Why Print Newspapers Are Nearing Extinction

September 13, 2011

Inspiration for a blog can strike anywhere and at any time. Recently, it struck me as I was driving past a dilapidated parking lot in the shadow of I-93 in Boston’s South End, where a sea of Boston Herald delivery trucks are stored when they’re not in use. While I’d long known the print newspaper industry was in trouble, I’d always thought there would be enough of a niche market to necessitate its existence at some reduced level. That parking lot convinced me that there won’t be, and that the end of print newspapers may come sooner than most people think.

Before I explain the relevance of this parking lot, allow me to summarize what most people who read blogs already know: print media revenues are deeply troubled. Generally, a newspaper’s sales come from two sources, both of which are currently in decline:

Subscription revenues are steadily bleeding as readers continue to shift to Google, Twitter, and Facebook for their news. The reasons are deeper than the obvious fact that more people are computer-literate than ever before. It’s really about readers’ priorities. The Herald, Globe, and New York Times newsrooms have experienced, talented journalists, but they can’t be all places at all times. Readers would rather get their news from a grammatically appalling Tweet four seconds after it happens than from a professionally polished article that breaks a half hour later.

Advertising revenues are also in steep decline, independent of the loss of readers, as companies increasingly prefer the deep analytics and instant feedback offered by the Internet. For example, Monetate, one of OpenView’s portfolio companies, allows you to run a controlled experiment on your website to see how visitors respond to different configurations, promotions, and displays. When matched head-to-head with this type of analytical feedback, print advertising doesn’t stand a chance.

Which brings me back to the parking lot full of delivery trucks. For the Herald, their top line is changing at a breakneck speed only possible when the internet is involved. By contrast, their costs are as immobile as a parked truck. The company purchased or leased the real estate and built the adjacent warehouse. They have to buy, fuel, maintain, and insure the trucks and hire drivers. As their subscribership continues to decrease, the trucks will be increasingly empty, but they’ll be unable to scale down any of these expenses without compromising the timeliness or frequency of their distribution, which would further disadvantage their product.

Many declining industries are able to gradually scale down and remain alive as niche markets. For proof, take the Vinyl record store down the street from me, a technology which, by my count, has been made obsolete four or five times in the past 15 years. But the economics of distributing physical newspapers, every morning, across an entire city, make it a deeply inflexible model and a good candidate for a swift and gruesome end. When the business model hits the red, we could see it vanish virtually overnight.

I’m not a fatalist when it comes to the rise and fall of industries. Once upon a time, Boston’s economy was based largely on Whaling. Today, much of the same waterfront property that once supported that extinct industry is now home to Boston’s financial community, including the venture capital firm at which I’m presently employed. The death of one industry made room, both figuratively and literally, for the emergence of another. So too will the death of print media bring a flood of new readership and advertising dollars to the Internet, and with it massive opportunities for companies that can use these dollars most effectively.

If the process happens as abruptly as I think it will, we’re going to see a bunch of formerly unknown companies make a ton of money in the next decade by embracing this change and getting out ahead of it. And if you’re thinking that we’ve already missed the boat on this transition, take a walk down to the Herald’s distribution facility in the South End. Imagine those delivery trucks filled with newspapers every morning, and think about how many readers that one newspaper alone has left to lose.

Behavioral Data Analyst

Nick is a Behavioral Data Analyst at <a href="https://www.betterment.com/">Betterment</a>. Previously he analyzed OpenView portfolio companies and their target markets to help them focus on opportunities for profitable growth.