Almost exactly 10 years ago, Thomas Steinfeld, today culture editor of the German quality daily Sueddeutsche Zeitung, invited 30 leading journalists to discuss the raison d’etre of quality newspapers. He came up with the conclusion: “The current economic crisis of newspapers is so serious, that there is reason to doubt its survival in the form familiar to us“.

The conference participants shared the understanding that their newspapers were part of the DNA of post-war Germany and its constitution and thus fulfilled a kind of crucial public function. That this had to be funded privately was not subject to debate, but was taken as a given. Patrick Bahners, then comment editor of Frankfurter Allgemeine Zeitung underlined this concept when he declared the federal president to be the “top culture editor of the nation”.

Since then the Germany’s national newspaper publishers have been stuck in a sort of analysis loop. At the same time, they are careering at full speed toward the insoluble problem of combining the the cost structures of profit-making enterprises with the mission of public institutions and charities, i.e. without sufficient income. In any case they lay claim to a role similar to those cultural entities financed by taxes and license-fees: schools, museums, theatres ǽƒ_ªƒ__ and in particular public service broadcasters ARD and ZDF.

Since the founding of the German Federal Republic, the national press has assumed a quasi-constitutional status, which they wear rather demonstratively. It is a confidence in performing a wide-ranging watching, discussing, and safeguarding role in the democratic body politic, the knowledge of being a highly subtle element in an increasingly complex cultural construct, in being able to deliver what, for example, Sueddeutsche Zeitung describes as its mission: “To contribute to information and to the free forming of opinions of the individual and to support a liberal and tolerant attitude, (…) to make a substantial contribution to the life, work and self-determination of the individual in a socially committed, free, democratic and free market society.”

You needn’t be a brand guru to see that with such vagueness in self-perception, you can never create a crystal-clear brand. The longing for the general interest and the belief in a social responsibility to reach potentially all halfway intelligent Germans of voting age, can in the end only really mean that you want to offer as many people as possible as many subjects as possible. That explains the relatively great indistinguishability of the leading quality publications in Germany.

Two Class Journalism

For many decades publishers could finance their self-imposed public service remit securely: research could take months and years, and there was still enough left for publishers to become billionaires and managing directors, editors sometimes millionaires. The private media economy worked like a magic power station: as there were more than enough readers and advertisers, there was always enough energy for moving the great and stolid public service. Journalists enjoyed the kind of generous working conditions seen only in public broadcasters nowadays.

Thus for some time Germany has now had two classes of journalism: those writing (and now also filming and speaking) for private publishers rarely have much time to think, and often not even to research. Those researching, filming, speaking and increasingly, writing in the service and pay of the license fees will have a choice of travelling by air or first class rail to an interview that may be broadcast the next day or week, or possibly not at all.

The contrast between the economic asymmetry of the privately and publicly funded editorial organisations is very stark indeed and is likely to increase in the years to come, at least in Germany where the license fee is being increased currently and hence the budgets available to broadcasters ARD and ZDF.

While the ǽƒ_ª_Financial Times Germanyǽƒ_ª¶ closed after 12 years with an annual loss of 21 million Euros, the ARD spends more than the same amount on a new studio outfit for its daily news show ǽƒ_ª_Tagesschauǽƒ_ª¶. Nobody knows what the running of programs such as ǽƒ_ª_Taggesschauǽƒ_ª¶ or ǽƒ_ª_Tagesthemenǽƒ_ª¶ (flagship news programs) has cost each ARD user over the past 12 years. Which makes it even more astonishing that the notion of a public service mission persists in supposedly intelligent private publishing houses. They insist on the principle of a basic provision and are foolhardy enough to risk a competition with the public service system. In the cold light of day this is hard to understand because this is a competition they can never win.

There is no Too-big-too-fail for newspapers

Very often, the word from publishers is that their journalism, particularly the print version, is the only true and decent kind and therefore irreplaceable. Again and again the attempt is made to differentiate themselves (ritually) from the publicly financed ǽƒ_ª_state mediaǽƒ_ª¶ and subsidy models. There is demonising against social media: “The self-promotion of each and everyone as the voice of public opinion and individual participation”. On the other hand the market and technology (Google) are termed enemies of ǽƒ_ª_good journalismǽƒ_ª¶ (Die Zeit).

