Why doesn't everyone get this? A recent post on BuzzMachine, Jeff Jarvis' blog, is titled The Real Sin: Not Running Businesses. Possible reasons why newspapers are sunk: not innovating, not charging, inaction, tying online to print. Jeff explores the concept that perhaps newspapers are sinking because for the longest time they weren't run like businesses. I commented:
There's an article in Wired - Why Craigslist Is Such A Mess - that touches on what everyone should know by now: once classifieds disappeared newspaper margins disappeared and that was all she wrote.
I disagree with "only a fraction of this loss is because of Newmark's company" but that's neither here nor there. Margins on classified were tremendous, especially at papers where the sales force wasn't unionized. Newspapers had close to a monopoly on classifieds. Take the $10 billion number mentioned above. Cut it in half and use that as a proxy for cash flow from newspaper classifieds. Multiply that by 10, which is the multiple of cash flow newspaper companies used to command. The result is that $50 billion of market cap was sucked out newspapers through the loss of classifieds. In May of 2002, the combined market cap of Dow Jones, Gannett, Knight-Ridder, New York Times and Tribune was about $50 billion. Talk about news all you want. Please stop talking about papers.