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By the Project for Excellence in Journalism and Rick Edmonds of the Poynter Institute

A single statistic provides a good illustration of how bad 2008 has been for newspapers. In 2006, total industry advertising was $49.3 billion.  In 2008, it was about $38 billion (estimating fourth-quarter results) – a decline in the two years of 23%. 1 At a number of metro dailies, especially where real estate has crashed the most, the percentage loss was worse. And further declines are on the way in 2009.

The immediate financial problem for newspapers has become hunkering down for survival.  Can the traditional cost structure – people, paper, presses and delivery fleets — be reduced at the same pace revenue is falling? For that matter, can newspaper companies with significant debt earn enough to make their interest payments?

Beyond the immediate, other questions linger. To what extent has the hunkering-down strategy newspapers are engaged in slowed, or even stopped, efforts at innovating new revenue streams online? Heading into 2008, many newspapers were convinced they had to approach their websites as their first product, and print as second. Is that approach, considered a key to innovation, a luxury papers couldn’t afford as the year went on? And to what extent have newspapers been weakened by the recession that will inhibit their ability to survive when the recovery finally begins?

For now, the industry has developed an array of cost-cutting strategies — cuts in news staff, the physical dimensions of the paper and the space devoted to news, most obviously.  The playbook now also includes sharing reporting and business functions with former rivals, outsourcing support functions as far afield as India and even, in a few cases, dropping print editions in favor of online-only publication some days of the week.

With these adjustments, the majority of newspapers remain profitable (although not nearly as profitable as they once were), and that may surprise some casual observers. Why not just break even, rather than cutting back on operations? The answer varies. Some companies must make a profit to stay in business, others to pay off lenders (who are paid from operating profits). It is also important to sustain shareholders– given the damage to stock price and company values.  They can always rehire and build back.  Still, despite making a profit, the damage has been considerable.

Newspaper stocks, which had lost 42% of their value from the start of 2005 to the end of 2007, lost an astonishing 83% of their remaining value during 2008.2 Only the Washington Post Company, among those whose stocks are publicly traded, now commands more than $10 a share (and its share price has been in the hundreds for years because it did not do splits as value grew).  A number – including former high-flyers McClatchy and Lee – were trading for less than $1 a share in early 2009.3

The longer-term issue for the business is quite different, but also daunting.  Newspapers hope to revive online advertising growth.  Online advertising for newspaper sites was growing at 33% a year earlier in the decade. But that is now over. In the final three quarters of 2008, online ad revenue declined.4

As we have noted in earlier years, the most important fact about the Internet is that it has in some significant way decoupled advertising from news.

It is now clear, if it wasn’t before 2008, that the industry will need to invent new revenue streams altogether. Internet advertising alone will not sustain the business. Of the $38 billion in advertising that the industry was estimated to have drawn in 2008, only $3 billion came from online.5

Put another way, roughly half of newspaper readers now access the papers online for at least some of their news. But the Web produces less than 10% of the industry’s revenue.

The new revenue streams could include serving news content and geo-specific advertising to the burgeoning smart-phone mobile market or providing downloadable versions of the paper to devices like Amazon’s Kindle, which are rapidly improving in ease of reading. It could mean arranging point-of-purchase revenue from online sales.

Or it could involve rethinking the free-content model, perhaps in cooperation with Internet service providers. The book publishing industry was successful in negotiating a royalty agreement with Google for the electronic reproduction of some books. But our sense is that little spadework has been done in any of these areas.

The problem is that the willingness to seek multiple new revenue sources and ability to do so are two different things. Newspapers have neither the profits nor the access to capital to finance rapid business transformation. Some critics think that industry leaders lack the needed business creativity as well.

There is one more mid-term/long-term possibility that is little talked about. What if marketers’ flight to digital advertising and other non-media formats accelerates?  What if some of the winning new advertising/marketing solutions have little or no relation to news content? After all, the surprise successes of this decade including — most prominently Google, Craigslist and Amazon – do a job for buyers and sellers without an expensive news effort.

That leaves the industry with an eye on another route in which it has had little success to date:  getting much more financial support from readers or patrons who value what newspapers do in gathering and making sense of the news.

Profits and Stock Performance

Newspapers’ profitability picture is changing and rapidly deteriorating. Here is a summary of where the industry stands after the battering of 2008 and an awful start in 2009.

