The U.S. Newspaper Industry in Transition
Suzanne M. Kirchhoff
Analyst in Industrial Organization and Business
July 8, 2009
Congressional Research Service
7-5700
www.crs.gov
R40700
CRS Report for Congress
P
repared for Members and Committees of Congress
The U.S. Newspaper Industry in Transition
Summary
The U.S. newspaper industry is suffering through what could be its worst financial crisis since the
Great Depression. Advertising revenues are plummeting due to the severe economic downturn,
while readership habits are changing as consumers turn to the Internet for free news and
information. Some major newspaper chains are burdened by heavy debt loads. In the past year,
seven major newspaper chains have declared bankruptcy, several big city papers have shut down,
and many have laid off reporters and editors, imposed pay reductions, cut the size of the physical
newspaper, or turned to Web-only publication.
As the problems intensify, there are growing concerns that the rapid decline of the newspaper
industry will impact civic and social life. Already there are fewer newspaper reporters covering
state capitols and city halls, while the number of states with newspapers covering Congress full-
time has dwindled to 23 from the most recent peak of 35 in 1985.
As old-style, print newspapers decline, new journalism startups are developing around the
country, aided by low entry costs on the Internet. The emerging ventures hold promise but do not
have the experience, resources, and reach of shrinking mainstream newspapers.
Congress has begun debating whether the financial problems in the newspaper industry pose a
public policy issue that warrants federal action. Whether a congressional response to the current
turmoil is justified may depend on the current causes of the crisis. If the causes are related to
significant technological shifts (the Internet, smart phones and electronic readers) or societal
changes that are disruptive to established business models and means of news dissemination, the
policy options may be quite limited, especially if new models of reporting (and, equally
important, advertising) are beginning to emerge. Governmental policy actions to bolster existing
businesses could stall or retard such a shift. In this case, policymakers might stand back and allow
the market to realign news gathering and delivery, as it has many times in the past. If, on the other
hand, the current crisis is related to the struggle of some major newspapers to survive the current
recession, possible policy options to ensure the continuing availability of in-depth local and
national news coverage by newspapers might include providing tax breaks, relaxing antitrust
policy, tightening copyright law, providing general support for the practice of journalism by
increasing funding for the Corporation for Public Broadcasting (CPB) or similar public programs,
or helping newspapers reorganize as nonprofit organizations. Policymakers may also determine
that some set of measures could ease the combination of social and technological transition and
the recession-related financial distress of the industry.
Congressional Research Service
The U.S. Newspaper Industry in Transition
Contents
Introduction ................................................................................................................................ 1
Industry History .......................................................................................................................... 2
Industry Conditions..................................................................................................................... 4
Industry Cost Cutting: Key to Survival? ................................................................................ 4
Declining Advertising Revenues, Recession, and the Internet ................................................ 5
Other Factors ........................................................................................................................ 7
Alternative News Sources ..................................................................................................... 9
Rise of the Web........................................................................................................................... 9
Interdependence ........................................................................................................................ 13
Searching for New Business Models ................................................................................... 16
Nonprofits........................................................................................................................... 18
Public Policy Issues .................................................................................................................. 20
Congressional Action ................................................................................................................ 21
Industry Proposals............................................................................................................... 21
Supporting the General Practice of Journalism .................................................................... 22
Figures
Figure 1. Change in National Advertising Spending, 2007-2008 .................................................. 6
Figure 2. Newspaper Advertising Revenues from 2003- 2008.................................................... 14
Tables
Table 1. Daily Print Newspaper Readership................................................................................. 3
Table 2. Top 20 U.S. Newspapers: Print Circulation .................................................................. 10
Table 3. Newspaper Website Readership.................................................................................... 12
Contacts
Author Contact Information ...................................................................................................... 23
Congressional Research Service
The U.S. Newspaper Industry in Transition
Introduction
The U.S. newspaper industry is in the midst of a historic restructuring, buffeted by a deep
recession that is battering crucial advertising revenues, long-term structural challenges as readers
turn to free news and entertainment on the Internet, and heavy debt burdens weighing down some
major media companies. As the distress mounts—seven U.S. newspaper companies have filed for
bankruptcy in the past year—lawmakers are debating possible legislation to assist the industry.
Additionally, the Federal Trade Commission (FTC) will hold a series of workshops beginning in
September 2009 to look at challenges facing newspapers, television, and radio in the Internet
age.1
Publishers are experimenting with new business approaches, but there is no widely agreed-upon
model to restore the link between newspaper content and earnings, which has been partially
severed on the Internet. Newspapers depend on advertising for about 80% of revenues. Even after
investing major sums in technology, and attracting millions of online readers, less than 10% of
overall newspaper ad dollars are Internet-driven.2 At the same time, print readership is falling,
further cutting into subscription and advertising revenues (see Table 1). Vin Crosbie, a noted
Syracuse University professor and consultant, has predicted that more than half the approximately
1,400 daily newspapers in the country could be out of business by the end of the next decade.3
Concerns extend beyond the tens of thousands of reporters and editors losing their jobs. A robust,
free press has been viewed by many as an essential check on government and business since the
early days of the Republic. “The only security of all is in a free press,” Thomas Jefferson wrote in
1823.4 House Speaker Nancy Pelosi, in a March letter to the Justice Department, argued that
current problems in the newspaper sector pose a significant challenge to democracy.5
Despite First Amendment sensitivities, Congress has intervened in the past to assist newspapers
and other media, building a broad record of regulation and support. Federal actions include the
1970 Newspaper Preservation Act, providing limited exemption from antitrust law; laws
allocating the public airwaves;6 copyright and fair content regulation;7 postal subsidies;8 and
financial aid through the Corporation for Public Broadcasting (CPB) and indirectly through the
National Endowment for the Humanities (NEH).9 Congress has ratified treaties governing fair use
1 Federal Trade Commission, “Extra! Extra! FTC Announces Workshop: ‘Can News Media Survive the Internet Age?
Competition, Consumer Protection, and First Amendment Perspectives,’” May 19, 2009.
2 Pew Research Center’s Project for Excellence in Journalism, The State of the News Media 2009: An Annual Report on
American Journalism. http://www.stateofthemedia.org/2009/index.htm.
3 Crosbie, Vin, “Transforming American Newspapers,” Corante, Aug. 20, 2008. http://rebuildingmedia.corante.com/
archives/2008/08/20/transforming_american_newspapers_part_1.php.
4 Thomas Jefferson to Lafayette, 1823. The Writings of Thomas Jefferson, Memorial Edition (Lipscomb and Bergh,
editors) 20 Vols., Washington, D.C., 1903-04, Vol. 15, p. 491. See University of Virginia Library, Thomas Jefferson
Digital Archive, Freedom of the Press. http://etext.virginia.edu/jefferson/quotations/jeff1600.htm#Top.
5 Letter from Nancy Pelosi, Speaker of the House, to the Honorable Eric Holder, Attorney General, March 16, 2009.
6 CRS Report R40009, Fairness Doctrine: History and Constitutional Issues, by Kathleen Ann Ruane.
7 CRS Report R40194, The Google Library Project: Is Digitization for Purposes of Online Indexing Fair Use Under
Copyright Law?, by Kate M. Manuel.
8 CRS Report R40162, Postage Subsidies for Periodicals: History and Recent Developments, by Kevin R. Kosar.
9 CRS Report RS22168, The Corporation for Public Broadcasting: Federal Funding Facts and Status, by Mark
Gurevitz and Glenn J. McLoughlin.
Congressional Research Service
1
The U.S. Newspaper Industry in Transition
of intellectual property on the Internet,10 and, in the 111th Congress, the House has considered and
passed the Free Flow of Information Act of 2009 (H.R. 985) to give journalists a right to withhold
information in grand jury proceedings.11 The bill was referred to the Senate Judiciary Committee.
Congress is now debating whether current financial problems, which have been most acute at
large, general-interest daily papers, pose a public policy issue that requires federal action. If the
answer is “yes,” options might include aiding existing newspapers as they grapple with the
transition to a digital news world; supporting the practice of journalism writ large; or taking a
hands-off approach to allow what might arguably be a major social, political, and technological
realignment in the way Americans choose to inform themselves about local, state, and national
news. Lawmakers have so far expressed little interest in a broad bailout of the industry, similar to
aid for the automobile or financial sectors. Senator Benjamin Cardin, who has introduced S. 673
to make it easier for newspapers to reorganize as nonprofit organizations, has said he does not
support a financial rescue for newspapers.12 The bill was referred to the Senate Finance
Committee.
There are critics of government action. Ken McIntyre, of the Heritage Foundation, has argued
that nonprofit status could “de-fang” the press, by preventing newspapers from endorsing
candidates or taking positions against whatever political party was in power.13 McIntyre endorses
the concept of a technology shift of Gutenberg proportions, citing media expert Clay Shirky: “...
We’re collectively living through 1500, when it’s easier to see what’s broken than what will
replace it ... Society doesn’t need newspapers. What we need is journalism.”14
Industry History
The newspaper industry has gone through prior periods of boom and bust. The popular press took
off in the 1830s with the creation of the so-called penny press: inexpensive papers that were sold
by street vendors, instead of the previous up-front subscription model.15 The industry grew in
importance, profitability, and influence, including the rise of sensationalistic “yellow journalism”
in the late 1800s.
