The Boston Globe revealed in a bit of soul searching that the newspaper said thanks but no thanks to a potential partnership with the founder of fledgling start-up that later became known as Monster.Com back in 1995.
Jeff Taylor had a small company then called Monster Board. He proposed a partnership with the Globe to share revenue. The price to the Globe was a mere $1 million. Of course, the Globe said no, and IMO that is part of the reason that the venerable newspaper may fold in the foreseeable future.
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This is how Globe reporter Robert Weisman described the meeting:
Taylor sat across the table from a team of Globe executives, including members of an unrelated Taylor family, the one that had run and held a controlling interest in New England's dominant newspaper for more than a century before selling it to The New York Times Co. in 1993.
He described Monster Board, his fledgling venture in Maynard that sold help-wanted ads online. Jeff Taylor proposed the Globe put up $1 million for an ownership stake that would give the paper a chance to put its lucrative classified advertising business on the Web - a step that might have cut into its revenue in the short term, but offered a chance to take the franchise national.
The answer was no. Sharing the newspaper's nearly $100 million a year in help-wanted advertising didn't make sense. "Our grandfathers would roll over in their graves," Jeff Taylor recalled being told. Soon after, he sold his business to the advertising giant TMP Worldwide. It expanded into Monster.com, a website that in 2000 generated more than $500 million, marking the beginning of the end of newspapers' near-monopoly on classified ads.
Jeff Taylor obviously had another vision, and one does not take a tiny start-up and turn it into a powerhouse like Monster.Com without a sense of what the future will portend.
What happened that day highlights the predicament the Globe and other papers have faced over the past 15 years as changes in technology and consumer habits upended their business model.
For decades, advertisers relied on newspapers to post job openings, sell homes, and unload cars because the medium reached a broad audience. But as more people migrated to the Internet, websites like Monster.com, Craigslist, and Cars.com popped up to specifically target those customers. Newspapers were slow to recognize the power of the Internet to erode, then splinter their familiar and almost effortlessly profitable business model. And though they've now built a significant Web presence, newspapers' online ad sales haven't grown nearly fast enough to offset the precipitous drop in print advertising. Nor do online ads command as much money as ads in the paper.
Not only that, but the shitty economy right now means that even long time advertisers are seeking cheaper and more direct means of contacting their customers. As a result, those auto dealers who Choose to advertise with the Globe, has been declining. Moreover, the cash crunch these dealers are facing by not moving merchandise means that even some that might want to advertise with the Globe are probably thinking otherwise.
The dilemma came into sharp focus on April 2 when the Times Co. told Globe union employees it is seeking $20 million in concessions, including pay and benefits, within 30 days or it may shut down the paper. The Globe has reported it lost an estimated $50 million in 2008 and is projected to lose $85 million this year. While the recession has hit the company hard, and it is no longer generating enough revenue to cover its costs, the biggest factor may be a shift of advertising to the Internet, which has accelerated in the past two years.
Basically, the only way the Globe can get some serious cash flow is if the NYT decides to sell its 17% share of the Boston Red Sox which is worth as much as $200 million. Even if the unions and management say yes to every demand, the paper would still only save $20 million out of the projected $85 million in losses. All the cuts will do is delay the inevitable because the paper is losing money hand over fist and the ideas that Globe and NYT management have to recoup that money is IMO completely frakking useless.
The geniuses on Morrissey Boulevard and in Times Square are convinced that the only way to save the company (is to destroy it). This would be accomplished by charging for content online, which the NYT itself abandoned after an outcry from loyal readers that didn't want to shell out extra money so they could read Paul Krugman (which IMO is one of the few reasons to read it in the first place).
Much like Wall Street, the Big Three, and the Republican Party, old school newspaper chains are shaking their head and wondering how they ended up in their current predicament.
"The newspaper business was a victim of its enormous success," industry analyst Alan Mutter said. "Because their revenues continued to grow up to 2005, about 10 years after most people heard about the Internet, they put very little effort and energy into trying to imagine how the world might change and what their position would be in a changed world."
