I find it hard these days not to glaze over when I see article after article about the death of the newspaper industry. It’s an industry in what looks like a death spiral, and has been for quite some time. Surprisingly though the news seems to get worse nearly every day.

So it was with much sadness that I read today (in the Wall Street Journal online edition delivered via RSS) that the Detroit News and Detroit Free Press, the two remaining daily newspapers in Detroit, are expecting to stop delivering physical newspapers all but three days a week. My normal response would have been to note this as yet another sign of the death of the industry — as I imagine most everyone else has — but this one struck close to home; literally.

Though I live in San Francisco now I was born and raised in the Detroit suburb of Grosse Pointe — where my grandmother, parents, brother, and extended family mostly still live — and grew up reading the Free Press. My parents have subscribed to the paper for as long as I can remember and it was my first introduction to newspapers, current events, and becoming an informed citizen. My mother worked for both the Free Press and the News as an art director, and many of my parent’s closest friends still work in the industry. It would be fair to say the the paper was a constant presence in my life, though in many cases it went unnoticed, only remarkable when there was a protracted labor dispute in the 90’s, a frame worthy front page when the Red Wings or Tigers won a title, and when Mitch Albom stopped writing a daily sports column.

But like most newspapers those in Detroit have been hit hard by the systemic changes in the industry, namely the Internet, and more accurately Craigslist. It has been hard not to notice the impact. A couple of years ago I had the pleasure of coming downstairs one morning around Christmas to see my father — who is 6′4″ — sitting in his usual chair straining to read a paper the size of a comic book. And now the companies are planning to stop delivery of those comic books all together, save Thursday, Friday, and Sunday, the most lucrative of days. Though I believe strongly in the power of the Internet, business efficiency, and progress, its hard not to feel disappointed.

From a strategy standpoint the newspaper industry is serving as a stark reminder of how nasty the innovators dilemma truly is — though calling the News and Free Press “great companies” may be a tad hyperbolic. Its clearly difficult to walk away from profitable businesses in favor of the inevitable future. But what I find more interesting here is not the destruction of long standing institutions but the lack of a viable economic alternative to take its place. While Craigslist is wildly popular it does not come close to matching the revenues of the newspapers it is leaving in its wake. Yes, Craigslist doesn’t even try, but I have a hard time believing it could if it wanted to.

If we were to be perfectly honest though newspapers have always been a strange beast: a forced bundle of journalism people were willing to pay a bit of money for and classified ads which pulled in the real cash. All with advertisements tossed in on top for good measure. The Internet has blown that bundle to pieces — as it has done with the musical anomaly called the “album” — and they have all been sold off at the lowest possible prices; reporting is free (with ads of course) and classified are mostly free (save a few select ads and a few select markets that subsidize the rest of us; thank you San Francisco job postings and erotic services).

I’m all for killing off inefficient industries, but in this case we don’t seem to be taking inefficient resources and capital and moving them to more efficient uses. Maybe its because I think citizen journalism is a sham, but real journalism practiced by newspapers is a critical part of how our society stays on track and nothing seems to be coming up to take its place. This despite the fact that it is an incredibly valuable service. Just this week we’ve seen a corrupt governor go down in no small part because of intrepid reporting from the Chicago Tribune. Ironically The Tribune Company filed for chapter 11 at exactly the same moment they filed the story; its hard to believe the governor would be on his ass today if the Tribune was already gone.

The simple problem is that We The People have been conditioned to think of journalism as a free good. This is not a new development; over the last hundred years the price we pay for journalism has been slowly coming down as it was subsidized by classifieds and advertising. Mostly what people pay for in a newspaper subscription is the convenience of delivery and the pleasure of holding a physical object. Now the News and Free Press are left with just the reporting as a viable offering but have priced themselves out of a business model. Further, nothing short of ‘free’ will work for anyone else trying to provide journalism. We’re not even willing to pay to remove the ads!

Frankly, I don’t see an easy way out. We’re in a situation which, in economics, we call path dependent. The newspaper industry started down this road years ago making rational choices, but now is unlikely to survive as more than a shell of its former self because of those very choices. And the rest of us appear to be screwed, as we have been trained to expect free journalism so no viable replacement business model is apparent. There are a lot of very smart folks looking at how to save journalism and it appears the numbers just don’t crunch.

So, consider this a warning to other industries: bundling is a thing of the past. You must assume hyper efficiency in the future and prepare for it today. Its the only way to stop yourselves from becoming path dependent.

As for this post, consider it a love letter to my hometown newspapers, or at least what is left of them. And a recommendation that they buy a few more servers; at least make it a fair fight.

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