News institutions are undergoing devastating layoffs – what can we do to save the industry?
2024 has already proven devastating for news media. Even preeminent national publications are not safe: journalists at Pitchfork, The LA Times, Time, The Wall Street Journal, NBC News, Business Insider and Sports Illustrated were among the 538 news jobs lost in January, a grim addition to the 3,087 layoffs recorded in 2023.
For those familiar with the industry, this is just the latest contraction in the long, painful descent of news. Journalists themselves are not too hopeful, judging by recent headlines such as “Is the Media Prepared For An Extinction Level Event?” and “The News About the News Industry is Getting Grimmer.” The headwinds started long before the digital era, as Bharat Anand notes in his recent book The Content Trap: newspaper circulation and profits began to decline in the 1980s following the rise of radio and television. But the internet undoubtedly accelerated the decline, as websites such as Craigslist siphoned off classified advertising revenue and social media massively increased competition for readers’ attention. Declining revenue has had an outsized effect on the bottom-line of newspapers due to high fixed costs such as printing, distribution, and journalist salaries, which collectively account for 50% of revenues, according to The Content Trap. As a result, news institutions are hit especially hard during periods of financial turmoil, such as the 2008 recession.
Following the recession, the newspaper ecosystem grew increasingly consolidated under private investment funds and wealthy individuals such as Jeff Bezos (who owns The Washington Post). The new owners slashed costs where possible and focused on digital sources of revenue such as paywalls and ad revenue from online traffic. There have been a handful of successes, such as The New York Times’ digital paywall, which generated $81 million in 2013, just two years after its launch. But the attempted turnarounds have largely failed for two key reasons.
First, despite monetization efforts, online traffic to news websites has declined as differentiated content ceases to be a value-driver for consumers. As Professor David Collis (MBA ’78) explained in an interview, “The problem with most newspapers is that their information is nice-to-know. And everyone has it, so it's a commodity that you can get anywhere.” Search engines and social media, exacerbating this problem, are sending fewer users to external links. Google, for example, rolled out AI-integrated search. With access to summarized answers, users no longer need to click on website links when conducting search queries. ChatGPT poses a similar problem, prompting The New York Times to sue OpenAI for using copyrighted articles to train its model, which in turn poses a competitive threat to the Times. The Messenger was perhaps the most recent and spectacular flop in the chase for digital eyeballs: after promising investors $100 million in annual revenue from programmatic advertising, the digital-only magazine generated a mere $3.8 million and declared bankruptcy after only eight months of operation. “The site's writers were forced to churn out empty-calorie slop in a desperate game of SEO whack-a-mole,” Chris Thompson says of the ill-fated paper in his article for The Defector.
Secondly, aggressive cost cutting has gutted newsrooms and created a vicious cycle of value deterioration. Elizabeth Hansen and Marc Hand summarize this negative feedback loop in their paper “The National Trust for Local News,” arguing that as budgets decrease “the quality and responsiveness of their product diminishes,” resulting in lower perceived legitimacy among consumers. The latest cost-cutting technique of promoting AI-generated articles has caused particular uproar among journalists and readers alike. Private ownership further amplifies legitimacy risk by giving the wealthy an even greater degree of influence over media. For instance, billionaire and Los Angeles Times owner Patrick Soon-Shiong threatened to fire journalists over an article reporting on a lawsuit against a fellow medical professional billionaire; his daughter Nika Soon-Shiong has similarly been accused of meddling in the newsroom.
News finds itself in dire straits at a precarious national moment: 2024 is an election year, and likely to be a divisive one that spawns misinformation. In 2020 that misinformation culminated in the January 6th Capitol Attack; this time around, the deception could be even more prevalent and convincing. Malicious actors now have at their disposal more sophisticated tools – propaganda websites littered with false AI-generated articles have surged by over 1,000 percent, and deep fake videos have similarly exploded in popularity. Remaining news institutions who double down on monetizing traffic will be incentivized to publish inflammatory content to drive clicks, thus intensifying polarization rather than ameliorating it, a trend that worries Collis: “The way to break through is by being more outrageous…but that pushes people to the extremes.” If we leave the news to breathe its dying gasp, there will be seismic repercussions for democracy.
There is still room for hope. In The Content Trap, Anand proposes a new strategic framework for news institutions in the digital age: focus on fostering connections, which create positive network effects, rather than pursuing a content-driven race to the bottom. This, he argues, is why The New York Times’ paywall succeeded where so many others failed: the Times “started from a simple question – can we charge for digital content? -- and extended to recognizing and managing the connections across customers that would arise from pricing decisions.” Anand also analyzes the success story of Schibsted, a Norwegian newspaper which leveraged its powerful network of readers to compete and win against emerging online alternatives in the classifieds arena. Schibsted applied these learnings to its online news division, creating an “infinite scroll” front page which better suited a digital medium than the traditional section layout of a print paper. HBS alumni and award-winning journalist Caleb Gayle (MBA ’19) is optimistic about journalists’ ability to adapt and make content itself foster these connections. “There’s a need for journalists to become a whole lot more entrepreneurial and business minded,” he said via interview. “My young journalism students are more acutely aware that they need to be polymathic in their approach…they realize that they need to be innovators.”
More sustainable paths forward have also been proposed outside of the private sector. In his review of proposed solutions to the journalism crisis for the Shorenstein Center, Craig Forman examines policies ranging from increasing government subsidies to requiring tech platforms to pay news providers. The latter has gained particular traction in recent years – France recently codified financial obligations for news aggregators such as Google. Many also suggest that more newspapers convert to nonprofits, a move that proved successful for The Salt Lake Tribune. A similar variation on this theme is The National Trust for Local News argued for by Hansen and Hand, which proposes the creation of a non-profit entity that can acquire and turn around struggling newspapers at scale. “Similar to the structures of the Nature Conservancy or the Trust for Public Land, a Trust for Local News would bring all of the capital, analytic skills, and operating expertise needed to negotiate and complete a newspaper group acquisition,” they write. Philanthropic investments, such as The American Journalism Project’s commitment of $42 million to local newsrooms, will play a crucial role in this proposed shift away from for-profit models.
For MBA students, there are ways to help regardless of one’s career path. Christian Trejbal proposes a few in The Seattle Times: paying for subscriptions, engaging with local press, and making donations to newspapers or news nonprofits like The American Journalism Project. Yet those seeking a mission-driven turnaround challenge should not discount the option of entering the news industry professionally, Gayle says: “I think it’s a really interesting business opportunity…this is incredibly fertile ground to be like a bull in a china cabinet, just figuring out what the best solutions might be, trying and failing very rapidly, because the feedback loop in this industry is really short.” There is both a fascinating career to be made and a democracy to be saved for HBS students who join the fight to prevent the mass extinction of news. What better way to be a leader who makes a difference?
Danielle Mitalipov (MBA ’25) is an RC interested in scaling climate technology and renewable energy generation. She is a Student Sustainability Associate (SSA), and helped organize the HBS Climate Symposium. Prior to HBS, she studied philosophy at Stanford University, and led merchandising for a global brand at adidas. Outside of school, she is usually writing or watching the latest release at the Coolidge Corner Theater.