Broadly, newspapers were not able to reduce cost structure as quickly as revenues fell. With results for three quarters in, public companies were typically reporting costs down about 8%. Revenues, however, fell by twice that. Operating profit margins fell to the high teens in 2007 and sunk into the low teens in 2008.6 If you consider fourth quarter the norm going forward, 2009 is almost certain to be worse than that.

Saying that newspapers still have relatively healthy margins – some hovering around 20% — is true as far as it goes, but misleading.  If a company continues to make a high margin on revenues that are down, its actual earnings are down, and it is actual earnings that matter – in making debt payments or providing a reasonable return for shareholders.

The overall averages also mask a range of results.  Smaller newspapers (up to 75,000 circulation) typically are doing better than the industry as a whole—with much more modest revenue declines and margins in the high teens.  They have lighter competition from online alternatives and may be the sole outlet for local coverage and retail advertising in their communities.

A number of major metropolitan papers have reported that they are now losing money to the tune of $1 million a week, the Atlanta Journal-Constitution, the Boston Globe and the San Francisco Chronicle among them.  The Seattle Times, the stronger paper in its joint operating agreement with the Post-Intelligencer, is also operating at a loss. The Denver Post, the stronger of the papers in another joint operating agreement, is also losing money and could lose even more as its former partner, the Rocky Mountain News, has ceased publication.

The Washington Post ran at roughly break-even in 2008 – a result the company can afford for at least a while because of strong earnings by its Kaplan Education, cable and local television station groups, together with extremely low debt.

Companies that strive to maintain margins and profits as high as they can may argue they have little choice given debt obligations and the forces depressing advertising.  Nonetheless, the strategy carries a pair of risks – weakening the print product and leaving a depleted kitty for investments in Web development or other new revenue streams.

Stock Values

Last year we reported on the two-year swoon of publicly held newspaper stocks. But 2008 was even worse – the public group lost 83% of its remaining value and shares have fallen even further in early 2009.7

The chart below provides detail.

Stock Values, Select Newspaper Companies

Company 12/31/2007 12/31/2008 % Change 2-Year Peak Decline from Peak
Gannett 39 8 -79.5% 62(3/07) -88%
New York Times 17.5 7 -60 27(6/07) -74
E.W. Scripps * 2 * 8 -75
The McClatchy Co. 12.5 0.8 -94 38(2/07) -67
The Washington Post 791 390 -51 857(11/07) -54
Lee Enterprises 15 0.40 -97 33(2/07) -99
Journal Communications 9 2.5 -72 14(7/07) -82
Media General 21 2 -90.5 41(2/07) -95
A.H. Belo Corp * 2 * * *

Source: Yahoo Finance
*E.W. Scripps split its local television, newspaper and cable television assets in 2008. The number provided in the chart above is the year-end stock price for the local television/newspaper assets, which retained the E.W.Scripps name. Cable television assets are now owned by Scripps Networks.
**A.H. Belo was formed when the Belo Corporation split off the company’s television and newspaper businesses in early 2008.

It exaggerates only a little to say the market values newspapers at close to zero.  Only companies with non-newspaper businesses – Gannett, Washington Post, the New York Times Co. and Media General – have some remaining appeal.  Debt-laden pure-play newspaper companies – McClatchy, Lee, GateHouse and Journal Register – are all trading for less than $1 a share.

Bad and uncertain earning prospects are the basic cause of Wall Street’s disenchantment, but there are two additional factors weighing against newspapers.  Institutional investors (who make up most of the market) typically have a horizon of 12 to 18 months.  Even industry optimists have a hard time arguing that the business will revive in that time frame.  Institutional investors are also wary of businesses that might “go to zero” even if the odds of failure are slight.  That sort of pick, gone wrong, can damage a fund’s ratings and hurt in attracting and holding customers for whom it manages money.

For an investor able to absorb such losses, newspaper stocks are a bargain at these prices if you believe that they will find a way to survive.  That helps explain why Mexican billionaire Carlos Slim Helú was willing to put $250 million into the New York Times (at 14 % interest) in January 2009 when other lenders might not.8

Where Did the Advertising Go?