Frank Schirrmacher, the co-publisher of the Frankfurter Allgemeine Zeitung (this newspaper has no editor but five publishers), defined his position in the essay Das heilige Versprechen (“The holy promise”):

ǽƒ_ª_In a world in which one can work out which institutions will profit most from the atomisation of public debate, in a world of supposed transparency, where shadow networks grow more quickly than ever before (as Manuel Castells has shown), the deciding question is this: How can a society survive without good journalism? Now, when sadly even journalists increasingly allow Silicon Valley and Wall Street to write their social forecasts, we risk a very simple answer: “it canǽƒ_ªƒ_½t.”

Maybe Schirrmacher is already anticipating the exodus and longs for a final, heroic moment or a magical rescue at the last minute. In any case he gives the ǽƒ_ªÓ_FAZǽƒ_ª¶ a crucial role in the system of the nation – as if the editorial outlook of concern for the public good was guaranteed by some kind of social contract.

Meanwhile there should be real concern about the FAZ accounts: Reports of up to 20 million Euro losses in 2012 have been published. Were these results to continue, even quite conservative opinion would calculate a closure of the newspaper in less than 10 years.

As important as publishers may be to the public, ǽƒ_ª_too big to fail does not apply to newspapers”, as Peter Hogenkamp, head of digital business of the Neue ZÇŸ¶¬rcher Zeitung rightly commented recently ǽƒ_ªƒ__ ironically on German public television.

Most citizens and loyal subscribers are not even aware of the situation, particularly those who echo the former editor-in-chief of the ARD Hartmann von der Tann: ǽƒ_ª_But I will always want my newspaper in the morning with my breakfast.”

These are often people who see the journalistic achievement of their favourite paper above all in the distribution of newspapers and who have no real idea of the anaemia of the publishers. For example, that figures for print runs and loyal subscribers are plummeting everywhere or that the the section of the national advertising budget has shrunk from a constant 40 percent in 1990 to less than 15 percent today.

The supposed saviours become victims

For a long time publishers were able to subsidise their unusual public mission with an unusual internal cross-subsidy. Cover prices never had to be pegged to real costs and were always kept relatively low so that circulation could be increased. Journalism was really, from a business point of view, the icing on the actual product: a widely circulated advertising carrier.

While publishing managers and above all journalists always fight against the notion of subsidies, they have always worked in a subsidy model particular to the press. The public has probably also always accepted this form of subsidy – like opera or theatre goers. In any case very few would be ready to pay realistic prices for the journalism they want to enjoy over breakfast.

Because this journalism is now increasingly created like any other product, financed by sales, the public mission has now become so expensive, that it is devouring the system from within. The intention of saving society has turned into the existential threat to the intended saviour. This problem has been partly overlooked, partly played down and underestimated, but also knowingly ignored by some.

Mission without boundaries

Zeit editor Giovanni diLorenzo, who as editor of the Tagesspiegel in Berlin once wanted “to make a weekly on a daily basis”, recently commented that the ǽƒ_ª_decisive questionǽƒ_ª¶ in his view is: “How can we finance high value journalism, concerned with profound analysis and research and the free reporting from across the globe, with its critical watchdog function?”

In truth, the publishers fail with the opulence and open-endedness of their mission which is mirrored in diLorenzoǽƒ_ªƒ_½s question. All national titles should be using the year 2013 to focus on the question already asked in 2003:

ǽƒ_ª_Which of all these things can we continue to finance?

Here, it is not really necessary to concentrate on the fate of the printed newspaper. A simple sum suffices to show that paper will only continue to be an alternative for those who are willing to pay a relatively high price.

The FT Deutschland would have had to charge between 5 and 7 Euro on advertising-free days, just to cover the cost of production. To please its owners, a moderate multiplying factor of 3 to 5 would have been necessary, making for a cover price of 15 to 21 Euro. So the FTD printed daily was never going to be an alternative.

Still journalists and managers across the nation dream of a magic cure for their existing structures, with existing contracts and rewards. At the same time they have to admit: ǽƒ_ª_We have no functioning business model for the futureǽƒ_ª¶… ǽƒ_ª_The situation is dangerousǽƒ_ª¶ … ǽƒ_ª_Paper has no futureǽƒ_ª¶. And yet they continue as before.

