Much ink is spilled over the expanding array of video marketplace choices that are competing for the attention of our eyeballs, but much less is usually written about the competition for our ears.  As this excellent new Business Week article by Olga Kharif makes clear, competition and innovation in the audio marketplace has never been more vibrant.  It’s something I’ve pointed out here before and here’s a chart I created for my Media Metrics report to highlight all the new competition for our ears.   We’ve come a long way since the days of my youth, when transistor radios and vinyl records were the extent of audio competition!

Jack Shafer, editor at large of Slate, is my favorite media pundit. Everything he does is worth reading, and his column this week is no different. It’s entitled “The Digital Slay-Ride: What’s killing newspapers is the same thing that killed the slide rule,” and in it he notes how “Hardly a day goes by, it seems, without some laid-off or bought-out journalist writing a letter of condolence to himself and his profession.” “The underlying cause of their grief,” Shafer argues, “can be traced to the same force that has destroyed other professions and industries: digital technology.” He recalls how people scoffed back in 1993 when Wired founder Louis Rossetto’s said that the “digital revolution is whipping through our lives like a Bengali typhoon” and destroying the old order. But no one is laughing anymore.  As I noted in my Media Metrics report, digital disruption and disintermediation has completely upended the media marketplace, as well as countless others. Toward that end, Shafer actually starts a list of professions or technologies that have been “typhooned” by the digital revolution. It’s a pretty amazing (and entertaining) list for those of us old enough to remember when all these things were dominate in our society and economy. Can you think of others?

• Bank tellers • Typewriters • Typesetting • Carburetors • Vacuum tubes • Slide rules • Disc jockeys • Stockbrokers • Telephone operators • Yellow pages • Repair guys • Bookbinders • Pimps (displaced by the cell phone and the Web) • Cassette and reel-to-reel recorders • VCRs • Turntables • Video stores • Record stores • Bookstores • Recording industry • Courier/messenger services • Travel agencies • Print and cinematic porn • Porn actors • Stenographers • Wired telcos • Drummers • Toll collectors (slayed by the E-ZPass) • Book publishing (especially reference works) • Conventional-watch makers • “Browse” shopping • U.S. Postal Service • Printing-press makers • Film cameras • Kodak (and other film-stock makers)

This is just a listing of the installments of my ongoing “Media Deconsolidation Series.” I needed to create a single repository of all the essays so I could point back to them in future articles and papers. For those not familiar with it, this series represents an effort to set the record straight regarding the many myths surrounding the media marketplace. These myths are usually propagated by a group of radical anti-media regulatory activists who I call the “media reformistas.” Sadly, however, many policymakers, journalists, and members of the public are buying into some of these myths, too.

In particular, I have spent much time here debunking the notion that rampant consolidation is taking place and that media operators are only growing larger and devouring more and more companies. In fact, nothing could be further from the truth. Over the past several years, traditional media operators and sectors have been coming apart at the seams in the face of unprecedented innovation and competition. The volume of divestiture activity has been quite intense, and most traditional media operators have been getting smaller, not bigger. As a result, America’s media marketplace is growing more fragmented and atomistic with each passing day.

Anyway, here’s the series so far…

• Media Deconsolidation (Part 24): I Read the News Today, Oh Boy
• Media Deconsolidation (Part 23): Cox Selling Most of its Newspapers
• Media Deconsolidation (Part 22): TW spin-off of cable unit
• Media Deconsolidation (Part 21): TW spin-off of AOL
• Media Deconsolidation (Part 20): News Corp spins off 8 TV stations
• Media Deconsolidation (Part 19): IAC/Interactive Corp. divides by 5
• Media Deconsolidation (Part 18): Scripps Splits
• Media Deconsolidation (Part 17): Clear Channel Station Sell-off
• Media Deconsolidation (Part 16): Clear Channel Crackup
• Media Deconsolidation (Part 15): AOL-TW Divorce Near?
• Media Deconsolidation, Part 14: Time Warner Without Time?
• Media Deconsolidation, Part 13: Tribune Considering Major Downsizing
• Media Deconsolidation, Part 12: Time Warner President Calls Synergy “Bull—t”
• Media Deconsolidation, Part 11: Knight Ridder’s Coming Crackup
• Media Deconsolidation, Part 10: Viacom’s Breakup Official
• Media Deconsolidation, Part 9: Viacom’s Split
• Media Deconsolidation, Part 8: Time Warner Spin Off of AOL Likely
• Media Deconsolidation, Parts 6 & 7: Emmis & Disney Divestitures
• Media Deconsolidation, Part 5: “Clear Channel to Dismantle Media Empire”
• Media Deconsolidation, Part 4: Is News Corp. Next to Downsize?
• Still More on Media Deconsolidation
• More on Media (De)Consolidation
• Stop This Insane Media De-Consolidation!

