US State of the Media 2009 report paints grim picture

The latest American State of the News Media report shows a continuing and catastrophic decline in advertising revenue in online, newspapers, magazines, radio and network television. Cable television was the only sector not to decline and the overall picture leaves analysts wondering how much farther the industry has yet to fall. Amid the gloom, the Pew Project report says 2009 was the breakthrough year for Twitter and other social media which emerged as powerful tools for disseminating information and mobilising citizens.

But the uncontrolled nature of social media is not much consolation for major news media organisations. Their most immediate concern is how much revenue they will regain as the US economy pulls out of recession. Market research and investment banking firm Veronis Suhler Stevenson predicts that by 2013 newspapers, radio and magazines will take in almost half as much in ad revenues as they did in 2006.

The collapse so far has been extraordinary. Newspapers, including online, saw ad revenue fall by a quarter during the year bringing the total loss over the last three years to 43 percent. Local television ad revenue fell 22 percent in 2009; triple the previous year’s decline. Magazine ad revenue dropped 17 percent, network TV is down by 8 percent, while online ad revenue fell by 5 percent. Revenue to network TV news and online news sites weren’t broken out of the overall totals but most likely fared much worse.

Newspapers are in the worst trouble. The researchers estimated the US newspaper industry has lost $1.6 billion in annual reporting and editing capacity since 2000 - roughly 30 percent. They predict further cuts in what remains a $4.4b industry in 2010. This is a major concern because newspapers still provide the largest share of reportorial journalism. The report uses the metaphor of sand in an hourglass. “The shrinking money left in print, which still provides 90% of the industry’s funds, is the amount of time left to invent new revenue models online,” it said. “The industry must find a new model before that money runs out.”

But it is not just newspapers feeling the heat. Network news divisions are on a long slow curve of decline since their 1980s peak period and have since halved in size. Local television has not been hit as hard but is also feeling the pain. One estimate puts the losses in the last two years at over 1,600 jobs roughly 6 percent. Flagship magazines such as Time and Newsweek have also shed almost half their staff since 1983.

Life on the Internet paints a more complex picture. Almost three in five Internet users now use some kind of social media, including Twitter, blogging and networking sites. Citizen journalism is on the rise at local levels and rapidly filling niches vacated by undernourished news organisations. But the report says that despite the invention and energy of new media efforts, their scale is dwarfed by what has been lost. The J-Lab project estimates $140 million of non-profit money has been pumped into new media in four years but that represents less than a tenth of newspaper losses alone. According to NYU’s Clay Shirky “the old stuff gets broken faster than the new stuff is put in its place.”

But this is not necessarily a bad thing. The motivation of news corporations over the last 20 years has been to cut expenses for the sake of profit eroding its sense of public good in favour of efficiency and profit. The researchers say the collapse of these ownership structures may mean a partial rebirth of community connection and public motive in news. But it warns unless someone can develop a system of financing the production of content, reportorial journalism will continue to shrink despite the new technologies.

The vexed question of a viable Internet revenue model is core to this problem. The researchers found that four out of every five online news consumers say they rarely click on online ads. Rupert Murdoch and News Ltd are moving to paywalls to address this problem but studies also show most people are “grazers” and only about one in five people say they would be willing to pay for online content - this number is likely to decrease with less voracious news consumers not included in the survey.

The upshot is a growing tendency towards niche operations. Most news organisations are becoming narrower in ambition and more specific in focus, brand and appeal. The researchers see the critical questions now as being: What collaborative models might work and under what ethical basis? Will there be more sharing of content and resources and what does that mean for fairness and accuracy? “The year ahead will not settle any of these,” they conclude. “But the urgency of these questions will become more pronounced.”