The last few months haven’t exactly been rosy for the publishing industry. Whether it was Verizon seeking a $4.6 billion write-down on its AOL and Yahoo acquisitions, the fire sale of Mic, or the layoffs at digital native companies like BuzzFeed and Vox, there have been plenty of signs that digital media companies are facing troubled waters.
And here’s what’s truly scary: all this is happening in what most would agree is a strong economy. If the market is this unstable during economic boom times, what happens when we enter a recession, an eventuality that some think will occur as early as this year?
Many journalists still bear the emotional scars of the last recession. In a great piece titled “Ten Years Ago, Almost Everyone in Media Got Fired,” Aaron Gell recounted the trauma he and his publishing brethren endured as their entire profession crumbled around them. “Either you’d been canned, or you were doing a fingertip hang over a lake of hellfire,” he wrote. “In a strange way, it may actually have been worse to be gainfully employed, because while the rest of us actually knew where we stood, the working stiffs quickly became BFFs with fear itself.”
At its 1990 height, the U.S. newspaper industry employed 56,900 journalists. By 2012, that number was down to 38,000, a drop of 33 percent. According to data compiled by The New York Times, overall newspaper employment dropped from 377,800 in 2004 to 211,300 in 2014. For those practicing journalism, the Great Recession was a bloodbath, and so you can’t blame those who wonder whether the next recession will be similarly catastrophic.
I don’t think it will be.
First a caveat: most would agree that the marketing budget is the first on the chopping block for distressed companies. Any sort of economic downturn will certainly be felt within the publishing industry, and, depending on the severity of a recession, we’ll likely see downstream negative effects throughout the entire media ecosystem.
But I think there’s strong evidence that the hemorrhaging of jobs and revenue we saw in the late aughts was largely driven by structural changes within the publishing industry, changes that were accelerated by the recession. In other words, the problems were already there; the collapse of global markets merely threw gasoline on the fire.
The recession just happened to coincide with the explosion of social media networks and the erosion of the economic moats that had made newspapers so profitable in the first place. Each city sprouted dozens of local blogs, and platforms like Yelp, Craigslist, and even Rotten Tomatoes started to render the traditional newspaper bundle obsolete. Newspapers were caught completely flat footed, almost entirely reliant on a print-based business model that had nowhere to go but down.
We know this because the industry started seeing signs of distress well before the recession began. Take a look at this chart tracking newspaper ad sales. You’ll notice that they take a nosedive sometime around mid-2006, when the economy was still in full swing.
You see the same downward trajectory if you isolate just for classifieds ad revenue, with it experiencing a sharp drop in 2007.
And these trends continued well after the recession ended and the economy had entered a strong recovery. Newsrooms jobs dropped by 10.4 percent in just 2014 alone.
Flash forward to 2019. Has the industry solved all of its structural problems? Certainly not. It still leans heavily on print advertising, and it’s struggled to wrestle away a meaningful slice of the digital advertising pie from Facebook and Google. It’s also still pretty common for publishers to announce draconian layoffs, even in otherwise thriving cities.
But publishers are still in a much better position now than they were in 2009. The display advertising market has matured, with most media companies leveraging adtech that’s affording them an increasingly better yield. The industry has diversified, and many publishers generate revenue from multiple sources that include display ads, native ads, ecommerce, events, and subscriptions.
Take The New York Times as an example. In the late aughts, it was in a truly dire place. It was saddled with The Boston Globe, a newspaper it had paid way too much for right at the height of the market. It was laying off reporters in droves and, much to its embarrassment, it was forced to take a major investment from Carlos Slim, a Mexican billionaire who was known for his questionable business ethics.
The last decade has seen an amazing transformation for the Grey Lady. It launched a metered paywall that now has 3 million digital subscribers. It purchased Wirecutter, an ecommerce site that’s become its fastesting-growing revenue source. And it debuted a podcast that generated more downloads in 2018 than any other show and currently operates as an eight-figure business.
Will a recession hurt the Times? Probably. But its diversified business model ensures that it’s much better equipped to weather an economic storm than it was a decade ago — a time when media watchers were openly wondering whether the publication would even continue to exist for much longer.
No, not every publisher is as well-positioned as The New York Times. But its evolution reflects larger changes within the publishing industry: an embrace of diversified revenue streams that will help insulate many news