Marketing

Surowiecki on Newspapers

Continuing my recent rants about newspapers, please see this interesting story in the New Yorker by James Surowiecki, author of The Wisdom of Crowds, entitled News You Can Lose.

On the source of the problems:

There’s no mystery as to the source of all the trouble: advertising revenue has dried up. In the third quarter alone, it dropped eighteen per cent, or almost two billion dollars, from last year. For most of the past decade, newspaper companies had profit margins that were the envy of other industries. This year, they have been happy just to stay in the black. Many traditional advertisers, like big department stores, are struggling, and the bursting of the housing bubble has devastated real-estate advertising. Even online ads, which were supposed to rescue the business, have declined lately, and they are, in any case, nowhere near as lucrative as their print counterparts.

While I've always seen publishers, and newspapers in particular, as challenged with The Innovator's Dilemma, before reading this article for some reason I'd never associated them with another of my favorite essays, Marketing Myopia (PDF for sale), by Harvard marketing guru Theodore Levitt.

From Surowiecki:

Levitt argued that a focus on products rather than on customers led the companies to misunderstand their core business. Had the bosses realized that they were in the transportation business, rather than the railroad business, they could have moved into trucking and air transport, rather than letting other companies dominate. By extension, many argue that if newspapers had understood they were in the information business, rather than the print business, they would have adapted more quickly and more successfully to the Net.

While I love Levitt's thoughts on marketing, the usual objection to Marketing Myopia is: say Penn Central Railroads had fully envisioned the future -- just because they successfully ran a railroad, do you actually believe that Penn Central Airlines would have been a big success? Even fully informed, can you get there from here? Put differently, seeing the future and having the core competencies to compete in the future are two different things.

I have a similar objection on behalf of newspapers. It's one thing to anticipate the whittling away of your classified ad business. It's quite another to have the skillset and Internet savvy to come up with Craigslist. In fact, if you could travel back in time and tell the Tribune Company about their future, how much do think they could have changed?

I hate to be fatalistic here and yes, they wouldn't have let themselves get involved in a highly leveraged buy-out -- but financing strategy aside -- do you think it would have changed much? Even with a fully informed visitor from the future whispering in their ear, do you think they ever could have made a Tribuneslist successful? And even if they could, what about economics. Craigslist runs a nationwide classified advertising platform and does it with about 25 staff.

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