Is the American newspaper industry
in as much trouble as it seems?

Prof. George Sylvie of the School of Journalism has some ideas ­ and they are not all pleasant to hear. A journalist, former newspaper reporter, editor (and past associate chair of the School), Sylvie is quick to point out it’s not just about profits anymore. "Journalism is a business, yes, but it’s one of the bedrocks of democracy, and if you don’t have quality journalism, you affect people’s abilities to make good, solid decisions. And when you do that, you affect who represents you,” Sylvie says.

Sylvie knows newspapers. A slight, somewhat rumpled man with glasses and a blunt manner, Sylvie has a disarming way of wearing his keys around his neck on a Superman lanyard. He looks like the former reporter he is. But, in truth, Sylvie is one of country’s leading experts on technology change and decision making in the newspaper industry.

His ready laugh and playful office ­― filled with dozens of mint-condition Hot Wheels cars ― hides a fierce drive to solve the most vexing problem facing a lot of papers today: just how do they thrive in the new online world without losing their journalistic soul?

A Culture Under Siege

For newsroom staffs, that new “convergent” world has been a mixed bag. With many American dailies now under corporate ownership, the pressure to meet Wall Street’s demands for back-breaking profit margins has inevitably led to experimentation. Some newspapers are choosing between getting rid of their city desks, firing staff and hiring bloggers, closing bureaus ― and everyone is relying heavily on wire service content ― anything to figure out how they can find more readers and get by with fewer costs.

The result, Sylvie says, is “journalism on crack. I’m talking about (getting a story out) 24/7, before it’s fully developed, getting it out there before you have a chance to vet it, think about it and digest it.”

That short-term, quarterly profit-oriented decision-making comes at a cost, Sylvie believes. Inevitably, those cuts show up in quality, circulation and newsroom morale. It sends a message to journalists that what they do, or what they consider essential, isn’t important.

“You now have journalists doing layout and pagination in addition to being reporters. ‘Oh, and by the way, take that computer and that video camera with you,’ ” Sylvie says. “ I have a favorite saying ― that convergence just means more work.”

That strain of constant job cutting, coupled with the added workload, exacerbates resistance to change. Sylvie suggests that journalists’ belief that their profession is a virtuous one ― that pursuit of the truth is akin to the priesthood ― isn’t something easily changed in the name of profit.

A Marriage of Sorts

Sylvie believes there’s a way to marry the two views ― pursuit of truth and the bottom line ― but newspapers aren’t doing it because of a lack of manpower, time and resources.

And that’s where UT research is filling the gap.

One of Sylvie’s recent studies (co-authored with colleague Iris Chyi) "One Product, Two Markets: How Geography Differentiates Online Newspaper Audiences" (George Sylvie and Hsiang Iris Chyi), advocates the need for managers to clearly understand the geographic market definitions for their online editions.

Newspapers think of their paper as a local product marketed to local audience filled with local advertisers, and this mindset extends to their online edition. But Sylvie’s and Chyi’s study of 136 online newspapers demonstrates the area outside the print edition’s circulation accounts for up to 65 percent of the overall audience.

Sylvie and Chyi argue that they are leaving money on the table by not asking: Why people are these people coming to our site? What is it about our content they find interesting? And why are they leaving so quickly?

While the local market accounts for only 38 percent of visitors, they account for nearly half of the monthly page-views and 55 percent of the minutes spent on the sites. In the long-distance segment there is breadth, but not depth, Sylvie says.

Without the depth, online newspapers cannot target that segment with specific advertising strategies or use them to attract more national advertisers. Instead, online newspapers are mostly stuck with the current practice of selling Internet advertising as an add-on to print sales.

Sylvie and Chyi’s study suggests, since local advertising accounts for 90 percent or more of newspapers website revenue, the local approach is likely costing newspapers millions of dollars per year.

“Newspapers have to learn to think outside their newsrooms,” Sylvie insists.

“Newspapers aren’t asking these questions because they aren’t used to asking about people who aren’t in the local area. All news is local ­ you’ve heard that ­ so it’s not in their genetic makeup.”

And yet, Sylvie insists, opportunity exists. The key is a viable business model that allows local papers to capitalize on their strengths.

The Long Tail

Online newspaper strategy has been an orphan in search of a home, Sylvie says. In his latest study, "Developing an Online Newspaper Business Model,"

he ties Chyi’s extensive work on online markets as well as his and Chyi’s notion of long-distance online newspaper audiences with Chris Anderson’s “Long Tailed Statistical Internet Model” to suggest a new, consumer-driven product unique to local online newspaper’s niche markets. (Anderson’s phrase, “The Long Tail,” was first coined in a 2004 article in Wired magazine to describe the niche strategy of Internet businesses like Amazon or Netflix.)

