Throughout history, newspapers have had to adapt to constantly changing business conditions. University of North Carolina Media Researcher and History Instructor Erinn Whitaker examines how innovation and disruption drive news organizations to develop new business models. This excerpt is from an article that will be published in the SAGE International Encyclopedia of Mass Media and Society, which will serve as a reference for undergraduate and graduate students.
Over the past 1,300 years newspapers have morphed from government pronouncements handwritten on silk in China to digital-only sites that churn out news updates, blogs, listicles, podcasts, videos, and investigative pieces 24 hours a day, seven days a week. Even as newspaper have chronicled some of the most memorable events that defined the course of human history, a series of innovations and external shocks have determined the economics of the industry, the choices publishers made to adjust, and the audiences who read these accounts.
Similarly, the ebb and flow of macro-economic cycles, as well as the supply of, and demand for, materials and talent have influenced profitability. In the first decades of the 21st century, as the industry grapples with dramatically shifting economic models, an existential question hangs in the air: Can newspapers survive in some form—whether print, digital or broadcast—in the digital age? Historically, the core mission of newspapers in democracies and capitalist societies around the world has been to inform a nation’s citizens so they can make better decisions about how they vote or spend their money. In the 21st century, even though national outlets, such as cable networks and digital sites, offer an abundance of news and opinion, local newspapers are still the prime, if not sole, source of credible news and information about what is happening in one’s own community. Yet, newspapers are disappearing at a rapid rate in countries throughout the Western world, and newsroom staffs at many of the surviving papers have been drastically reduced. Therefore, new and different business models are needed if newspapers are to survive and thrive, in whatever form, in the 21st century.
Historians typically divide the history of technology and newspapers into three eras: the preindustrial period, when goods were essentially handmade; the industrial period, with its emphasis on the mass production and distribution of machine-made products; and the postindustrial world, in which economic activity shifted away from manufacturing toward services.
In the preindustrial period, the Romans produced government bulletins carved in metal or stone and displayed them in public places. In China, around the eighth century, government officials began disseminating newssheets among court officials that were handwritten on silk. Scholars trace the first reference to a privately published newssheet to Beijing in the 1580s.
Although newspapers got their start in China, it was Europe that spearheaded changes in printing technology. Around 1450, German blacksmith and engraver Johannes Gutenberg combined four processes to revolutionize the publishing industry. He developed a hand mold to cast letters and fitted them into a frame to imprint words on a page. He also adjusted the viscosity of ink so that it bonded more firmly with paper and was not destroyed by the metal type. Most famously, Gutenberg invented a new press: one with a screw that could be tightened through a wooden handle and transfer impressions onto paper.
Gutenberg’s inventions changed the industry from one dependent on scribes and aimed at highly educated elites to one capable of efficient production of printed material that could be widely circulated among all who were literate. During this time, pamphlets evolved into newspapers, with the first European newspaper published in Strasbourg in 1605. Soon after, the first English language periodical appeared in London in the 1620s and the first daily newspaper, the British Daily Courant, surfaced in 1702.
Industrial Revolution’s Transformation of the Newspaper Industry
The newspaper industry remained virtually unchanged over the next 200 years until a wave of technological changes, during what is known as the Industrial Revolution, reshaped existing business models. Before the 1800s, newspaper publishers were limited in the number of papers they could produce by the labor-intensive process involved in printing a newspaper on a flat-bed press, essentially unchanged from the Gutenberg era. In addition, with very few long-distance transportation options available, they were limited to distributing their newspaper to a small geographic area. Newspaper publishers often produced as few as 100 copies, and made their money almost exclusively through subscriptions. Beginning in 1712, a stamp tax was levied by the British government on newspaper publishers. The Stamp Act left an imprint on the layout of newspapers. Publishers made their pages as large as possible because they had to pay a tax per sheet used.
