Newspapers may be Playing a big Role in this election — but what does that mean for the sector’s survival?

A Resurgent U.S. Press Corps Needs a New Business Model
Barry Ritholtz
Washington Post, October 23 2016



“I never quarrel with a man who buys ink by the barrel.” So said Charles Brownson, a former Republican congressman from Indianapolis, in 1964. It remains good advice — especially good advice for anyone hoping to be elected president of the United States.Brownson’s wisdom probably comes too late for GOP nominee Donald Trump. The electoral college map is beginning to look insurmountable, as several formerly deep red states — Arizona? Georgia?? Texas?!? — are, almost unthinkably, coming into play for Hillary Clinton.The race looked very different before the debates began. In early August, Nate Silver’s’s aggregated polling gave Democratic candidate Hillary Clinton an 87 percent chance of winning, while Trump had 12 percent. After a terrible few weeks for Clinton, culminating in the fainting at the 9/11 memorial, the odds moved significantly in Trump’s direction. By the eve of the first debate, they had narrowed considerably: Clinton 55 percent, Trump 45 percent. The momentum was on Trump’s side, and he was within striking distance.

Then it all started to go wrong.

His debate performance was poor, and he looked unprepared. He could not leave the Alicia Machado comments alone — the former Miss Universe who he said had gained weight. Days later, he went on a late-night tweet storm.

Trump might have recovered from any of those missteps. But those who “buy ink by the barrel” — a.k.a. investigative journalists — had a job to do, and their research paid off. A series of devastating news items crashed Trump’s approval ­ratings. Each successive news item, every new revelation, sent his polling numbers lower and lower.

Journalists followed Clinton, too, but she had been a government figure for decades: in Arkansas as first lady to Gov. Bill Clinton, then in his White House as first lady, then as New York’s junior senator, and eventually as secretary of state. The FBI had thoroughly vetted her. The Benghazi hearings and email investigation found politically damaging sound bites, but there were not any surprises.

Trump in contrast, turned out to have a few skeletons in each of the closets in all his many homes. Despite being a reality TV star, not all that much was known about him. His political advisers had wanted to put him through the usual vetting, but the GOP nominee refused.

His wildly improvisational candidacy created an opportunity for the media, and the media took advantage: Remember the stories about the 3,500 (make that 4,000) lawsuits he had been party to; the fake philanthropy; the federal taxes he avoided; the deposition in which he admitted lies; the firing of women who weren’t “pretty enough”; pretending to be a publicist to brag about himself; the profits from “free” seminars at Trump University; and, of course, the lewd conversation with Billy Bush?

Each of these stories significantly impacted the election campaign. They dominated the news cycle, sometimes for days; they affected polling; they all lowered the chance of his being elected president.

And just about all of them were broken by old-fashioned, reporter-driven print media.

Which raises an interesting question here in the business section of one of those journalistic enterprises: Given the significance of the reporting on this campaign, are newspapers once again an ­investable sector? What sort of business model should this battered sector embrace?

It’s old news that the print sector fell on very hard times as its traditional business model — hire reporters, print up what they write on pulp, distribute it to paying subscribers, and sell advertising on those same pages — frayed. Craigslist was cheaper, eBay was more comprehensive and Google News was free. In the 20 or so years since AOL and Netscape helped make the Internet mainstream, newspapers have suffered more than just about any other industry.

Even though journalism by print newspapers is very likely to impact the outcome of this election, it is hard to see how this makes the sector investable. The stock prices tell a big part of the story.

The New York Times is about $11.50 per share — the same price it has been the past two years, and the same it was in the middle of 2013. E.E. Scripps is about $15; it was the same price in 2013 as well. Gannett stock has gone mostly down. McClatchy is up to $18 from its start of the year at $12; but before you get too excited about that 50 percent rally, recall it was $70 just two years ago. Time Inc. is $13.50, about where it was a year ago, and down from the mid-$20s two years ago. (The Wall Street Journal is part of News Corp., and does not trade separately.)

If all of the breaking stories and intense media attention of this election campaign cannot move these stocks prices higher, what on earth will? Attention to the press is as intense as it ever gets in the final 30 days of the election. And in less than three weeks, this campaign will be over.

Then what?

Print journalism needs a new business model.

After all of the votes are counted, confetti thrown and the balloons popped, the sector is left with a few options for survival in the Internet era:

1) Advertising model

2) Subscription model

3) Hybrid (advertising/subscription)

4) Endowment

The advertising model is just what it sounds like: Serve up content on as many subjects as you can, and run advertising along with it. This has proven to be both challenging to execute and difficult to grow. Just ask Yahoo: Less than a decade ago, it turned down Microsoft’s unsolicited $44.6 billion bid. Despite hundreds of millions of readers, the company this year agreed to be bought by Verizon for just $4.8 billion.

The subscription model — where subscribers pay a monthly or annual fee — seems to work only for a limited number of publishers. The Wall Street Journal in finance, the New York Times for arts and entertainment, The Washington Post for politics. Most of the regional and smaller local papers are finding it challenging to fund themselves this way, even when combined with local advertising dollars. The model does not work well at smaller scales. The same is true for a hybrid approach.

I find myself increasingly attracted to the endowment model. That is where a wealthy benefactor or company creates a foundation to fund a newspaper’s operations. The Guardian newspaper group in Britain has financial security and editorial independence courtesy of the Scott Trust and about $2 billion in total endowment. Bloomberg Newsbenefits from the revenue the flagship terminal generates. Pro Publica, a newsroom that performs “investigative journalism in the public interest” — it won the first Pulitzer Prize for reporting published only online — was funded by a grant from the Sandler Foundation. The Washington Post is owned by Amazon founder and chief executive Jeffrey P. Bezos, who recently topped Warren Buffett as the world’s third-wealthiest person; he can afford to cover a bad quarter or two, if need be. If I were to give New York Times publisher Arthur Ochs Sulzberger Jr. some advice, it would be to find a way to cozy up to former New York mayor Michael Bloomberg and have the Bloomberg Foundation somehow endow the “Gray Lady.”