Earlier editions of this report have discussed the decline of newspaper advertising with emphasis on the precipitous fall of print classifieds.  The short story of 2008’s distress is that those downward trends were compounded – probably doubled – by the recession.

Breakdown of Daily Newspaper Ad Expenditures
Design Your Own Chart

Source: Business Analysis and Research, Newspaper Association of America

In early 2009, companies in many industries began announcing huge layoffs and otherwise buttoning down to weather the economic crisis.  Advertising has been cut and stands to be cut further.

The leading edge of the classified troubles came early in the decade with the fast rise of Monster — an ingenious and potent electronic system for matching the needs of employers with the availability and ambition of job seekers.  It was simply a better mousetrap than column after column of print advertising in which each extra word increased the cost.

The industry rallied with a copycat service of its own. By 2007 and 2008, that service, CareerBuilder, had built a comparable volume of listings.  But by the second half of 2008 many companies had stopped hiring.  Job-listing revenues were down 43.6% in the third quarter compared to the same period in 2007.9

Craigslist was a second killer competitor for classified advertising.  Its listings – except those for jobs in the biggest cities – were free.  If offered a no-frills (no news –content) marketplace for such things as general merchandise, used cars, apartment rentals and jobs.  Users could go on at length, for instance describing the virtues of a car being sold and including a few color pictures.

Meanwhile, Google grew to become an indirect but potent competitor for advertising.  The great majority (98 %) of the company’s revenue comes from advertising and the great majority of that is linked to search.10 Google News carries virtually no ads, and its business function is to drive users to search.  Search advertising is easy to place and much of it priced by an auction, but its greatest appeal to marketers is being highly targeted to interests users display in their search choices. It is a moneymaker to Google because of the sheer volume of search advertising in the system. Two-thirds of all U.S. searches go through its system, allowing it to make billions a year from pennies per search ad.

Put it all together with similar competitors in real estate and autos, and the newspaper industry has seen classified volume shrink from $19.6 billion in 2000 to about $10.2 billion in 2008 (estimating the fourth quarter).11 Of the 23% total two-year decline in advertising, highlighted at the start of this section, four-fifths comes from plunging classifieds.

Lauren Rich Fine, a media analyst, suggested to publishers at a meeting in early 2008 that they might prudently plan for print classifieds to go to zero over the next five years.12 The performance is unlikely to be that bad – but the point is that print classified is nothing to count on any more.

Several subcategories within newspaper classified are experiencing especially hard times.  Real estate has crashed and real estate advertising with it.  This is particularly painful to papers in California, Florida and some cities that were raking in cash during the middle of the decade from the big ad budgets for new subdivisions and condos.

The troubles of the auto industry also hit particularly hard.  The number of local dealerships is being reduced and those remaining get smaller advertising allowances from the manufacturers.

Beyond the classified debacle, there are other challenges:

●Retail has been hit by the wave of mergers, which may now have run its course.  The loss of market share by traditional department stores (once the most prolific newspaper advertisers) to Wal-Mart and other discounters (who use newspapers only lightly) continues year to year.

●National advertising is by no means hopeless but depends on product cycles.  For instance, there is still competition among the cell phone and broadband carriers that plays out in dueling full-page ads.  Airline competition has cooled for now.  The entire category is hurt by recession.

●From a small base, online advertising was growing at a robust rate of between 26% and 31% from 2003 to 2006.  The rate of growth declined to 18.8 % in 2007 and then plummeted to 2 percent in 2008.13 The industry argues that this is mostly recession related but substantial doubts now exist about the effectiveness of web site display advertising and the rates it can command.

●Eroding circulation and increased competition have cost newspapers the ability to control prices.  In better times, the industry could impose big rate increases on advertisers beyond inflation, even if circulation fell. Even now, rates are not discounted to match falling circulation, but holding even will be the best most newspapers can do in 2009.

Hunting for a few nuggets of good news in this rubble, here are several:

●Print still works for a number of advertisers.  The stack of inserts jammed into most Sunday papers attests to that. Price point promotions and coupons can be replicated on the web but shoppers do not seem in a hurry to change.

●As much as half of the current declines relate to the recession rather than changing media preferences.  When the recession is over, sooner or later, there is a potential for bounce back, even in such disaster categories as real estate and cars.