The technological changes in the 1800s came in successive waves, as breakthroughs in technology often do. First, a paper-making device dramatically drove down the cost of paper, which previously had been made from rags churned by hand. Then, in 1814, the London Times became the first newspaper to use a steam-powered cylinder press. The hand press allowed an experienced printer to make roughly 250 impressions per hour, but by 1846 the Hoe Tye Revolving Machine enabled newsmakers to print thousands of copies an hour. Moreover, the construction of railroads and canals and improvements to the postal service decreased the cost of distribution and improved a newspaper’s ability to reach residents in far-flung areas on a year-round basis. As a result, The Times of London became Britain’s first national newspaper. At the same time, mass migrations of people into cities to work in industrial factories expanded the pool of prospective readers.
Previously, one or two people could do all of the necessary tasks involved in producing and distributing a newspaper, but by the 1850s large U.S. and European dailies employed up to 100 people. During the 19th century, a clear division of labor emerged between the journalists (those who wrote and edited stories) and the craftsmen on the business side (those who set type, ran the printing presses, sold advertisements, and distributed the paper).
The steam-powered presses were much more expensive that the hand-operated types. To publish a newspaper, one first had to accumulate enough money to buy a printing press, and then hire the dozens of people needed to create the content, as well as print and distribute it. These were fixed costs. Other costs, which consisted of newsprint and ink, as well distribution, varied according to how many papers were sold. Based on this model, the first copy of a newspaper published was very expensive since it carried all the fixed costs required to produce an edition of the paper. However, the marginal costs of printing and distributing additional papers fell dramatically since fixed costs were spread over more and more copies.
The 1830s ushered in the era of the “penny press,” as newspapers sought to take advantage of these economies of scale. Newspapers dropped the cost of a single copy from six cents to one or two cents and made up the difference in revenue by charging businesses to advertise their goods and services to their audience. Instead of the oversized sheets used by New York’s established dailies, which measured up to 3 feet by 2 feet, the penny press papers were typically smaller—12 inches by 18 inches—and newsboys hawked them on the street. These lower prices drew more readers, which brought down the marginal cost of each copy, and publishers simultaneously increased the price they charged advertisers to reach this growing audience. This created a business model for newspapers in many countries that has held until recently, whereby advertisers—not readers—provided newspapers with the majority of their revenues and profits.
In addition, developments such as the telegraph cut the cost of producing content while offering readers more timely and relevant news. In the 1850s, during the Crimean War, The Times of London became one of the first modern-day papers to dispatch a war correspondent. Editors and publishers also began pooling journalistic resources with other news organizations to create cooperatives and news services, such as the Agency France Press, established in 1835, and the Associated Press, in 1846.
By the second half of the century, new urban dwellers had access to inexpensive, up-to-date, multipage dailies, which had circulations in the tens of thousands. The newspaper industry became a much more profitable business with this new business model. In Great Britain, the Manchester Guardian and The Daily Telegraph rose to journalistic prominence, alongside The Times. While The Times maintained close ties to the ruling elite, the Telegraph aimed its content at an emerging middle class and by 1890 had a circulation of 300,000. In 1896, Lloyd’s Weekly, a Sunday paper, became the first publication to sell 1 million copies.
In the United States, the first generation of media barons, including William Randolph Hearst and Joseph Pulitzer, gained notoriety for the “yellow journalism” of their large city papers. These papers were so named because the newsprint was yellow in color and often included sensationalist stories, comics, team sports, reduced coverage of politics, and a new emphasis on crime.
In contrast to the yellow journalism practiced by Hearst and Pulitzer, many newspapers in the United States became less partisan and less sensational. While these publishers had local political influence, they did not want to alienate potential subscribers with partisan content. So increasingly, front page news stories became more objective, while opinion writing and columns gravitated to the editorial pages. Adolph Ochs, who purchased The New York Times in 1896, declared that his paper would publish “All the News That’s Fit to Print.” Ochs turned around the fate of cash-strapped The New York Times, reducing its price from three cents to one cent and ramping up its readership from fewer than 10,000 at the time of his purchase to nearly 1 million by the 1920s.