During the Great Depression, plunging revenues and competition from the emerging technology
of radio hurt newspapers. Newspaper advertising revenue fell 45% from 1929 to 1933, and was
still down 20% in 1941. Hundreds of newspapers went out of business or suspended operations,
while a third of newspaper salaried workers lost their jobs. Radio increased in importance and
was the only media segment that realized gains in advertising during the Depression.16
10 CRS Report RL34292, Intellectual Property Rights and International Trade, by Shayerah Ilias and Ian F. Fergusson.
11 CRS Report RL34193, Journalists’ Privilege: Overview of the Law and Legislation in the 110th and 111th
Congresses, by Henry Cohen and Kathleen Ann Ruane.
12 Cardin, Benjamin, “A Plan to Save Our Free Press,” Washington Post, April 3, 2009, p. A19.
13 McIntyre, Ken, “Death of Newspapers Does Not Mean the End of Journalism,” U.S. News and World Report, May 8,
2009.
14 Ibid.
15 Emery, Edwin and Michael Emery, The Press and America: An Interpretive History of the Mass Media, Fourth
Edition. Englewood Cliffs, NJ: Prentice-Hall, 1978. pp, 119-123.
16 Ibid., pp. 399-400, p. 428, p. 436.
Congressional Research Service
2
The U.S. Newspaper Industry in Transition
With the rise of television, the newspaper business faced another major transformation. In the
1960s, television surpassed newspapers as a source of information, and TV networks became
more adept at capturing national advertising.17 Thereafter, the newspaper sector consolidated as
family-owned papers were bought by growing chains. Between 1960 and 1980, 57 newspaper
owners sold their properties to Gannett Co. By 1977, 170 newspaper groups owned two-thirds of
the country’s 1,700 daily papers. From 1969 to 1973, 10 newspaper companies went public,
including the Washington Post Co., New York Times Co., and Times Mirror Co.18
Table 1. Daily Print Newspaper Readership
Percentage of Total Adults Who Read a Print Newspaper on a Weekday
Year
Percentage of Total Adults
Percentage of Men
Percentage of Women
1998 58.6
62.2
55.2
1999 56.9
60.6
53.4
2000 55.1
58.8
51.7
2001 54.3
57.5
51.3
2002 55.4
58.2
52.8
2003 54.1
56.8
51.5
2004 52.8
55.5
50.2
2005 51.6
54.1
49.2
2006 49.9
52.3
47.6
2007 48.4
51.0
45.9
Source: Scarborough Research Top 50 Market Report 1998-2007, prepared by Newspaper Association of
America.
As chain ownership grew an increasing number of cities became one-paper towns, leading to
concerns about lack of competition and a diminished watchdog role for the media—similar to
worries voiced today. In 1910, nearly 60% of cities had competing daily papers. By 1930, that
figure had fallen to 21%, and by 1971 to 2%.19
Some local papers around the country tried to combat the economic stresses by pooling
advertising and circulation operations. The U.S. Supreme Court in the 1969 decision United
States v. Citizen Publishing Co. ruled against such arrangements. In response, Congress passed
the Newspaper Preservation Act of 1970 (P.L. 91-353; 15 U.S.C. 43).20 The law provided a
limited antitrust exemption for certain newspapers that combined financial functions but
maintained separate newsrooms. While there were 25 to 30 such agreements in force at any one
time in recent decades, just a handful remain today, and they have not been sufficient to save
17 Matthei, Harry, “Inventing the Commercial: the imperium of modern television advertising was born in desperate
improvisation,” American Heritage, May/June 1997, Volume 48, Issue 3.
18 Neiva, Elizabeth M., “Chain Building: The Consolidation of the American Newspaper Industry, 1955-1980,”
Business and Economic History, Volume 24, No. 1, Fall 1995.
19 Report of the Assistant Attorney General in Charge of the Antitrust Division, In the Matter of: Application by the
E.W. Scripps Co. and MediaNews Group Inc. For Approval of a Joint Operating Agreement Pursuant to the Newspaper
Preservation Act, File No. 44-03-24-15 (September 8, 2000), p. 16-17.
20 Ibid.
Congressional Research Service
3
The U.S. Newspaper Industry in Transition
some weakening newspapers.21 The Seattle Post-Intelligencer, Minneapolis Star Tribune, Rocky
Mountain News, and Tucson Citizen—papers that were part of joint operating agreements—
recently closed, declared bankruptcy, or moved to Web-only production.
The increasing importance of cable television in the 1980s had a far-reaching impact on
newspapers, as consumers turned to 24-hour cable news stations for information. Still, many
newspapers continued to enjoy extremely profitable, quasi-monopoly status in their communities.
Major newspaper companies posted double-digit returns on equity (profit compared to average
shareholder equity) through most of the current decade. Profits peaked at 22.7% in 2000 and
declined to just over 10% in 2008, as newspaper companies instituted severe budget cuts and
layoffs.22 Cash flow margins for big, public newspaper companies reached their high in the late
1990s at 29%, an average that declined to 13% in 2008 with large differences from paper to
paper.23
Industry Conditions
There are now about 1,400 daily newspapers in the United States and thousands of community
papers, which generally publish weekly or biweekly. A handful of papers, including the Wall
Street Journal, USA TODAY, and the New York Times, have a national print readership topping a
million or more.24 The top 50 papers account for about a third of circulation, among them the big
city papers that had some of the largest circulation declines last year.25 Overall, the newspaper
industry, including printers, reporters, advertising salespeople and other personnel, was a roughly
$50 billion business in 2002, according to Census Bureau data, employing about 400,000
people.26
Industry Cost Cutting: Key to Survival?
For the traditional, general-interest print newspapers analyzed in this report, labor makes up about
50% of costs, with production and distribution accounting for 30% and other expenses for the
rest.27 Newspapers have taken dramatic steps to cut costs as their financial picture has worsened,
including trimming the size of the print newspaper, eliminating staff, or reducing the number of
days the print newspaper is delivered to subscribers.
21 Jones, Fredrick, “The Newspaper Preservation Act: Is it a Necessary Loophole in Antitrust Laws?,” paper presented
at the Annual Meeting of the Association for Education in Journalism, August 8-11, 1981. Farhi, Paul, “The Death of
the JOA,” American Journalism Review, September 1999.
22 Morton, John, “Not Dead Yet,” American Journalism Review, June/July 2009 issue.
23 Fine, Lauren Rich, “Bad Public Relations or Is This a Real Crisis?: YES,” Duke Conference on Nonprofit Media,
May 4-5, 2009. http://www.pubpol.duke.edu/nonprofitmedia/documents/dwcrichfinefinal.pdf.
24 Audit Bureau of Circulations, “Circulation Averages for the Six Months Ended March 31, 2009.”
http://abcas3.accessabc.com/ecirc/newstitlesearchus.asp.
25 Pew Research Center’s Project for Excellence in Journalism, The State of the News Media 2009: An Annual Report
on American Journalism. http://www.stateofthemedia.org/2009/index.htm.
26 U.S. Census Bureau, Industry Statistics Sampler, NAICS 511110, Newspaper Publishers.
27 Fine, Lauren Rich, “Bad Public Relations or Is This a Real Crisis?: YES,” Duke Conference on Nonprofit Media,
May 4-5, 2009.
Congressional Research Service
4
The U.S. Newspaper Industry in Transition
Daily papers cut their newsrooms by 11% in 2008, the biggest one-year drop since 1978. Daily
newsroom staffing is off 17% from the recent, 2001 peak of 56,400.28 According to Erica Smith, a
reporter with the St. Louis Post-Dispatch, nearly 10,000 journalists were laid-off or took buyouts
in the first five months of 2009 alone.29 The number of reporters covering state legislatures in
2009 is down more than 30% from 2003.30 The number of papers seeking press credentials for
Washington-based reporters is two-thirds below the levels of the 1980s. (However, the total
number of daily reporters seeking credentials remained basically steady due to an increase in
foreign press and specialty publications targeted at specific industries or niche markets.31)
Newspapers from 23 states had Washington-based reporters in 2008, compared to 35 in 1985.32
Declining Advertising Revenues, Recession, and the Internet
On the other side of the ledger, retail, classified, and national ads account for 80% of newspaper
revenues. Subscriptions and newsstand sales make up most of the rest. Sunday newspapers, with
their bulky ad inserts and extra sections, along with papers published later in the week, can
account for more than half of newspaper print dollars.33 Underscoring the importance of the
Sunday paper, the Atlanta Journal Constitution has launched an advertising campaign called
“Unplug. It’s Sunday,” asking readers to buy the Sunday print edition, rather than read the paper
online.34
The traditional advertising model for years generated healthy profits, subsidized expensive
foreign, investigative, and other reporting and helped keep subscription and newsstand prices low.
But the model is breaking down. Newspapers have seen a dramatic drop in advertising during the
recession. While other media have also been hurt, newspapers have had some of the sharpest
declines (see Figure 1). The situation appears to be getting worse. TNS Media Intelligence says
newspaper ad revenue fell by 25.5% in the first quarter of 2009, compared to a year earlier.
