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Newspapers: Stabilizing, but Still Threatened

By Rick Edmonds of the Poynter Institute and Emily Guskin, Amy Mitchell and Mark Jurkowitz of the Pew Research Center

Updated July 18, 2013

If the newspaper industry had theme music in 2013, it might use “Been down so long it looks like up to me,” the much-recycled line from a 1920s blues song.

For the first time since the deep recession that began in 2007, newspaper organizations have grounds for a modicum of optimism:

All those positives, however, are for the time being mostly promise rather than performance. The most basic indicators have not turned around. The industry is little more than half the size it once was. Considerable dangers persist:

So the industry entered 2013 with some positive signs but still dealing with difficult economic realities. The two biggest newspaper developments of the last year – digital paywalls and reduced print frequency – capture that odd mix of expansion and contraction now typical within the industry.

Digital Pay Plans Catch Fire

The New York Times introduced its digital pay plan in March 2011. Some regional papers like Morris Communications’ Augusta Chronicle started even earlier. But 2012 was the year when the movement to digital pay really gathered momentum.

Gannett announced in February 2012 that all 80 of its community papers would have digital pay plans by the end of the year.3 (By early December 78 had digital pay plans. USA Today remains free online, for now.) Gannett told investors it expected the move – along with print subscription price increases – to generate $100 million in earnings annually starting in 2013.

When Gannett reported in early 2013 that its digital revenue projections were on track, it seemed to signal that such initiatives could work at papers of varying sizes, not just The New York Times.

Other chains also have embraced digital pay: Lee’s 47 papers, beginning in the second half of 2011; McClatchy’s 30 in 2012, and E.W. Scripps’ 14 early this year.4 Some like Journal Register and Advance that give first priority to building digital revenues are continuing to allow free access in order to maximize traffic and, therefore, ad revenues. One notable holdout, The Seattle Times, announced in February 2013 that it was shifting to a paywall. Others like The Washington Post and The Tampa Bay Times have acknowledged that they are re-evaluating.

25-Top 25 Newspaper Daily Digital Editions

Most digital pay plans are built around three elements. The first is the paywall. Heavy users of a site eventually encounter a notice to pay up for a digital subscription or lose access. The second is allowance for a large volume of “casual traffic” that an earlier generation of hard paywalls, like The Times of London’s, would have blocked. This permits a certain number of free articles each month and free access to articles found through search, links and social media references, and it opens the way for more skilled computer users to delete cookies or otherwise game the pay barrier.

Even more important is the third element: To stabilize and potentially grow print circulation, digital access is typically offered free or at a greatly reduced rate to print subscribers. A subscription to just the Sunday paper (by far the biggest and most profitable of the week) normally qualifies. At The Los Angeles Times and some other papers, digital plus Sunday is cheaper than digital alone.

Early results indicate minimum negative impact on digital audience or advertising.

The New York Times (including its international edition) now has 640,000 digital subscribers, Gannett 46,000.5 But with print price increases, both have had big gains in total circulation revenue. At The New York Times, a significant milestone was passed as circulation now accounts for a bigger share of revenue than advertising. And circulation revenue gains have come close to covering print ad losses.

At Gannett, the digital pay plan pushed circulation revenue up 17%, year-to-year, in the fourth quarter of 2012 (fourth quarter 2012 included an extra week).6 It now generates about a third of publishing revenue. In the fourth quarter of last year, Lee’s newspapers showed a year-to-year circulation revenue gain of nearly 4%; they get 25% of operating revenue from circulation.7 McClatchy, which launched its digital pay plan later than the others, gets only 20% of its revenue from circulation, but saw it grow 5.4% for the quarter.8

Taken together, the circulation initiatives are slowly rebalancing the industry’s reliance on advertising over circulation as a revenue source. It will be some years still until the industry comes close to the international norm, achieved in the U.S. by The New York Times in 2012, of close to a 50-50 circulation/advertising split (a small percentage of revenue also comes from other sources), but others are seeing some measurable success.9 1-Print Advertising Fall, Online Grows - Copy


Looking forward, digital pay plans have an added plus. Getting users accustomed to the principle of paying for content could ensure the plans will function well no matter what platforms people prefer in coming years, including the growing array of mobile devices.

Some object to digital pay on ideological grounds. Information wants to be free, say theorists like Jeff Jarvis, Steve Buttry and Mathew Ingram and any retreat from full participation in the open web is viewed as suspect, a turnoff to a younger generation of potential news readers/users.

