Strib defauls

The Newsosaur brought word yesterday that the Minneapolis Star Tribune defaulted for the second straight quarter on debt payments. The former KRT paper that was spun off in the McClatchy deal to avoid conflict issues (MNI already owned The St. Paul Pioneer Press).

The Strib was purchased in Dec. 2006 by a private equity group, Avista Partners, made up of former investment bankers. At the time The Star Tribune has a paid circulation of 361,172 daily copies and 596,333 on Sunday. Purchase price was $538 million, less than half what McClatchy paid for purchase in 1998. At the time of the deal the paper was reportedly still earning a profit.

To finance the deal, Avista borrowed $340 million initially and nearly $100 million a year later. Since then it has been forced to write-down most of the newspaper’s value and now, because of falling advertising revenue, finds itself unable to meet the payments on the remaining debt estimated at about $436 million.

The company is in the process of attempting to restructure the debt, but that will undoubtedly bring higher interest payments. MNI recently had to cut a similar deal and rates on their extended time table could top 10 percent, according to reports.

Here’s the kicker, under the circumstances some are estimating the Strib is now worth $125 million. However, that figure is based on the price one would pay to purchase all of their outstanding debt paper and not other more common ways of valuing a newspaper (i.e. cash flow or assets). But, under the circumstances the figure quoted may be charitable given the increasingly uncertain revenue picture for newspapers and that some traditional newspaper assets (such as brand or goodwill) likely have little intrinsic value at this point.

I’m sure folks at the Strib take little solace in knowing they probably aren’t alone. The Philadelphia Inquirer, another spin-off from the KRT deal, is struggling in similar waters. Also, the entire Tribune company (owners of the LA Times, Chicago Tribune and Baltimore Sun) could face default on its debt of $13 billion in the coming year according to some reports.

 

Tags: newspaperdebt, loan default, newspaper future,

Fail Efficiently

“The way to get a great idea is to have many ideas. By definition, most of your ideas will fail. You want to be able to generate ideas very fast, very cheaply and fail very often but at very low cost. Magic Labs is optimized for the efficiency of failure. Among the many ideas, there will be great ideas that bubble up and then we will invest R&D efforts to cultivate the great ideas.”

The quote is from John Wang, chief marketing officer at HTC, the company behind the first cellular handset to be powered by Google Android operating system. Find more of the interview here.

What’s the point? I wonder how many newspapers have an R&D mindset? Retrenchment seems all the rage at newspapers these days. It’s always worked in the past — right? However, some might argue it is simply trying to hold onto a past that has already passed. If now is not the time for radical reinvention then such innovation will be done on the ashes of newspapers.

Speaking of the ashes of newspapers, here is a thought from one of the leading innovators in newspapers: Dean Singleton. According to Singleton, most of newspapers problems are related to the recent economic downturn. Here is what he told Paidcontent.org.

“The biggest thing we need right now is an improved economy, because at least 60 percent of the revenue problem we’re facing today is good-old fashioned economic recession.”

Alan Mutter, of Newsosaur, sees things differently.

Newspaper ad sales didn’t just go the wrong way in 2007. They have been declining steadily since 2001, when the economy suffered the twin shocks of 9/11 and the tech collapse. Even after the economy rebounded in 2003, newspaper sales consistently trailed the growth of the gross domestic product, as detailed here. Newspaper sales actually began falling in the second quarter of 2006 – even though the expansion continued for more than a year – and the rate of decline has accelerated ever since.

However, Singleton doesn’t stop there. He rightly adds: “If we lose $1 dollar in print, we don’t need $1 dollar to come back online. We need 30 cents. Maybe even 20 cents, because of the marginal profit that online produces.”

If that’s true and the money can be found online to enable newspaper survival, should those dollars go to bloated profit margins that serve greedy investors or should they be devoted to innovation and quality content production? Which will better serve the business in the long term?

I bet I know where Mr. Singleton stands on that question.

Tags: Futureof Newspapers, advertising, online model, economy

Q4 newspaper advertising looks thin

Newspaper advertising was falling hard even before the financial markets tanked. Not a good sign heading into the final quarter of 2008.