The Pew Research Center’s Project for Excellence in Journalism estimates that about half the
recent drop in advertising is due to the poor economy, as auto dealers go out of business and other
retailers cut back.35 But it is not clear that most of those ad dollars will come back when business
activity revives. Newspapers are also in the throes of long-term, structural changes as readers and
advertisers move to the Internet. While newspapers’ online presence is surging, Internet revenues
28 “U.S. newsroom employment declines,” American Society of News Editors, April 16, 2009. http://www.asne.org/
index.cfm?id=1138.
29 Johnston, David Cay, “Welcome to the Jungle: Journalists, meet the all-or-nothing job market,” Columbia
Journalism Review, May 22, 2009; Smith, Erica, “Layoffs and buyouts at U.S. newspapers in 2009,” Paper Cuts.
http://graphicdesignr.net/papercuts.
30 Dorroh, Jennifer, “Statehouse Exodus,” American Journalism Review, April/May 2009. http://www.ajr.org/
Article.asp?id=4721.
31 Pew Research Center’s Project for Excellence in Journalism, The New Washington Press Corps: As Mainstream
Media Decline, Niche and Foreign Outlets Grow, February 11, 2009, p. 2. http://www.journalism.org/analysis_report/
new_washington_press_corps.
32 Ibid.
33 Pew Research Center’s Project for Excellence in Journalism, The State of the News Media 2009: An Annual Report
on American Journalism. http://www.stateofthemedia.org/2009/index.htm.
34 See the Atlanta Journal Constitution website: http://media.ajc.com/unplugsunday/?cxnsid=ajcse51992.
35 Pew Research Center’s Project for Excellence in Journalism, The State of the News Media 2009: An Annual Report
on American Journalism. http://www.stateofthemedia.org/2009/index.htm.
Congressional Research Service
5
The U.S. Newspaper Industry in Transition
lag far behind Internet readership. Currently, less than 10% of newspaper company ad revenues
are earned online.
Figure 1. Change in National Advertising Spending, 2007-2008
10
5
0
Television
Magazine
Newspaper
Internet
Radio
Outdoor
-5
-10
-15
-20
Source: TNS Media Intelligence.
Notes: Indicates average percentage decline/increase in Q4 2008 compared to Q4 2007.
In one example, classified advertising, which accounted for about 50% of ad revenues for many
papers at its peak in 2008,36 has gravitated from print to specialized websites like Craigslist and
auto, real estate, and help wanted sites.37 Media companies have tried various strategies to hold
on to the classified market, with big chains like McClatchy, the Tribune Co., the Washington Post
Co., A.H. Belo, and Gannett Co. jointly owning Classified Ventures, which runs sites like
cars.com and homegain.com.38 A coalition of media firms created CareerBuilder.com, a job
placement site.39 The sour economy has, at least temporarily, undercut those efforts, with the
36 Fine, Lauren Rich, “Bad Public Relations or Is This a Real Crisis?: YES,” Duke Conference on Nonprofit Media,
May 4-5, 2009, p. 11.
37 Vogel, Harold L., Entertainment Industry Economics: A Guide for Financial Analysis, Sixth Edition, Cambridge:
University Press, 2004, p. 318.
38 Learmonth, Michael, “Newspapers Build Digital Portfolios,” Advertising Age, May 5, 2009.
39 Gannett, the Tribune Co., McClatchy, and Microsoft own Careerbuilder.com. http://www.careerbuilder.com/share/
aboutus/profile_main.aspx.
Congressional Research Service
6
The U.S. Newspaper Industry in Transition
volume of classified ads plunging online and in print. Nationally, classified help-wanted ads fell
67.4% in the first quarter of 2009.40
Other Factors
Another reason the newspaper industry is in trouble: red ink. Some large newspaper companies
took on significant debt shortly before the economic downturn hit. Real estate developer Sam
Zell, for instance, took the Tribune Co.—one of the nation’s most prominent newspaper chains—
private in 2007 in a leveraged $8.2 billion deal he later called a mistake.41 The Tribune Co., now
in bankruptcy, has imposed large staff reductions, consolidated operations, and taken other steps
to reorganize.
In 2006, McClatchy Co. bought newspaper chain Knight Ridder for more than $4 billion. In May
2009, the company offered to buy back more than $1 billion of its debt at a discount.42 Lee
Enterprises, a newspaper publishing company based in Davenport, Iowa, in its first quarter 2009
report, noted that to secure new lines of credit, it had agreed, among other things, to limit capital
spending.43
Legacy costs are a complicating factor. Many newspapers have traditional, defined-benefit
pension plans, which now appear underfunded due to large losses in market investments.
McClatchy, in its 2009 first quarter earnings report, noted it will have to make bigger cash
contributions to its pension plans in coming years than previously expected, due to poor market
returns and changes in pension law. The company cautioned investors that “the contributions will
place additional strain on the company’s liquidity needs.”44
Investors have soured on newspapers. Some large newspaper companies saw their stock prices
drop by more than 80% last year—far beyond the overall decline in the publishing industry and
various stock indices. Newspaper stock prices rebounded a bit in 2009, but are still near historic
lows.45 With revenues declining and their ability to raise new capital impaired, some newspaper
companies are in danger of breaching financing agreements with their lenders. If that happens,
lenders could terminate lines of credit and call in existing loans.
Overall, seven newspaper companies have declared bankruptcy in the past year:
• The Tribune Co., which publishes the Chicago Tribune, Los Angeles Times,
Baltimore Sun, and five other large metro daily papers;
• Philadelphia Newspapers LLC, which publishes the Philadelphia Inquirer and
the Philadelphia Daily News;
40 Reflections of a Newsosaur, “Worst Quarter for Newspapers: Sales dive $2.6B,” http://newsosaur.blogspot.com/
2009/06/worst-quarter-for-newspapers-sales-dive.html.
41 Miles, Greg and Brian Louis, “Billionaire Zell Says ‘I Made a Mistake’ in Purchasing Tribune,” Bloomberg.com,
April 15, 2009.
42 McClatchy Co., “McClatchy announces private debt exchange offer for $1.150 billion of debt securities,” Press
Release, May 21, 2009.
43 Securities and Exchange Commission. Form 10-Q filed by Lee Enterprises for the period ended Mar 29, 2009.
44 Securities and Exchange Commission Form 10-Q, filed by McClatchy Co. for the period ended Mar 29, 2009.
45 Pew Research Center’s Project for Excellence in Journalism, The State of the News Media 2009: An Annual Report
on American Journalism. http://www.stateofthemedia.org/2009/index.htm.
Congressional Research Service
7
The U.S. Newspaper Industry in Transition
• Sun-Times Media Group, which owns the Chicago Sun Times and suburban
papers;
• Star Tribune Holdings Co., which owns the Star Tribune of Minneapolis;
• Journal-Register Co., which owns the New Haven Register, Trentonian and Daily
Local News of West Chester, Pa., among other papers;
• American Community Newspapers, which publishes the Stillwater (MN). Gazette
and the Plano Star Courier, in addition to non-daily papers in four states; and
• Creative Loafing, which publishes alternative newspapers including the Chicago
Reader, Washington City Paper, and others.46
The New York Times also threatened to close the Boston Globe, without major wage concessions.
While the distress is acute, the problems are not uniform. Some large companies such as Gannett
remain profitable.47 Declining circulation numbers reflect, in part, a conscious effort by some
papers to reduce printing and other costs by moving to online-only editions or shrinking their
delivery area. The Detroit News and Detroit Free Press, which are combined in a joint operating
agreement, cut daily delivery of the print newspapers to three days a week.48 Newspapers have
started their own ad campaign to promote the industry.49
Smaller community papers generally have not experienced as severe a falloff in staff and
revenues as big, metro dailies, though they are taking increasingly large hits as the downturn
continues. Ad revenue at community papers was down about 18.7% in the first quarter of 2009,
compared to an average decline of 28.8% at bigger papers.50 Newspaper analyst John Morton
estimates there are about 1,000 smaller daily papers, with circulations under 50,000, that remain
profitable. Smaller papers are in a better financial position than large dailies for several reasons.
Smaller papers are less dependent on classified ads, operate in less complex markets, and tend to
be closer to their readers and advertisers than large dailies.51
The University of Missouri-Columbia, in an annual survey for community papers, found high
brand loyalty, a preference for the print product, and less Internet competition than at big city
papers. The most recent study looked at weekly community papers located in markets of 25,000
or less.52
46 Fitzgerald, Mark, “And Then There Were 7: American Community Newspapers Files for Bankruptcy,” Editor and
Publisher, April 28, 2009 http://www.editorandpublisher.com/eandp/news/article_display.jsp?vnu_content_id=
1003967275.
47 “Gannett Co., Inc. Reports First Quarter Results,” News Release, April 16, 2009 http://www.gannett.com/news/
pressrelease/2009/1Q09.pdf; Lane, Nancy, “Community Newspapers Report 4th Quarter Results; Continue to
Outperform Industry,” Suburban Newspapers of America, March 3, 2009. http://www.suburban-news.org/News/
SNANewsDetail.aspx?ID=100317.
