Rage Against the Machine: Frank Blethen’s Plea for the Seattle Times

It’s hard not to sympathize with Frank Blethen. The publisher of the Seattle Times has seen his family’s newspaper business, owned since 1896, take a precipitous decline in its fortunes since the beginning of the 21st Century.

Last month Blethen took to his paper’s editorial page with a full-throated warning about the dangers to American democracy if locally-owned newspapers aren’t bailed out. The culprit, he writes?  “Capitalism is destroying our once trusted local newspaper system while enabling unfettered and irresponsible social media and embracing destructive digital advertising monopolies.”  

He explains:

“Our founders built the American democracy on four pillars:

Localism: A national system of independent, local newspaper

Subsidization: Local newspapers would be subsidized to ensure an informed and engaged citizenry. To foster engagement, the Founders created postal delivery as the neutral subsidy to deliver local newspapers.

Literacy: Increased literacy was also necessary for self-government to thrive. Hence, the Founders doubled down on federal investment in common local schools.

Freedom of the press: To protect their news system they enshrined freedom of the press in the U.S. Constitution.”

Perhaps he ought to be granted some interpretive leeway in the historical record. But far from a “system” of newspapers, the press in post-colonial times was energetically, even outrageously capitalist and competitive in its pursuit of readers. Surely creation of the postal system was because people wanted mail rather than to give a “neutral subsidy” to deliver newspapers. And certainly no list of pillars of democracy is complete without the right to vote and representation.  

No matter, his alarm is real.

Along with the rest of the newspaper industry, the Times has seen its traditional business model, based on a hybrid of subscriptions and advertising, collapse. In the traditional model, classifieds and display advertising carried most of the load, while subscriptions were as valuable for the eyeballs they delivered as for the subscription revenue they generated. You built audience so you could sell access to it to advertisers (anticipating the 21^st Century technology model in which the user is the product).

But over the past 20 years that traditional newspaper advertising model has collapsed. First, in the late 90s, Craigslist devoured the classifieds business, which at the time accounted for about 40 percent of ad revenue at a typical newspaper. Then, in the early 2000s, as the online audience grew exponentially, new digital ad networks predictably sprang up to monetize that traffic. Suddenly it was cheaper and more effective to reach consumers by advertising online.

Unlike the print ad model, where you had to ask readers who they were and guess whether or not they saw your ad, an online reader could be measured by each click to know exactly who was looking at what. Soon new adtech platforms owned by Google and Facebook made it so efficient (and cheap) to target audience that advertisers migrated away from having to make deals with each publisher.

To add to traditional publishers’ woes, an explosion of content on the web and an exponential scaling up of places to slap ads meant that the price of ads—which had in print until the internet age been set in a virtual monopoly by traditional newspapers—plummeted. Now, even if you could sell your ads alongside the giant ad networks, the prices you could get were a fraction of what they had been. Classic supply and demand.

Predictably, newspaper advertising cratered: from $53-$68 billion in the early 2000s to around $8.3 billion today. Print circulation dropped from about 63 million in the late 80s to about 25 million now. Of the 6,380 general-interest local newspapers remaining—1,230 dailies and 5,150 weekly—currently an average of two per month are shutting down. Twenty-five hundred papers have closed. The number of newspaper journalists has fallen about 65 percent since 2000.

What was really bad though, was how slow newspapers were to deal with the existential threat posed by the online revolution. They could have and were well-positioned to anticipate a Craigslist-type service to keep their classifieds business but didn’t. They had big fat profit margins (during the 1990s, typically around 20 percent) and the means to invest in new ways to reach online readership, but hung back, sticking with clunky websites and stubbornly regarding online news as the junior side of print. For the first ten years of the internet, many newspapers, including The New York Times, even kept their print and internet operations separate.

They hung back betting that the increasing reach of their stories and growing audience online would translate into growing digital ad revenue, not understanding that a rapidly scaling-up audience and an explosion of new content across the web would hammer down ad rates. And they didn’t grasp that what would become the new Attention Economy, largely feasting on content created by the audience itself, worked in very different ways from the traditional market for journalism they had been competing in.

Most important though, is that they failed to understand that the relationship between audience and content provider was fundamentally changing. They clung to the notion that “quality journalism” as they defined it would win out in the end, that “delivering the news” was the same as developing an audience that wanted to engage with it. That “the news” was a much messier concept involving many more voices and narratives than commonly provided by the traditional press.

Not that there isn’t a significant appetite for traditional news—but the business model that supported it has atomized. Now newspapers became one among many voices clamoring for attention. And instead of innovating and trying to understand this new dynamic and getting better in order to compete, they went the other way, shrinking their product (literally – the size of the print pages and the number of them is significantly smaller), downsizing staffs, and abandoning whole areas of coverage and geographic areas like suburbs and rural communities all while they were raising newsstand and subscription prices.

