The term “creative destruction” was used to promote countless business models of dubious value during the height of the dot com mania of the late 1990s. In the ensuing collapse, many observers have grown weary of this term and attribute its use to exaggeration and hyperbole. Nevertheless, the concept of creative destruction developed by Joseph Schumpeter nearly seven decades ago is impacting the newspaper publishing business like a category five hurricane.
In a nutshell, creative destruction refers to the process by which capitalism periodically replaces an established order through a disruptive change that redefines the competitive landscape. Such a change is clearly taking place today for traditional news publishers. This is true not only for print newspapers but for all traditional forms of news such as radio and television. However, the most severe dislocations up to this point have impacted print media.
Print Newshounds: The New Endangered Species
According to a very insightful article recently published by The Economist, the percentage of Americans who read traditional newspapers has dropped from 58% to 34% since 1994. More people are now obtaining their news from cable and Internet sources, with the latter showing dramatic growth this decade. However, some people are simply not getting news in any form and this is particularly true for younger people. The Economist reports that the percentage of 18 to 24 year olds who did not get news in any form on a typical day rose from 25% to 34% over the past decade.
At the Berkshire Hathaway annual meeting, Warren Buffett made a number of bearish statements about the newspaper industry and even went as far as to say that investors should steer clear of the sector and that from an economic perspective, Berkshire would have been better off selling The Buffalo News years ago.
Warren Buffett and Charlie Munger are well known for being print newshounds reading five or more newspapers per day. Personally, I read two newspapers on most days (HOW do they read five?) and prefer the concentrated focus of a physical newspaper to the distractions and eye strain associated with reading online. I also read most magazines and investment publications in print form and I subscribe to the print edition of Value Line. This may be strange coming from someone who publishes a financial blog, but I simply do not like reading lots of content online.
I cannot imagine starting the day without reading a physical newspaper, but I believe that the days of print are drawing to a close. What will replace the print newspaper?
Internet News Sources
On one hand, the Internet has dramatically reduced the barriers to entry for publishing and created a much more even playing field for writers. However, this has also created major problems for traditional publishers who hope to capture readers online and to replicate the advertising revenue models that were the bread and butter of the print world for so many decades. In many cases, there is simply too much information online and much of it is of dubious value. Authoritative sources of information may get lost in the noise. While financially oriented publishers such as the Wall Street Journal and the Financial Times have been able to charge subscription fees directly to readers, most newspapers have not been able to develop such a revenue model.
While the Internet provides numerous advantages over print media in terms of being able to link to related sources and maintain up to the minute accuracy in coverage, it also suffers from serious limitations. In my opinion, one of the most serious limitations is related to the act of reading online. Reading short articles online is not a problem, but few readers would be eager to read long form investigative reporting or analysis on a computer screen. The eye strain and form factor of a computer is not appropriate for such reading, and computers provide too many distractions that do not come with a cup of coffee and a copy of the print Wall Street Journal.
Can E Readers Substitute for Paper?
I do not own a Kindle at this time but I am considering the Kindle DX which will be released later this year. I have also published this blog on the Kindle. Sony has also developed a Digital Book Reader that competes with Kindle. I came across an interview with Amazon’s Jeff Bezos recently and found his comments on the future of newspapers worth sharing here:
Here is a link to the video for RSS subscribers.
It seems like the new Kindle may deliver something similar to the experience of reading a traditional newspaper with the advantages of electronic delivery. Electronic delivery could be very attractive for someone who travels frequently. I will have to reserve judgment on whether the Kindle DX can deliver on this until I read some updated reviews on how newspapers are being delivered and formatted. I may purchase a Kindle DX as a book reader but I’m probably too set in my ways to part with newsprint until it either becomes prohibitively expensive or discontinued entirely. Fortunately for those resistant to change, that day will probably not come for some time and Schumpeter’s forces of creative destruction will continue to exert influence with improved e reader technology.
Who knows, perhaps a future e reader will even replicate the cherished experience of having newsprint residue on your hands after finishing the morning paper?