Newspapers Struggle to Respond to Web Challenge

The newspaper business is bad and getting worse. The Web is stealing the industry's readers, advertisers, revenues and even its enthusiasm for the business. But as newspapers struggle to respond, lessons for other industries confronting disruptive technologies are emerging.

By C.G. Lynch
Thu, April 05, 2007

CIO

A clear, crisp winter morning in the South End of Boston. Beneath an overpass, at the crossroads of two of the city’s main highways, yellow-and-blue delivery trucks line the parking lot of The Boston Herald, the nation’s 43rd-largest newspaper, with a daily circulation of approximately 230,000 (150,000 on Sundays). Once a part of the Hearst publishing empire, the struggling paper was sold in 1982 to Rupert Murdoch’s News America Corp. for a mere $1 million. Murdoch promptly laid off nearly 200 employees and offered others buyouts. The media mogul introduced computers and Australian editors to the newsroom, and the paper offered prizes and giveaways to attract readers. In 1994, with the tabloid still struggling, Murdoch sold it to its publisher, Patrick J. Purcell, for between $15 million and $20 million. Today, inside the cluttered Herald newsroom, reporters and editors peck away at keyboards amid the crackle of police scanners. The carpeting is stained and threadbare, wires hang pendulously from the ceiling. The room is dotted with empty desks, in large part because the paper has laid off at least 25 percent of its writers and editors over the past couple of years. Memos, including an aging photocopy of how to properly fill out a time slip, are taped to pillars running down the middle of the room. Dismal as it may seem to an outsider, the scene is nothing new to the Herald, a paper that for years has run a distant second to its crosstown rival, the New York Times–owned Boston Globe, with its daily circulation of 414,000 (670,000 on Sundays).

But it doesn’t take a visit to the Herald’s run-down newsroom to understand how badly the newspaper industry has fared in recent years. Across the industry, ad revenue­, which is how newspapers make most of their money, grew by less than 3 percent in 2005 before flatlining in 2006, according to this year’s “State of the News Media” report by the Project for Excellence in Journalism. The Newspaper Association of America reported this past fall that circulation for the some 770 dailies in the United States dropped 2.8 percent in 2006. On Wall Street, newspaper companies took a pummeling, with stock prices typically falling by an average of 14 percent. In desperation, many newspapers have begun to merge with, or acquire, their competitors in an attempt to gain market share and leverage economies of scale. In March 2006, Knight Ridder, then America’s second-largest newspaper publisher behind Gannett, was bought by a smaller outfit, McClatchy. In New York, former General Electric CEO Jack Welch and some investors offered to purchase the Globe from the Times for between $500 million and $600 million. The Times, which had bought the previously family-owned Globe for $1.1 billion in 1993, rejected the offer. But just a few months later, in January 2007, the Times turned around and devalued the Globe and the Worcester Telegram & Gazette (another Times property) by more than $800 million.

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