According to a June Bloomberg News report:

Print advertising sales by American newspapers fell the most on record in the first quarter, tumbling 14 percent as the real estate and job markets shrank and business was lost to the Internet.

Advertisers spent $8.43 billion on newspaper ads in the first three months of 2008, according to the Newspaper Association of America, the eighth drop in a row. Real estate and recruitment ads each fell 35 percent.

The pace of that decline picked up in Q2 of 2008, but NAA is predicting it will stabilize for the rest of the year and the dive will become shallower in 2009. It isn’t clear why they believe the pace won’t continue to accelerate. But chances are all those calculations went out the window in the past few weeks as bank failures and stock market woes have all but guaranteed that advertising dollars will be at a premium for the rest of the year — if not longer.

What a bummer for those of us still trying to make a go in the newspaper business.

Tags: advertising, financial meltdown, future of newspapers

Media stocks slide with Dow

Media stocks didn’t escape the mayhem on Monday, Sept. 29. Newspaper stocks have already been drubbed this year (heck, most have had their pants yanked to their ankles at this point) and some took another beating: Newscorp down nearly 10 percent; Gannett down almost 7 percent; Media General down 4.5 percent.

Oddly, McClatchy — which has dropped more than 90 percent of its value since the ill-fated KRT purchase in 2005 — rose nearly 2 percent. The bump was on news of a new agreement with lenders regarding the $1.2 billion debt it is carrying. But even that silver cloud had a lead lining because the deal — negotiated because of reduced revenue expectations — required the newspaper company to put up more collateral and accept a higher interest rate.

Does it mean anything that broadcasters were hit harder than most newspaper companies? Or is that simply because there is more value remaining in the TV company stocks than in most from newspapers?

The following figures are from Al Tompkins blog.

News Corp. and Viacom hit their lowest levels in more than four years, while CBS and Time Warner fell to one-year lows.

Here’s my summary:
News Corp. down 9.6%
Viacom down 7.83%
CBS down 7.14%
Belo Corp. down 4.27%
Time Warner down 9.22%
Walt Disney Co. down 9.22%
Gannett Co. down 6.59%
New York Times Co. down 3.82%
Media General down 4.33%
Washington Post Co. down 4.18%
McClatchy Co. actually rose 1.78% on news that a new debt agreement had been struck with lenders.
Hearst-Argyle Television was only down 2.87%
Meredith Corp. was down even less, only .69%
Charter Communications down 2.38%
Cablevision Systems Corp. down 5.47%
General Electric Co., a Dow Industrial Average component and parent of NBC Universal, saw a 8.51% stock price drop Monday.

What’s the plan?

Newspapers are in the midst of the greatest retrenchment in their modern history. Almost weekly there are reports of a few hundred more jobs being cut or eliminated. According to the Paper Cuts web site, created to track the loss of jobs at US newspapers, there have been nearly 11,000 jobs lost this year and there are still three months to go. That’s up from about 2,200 in all of last year.

It isn’t like this hasn’t happened before. There have been multiple rounds of buyouts at the newspaper I now call home. The most recent will reduce editorial staff by almost one-third. At my last paper, a mid-sized daily in the Philadelphia area, I survived three rounds of layoffs. In one round I saw a photographer with 12 years at the paper ushered out the door because he had the least seniority in that department.

But the difference in the past was that the newspapers didn’t really need a plan. They cut back and rode it out, confident that the economic factors affecting their bottom line would eventually be reversed and all would return to business as usual. That doesn’t seem likely this time.

The newspaper industry is in the midst of the longest and most severe advertising revenue downturn in US history. And rather than finding a floor, indicators are that everything up to now has just been the beginning of a deepening decline.

Here is what Alan Mutter at Newsosaur had to say on the subject:

In the longest sales setback ever, advertising revenues at newspapers declined for 9 or 10 consecutive quarters in the period ended on June 30, 2008. This surpasses the downturns in 1990-91 and 2001-02, when sales in each case slid for six of eight consecutive quarters before they revived.

