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Stop the Presses

Stop the Presses

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

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

Reader ROI

  • Why newspapers were slow to respond to the Internet
  • How some papers are leveraging new technology
  • Why business models are so hard to change

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 US'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 Corporation for a mere $US1 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.

Closing the gap between the revenue generated by the old model and that produced by the new is one of the greatest challenges for businesses adapting to disruptive technologies

Jennifer Carroll, — new media VP, Gannett

In 1994, with the tabloid still struggling, Murdoch sold it to its publisher, Patrick J Purcell, for between $US15 million and $US20 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 cross-town 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 northern autumn that circulation for the some 770 dailies in the United States dropped 2.8 percent in 2006. On Wall Street, newspaper companies took a pummelling, 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 $US500 million and $US600 million.

The Times, which had bought the previously family-owned Globe for $US1.1 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 $US800 million.

What's gone so horribly wrong with the newspaper business?

Many believe the answer is simple, profound and inescapable: the Web.

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