Related reading:

• What the Media Reformistas Really Want
• Your Soapbox is My Soapbox! Thoughts on the Media Access Movement
• BOOK: Media Myths: Making Sense of the Debate over Media Ownership (2005)
• SPECIAL REPORT: Media Metrics: The True State of the Modern Media Marketplace (2008)
• BOOK:  A Manifesto for Media Freedom (with Brian Anderson, 2008).

I’m fond of quoting Diane Mermigas, editor-at-large at MediaPost, who is one of the finest media market watchers in the journalism business today. Her latest MediaPost column offers another sobering look at the radical changing sweeping through the media marketplace today. In that article, she notes that even though we are in an era of Big Government bailouts for financial institutions and (possibly) auto makers, old media operators will be left to to fend for themselves, and many will likely die off as a result:

What we do know is there will be no federally funded bail for media, Internet, entertainment and advertising. Big media by definition is not nimble and innovative enough to simply dump what’s not working, modify what can be saved, and grow what works. There isn’t much that big media companies can bank on or reliably forecast moving into 2009. They are hamstrung between deteriorating traditional costs and revenues and evolving digital business models that do not offset the losses, generating less than 10% of their overall incomes. Big media isn’t just being ravaged by recession; it is being sacked by a technological transformation of enormous proportions.

I discussed a lot of the forces behind the current media meltdown in my recent PFF special report, “Media Metrics: The True State of America’s Marketplace.” As I noted there, this Schumpeterian “creative destruction” we are witnessing today is a normal (but gut-wrenching) part of any major technological transformation, and it need not be addressed with government subsides or interference. However, the problem for many traditional media providers is, as I noted in my special report:

there’s a lot of regulating still going on as well. America’s media marketplace remains subject to a wide variety of regulations… These regulations limit the ability of media operators to respond to the rapidly changing market environment. If all market players were equally hobbled by regulation, perhaps this issue would be less problematic. But these rules are applied in a remarkably arbitrary fashion, with some sectors and firms (over-the-air broadcasters, in particular) being singled out for harsher regulatory treatment than others.

Some will say, “Just let ’em die. We don’t need those old media providers anyway.” If that’s your position, so be it, but I would hope that others (especially public policymakers) would understand the radical unfairness of not giving those players a fighting chance at survival by eliminating the archaic regulations that bind their hands as the seek to reinvent themselves.

[For additional discussion, see my essay from earlier this week, “Remember Newspapers?”]

In a City Journal article earlier this year, I wondered “how long some local papers have left when they are barred from restructuring their businesses or partnering with other local media operators to stem the bleeding and reinvent their business models.”  I was responding to the Senate’s smack-down of a half-hearted reform effort that FCC chairman Kevin Martin pushed through in November 2007, which proposed relaxing the FCC’s newspaper/broadcast cross-ownership rule. That rule, unrevised since going into effect in 1975, prohibits a newspaper operator from also owning a radio or television station in the same media market. However, waivers were granted to grandfather in some combined newspaper and broadcast operations that had existed long before the ban took effect. Martin’s proposal was to simply tweak the rule to permit similar combinations in just the nation’s 20 largest media markets.

Martin’s limited liberalization proposal, however, led to howls of disapproval from FCC democrats like Michael Copps and many folks on both side of the aisle in Congress. Supposedly, this was nothing more than a “giveaway” to the newspaper industry, which critics said was doing just fine.  It really makes you wonder if any of those critics even both reading the news about newspapers today.

As I have documented here on many occasions, as well as in my big Media Metrics report, the newspaper industry is in huge trouble with every financial variable of importance rapidly heading south. Alan Mutter does a good job here of summarizing “the secular forces dragging down newspapers: Declining readership, shrinking advertising, high fixed costs and growing online competition that makes it increasingly difficult to charge the premium ad rates that were possible prior to the Internet.”  As a result of these forces, everyday brings another headline like this one today in the New York Times: “The Star-Ledger of Newark Plans 40% Cut,” or this one in the Wall Street Journal: “Some Newspapers Shed Unprofitable Readers.”  The numbers are just miserable, and they just get worse and worse.