●With improving news websites, specialty sites like those for moms or nightlife and niche print publications targeted at youth or the luxury market, newspaper sales people have a rich array of options from which to sell a package solution to a given advertiser.

●The percentage declines paint a depressing picture, but $38 billon is a pretty good residual base of business.  Some of the hottest Web phenomena – YouTube, Facebook and Twitter, to take three examples – have all kinds of potential but no advertising to speak of yet.

Cutting Costs Deeply and Broadly

If advertising revenues go down 23% or more in two years and more declines are on the way, aggressive cost-cutting is a necessity rather than an option.

The newspaper industry has responded to its revenue crisis by ramping up the cost-cutting strategies of recent years and working on some new wrinkles.

Most obvious to the readers is the continuing reduction in newsroom staff and the space devoted to news.  Along the way free-standing sections like business typically get so small that they are tucked into another.  These changes are the focus of the next section of this report, News Investment.

A related money-saving strategy is to reduce the physical dimension of the printed newspaper, both the weight of the paper and the size of the pages. Our sense is that the present almost-see-through thickness that is widely used is about as far as most can go without becoming tissue-like.

The cycle of downsized pages, on the other hand, is likely to continue on during 2009.  Though all but a few papers have resisted the option of converting to tabloid or the slightly larger Berliner format, the most radically trimmed are backing into dimensions only a bit larger.  Most of the bigger holdouts – the New York Times, the Wall Street Journal and the St. Petersburg Times – did reduce their width in 2007 or 2008.  Remaining wide-body papers like the Concord Monitor look a little odd and antique but can still capitalize on the options for photo display and design variations.

Using less paper was a particular focus because after several flat years, newsprint prices rose sharply from the end of 2007 through most of 2008 – going as much as 25 % higher year-to-year.14 Minimizing paper consumption (together with circulation losses) defrayed what could have been a killer expense.  Very soft demand eventually put an end to the increases.  Rates peaked in early November, have fallen since and are expected to decline through 2009, but by a few percentage points, not by 25.

Another big target for savings was circulation, especially delivery.  Here, too, price was a factor.  Mid-year 2008 gas prices of $4 a gallon or more got the attention of any managers who were not already figuring ways to cut the fuel costs of a delivery fleet.  As with paper, the price situation had eased greatly by year-end, even if $2 a gallon gas is more a respite than a trend going forward.

A popular strategy, especially for metro papers (detailed in the Audience section of this chapter) is to trim circulation in the state, the region and even to more distant parts of the metro area.  Those are the most costly papers to deliver and the audience is not of much value to local advertisers.

Newspapers are also finding ways to outsource circulation costs.  The New York Times now routinely contracts with local papers to deliver its national edition.  And, in late 2008, it took the step of shutting down the business it owned that delivered newspapers and magazines in the New York area.  Other companies have contracted phone solicitations for new subscribers or even complaints about missed deliveries to call centers elsewhere in the country or abroad.

Other outsourcing strategies, started in late 2007 and continuing on through 2008, include moving overseas the jobs of composing, designing or laying out advertising, often to India, or subcontracting routine business functions like payroll to outside vendors

More and more newspapers are quietly also leaving the business of printing their own papers.  In fact a large segment of the industry seems to be reorganizing itself into those that want to continue printing and take on extra jobs and those that are ditching the function.

As the recession deepened, other tactics emerged, such as salary freezes and suspending company payments to retirement funds.  Gannett announced that it would require all employees (up to the CEO) to take a week’s unpaid furlough during the first three months of the year.15 That practice seems likely to catch on and may at least signal that management, like outside critics, wants to avoid the solution of cutting staff and downsizing the print product again and again.

Selling Assets

For many newspaper companies, trimming operating costs is not enough.  A next recourse may be selling assets. Some big papers are in process of selling all or part of their headquarters buildings.  Among the sellers:  the New York Times, the Chicago Tribune, the Los Angeles Times and the Philadelphia Inquirer.  The Miami Herald has been trying to sell a large parcel of vacant land downtown.

In early 2009, Tribune was trying to sell the Chicago Cubs and the New York Times its 17.8 % share in the Boston Red Sox.  Small television holdings or other stray businesses are also candidates for sales to raise cash.

