[Editor's note: This is Part 1 of a two-part series. Part 2 will appear in a future issue.]
The advent of the Internet has been revolutionary for newspapers. However, newspaper publishers are still searching for economically viable digital publishing models. Part 1 of this two-part series examines why newspapers have been migrating toward online delivery and how well they are doing in the rapidly changing media environment; Part 2 will cover alternative visions for the future of newspapers.
The Internet can be viewed as an opportunity for newspapers, but it is also a threat to them. As more people spend more time online, they spend less of their time reading newsprint. Worldwide circulation has dropped 2 percent to 3 percent annually for the past decade.
Even before the Internet changed everything, U.S. newspapers were experiencing steady drops in readership. In 1964, 80 percent of adults read a newspaper daily; by 2003, daily readership was down to 54 percent. The rate of circulation decline has increased in recent months.
The greatest losses seem to be in the major metropolitan areas that have populations between 250,000 and 500,000. Large national and small-town newspapers appear to be holding their own. Recent 6-month circulation figures among major papers ranged from slight gains for The New York Times to steady ones for USA TODAY to as big a drop as 15.6 percent for the San Francisco Chronicle.
Lack of public interest in the news does not appear to be the issue. Online news readership is high for all age groups, and television is finding audiences for 24-hour news programming.
Profits at the largest newspaper companies have been declining precipitously. In an April Wall Street Journal roundup, 1Q 2006 profits at McClatchy Co. (which was in the process of purchasing the Knight-Ridder chain) fell 15 percent, while Tribune Co. profits fell 28 percent and New York Times Co. dropped 69 percent over the previous year's first quarter. A New York Times report recorded 2,000 staff layoffs in the industry last year alone.
All of this matters because it threatens to undermine the strength of our most significant news gathering institutions. They are the bulwark of our democratic system.
For a long time, the industry has been warily anticipating this day. Newspaper associations have been discussing the inevitable future since news of French and British experimentation with teletext and videotex crossed the Atlantic in the mid-1970s. There have been comprehensive planning efforts and "newspaper of the future" projects. Leading-edge newspapers and chains have been developing alternative ways to deliver their services, not only to readers but to advertisers as well.
These early efforts are beginning to pay off, at least in terms of securing a leadership position for newspaper content online.
News Wins Online
More than 1,500 U.S. daily newspapers have online editions. According to the Newspaper Association of America (NAA; http://www.naa.org), newspaper sites reached more local Web users than any other local site in 22 of the top 25 U.S. metro areas. Newspaper Web sites were the preferred online destination for local news for general Internet users (62 percent) as well as online newspaper users (85 percent).
Readership of newspaper Web sites is on the rise: It's 8 percent higher than last year with 37 percent more online users in 1Q 2006, according to Nielsen//NetRatings. About 56 million readers viewed newspaper Web sites online during a recent quarter, compared with more than 45 million average daily circulation for hard-copy editions. During 2005, the number of unique newspaper Web site visitors had jumped 21 percent while the number of their page views rose 43 percent, according to an NAA study.
The use of the Net as a source for news is especially strong among young people, the lowest demographic group …