Now, you might say, “So what? That’s creative destruction at work.” Indeed it is, and it’s an entirely natural and healthy marketplace phenomenon. The problem, however, is that there’s still a lot of regulating going on.  Specifically, papers remain bound by red tape in the form of artificial market ownership restrictions that disallow the creation of new business models that might save them what appears to be their possible extinction.

I am not at all confident that consolidation or creative ownership arrangements will actually throw them much of a lifeline — it’s probably too little, too late, now that so many readers and advertisers have flocked to the Net and other media platforms.   Nonetheless, they should not be bound by archaic media ownership rules put on the books a quarter century ago in an era of less competition and consumer choice.  Let papers restructure and compete.  It may be their only chance at survival.

Update: Just a few minutes after posting this I came across this NYT article documenting the latest quarterly newspaper circulation numbers and how the numbers just keep getting worse. Sales in the spring and summer fell almost 5 percent from the previous year according to the Audit Bureau of Circulations.

As we’ve discussed here before, newspapers are struggling. We all know that. The question is what, if anything, will save them? Most pundits tend to point to a two-fold solution: (1) get serious about leveraging the natural local advantages newspapers hold; (2) and find away to do so online as quickly as possible before they lose the bulk of the local online ad market to other competitors. This is why there’s a lot of talk these days about turning traditional papers into “hyper-local” web portals for their communities. Of course, there’s no guarantee that will work, especially in light of changing attitudes about “media localism.”

But let’s assume that that is indeed the best path forward. Will it really save newspapers? As eMarketer reports in today’s newsletter on “Can Local Web Ads Save Newspapers,” it’s a bit of a good news–bad news story:

The good news is that newspaper site ad revenues are growing along with other online ad spending, especially for local news sites. Local newspaper online ad revenues are predicted to reach $3.7 billion this year, according to eMarketer calculations based on Borrell Associates data. The bad news is that this spending will not make up for print ad losses for some time, according to Lisa Phillips, senior analyst at eMarketer. Ms. Phillips noted that advertisers still pay more for print readers than for online readers. “This is a transition that will take several years,” she said. “Local advertisers are paying attention to the shift in reader behavior, but it will take a while for everyone to adjust.”

And so we will have to wait to see how it all plays out. But I am highly skeptical that traditional newspapers operators will be able to make up anywhere near the amount of revenue online that they are hemorrhaging over on the print side of the business. There’s just too much other competition out there online already for our eyes and ears. The age of “protectable scarcity” is dead and that means newspapers just don’t have the lock on local or regional markets they once did.

Terrific piece here from Ed Felten on how new technologies and cultural trends are undermining traditional conceptions of “media localism.” It’s a theme I have written on at length, most recently in this essay on “Our Continued Wishful Thinking about ‘Media Localism‘.” Anyway, as Felten correctly notes in the conclusion of his essay:

New technologies undermine the rationale for localist policies. It’s easier to get far-away content now — indeed the whole notion that content is bound to a place is fading away. With access to more content sources, there are more possible venues for local programming, making it less likely that local programming will be unavailable because of the whims or blind spots of a few station owners. It’s getting easier and cheaper to gather and distribute information, so more people have the means to produce local programming. In short, we’re looking at a future with more non-local programming and more local programming.

That’s exactly right. As Grant Eskelsen and I argue in Chapter 6 of our new Media Metrics book:

The decline of “localism” in media is a much-lamented but quite natural phenomenon as citizens gain access to news and entertainment sources of broader scale and scope. Although it is impossible to scientifically measure exactly how much “local” fare citizens demand—and defining the term is another challenge—we know that they still receive a wealth of information about developments in their communities. However, it is also evident that, left to their own devices, many citizens have voluntarily flocked to national (and even international) sources of news and entertainment. […] [But] the demise of “localism” has been greatly exaggerated. The relative decline in local media is simply a natural development resulting from the voluntary choices made by millions of American citizens, but the tools for producing, distributing, and acquiring local content are more robust than ever.

