How We Got Here and How We Get Out of Here

Journalism isn't in jeopardy; it's just in another transition to a new and better place. And as long as the public puts a premium on quality information and analysis -- and the public always will -- journalism will thrive.
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Kenneth Lerer delivered the following speech at the Columbia Journalism School Annual New Media Lecture Series on Thursday, April 23, 2009 This is the end of my year at Columbia and I want to really thank you for having me. I've had a totally terrific time. I learned a ton from Sree throughout this year, so thank you Sree, as well as from the students who came to the lectures.

I sat in on one of Michael Shapiro's classes one day last Fall, where we brainstormed ideas for Brooklyn Ink. (By the way, a site that I think could be a real business.) And I remember one of the students asking me, with all the press about newspapers and magazines going out of business, if I thought there would still be a job available for her by the time she graduated. I assured her there would be, that yes the business of journalism was certainly in a state of flux, but that didn't mean she would have nowhere to go. But her question hit home and I thought of my own two children, and how hard it is and how anxiety-provoking it can be looking for a job.

Since that class, it seems that I have had that same conversation with different students everyday I've been on campus. So I thought I'd talk a little about the state of print journalism today, and how we got here and how are we going to get out of here. And within that discussion there may even be some ideas on where to find the best jobs.

To underscore the importance of this issue, just a few days ago, as you know, the Pulitzer prizes were awarded and the New York Times won 5, including one for best investigative reporting and one for breaking news reporting. Few things are more important in the world of journalism, than to assure that the New York Times and other great institutions not only survive, but also flourish... so they can keep producing great, quality news. There is no reason why they can't succeed. They do not have to compromise their journalism even as their business model evolves inevitably to digital.

I want to make one thing clear. Anyone who whispers, or says out loud, that the future of journalism is in doubt, could not be more wrong. I'm really excited and optimistic about its future. Here's why, in short: there are more readers of news than ever before and that number is growing every year... we've only just begun to explore the countless areas where news will be expanded and democratized online... there is and will be more and more content to choose from and more ways to choose it... we can access almost limitless commentary and expert analysis, within minutes of important events... journalists can reach unlimited readers, all around the world, and they can engage and debate with no technological barrier. No, journalism isn't in jeopardy; it's just in another transition to a new and better place. And as long as the public puts a premium on quality information and analysis -- and the public always will -- journalism will survive and thrive.

A lot of what we're seeing online today is actually a return, full circle, to the way things were when American newspapers began; a mixture of advocacy and investigative in-your-face journalism. There is a long and distinguished history of such newspapers -- from the papers that were fiercely loyal to Jefferson or Hamilton, to the abolitionist broadsheets, to the activist newspapers at the turn of the century. As my partner Arianna Huffington says, the mission of journalism has always been "truth-seeking, not striking some fictitious balance between two sides." And anyway, who can doubt that it's always been important to give consumers what they want.

The truth is, the delivery system is changing. But there are aspects of journalism that have remained constant over time. That said; it's impossible to ignore the transition we're in today. You can't pick up a newspaper, or read a blog, without finding a story about the mounting troubles that have overtaken the print world. (And by the way, not just the print world has been affected. We're all very familiar with the sweeping changes that are reshaping the broadcast news business. But today I'll stay focused on print and on newspapers more specifically.

And while no one knows what the future will look like exactly, I'm confident that within a few years, tops, the news landscape will look fundamentally different from what it looks like today, with many new players, with some new leaders, but still totally fulfilling its vital purpose.

The truth is that the market changes we are now seeing have been inevitable for years -- and very obvious. But the financial crisis of the last year has greatly accelerated the scope and pace of change and is threatening the survival of American institutions that have outlasted Panics, Depressions, and both World Wars... The Rocky Mountain News and the Seattle Post Intelligencer -- both founded during Abraham Lincoln's lifetime -- folded this year. The Tribune Company, which owns The Chicago Tribune, The Los Angeles Times, and five other daily papers, declared bankruptcy last December. And early this month, The New York Times threatened to close The Boston Globe -- one of the defining papers in America -- if management can't get union concessions.