Newspapers in the 1860s and 1870s mostly included editorials, reproduced speeches, excerpts from novels and poetry and a few local ads. By the early 1900s, newspapers had greatly expanded their content and were using multicolumn headlines to attract passers-by to the paper. The growing importance of advertising categories such as food, drink, fuel, and tobacco spurred many newspaper publishers to focus on providing content that would increase circulation among the types of readers who would buy these products. Women, who had previously been ignored, were given advice columns in newspapers, where they could learn about fashion, household maintenance, and family issues. In the Western world, journalism had evolved into a profession. The first journalism school was established in France at the turn of the century and the University of Missouri opened one in the United States soon after.
In many ways, the late 19th and early 20th century was a golden age for newspapers in Europe and the United States, as content expanded, circulation increased exponentially and the number of newspapers reached historic levels. By 1914, there were 80 daily newspapers in Paris alone, including Le Figaro and Le Temps. By 1920, there were 130 newspapers for every 100 households in the United States, and 40% of all cities and towns in the country had two or more competing papers.
Changes During the Electronic Era
The emergence of radio in the first half of the 20th century and television in the second half effectively ended the dominance of newspapers in the United States and Europe. Both radio and television, with their national network of regional and locally affiliated stations, quickly reached a much larger audience over the airwaves than the largest city newspapers. Between 1930 and 1940, the number of U.S. households with at least one radio doubled from 40% to more than 80% as listeners tuned into expanding programing that included newscasts and entertainment shows. Television was embraced at an even quicker rate. By 1960, 90% of households in the United States had a television, up from less than ten percent in 1950.
Many European countries adopted a nonprofit, government-supported model for their broadcasting network, funded by a fee charged to all households. In contrast, in the United States, since listeners could receive the over-the-air signal for free, a for-profit model broadcast prevailed. Therefore, the broadcast outlets in the United States relied almost exclusively on the revenue from advertisers who wanted to reach the mass audiences these new mediums attracted. As newspaper readers turned increasingly to radio and then television for breaking news coverage, advertisers reallocated dollars that had previously gone to newspapers. Economists call this a zero sum game in which one medium wins at the other’s expense.
Beginning in the 1920s, newspaper owners began to acquire newspapers in other markets, reasoning they could better compete with radio for advertisers if they owned multiple papers in multiple cities. Media moguls, such as E.W. Scripps and Hearst, built the first big privately owned chains of more than 20 papers. Although there was concern that these new chains might be able to dictate rates to advertisers, uneasiness faded as first radio and then television attracted mass audiences that surpassed the circulation of these chains. By 1960, almost one third of newspapers were owned by a chain. The newspaper barons of the late 19th century, such as Hearst and Pulitzer, were replaced by professional managers who held most of the executive positions in these chains. However, in contrast to many other corporations, the newspaper business continued to primarily be a family-centered enterprise. The large chains maintained the names of their founders (e.g., Gannett, Lee, Knight Ridder, Dow Jones) or of their flagship paper (e.g., The New York Times, The Washington Post).
In the years following World War II, as television became ubiquitous, hundreds of papers in communities across the country ceased publications. Papers published and distributed in the afternoon were especially vulnerable as residents moved to the suburbs and commuter patterns changed. In an effort to preserve diverse editorial viewpoints in major cities, the U.S. Department of Justice often approved joint operating agreements allowing for two competing papers to merge business operations, while maintaining separate newsrooms. However, in small and mid-sized markets only one newspaper usually survived. Ironically, as newspapers merged or ceased to exist, circulation of the surviving newspaper often increased. In 1984, U.S daily circulation peaked at just over 60 million, according to the Newspaper Association of American.
While circulation revenue for newspapers increased slightly over the latter half of the 20th century as surviving newspapers raised subscription prices, publishers increasingly relied on advertising, which accounted for the majority of total revenue. Unable to compete against television and radio for national advertising accounts, newspapers focused on attracting local retail and classified advertisers. The sole surviving newspaper in a community became a de facto monopoly, the only source of news for their communities and the only viable advertising option for local businesses. With its low production costs compared to retail advertising, the explosive growth of classified advertising propelled the profits of the surviving newspapers in small and mid-sized communities to historic highs. Many newspapers routinely posted annual profit margins of 20% to 40%.