There are some practical challenges as well. While The New York Times is clearly offering valued content on all platforms, some of the 450 papers with digital pay plans in place or in the works may be spread too thin for that. Digital subscription growth is typically fueled by deeply discounted trial offers. Converting discounted subscriptions to fully paid ones is a work in progress. Also, a New York Times executive conceded, in a discussion with industry analysts, that profit margins on the new revenues are nowhere near those realized by selling additional ads.10

Nonetheless, newspapers often move in a pack when a new business idea shows merit, and the momentum for digital pay plans for papers of all sizes seems certain to continue through 2013.

New Orleans Story: Three-Day-a-Week Publishing Sparks Debate

In May 2012, Advance Publications announced that The Times-Picayune would shift to three-day-a-week publication in the fall, making New Orleans the largest U.S. city without a daily print newspaper.

Advance portrayed the move as a way to get ahead of the curve of shifting audience preferences, save money on a legacy pressroom, paper and delivery costs, and make the website — on various platforms — the focus of its news and business-growing efforts. The change was necessary for long-term survival, executives said.

It was met, though, with loud and long howls of protest from news staff, elected officials and loyal print readers.  Industry critics including Newspaper Association of America chairman James Moroney, publisher of The Dallas Morning News, said the move sent all the wrong signals for an industry battling image problems. Revenue losses could easily end up greater than savings, opening the market to competition from local TV web sites and others, the critics said, adding that, at a fundamental level, Advance seemed to be saying to print readers, “You don’t need us every day” — at a time when 85% of industry ad revenues remain in print.11

A number of analysts thought the move made financial sense in the near term only as a way to cut the traditional newsroom staff deeply. The Times-Picayune did, letting 84 of 171 go, while promising to hire some of those back and add jobs for the expanded digital operation. Ultimately the staff, including 8 people already working at NOLA, grew back to roughly 150. So the staffing loss was 20 to 30 positions together with some changes in the mix of job status and duties.

The financial logic driving reduced frequency, which has been discussed as an option for years, is that print advertising is now concentrated on Sunday (nearly half the total) and a few weekdays. The few advertisers on Mondays, Tuesdays and Saturdays might be persuaded to switch schedules to the remaining print days, the theory goes. And as print advertising continues to fall, readers also may be more satisfied with three substantial print editions a week.

Advance had tested this big shift to digital starting in 2009 at its Ann Arbor operation and others in Michigan. The sites, using search engine optimization and other techniques, have posted strong traffic numbers. Advance says its emphasis on digital has made money. But the sites remain clunky in design and technology, and news coverage is notably thin with, for example, high priority local beats that seem to be covered by part-time freelancers.

It is too early to say how the newer conversions are doing. Times Picayune editor Jim Amoss did say in 2013 that print circulation is up slightly on each of the three days still published and that unique visitors to the web site have risen from 3.4 million per month in 2011 to 4.2 million monthly in 2012.12

Advance is taking this model to more of its 33 papers. It reduced the number of days it printed papers in Birmingham and Mobile, Ala., in 2012. In February 2013, it did the same in Harrisburg, Pa., and Syracuse, N.Y. And it signaled with letters to readers and announcements of coming staff cuts that it probably will follow suit this year at its largest papers in Newark, Cleveland and Portland, Ore.

In Pew Research interviews with executives at 13 major newspaper companies in early 2012, the most common prediction was that more and more papers would soon adopt the three-day-a-week publication schedule.13 Watching how many other publishers follow Advance’s lead in 2013 will be a referendum of sorts in how the industry sees its future split between print and digital platforms.

There were plenty more trends to track for 2012 and looking ahead in 2013. Oddly as the industry becomes much smaller, it also becomes more complex. The measures we have used to assess newspaper revenues in nine previous reports no longer capture a full picture, but new statistical indicators for such varied activities as digital agencies, e-commerce, event revenue and more are still under development.

News Capacity

This chapter, like those in the nine earlier editions, necessarily dwells on the business turmoil sweeping through the newspaper industry for the last decade. We recognize, though, that some readers are most interested in a different bottom-line: Will their local paper remain a valued source of news and accountability journalism? Does the industry still hold top chair at the table in deep coverage of national and international affairs, its investigative fangs still sharp? Or has that role passed on to a networked agglomeration of digital efforts ranging in scale from potent new entities like Politico and ProPublica to bloggers to citizen observers.

