The Catalyst Code

Industries like people sometimes do not live forever. The whaling industry was the major source of fuel for Americans in the 19th century. Great fortunes were made and Nantucket was once the whaling capital of the world. It died as people switched to gas and electricity. The typewriter industry had an almost century run from the late 19th to the late 20th century. My guess is that typewriters are about as familiar as whale oil for people under 50.

When an industry gets very sick it faces some of the same decisions as people face. Maybe I can take some strong medicine and keep on living, recognizing that I might even feel sicker in the meantime. Or maybe I should just make the best of my remaining years. I think the newspaper industry may be facing this choice now.

You all know the story—they’ve been walloped on the content side as people go to the web for content, and they’ve been shellacked on the advertiser side as companies move to better targeted and cheaper web ads. They’ve gone to “the doctor”—commissioning a series of reports led by a famed Harvard Business School Professor. As Mark Fitzgerald recounts, the first dose of medicine—loading up of multiple products for niche audiences– didn’t work and might have even made them sicker. So the new medicine now being prescribed is to turn themselves into “local information and connection utilities” whatever that means. Boy, sounds a lot like a clinical trial to me.

It might be time for investors to recognize that just as great whaling companies weren’t needed as mass electrification came into being, newspaper companies might not be so needed in the internet world. If that were true then newspapers should milk their franchises for what they are worth, recognizing that they aren’t going to be around all that much longer. In practice, that means making as much money as they can from subscribers and advertisers who still like these products and figuring out ways to take what newspapers know how to do best—collect and assemble content—and transit that expertise to internet firms that can use it.

My view is that this is a far better strategy for newspaper investors than squandering money on trying to do something they aren’t good at: in essence, make the best of the years they have left without monkeying around with a bunch of experiments that will diminish their quality of like (aka returns) in the meantime. That doesn’t mean that no newspaper company could make the transition to the new world. Western Union managed to segue from being the dominant telegraph company to, slowly and painfully, being the dominant money transfer company today. American Express managed to go from being a pony express company to making a fortune off of credit cards.

But wishful thinking and a lot of MBA jargon won’t substitute for a real plan to the beat the internet disease that afflicts the newspaper industry. For more, see our IDEAS article, “Tomorrow’s News Today: 5 Strategies for Survival”.