I think it is fair to say that once this financial crisis is done, the landscape of America (and the world) will be different. Venerable institutions will have disappeared. New upstart companies will have taken advantage of the tumult to move into markets. Some things that used to happen will permanently be gone. Some new things will have taken their places. The world will be different tomorrow than it was yesterday.
I was thinking yesterday about two of the industries currently in upheaval — the car companies and the newspapers. I was reading this article about how the newspapers that were going under were the ones whose owners had attempted to extract cash from them or who had leveraged them heavily.
When a car company goes bankrupt (or an airplane manufacturer), it pretty much means that there is one fewer car company in the world and likely always will be. The capital requirements for building cars is monumental — all the factories and parts suppliers and designs and dealerships. It would take a mammoth infusion of capital to even produce one car and sell it at one dealership — maybe a billion dollars to start up, even on a small scale. So if a manufacturer disappears, the only way we’ll get new companies is if existing companies with that infrastructure splinter, or someone takes over the remnants of the old one.
But newspapers? As far as I know, newspapers require three things to run them:
1) People to learn the news and write it up (reporters)
2) People to edit that news, check it and hold the reporters to standards (editors — this is where a newspaper is not equal to a bunch of amateur bloggers collating their reports)
3) A way of disseminating the news. That could be a print edition or a web edition.
Um, on the face of it, it requires about as much as an internet startup does. Talented people willing to spend their time for equity, and with experience in the business could start a newspaper from scratch, I believe. Where am I wrong in this equation?
There are lots of printers to whom they could outsource a print run, but I have a sneaking suspicion that paper newspapers might indeed die off in this period, to be replaced by digital versions. (NOTE: The Boston Globe provides me a tremendous service and gives me lots of my news. For free. Online. If I want to give them my money, I have to sign up for their dead trees. I do not want dead trees. So I don’t give them my money.)
There is, of course, still the issue of the revenue model. But could current revenue models work if the newspapers didn’t have to pull the weight of previous debt? Is the problem that these companies can’t honor prior commitments and make a profit today?
So my thesis, to boil it down, is that existing newspapers may go belly up en masse. But the news function of newspapers will move to a new online model which will run partially by subscription and new information companies will arise to replace the old newspapers. I believe that some of the sea changes we are witnessing will include requiring people to pay for content they now expect to be free (online news) and a return to the idea that a company can employ people and throw off a modest profit — and not need to make investors wildly wealthy. I think more people (like my imagined news entrepreneurs) will value a good, enjoyable job that will pay the bills, without needing a promise of vast pelf in order to spend their time in the endeavor.