Knight Ridder’s problems illustrate newspapers’ troubled Internet adaptation

"In the long term, most observers agree, the future of newspapers lies with the Web... The question is, can the Internet generate revenue - and readers - fast enough to make up for the shortfalls from print?"

This quote from an essay entitled "The End of News" published in The New York Review of Books by Michael Massing, a contributing editor of the Columbia Journalism Review, sums up the state of the newspaper industry's problems.

Unfortunately, it doesn't look like Knight Ridder is going to make it fast enough. But it, as well as most other newspaper companies, certainly had a shot.

Looking at October's "Top 20 Online Current Events & Global News Destinations" put out by Nielsen/NetRatings, Knight Ridder Digital ranks sixth, ahead of the New York Times and the Washington Post. In fact, six of America's top newspaper publishers are on the list.

This sounds like good news, considering that tens of millions of people are still reading newspaper journalism, despite it being on a screen. But shareholders don't seem to be so enthusiastic. Nor were they very prognostic when the Internet seriously began to revolutionize the media world a little over ten years ago.

If executives and editors had, in the early 90's, taken stock in their papers and the possibilities provided to them by the Internet instead of beginning to demand unworldly profit margins, the story could be very different today.

Look at some recent evidence of how newspapers on the Internet are evolving and could eventually take over print's primacy.

The Guardian's Simon Waldman has declared that his paper is preparing itself for the future, saying that within "six to seven years" Guardian Newspapers will dedicate 80% of it's time to its Internet functions (see Simon's clarification of this quote in the comments).

The New York Times has reported fairly favorable figures for its experimental online subscription service, TimesSelect. 

Delegates at the Shaping the Future of the Newspaper conference were told that "newspapers have no future without online and digital services."

It is also well known that online advertising, which currently makes up 4-5% of newspaper revenue, is skyrocketing,   

Lee Enterprises has reported a 143.2% online ad growth, helped by its summer acquisition of the newspaper publisher Pulitzer.

Dow Jones, also being pressured by investors to sell, recently claimed modest advertising profit but admitted that they would have been even to negative if it hadn't been for its Internet acquisition, MarketWatch.

And many major newspaper organizations, NYTCo., WaPoCo., Tribune, KR, Gannett, etc., have by now bought or own part of an Internet based company. 

Whereas some newspaper companies are being persuaded to sell by investors, new media companies are being encouraged by them. A start-up blogging company, temporarily called Pajamas Media received $3.5 million. Investors have given $4 million to a new photo sharing site called Riya.  

If they had been a bit more predictive, newspaper companies would have diversified online earlier, such as WaPo, which got a bargain when it bought the online magazine Slate.

Of course, when it comes down to it, there's no use in wondering what could have been. The reality is newspapers did not invest in themselves, and many newspaper publishers are now paying the price.

But what's to happen to their papers, those traditionally needed to balance democratic societies? 

Logically, as many have advised, another major newspaper company would be best suited for a Knight Ridder takeover. But even that looks problematic.

Gannett, listed as a possible Knight Ridder buyer and the only newspaper company to place before KR in the Nielsen Ratings (5th place, Gannett's USAToday.com was ranked separately was ranked 9th), has announced that it's own revenues fell 2.7% in October.

It has been rumored that billionaire Philip Anschutz, who first became a newspaper man with his 2004 purchase of the San Francisco Examiner, may be interested in KR. But if that happened, many traditional metro dailies would eventually be distributed for free under Anschutz's quasi-nationally copyrighted Examiner banner.

Some think that Citizen Journalism could help newspapers. But, as noted in this Poynter essay by Rick Edmonds, it's too early to tell if sustainable business models will develop and citizen journalism proponents such as Dan Gillmor reject the idea that citJ will ever replace the MSM.

In a worse-case scenario, if investors who didn't much care about newspapers were to buy out a company like Knight Ridder, or a piece of it, they would more than likely suck as much profit out of it in a short period before merging it with another company, essentially erasing titles from the market.  

This, according to Massing, would be devastating; "If the leading newspapers lose their capacity to report and conduct inquiries, the American public will become even more susceptible to the manipulations and deceptions of those in power."

So can newspapers save themselves and their democratic role in the digital age?

It's true the Internet revolution caught newspapers off guard. But it is obvious that they have realized their mistakes and are frantically trying to make up for them. When considering the direction in which the media world is moving, with a little more time and investment in their Internet operations, newspapers should be able to adapt their journalism and role in society. This, however, can only happen with the patience and support of their boards and shareholders.        

Sources: The New York Review of Books, PJNet, PaidContent (Riya), Yelvington, News24.com, BusinessWeek, Poynter