If sagging newspaper sales don’t turn around in the second half of this year – which few expect they can do – then the decline will be on track to be twice as long as any in history.

What will make matters worse? More major retailers are expected to go bankrupt and the credit crunch will discourage others from spending cash on hand for newspaper ads. But what may be most telling is that advertisers are losing confidence in newspapers.

As evidence Mutter cites a report to the NAA Retail Advertising Forum that just concluded in Dallas, TX.

While most of the retailers appearing at the NAA conference continued to profess their appreciation for newspaper advertising, David T. Clark of Deutsche Bank said in the report that nearly all of them are moving ever-greater percentages of their advertising budgets to the interactive media – especially when young people are the targets.

Marketers “are ‘flummoxed’ by the multitude of media choices they have right now, so there is an opportunity for newspapers to step in and offer a multi-platform ‘big idea’ to major retail advertisers,” says Clark. “However, it is unclear whether many newspapers are up to the challenge, though there appear to be some that are.”

And newspapers may have a limited window in which to prove they deserve continued advertiser support. According to Clark.

“The next year to 18 months may be ‘make or break’ for the newspapers,” he said in the report. All signs point to weak retail sales and lean advertising budgets for the balance of this year and much of next, [making] it “unclear” whether newspapers “are moving fast enough to secure local market share for when the economy climbs out of its hole.”

What’s your newspaper doing? Do they have a plan to stop their slide or climb out of the hole? Or are they just cutting jobs and hoping it will all turn around on its own? And what are you doing to prepare yourself for what comes out of their plan?

Tags: futureof newspapers, advertising, revenue, employment

My predicition? Pain

One of my favorite line’s from a bad movie comes from Clubber Lang (aka Mr. T) in the lovably bad Rocky II. When asked by a TV person about his expectation for his fight against defending champion Rocky Balboa (aka Sly Stallone).

“My prediction,” Clubber snarled. “Pain.”

What’s the prognosis for metro newspapers? Don’t take my word, listen to two private owners who have built media empires around the big-city paper. They recently indicated a belief it will be too painful to endure.

“The intentions of Copley Press and Advance Publications to explore the sale of two of their signature properties represents a discouraging new lack of confidence in the future of metro newspapers,” Alan Mutter wrote in an Aug. 4 Newsosaur post.

“The potential sale of the San Diego Union-Tribune and Newark Star-Ledger at the worst time in the history of newspapering can mean only one thing: The publishers don’t think the business will get any better.”

Mutter pointed out that the traditional newspaper response to a negative economic climate was to cut back wherever possible and then wait for the tide to turn. That they are looking to sell at a time when there will be few buyers and anyone interested will be offering far less than what would have been considered market value just two years ago.

“With the publishers deciding … to pursue potential exits at a time buyers are few and far between, the irresistible conclusion is that they foresee only a steady wasting of the assets they have held for multiple generations,” Mutter wrote. “Their willingness to consider dumping their papers at what most likely would be fire-sale prices amounts to a repudiation of the businesses that helped build their family fortunes.

“Because Copley and Advance do not appear to be under pressure to divest assets to raise cash to pay down debt, they would seem to be in a position to wait for a more propitious time to sell. Their lack of patience suggests a lack of confidence that better days lie ahead, at least with respect to these two properties.”

I’m not sure which is more depressing. Two major private owners moving, possibly, to simply eliminate newspapers that have been a cash suck. Or the slow, painful, and — ultimately — futile efforts by some of the major public chains to shore up their share prices by dumping more people. Gannett announced 1,000 job cuts across the country and got a modest boost in their bludgeoned stock price. That bump lasted less than a week and their stock closed yesterday almost $2 below the closing price the day before the layoffs was announced.

The following is from Gannettblog, an unofficial community that has sprung up to follow what is happening with the McLean, VA-based chain. It lists the share prices for GCI stock over the last week.

• Wednesday: before GCI confirmed layoffs: $19.26
• Thursday: after layoffs confirmed: $21.31
• Friday: $20.65
• Monday: $19.54
• Yesterday: 18.65
• Today: $17.40

Folks at the Star Ledger can at least look at the eventual demise of their employer as the result of financial losses. The paper reportedly lost tens of millions of dollars over the past two years. Gannett has been profitable until this year, though their collapsing revenues may put them in the red for 2008.

