To tell whether the decline of newspapers is just a normal story of disruptive innovation or something the rest of need to worry about, we need to look at outputs, not inputs. It wasn’t a “crisis in telephony” when the switch to automatic dialing allowed AT&T to lay off thousands of phone operators (unless you got laid off). It wasn’t a “crisis in computing” when the PC put minicomputer manufacturers like DEC out of business. By the same token, a 30 percent decline in newsroom staff might just reflect increased journalistic efficiency.
How could this be? A reporter’s job is to collect, organize, and summarize information about important events in the world. The more of the world’s information that comes pre-organized, the easier the reporter’s job will be. And the Internet is a gigantic information-organizing machine. Sites like Google, Wikipedia, and Twitter provide vast amounts of information “pre-digested.” Reporters still have to do some work to get the information they need from these tools and turn them into publishable copy. But more and more of the basic work is done for us.
I’m guessing that the top performers in the news room, say the best 5%-10% of the writers and editors, produce 50% or more of the real value of the newspaper. The hungriest reporters. The best writers. The most competitive and aggressive editors.
What if that group, the most valuable assets that the NYTimes controls, simply walked out of the building and started their own company? What would that look like?
The New New York Times, or NNYT, would have a writing staff of say 50 people. These are among the best journalists in the world, and let’s say they wanted to pay themselves $200,000/year, a top salary for a reporter of that stature. That’s just $10 million a year in payroll expenses. Call it $12 million with benefits. Plus, they all have stock options in the new company.
If TechCrunch is any indication, the amount of support staff (developers, office staff, sales people, admin) needed to run the company is at most 20%, or another ten people, particularly if they outsource a lot of that. Put everyone in the cheapest office possible, and you’re looking at additional payroll, benefits and office expenses of another $3-4 million per year.
Now lets just add another 50% on top of that for other expenses and a safety net, and round it up to $25 million per year in total expenses.
That’s $25 million/year to have a well paid staff of the best journalists on the planet. How long before they outstrip those 16 million monthly visitors and 124 million page views? 5 years? Less?
How many private equity funds would kill to put $100 million behind the NNYT to make sure the company had plenty of money until it reached profitability?
Much has changed since Arrington wrote his post. AOL’s experiments in hiring veteran journalists haven’t turned out flawlessly. Yet Arrington’s basic point is that elite news organizations shorn of legacy costs might fare well.
A deeper concern is that we might not have enough investigative journalism focused on communities that don’t draw the attention of advertisers. This, however, has always been true, even in the glory days of the newspaper business, and it is an appropriate focus of non-profit effort.