about 15 percent from digital ad sales, even as readers flock to consuming news digitally. The New York Times does much better than most, earning 28.2 percent of its ad revenue from digital sales, but that’s still not good enough.

The Need for Reinvention

Still, even in these tough times, the newspaper industry has shown an amazing degree of resiliency. As difficult as things are for newspaper companies and their investors, notes NAA’s Little, “There is one fact that always tends to be obscured or outright ignored—newspapers are still making money, and newspapers remain a good investment.”

Newspapers are profitable, as Little notes, but their profit margins are a fraction of what they were as recently as 25 years ago. Then, many newspapers earned 25 to 30 cents on each dollar that came through the door. Today, most earn a meager 1 to 3 percent. That’s a rate of profit common in the low-margin grocery business but one with which newspapers until recently were unfamiliar.

Why does Little believe in newspapers? Perhaps it’s because in January 2015, the digital audiences of newspapers reached a record 173 million. That figure was up 4.8 percent in a single month and represented 82 percent of the total U.S. adult online population. If 82 percent of any population is consuming your product, you’re doing something right.

Or perhaps it’s because a savvy investor like Warren Buffett invested heavily in newspapers as recently as 2014. And, of course, there are still about 1,380 daily newspapers nationwide. Small- and medium-sized newspapers are doing relatively well, too. It’s the metro newspapers in large- and medium-sized cities that are responsible for much of the industry’s rapid decline.

One major problem is that little of the digital ad revenue from online news sites is flowing to the news organizations that actually report that news. According to Pew, five companies—Google, Facebook, Microsoft, Yahoo and AOL, all content aggregators, not sources of original news reporting—were the recipients of 61 percent of domestic digital ad revenue in 2014. Their percentage of the market is declining by only 1 percent a year. That means others, such as news companies, are not experiencing much of an increase.

There’s tremendous growth in digital ad revenue, particularly in mobile, but only slightly increasing, flat or declining revenue for the legacy media companies that actually report and write the news. Again, Google, Facebook and similar companies don’t gather the news. For the most part, they simply aggregate it or link to it. While doing so, they collect the lion’s share of that growing digital revenue stream. Those who pay to create it in the first place get little of that revenue.

In the face of declining ad revenues, maintaining any profit margin at all has been difficult for print media. To achieve those meager results, newspapers have cut employment severely and moved to various pay models for their online sites. Some found new streams of revenue in commercial printing (printing other newspapers, for example) or acting as advertising agencies to place ads in various local media, not just those they own. Still others are selling their aging buildings on prime downtown land and moving to smaller, more cost-efficient offices. As a result, meager profits to date have been maintained primarily through cost-cutting or the one-time sale of assets. Most of those savings have been achieved, and now comes the tough part—finding more new revenue.

legacy media

Traditional media outlets such as newspapers, magazines, broadcast television and the like.

Legacy Media Extend Their Reach If readers are determined to consume news on mobile devices, publishers seem happy to provide it that way. Two notable shifts in ways to get news were announced recently, and one major publisher, The New York Times, is participating in both.

Facebook rolled out a service called Instant Articles, which allows publishers to post their stories directly into Facebook’s newsfeed. Early participants, in addition to the Times, are National Geographic, The Guardian, BBC News, Spiegel Online, BuzzFeed, NBC News and The Atlantic.

Facebook engineered a design change in its mobile app that allows articles to load faster than ever before. There are new interactive features, too, including the ability to zoom in on high-resolution photos. Autoplay videos can be embedded in stories, and interactive maps, something the Times has handled exceedingly well on its website, also are possible. The user also can comment on an article or hear audio captions for photos.

Publishers were attracted to the service because they can keep all the revenue derived from stories they post by selling ads within them. They also can use Facebook’s Audience Network to monetize unsold content. In that case, Facebook gets a cut.

Weeks after the Facebook Instant Articles announcement, Apple announced a News application it bundled with iOS9, the newest version of its operating system. It combines articles from more than 50 publishers, again including The New York Times. Among other publishers on board at launch were the Daily Mail of London, Vox Media, Condé Nast, Hearst and Time Inc.

Like Facebook, Apple said its contracts with the publishers allow them to keep 100 percent of the revenue from ads they sell themselves and 70 percent of revenue generated through Apple’s iAd system.

Both ventures allow publishers to put their content in front of huge audiences. Facebook is on the mobile devices and desktops of millions of users worldwide. And Apple’s News app is ubiquitous, too, because it is bundled with the operating system, also on millions of mobile devices and desktops worldwide.

“We see great potential . . . to reach very, very large groups,” said Mark Thompson, president of The New York Times Co. By partnering with a social media powerhouse like Facebook and one of the world’s largest companies in Apple, publishers hope to vastly increase their digital revenues.

Recently, however, legacy news organizations have sought ways to recoup advertising revenues. Perhaps news aggregators have begun to realize that without the work of newspapers, they would have little to aggregate. Whatever the impetus, newspapers, magazines and other legacy media have begun to enter into financial arrangements with large web companies that benefit both parties. (See the box “Legacy Media Extend Their Reach” above.)

Newspapers: Still the Source of Most News

There’s an excellent reason for the media industry, the online and mobile industries and the population in general to be concerned about the health of newspapers. Newspapers are the creators of most of the news consumed in the U.S. In fact, several studies have concluded that as much as 85 percent of all U.S. news originated at newspapers. The reason? Newspapers have the largest and best news-gathering staffs in almost every city in the country. They typically employ more journalists than all the radio and television stations in that city combined. That’s still true in most places even with the recent sharp reductions in newsroom employment.