Sometimes the assets are valuable and profitable businesses.  Landmark Communications of Norfolk sold its Weather Channel subsidiary to NBC Universal and two private equity funds for an estimated $3.5 billion in June 2008.16 The St. Petersburg Times sold the book division of Congressional Quarterly in 2008 and put CQ itself, a family of information products about Congress and politics, on the block in early 2009.

As noted in the ownership section of this chapter, companies would be willing (and some are trying) to sell some of the newspapers they own and pull back to one or two they consider core.  The trouble is, though, that there is little buyer interest and those few potential buyers who may be interested are likely to have trouble finding financing.

Omitting Print Editions

For some papers, trying all of the above still is not enough.  They may be operating at a loss or making a profit but not enough to make debt payments.  Staying the course does not make sense.

In late 2008 and early 2009, several strategies emerged for such distressed papers.

One is to limit print publication — or at least home delivery – to certain days of the week and steer readers and advertisers to the online version on other days.  Small-circulation papers in Madison and Superior, Wis., were first to make the shift.  Then in the fall, the East Valley Tribune, serving the eastern suburbs of Phoenix, announced that it would print just Wednesdays, Thursdays, Fridays and Sundays (switching to free distribution), relying on its online version for the other days.  At the same time, it discontinued coverage and distribution in the older close-in suburbs of Tempe and Scottsdale, focusing on the more remote and fast-growing communities of Mesa, Chandler and Gilbert.

Then in early November the Christian Science Monitor announced that it would become an online-only publication, except for a single, magazine-style weekend issue.  The Monitor’s unusual business model relies almost entirely on circulation revenues and a subsidy from the Christian Science Church.  It gets a minimal amount of advertising and thus was not sacrificing much revenue by eliminating print versions.  Its readers tilt older, however, so there is some risk in trying to get them to follow to online.

The new publication schedule also solves a problem particular to the Monitor.  Its modest circulation of just under 50,000 is scattered nationwide.  That requires delivery by mail – and a noon deadline for midday delivery the next day, hardly a match to the growing expectation that news or analysis will be available as soon as it is finished.

In December, the joint operating agreement agency in Detroit announced that its papers will be home-delivered only three days a week (the Detroit Free Press on Thursday, Friday and Sunday, and the Detroit News on Thursday and Friday).  The papers will print compact print editions the other days but they will be distributed only in racks and retail outlets.

The Detroit deal illustrates both the logic and possible perils of this strategy.   The agency’s president and Free Press publisher, David Hunke, said that a majority of print ad revenues come from the Sunday and other late-in-the-week issues.17 So the move puts a comparatively modest amount of advertising at risk, and the papers can hope to retain some of that in the compact editions or move it to later in the week.

At the same time, the reduced print schedule will save on delivery and paper costs and probably allow some reduction in pressroom staffing.   Of course, the savings fall well short of what could be realized by dropping print altogether in favor of online. That would take paper, delivery and pressroom costs to zero.

Hunke said that the big change made more sense than continuing to whittle away at staff and news space.  He seemed to be acknowledging, without underscoring the specifics, that the move had substantial risks.

First, it is not a sure thing that the savings will outweigh the loss of advertising and circulation revenue. More subtly, there seems to be a problem in telling loyal seven-day-a-week subscribers that the print paper is expendable some days.  Robert Dickey, president of Gannett’s newspaper division, told us in December that he was glad that nearly all Gannett papers (except the Free Press) are profitable enough that it was not necessary to try a strategy about which he has serious misgivings.18 Even if the early-in-the-week papers generate less advertising revenue, he said, they bring readers in and keep them around for the more profitable days at the end of the week.

Still, with the recession locking metro papers into losses, we expect to see more experimenting with a partial movement to online-only during 2009.

Bankruptcy and Closing Down Altogether

Two other responses to distress are strictly financial.  Sam Zell’s Tribune Company led the way in December and the Star Tribune of Minneapolis has followed in filing for bankruptcy protection.  That basically means that assets fall short of debts, and usually that operating income is not covering the cost of debt service.

But it is a little more complicated – typically the company filing is looking for a window in which it can partly repay some of its debts and shed some and then continue to operate a smaller company.  Major lenders and smaller creditors may instead seek to oust management and force the sale of assets.  It is hard to predict an outcome in the early phases of the proceedings.  Meanwhile, the newspapers involved continue to publish.