At the beginning of the Internet Age, newspapers were more able to develop new digital ad models than anyone else — they were already in the ad business. But their lack of entrepreneurial spirit and arrogance of thinking they owned the market stopped them.

From a reader perspective, the Seattle Times delivers a significantly reduced product compared to what it offered in the late 1900s. Given the explosion of online competition for attention and the Times’ reduced resources to compete, it’s not surprising the paper has struggled.  

In Blethen’s account, though:

”In America today, there are three causes driving the collapse of our trusted local free press system:

• The loss of local newspaper stewardships to absentee financial mercenaries who have massively disinvested in local journalism and journalism staffs.
• The monopolization of digital advertising by Big Tech. This illegal monopoly has destroyed local newspapers’ dominant revenue stream.
• The inexcusable failure of successive presidents, congressional leaders and regulatory agencies to deal with the loss of local newspapers to the absentee financial mercenaries.”

He adds:

“America’s civic fault lines are deteriorating [sic]. Civility has not been this bad since our Civil War in the 1860s. It is ironic this demise has not been driven by political disruption, but rather by American capitalism run amok. Capitalism is destroying our once trusted local newspaper system while enabling unfettered and irresponsible social media and embracing destructive digital advertising monopolies.”

Blethen has fought valiantly while his paper’s valuation has been driven down. He started a campaign several years ago lobbying for tax relief and subsidy for locally-owned newspapers, settling on the idea that what ails the local press is decline of local ownership, his theory, evidently being that locally-owned produces a better product (a dubious assertion at best). There’s certainly no question Blethen is all in. His company has sold off assets, given up its former home, sold off a big printing plant and spent down its reserves, an unquestionable commitment to keeping his newspaper alive in Seattle.

The decline in local ownership of newspapers and consolidation of the business across the country happened well before the internet came along. It was the result of local owners cashing in on high valuations and big media companies believing they could streamline operations. The resulting product was often less in tune with its community. From the 50,000-foot view, corporatization of the newspaper industry in the 80s and 90s made it less relevant to readers. However, local ownership was hardly a prescription for excellent journalism. Quality was highly variable and dependent on the smarts and scruples of their owners.

Alas, it’s highly doubtful Blethen’s prescription for a regulatory cure would reverse his fortunes. And his blame for current woes — while correct in identifying the players –misses the mark with his proposed solutions. His claim that Google and Facebook have created monopolies in adtech is certainly true.

It’s not that Big Tech was necessarily more innovative than the journalists; they just got obscenely rich very quickly and then gobbled up all the Little Tech companies that were innovating around ad markets, user experience and Big Data metrics. When something promising came along, rather than compete, they swallowed it up. And federal regulators allowed it, creating behemoth companies that could smash everything in their paths. Where were newspaper owners while all this was happening?

The platforms not only dominate the ad supply market, they also control ad demand. They place ads next to search links and in social media feeds, effectively using their scale to control the market and capture ad revenue upstream from publishers. Media publishers have been trying to make the case for years that Google and Facebook should pay new organizations fees for showing links to their content.

The problem with this argument is that so much traffic flows through these two web platforms that publishers desperate to reach readers have gone to increasingly greater lengths to chase featured placement on Google and Facebook et al. It’s hard to demand payment from the companies when you’re begging them to feature links to your stories. Especially when competing content producers have been trained to pay (sponsored links) to get reach on social media and in search results.

Besides, say the platforms, news publications’ stories represent a very small percentage of share traffic. From Google’s and social media platforms’ perspective, if news organizations vanished from their sites, they’d hardly be missed. And why should platforms pay journalists for their work when millions of other content producers – many with much larger followings – aren’t compensated with fees from the platforms? That’s not how markets work.

But take Blethen at his word that the platforms are in effect stealing his content. With a few lines of code on the Seattle Times website he could make Times stories invisible to Google et al. Problem solved. Obviously he’s not going to do that.

Blethen also points to hedge funds that have been buying up newspapers all over the country, milking their assets, cutting newsrooms and riding them down until they go out of business. No question these vampire funds have accelerated the demise of local newspapers, leaving many communities with diminished local news, and, when the papers close, often none at all. But the funds have managed to scoop up distressed papers only because their business models are no longer viable and actual journalists can’t find ways to make them work. Hedge funds buy them because there’s still money to be made in stranded assets as they decline and fail. They are a symptom of the problem rather than the cause.

Finally, Blethen attacks government for not recognizing the problems and giving (locally-owned) newspapers subsidy. American governments have been slow to regulate online platforms, and incoherent in coming up with regulations that make sense. To understand the scale of the problem, watch any ten minutes of a Congressional hearing on tech reform to see how little lawmakers understand what they’re dealing with.

