Sam Zell: "The Model for Newspapers No Longer Works"

[Brad King]

Here's a really interesting memo sent out by Sam Zell to the Tribune staff.

This on the heels of the announcement that the paper would be smaller (to give it a 50-50 news-ad split) and so would the staff.

Are we reaching the tipping point?

[Kevin Dugan]

This post from BizWeek wonders the same thing...pointing to Zell's memo and Philly Enquirer's fake ad campaign as examples:
http://tinyurl.com/583488

[Brad King]

I'm starting to hear more publishers discuss this, which is a different conversation than we're going to try to push through a few more ideas based upon our old model.

It's going to be interesting to see how it plays out. I'm not sure the technical muscle exists in the industry right now to pull off a complete change. Too many of the brightest coders and designers find their way to pure-tech or tech-centric companies.

But if there is a true shift in paradigm -- if technologists are brought in at the manager levels and given an equal seat at the table -- we'll see that reflected in hiring in the next few years.

Would love to get some data on where the top programmers from engineering schools work (in terms of market, not specific company).

[David]

Tipping point? Er, no. We've capsized.

It will take a while for papers to shrink to the minimum market size. Balmer might be optimistic that it's zero and that it will happen in 10 years. But anyone who has walked into a newsroom knows that it's too late. And here's why:

There is a specific sequence of death in an industry. It goes like this

1. During good times, companies try new things. But invariably, they never follow their best ideas out of fear that the new ideas will cannibalize current business.
2. Inevitably, marekets shift and the core business does not make the profits to which it has become accustom. One of two things happens. A, return to step one, but with more urgency, less money and more fear. B, move directly to step 3.
3. Starting cutting costs. The short term solution to declining markets is to cut cost structure to maintain profit margins. Cutting costs always leads to cutting out new product R&D.
4. Death rattle. Cutting costs in hopes the market returns doesn't work. Lack of serious investment in new markets makes it impossible to grow into them.
5. Morbidity. The industry settles on some sort of bottom, a minimal level support a minimal market.

That's how it works. And you'll notice that the turning point is at step 2. Most companies never do step 2 right. Instead, they realize what's going on at step 3 or 4. Too late.

Maybe I'm wrong. But my guess, as is Zell's, the media companies are going to gut newspapers soon. They will move their infrastructural focus, their talent, their capital and the best parts of their organizations to new ventures. This will not be the editors of our papers. They screwed up. It will be the money men, trying to make the best of a bad situation.

-- David

[Brad King]

Ah, I've never met a man more convinced of failure than me.

I think the bean counters have been running the show for some time, particularly with the big public companies. The problem has been two-fold: the landscape underneath (ie, the Web) happened and there was nobody in management who understood what that mean and that meant more resources were put into "forward-thinking" projects with a print focus.

Today, we have an industry that is creating Flash maps and calling that innovative or Twitter updates and thinking that gets to the heart of the matter.

As the other David would say, I think, there are surely some innovative projects going on; however, there are no systemic projects that permeate an entire news organization (or very, very, very few)...which leads, I think, into David Thomas' argument that trouble is on the way.

Signed,

A Bad Moon Rising