News media: huge cuts set to continue, study suggests

Advances in online news media have not offset financial losses, suggesting that the hollowing out of the industry – with reporters being laid off and foreign bureaus being slashed – is set to continue until new business models are developed, according to a new report.

Newspapers now spend $1.6 billion less per year on reporting and editing than they did a decade ago, according to a study by the Pew Research Center’s Project for Excellence in Journalism.

And although online news sites are rushing to scoop up audiences shed by traditional news media, they have yet to develop a profitable business model – and continue to rely heavily on traditional news outlets for original reporting.

“One of the broadest conclusions we draw is that the losses in traditional news gathering vastly outweigh the new experimentation and influx of energy we’re seeing in new media,” says Amy Mitchell, Deputy Director for the Pew Center. “We’re seeing a lot of new ideas, but it just doesn’t amount to what we’ve lost.”

The losses paint a grim picture of an industry in tumultuous transition.

In 2009, revenues were down in almost every sector of the news media. Newspapers saw ad revenue fall 26 percent, bringing the total loss in revenues to 43 percent over the last three years. Local television news and radio both saw revenues drop 22 percent. Magazine revenues were also off 17 percent in 2009. Even online ad revenues fell 5 percent.

As a result, nearly half of the 37 publicly traded media companies for which there is current data lost money in 2009, according to a Pew Research Center analysis.

It's not the economy, stupid

The economy is only partly to blame for the industry’s declining revenues, says Ms. Mitchell.

“Clearly the recession had a huge impact,” she says. “But one of the questions everybody is asking is how much [of the decline] is tied to the recession and how much is the industry changing? Most of the thinking suggests at least half is industry-related rather than recession-related.”

One of the greatest concerns for all news media is that shrinking revenues will translate into less resource-intensive original reporting. Already, news organizations across the country have cut staff, eliminated some foreign bureaus, and begun to rely more heavily on wire stories and blogging. The Pew Center predicts more cutbacks in newsgathering.

“Last year was significantly harder on the news industry even than 2008,” said Pew Center Director Tom Rosenstiel. “And the report predicts still more cutbacks in 2010, even with an improving economy.”

That trend of cutbacks will continue until the industry finds a profitable business model, the report predicts.

“And as we enter 2010 there is little evidence that journalism online has found a sustaining revenue model,” the study reports.

The elusive online business model

The report also found a high degree of public resistance to online ads.

Almost 80 percent of online news consumers say they never or rarely clicked on an online ad, the study found.

And prospects for paid online subscriptions are discouraging: only 35 percent of online news consumers can identify a “favorite” news website, the study reports. Of this 35 percent – the group most likely to pay for content – only 19 percent said they would continue to visit their favorite site if they had to pay for it.

“That sense of brand loyalty just isn’t there,” says Mitchell. “There’s a very strong resistance to paying for content online.”

Very few sites currently charge consumers for content (the Wall Street Journal and Salon.com among them), and even those that don’t are struggling simply to attract more eyeballs and keep them there longer.

Of the 4,600 news sites tracked by Nielsen, the top 7 percent got 80 percent of traffic, according to the report. The average visitor spent only about three minutes on any given news site.

The hurdles to change public mindset and make online news profitable is vast, says Mitchell.

But the advantage, she adds, is that the industry is poised to reinvent itself.

“That’s the positive part,” she says. “There’s a lot of ideas and willingness to experiment ... to try new things.”

Still, the image of the industry is that of sand in an hourglass, the report proposes. “The shrinking money left in print…is the amount of time left to invent new revenue models online. The industry must find a new model before the money runs out.”