Dave Morgan of Tacoda:
Given the enormous
cost structures attendant to newspaper publishing, from buying
newsprint and operating printing presses to paying the salaries of
editors and reporters, these companies can sustain price destruction
for only so long. In the old days of two newspaper towns, once one got
a significant upper hand in the rate card battle, it started pushing
the other in a downward profit spiral that ended with either the
shutting down of the weaker newspaper, or its consolidation into a
government-sanctioned joint operating agreement with certain shared
services. There have been few other outcomes. It didn’t matter how
popular the newspaper was with its readers. It was all about
That is what newspapers are
facing today. The swarms of Internet competitors are creating the
effect of a second newspaper when it comes to capturing local ad
What does this mean?
This means that local ad pricing will drop, and competitively driven
pricing schemes, like performance-based pricing and auction-based
sales, will take hold.
While I think that this is a problem for newspapers to think about, I don’t know that it will (quickly) have a major impact in any decline. We, for instance, will be a great deal for lots of advertisers, but primarily those niche and neighborhood folks down the Long Tail who don’t currently advertise in the daily newspaper because it’s not efficient or affordable for them.
I think folks downmarket from the dailies will feel the pain much sooner.