When good business sense goes bad
So I was thinking, as I read this Gawker post (because Will Sullivan linked to it, and I look at almost everything Will links to, except the Lego things), that maybe there’s a parallel between what happened to daily newspapers and … Walmart. You know, an enterprise gets big, then bigger, and wipes out all the small, local competition. So you’re left with this kind of featureless big thing that has no local flavor anymore, and every Walmart you enter smells the same, no matter where it is.
But that’s not exactly what happened to newspapers. And Walmart seems to be in no financial difficulty.
Next I thought about Applebee’s. I don’t know if Applebee’s ever drove a real restaurant out of business, but there is that parallel of a chain that sprouts up its outlets all over the place, and each one is the same as the one in the last town — or the next town. Newspapers did that as the companies that own them bought up papers in geographic clusters and realized nice economies of scale (nice for the shareholders, not for the communities) by making them all alike, stuffed full of wire copy and syndicated columns about, I don’t know, teen dating? (As if any teens were reading the newspaper, doh.)
But Applebee’s is pretty successful too, as far as I can tell. The parking lot is often full.
So in other businesses, you can buy up and/or kill off the competition (in some cases by underselling), consolidate, and strip away everything that makes the business unique, or interesting — and come out on top.
Why didn’t that work for the newspaper business?
I think the big difference between the parallels you’re drawing is that there’s never been a situation where suddenly every Walmart or every Applebees was suddenly in competition with every other one. Suddenly, with duplicate menus and mirrored pricing, there would be no need for thousands of outlets.
Well that’s what’s happened with newspapers: all these similar papers carrying the same wire stories are suddenly in competition with every other paper in the world. The Internet puts every paper on the same rack.
I mean look at the political conventions right now: 15,000 journalists to tell essentially the same story? That’s not sustainable, same as if it was 15,000 Applebees trying to serve the same slice of pie to the same customers.
August 26, 2008 at 7:47 amAnother difference is that Wal-Mart’s revenues actually come from the people who buy stuff at Wal-Mart, and Applebee’s revenues come from the people who eat at Applebee’s. A newspaper’s revenues doesn’t come from the people who buy the newspapers, though. It comes (or used to come) from people who want to put ads in the paper.
August 26, 2008 at 8:29 amApplebee’s has been successful over the years, but, like a lot of other casual dining restaurants, is having to change to survive:
August 26, 2008 at 10:21 amhttp://www.nytimes.com/2008/08/20/dining/20applebee.html
If people stopped shopping at Walmart, or stopped eating at Applebee’s, then those businesses would either change — or fail.
Even though the newspapers make the greater share of revenues from advertising — and not from what a reader pays to buy the newspaper — the decline in business seems to depend on the declining number of customers. If circulation (and in some cases, single copy sales) had remained at the levels of the 1960s and 1970s, say, then the advertisers would still be pumping in the money, yes?
So maybe this is parallel: stopped shopping, stopped eating, stopped reading. The article about Applebee’s is interesting: What should you do to keep your customers coming in?
August 26, 2008 at 10:31 amIs the newspaper the Wal-Mart in this analogy, or is it the little mom-and-pop neighborhood business that gets pushed out of business when a Wal-Mart (the Internet) moves in and offers people infinitely more products at considerably lower costs? Maybe instead of looking at chains and big box stores for tips, newspapers should be thinking more like the independent bookstores that have managed to survive B&N and Borders:
http://www.bizjournals.com/twincities/stories/1998/08/03/focus1.html
August 26, 2008 at 12:32 pm– Though some newspaper chains homogenized their content, they didn’t market themselves as a national brand like Applebee’s. So they didn’t garner such benefits as economies of advertising scale and the notion that it’s a big deal to have a “national” franchise in your town.
– Even papers that relied heavily on wires still covered some local news — so, unlike McDonald’s, you couldn’t guarantee that the content was exactly the same from one franchise to another. And the quality of a newspaper’s content is far more reliant on the quality of its staff than is the taste of the burger at your local Wendy’s. Burger King tastes the same in Chicago or Sheboygan. The writing in the local paper is, I would suspect, more varied.
– Wal-Mart’s size allows it to say that you can find what you need there, cheaper than elsewhere. Newspapers, however underpriced, are still more expensive than TV news or Web sites (not counting the equipment, of course). And unlike Wal-Mart, papers can’t buy their news cheaper the more of it they print. Nor can we tell a syndicate that we’ll only pay for its content when we can prove someone actually read it.
– As big as Wal-Mart is, it hasn’t eliminated all rivals. Don’t like Wal-Mart? You can go to Target. Or K-mart. You’ll keep the discount-store habit. Wal-Mart may lure you back someday. Don’t like your local paper? You’ll probably drop the newspaper habit entirely — and that’s a lot harder to bring back.