48 Press Release From Detroit Media Partnership, Dec. 16, 2008 http://www.freep.com/article/20081216/
BUSINESS06/81216036/.
49 http://news.newspaperproject.org/.
50 Lane, Nancy, “Community Papers Report First Quarter 2009 Results,” Suburban Newspapers of America, June 2,
2009. http://www.suburban-news.org/News/SNANewsDetail.aspx?ID=100335.
51 Morton, John, “Not Dead Yet,” American Journalism Review, June/July 2009 issue.
52 Donald W. Reynolds Journalism Institute’s Center for Advanced Social Research at the Missouri School of
Journalism at the University of Missouri, “2008 Community Newspaper Study,” with the National Newspaper
Association.
Congressional Research Service
8
The U.S. Newspaper Industry in Transition
Alternative News Sources
As traditional, print newspapers take a financial beating, new media sources are rising on the
Internet, helped by low entry costs. Alternative sources of news and information are becoming
available to a potentially vast audience via an increasing number of wired and wireless devices
(including wireless netbooks, wireless phones, and amazonkindle®-style wireless e-readers).
Emerging news organizations include a growing number of foundation-funded projects focused
on investigative reporting, in-depth health policy news, and local reporting. Examples include
ProPublica (ProPublica.org), Kaiser Health News, and Voice of San Diego.53 GlobalPost is a for-
profit enterprise, focused on international reporting, that relies on advertising, syndication to
newspapers, and paid membership (http://www.globalpost.com).
But even the most promising startups do not have anywhere near the resources of major city daily
papers, leading to concerns that important news will go uncovered. The decline of print
newspapers also has other, indirect impacts. Many radio and television stations piggyback on
reporting done by much larger newspaper staffs, both locally and nationally, and will be hard-
pressed to pick up the slack—especially as they impose their own cost-cutting in response to
falling revenues. For example, the Dallas Morning News, which is owned by A. H. Belo, has
more reporters in that city than the ABC, NBC, CBS and Fox television affiliates combined.54
So far, no one has come up with a workable strategy for garnering sufficient advertising or
subscription revenues on the Internet, or through a hybrid print/online model, that would enable
many troubled newspapers to continue at current staffing levels, or keep providing the same
broad array of news, from recipes to foreign affairs to sports and local politics. Papers are
experimenting, from charging “micropayments” for select content on the Internet to suggesting
revenue-sharing with online search engines, such as Google, to cracking down on unauthorized
reproduction of their content and creating their own spin-off websites and Web portals. Broadcast
outlets are starting print and Web-based products in markets where newspapers are on the
decline.55 Many newspapers are increasing subscription prices for their traditional print editions.
Typically, new business models are slowly introduced as old ones become less viable. But the
current, deep recession, by cutting into newspaper earnings, has compressed the time period for
developing new business plans and limited the amount of money newspapers have to devote to
current operations, let alone craft sweeping initiatives.
Rise of the Web
For now, the key challenge for newspapers is to hold on to lucrative print readers, while finding
ways to make more money from a growing online audience that generally reads the paper for
53 http://www.propublica.org/; http://www.kaiserhealthnews.org/; http://www.voiceofsandiego.org/.
54 Testimony of James M. Moroney III, Committee on Commerce, Science and Transportation, Subcommittee on
Communications, Technology and the Internet. Hearing on The Future of Journalism: Communications, Technology,
and the Internet. May 6, 2009. http://commerce.senate.gov/public/index.cfm?FuseAction=Hearings.Testimony&
Hearing_ID=7f8df1a5-5504-4f4c-ba34-ba3dc3955c61&Witness_ID=8406bab3-0f6f-422c-a805-c02103bb8ba5.
55 Malone, Michael, “Stations Search for Gold in a Post-Newspaper Landscape,” Broadcasting & Cable, May 2, 2009.
http://www.broadcastingcable.com/article/231044Cover_Story_Stations_Search_for_Gold_In_a_
Post_Newspaper_Landscape.php.
Congressional Research Service
9
The U.S. Newspaper Industry in Transition
free. Print circulation for daily papers fell by 13.5% from 2001 to 2008, and 17.3% for Sunday
editions.56 Losses are mounting. Average daily newspaper print circulation fell 7% alone during
the six-month period ending March 31, 2009, compared to the same period in 2008 (see Table
2).57
Table 2. Top 20 U.S. Newspapers: Print Circulation
(Six-Month Period Ending in March 2009)
Six Months
Daily Print
Ending March
Newspaper
Circulation
2009
USA TODAY
2,113,725
-7.46%
The Wal Street Journal
2,082,189
0.61%
The New York Times
1,039,031
-3.55%
Los Angeles Times
723,181
-6.55%
The Washington Post
665,383
-1.16%
New York Daily News
602,857
-14.26%
New York Post
558,140
-20.55%
Chicago Tribune
501,202
-7.47%
Houston Chronicle
425,138
-13.96%
The Arizona Republic
389,701
-5.72%
The Denver Post
371,728
NA
Newsday
368,194
-3.01%
The Dal as Morning News
331,907
-9.88%
Minneapolis Star-Tribune
320,076
-0.71%
Chicago Sun-Times
312,141
-0.04%
San Francisco Chronicle
312,118
-15.72%
The Boston Globe
302,638
-13.68%
Cleveland Plain Dealer
291,630
-11.70%
Detroit Free Press
290,730
-5.90%
The Philadelphia Inquirer
288,298
-13.72%
Source: Nielsen Online and Editor & Publisher.
Notes: Figures are for six months ending in March 2009 compared to same period in March 2008. Averages are
for Monday-Friday readership.
As print circulation declines, online readership is soaring. U.S. newspaper websites averaged
more than 73 million individual visitors a month in the first quarter of 2009, up 10.5% from the
56 Pew Research Center’s Project for Excellence in Journalism, The State of the News Media 2009: An Annual Report
on American Journalism, http://www.stateofthemedia.org/2009/index.htm.
57 Audit Bureau of Circulations, April 27, 2009. http://abcas3.accessabc.com/ecirc/newstitlesearchus.asp; Saba,
Jennifer, “New FAS-FAX Shows (More) Steep Circulation Losses,” Editor and Publisher, April 27, 2009.
Congressional Research Service
10
The U.S. Newspaper Industry in Transition
same period in 2008 (see Table 3).58 Newspapers are attracting online readers from well beyond
their local communities, including other cities and countries.
Newspaper executives point to surging online readership as an endorsement of their product,
saying public interest in news has increased, not diminished. But readership trends are complex,
as habits and preferences evolve in response to the enormous array of information available on
the Internet, television, and through devices such as hand-held readers and cell phones. Though
readers want news, they do not necessarily want it from a traditional paper, and are using multiple
sources. For example, there is just one newspaper in the top five news websites, as measured by
Nielsen Online. The biggest news websites, in descending order are: MSNBC Digital Network,
CNN Digital Network, Yahoo! News, AOL News, and NYTimes.com. MSNBC had nearly twice
the online audience of the New York Times.59
Consumer demand and technology are changing the way news is read and offered. Most
newspapers offer a general package of sports, entertainment, business, and national stories, with
editors signaling the importance of the news by its placement in the physical paper. Today,
websites like Google or Yahoo are mimicking the job of editors, by using sophisticated computer
programs to automatically compile links to content from newspapers, wire services, blogs, and
other sources from around the world. Other so-called aggregators run websites that mix links to
newspapers’ stories with some original content, and bloggers frequently mingle newspaper and
other reporting with their own commentary and insights. Increasingly individual stories are
displayed on the Web as discrete products, separate from a broader newspaper.
About 22% of readers who visited newspaper websites in March arrived indirectly, by first
clicking onto online search engines like Google, with another big share arriving through the front
page of Web portals like Yahoo or MSN, according to one analysis. A separate 22% came from
traffic moving between media and news websites, containing links to specific stories.60 Once
readers arrive at newspaper websites, they spend less time there, on average, than print readers
spend reading a traditional newspaper, though some studies show that time online has been
increasing. Web readers spend an average of 53 minutes a week with newspapers—or just under
eight minutes a day, according to a study by the Annenberg School of Communication at the
University of Southern California. The study also found, however, that 22% of readers had
recently dropped a paid print newspaper or magazine subscription because they could get the
paper free online.61
58 Newspaper Association of America, “Newspaper Web Site Audience Increases More Than Ten Percent In First
Quarter To 73.3 Million Visitors,” April 23, 2009. http://www.naa.org/PressCenter/SearchPressReleases/2009/
Newspaper-Web-Site-Audience-Increases-More-Than-Ten-Percent.aspx.
59 Nielsen Wire, “MSNBC, CNN Top Global News Sites in March, NY Times Top Paper,” April 21, 2009.
http://blog.nielsen.com/nielsenwire/online_mobile/msnbc-and-cnn-top-global-news-sites-in-march/; Langeveld, Martin,
“Online newspaper audience growth: Good news? Not really,” Nieman Journalism Lab, Harvard University, April 26,
2009. http://www.niemanlab.org/2009/04/online-newspaper-audience-growth-good-news-not-really/#more-4442.