Blethen isn’t wrong about the need for regulation, but his idea for a cure to give diminished legacy publications such as his (and specifically locally-owned legacies) special tax and regulatory breaks so they can… do what, slow their decline(?), doesn’t fix the problems.

The Times owner points to innovations his paper has made such as sponsorships of coverage areas such as transportation and education as groundbreaking. But these initiatives create their own issues in finding funders and preserving editorial independence, and besides, they do more to shore up traditional coverage than find new and better ways of doing it. Meanwhile, the paper has been painfully slow to evolve:

• It hasn’t improved its photo/graphics/multimedia/interactive presentation and for the most part still treats its audience as product rather than participant in the relationship.
• Its payments and subscriptions system is archaic and frustrating to navigate, turning off readers.
• It has an inflexible paywall that doesn’t learn how to extract maximum value.
• It has no micro-payment scheme, no incentives for readers to evangelize for it. No community-building program to give readers a voice or talk to one another.
• People don’t love the Seattle Times – it’s at best a transaction.

It has, for example, invested little in improving its commenting system and building a community around discussion of the news, with the result that Times reader comments are often a quick elevator down to the corner of AngryTown and Conspiracy Village. By contrast, reading New York Times or Wall Street Journal reader comments often adds interesting and provocative insight. Successful reader comments sections aren’t just about giving readers a chance to vent, they’re about creating community around things people care about. And that takes investment.

Where the NYT, WSJ and Washington Post have expanded their revenue sources by diversifying their content and adding product lines like games and recipes and product reviews, the Seattle Times has largely stuck to its tried and true. The New York Times has been furiously adding staff to build the largest and most diverse newsroom in its history, and has acquired new content lines such as Wordle and Wirecutter and The Athletic to supplement its offerings and spark new revenue. The efforts have been rewarded, and the Times recently surpassed 10 million digital subscribers, becoming reader-supported rather than advertising-driven. By comparison, the Seattle Times reported ~80,000+ digital subscribers last year.

Even doubling or tripling that number won’t sustain the Seattle Times. Giving local legacy publishers tax breaks won’t drive the kinds of changes needed in the ways they think about the business to make it work. And even if Congress regulates Big Tech to break up the adtech monopolies, advertising is never going to get back to where it was. Blethen told a panel at Town Hall this week that the business just needs to be stabilized until the advertising returns. It’s not going to return. That he thinks so is a problem.

So what to do? There are no easy fixes, and even once-promising digital native newssites such as Buzzfeed and Vox are flailing.

A few ideas:

• Yes, break up the platforms’ adtech monopolies. No company should control all sides of the market. Force Google and Facebook to divest so they can’t control the market.
• Understand that while advertising can be a part of the revenue mix, it will never return to the days of 80 percent of revenue. Diversify the product and what you charge. The original genius of newspapers was in aggregating content people wanted to subsidize the content they needed.
• Non-profits aren’t a cure. But they can be part of the mix. Giving motivated funders ways to support you is a no-brainer. Create a non-profit arm that supports special initiatives.
• Subscriptions will be part of any model, but think also about memberships that offer something more. The Guardian in the UK does member events and even had a clubhouse for readers to come hang out in. Museums do memberships. Gyms run on memberships. Memberships though, mean being less transactional in the ways you interact with readers.
• Try “pay-as-you-will” schemes for those who might not become regular readers but somehow landed on a story that attracted them. Sell “bundles” of content that slices and dices what you make. Make your paywall porous to lure in repeats. Make the ability to give you money as easy as a single click in whatever way on whatever platform a reader wants to live in.
• Have “reader concierges” who get to know subscribers and whose focus is on helping guide people through what you’re doing and holds their hand when they have a question.
• Get into “real-time” news – things people want to know when they want to know it. Expand the definition of what you’re reporting.
• Most important: Figure out a way to turn the community’s perception of The Times as a shrinking endangered species that delivers less and less to one that is actively figuring out how to reinvent and not afraid to try new things. Traffic “Labs” and Education “Labs” might deliver important reporting, but they aren’t reasons people buy the paper. Where’s the fun?

Northwestern University’s Medill Local News Initiative reported last year that 20 percent of Americans now live in news deserts – communities with no local news reporting. That’s about 70 million people in communities without a local newsroom. More than 230 newspapers have shut down in the past two years.

That Blethen’s Times isn’t among them yet is testament to his stubbornness to keep going and willingness to subsidize the decline. But given the structural challenges arrayed against his conventional strategy and his lack of capacity to innovate, it’s difficult to see the Times’ fortunes improving without significant rethinking of its business and journalism model, especially with the digital ad market further cratering and as new AI systems come online with tsunamis of new content. While it might make him feel better to rage against capitalism run amok and demand bailouts from government, surely it’s little more than a distraction from the real work needed to solve the problems.