Norman Pearlstine, former top editor at both Time Inc. and the Wall Street Journal, and now a senior advisor at Carlyle Group, thinks newspapers are in for plenty more pain — some self-inflicted.
The main problem, obviously, is newspapers are chained to an inefficient delivery system for content and advertising. But Norm believes newspapers brought some of this on themselves by failing to innovate when they were reaping huge margins from local monopolies in the 80s and 90s. The last game-changing innovation by a major newspaper chain was the launch of USA Today, in 1980.
Speaking to an audience of media execs at the Argyle Executive Forum, Pearlstine said he he believes the news business is going back to the end of the 19th century, when a city like Chicago had 28 local papers, all small and privately owned.
Pearlstine doesn’t believe the newspaper business model will support the kind of long-form, investigative journalism that many of the top reporters and editors have spent their careers pursuing.
Case in point: The Washington Post’s recent 17,000-word, four-part series on IED’s in Iraq. Great story, Norm said, but probably better positioned as a book, or a premium download for Amazon’s (AMZN) Kindle. “There might be 50,000 people in the world who want to read that story, but not the ones advertisers want to reach,” he said.
Pearlstine was a little more sanguine about the magazine business, which still has at least one growing category (celebrity mags), some growing publications (The Economist), and content that is not as easily commoditized. He said for this reason Time Warner (TWX) probably won’t sell Time Inc. He estimated that People generates 40% of Time Inc.’s cash flow.