And even papers that seem safe for now have instituted massive spending cuts. Printed dailies are becoming slimmer, and so are the staffs that create them. In a belated, almost desperate effort to adapt, publishers everywhere are trimming costs and closing production plants. Meanwhile, Internet news sources -- including some of the online versions of the papers themselves -- continue to gain readers while opening real new pathways of information.

Not surprisingly, we're now in the midst of an industry-wide debate over what all this means for the future of news. Virtually everyone with a stake in journalism has weighed in. Some fear that journalism will vanish if papers no longer hit the doorstep. Others say that the delivery medium is meaningless; they don't care if news is printed, or not, as long as quality content remains. But the future of journalism is not dependent upon the future of newspapers and as all this is debated back and forth that's very important to remember.

The news business now faces real practical questions, such as how to pay for digital content and how to preserve standards online. But beyond these logistical challenges, we have to ask whether printed newspapers can remain relevant, or whether they're becoming anachronisms like paper checks and fax machines. And if digital news is the future, how much of the old system can we -- or should we -- preserve?

There are no perfect answers to these questions and there are very difficult choices to be made. But at this point we have to see the world as it is and not kid ourselves. So before we deal with these questions: how did we get to this point? Figuring out how we got here may help us get out of here.

It would be easy for traditional newspapers to blame their present distress on the economic turbulence of the last nine months and some are doing just that. But that would be wrong. The changes that have been moving across the business for over a decade are far too big for that. We need to look beyond the current headlines -- to the time before the economic downturn, before the housing bubble, before Google, before Twitter, before George W. Bush.

After all, the Internet hasn't been lurking under our radar all these years; it's been exploding all around us. There were clear and present danger signs that presaged this time of change.

By the time Craigslist appeared in 1995, AOL and Internet Explorer had already made Internet usage common and easy. Sure it was slow, and you had to pay by the minute. But the Internet had an undeniable and unstoppable presence by the mid-1990s. It was powerful enough that in 1998 the Lewinsky scandal broke online, prompting a CNN reporter to complain that "in the Internet Age... a 30-year-old former CBS gift-shop clerk ... can wield nearly as much power as.... the editor of The New York Times."

While he didn't mean this as a compliment, his comment did underscore a too-often ignored truth about Internet news, one that has been proven many times since. Web reporting is not a sideshow to print journalism. It breaks and creates -- important news.

This was a decade ago: one year since Google, two years since Slate. But the Internet's potential was already clear. By this time we were reading more and more about the growing blog phenomenon. Newspaper circulation began a downward trend that hasn't stopped since. The pieces may not have come together yet, but they were surely lining up.

As new technologies appeared, it was never a question of if they would evolve, but when. Once we had the laptop, it was only a matter of time until we had the BlackBerry, then the Kindle. Wi-Fi got better; computers got faster; the Internet kept growing. News blogs like Andrew Sullivan's Daily Dish built large and loyal followings. Aggregators like Google News let readers find stories from across the web and not just in the major outlets. Sites like YouTube let people get involved and Facebook and MySpace led the industry in building huge online communities.

This all happened over the last ten years. At the time, it wasn't totally obvious that these developments would change the news business forever, but it was clearly where the consumer was going -- and of course they did go there in huge numbers. Newspapers made token attempts to adapt, but they never reformed their business models in the transformative way that would have been required for the inevitable shift online.

So why didn't newspapers see the signs? Why didn't they foresee or react to what was happening when their next generation of readers, including their own children, became so plugged into the Internet? Even if they couldn't envision the exact shape of tomorrow, it was clear that it wouldn't be a repeat of yesterday. It was obvious that the old assumptions wouldn't hold for much longer.

Part of the problem was that these assumptions were embedded into huge corporate structures that weren't built for sharp turns. Years of media consolidation created a handful of conglomerates that now control enormous swaths of the media market. Some, like Disney, G.E., Viacom and Time Warner have bought up all types of media, from magazines and TV to movies and books. Newspaper companies followed the lead and expanded as well. News Corp., Hearst, and the New York Times Company now own over two hundred newspapers between them. This vertical integration left them with far less competition, so they were able to grow without innovation. But they also lost perspective. They doubled down on a business plan that seemed to work short term, and then stifled creativity by barricading themselves in a corporate echo chamber. So they kept expanding their control in the analogue world, even while the digital world was on the rise.