However, Newsosaur’s Mutter says the decision by Advance Publications and Copley to consider selling or closing papers means they have reached a conclusion not yet embraced by the publicly traded chains.

“Presumably, the Newark and San Diego papers could be operated indefinitely with lower margins than companies like Gannett, Lee Enterprises or McClatchy [which] need to pay dividends, cover interest payments and try to reverse Wall Street’s unprecedentedly negative opinion of their stocks.

“But the plan to explore the sale of the paper(s) explicitly signifies that the controlling family is not only approaching the limit of its charity but also has lost faith in the possibility of an eventual turnaround.”

Mutter predicts the vaunted San Francisco Chronicle may be the next major metro to be put up for sale or have its metaphorical head on a block.

What’s the up-side here? Is there any hope?

“While the short list of potential buyers would seem short indeed, it is conceivable that the Newark paper could be of interest to Cablevision, the new owners of Newsday, whose Tri-State cable-TV interconnect coincides relatively closely with the paper’s footprint in New Jersey,” Mutter wrote.

“A case could be made for consolidating the Star-Ledger’s operations with those of one or both of the New York Post or New York Daily News. This outcome would become more plausible if the dueling tabs move forward on their reported discussions about combining their printing, distribution and back-office activities.”

It’s a dim hope and may imply more confidence than almost anyone has at the moment that troubled US newspapers will ever return to any type of prosperity. But that’s what us dedicated newspaper folk do, we embrace dim hope even in the face of expected pain.

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Tags: newsbiz, stock, future of newspapers, hope

How to become a millionaire

An old joke is making the rounds for newspaper folks these days. It goes like this: Want to know how to become a millionaire? Invest a billion dollars in newspapers.

That bit isn’t funny to anyone. But it is true for people investing in newspapers these days. Newspaper stock values are crashing. McClatchy has lost 95 percent of its stock value since purchasing KRT. Gatehouse Media stock has essentially become a penny player. Journal Register company stock is basically worthless. Even the strong public chains have lost significant amounts of stock valuation (Gannett down 80 percent since the beginning of 2005, New York Times down 70 percent for the same period, Newscorp down 36 percent).

If one had invested $1 billion three years ago in some of the world’s biggest public newspaper companies, there is a good chance it would be worth less than $1 million today.

So what’s the good news? For those who like to see the world through a rosè-tinted wine glass, there is the possibility of a white knight. Or maybe just a gray one.

Alan Mutter writes at Newsosaur:

With a growing number of newspapers on the market at a time they most likely will fetch historically low prices, somebody is going to start buying some of them. But don’t count on the usual suspects.

Start thinking, instead, about such unconventional potential purchasers as the multibillion-dollar investment funds created by countries like Singapore or the sheikhdoms of the United Arab Emirates.

The upside is those non-traditional players all have multiple billions to pour into newspapers. The downside(s) — numerous. Mutter points out many, including both the agendas some of these investors might hope to push with their media properties and the potential backlash of having the local paper owned by a group of dimm fur’ners (as my Alabama relatives would say).

However, few traditional media players have the where-withal, desire or stock-holder backing to buy the newspapers that are (or soon will be) on the market. Most are cash-strapped, debt-laden or revenue challenged at the moment. But even those who aren’t would have to know something that has escaped the perception of most media analysts before plunking down anything for those rags on the blocks. That something would be how to stop the bleeding.

Mutter has some thoughts on that, as well. Maybe I will get to them tomorrow.

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Tags: newsbiz, stock value, newspaper investors

Bad news burden

Stuff I have been talking about for three years is coming to pass. Newspaper stocks are falling and newspaper revenues are rushing to catch up. Desperate journalists are trying to figure out if there is a future in their vocation or whether they should practice flipping burgers so they have a fall back. A guy in my newsroom periodically calls out: “Next window please.” He’s practicing for his next job.

People have long told me I am too much doom and gloom. Frequently a conversation concludes with: “Thanks Paul, now I really feel like killing myself.”