The chains began competing with one another to acquire these reliably profitable papers. A 2016 study by the University of North Carolina at Chapel Hill noted that by 2000, chains owned more than 90% of U.S. newspapers. Some chains—such as Gannett, Knight-Ridder and Dow Jones—raised capital by selling stock. The publicly traded chains, which tended to be much larger than privately held ones, had to be attentive to their shareholders. This raised concerns that newspaper corporations would put shareholder expectations ahead of substantive journalism and their civic responsibilities to the communities where their papers were located. To allay such concerns, some chains—such as Knight Ridder and The New York Times Company—invested in their newsrooms, hiring journalists who produced in-depth, hard-hitting, prize-winning foreign, national and investigative pieces that exposed problems that needed to be addressed. It was the sort of long-form journalism that could not be easily duplicated by broadcast reporters, who were often limited by the air time allotted to news. This golden age of investigative journalism in the United States was aided by major court decisions—including ones related to libel suits—that made it easier for publishers to prevail when they were sued for their hard-hitting journalism.
As the newspaper industry was contracting in the United States, many newspapers in European and Asian democracies were experiencing a rebirth. During World War II, newspapers in countries under Japanese and Nazi control had endured censorship and become mouthpieces for the government. In the post-war years, newly established publications, such as Le Monde in France and Die Welt in West Berlin, achieved national and international journalistic reputations. In Japan, Asahi Shimbun and Yomiuri Shinbun, both of which had been established in the 19th century, gained millions of subscribers in the latter half of the 20th century and became the two most widely read papers in the world, with a total of almost 20 million copies in circulation between them.
New media barons and new media corporations emerged. The Jain family, owners of The Times of India, because a media empire to be reckoned with throughout Asia by founding other papers in India and establishing numerous local editions. Across the India Ocean, in Australia, Rupert Murdoch inherited two Australian newspapers in the 1950s, and through a series of acquisitions over the next four decades built one of the world’s largest media corporations with major newspaper holdings in the United States and United Kingdom, including The Times of London, a major studio and a major television network.
Disruption From the Internet
By 2000, circulation in the United States was already declining, but newspaper advertising revenues, which had been climbing steadily since 1950, peaked at $60 billion. However, only 10 years later, advertising revenues had sunk below 1950’s level and continued to decline throughout the second decade of the 21st century.
The Internet attacked the 20th century business model of newspapers in Europe and the United States on both the cost and revenue side. When the Internet was opened to commercial use in the 1990s, many newspaper executives failed to foresee what a disruptive force it could be. Executives at a number of papers began innovating and offering free online content in the mid-1990s, but they operated under the mistaken premise that their websites would be supported by digital advertising revenue. Portals in the early 1990s—followed by e-commerce sites, search engines and social networks—lured more and more people and advertisers online and away from their televisions and newspapers. According to the Pew Research Center, since 2011 more U.S. residents access digital sites for their news online than print newspapers.
The rise of sites such as Craigslist, Monster and Zillow wiped out the market for newspaper classifieds. To make matter worse, in the first decade of 2000, tech giants Google and Facebook commandeered most of the retail advertising dollars that newspapers still relied on. By 2017, a study by e-Marketer estimated that the duopoly of Google and Facebook received about 60% of all digital advertising dollars in the United States and were responsible for 99% of ad revenue growth in 2016. This left legacy media, such as television and newspapers, as well as start-up digital sites, such as Buzzfeed and Vice, fighting over the remaining digital dollars.
The Great Recession of 2008 accelerated the downward spiral of the newspaper industry, as profits plunged into the single digits and forced many chains into bankruptcy. Private equity firms and hedge funds rushed in to gobble up hundreds of distressed newspapers in hundreds of small and mid-sized communities in the United States. These new newspaper chains adopted corporate-sounding names—such a New Media/Gatehouse and Digital First—to differentiate themselves from the iconic newspaper chains of the 20th century, with family names, such Knight Ridder and McClatchy. In contrast to previous eras, few in the top ranks had journalistic experience and they primarily viewed newspapers as investments. The new media barons tended to follow a standard operating procedure, imitated by many of the legacy 20th century chains, that included aggressive cost cutting, advertiser-friendly policies, and the sale or shuttering of under-performing newspapers.