A final option is simply to close an unprofitable newspaper.  The Rocky Mountain News in Denver, owned by E.W. Scripps, took that course in late February 2009. Earlier, two Journal Register papers -– in Bristol and New Britain, Conn. — had been threatened with closing, but Michael Schroeder, an experienced publisher, stepped forward at the last minute to buy them.

The owners of the Seattle Post Intelligencer (Hearst) and Tucson Citizen (Gannett) announced that those papers would be closed in the first quarter of 2009 unless a buyer can be found. Those two, like the Rocky are the weaker papers in a joint operating agreement, an arrangement that has not worked well in good times and whose weakness – trying to divide up advertising in a market that naturally supports just one paper — is further exposed in a recession.

Also in the early months of 2009, management at several metro papers – the Seattle Times, Denver Post and San Francisco Chronicle – have demanded concession from unions and threatened bankruptcy or closing should those negotiations fail.

Our guess is that there will be more bankruptcies and at least a few more closures this year.

Will Online Ad Growth Resume or Other Rescue Prospects Emerge?

We have posed the question in past reports of how quickly online advertising revenues (or those from other ventures) will need to grow to make up for declines in print advertising and print readership.

Our initial answer three years ago was that the base was so small that even growing a third a year (a hard pace to sustain), online advertising revenues would not draw even with print advertising revenues until late next decade.  Since then, print has gone from flat to falling quickly, but online growth stalled out too.

A consensus view within the industry is that online growth can rally after the recession, perhaps even get a second wind as technical improvements like a developing partnership with Yahoo make it easier for advertisers to place and target their sales messages.19 That is an enticing promise.  Obviously, a higher volume of display advertising at higher rates is exactly what is needed to snap newspaper websites out of their business doldrums.

But it is now unlikely to ever reach the point where newsrooms could operate at the levels of newsgathering they once did, even after the cost savings of eliminating printing and distribution.

One of the few encouraging bits of advertising news in 2008 from McClatchy and others was that online display advertising rose sharply and that the first tests of the Yahoo system were yielding additional sales.20 Over all, however, online ad revenues declined slightly because much of it is still tied to a combination with print classifieds.  And the industry has been sluggish about developing easy self-placement systems for online classifieds, which is part of the appeal of Google and other electronic rivals.

Print vs. Online Ad Expenditures, Newspapers
Design Your Own Chart

Source: Business Analysis and Research, Newspaper Association of America

Gannett and others are getting good results from specialized sites for moms and other audiences.  Gannett now has a shared template among its 85 community papers for moms, local nightlife and high school sports.  Each generates traffic and a high volume of free user-contributed content, plus a specialized audience of interest to local and national advertisers.

Audience for newspaper sites continues to grow at a healthy pace – by 12.1 % as measured by unique visitors per month in 2008 versus 2007.21 How much time those visitors spend on site is a mixed bag.  Over all the numbers are low (10 minutes or less per month is typical) and, in some cases, declining, but that is influenced by the large volume of traffic that comes via search and may stay for only an article or two.22 Sites continue to add features – blogs, discussion chains, video and audio—that would encourage the interested user to linger.

So industry executives can argue, with reason, that they are developing their sites for future ad growth – even if the current business reversals mask that.

A second point of consensus seems to be that continued print advertising plus website advertising will likely not be enough to sustain a healthy business.  So looking for other potential revenue streams is also part of the game plan.

Among the top prospects are downloadable versions of the newspaper to wireless devices like the Kindle, for which users would pay something but not as much for a print version.

Also serving news and advertising to mobile devices is considered a hot prospect, especially as the devices themselves like Apple’s i-Phone have improved in applications offered and readability of display.  The New York Times reported that mobile page views rose from 500,000 in January 2007 to 19 million in May  2008.23

Still there remain many details to be filled in, both in tailoring news reports to the specs of the medium and particularly displaying advertising and including a measure of geo-targeting.

In fact, the jury is very much out on how well online ads running alongside news content work for users.  Many readers dip in and out of sites quickly; many considering a product or service go straight to a search or shopping site and probably are just as happy that no news is getting in the way of what they are looking for.

