Archive for August, 2008


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 the investment would be approaching $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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Fear and Loathing in the newspaper business

I’m no Hunter S. but …

There was failure in almost every direction, growing all the time. Not just across the publicly held chains, but up the gray ladies and down the suburban dailies all around the country. . . . You couldn’t strike sparks anywhere, even banging a rock on a hard place. There was a fantastic universal sense that whatever we were doing was wrong, that we were losing. . . .

And that, I think, was the handle — that sense of inevitable doom from the forces of new and modern. Not just in a mean or commercial sense; we were better than that. We felt our energy simply needed to prevail. Without us, who would watch the animals, who would check the cages. Would anyone care if we didn’t? Would anyone notice if we were gone? Or is it all about Brittney’s panty-less crotch, her shaved-head madness, oh those poor children, those poor, poor children. Rachel’s lament as entertainment; Rachel’s lament covered by the National Enquirer . . . But there seemed no point in fighting — on our side or theirs. They had all the momentum; they were riding the crest of a high and beautiful wave. We were about to be swept beneath it. . . .


Bad news burden

Stuff I have been talking about for 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 says 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 Dave, 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 execute effectively, and the deep pockets to pull it off.

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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Print first, think later

Buzzmachine takes note today of the new tack ordered at the ailing Philadelphia Inquirer. Put everything in print first. That will shore up the falling subscriptions at the financially free-falling newspaper.

Here is what the memo from the Inquirer managing editor says:

Colleagues – Beginning today, we are adopting an Inquirer first policy for our signature investigative reporting, enterprise, trend stories, news features, and reviews of all sorts. What that means is that we won’t post those stories online until they’re in print.

This isn’t about the rush to be first, as some commenters at Buzzmachine have suggested. This is about establishing a clear policy that the dead trees edition trumps all. Problem with those blanket statements is that they tend to stand in the way of a thoughtful decision-making process.

Here is what might be a better policy to establish — we will determine, beginning with the assignment of every story, whether it would work best in print, with photos, as video, including graphics or any combination of those things. We will likewise decide, as each story nears completion whether it should break first in print, online or in some other fashion. We won’t put print ahead of online or vice versa because putting the audience and the story first will eventually serve us better than any arbitrary decision-making process.

By simply deciding paper comes first, they are betting they can help themselves by forcing people to buy the paper in order to get the story. Parents eat their own children, story at 11. (Me, I love it when TV does that. I always stay tuned.) First they better hope their “investigative reporting, enterprise, trend stories, news features, and reviews” are very, very compelling. Else-wise, would-be readers will simply shrug and look at something else. Evidence also is this is a pretty bad time for them to be making such a gamble. If they are wrong they are likely gone.

You would think the “brains” at newspapers would be past this type of thinking at this point. But I just had a long conversation with a long-time newspaper man at my place who still thinks we just need to wait out this “perfect storm.” Once classified comes back and the real estate market turns around then those with the patience to weather this little “down-turn” will be sitting pretty. Yeah, that’s a good plan, too.


Bad news, good news, bad news

First the bad news: Advertisers are deserting newspapers at an alarming rate. Not just classified advertisers, but also those who have traditionally bought display ads.

The good news? The advertisers fleeing newspapers are going online. Many newspapers have relatively popular online sites. Thus they have the potential to get that migrating advertising. Sure those ads don’t bring in as much revenue as they did in print. But it’s better than nothing, right?

Now the really bad news: Newspapers aren’t getting that advertising. In fact, they are getting less of it now than they did before (After some promise two years ago, stats from local media researcher Borrell Associates show that newspapers’ share of the local online market is now 27.4 percent, down from 35.9 percent in 2006, even as the total segment has seen 57.2 percent gains last year). Why? There reasons are numerous and highly dismaying. The following are from a July 30 post by

1. Newspaper advertising sales teams either can’t or won’t sell online. “Unfortunately, salespeople and media buyers, who in most cases rely on commissions, have a reason to dislike online ads because of the lower dollar amounts online brings to the table,” according to the paidcontent piece.
2. “When newspapers do sell ads on their sites,” the paidcontent post goes on, “they typically look for larger marketers to buy banner ads. But much of the growth in online ad spend is being driven by small, local businesses like pizza places and plumbers who want to attract customers looking for area services. And since search is key to attracting those local customers, that’s why internet companies like Google (NSDQ: GOOG) and have taken a 53.3 percent share of local online ad sales.”

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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. A great many newspapers currently operating in the US will cease to exist in the next 15-20 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. 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 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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