At the most extreme, these strategies led to the closure of hundreds of community newspapers in the United States and the rise of “news deserts” across vast swaths of the country. Researchers at the University of North Carolina at Chapel Hill estimate that between 2004 and 2018, the United States lost about one in five newspapers, including more than 60 dailies and 1,700 weeklies. Newsroom employment was cut in half between 2008 and 2018, with many of the surviving 7,100 newspapers in the country became shells of their former selves—“ghost newspapers.” Print circulation of newspapers in the United States declined by almost half between 2004 and 2018, leaving only 56 papers in 2019 that sold more than 100,000 copies daily. At the same time the size of national chains increased exponentially, with the 10 largest chains in the country owning between 70 and 450 newspapers in 2019.
The newspaper trends in Europe and Canada have largely mirrored those in the United States. Daily household penetration of print newspapers in Europe dropped from 40% in 2012 to less than 30% in 2016 as online outlets became increasingly ubiquitous, according to data from the site statista. Canada has lost one in five newspapers since 2004, roughly equal to the rate in the United States.
In Asia, circulation is declining in mature markets, such as Japan, but as at a slower rate than in Europe and the United States. Household penetration in Japan fell below 100% in 2013, for the first time since the 1950s. Since the beginning of the 21st century, circulation of Japan’s newspapers, which have been slow to develop digital sites since print remains profitable, has fallen 20%, from roughly 50 million to 40 million. Only newspapers in India, the second largest newspaper market in the world, have bucked the trend. Circulation of its 8,000 papers jumped from 40 million copies in 2006 to more than 60 million in 2016.
In 2018, there were more than 200 million unique visitors to European websites each month, with the Daily Mail and the Guardian attracting the largest audiences: 20 million and 16 million, respectively. Three other sites attracted more 10 million each month: the Hurriyet and Milliyet in Turkey and the German newspaper, Bild. In the United States most of the country’s 7,100 newspapers have companion websites, which attract a total of around 11 million visitors monthly.
Yet, in 2019, despite the large online audiences that read European and U.S. newspapers, the Guardian Media Group in Great Britain, which also owns the Observer, and The New York Times, which had 3 million digital subscribers (in addition to its 1 million print circulation), were among the handful of newspapers in the world that had managed to make substantial progress in transitioning to a digital business model. For the first time in its history, the Guardian company earned more of its money in 2018 from digital operations than print, while The New York Times reported that subscriber revenue exceeded revenue from print and digital advertisers.
The business model that sustained journalism for two centuries has been demolished in less than two decades. In the 20th century, one business model prevailed, in which most newspapers relied on advertisers for the majority of their income. All this leaves unresolved the future of thousands of other newspapers around the world as they struggle to find their business footing in this new world. In the 21st century, it seems clear that there will be, not one business model, but many—and those that enable newspapers to survive and thrive will be tied to the specific needs of the readers and businesses in the communities they serve. Some media organizations may attempt to get their subscribers to pay more, some may opt for a nonprofit model, but all need to consider how they are uniquely poised to address their readers’ and advertisers’ shifting media habits.
Based on the experience of other industries that have confronted similar disruptive innovations, successful newspapers will have in place a strategy for transforming at least one third of their business models every five years. According to research at the University of North Carolina, this will involve investing in their human capital—their journalism and sales efforts— while constantly making tough decisions about where to trim costs. Successful publishers will establish five-year goals for costs and revenue, and then prioritize those initiatives most likely to lead long-term profitability and sustainability, even if it means lower profits in the short term.
Even so, many newspapers—especially those in economically struggling communities—may not survive. Therefore, Penelope Muse Abernathy concludes in The Expanding News Desert, there is compelling need for philanthropic organizations, government officials and concerned citizens to work together to identify communities at risk of becoming news deserts and then get the funding to support both legacy news organizations and digital start-ups serving those communities during this transition period.
The report concludes: Our sense of community and our trust in democracy at all levels suffer when journalism is lost or diminished. . . . We need to be sure that whatever replaces the 20th century version of newspapers serves the same community-building functions and . . . (that) we empower journalistic entrepreneurs to revive (newspapers), in whatever form – print, broadcast or digital.