Last year and the start of 2013 offer little that is different from recent trends in news staffing.  The American Society of News Editors annual employment census typically is completed soon after publication of this report. For 2011, ASNE reported a net loss of 1,000 full-time professional jobs in U.S. newsrooms.14 Judging by a string of buyout/layoff announcements continuing into 2013, another loss of 1,000 seems a reasonable estimate for 2012. (The American Society of News Editors updated the newsroom census figures in June 2013. For those data, read a brief report here.)

12-Newsroom Workforce Still Dropping


That would take the industry below 40,000 newsroom employment for the first time since the census began in 1978, down 30% since 2000.

We have taken the position each year that the industry is ailing but not dying and continue to believe that. However, there may not be a great difference for readers in a paper folding (as one of Warren Buffett’s, in Manassas, Va., did late in 2012) or cutting back to three days a week in print while exchanging traditional reporters and editors for a smaller group of digital specialists. Or keeping up seven-day-a-week print publication with a small harried news staff without the time or skill to take on ambitious projects.

That said, The New York Times, The Wall Street Journal and The Washington Post have not bailed out on a wide-ranging, well-staffed daily report, employing the most talented writers, columnists and editors and a growing corps of younger new media specialists like The Times’ Nate Silver and Andrew Ross Sorkin. The three newspapers are also leaders in adapting their journalism (with digital enhancements) for display on the traditional web as well as smartphones, tablets and social media applications.

Also a number of top metros – among them, The Boston Globe, The Seattle Times, The Milwaukee Journal-Sentinel and The Tampa Bay Times – produce a strong daily report and find the resources for high-impact special projects, as evidenced by multiple Pulitzer Prizes at each in recent years.  The Seattle Times and The Boston Globe have also been leaders in tapping into other community and freelance reporting sources for the town-by-town or neighborhood-by-neighborhood coverage they can no longer afford to staff professionally themselves.

The migration of audience to digital platforms and the advances in new media efforts have surfaced new issues in evaluating news capacity. Digital brings with it a host of novel newsroom job descriptions – aggregator, coordinator of community conversations, technologist.  Depending on your viewpoint, one could argue these are low-impact substitutes for the thinned ranks of traditional reporters, editors and visual journalists. Or, some argue, the new jobs are making newspaper content more relevant and deepening connection with audiences as preferences change about how to get news, share it and talk about it.

For many years, a great advantage for digital news reports has been that their production is inexpensive and dissemination is close to free. Plus, they are available whenever and wherever the user wants and can be up-to-the-moment timely in a way a once-a-day print report never can.

All that is true, but it has become apparent that producing on all major platforms clearly requires some big investments and frequent updates. Designing a top-of-the line iPad app, for instance, can be at least a $100,000 upfront investment; even a modest one will cost $35,000.15 Now, with various Android-based devices competing with Apple, one size does not fit all display platforms, encouraging organizations to start over with an HTML 5 responsive design system that can reconfigure a report to fit any device and screen dimensions. More broadly, a newspaper organization’s digital ambitions often collide with a clunky, quickly obsolete content management system. Plenty of human effort becomes needed for even barely acceptable presentation. Basic websites are now on a second and third generation of redesigns.

Users don’t want to hear excuses for slow loading times (which also leave many banner ads unwatched as users move quickly to something else). Management of the newsroom and the rest of the enterprise now seems to involve endless selection of vendors, sorting through sales pitches to find partners that can deliver as promised.

Digital Advertising and Other New Revenue Streams

Continuing a slump that began in late 2011, the industry’s digital ad revenues grew by 3.7%  last year.16 The third and fourth quarters picked up, but not enough to change the overall trajectory.

The problems remain the same we and others have identified for the last several years.  The first has to do with competition.

Display advertising (made up primarily of banner ads) is the bread-and-butter of newspaper websites and has seen strong growth in the last two years—22% in 2012 according to eMarketer.17 But Google and Facebook have brought sophisticated ad-targeting techniques to the market for display ads, giving them a leg up over many media organizations. Google’s investments in the area have placed it as the leader in display ad revenue as well as search.

27-Banner Ads Make Up the Largest Portion of Display Advertising


The second problem relates to price point. The enormous available inventory of advertising options on the internet continues to drive down prices. A December forecast by Zenith Optimedia, an advertising analytics and forecasting firm, showed the volume of display advertising up in both 2012 and 2013 but revenue flat.18 But with prices falling, the only way to increase revenues much is to get a bigger piece of the pie or to target ads to consumer profiles, supporting higher rates.  That, however, takes the industry back to the problem of competing with well-funded industry giants.  (For more on the state of digital advertising, please see the digital chapter of this report.)

