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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.
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.
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.
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.
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
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.
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.
question as the state of the newspaper – and the rest of the media –
continues to decline is how the American people will keep themselves
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.
first few rumblings of a replacement scheme are being heard nationally
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
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
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