60 Dougherty, Heather, “Online news aggregators—friend or foe?,” Hitwise, April 8, 2009. http://weblogs.hitwise.com/
heather-dougherty/2009/04/online_news_aggregators_friend.html.
61 University of Southern California, Annenberg School for Communication, Annual Internet Survey by the Center for
the Digital Future finds large increases in use of online newspapers, April 29, 2009. http://www.digitalcenter.org/pdf/
2009_Digital_Future_Project_Release_Highlights.pdf. Other studies peg online readership at much lower levels. Data
by Nielsen Online for the National Newspaper Assn. show the more than 70 million unique online readers in April
visited websites an average of eight times and spent 43 minutes online per month. http://www.naa.org/
TrendsandNumbers/Newspaper-Websites.aspx.
Congressional Research Service
11
The U.S. Newspaper Industry in Transition
Table 3. Newspaper Website Readership
Newspaper website readership showed generally strong gains during the past year.
Unique Views in
Change from
Newspaper Website
April 2009
April 2008
New York Times
16,546,000
-8%
Wal Street Journal Online
12,398,000
160%
USA TODAY.com
11,987,000
12%
Washingtonpost.com 10,232,000
8%
LA Times
8,418,000
18%
Boston.com 5,888,000
33%
Daily News Online Edition
5,033,000
73%
New York Post
4,403,000
27%
Chicago Tribune
4,342,000
30%
SFGate.com – San Francisco Chronicle
3,489,000
-9%
Newsday
3,380,000
32%
Politico
3,208,000
83%
The Washington Times
2,772,000
70%
Atlanta Journal Constitution
2,677,000
-3%
The Houston Chronicle
2,659,000
9%
NJ.com 2,658,000
106%
Chicago Sun-Times
2,495,000
-7%
The Seattle Times
2,318,000
39%
MiamiHerald.com 2,192,000
104%
Dal asnews.com – Dal as Morning News
2,166,000
-12%
Baltimore Sun
2,030,000
23%
Star Tribune
1,991,000
40%
Azcentral.com 1,779,000
9%
Source: Nielsen Online. Online traffic can fluctuate widely from month to month.
By contrast, Northwestern University researchers found that consumers who read print
newspapers in 2008 averaged 27 minutes with the paper on weekdays and 57 minutes on
Sundays. Readers peruse their print newspaper about five days a week, completing 60% of the
newspaper on a typical weekday and 62% on Sunday.62
Younger consumers have traditionally had lower readership rates than older consumers, a trend
that is continuing and possibly accelerating, even though young Americans are spending more
time online. Just 5% of teens and 9% of young adults called themselves heavy users of
newspapers in a 2007 survey. At the same time, only 8% of teens and 13% of young adults
62 Peer, Limor, Mary Nesbitt and Bob LeBailly, “Reader Behavior Scores, local daily newspapers, 2008,” Northwestern
University, July 2008. http://www.readership.org/consumers/rbs/data/rbs2008.pdf.
Congressional Research Service
12
The U.S. Newspaper Industry in Transition
reported themselves as heavy consumers of Internet-based news—while the majority of both age
groups termed themselves non-users of news.63 But older Americans may be less loyal readers
than in the past. The Pew Research Center, in a survey of 2008 reading patterns, found 53% of
those in the Silent/Greatest Generation age bracket (born before 1946) reported reading a
newspaper the previous day. A decade earlier, the share was 65%.64
Interdependence
While future growth is clearly online, there is still a huge interdependence between traditional
print, with its tens of millions of readers, and emerging Internet products. Many so-called new
media ventures rely partly on print advertising for their revenues. The political news publication
Politico makes about 50% of its money from ads in its free print newspaper (published several
times a week), even though it has more than 3 million online readers.65 Web aggregators such as
the Huffington Post or Drudge Report rely on links to information and content from traditional
print newspapers. The combination of a print and Web presence can give a paper a potent reach.
In 81 local markets studied by Scarborough Research, 75% of adults read the paper weekly in
print or online.66
For a time it appeared the traditional advertising model might work for online news, as Internet
ad revenues started to take off earlier this decade. Those trends have begun to reverse (see Figure
2). Combined newspaper print and online ad revenue was $37.8 billion in 2008, down 23.5%
from the 2003 high of $49.4 billion.67 The 2008 figure includes $34.7 billion from print and $3
billion from online advertising. Though the online figure was an increase from $1.2 billion in
2004, both print and online ad revenues fell last year.
There are a host of reasons why newspapers’ Internet ad revenues have not been more robust,
including the fact that the industry arguably was somewhat slow to embrace the technology. In
1995, a group of nine large media companies formed the New Century Network, with the idea of
pooling resources and competing with online companies. The effort foundered as the companies
disagreed on strategy, and was shut down in 1998.68 Individual companies formed partnerships
with online companies like Amazon.com. The New York Times in 2005 announced TimesSelect,
charging readers for access to prominent editorialists and other content. It ended the venture in
2007. With $10 million in revenues, the Times believed that TimesSelect was a success, but
63 Harvard University, Kennedy School of Government, Young People and News, Joan Shorenstein Center on the Press,
Politics and Public Policy, July 2007, p 11.
64 Pew Research Center for the People & the Press, “Newspapers Face a Challenging Calculus,” February 26, 2009.
65 Information comes from Politico Editor-in-Chief John Harris in a June 27 speech to the Individuated News
Conference, held at the Washington Times, Washington DC.
66 Scarborough Research, “Rochester, Cleveland and Buffalo are Tops for Print/Online Newspaper Readers,” March
25, 2009. http://www.scarborough.com/press_releases/INA%20FINAL%203.25.pdf.
67 Business Analysis and Research, Newspaper Association of America. http://www.naa.org/TrendsandNumbers/
Advertising-Expenditures.aspx (viewed May 25, 2009).
68 Dugan, Ianthe Jeanne, “New-Media Meltdown at New Century,” Business Week, March 23, 1998.
http://74.125.47.132/search?q=cache:9y1hivSDmeQJ:www.businessweek.com/archives/1998/b3570103.arc.htm+
new+media+meltdown+at+new+century+business+week&cd=2&hl=en&ct=clnk&gl=us.
Congressional Research Service
13
The U.S. Newspaper Industry in Transition
decided that “by opening millions of pages to search engines, that traffic growth will continue and
with it, ad revenue growth.”69
Figure 2. Newspaper Advertising Revenues from 2003- 2008
$50
$45
rs
$40
lla
$35
o
f d
$30
o
$25
s
n
$20
$15
illio
b
$10
in
$5
$0
2003
2004
2005
2006
2007
2008
Print Ads
Internet Ads
Source: Newspaper Association of America.
While newspapers were slow to seize the online market, Internet companies like Google, Yahoo
and others have successfully captured tens of billions of advertising dollars. Some media
executives argue that Internet companies that offer advertising on their portals next to news from
other publications, or via search engines that provide readers with headlines and a few lines of
copy from newspaper stories, are unfairly making billions of dollars in advertising revenues at the
expense of newspapers. Internet firms counter that their models fall within standard copyright
law, and provide an essential service to newspapers since the links on their websites direct
millions of readers to newspaper home pages. They also note that newspapers can easily block
content from other sources that aggregate news through simple computer code.70 Many
newspapers themselves aggregate copy from multiple sources, with specialized online newspaper
content by bloggers and columnists that frequently provide links to other media and non-media
products.71
A number of websites go beyond providing a snippet of news articles to running entire stories
from newspapers, without compensation. Media experts suggest this could be a fertile area for
69 Kramer, Staci D., “New York Times to Close TimesSelect Effective Midnight Tuesday; Will Open Last 20 Years of
Archives,” paid.Content.org: The Economics of Content. September 17, 2007. http://www.paidcontent.org/entry/419-
new-york-times-to-close-timesselect-effective-wednesday/.
70 Testimony of Marissa Mayer, Google Vice President, Search Products and User Experience, Senate Commerce,
Science and Transportation Subcommittee on Communications, Technology and the Internet, May 6, 2009.
71 Ibid.
Congressional Research Service
14
The U.S. Newspaper Industry in Transition
newspapers to garner more revenues. Services such as Attributor.com have created computer
programs to help publishers track how their content is being used.72
Some media experts say newspapers have not done enough to engage with readers, who want
more control over the news they read. Major newspapers have had online websites for more than
a decade, but initially created online versions of their print product that in retrospect were too
static for the interactive Web. Most have elected not to charge readers for their online product, on
the premise that doing so tends to reduce audience size and discourage advertisers. There are
some notable exceptions to the model: The Wall Street Journal provides general access to only
part of its website, and has more than a million paying online subscribers and provides its
newspaper subscribers with access to its online subscription site. The Associated Press, a
nonprofit cooperative of more than 1,400 newspapers, has contracted to sell full stories to Internet
firms, including America Online, Google, and Yahoo.