For more than a century, the legacy media, newspapers in particular, have funded the extensive news-gathering operation that exists in the U.S. and much of the rest of the world. Yet increasingly, because of the diminished audiences for print journalism, newspapers are trimming the size of their staffs in an effort to survive. Local television stations did the same in recent years as cable news channels reduced the size of their audiences.

Because newspapers are the source of most of the news we consume, if they disappear, who produces that news? Indeed, most of the information found on Yahoo, Google News or other content aggregators originated with legacy media operations, most often newspapers. The same is true with most other news websites.

FIGURE 2.1 Collaborations with Facebook’s Instant Articles and Apple’s Apple News make it possible for legacy media like The New York Times to distribute their stories more widely and consequently get more revenue from them.

As we go about the task of creating a new business model for the news media, what we must save is not specific newspapers and television programs, and not necessarily the companies that own them, but the high-quality reporting they produce.

True, replacing spot news—breaking news that occurred today—might not be too tough. After all, if a plane crashes, some blogger or citizen, if no one else, is bound to report it. More problematic is the potential loss of in-depth investigative journalism—what journalist Alex S. Jones calls establishing in the public a new understanding of an issue derived from intensive journalistic investigation.

Jones is the Laurence M. Lombard Lecturer in the Press and Public Policy and the director of the Joan Shorenstein Center on the Press, Politics and Public Policy at Harvard University. In his book

Losing the News: The Future of the News That Feeds Democracy, he praises the technological changes that are altering the journalism landscape, but he fears the loss of the “iron core of news that serves as a watchdog over government, holds the powerful accountable, and gives citizens what they need.” He’s hopeful and optimistic that the “iron core” can be saved.

In a review of Jones’ book in The New York Times, Harold Evans, former editor of The Sunday Times of London and The Times of London, points out what happens when this kind of news doesn’t get enough attention: “the insufficiently monitored housing bubble, leading to the financial meltdown; the neglect in New Orleans, leading to the devastation after Katrina; or the formation of Al Qaeda in Afghanistan, leading to 9/11.”

spot news

A timely report of an event that is unfolding at the moment.

GRAMMAR CHECK What’s the grammar error in this sentence?

After arriving at the Greek island of Lesbos thousands of refugees find themselves with insufficient food and medical care.

See Appendix 1, Rule 6.

Other Legacy Media Are Affected, Too

Other legacy media—television and newsmagazines in particular—have been affected by changing news consumption patterns, too, but certainly not to the degree that newspapers have. For a while, it appeared that cable television news channels were cutting into the audiences and revenue of local television stations in a way that mimicked the decline at newspapers. But according to Pew, which tracks media consumption patterns, in the last few years average daily viewership of local television began increasing again (3 percent in 2014, for example) and cable audiences began to shrink (a sharp 8 percent decline during the same year). Network television news also experienced a 5 percent increase in viewership that year following years of decline.

The increasing popularity of the web and mobile news also forced television stations to add staff members who create news for those media. Television scripts were not useful on the web, so many stations hired journalists to write and edit stories that much more closely resembled those found in newspapers. That added to their costs even as revenue decreased or remained flat.

For its part, the magazine industry shares a lot of problems with newspapers, not the least of which are high production and distribution costs. In 2014, the magazine industry as a whole experienced a precipitous decline of 14 percent in total circulation. But the Pew Center is primarily interested in tracking a subset of 15 magazines that specialize in providing news or news analysis, among them Time, The Nation, Fortune, Forbes, Vanity Fair, Rolling Stone, The Economist and Wired. Those 15 experienced a decline of only 1 percent that year.

For those interested in magazine careers, the newsmagazines are not the only place to find jobs. The industry as a whole continues to provide thousands of new jobs for young journalists each year. Most who graduate from schools and departments of journalism and seek magazine jobs find employment at publications outside the news sector. Those jobs are found at places such as corporate magazines, magazines published by not-for-profits, business-to-business magazines and thousands of niche magazines catering to targeted audiences—Boating for powerboat enthusiasts, Men’s Health, Woman’s Day and the like.

There also are thousands of niche websites, some designed to appeal to users with common interests. Passionate football fans, for example, can follow their teams’ recruiting on sites like Rivals.com, Scout.com, and ESPN.com. Then there are the magazinelike sites that have no print equivalent, including Slate.com.

Every company and every not-for-profit has a website these days, and those provide good opportunities for those with journalistic skills, just as their magazines have done for years.

ON THE JOB The Lure of New Media Adam Falk graduated with a degree in magazine journalism, but he knew he wouldn’t be entering the magazine world right away. There was too much more he wanted to try.

At the University of Missouri, he’d focused on building a new-media skill set to tell stories in innovative ways. Just after graduation, he took a web design internship with the Media Policy Center, a nonprofit film company in Santa Monica, Calif.

Eventually, he found his way to the startup world. He moved to Newsy, a video news company headquartered in Columbia, Mo., for which he had worked while attending college. Then he went back to Los Angeles to start a small Newsy studio there.

“The best thing about working for a startup is that your presence makes an impact, and your work gets seen. Chances are, I wouldn’t have the same opportunities working an entry-level job at a larger media company,” Falk says.

Then, The Wall Street Journal came calling. He now lives in New Yor