for their news. If that wasn't bad enough, most news is free for the viewing. People have become used to getting their news whenever they want at no cost. Newspapers with their rigid deadlines cannot compete with that.

So what has been the newspaper industry's solution? Nearly every single news outlet has decided it will rush to the Internet with the same hackneyed newspaper format and charge for viewership. With the IPad, they will get a larger format, which offers opportunities for full color advertising. However, the industry isn't willing to change its content or format or business model. This is a prescription for utter failure.

Here are some points the industry should be addressing:

1. Newspapers must change their entire business model. One possible solution is to adopt the one used in the wireless industry. The carriers subsidize the phone in exchange for a contract that ties the customers for a defined period of time, so it can recoup the subsidy. The newspaper industry could offer a subsidized IPad or other reader device along with a subscription at a price point significantly below its printed newsstand cost. Expecting customers to buy their own media devices and then be willing to pay today's newsstand prices for the same content is unrealistic.

2. With so much free content on the Internet, why do newspapers expect consumers will now pay? It reminds me of what happened in the music industry, which fought tooth and nail to save the CD when everyone was downloading songs on the Internet. Finally, the industry came to its senses and allowed its music to be sold at bargain basement prices on the Internet. There was no way to save the CD price model. Newspapers must deliver more value than they do today, which means not only a lower price point, but richer, targeted content. They cannot continue dual operations--one print and the other on the Internet--and live another 10 years. Unless the industry kills off print, it will drive itself to bankruptcy. The industry argues: but what about those who still want print versions? Give them the option of owning a industry-subsidized reader, described above.

3. Newspapers are ruled today by print-heads. All they know is cranking up the presses and turning out news they believe people want. Consumers no longer want the industry to dictate the news they receive. That's why readership has dipped. The Internet has freed consumers to search for the news they want. What a novel concept! If newspapers want to remain viable, the industry needs to overhaul what "news" means. As newspapers flee to the Internet, the industry should give consumers the tools to design their own content. Let readers decide if they want sports or international news or social commentary or whatever. Newspapers can use computing power to deliver individually edited news to each subscriber. This will allow the industry to build a direct relationship with each customer. In addition, the industry could give consumers the option of receiving alerts on subjects or news they want. Putting a version of today's printed newspaper on the Internet is a loser. But it is all the print-headed execs know.

4. Newspapers have lost advertising revenue because it is not a targeted medium. Ads that might only appeal to high-income subscribers are right next to those aimed at cost-conscious consumers. The Internet not only offers the ability to target, but it has better measurement tools to let advertisers know their investment delivers consumers. Once newspapers adopt the Internet model, the industry needs to offer improved value for advertisers, using the computing tools available do deliver targeted demographics. Additionally, the industry cannot just run the same print version of an ad on the Internet. Ads must include video, for example, to take advantage of the medium.

I don't pretend to have all the answers to the industry's problems. However, I am certain of one thing. Without sweeping changes in their business model, newspapers will go the way of the dinosaur.