Funny thing is all of this doesn’t make me feel good. Quite the opposite, in fact. So I was right. What’s my reward? The death of the entire industry I have known and loved for 30 years.

I try to keep hope. There is still a chance after all. Though the desperate efforts of desperate newspapers remind me of a dying animal flailing, I want to believe somebody will find something that will make things work out in the end. What’s more, there are business opportunities in this, especially if you can be satisfied with profit margins of less than 30 percent. In fact, there may be some pretty significant business opportunities if, say, one could work out a syndication model for news that works something like Google ads, paying content creators something per view of a piece. That would reward those who make better content as well as the sites that package and promote it well. Most likely it will be a company like Google or Amazon that devise something like this. Few other sites have the yank to bring all newspapers to the table, the expertise to pull it off, and the deep pockets to pull it off. The rich do get richer.

Can that save newspaper journalism without the paper component? Not unless somebody invents it, surely. But possibly not even then.

It’s likely there is no single solution. It will be a bunch of little innovations coupled with the willingness of journalists to work for even less money and ever longer hours. Things like EveryBlock hold out the hope of a technological solution that will help people find the news most pertinent to their community or even neighborhood (though that may benefit bloggers more than newspaper sites). The reluctant venturing into niche web sites holds the hope of incremental revenue sources that will help offset the monumental losses of classified and national advertising.

But there is still too much uncertainty, too much stumbling, too much fearful hesitation, and far too much anger to be sure that many newspapers will survive. The overall U.S. economic malaise is just the icing on the cake.

Sure, I’m Mr. Doom-and-Gloom, but it’s not because I want to blow out the candles.

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Making the right decision

I just ran across a blog by William Lobdell called Lobdell’s OC. What caught my attention was a post called 42 things I know. In that the author details a number of things he knows about the newspaper business that culminated in his departure from the Los Angeles Times just a few days ago (beginning of Aug. 2008).

I’ll get to a few of the things he knows in a moment. But this blog is salient to me because it is evidence of a few things I have been talking about for a while. Among those would be that the future of journalism lies with those who are abandoning newspapers. At his blog Lobdell is aggregating Orange County, CA news. The post today is about the Irvine Tattler, which is, in Lobdell’s words:  “Filling the gap left by the retreating forces of the Los Angeles Times and Orange County Register.”

He adds that Stephen Smith, who runs the Tattler, “has developed a wonderful muckracking site focused on Irvine politics. He’s broken several big stories (for instance, he recently reported that “councilman and mayoral candidate Sukhee Kang used a California Public Records Act (CPRA) request in August 2006 to obtain an estimated 90,000 records with personal information about Irvine voters, including birth dates, home addresses and e-mail addresses).”

Apparently Lobdell left the LA Times after 18 years working there, including 8 years as editor of its sister paper(s) the Newport Beach/Costa Mesa Daily Pilot. He has few good things to say about Sam Zell, the billionaire real estate mogul who took over the Tribune Co., which currently owns the LA Times. But, number 20 on his list is this: “Sam Zell isn’t the ultimate villain. Though I originally thought he might be the kick in the ass we needed, I can’t stand the guy. But in the long run, he’s just an accelerator for a downfall that is happening naturally.”

Here are a few more:

• Newspapers were unbelievably slow in embracing the Internet, even though younger reporters have been pleading with their bosses for years to embrace the Web.
• Amazingly, it took until 2005 for top editors at The Times to realize the Internet not only wasn’t going away but might lead to the demise of newspaper.
• Prior to that, the Internet operation at The Times was used as a place to hide reporters and editors who had fallen out of favor.
• For a news operation filled with journalists with a mostly liberal bent, few people embrace the kind of progressive change necessary to save, or at least delay the fall of, the franchise.

Except for the bit about using the internet operation as a gulag, that sounds exactly like my place. The difference with our operation is that the internet arm and the print people are so completely separate that neither would ever accept anyone from the other. Until only a few days ago both mostly believed they could survive without the other. In all likelihood, the web folks will soon find out if they are right.

