Maariv's near-death experience
The situation of newspapers in Israel isn't as bleak is in America, but it could be, because of the presence of one American.
A quasi-post-mortem of the near-death experience of Maariv yields at least two conclusions. One is that capitalists and the media are not perfect partners. That should be self-evident, but in today’s cult of entrepreneur worship - whose followers believe with perfect faith that investors and the markets always know best - the Maariv saga is a useful corrective. The second is that the biggest problem facing the Israeli newspaper business isn’t the Internet but one particular capitalist, who makes up for any vision shortfall with a wad of cash.
There is myth that is overwhelming America and even has some acolytes here (at least in the Prime Minister’s Office and the treasury) that entrepreneurs are people who combine iron-clad financial logic with vision, insights, hard work and sacrifice. They can see trends and capture opportunities ordinary mortals miss. Their abilities are measured by how big a cash pile they can accumulate while they do the rest of us a favor by creating jobs. If you want role models for this, there are certainly enough of them, like Steve Jobs, Richard Branson or Warren Buffett and, closer to home, Stef Wertheimer or Eli Hurvitz.
But the typical entrepreneur/CEO/investor is nothing of the sort. Leave aside Steve Jobs, who had an incredibly successful run of new products that he was personally involved in conceiving and designing, or Eli Hurvitz who created a multinational company out of a tiny business in a Middle Eastern backwater. The majority of entrepreneurs are successful because they are more aggressive and single-minded in the pursuit of their personal goals.
Those who reach the very top more often than not are boosted there by a critical bit of luck – they were in the right place at the right time.
That is not say that free markets are useless or that entrepreneurs as a class are a bunch of schleppers. But their contributions to economic growth and their ability to fathom the intricacies of the economy and markets are routinely over-estimated.
Ofer Nimrodi and Nochi Dankner – the latter, at least, once praised for business savvy -- each had their go at Maariv and they ran it no better than if it had been nationalized. True, both had motives other than pure business considerations, but that only reinforces the case that entrepreneurs are people, too, easily distracted from the goal of making money by ego, personal preferences, vendettas and host of other motives that never make it into economics textbooks.
With his clear political agenda, Shlomo Ben-Tzvi will likely do no better with Maariv.
Like other newspapers in the storm-tossed media environment, Maariv is a business that demands that rare kind of entrepreneur who does have vision and all those other fine qualities celebrated at the Republican Convention last month. The typical entrepreneur can make a go of a business, maybe even turn around an ailing one, by cutting costs, introducing a new products, making a strategic merger or acquisition, or by employing one of the other gadgets in the CEO tool chest.
But newspapers, like the other fixtures of the 20th-century media industry – recorded music, radio, film and television – is embroiled in a technology revolution spurred by the Internet and related technologies whose outcome is far from certain.
No one in the old media has figured out to come out on top of this. Even Rupert Murdoch, a media magician by most measures, has struggled with his tablet newspaper, The Daily, and hasn’t perfected a paywall model for his older properties. The U.S. newspaper industry is in what looks like terminal decline. Newspapers last year were a $34 billion industry, compared with $59.2 billion in 2000, according to the American Newspaper Association. Last year, newspapers succeeded in boosting their online revenues by $207 million even in a troubled economy, but revenue from their print editions plunged $2.1 billion. The transition from print to screen is a shrinking proposition.
xHamster wins hands down
It is not hard to see why. News gathering is an expensive business but users have become accustomed to getting all their content for free and advertisers aren’t prepared to pay much for people who aren’t paying for their content. The solution adopted by most publishers is to reduce their content costs (that is, firing journalists), thereby making their content worth even less when they try to set up paywalls. The most lucrative advertising – the classifieds – have drifted away from newspapers to pure advertising sites like Craigslist. Among pure news sites in America, CNN Interactive attracts the most people, but it is No. 20 on the Alexa ranking. The New York Times is No. 37, behind Israel’s Babylon translation site and xHamster, which is not about rodents; it's the first part of the word that counts.
In Israel, the situation of newspapers is not nearly as bleak. The TGI survey of newspaper readership found that is the first half of the year, 66.5% of adult Jewish Israelis read a daily newspaper, higher than the 65.1% rate in 2002. Among the top 21 websites, the three daily newspapers (Yedioth, Maariv and Haaretz) and the three financial dailies (TheMarker, Calcalist and Globes) all have a place.
All is not good: The biggest sites by far are non-news outlets (Google, Facebook, YouTube and the like). Many of the top sites eat directly into newspaper revenue, such as the classifieds site Yad2 ("second-hand").
But the real problem for Maariv and Israel’s other newspapers is Sheldon Adelson and his freebie Yisrael Hayom.
Adelson not only doesn’t have to worry about the vision thing, or how to make the transition to Internet, he doesn’t have to concern himself about making any money at all. Along the way he has decimated the newspaper industry.
Maariv is the biggest victim, with its share of newspaper readers halved from close to a quarter a decade ago to under 12% in the first half of this year. The other’s gave been hurt as well – Yedioth Ahronot is down almost nine percentage points 37.6% and Haaretz down two to 7% – but Maariv was the big loser.
Yisrael Hayom has 38.7% of all readers and the smaller giveaway Israel Post 8.9%. Neither existed in 2002.
Yisrael Hayom has also taken a toll on ads. While the number of inches of advertising in newspaper has actually risen from 18.3 million in 2004 to 28.3 million last year, revenues have collapsed because ad rates have plummeted, according to Yifat, a media-monitoring firm. Newspapers took in just NIS 1.16 billion from ads last year, down from NIS 1.47 billion in 2004, with more newspapers competing for a meaner pie and cutting their ad rates. One competition charges rates without consideration of profitability.
More news outlets is good for readers and for democracy. It is difficult, however, to see how this can be sustained.