Over at Technology 360, Dennis Haarsager points out that there’s probably too much gloom-and-doom out there in the blogosphere regarding the future of various media platforms. He did phrase searches “to see how the media stacked up in the death department.” He got back the following results:

“death of television”, 13,000 results “death of TV”, 28,200 results “death of radio”, 227,000 results “death of newspapers”, 331,000 results “death of blogs”, “death of the blogs”, “death of the blog”, 81,400 results “death of the web”, 215,000 results “death of the net”, 746,000 results “death of the internet”, 1,910,000 results

No doubt—as Mark Twain might have said—the rumors of the death of media have been greatly exaggerated. And, as Mike Mansick of TechDirt points out, not all papers or media outlets are facing gloom and doom scenarios.

Nonetheless, many traditional media sectors and providers do find themselves in troubled waters today as tsunami of creative destruction tears through their markets. In our new “Media Metrics” report, Grant Eskelsen and I show how two sectors in particular—radio broadcasting and newspapers—are getting hammered particularly hard by a sort of “media perfect storm”:

• loss of protected markets or “protected scarcity” = there’s just no guaranteed audience anymore

• rapid technological change = the way media is created and transmitted has been completely transformed

• massive inflow of new competitors / platforms = no way to stop the deluge of new voices, including user-generated content

• loss of consumer confidence and allegiance = people have plenty of other places to turn their attention

• loss of advertiser confidence and allegiance = advertisers have plenty of other places to promote their goods and services (including direct-to-consumer appeals and ‘word-of-mouth’ marketing efforts)

• loss of investor confidence and allegiance = shareholders have lots of other places to invest their capital today

The results have been particularly grim for newspaper in recent months as various reports have noted. Over at the “Reflections of a Newsosaur” blog, Alan Mutter has been tracking the bad news closely. Last Friday he noted how “7 newspaper stocks hit record lows in 1 day,” and in a follow-up post this week he noted that:

In a historic rout, newspaper shares have lost nearly $4 billion in value in the first 10 trading days of July, an amount greater than the combined market capitalization of all but the three largest publicly held publishing companies. The $3.9 billion plunge in the value of newspaper stocks since the first of this month – a period marked by successive new lows in the prices of several issues – has dropped the collective value of the following publishers to just $3.6 billion: * A.H. Belo (AHC) today is worth $119 million, down 58% from $282 million when it began trading earlier this year as a free-standing newspaper publisher. * GateHouse Media (GHS), worth $59 million, down 95% from $1.2 billion at its curiously strong initial public offering in October, 2006. * Journal Communications (JRN), worth $266 million, down 78% from $1.2 billion on Dec. 31, 2004. * Journal Register Co. (JRCO), worth $6 million, down 99% from $746 million on Dec. 31, 2004. * Lee Enterprises (LEE), worth $145 million, down 93% from $2 billion on Dec. 31, 2004. * Media General (MEG), worth $248 million, down 83% from $1.5 billion on Dec. 31, 2004. * McClatchy (MNI), worth $387 million, down 93% from $5.7 billion on Dec. 31, 2004. * New York Times Co. (NYT), worth $1.85 billion, down 67% from $5.6 billion on Dec. 31, 2004. * Scripps (SSP), worth $522 million, which was newly launched as a pure-plan newspaper company on July 1, 2008. More details below. * Sun-Times Media Group (SUTM), worth $32 million, down 98% from $1.3 billion on Dec. 31. 2004. The only companies not on the above list are: * Gannett (GCI), worth a bit less than $4 billion, down 79% from $18.5 billion on Dec. 31, 2004. * News Corp. (NWS), worth $37.2 billion, down 36% from $58.4 billion on Dec. 31, 2004. * Washington Post (WPO), worth $5.5 billion, down 24% from $7.3 billion on Dec. 31, 2004. At today’s close, the total decline in value of the dozen newspaper shares trading since the first of the year was nearly $27.7 billion, a plunge of 35.7% in 6 1/2 months. This calculation does not include the shares of Scripps, which dropped some $6.2 billion in value on July 1 after the company’s non-newspaper assets were spun into a separate company. Counting Scripps, the aggregate value of newspaper shares dropped $10.2 billion since the first of this month. When you back SSP out of the calculations, you find that newspaper stocks have slipped $3.9 billion since July 1.

