For those who aren’t quite sure why these media layoffs keep happening, or think “it’s the internet!” or “people don’t pay to subscribe,” there’s a lot more going on. Though that is part of that. Here’s a cliffs notes version - not exhaustive but it hits the highlights:
1. What is considered The Golden Age of Newspapers ended around the late ‘80s. Subscriptions began dropping in the ‘70s year over year, but not enough to show cracks.
Newspapers spent most of the 20th century consolidating into chains, but in the latter half of the century they became part of conglomerates and were publicly traded. Profit margins for companies like Gannett and Knight Ridder were commonly around 30-40%.
Circulation levels continue to drop, and the trend accelerated in the early part of last decade. With less readership and huge debt service commitments, it became a vicious spiral that required more cuts to meet debt goals and satisfy shareholders who were used to big profits.
And less quality meant less people found value in the product, and so they subscribed less. This is what Phil Meyer famously called the Death Spiral. Newspapers ate their own seed corn during bumper crop days and then had no resources when it got tough.
Less subscribers didn’t just mean less subscription money. By early 2000 about 75-80% of a typical newspaper’s revenue came from display and classified ads. And while subscriptions only account for 10-15% of revenue, a loss of subscribers mean less ad revenue.