The number of newspaper websites allowing consumer comment, streaming video, and other
interactive features has been rising. At the same time, the number of newspapers requiring readers
simply to register to enter their websites—submitting basic age and geographic data—has
declined as the industry has moved toward an increasingly open platform.73
Even if open access does lure more readers to websites, higher readership alone may not solve the
problem. Online advertisements often sell for just a fraction of the price of print ads. A quarter-
page ad in a print newspaper generally costs about $10 per 1,000 consumers. On the Internet, a
“skyscraper ad” up the side of the screen, or a large banner ad across the top of a screen, can run
$5 to $8 per 1,000 viewers, and some national display ads cost less than $1 per 1,000.74 Ad rates
are also declining as the number of websites competing for consumers’ attention proliferates, the
economy worsens, and companies become more sophisticated about tracking consumers who
view or click on an ad. PubMatic, a private firm that works with 5,500 online publishers,
estimates display ad prices dropped nearly 50% from the end of 2007 to the end of 2008.75
Some publishers have had success getting higher prices for online ad rates, including a group of
about 800 newspapers that have joined in an alliance with Yahoo, which allows cross-selling of
ads on their websites and on Yahoo and more ability to target ads based on consumer data gleaned
through Web visits.76
In another challenge to the traditional ad-based model, U.S. businesses are altering advertising
strategy by developing their own specialized websites as marketing tools to drive traffic to their
stores or products. Consumers now have access to online circulars, such as Coupons.com,
RetailMeNot.com and Coupon Cabin (couponcabin.com).77 Regal Entertainment Group, the top
U.S. movie chain, told investors it has cut its advertising from $13,000 per screen in 1999 to
72 http://www.attributor.com/about_us.php.
73 The Bivings Group, “The Use of the Internet by America’s Newspapers,” December 18, 2008.
http://www.bivingsreport.com/2008/the-use-of-the-internet-by-americas-largest-newspapers-2008-edition/.
74 Borrell, Gordon, CEO of Borrell Associates, a Williamsburg, Va.-based advertising consulting firm.
75 PubMatic, “The Q4 2008 AdPrice Index,” January 2009. http://www.pubmatic.com/adpriceindex/
AdPriceIndex_Quarterly_Q4_08.pdf.
76 Helft, Miguel, Yahoo Teams with Newspapers to Sell Ads, New York Times, Feb. 27, 2009.
http://www.nytimes.com/2009/02/28/technology/internet/28yahoo.html.
77 The Nielsen Co., “The Global Online Media Landscape, Identifying Opportunities in a Challenging Market,” p. 17.
http://nielsen-online.com/emc/0904_report/nielsen-online-global-lanscapefinal1.pdf.
Congressional Research Service
15
The U.S. Newspaper Industry in Transition
$3,000 a screen today. Movie customers are getting more movie and show-time information
online, with newspapers now a second or third choice.78
IBM Global Business Services projects traditional media such as newspapers, radio, and
television will have 32% of the advertising market in 2012, down from 47% in 2002.79
Advertisers are turning to strategies like product placement in films and television, and are trying
to tap into social networks such as Facebook. Companies are using online data to closely track
specific shoppers and tailor products to their needs, raising potential privacy issues.80
Searching for New Business Models
The Harvard Business School has developed a case study, entitled The Newspaper Industry in
Crisis, as a teaching tool “to help students to understand the dynamics of radical industry change
and foster a discussion around potentially viable business models on the internet.” The premise of
the study is that the newspaper’s 19th century business model has been turned upside down by the
near instantaneous dissemination of news through multiple channels. The rapidity of industry
change has forced newspaper executives to make major business decisions with only limited data
and real-world experience.81
Newspapers are increasingly talking about setting up so-called pay walls around parts of their
product. Some experts predict media companies could end up in a net loss position, however,
even if they set low online subscription or individual payment fees.82 James Moroney, publisher
and CEO of the Dallas Morning News, speaking on behalf of newspaper publishers, asked a
Senate Commerce subcommittee in May to give newspapers a limited antitrust exemption so they
could “jointly experiment with innovative content distribution and cost-saving arrangements.”83
Moroney argued that newspapers must act as a group to impose new payments for online content
if their efforts are to be successful. Without joint action, readers will simply turn to other online
information.
But publishers are starting to rework their online strategy even without congressional action.
MediaNews Group, which operates 54 daily papers in 11 states, announced in a May 8, 2009,
memorandum that it will also stop providing unfettered access to its websites, saying the policy
78 Regal Entertainment Investor Day, May 12, 2009. See Reuters Mediafile, “Regal: Movie goers use Web for info, not
Newspapers,” May 13, 2009. http://blogs.reuters.com/mediafile/2009/05/13/regal-movie-goers-use-web-for-info-not-
newspapers/.
79 Berman, Saul, Bill Battino and Karen Feldman, “Beyond Advertising: Choosing a strategic path to the digital
consumer,” IBM Global Business Services, p. 6.
80 CRS Report RL34693, Privacy Law and Online Advertising: Legal Analysis of Data Gathering By Online
Advertisers Such As Double Click and NebuAd, by Kathleen Ann Ruane.
81 Collis, David J., Peter Olson, Mary Furey, The Newspaper Industry in Crisis, Harvard Business School, Case Study #
N2-709-463, March 11, 2009.
82 Langeveld, Martin, “Paying for online news, Sorry but the math just doesn’t work,” Nieman Journalism Lab,
Harvard University, April 3, 2009; Media Café, Mignon Media, “Charging for Online Content? New Updated Figures
for newspapers with a circulation of 50K.” http://mediacafe.blogspot.com/.
83 Testimony of James M. Moroney III, Senate Committee on Commerce, Science and Transportation, Subcommittee
on Communications, Technology and the Internet. Hearing on The Future of Journalism: Communications,
Technology, and the Internet. May 6, 2009. http://commerce.senate.gov/public/index.cfm?FuseAction=
Hearings.Testimony&Hearing_ID=7f8df1a5-5504-4f4c-ba34-ba3dc3955c61&Witness_ID=8406bab3-0f6f-422c-a805-
c02103bb8ba5.
Congressional Research Service
16
The U.S. Newspaper Industry in Transition
was “an injustice” to print subscribers and created the impression that the content had no value.
The company plans to begin charging for select content, create more separation between its
online and print sites, and create a new “local utility site” focused on younger readers with
entertainment, shopping, and other services, according to the memo.84
Publisher Steven Brill and other media investors have announced a venture called Journalism
Online, to create a password-protected website where consumers can buy annual or monthly
subscriptions, day passes, or single articles from major publishers. The company would also
negotiate licensing and royalty fees with search engines and other providers.85 A consortium of
newspapers working with Yahoo to improve ad targeting is seeing some early success.86
Amazon.com has introduced Kindle DX, a larger (9.7-inch screen) version of its popular Kindle
reader. Consumers who buy Kindle readers can purchase monthly subscriptions to the New York
Times, Washington Post, Wall Street Journal, and numerous other major newspapers at rates
ranging from $9.99 to $14.99, which can be hundreds of dollars below the cost of a print
subscription.87
In a small number of cases, papers are turning to Web-only production. Researchers at the City
University of London analyzed a 2007 decision by the Finnish financial daily Taloussanomat to
become the first all-digital newspaper in Europe. The paper ended subscriptions and offered
readers access through the Web, mobile phones, and e-mail. The newspaper reduced costs more
than 50% by eliminating print and delivery cost, and saved additional money by reducing staff.
Revenues plunged by 75%, however, from the loss of print ads and circulation dollars. Online
advertising did not increase as expected. “Although Taloussanomat’s visitor numbers have risen
following their decision to go online-only, the rise has been faltering and markedly less than at
some other online newspapers that retained a print edition.”88
The authors say Taloussanomat’s strategy could work for some troubled papers, but operating
losses need to be high to justify such a dramatic change. In the United States, there are indications
that Web readership has fallen off since the Seattle Post Intelligencer moved to a Web-only
publication.
The Christian Science Monitor was the first national newspaper to move to a Web-only daily
edition. The paper also offers readers the chance to subscribe to a weekly print and daily e-mail
edition. In a recent memo to staff, Christian Science Monitor Editor John Yemma said there were
preliminary signs that the experiment was working. Web readership of national news rose to 1.1
million page views in June from 570,000 the previous month, and overall Web traffic was up 25%
on a year-over-year basis. Circulation of the weekly is now about 50,000. But Yemma said the
paper still needs to find ways to increase reader engagement on the Internet. “We are acquiring
84 MediaNews memo, May 8, 2009. http://www.poynter.org/column.asp?id=45&aid=163508.
85 “Media Leaders Form Journalism Online, LLC,” press release April 14, 2009. http://www.journalismonline.com/.
86 Ives, Nat, “Some Newspapers Booking Local Ads, Thanks to Yahoo,” Advertising Age, May 21, 2009.
87 See http://www.amazon.com/Kindle-Newspapers/b/ref=sa_menu_knews3?ie=UTF8&node=1263068011&pf_rd_p=
328655101&pf_rd_s=left-nav-1&pf_rd_t=101&pf_rd_i=507846&pf_rd_m=ATVPDKIKX0DER&pf_rd_r=
1JJBXJHBAD4E07CYSZDS.
88 Thurman, Neal and Merja Myllylahti, “Taking the Paper out of News: A case study of Taloussanomat, Europe’s first
online-only newspaper,” Graduate School of Journalism, City University, London, 2009.