It's not that newspaper owners simply ignored the Internet; they were paralyzed by their apparent success. While threats to their industry dominance were clear on the horizon, for most of this time their business model seemed fundamentally sound.

It wasn't the first time something like this happened, and it won't be the last. In 1978 Casio Company revolutionized the typing industry by inventing the electronic typewriter, complete with text memory -- but why didn't it enter the computer market with the force of companies like Apple? Or have you ever wondered why Price's Patent Candles Ltd. didn't become General Electric? The history of business is a succession of innovations that have toppled industry leaders, again and again.

Clayton Christensen calls this The Innovator's Dilemma. The problem, as he describes it, is that the best companies in any industry will eventually lose market dominance by doing everything that a good business should do. (By the way, if I were in charge of Columbia University I would make this required reading for every incoming student) Good businesses listen to their customers, they give them what they want, and because of this they ultimately fail.

Customers are no better at seeing the future than corporations. And if something doesn't exist yet, they rarely know that they might want it someday.

For years, newspapers made market decisions based on a specific set of values -- derived from customer preferences and expectations. So these companies invested in making sure that their papers were delivered on time, that they had features and magazines and ink that smudged less. Trivial as they may have seemed at the time, these were the choices that brought us here today.

While newspaper publishers invested in creating a product with the qualities their loyal customers cared about, they ignored the things that subscribers apparently didn't value and certainly didn't demand. Breaking news at the instant it occurred: No one expected the papers to deliver a new copy to their home no matter how big the story. Longtime readers also never expressed much interest in engaging with their news, or debating other readers in a public forum. Letters to the editor were late and little more than a tired afterthought.

So even though the Internet made revolutionary advances possible, newspaper publishers saw little incentive to pursue major changes. Why establish an Internet presence when almost none of their customers were asking for it? The Internet had a small reader base, one that couldn't provide nearly as much revenue as the printed product's buyers. Why should journalistic giants enter a nascent market with such little payoff?

And this, really, was the essential problem. Traditional media outlets could have developed the online market. They were large successful businesses; they had the resources to devote to the business if they had wanted to. But they concluded that because most of their customers weren't asking for it, they didn't have to do it. They lived with this conclusion until it was too late. For too long they complacently relied on the mantra: Who wants to read on a screen?

Digital news was a classic case of what Christensen terms a "disruptive technology" -- a development that mainstream consumers aren't interested in -- at first. Whatever their assets, these innovations have too many downsides, or so it seems. In this case, Internet news wasn't as professional as print media. It wasn't very portable, and there wasn't very much of it. And of course, you had to read it on a screen -- no one will ever do that.

But, like other disruptive technologies, the Internet also had some new and potentially transformative assets. Online news was cheaper; it was more up to date. And technology predictably made Internet transmission more convenient. While newspapers, comforted by the knowledge that they were satisfying their customers' demands, ignored the Internet's potential strengths, new and smaller companies emerged to exploit these possibilities. As the professionalism of Internet news improved, the technology's other assets became more and more appealing to mainstream consumers. Reading the day's stories online became a viable alternative to buying a paper. And then it was only a short step to where newspapers find themselves today.

When a disruptive change occurs in an industry, the companies that are first to innovate dominate the new market. And because print newspapers waited too long to meaningfully move online, they left an opening for other enterprises to take over the provision of Internet news.

By the time this technology became commonplace, it was already too late for most traditional news outlets to catch up.

So it's not that newspapers didn't notice the Internet. And it's not that they didn't hold to their original business model because they were stupid, or lazy, or because they had some sort of pathological aversion to technology. Newspapers are in trouble now because, ironically, they were very well run -- for the world that was, not for the world that was coming to be.

