Blaming Newspaper Management For Newspaper Problems

The New York Times (NYT)  and Washington Post (WPO) both said that they would have to cut jobs and salaries. The falling revenue in the print advertising business is overtaking them and they have no other choice. Sales are dropping, at some newspapers by more than 20% a year. But, many newspapers still have employee and cost bases that were based on the industry’s very successful years at the beginning of the decade.

It is considered bad form to blame people for a catastrophe after it happens, unless someone involved has committed a felony. In the case of newspapers how the house caved in is worth a hard look. It says a great deal about how industries that do not have to fail, fall apart anyway.

Martin Nisenholtz has run the electronic and digital operations of The New York Times since 1995. He probably saw problems that the newspaper industry faced when they were still far off. Fourteen years ago, he was dealing with the internet in a period when consumer access to broadband did not exist. Whatever Nisenholtz shared with the people who run The New York Times will probably never see the light of day. It is very probable that if he warned about the possible disruption that the print business might face that the warning was ignored.

Most large print media companies had early experiments set up to test drive the internet. Time, Inc. had a large project know as Pathfinder. It was expensive to operate and eventually folded. Looking back, it might have been a good idea to have kept it open.

In large companies, it is not really the job of the CEO to run the company. There are plenty of bright operational, financial, and legal executives. Business schools teach that CEOs are charged with looking at a company’s future so that they can think strategically about how to position their firms for the world as it will be in five or ten years.

What is rarely mentioned is that the best CEOs spend most of their time thinking about what will put their companies out of business and doing something to prevent this catastrophe.  Although it may be overly simplistic, GE did it decades ago when it diversified away from being in the light bulb and electric fan businesses that were its beginnings in the 1890s. Some investors would say that GE is too diverse now, but its system served the company well for the great majority of the years during the last century.

The heads of publishing companies have spend most of the last 20 years worrying about the costs of organized labor, the price of printing paper, and postal rates. It clearly did not occur to them that the early internet successes like Lycos, Excite, and Altavisa were in the information gathering, sorting, and creating businesses. Their indexing and presentation of content looked clumsy in 1997 and 1998.  It is incredible to remember that Yahoo! (YHOO) had its first day of 100,000 unique visitors in 1994. The company went public in early 1996. Google (GOOG) raised $25 million in 1999.  In 2000, it was offering search results in ten languages.

It seems obvious to most average people now that the control, and to some extent the creation of content, began moving rapidly to the Internet as long as eleven or twelve years ago. Not a single large print media company chief saw that at the time. The role of the content CEO as visionary did not work. Looking ahead in 1998, he saw the US Postal System and his unionized workers as his greatest enemies. Now newspaper unions have almost no bargaining power to save their member’s jobs because the entire industry is going under.

It may be too late to do much about the newspaper industry now. A lot of people blundered. If any lesson is left behind, it is that the obvious hurdles most business face are not the ones that will bring them down.

You never see the bullet that kills you, unless  of course, you are watching for it.

Douglas A. McIntyre