All I can say to this is Wow. Just… wow. These are stunning numbers, and if you need a graphic illustration of how much bleeding has been taking place, take a look at this chart showing newspaper stock drops over the past 4 years:

Just miserable. And it reminds me of the market cap chart that Grant and I put together for our Media Metrics book that compared Google’s market cap to the market caps of the biggest players in the newspaper business (as of January):

And, when you realize how rapidly newspaper advertising revenues are plummeting, you begin to understand why many analysts speak in gloom-and-doom terms about this sector:

And daily circulation is falling rapidly overall…

Folks, there is just no getting around the fact that the newspaper sector is in serious, serious trouble. That’s not to say that they’ll all be going the way of the Dodo bird tomorrow. But many will die. Some potentially soon.

Others will reinvent themselves as online portals of hyper-local content and find new ways to connect with their readers. But hyper-localism can only get you so far, and things will never be like they were in the past.

If you want to read the absolute best analysis of where things stand today—and what the newspaper industry will need to do to re-invent itself in the face of this challenge—I highly recommend Terry Heaton’s article about “Failure at the Top.” It’s must-reading on the subject. He argues:

To be sure, the paradigm of ad-supported content isn’t going to go away. Media companies will continue to make good money from their own content, but it will never be the growth engine it once was. We simply must find another way, because the more advertising evolves without us, the harder it will be for anybody to sustain the kind of business we’ve known in the past, much less make it grow. These are challenging times for those at the top of media companies big and small, and while we can easily point fingers of blame at culture, technology or a hundred other things, it’s the responsibility of our leaders to rise to meet business challenges. The only failures that matter, therefore, are those at the top.

Make sure to read his entire article to see what he means by that and what he recommends to change it.

(In the meantime, it sure couldn’t hurt for Congress or the FCC to give the newspaper industry a little regulatory leeway as it attempts to keep from drowning. The archaic regulations that continue to bind this sector are even more unjustifiable in light of the challenges described above.)

Faithful readers will recall that, several months ago, I penned a 7-part “Media Metrics” series that took a hard look at the health of the media marketplace. Today, the Progress & Freedom Foundation is releasing a greatly expanded version of these essays that I have put together with my PFF colleague Grant Eskelsen. In this 100-page special report, “Media Metrics: The True State of the Modern Media Marketplace,” we begin by noting that heated debates about the state of the media marketplace continue to rage in Washington, and opinions seem to range from grim to outright apocalyptic. As we note on pg. 1:

Many people—including a large number of legislators and regulators—argue that America’s media marketplace is in a miserable state. Some claim that citizens lack choice in media outlets and that options are just as scarce as ever. Others believe that media “localism” is dead or that many groups or niches go underserved because of a lack of true “diversity” in media. Others argue that the market is hopelessly over-concentrated in the hands of a few evil media barons who are hell-bent on force-feeding us corporate propaganda. And still others say that the quality of news and entertainment in our society has deteriorated because of a combination of all of the above. It all sounds quite troubling, but is any of it true?

After taking an objective look at the true state of America’s media marketplace, we conclude that such pessimism is unwarranted. Indeed, a careful review of the facts reveals that—contrary to what those media critics suggest—we have more media choice, more media competition, and more media diversity than ever before. Indeed, to the extent there was ever a “golden age” of media in America, we are living in it today. The media sky has never been brighter and it is getting brighter with each passing year. We come to this conclusion by looking beyond the rhetoric that has for too long governed debates about media in American and providing a comprehensive look at a variety of media sectors such as audio, video, print and online media. Our survey contains over 70 charts and exhibits illustrating facts and figures on such diverse topics as advertising revenue, company market share, audience trends, and areas of growth in the sector. We will also aim to periodically updated the report to reflect the rapidly evolving media industry.

We encourage readers to provider input about how to improve and expand the report going forward in an attempt to refine and improve the metrics. And we look forward to future debates on this subject–debates that we hope will be guided by facts instead of fanaticism and by evidence instead of emotion. The hyperbolic rhetoric, shameless fear-mongering, and unsubstantiated claims that have driven policy debates in recent years have no foundation in reality and should be rejected as the debate over media policy continues.

This and future installments of “Media Metrics: The True State of the Modern Media Marketplace” will be available on the PFF website at www.pff.org/mediametrics. I have also embedded the entire document below as a Scribd file so that those interested in the topic can peruse the report immediately.