A new opportunity lies in video advertising, which is growing so much that some organizations say they are having trouble putting up enough video content to keep up with advertiser demand. But, given how quickly Google, Facebook and the ad networks have moved in on display, there is a good chance they could do the same for video.

Another difficulty is that some of the more pricey ads, like big pop-up “takeovers” and drop downs that cover home page content, risk annoying the audience.

The industry will keep plugging away at the digital ad conundrum, but the slow progress has prompted serious efforts to expand other revenue options. One of the most broadly successful has been offering digital marketing services to local businesses that want a presence in social media but don’t know how to go about it. Event marketing and other sponsorships are also a relatively easy sell in the current market.

Another opportunity is to acquire specialized sites, as The Dallas Morning News did last year with the well-established entertainment-oriented site, Pegasus. USA Today and others find specialized sports sites do well (coverage of a college’s big-time football and basketball programs can draw a national audience).

The Morning News also has developed a business selling content from its archives to advertisers for their own marketing materials. In March 2013, The Washington Post began experimenting with another form of sponsored content, sometimes called native advertising, running a labeled essay from an advertiser on its homepage. This format has become hot with digital marketers, eager to break through the clutter. But critics say it cheapens the news product, as The Atlantic found in early 2013 when it accepted a sponsored contribution from the Church of Scientology and its marketing staff appeared to be censoring negative comments.

Digital First Media, the umbrella company that manages both MediaNews and Journal Register, has put resources in building its own ad network rather than ceding that business to other exchanges.

The Deseret News in Salt Lake City has expanded its own website and a separate contributor content site, Deseret Direct, to reach a wider audience of Mormons nationwide and internationally.

Most of these innovations bring cultural challenges to companies. And those involved, including Gannett, GateHouse and Deseret, note that the efforts involve recruiting people from outside newspapers and, often, creating separate companies inside the corporation to insulate them from traditional print operations.

3-Ad Revenue Decline Continues to Slow Down - Copy


Absent reliable measures of each of these new revenue streams, companies confidentially exchanging business information have developed an informal proxy: The difference between advertising losses and overall revenue loss in a given period. For example, if ad revenues are down 6% for the year but total revenues are down just 2%, that is a sign of progress in developing replacement sources of revenue.19

Three weeks after initial publication of this report, the Newspaper Association of America released new figures based on areas of revenue that had no previously been measured from 15 newspaper companies. It found roughly $5.9 billion in new and old “other” revenues that had not previously been tabulated. Altogether, that makes newspapers a $38.6 billion industry rather than $33 billion if ad revenue and circulation revenue were the only activities counted.

The data come from an NAA survey of 17 newspaper companies (with revenue data from 15 of them), representing about 40% of industry circulation and 50% of revenues, also reported that circulation revenue grew 5% from 2011 levels.

(So while ad revenue fell 6% for the year, total industry revenue was off only 2% according to these figures.)

Tablets, Smartphones and Social Media

Even if growth slows from exponential to merely fast, each of these three platforms has become huge and stands to get bigger.20 Nearly half of U.S. adults have smartphones and 31% have tablet devices, according to a January 2013 Pew Research survey. A rising share of news consumption goes to each of these platforms. Some digital business analysts see mobile largely supplanting desktop/laptop consumption of news within two or three years.

Newspapers have responded, as they more or less must, by making their content available in mobile formats. An Alliance for Audited Media survey of 210 media companies in January 2013 found that 100% expect to be on mobile by the end of the year.21

Something critical is missing, however: advertising. Repeating the experience of the web, publishers are finding that strong non-news competitors are abundant and that ads seem not to mesh gracefully with news reading. Industry ad revenue on the devices remains too negligible to merit measurement. Indeed, 2011 data, collected from a sample of about 40 papers by Pew Research, found mobile ad revenue accounting for less than 1% of digital revenue over all.

Media analyst Frédéric Filloux summed up the situation in a December commentary in his Monday Note newsletter: “Mobile audiences are large and growing. Great. But their monetization is mostly a disaster….So where do we go from here?”22

The industry consensus is to be present on both platforms to build audience, in the hope that advertising and other forms of new revenue will follow. As noted above, while smartphone news apps are typically free and subscriptions to tablet apps can be a tough sell, both are part of the package generating new bundled subscription revenue. Maybe with time, they will sell separately.