August 26, 2008 at 12:57 pm@John Kroll - Ah. There is the danger of a real monopoly: “Don’t like your local paper? You’ll probably drop the newspaper habit entirely — and that’s a lot harder to bring back.”
And if the monopoly product is lousy (imagine: only one supermarket in your town?), you’re just stuck with it.
August 26, 2008 at 2:22 pmAccording to Digital Deliverance’s Vin Crosbie, whose opinion I share, it’s a classic manifestation of the law of supply and demand: http://www.digitaldeliverance.com/blog/2008/08/transforming_american_newspape_1.html . When there is an abundance of material, whatever it is, the supplier suffers and the consumer benefits. The information market is glutted. Economically, the suppliers are losing. Socially, everyone loses until and unless news Web sites take notice that in order to prosper, they’ll need to provide content that is unique and useful to the consumer. Thanks to Vin for putting this critical issue into focus.
August 26, 2008 at 3:05 pmI LOVE IT when Will links to Lego stuff!
August 26, 2008 at 4:36 pm@John Boor - good link, thanks!
@Digidave - I like it that he links to Lego … just not my thing, y’know.
August 26, 2008 at 6:14 pmJohn Boor writes that news Web sites will “need to provide content that is unique and useful to the consumer.”
I would add that in addition to PROVIDING it, the news organizations have to make it convenient, and not annoying, not difficult.
Some of their Web sites fail at these in every way.
August 26, 2008 at 6:19 pm@Mindy, re 6: Well, you’re stuck with that rotten supermarket until you find an alternative. And pent-up resentment and dissatisfaction can make the fall harder and faster when alternatives arise.
I think I see the results of monopoly in the savage or cynical attitudes many people have toward their hometown papers. In Chicago when I grew up, you might sneer at the Trib, but that meant you probably cheered the Sun-Times. If you thought Hearst’s American was too grubby, you were probably a fan of the respectable Daily News. Today, in most cities, your only choice in a major paper is take it or leave it.
I’ve said this before: Smart papers would stop trying to be all things to all people, online at least. They’d use a common CMS to feed alternative Web interfaces — a conservative version and a liberal one, one youth-oriented and one traditional, whatever makes sense for their market. A lot of the difference between one version and the other would simply come down to story selection and play, and that’s just a handful of people to call the shots.
My friends from Philadelphia would remind me that competition is no guarantee of profit. But online, there’s nowhere near the extra cost for paper and printing and distribution. The Tribune’s Red Eye has shown you can get an audience with skillful repackaging. Online, you can do that even more cheaply.
And with our shrinking newsrooms, the opportunities for journalists to run something major are dwindling. If we created some online sandboxes for our best and brightest — let them experiment with hard-news-only sites, or Red Eye clones, with sites that have far more political bite in their opinions than our tepid editorials dare now, or with sites that are all about apolitical news you can use — if we did that, we just might uncover the kind of creativity that can carry us forward.
If nothing else, we’d have more fun on the way down.
August 27, 2008 at 12:08 amThanks for the shout out, Mindy!
And here’s nerd trifectagasm:
August 27, 2008 at 3:23 pmStar Wars.
Olympic. (Ping pong is officially a nerd sport)
Legos.
http://bub.blicio.us/?p=111111154
(For DigiDave)
Opps, wrong link!:
August 27, 2008 at 3:24 pmhttp://www.flickr.com/photos/seven13avenue/sets/72157606667814881/
@Will - hilarious! (That guy needs a life.)
August 27, 2008 at 3:55 pm@John Zhu - sorry - in my mind, most newspapers have become Walmart, because their corporate owner killed off all the smaller newspapers and pretended that one generic mega-paper could serve all communities. The mom-and-pops that are now gone = smaller newspapers that people actually bought and read and talked about.
August 27, 2008 at 3:57 pm@Mindy, I can kind of see your point, and if we were talking about the competition between one big paper and the smaller papers, I would agree that the big paper is Walmart (except Walmart actually does serve most of the communities’ needs; otherwise people would still be going to the mom & pop shops). But when we’re talking about a big paper vs. the sum of the Internet, I think the paper is definitely the much smaller dog in that fight.
August 28, 2008 at 8:47 amIn my mind, the Internet can’t be compared to Walmart because it’s not a corporation and it’s not owned by a single entity. The Internet is a global system, like Earth’s atmosphere.
Where I see some hopefulness in my loose metaphor is when we think about a good home-style restaurant in the same town as an Applebee’s. Even if the bill might come in a little higher, a lot of people will prefer the home-style place and continue eating there.
But it has to be a GOOD home-style place, or it will go out of business.
August 28, 2008 at 9:15 am