Internet-based companies have so far failed to create large numbers of journalism jobs. Newspapers, however, are still a leading employer of journalists and other people involved in the production and distribution of advertising, news and other information.
For example, newspapers remain the primary source of news about local governments.
This chart shows how newspapers were affected by competition from new media and the recession of 2007-2009. U. S. newspapers employed about 389,000 people in 2002. Ten years later, employment had decreased 62% to just 241,000 people.
Declining employment resulted in wage stagnation at newspapers. Weekly earnings averaged $337 from 2007-2011, according to the Bureau of Labor Statistics. This inflation-adjusted figure is equivalent to an average annual wage of just $17,571.
Internet companies have not created many journalism jobs
Internet-based media companies have not created enough jobs to offset losses at newspapers. Internet Publishing and Broadcasting and Web Search Portals is the employment category that includes news sites. This category includes more than 80 kinds of Internet-only companies, many producing information that is not found in a typical newspaper.
In 2011, Internet-only publishers employed about 108,000 people, or 56% fewer people than the entire newspaper industry.
A lot of people who have lost newspaper jobs are understandably angry and frustrated. But newspapers are facing an entirely new form of competition that developed with devastating speed.
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Advertising revenue is the economic life-blood of newspapers and their newer media competitors. This second chart compares ad revenue for the entire U.S. newspaper industry with ad revenue for a single new media company – Google.
Google generated about $410,000 in advertising revenue in 2002. Five years later, Google generated more than $1 billion in ad revenue. By 2010 Google generated $28.2 billion in ad revenue, or $2.3 billion more than the entire newspaper industry.
The steep decline in newspaper advertising revenue was accelerated by the recession. But the chart shows revenue at Google increased throughout the recession and recovery. Meanwhile, revenue at newspapers continues to decline.
What are the lessons from the last 10 years?
New media companies are competing in entirely new markets. These markets only superficially resemble older media markets, primarily because the newer companies compete for advertising revenue.
Companies like Google operate in global markets. They use automation – computers and high-speed Internet connections – to sell advertising that is cheaper and potentially more effective than ads sold by newspapers and other older media companies.
Automation allows Google and other new media companies to generate profits using a system of micropayments, earning just a few pennies or dollars per year from each of their millions of customers.
Companies like Google, Facebook, Twitter and others compete to deliver unprecedented access to information and advertising around the world. These companies are marvels of the information age. But we are just beginning to understand the economic, social, and cultural benefits and costs generated by new media companies.
However, it is already clear that older media companies cannot compete directly with newer companies. The older companies cannot survive on micropayments because they rely on people – journalists and other employees- to produce and deliver information in smaller local, regional or national markets.
Older companies must instead stabilize declining revenue and employment as a first step toward returning to profitability. I started this series of posts because older companies are taking important steps toward stabilization.
Will those who did not learn from the past keep making the same mistakes?
I am dismayed by the failure of many commentators to understand basic economic facts about the competition between older and newer media markets.
The most recent manifestation of this failure is the Google Journalism Fellowships. Journalism foundations are working with Google to develop new tools for computer-assisted reporting and other ventures.
But Google’s reliance on micropayments means it cannot afford to hire large numbers of journalists and pay them a living wage. Does anyone at these foundations actually understand Google's business model?
The failure to understand the information economy extends far beyond these foundations. The failure includes many journalists, many journalism educators, and many business people who run journalism businesses.
We know what the last 10 years looked like because of this failure to understand. What will the next 10 years will bring?