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October 30, 2008

Want an Industry to Bail Out? How About the Endangered Newspaper?


Built on an unrealistic profit curve that prompted management to take on unwise debt. Burdened by an unpredictable future, declining customer base and damaged by the freeze in the credit markets.


Also, critical to the country.


It’s ironic that one of the great underreported financial stories has been the near collapse of the newspaper industry. Today, we know about the woes of Wall Street and the problems of the Big Three, thanks in large part because of the newspaper industry, but it seems like papers are unwilling to tell their own sad tale of woe.


This week, the drumbeat of bad news continued. The nation’s biggest newspaper chain, Gannett Co., announced a 10 percent reduction in the workforce of its community newspapers division. This followed on the footsteps of what has become routine bad news in the industry – new circulation numbers out that show a drop in readership of about 4.5 percent over the last six months.


The difference between the woes of the newspaper industry and Wall Street are that Wall Street’s problems are new, and stark. Newspapers have been in decline since the mid-1980s when their circulation started what has been a long, slow fall.


During the ’90s, that fall was masked by a rise in profits. While readers continued to desert the daily paper – much of it due to the inability of papers to stay current and also because of habit changes among customers – papers themselves wedged open huge profit margins. Investors were happy and companies got flush with cash and started a binge of acquisitions.


The wheels came off the bus early this decade, and today stock values are in many cases fractions of what they used to be. Companies still reap good profits, but often good enough to limp along one or two steps ahead of debtors. It’s like a bad horror movie – the victim staggers along with the monster right behind. One faltered step and the victim is devoured. Earlier this year, two of those companies were de-listed from the New York Stock Exchange because their stock value had fallen below $1 a share.


Today, the state of the industry is like a train wreck. You know that something horrific is happening, and you’d like to turn your head. But you can’t. Sometime in a next minute or so, you expect to see carnage, and lots of it.


You could argue that if there’s an industry to bail out, it would be newspapers. Despite the fact that basically everyone hates newspapers, the industry does play a critical role in educating the public, and connecting people to communities. You could make that case, but people are unlikely to listen.


The question as the state of the newspaper – and the rest of the media – continues to decline is how the American people will keep themselves informed.


Most people today would answer that question with, “The Internet,” as if the knowledge and solid information will spring forth from the Internet like water from bare rock. So far, the Internet has mostly aided and abetted the proliferation of nonsense. Such a framework would need to provide information on what is happening internationally, nationally, at the state level and even locally.


The first few rumblings of a replacement scheme are being heard nationally and internationally.


The critical question, however, is what will take over at the state and local levels. Ironically, it is there that Gannett’s cuts will be felt most acutely. The loss of a reporter covering nationwide issues is easily masked. The loss of a reporter in a town of 50,000 is much more noticeable.


For people living in small and mid-sized cities, this should be an issue of serious concern. The story of the decline of the newspaper should right now be prompting them to ask how the financial woes of national chains will affect the ability of people to practice democracy at a small scale.


© 2008 North Star Writers Group. May not be republished without permission.


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