Lobdell is even-handed in his assessment of what brought the Times to where it is today. But what really struck me were his thoughts for the future. Thoughts that he probably had to leave the company in order to voice without fear of reprisal. Thoughts which likely no one at the LA Times wanted to hear while he was there.

First, “I’d get realistic estimation on the size of The Times’ future work force and then make one large cut to get it there (good sources say another 150-200 layoffs are on the horizon). An internet operation can’t support a huge newsgathering operation, and morale would improve if everyone knew no more major layoffs loomed. People can deal with reality; it’s just this surrealistic no-man’s-land that make it impossible to move forward and has good people bailing out.”

My newspaper has been dying the death of a thousand cuts for quite some time. There have been numerous buy-outs, a hiring freeze that has lasted for years, and the looming threat of layoffs (though they haven’t hit yet). Every work force reduction is followed within months by another memo from the publisher about how we have to find new ways to live within our means. It would be funny if it weren’t so terrifying to suppose how one can ever live within something that is disappearing more rapidly than even our brightest business types are able to suppose.

Perhaps, also, the LA Times is like my place where no one seems to have set clear priorities (what should we cover, local news or that big story in Iraq, high school sports or the Olympics) and no one seems able to make the hard decisions about the coverage and personal that will help us focus on the elusive goals of living within our means while still serving our core audiences.

Lobdell hits another pet peeve of mine with this one: “I’d take the very talented journalists I had and develop a SERIES of websites that provided the best information for that beat/subject matter. The Web is all about niches. The Times, for instance, could have the premiere sites for every professional and college sports team in Southern California. It could be THE place to turn to for news on City Hall, Los Angeles Unified School District, and Los Angeles Police Department. Not to mention Southern California environmental issues, LAX and the coast.”

I was just speaking to some people at my place about this. For years newspapers knew that most readers threw away, every day, 85 percent of the newspaper. Yet most newspaper sites attempt to duplicate in content and organization, that news on paper. Newspaper people talk about branding and comprehensiveness and a whole raft of other bullshit. They should simply admit what they already know and build web sites around that knowledge. Most readers don’t want all five pounds of newspaper every day. They won’t wade through even one pound in search of what they want. They just want the 8 ounces of greatest import to themselves. Newspapers seem completely unable to recognize this or serve these people. That’s why online news aggregators do so well.

It makes sense on so many levels. Identify the biggest or most devoted audiences that your paper has. Most papers have them. At my paper they are the folks that buy for high school sports. Then build a site dedicated exclusively around serving that audience. A site that serves that audience like no other site can. A site with all the stuff you can find in print as well as tons of stuff you can’t. A site with ever growing depth but pre-defined width. And, perhaps most important, some method of allowing the community to be involved — to make it their own — besides space for comments.

Such an approach has many benefits. It taps into an existing audience. It targets an audience that can be recruited (they already read your frickin’ newspaper, dummy, so use it like a billboard). And you don’t need any back-end software or registration devices to help identify the audience so you can deliver them to advertisers. You already know who they are and what they want because they are going to a site that does only one thing.

Develop web sites for every such audience. Make them independent, stand-alone sites. In some instances, don’t even identify their affiliation with the larger newspaper. Then, take the best of the material from those sites and pull it into your big umbrella site for those folks who want the whole 5 pound experience.

Lobdell says something very similar in number 38: “You could combine all these different blogs/websites under the www.latimes.com banner, but make it simple for readers to navigate to the sites they want to become attached/devoted to.”

He concludes with these last three things:
• I have no doubt my newsroom colleagues who I left behind can adapt to the challenges of the New Media environment.
• But I’ve seen no evidence that other parts of the company — especially the “leaders” — are willing, able and competent.
• And this is ultimately why I left The Times. Though the paper has been in business for 125 years, it had become riskier to stay than to go.

Unfortunately, that sounds like an epitaph that will be heard from many newspaper people in the next few years.

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Tags: JOURNALISM, LOS ANGELES TIMES, NEWSPAPERS, Lobdell’s OC

Newspaper stocks crashing

My attention was recently called to a July 15 blog post by Alan Mutter at Newsosaur. He notes the collapse of the stock prices for most newspaper companies. Here are the highlights.