Congressional Research Service
17
The U.S. Newspaper Industry in Transition
readers, but we must convert them from one-and-done visits via aggregators like Google,” he
wrote.
Newspaper editors met in Illinois in late May under the auspices of the Newspaper Association of
America to discuss general strategy, including options for garnering more revenues from the Web.
Among those presenting at the conference were Brill’s Journalism Online, Attributor, and Alan
Mutter, a Silicon Valley executive who presented a plan for something he calls View Pass, a one-
time registration system for the Web that would track consumers as they move among newspaper
websites. Publishers could collect information on viewers’ habits and preferences, helping them
target ads and charge higher rates.89 The system would be designed to protect consumer privacy.
Mutter said newspapers with accurate data on consumer behavior should be able to generate ad
rates 17 times higher than they can charge for untargeted Internet advertisements.
Some newspaper publishers are trying to diversify their operations to generate additional revenue
streams. Often, however, the companies have branched into other media and Internet ventures
that are also taking a financial hit during the downturn. Gannett, in addition to being the nation’s
largest newspaper chain, owns television stations and is investing in digital products, such as
PointRoll, an Internet ad services business. Still, about 84% of Gannett’s revenues came from
newspaper publishing; digital products accounted for 4% of revenues in 2008.90
The Washington Post Co., which owns the Washington Post and Newsweek, derives more than
two-thirds of its revenues from its Kaplan Inc. educational division and its Cable One cable
division.91 The New York Times Co. in 2008 earned about 87% of its revenues from newspapers,
including the Boston Globe. About.com, a Times-owned website where consumers can seek
advice from experts in areas as diverse as alternative medicine, gardening, and home repair,
contributed about $115 million in non-newspaper revenue.92
Nonprofits
One idea garnering significant attention is organizing or reorganizing newspapers as nonprofit
entities, thus shielding them from taxes on certain income and allowing businesses and
individuals to deduct the cost of subscriptions or to make tax-deductible contributions. Senator
Cardin’s proposal, S. 673, would clarify questions about tax deductibility, allowable advertising,
and other issues, while making it clear that newspapers organized as nonprofits would not be
allowed to make political endorsements.
Newspaper publishers and union representatives have been discussing similar proposals that
would let newspapers organize as low-profit limited liability corporations, known as L3Cs, that
combine aspects of a nonprofit and for-profit business, including a cap on profits. The L3Cs are
allowed in some states.93
89 Mutter, Alan D., “What I recommended to publishers in Chicago,” Reflections of a Newsosaur, June 4, 2009.
http://newsosaur.blogspot.com/2009/06/what-i-recommended-to-publishers-in.html.
90 Standard & Poor’s Stock Report, Gannett Co. Inc., May 23, 2009.
91 Standard & Poor’s Stock Report, Washington Post Co., May 23, 2009.
92 Abernathy, Penelope Muse, “A Nonprofit Model for the New York Times?” Duke Conference on Nonprofit Media,
May 4-5, 2009.
93 Pickard, Victor, Josh Stearns & Craig Aaron, Saving the News: Toward a National Journalism Strategy. Free Press,
(continued...)
Congressional Research Service
18
The U.S. Newspaper Industry in Transition
There are already a number of high profile, nonprofit news organizations operating in the United
States, including the Christian Science Monitor.94 Times Publishing Co., which is owned by the
nonprofit Poynter Institute for Media Studies, an educational institution, publishes the St.
Petersburg Times; Congressional Quarterly; Governing; Tampa Bay Times, a free daily; Florida
Trend, a business magazine; and some community weeklies. After-tax earnings are put back into
the business and into the Poynter Institute, a nonprofit educational institution.95
Publisher Nelson Poynter created the nonprofit structure in the 1970s in part to shield the St.
Petersburg Times from outside corporate raiders and ensure its editorial independence. That
mission appears to have succeeded, but the model is not a guarantee of financial security in a
changing market environment. Just as other educational institutions have seen their endowments
decline, the Poynter Institute is facing financial pressures. The severe housing slump in Florida
has hurt newspaper earnings. The Poynter Institute, which has imposed budget cuts, is in the
process of selling Congressional Quarterly.
The nonprofit model is gaining ground in some areas such as investigative journalism.
Organizations including the Center for Investigative Reporting, the Center for Public Integrity,
and Investigative Reporters and Editors have worked for years to expand and strengthen
investigative reporting through their own projects and by training journalists. ProPublica, which
started operations in 2008, has a staff of more than 30 reporters pursuing investigative stories,
sometimes in conjunction with other media organizations. The field is rapidly expanding, often in
affiliation with colleges and universities, many with their own schools of journalism. There are
investigative reporting centers at Columbia University, Brandeis University, American University,
and Boston University. Another center is supported by the University of Wisconsin. Efforts are
under way to create centers at the University of Washington and at the University of Colorado.96
The Huffington Post, in partnership with Atlantic Philanthropies, created an investigative
reporting project, with an initial $1.75 million budget.
Additional nonprofit models include the Pulitzer Center On Crisis Reporting
(http://www.pulitzercenter.org), which focuses on training and reporting of international news.
MinnPost (http://www.minnpost.com) is a nonprofit news website, as is Chi-Town Daily News
(http://www.chitowndailynews.org).
The Associated Press in June announced it would start delivering stories by the Center for Public
Integrity, the Investigative Reporting Workshop at American University, the Center for
Investigative Reporting, and ProPublica to the more than 1,400 newspapers that are AP
members.97 A few conservative commentators criticized the move, saying the nonprofit
(...continued)
2009. http://www.freepress.net/files/saving_the_news.pdf.
94 The St. Petersburg Times won two Pulitzer Prizes in 2009, one for national reporting and the other for feature
writing. Columbia University News, Columbia University Announces 93rd Annual Pulitzer Prizes In Journalism,
Letters, Drama and Music, April 20, 2009.
95 http://www.hoovers.com/the-poynter-institute/--ID__107699--/free-co-factsheet.xhtml; “The Poynter Institute, What
We Do,” http://www.poynter.org/content/content_view.asp?id=8090.
96 Houston, Brant, Knight Chair in Investigative and Enterprise Reporting, University of Illinois, “The First Draft:
Emerging Models for Regional and State Non-Profit Investigative Journalism Centers,” Duke Conference on Nonprofit
Media, May 4-5, 2009.
97 Associated Press news release “AP to distribute content from nonprofit journalism organizations,” June 13, 2009
06/13/2009 http://www.ap.org/pages/about/pressreleases/pr_061309a.html.
Congressional Research Service
19
The U.S. Newspaper Industry in Transition
organizations were funded by politically liberal donors and their work amounted to advocacy
rather than journalism.98
Public Policy Issues
Some observers suggest that escalating problems in the newspaper industry could have broad
social and civic implications, as fewer reporters monitor increasingly complex decisions by
government and business. A Princeton University analysis published by the National Bureau of
Economic Research found, for example, that the year after the Cincinnati Post closed in 2007,
fewer candidates in the suburbs that had previously been covered by the paper ran for municipal
office, incumbents became more likely to win, and voter turnout fell.99
Alberto Ibarguen, president of the John S. and James L. Knight Foundation, worries that many
Americans will have less access to news, including those in areas not served by high-speed
broadband, the poor, and older readers who are less Web-savvy. News could become more
bifurcated, with significantly less access for many citizens. The Web offers abundant information
on national and international issues. It is also a place where Americans are splintering into self-
defined communities—connected through social networks or shared interests like travel or
sports—whereas mainstream newspapers serve civic societies defined by geographic and political
boundaries.100 “We already live in an era where it is more likely that a high school student can
more easily access information about swine flu or the crisis in Darfur than corruption in city
government or decisions about education in his town,” Ibarguen told a Senate committee in May.
Other observers see the decline of newspapers as part of a natural, even necessary, transition for
an industry that is variously described as having become too liberal, too corporate, too smug, or
too ineffectual and generally in need of a good shaking up. In a market-based economy, some
argue, the best approach is to let new models arise without government direction or interference.
In a recent survey, only 43% of respondents said losing their local newspaper would hurt civic
life in their community “a lot.”101
Mark Potts, a former Washington Post journalist who is now a media consultant and analyst, in a
recent speech and subsequent Web posting, questioned the suggestion that communities will be
bereft of options if major newspapers such as the Baltimore Sun cease operation. At a symposium
in Baltimore he laid out a list of alternative weekly papers, business publications, websites and
blogs that have already arisen to serve local readers.102
98 Sheppard, Noel, “AP to Publish Work of Four Liberal Nonprofits,” NewsBusters, June 13, 2009.
http://newsbusters.org/blogs/noel-sheppard/2009/06/13/ap-publish-work-four-liberal-nonprofits.
99 Schulhofer-Wohl, Sam and Miguel Garrido, “Do Newspapers Matter? Evidence from the Closure of the Cincinnati
Post,” National Bureau of Economic Research, Working Paper 14817, March 2009. http://www.nber.org/papers/
w14817.pdf.
