Magazine article The Wilson Quarterly

The Suicide of the Newspaper

Magazine article The Wilson Quarterly

The Suicide of the Newspaper

Article excerpt

Wall Street danced on New York Newsday's grave yesterday," the New York Daily News reported last year after Times Mirror Company stock jumped on the news that it would shut down the 10-year-old daily. Times Mirror CEO Mark H. Willes then turned his attention to the chain's flagship paper, the highly regarded and very profitable Los Angeles Times. One-hundred-and-fifty positions there were slashed, and numerous special sections of the paper were eliminated. These dramatic acts were not simply the work of one crazed "cereal killer" (as Willes, who had come to Times Mirror from General Mills, soon found himself designated). They were part of a widespread trend, one that has some analysts worried that the days of the good newspapers now in existence may be numbered.

In business jargon, "the 'core competency' of newspapers - that service that no one else can do better - is reporting the news," notes Alex S. Jones, a Pulitzer Prize-winning journalist. "Yet throughout the nation," he writes in Nieman Reports (Spring 1996), "news budgets are being squeezed, news staffs depleted, news travel curtailed, news holes [total space for news] reduced, and the news itself dumbed down." Challenged by the electronic "information superhighway," the nation's newspaper executives, Jones says, are busily undermining "the very thing that is the absolute essential key to their survival."

Why? Not because newspapers are unprofitable, John Morton, a media analyst for a Wall Street firm, points out in the same issue of Nieman Reports. Newspapers have serious problems - notably, waning circulation and readership, particularly among young people, and, as a result, some restless advertisers - but lack of profits is generally not one of them. Profitability in the newspaper industry is roughly twice the average for Fortune 500 firms, Morton says. Newspaper executives want to increase that to three or four times the average. This is not simple greed on their part - they are responding to what Morton calls "the inflated level of expectations" of shareholders.

In the mid-1980s, the newspaper business thrived. "Newspaper unions had been generally neutralized and high technology allowed huge savings in production costs," Alex Jones notes. "Most newspapers were the only ones in town, and the Reagan economy was booming." In 1986, newspapers with a circulation of about 50,000 reported average profits of more than 20 percent; at some bottom line-oriented chains, they were double that.

Then profit margins began to shrink. "The leveraged buyout frenzy of the 1980s sank the advertising budgets of several major department store chains," Morton explains, and other retailers also cut back. The 1990 recession bit deeply into classified ads, which provided 42 percent of all advertising revenues.

In 1991, average profit margins hit a bottom of about 12 percent. Shareholders sent management a message: get the profit margins back up. Cost cutting and cereal killers followed. "New York Newsday wasn't killed because Willes worried it would run forever at a loss," Sydney H. Schanberg, a former New York Newsday columnist, asserts in the Washington Monthly (March 1996). "It was killed because a paper of its quality was not going to earn the massive profits that would make him a hero on Wall Street."

Columnist Richard Harwood, in the Washington Post (July 31, 1995; Apr. …

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