Newspapers aren't in the position they're in today solely because of the innovator's dilemma. Even as they've tried to move online, they've had trouble adapting for several key reasons. First, efficiency standards have changed. Many newspapers tried to transfer their longstanding value systems -- those that work in the print industry -- to the Internet. This is one of the primary reasons that they can't compete against other online news sources. A web site can generate traffic by providing compelling analysis, even if only a handful of people are producing it. Compare that to The Los Angeles Times, which has six hundred people in its newsroom. To make this number of journalists relatively profitable in the internet age, the Times would have to generate six hundred times more traffic than the site made by one competent and devoted blogger. Sometimes this ratio holds, but it often doesn't.

So a specialized online news source can provide content more efficiently; it can survive while taking in much less revenue.

Increased competition is a second reason that newspapers have trouble online. Their business model was never perfect, but historically they succeeded by establishing oligopolies or even monopolies in local markets. Since one or two papers tended to dominate certain areas, the advertisers had no choice but to pay high prices to reach consumers. In contrast, readers on the Internet constantly travel among many sites, making monopoly impossible, and making it equally impossible to charge high rates for Internet ads. In addition, and very importantly, websites like Craigslist and e-Bay also dramatically impacted the newspaper business by destroying the market for paid classified ads. Warren Buffett has said that newspapers are in trouble partly because "few businesses get better with more competitors." And in the case of newspapers, which base their entire cost structure on monopoly pricing, the rise of competition has made their business model obsolete.

The changing news cycle is third factor. It's much faster now, and it runs twenty-four hours a day. Readers have come to expect that information will be continually updated and constantly available. Print newspapers are inherently unable to adapt to this demand. Consider what happened on July 7, 2005. On that morning, bombs exploded in several London subway stations. It was a traumatic and shocking event -- and the New York Times did feature London on the front page that morning. The headline read "London Wins 2012 Olympics."

The subway bombings occurred at 9 am London time -- 4 am in New York. Most editions of the paper had already gone to print. And so the front-page story was out of date even before it hit the newsstands and the doorsteps that day.

The Times sets a high standard for journalism. So I'm not singling them out. This simply serves to demonstrate the fundamental shift in our notions of when -- and how -- news should be available.

Four main factors got us here tonight: the Innovator's Dilemma, increased competition, a changing news cycle, and a new model of online efficiency. Add to that the economic crisis and welcome to the perfect storm. It's important to remember that while the financial downturn may have accelerated these factors, they were all in motion long before the housing bubble burst. Many of the changes we're seeing now have been both obvious and inevitable for years. Newspapers could have taken that time to gradually adjust to this new era of journalism, but now that opportunity is lost. In today's economic climate newspapers have to find a way to adapt, and they'll have to do it fast.

So now what? How do we get out of here?

Jack Welch said that to succeed you have to "face reality as it is, not as it was or as you wish it were." That's perfect advice to the newspaper industry.

The reality is, in short, that newspapers followed their longtime customers down the rabbit hole and lost track of their future readers. They are scrambling to adapt, and everyone has a different idea about how to fix the problem.

I know for sure that no one idea is perfect, and no single idea will work instantly. This will be a difficult process that newspapers should have started for real years ago. That said, it's still doable if newspaper owners move away from their legacy business model, and if they follow what their consumers have come to want and expect from the Internet.

As a starting point, I think that online newspapers need to think of themselves as technology companies, as much as media companies. They need to recognize that new technologies have changed the culture of news, and that online readers want engagement instead of passive delivery. There is also the Internet culture and economy of linking online, a culture that newspapers need to accept (and see as an opportunity). And also, as a friend of mine at MTV said to me a few years ago, ubiquity is the new exclusivity. That means that news outlets need to get their content out there in as many places as they can.

I think that accepting these facts will be an important step. But I also want to share what other people think, so here is a partial list of the ideas that are out there. Some of them are good and workable in my view, and some are not so good. But you should decide for yourselves.

1. Build walled gardens Don't allow others to link to your content. Build a big wall around your content and charge for it. That will show them.

2. Give print newspapers tax subsidies. The Nation recently published a proposal to subsidize newspapers. In this scenario, every person who subscribed to a newspaper for a whole year would receive a two hundred dollar tax deduction. The government could do this to direct money to print news without influencing content or picking winners and losers among print outlets.