100 Testimony of Alberto Ibarguen, President, John S. and James L. Knight Foundation, Senate Commerce, Science and
Transportation Subcommittee on Communications, Technology, and the Internet, May 6, 2009.
101 “Stop the Presses? Many Americans Wouldn’t Care a Lot if Local Papers Folded,” The Pew Research Center for the
People & the Press, March 12, 2009.
102 Potts, Mark, “Choices in Charm City,” Recovering Journalist, June 3, 2009. http://recoveringjournalist.typepad.com/
recovering_journalist/2009/06/choices-in-charm-city-1.html.
Congressional Research Service
20
The U.S. Newspaper Industry in Transition
Congressional Action
Congress has begun discussing broader issues arising from the transformation of the newspaper
industry, but the debate has not gone beyond the hearing stage. The House Judiciary
Subcommittee on Courts and Competition Policy in April held a hearing on the possibility of
changing antitrust law to allow more collaboration and mergers in the newspaper industry. The
Senate Commerce Subcommittee on Communications, Technology, and the Internet held a
general hearing on the issue in May 2008.
Just as there is no one business model that will return newspapers to the recent era of double-digit
profitability, there does not appear to be any one legislative proposal that will stabilize the
newspaper industry. The issue is further complicated by the fact that government involvement in
the press raises potential conflicts of interest. Reporters and editorialists cover, and often write
stories about, the legislators who are now being asked for help. Elected officials depend on
newspapers for political endorsements and to communicate with their constituents.
Industry Proposals
Newspaper publishers in May, among other things, asked the Senate to temporarily relax antitrust
law to allow them to work together to set a new pricing policy for the Internet and to change tax
law to allow media companies to write off past losses.103
Relaxing federal antitrust law to allow more newspaper mergers or to let newspaper publishers
collaborate on Internet pricing policy could help bring new investment into the industry and
create economies of scale. But the Newspaper Guild, one of the main unions in the newspaper
industry, argues that newspaper chains have used mergers to undermine existing contracts.104 The
policy could put startups at a disadvantage. The Justice Department at a House Judiciary
subcommittee hearing was cool to expanded antitrust exemptions, saying current antitrust law is
flexible enough to meet the needs of the changing media marketplace.105 Media companies are
already announcing plans to move ahead with efforts to impose subscription or other pay rules for
online content, in the absence of congressional action.106
Another potential avenue involves the fair use doctrine of copyright law. Some publishers say
Internet aggregators or search engines are profiting unfairly selling advertising via Internet search
functions that display several lines or headlines of original newspaper stories.107 Internet firms
say their policies provide a major benefit to newspapers by directing millions of readers to their
103 Testimony of James M. Moroney III, Committee on Commerce, Science and Transportation, Subcommittee on
Communications, Technology and the Internet. Hearing on The Future of Journalism: Communications, Technology,
and the Internet. May 6, 2009. http://commerce.senate.gov/public/index.cfm?FuseAction=Hearings.Testimony&
Hearing_ID=7f8df1a5-5504-4f4c-ba34-ba3dc3955c61&Witness_ID=8406bab3-0f6f-422c-a805-c02103bb8ba5.
104 Testimony by Newspaper Guild President Bernie Lunzer to the House Judiciary Committee, April 17, 2009.
105 Statement of Carl Shapiro, Deputy Assistant Attorney General for Economics, Antitrust Division, Department of
Justice, House Justice Subcommittee on Courts and Competition Policy, April 21, 2009.
106 Testimony of Marissa Mayer, Google Vice President, Search Products and User Experience, Senate Commerce,
Science, and Transportation Subcommittee on Communications, Technology, and the Internet, May 6, 2009.
107 Testimony of James M. Moroney III, Committee on Commerce, Science, and Transportation, Subcommittee on
Communications, Technology, and the Internet. Hearing on The Future of Journalism: Communications, Technology,
and the Internet. May 6, 2009.
Congressional Research Service
21
The U.S. Newspaper Industry in Transition
websites when they click on the displayed links. Newspapers have the ability to block so-called
aggregators from posting links to their copy, and can require readers to register or subscribe to
access their websites. A number of newspapers are themselves aggregators, with in-house
bloggers or reporters who post links to other newspaper stories.
Even if newspapers do find a way to generate significantly higher online advertising returns, there
are questions about whether Web-based revenues will be sufficient to support newspapers of the
current size and scope.108
Supporting the General Practice of Journalism
Some media experts have suggested that the best approach is arms-length federal involvement,
where Congress provides federal funding to support the general practice of news gathering, rather
than supporting specific newspapers. Such proposals include helping newspapers convert to
employee-owned or nonprofit entities, increasing public funding for existing institutions like the
Corporation for Public Broadcasting, creating a public trust to support reporting, and bolstering
journalism programs affiliated with educational institutions.109
Former Washington Post managing editor Steve Coll, now president of the New America
Foundation, is among those suggesting that Congress support journalism by increasing funding
for the Corporation for Public Broadcasting or the National Endowment for the Humanities.110
Free Press, a nonprofit organization aimed at promoting citizen participation in journalism, has
suggested a research and development fund for innovation in journalism.111 Other proposals
include creating a jobs-for-journalists program, instituting a prepackaged bankruptcy structure
making it easier for papers to reorganize,112 and ending efforts to overturn a 2003 Federal
Communications Commission (FCC) decision allowing cross-ownership of broadcast and print
outlets in the same market.113 Another option could be to expand broadband access and increase
training and technology literacy programs to ensure that all consumers have access to Internet
news.114
U.S. public financing has been controversial in the past, however. Republican lawmakers in the
mid-1990s, for example, tried to eliminate funding for the Corporation for Public Broadcasting,
citing its perceived liberal bias. The issue flared up again in the 2005 appropriations process.115
108 Collis, David J., Peter Olson, Mary Furey, The Newspaper Industry in Crisis, Harvard Business School, Case Study
# N2-709-463, March 11, 2009.
109 Remarks of Acting FCC Chairman Michael J. Copps, Free Press Summit: Changing Media, Washington, DC May
14, 2009. http://www.fcc.gov.
110 Testimony of Steve Coll, Committee on Commerce, Science, and Transportation, May 6, 2009.
111 Pickard, Victor, Josh Stearns and Craig Aaron, Saving The News: Toward a National Journalism Strategy, Free
Press, May 2009. http://www.freepress.net/files/saving_the_news.pdf.
112 Ibid.
113 Testimony of Alberto Ibarguen, President John S. and James L. Knight Foundation, Senate Commerce, Science, and
Transportation Subcommittee on Communications, Technology, and the Internet, May 6, 2009.
114 Ibid.
115 Farhi, Paul, “Public Broadcasting Targeted by House,” Washington Post, June 10, 2005, P. A1.
http://www.washingtonpost.com/wp-dyn/content/article/2005/06/09/AR2005060902283.html.
Congressional Research Service
22
The U.S. Newspaper Industry in Transition
At the state level, the Washington legislature approved a temporary, 40% state tax break for the
news industry.116 New York Mayor Michael Bloomberg in July announced initiatives to
encourage new media companies to locate in the city.117 Internationally, France has announced it
will provide free, one-year newspaper subscriptions to teenagers on their 18th birthday, increase
French government print advertising, and boost financial support for newspaper deliveries.118
More narrowly, the Senate Press Gallery is reviewing its definition of what constitutes a reporter
or news agency, in response to complaints from foundation-supported and online organizations
that they have been not been granted full press credentials, needed to cover much of official
Washington.119
“While we may have once hoped that we could merely shift our operations online and continue
operating as usual, the comparably much smaller revenue generated from Internet advertising has
shown that we must continue to look for another answer. We can’t wait to see if advertising
revenue comes back after the recession is over, as much of it won’t,” Philadelphia Newspapers
CEO Brian Tierney told a House subcommittee in April.120
Congressional committees are considering holding additional hearings on the state of the
newspaper industry, but as yet there is no major push for legislative action. Advertising revenues
do not appear to have revived during the first half of 2009, opening the possibility of further deep
staff layoffs and pay cuts, curtailed circulation, and other measures including retrenchment at
papers across the country. It is unclear whether newspapers will quickly be able to develop a new
business model that will allow for the continuation of most existing general-interest publications,
or whether the industry will reorganize as smaller, more targeted products—with readers pulling
from a variety of specialized sources for their news.
Author Contact Information
Suzanne M. Kirchhoff
Analyst in Industrial Organization and Business
skirchhoff@crs.loc.gov, 7-0658
116 “Gov. Gregoire approves tax cut for Washington state newspapers,” Seattle Times, May 12, 2009.
http://seattletimes.nwsource.com/html/localnews/2009212482_apwanewspapertaxcuts.html.
117 McGeehan, Patrick, “City Starts Program to Foster Entrepreneurial New Media,” New York Times, July 8, 2009.
118 Pfanner, Eric, “France Expands Its Financial Support for Newspapers,” New York Times, Jan 23, 2009, p. B2.
119 Senate Press Gallery Staff.
120 Written statement of Brian Tierney, CEO of Philadelphia Newspapers, LLC, House Judiciary Subcommittee on
Courts and Competition Policy, April 21, 2009.
Congressional Research Service
23