When Gannett, the owner of USA Today, told its employees last week that they would each have to take a week’s unpaid leave, it was “the crowning blow in making us look like the auto industry”, one former editor told Alan Mutter, the newspaper veteran and blogger.
Unlike Detroit, however, the newspaper industry is looking to wealthy individuals rather than government to bail it out.
The New York Times Company has struck its debt deal with Carlos Slim, Mexico’s richest man, just as Alexander Lebedev, the former KGB agent and head of Russia’s National Reserve Bank, is in talks to buy London’s Evening Standard and pondering a further bid for the Independent newspapers in the UK.
Newspapers have long been the playthings of wealthy men but a seemingly endless decline in advertising revenues is raising the question of whether private ownership or the shelter of sitting within diversified empires is now the industry’s only valid business model.
The question is most acute in America’s regionally fragmented newspaper industry, where most titles enjoyed monopolies or near- monopolies over classified advertising revenues in the cities they served.
Anyone wanting to advertise a job, a house or a service in Philadelphia or Seattle used to have few options but the local paper, turning these titles into very profit-able enterprises with vast newsrooms by international standards.
A decade of incursions by free online listings and the decline of print readership has destroyed the old business model.
The $5.6bn Rupert Murdoch’s News Corp paid in 2007 for Dow Jones, owner of the Wall Street Journal and several local papers, would now be sufficient to buy Gannett, the New York Times, McClatchy, Media General, Belo and Lee Enterprises, even at twice their current share prices. The Dow Jones titles are now supported by more stable cable channels and film studio revenues, just as the Washington Post is protected by the far larger income its parent company makes from its Kaplan education arm.
For those without such diversified parents, however, prospects are getting bleaker. According to an analysis published last week by eMarketer, a digital marketing and media research group, US newspaper advertising revenues dropped 16.4 per cent to $37.9bn in 2008.
Another $10bn of advertising revenues will disappear by 2012, eMarketer estimates, leaving the industry half the size it was in 2005.
The prospect is prompting several newspaper owners to make deep cuts to staffing, attempt to find buyers for lossmaking titles and consider closures. Lee Enterprises, owner of the St Louis Post-Dispatch, said on Tuesday it would cut 10 per cent from its headcount.
The owners of the Seattle Post-Intelligencer and the Rocky Mountain News in Denver have warned that they may close the titles if they cannot find buyers for them in a matter of weeks.
Even wealthy patrons have reason to be wary, however. Sam Zell, the highest profile recent new entrant into the newspaper business, saw his $8.2bn purchase of the Tribune Company end last month in the bankruptcy courts.
Having long been seen as useful assets for burnishing their proprietors’ reputations, newspapers now pose as much risk of tarnishing their owners’ names.