Changing their products, that much they know, is risky, because that would lead to a change in the contractual basis and how to retain the customary lifestyle with a reduced salary and a disappearing bonus? Sometimes people in the publishing industry can be very similar to the bankers being criticised in the editorials.

In fact, the palliative phase has already begun, at the end of which stands a certain death and a stiff bill, unless mental attitudes and material structures can be radically changed in the coming years. The case of FTD and the bankruptcy filing of Frankfurter Rundschau paper show that continued cost-cutting at the foundations, precisely where there should be a unique daily creative effort, is counterproductive in newspaper publishing. These measures merely delay the funeral and in the end make the whole business unbelievably expensive.

The risk of one product enterprises

This positioning as socially important, morally superior and virtually without competition in the open market, also creates a legitimisation for cartel behaviour. While the common good is the declares goal up front, there is the danger of damage behind the scenes, for example through collusion in the advertising market.

While there are good reasons for the ǽƒ_ª_FTDǽƒ_ª¶ and the ǽƒ_ª_Frankfurter Rundschauǽƒ_ª¶ to have been the first newspapers to leave the market, there is no reason why they should be the last. For publishing houses like DuMont and Gruner+Jahr, closing individual titles is an opportunity, as they have many brands. ǽƒ_ª_FAZǽƒ_ª¶ and ǽƒ_ª_SZǽƒ_ª¶ belong to virtually one-product-enterprises and closures would mean a 100 percent loss for their publishers.

Which is why one product enterprises have a particularly hard time with changes and risks and delay fundamental decisions. They – and society – lose time and in the worst cases they fudge the problems and possibly even hide the fact that their journalistic apparatus canǽƒ_ªƒ_½t be re-financed and their journalism in its current form is insolvent.

Sober economists would speak of a failure of the market in such cases. Should society still desire the service, there would be justification for a state subsidy, possibly in the form of a public licence fee.

Five proposals of reform for the year 2013:

1. Uniqueness: Because the significance of cover prices – printed and digital – will grow immensely, publishers will have to give their products much stronger identities and distinctiveness. At the same time, newspapers will have to give up the race for high circulations with low prices and aim for high sales prices and lower print runs. This creates the additional pressure to change todayǽƒ_ªƒ_½s products: it will be a question of re-inventing them – or closing them.

2. Frequency: Publishers will have to scrutinise the costs of their daily publications and probably give this up. Instead, they must create new, realistic sales prices based on the new frequency. The same conclusion was reached by Martin Langeveld who recently formulated a prognosis for 2013 for Harvard University: ǽƒ_ª_The coming death of seven-day publicationǽƒ_ª¶. (Note: see TheMediaBriefing’s recent article on this problem)

3. New money: In any case, publishers will have to diversify their income streams, target more business with citizens and the state, possibly even with the EU, as well as club memberships of readers, as outlined by Michael Manness of the Knight Foundation for the Nieman Journalism Lab. German quality newspapers will have to learn from the budget structures of public institutions such as theatres or the larger NGOs, as well as the varied income streams of some journalistic projects of the Knight Foundation, for example the Texas Tribune. That includes sponsoring and public grants, for example for deliveries of newspapers to schools and universities, or donor activities such as dinners, festivals or telephone campaigns, heavily used by public television in the USA. The english ǽƒ_ª_Financial Timesǽƒ_ª¶ made the suggestion in early December 2012, that German newspapers should find oligarchs as sponsors. Prominent examples for these in Europe are ǽƒ_ª_Les Echoǽƒ_ª¶ in France and ǽƒ_ª_The Evening Standardǽƒ_ª¶ in Britain.

4. Commercialisation: The traditional Chinese wall between news and commentary is obsolete and could be a model for a new division: between radically commercial and totally uncommercial subjects and areas. Here there currently are mixes that damage credibility and still donǽƒ_ªƒ_½t guarantee income. Publishers must inspect and exploit all possible commercial openings and not just in the narrow sense of journalism, but in every kind of content, digital and non-digital.

5. Information: Above all publishers should inform the public, their colleagues and their readers about the true situation and the possibly consequences and avoid hiding the problem.

Peter Littger is country director for Germany at Innovation, the international media consulting group. He tweets as @plittger.