Saturday, December 6, 2008

Newspaper industry crisis deepens - can bailout demands be far behind?

We have been warning of this eventuality for years, naming it the newspaper industry death spiral. Newspapers are locked into a technology of the 19th century, still valuable for many uses, but not suited to rapid and inexpensive delivery of news and commentary. Their high fixed costs (staff, capital goods like presses and trucks), and high variable costs (newsprint and ink and gasoline for delivery) make them unable to effectively compete aginst websites.

However, webiste advertising rates remain a fraction of those enjoyed by newspapers. Even with lower costs, websites face a difficult task in garnbering enough revenue to support extensive newsgathering operations.

It is now a fair probability that the Obama Administration and Democrat-controlled Congress will seriously consider a newspaper industry bailout next year.

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