The approach looks at the newspaper’s resources and re-bundles them into a consumer-selected content that’s available on-demand. This approach, known as a Resource Based View (RBV), changes the focus from the newspapers’ products, to the specific components in the paper’s value chain.

Historically, newspapers have been blinded by a traditional mass-approach mode: scarce competition kept them thinking their audiences remained passive and accepting of reading what they were given. In truth, recent research has demonstrated that modern media consumers are both fickle and demanding, preferring functionality, convenience, comprehensiveness or timeliness­sometimes, all of the above. The old approach of building a portal and waiting for loyal readers to show up no longer works.

“Modern technology has put life at our fingertips, but the local paper isn’t there,” Sylvie says. “People won’t wait for the locals to catch up. They’ll go elsewhere.”

This Resource Based View (unlike the traditional model) spurs a search for value, but from the consumer’s viewpoint. In short, what does the local paper have to offer that no one else has? Sylvie argues local papers already have unique niches that can be exploited. They simply aren’t doing it.

A good example of local niches is the Austin American- Statesman’s coverage of Longhorn sports, Texas legislature and Austin culture. Simply put, the Statesman owns the coverage on all things that make Austin, well, Austin.

Further, more than 50 percent of their audience consists of long-distance readers, and many ­ some estimates say up to 75 percent ― are in central Texas’ backyard.

So how does a local paper like the Statesman exploit their relevant niche?

Sylvie says one key is employing search engine optimization technology on the paper’s site. Those visitors are already coming to the site, probably not every day, but why not become a library or repository of useful, local information for those visitors?

“Newspapers have to make their data more available to users,” Sylvie says.

“They haven’t kept up with the technology that people expect and that’s why they keep losing out to Google.”

Anderson’s “long tail” statistical model (Anderson, 2006, Brynjolfoon et al., 2007) indicates the Internet increases the share of niches, giving online newspapers opportunities to serve as many niches as they can identify and as the consumer demands.

Currently, the cost of an online ad ― if it is even sold as a stand-alone ― is only about 20 ­ 30 percent of the cost of a print ad. And though work remains to be done in terms of educating advertisers of the value of these market segments, as newspapers move towards digitally and selectively addressing audiences, those numbers are certain to rise.

For this to work, Sylvie says newspapers must do more than produce exclusive “niche” content and are going to have to stop thinking in the old ways and invest in the new technologies.

“They have to decide,” Sylvie says, “are short-term profits the priority? Or do they begin investing in what they need to make long-term profits possible? It boils down to: What do you want to do?”

New Bedfellows

The days of the old-fashioned “build it and they will come” model of developing websites are over, Sylvie argues. Online newspapers must abandon the current tactic of media companies to keep control over their distribution network. Rather, it’s time for them to embrace new technology platforms and enter into some strategic alliances with new business partners.

The obvious example is the ubiquitous cell phone. Since newspapers can be read online, and since most smart phone users have the Internet, why not go after this huge potential market? Not everyone has a personal computer or broadband access at home, but nearly everyone carries a cell phone, and while only about 5 percent of those are smart phones ― like the iPhone or the Samsung Instinct ― the number is growing exponentially.

The full video and sound capability of the iPhone is ideal for delivering a local daily’s online content, Sylvie says. A smart strategic alliance might be an exclusive arrangement with the companies who have exclusives on these hot new phones to make the online paper the exclusive Internet portal for those devices.

Newspapers are missing the boat on another front as well. Smart alliances with retail stores, for example a bookstore chain like Barnes & Noble, could provide outlets for content, and by extension, the newspaper’s advertisers.

Everyone has seen bookstore customers relaxing at the in-store coffee shop.

What are they usually doing? Either reading The New York Times or leafing through one of the store’s magazines.

Why not, Sylvie muses, put a Kindle (the new electronic reader from Amazon) on every table that is programmed with the online newspapers portal as the gateway to the Internet, giving their advertisers access to an audience that is educated, literate and technologically sophisticated?

Sylvie’s research suggests the biggest risk for local newspapers is for them to continue as passive players as the digital media world passes them by.

“Newspapers have to decide what they want to do. Do they want to invest in the new technologies that will provide them with an infinite revenue stream?

Or are they satisfied with short-term profits? People expect to see the new technology today. They won’t wait for the dailies to catch up,” Sylvie says.

If they decide they want to take the long view and grab the long-tail, Sylvie believes that research can play a key role in helping them through that sometimes-scary transition.