3. Hyper-specializationSome have argued that we don't need big news organizations. Instead, they envision a new journalistic community that is made up of many small outlets that each specialize in one small area of news. By embracing this specialization, some believe that news outlets can become much more efficient.

4. Establish a Gatekeeper of the Web for all content.In order to get most content that's on the web, consumers would have to pay a middleman for access.

5. Micropayments This idea has some fans. Papers would sell news stories like songs are sold on iTunes. Proponents contend that readers will be happy to hand over small payments if websites find an easy enough system.

6. Newspapers as aggregators With his model, newspapers would essentially become only aggregators for online content, finding the best stories from across the web and offering a seal of approval for the credibility of anything they link to. 7. Focus on analysis, not news gathering Some say with so much free information available online, there's no reason that every paper needs to write its own version of the same story. Instead, by focusing on analysis, not news gathering, newspapers can produce unique content with far smaller staffs.

8. Close down the presses literally today As technologies like the Kindle become cheaper and better, it makes less and less sense to print the news. It already costs the New York Times twice as much to print and distribute its paper than it would to just send all of its yearly customers a free Kindle. So close down those presses today.

9. Foundation support Investigative reporting could also be funded through not-for-profit foundations. Experienced freelance reporters -- as well as amateurs with compelling skills and ideas -- could apply to these funds for the support to pursue important stories. Everything produced would be open source, meaning that the stories could be posted on blogs or make the front page of the Times -- and they'd get them for free.

10. Another Washington Bailout I guess right now there has to be a bailout for everything, and The Newspaper Revitalization Act would allow newspapers to operate as non-profits, if they choose, under 501(c)(3) status for educational purposes, similar to public broadcasting. Newspapers would not be allowed to make political endorsements, but would be allowed to freely report on all issues, including political campaigns. Advertising and subscription revenue would be tax exempt and contributions to support coverage or operations could be tax deductible.

That's a pretty long list -- and those are just some of the ideas out there.

Some of these proposals are clearly better than others. Building walled gardens, especially, would be a huge mistake. The Internet economy is a linked one, as Jeff Jarvis likes to say. Newspapers need to acknowledge this, and see that online news is different than print and need to adjust. The linked Internet economy is here to stay.

So how do I think we get out of here?

If I owned a newspaper, I would move to a robust hybrid model very quickly. I would aggressively build out my online business and I would start planning my future without the printing press. By responding to consumer demands for greater engagement, I would take advantage of the changes the Internet has brought. I would open the door to citizen journalism and to small, local investigative units like the ones that we are seeing in many cities. I don't mean to suggest that citizen reporters can replace the great work of journalists like Dexter Filkins or David Barstow, of the Times. But if newspapers pursue these new ways of newsgathering, it will help build their online community and that will, in turn, attract more users and that will make for a better business model.

My bottom-line advice is pretty straightforward.

Embrace disruptive innovation -- continuing to resist it is to fail to understand what has happened in the last 15 years. It won't work, and more precious time will be wasted.

Build out the print business model into a workable hybrid. Integrate online and do it fast, and encourage reporters to create and engage community -- and to draw on citizen journalists for their stories.

It's time the industry got comfortable with the idea that media today is a networked/ecosystem. It's all about originating, aggregating, curating, linking, and spurring conversations. Why? Because users want it this way. For today's newspapers to compete, they will have to offer their readers more chances to engage and discuss, to react and interact.

Build your online brand. It's not hard you can do it these days very quickly.

And remember ubiquity is the new exclusivity. The way for newspapers to be somewhere is to be everywhere.

I want to stress again what I said to the student in Michael Shapiro's class many months ago. Journalism has a great future. It isn't going anywhere. Nothing could ever replace the invaluable role that journalists play in our society. And as the Internet grows, news will only improve... so become part of the future and jump in. The impact you can make today vs. just a few short years ago -- by breaking a story online, by creating a blog that will make a difference, by starting a site from scratch and being able to build a brand in one year is what it's all about. Sometimes I'm very jealous I'm not you 25 all over again. But just sometimes.

Thank you very much for having me.

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