: A.H. Belo (AHC) today is worth $119 million, down 58% from $282 million when it began trading earlier this year as a free-standing newspaper publisher.

:: GateHouse Media (GHS), worth $59 million, down 95% from $1.2 billion at its curiously strong initial public offering in October, 2006.

:: Journal Communications (JRN), worth $266 million, down 78% from $1.2 billion on Dec. 31, 2004.

:: Journal Register Co. (JRCO), worth $6 million, down 99% from $746 million on Dec. 31, 2004.

:: Lee Enterprises (LEE), worth $145 million, down 93% from $2 billion on Dec. 31, 2004.

:: Media General (MEG), worth $248 million, down 83% from $1.5 billion on Dec. 31, 2004.

:: McClatchy (MNI), worth $387 million, down 93% from $5.7 billion on Dec. 31, 2004.

:: New York Times Co. (NYT), worth $1.85 billion, down 67% from $5.6 billion on Dec. 31, 2004.

:: Scripps (SSP), worth $522 million, which was newly launched as a pure-plan newspaper company on July 1, 2008. More details below.

:: Sun-Times Media Group (SUTM), worth $32 million, down 98% from $1.3 billion on Dec. 31. 2004.

The only companies not on the above list are:

:: Gannett (GCI), worth a bit less than $4 billion, down 79% from $18.5 billion on Dec. 31, 2004.

:: News Corp. (NWS), worth $37.2 billion, down 36% from $58.4 billion on Dec. 31, 2004.

:: Washington Post (WPO), worth $5.5 billion, down 24% from $7.3 billion on Dec. 31, 2004.

My thoughts? Publicly traded newspaper companies have helped bring the news industry to this place. They are NOT solely responsible for everything that is wrong, but they established the concept that serving shareholders is job one. How do they serve shareholds? With something that can only be maintained under monopoly-type conditions: high-profit margins. Gannett’s target for annual profits has been 29 percent. They have essentially determined everything that they do — from corporate to staffing at local papers — based on hitting that target. They have apparently hit that number pretty consistently for quite a few years.

Not going to happen any more.

Now to drag out my crystal ball. At least 60 percent of newspapers currently operating in the US will cease to exist in the next 5-10 years. I don’t mean simply stop printing on dead trees and move their entire operations to the web. I believe they will go belly up and die.

Companies such as Gannett, while looking fairly healthy compared to their brethren at the moment, will have to get out of the newspaper business (i.e. leave all of their papers to die lonely deaths) or have them suck down the entire company. The worship of profit over everything else would almost dictate my prediction. Their shareholders demand nearly 30 percent in profit. The “newspaper” business of the future will be lucky to achieve 5 percent profit.

What does the future hold? Private ownership of newspapers (although that term will likely soon be anachronistic, since news on paper will be gone). Some of those private owners will be rich people with axes to grind. They may succeed in spite of that. Many will have no newspaper business sense and simply pour some millions into the “paper” and eventually get out (a la the Philadelphia Inquirer). Many former newspaper people will take up the local news slack by starting their own online “papers.” National organizations will take over much of the government watchdog role.

What will get lost? Investigative journalism at the state and local level for many areas. The watch-dog role of newspapers, which some may arguably have not performed very well anyway, will now become largely non-existent. Hopefully the American people will eventually realize what they have lost and support some system that comes along (10 years or so into the future) to support such things.

If it weren’t for the things that newspapers could do, like throw 20 people at wading through a mountain of documents to try and find out how a mayor systematically looted a city for three decades, then I might not miss them. I, too, am sick of the old boy network that blocks innovation and their tunnel vision regarding what is a story (it isn’t news unless I say it’s news). But the price for shedding this will be steep — especially in a country where informed citizens are supposed to keep the government honest, but those informed citizens almost never attend a government meeting and look at government documents even less. The cost of losing that will be far higher than the billions in stock value that evaporated in the month of July 2008.

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Tags: newspaperstock, profit margin, private ownership, watchdog, investigative journalism