So the hubris of the industry was what ruined it, which is not surprising since even today many in the industry fail to see that they are an outdated model and that fewer and fewer Americans get their news the old-fashioned way.
One of the only revenue streams that newspapers are still clinging to is Legal Notices. The reason for this is that industry lobbyists pressed state legislatures to legally bar weeklies and alternative papers from the lucrative Legal Notice section.
I know for a fact that this is what happened in New Jersey where I was a managing editor of a weekly paper. The attorney, Alfred E. Porro, that represented the New Jersey Press Association (which I was a dues paying member at the time) had lobbied Trenton to do exactly that. Porrro later served five years for wire fraud, embezzling clients of his.
Over at the Globe, revenue remained steady until 2005, and management was reluctant to tamper with the cash cow. By the time they did, it was too late.
During the boom years of the 1980s and 1990s, classified accounted for about half of all Globe advertising, and help wanted about half of classified ads, Taylor recalled. "On peak weekends, there were help-wanted sections that were over 100 pages at $40,000 to $50,000 a page," he said. "We're talking $5 million newspapers for those Sundays. These were big, healthy newspapers."
The rollicking success of the Globe and other newspapers in the first years of the Internet age made it harder to anticipate the threat from upstart websites like Monster.com, Craigslist, and Google, which links advertising to its popular search engine. The Globe's annual profits reached about $100 million for several years in the late 1990s, according to a former executive. Among their best-paying advertising customers until the Internet bubble burst in 2001, ironically, were dot-com start-ups buying brand advertising to raise their profile.
Had the Globe teamed up with Taylor and Monster, we might be looking at a completely different picture, but hindsight is 20-20.
But in recent years the Globe's advertising revenues have sagged. With the recession exacerbating the decline, total advertising revenue at the Globe is projected to fall more than 25 percent this year, while advertising at Boston.com is expected to remain flat, according to people familiar with the matter who requested anonymity because they are not authorized to speak publicly. Classified advertising is projected to plummet 50 percent this year, these people say.
Nationally, the picture is much the same. Financial analysts from Barclays Capital project US newspaper advertising will decline 22 percent in 2009 and another 10 percent in 2010.
As Kos and other purveyors of online news have noted, the prevailing attitude among newspaper publishers and major newspaper chains is that they are integral to people's lives. That may still be true, but the number of people for whom that is true has been shrinking for years. Profits in the 80's and 90's hid many of the long term problems with the industry, chiefly the pigheaded reliance on expensive newsprint.
There already exists a superior product to newsprint. The problem is that the material is currently illegal in the U.S. and can not be cultivated for any use as a result. That would be hemp which is significantly stronger than newsprint and much cheaper. Moreover, hemp is much more sustainable alternative to newsprint as the crop can be replanted and harvested as much as twice a year in some climes.
Back when I was an ME at my weekly, we had a wage freeze for three years. The reason our CEO gave was that the price of newsprint kept going up and since it was the chain's largest expense, it was hampering any effort to make any kind of long term financial plans.
Ironically, newspaper chains like Hearst Newspapers were instrumental in getting hemp banned as an industrial crop in 1937. Today, many major chains like the New York Times Co. have themselves invested in paper mills and are thus perpetuating the problem.
A paradox of the Internet age is that the Globe and other newspapers enjoy more readers than ever through their papers and websites combined, but fewer readers pay for the news. Boston.com was a pioneer in creating a regional website that did more than simply post news from the paper. While the Globe is the nation's 14th-largest newspaper, Boston.com today is the sixth most visited newspaper website, with 5.6 million unique visitors in February, according to Nielsen Media Research.
Still that is not enough. The newspapers feel entitled to their formerly profitable business models without adopting or acknowledging a new paradigm. Unless they figure out something fast they will go the way of the Dodo Bird.