Newspapers' publicly held problem

  I write as  someone who worked for several newspapers in a 43-year career in that business ,  as a finance editor at three  of them and whose generally Republican family was in the business world (no dreamy eyed professors or liberal social reformers in my upbringing).

There's been much incomplete reporting on the implosion of the newspaper business,  whose crisis  poses  grave threats to  the knowledge and  civic engagement of citizenry. Indeed, the general level of ignorance seems to rise every year commensurate with the  accelerating move of life onto the Internet.

The Internet has long  and glibly been cited as virtually the only reason for the sector's decline. But in fact, business reporters (they fear antagonizing their bosses) generally fail to note the huge and destructive  impact (to journalism anyway) of public ownership.

Most newspapers used to be closely held, often family held, enterprises. Their owners, of course, wanted to make a good profit, and in fact dominant newspapers in their areas generally made a very good profit.  Historically,   the best  metropolitan papers, with high journalistic ambitions, made about a 10-15 percent profit  margin -- more than the average of the margins of companies listed on the S&P 500 Index.  But the owners tended to want more than just money (unlike, mostly, now). They wanted influence and many even had altruistic aims -- improving their communities, etc.

But, accelerating in the '90s, came the sale of these companies at big prices to publicly held enterprises listed on stock exchanges.  Wall Street took over from  civic concerns. With the pressure to please the stock analysts, and enrich themselves,   senior execs (who also had a lot of stock in their companies) of the new owning companies pushed for ever-higher profit margins -- to astronomical levels of 30 percent or more.  Meanwhile, they had to worry about paying off the debt incurred to buy the newspaper companies.


So for years they did not reinvest in their properties, but rather laid off as many employees as they could, and made other cuts, to keep the profit margin (and thus capital gains, dividends and  senior execs' salaries) as high as possible.  The  emphasis was on meeting targets for the next quarter, and not building for the long term. Take the money and run.


As always in business, there were some notable exceptions to this money-only culture and I was fortunate to work for a couple of them. My last boss, for example, Howard Sutton, of The Providence Journal, spent innumerable hours (much of it anonymously) working for the betterment of his community.

Since a lot of these newspapers were well entrenched as virtual monopolies in their areas, this worked for a while -- until the papers were so hollowed out that their decline was probably irreversible (though the senior execs and  their pals on their boards  continued to pay themselves  gargantuan compensation for many years as  all this went on).

Indeed, the intensity of shareowners'/execs' thirst for huge and immediate payouts seems to swell every year. I am as greedy as the next fellow, and firmly  believe in capitalism and its creativity, but I've been astonished by the surge in senior executive pay since I worked in Lower Manhattan at The Wall Street Journal in the '70s.

Meanwhile, in the early and '90s, the execs made the catastrophic decision as the World Wide Web got rolling to put the journalism on papers' Web sites for free, thus encouraging many readers to cancel their paid subscriptions to the paper version (whence came and still comes most of the revenue). The magical thinking was that the new ad revenue   on their Web sites would make up for the loss of revenue from readers' subscriptions.

In fact, Web sites are generally lousy places for most  ads, especially display ads.  Those reading news media on screens,  unlike folks browsing through a newspaper, are generally irritated by ads. (The "X''  button  to close the ads gets intense use!)

There was no display-ad bonanza.  And the likes of Craig's List swiped the vast and easy money from classified ads. The Internet is great for classified ads.

And by offering all this information, collected by hardworking reporters and processed by hardworking editors, for free, the newspapers were in effect telling their readers what they thought the stuff was worth. Bad marketing!

The Internet has posed big challenges to newspapers, but that's only part of the story.  Meanwhile, those old-fashioned press lords of family own companies look good. They were in it for the money, but for other things, too.


-- Robert Whitcomb