While all but a few sites (the Wall Street Journal and the Financial Times are the most notable exceptions) make access to all of their content free and have even dropped registration requirements, a number of save-the-industry essays in early 2009, including a Time magazine cover story by Walter Isaacson, a former managing editor of the magazine, advocated revisiting the decision to give away stories that are expensive to produce.24 He focused on ways to get readers to pay. A more promising option, less part of the debate at this point, may be negotiating with aggregators like Google as well as Internet service providers like Verizon to share revenue with news producers.

That is not totally out of the question but, as a practical matter, most newspaper publishers have built their current online ad base and future prospects on getting as many ad views as possible with content that is free and accessible through search.

All of this is meant to suggest that newspapers situation is by no means hopeless if (and it is a big if), they can weather near-term challenges.

As noted at the beginning of this section, however, there are some grimmer scenarios that cannot be ruled out.  What if audience begins to migrate much more quickly to digital formats, some newspaper-related but more not?  What if the shift from traditional to digital formats accelerates and much of the business goes to non-news alternatives, some familiar and some yet to be invented?

Internet advocates like Morgan Stanley analyst Mary Meeker argue that there is plenty of “take-away” business still parked in print budgets that logically should be diverted to digital alternatives.25 Our sense is that some sort of reallocation is happening only slowly during the recession but it might pick up momentum after.

Then the new-business-model heat would really be turned up on newspaper organizations.  Can they find someone else to pay for what is most valuable in the news and analysis they produce as many traditional advertisers move on?


1.Newspaper Association of America, “Trends and Numbers” at Most recent figures are as of the end of 2007, adjusted for further losses in 2008.  4th Quarter projected at an 18 % loss.

2.Alan Mutter, “Newspaper Share Value Fell $64B in 2008,” Reflections of a Newsosaur, January 1, 2009

3. Yahoo Finance

4.Newspaper Association of America, “Trends and Numbers” at Most recent figures are as of the end of 2007, adjusted for further losses in 2008

5. Newspaper Association of America, “Trends and Numbers” at Most recent figures are as of the end of 2007, adjusted for further losses in 2008

6. Various company presentations, UBS Global Media Conference, New York, December 2008.  Also John Morton, “It Could Be Worse,” AJR, December/January 2009

7. Alan Mutter, “Newspaper Share Value Fell $64B in 2008,” Reflections of a Newsosaur, January 1, 2009

8. Eric Dash, “Mexican Billionaire Invests in Times Company,” New York Times, January 19, 2009

9. Newspaper Association of America, “Trends and Numbers” at Most recent figures are as of the end of 2007, adjusted for further losses in 2008

10. Jordan Gibson:  “Picture This:  Guess Where Google Gets 98 % of Its Revenues,” Industry Standard, July 15, 2008

11. Newspaper Association of America, “Trends and Numbers” at Most recent figures are as of the end of 2007, adjusted for further losses in 2008

12. Lauren Rich Fine, Ethics Fellows Conference, Poynter Institute, March 2008

13.Newspaper Association of America, “Trends and Numbers” at Most recent figures are as of the end of 2007, adjusted for further losses in 2008

14. “Newsprint Price Increase Squeezes All Newspapers,” The Rural Blog, July 3, 2008

15. Joe Strupp, “Gannett Announces One-Week Unpaid Furloughs,” Editor and Publisher, January 14, 2009

16. Philip Walzer, “Weather Channel Deal Sealed For $3.5 Billion to NBC,” Virginian Pilot, July 7, 2008

17. “Detroit Free Press and News Redirect Staff, Resources to Digital Delivery of News,” December 16, 2008

18. Robert Dickey, Interview with Rick Edmonds, December 2008

19. Miguel Helft, “Yahoo Teams With Newspapers to Sell Ads,” New York Times, February 27, 2009

20. McClatchy presentation, UBS Global Media Conference, New York, December 2008

21. “Newspaper Website Audience Rises 12 % in 2008,” Newspaper Association of America,” January 26, 2009

22. Jennifer Saba, “Top 30 Newspaper Websites By Time Spent,” Editor and Publisher, February 24, 2009

23. Jean Yves Chanon, “U.S. Mobile News Market Nearing Maturity According to NYT,”, August14, 2008

24. Walter Isaacson, “How to Save Your Newspaper,” Time,  February 05, 2009

25. Mary Meeker, “Technology/Internet Trends,” Web 2.0 Summit, San Francisco, November 5, 2008