The tablet, in particular, is so new that both advertising agencies and publishers are still learning what works best. More premium-priced sponsorships that spotlight a single advertiser look to be a promising avenue. Tablet usage, a Pew Research/Economist study showed, tends to be for much more extended sessions than the three to five minutes typical of reading newspaper websites on desktops. A number of readers say they are seeking a print-like experience. That suggests at least a potential for brand-building advertising on the devices.23

Hedging their bets, 12 newspaper companies have invested in developing a freestanding smartphone “discovery” shopping site. The new company, Wanderful, absorbed a similar Associated Press effort and will debut an enhanced version of the Find n Save site at the end of this quarter. Significantly, it will not be embedded into news sites – a nod to the fact that the search for products, comparative pricing and buying on mobile are activities distinct from reading the news.

But the very slow progress in digital advertising makes print editions, where the ads run alongside news and the physical product brings a package of inserts into the home, seem worth taking another look at. For now, the consensus  on the future of print seems to be shifting and even elongating somewhat, with more of an industry acknowledgement that it will be around for years, maybe decades, contributing a smaller but still significant share of revenues and profits.

Earl Wilkinson, executive director of the International News Media Association and something of a digital evangelist, recalibrated his views in a December report. As the industry continues working on transformation, he wrote, “a print + digital dynamic” will be the norm for the foreseeable future.

Danish scholar Rasmus Kleis Nielsen, in a report for the Oxford Reuters Institute, argues that we are nearer to the beginning than the mid-point of full digital transition. Guttenberg’s printing innovations took the better part of 100 years, he notes, to fully eclipse the old order of scribes. “The direction of travel is clearly toward ‘new’ media,” Nielsen concludes, “but ‘old’ media are still very much with us and do not appear to be about to disappear wholesale.”24


The two six-month periods for reporting circulation in 2012 marked the first time apples-to-apples comparisons were possible under new rules adopted by the Audit Bureau of Circulations (which late in the year changed its name to the Alliance for Audited Media).

9-Total Circulation Stabilizes in 2012


Those results suggested a welcome stabilization. Total daily circulation was essentially even in the most recent report. Sunday circulation, up 5% year-to-year for the period ending in March 2012, rose only 0.6% in September.25 The slowdown in Sunday growth was largely explained by the waning of the super-couponing craze of 2011, which had some bargain-hunters buying multiple copies of the print edition on Sundays to maximize savings.

There were some hidden changes in those seemingly static numbers, however. In the most recent report, paid digital accounts for 15.3% of circulation, up 5.5 percentage points from a year earlier.26 That is good in generating new revenue, establishing that full access is not a freebie and supporting subscription price increases. But for advertising, trading out paid print for paid digital is a negative for now because the rates are so much lower.

Using total circulation as the summary metric allows newspapers to build their numbers with so-called Sunday Select products, essentially bundles of inserts with little or no accompanying news, delivered to readers in certain zip codes who request the product.

Also, organizations are allowed to count branded editions, a category that includes free tabloid or foreign language versions of the paper. So, for instance, The Tampa Bay Times showed a 73,000 daily increase from the previous year’s report by virtue of counting, for the first time, distribution of its free tabloid edition, TBT.27

The rules also allow some double-counting of digital subscriptions so long as the various platforms are accessed with some frequency. It is unclear how many publications use that provision. The Alliance for Audited Media is phasing in a new measure, “total consumer accounts,” that would allow advertisers to subtract out the double-counting.

John Murray, who directs audience research at the Newspaper Association of America, dug deeper into the most recent Alliance for Audited Media report. His analysis confirms the degree to which digital pay plans bolster the figures and in many cases mask print losses: nearly all the growth came from the largest newspapers, the most active in signing digital subscribers and offering Sunday Select products. The change is rapid enough, Murray found, that for papers with more than 500,000 circulation, only 64% of Sunday copies counted remain paid print.

26-Sunday Circulation Trends Show Gains in Largest Papers, Fueled by Digital Growth

This indicates a good-news/bad-news bottom line on audience for the industry. Combined with measures of unique visitors and page views along with market reach across platforms, the Alliance for Audited Media’s new circulation math shows total audience holding steady. On the other hand, the print audience, by far the most lucrative for advertising, continues to shrink.

21-Aggregated U.S. Newspaper Website Audiences

Print Advertising

It was another year of losses for this key source of revenue. In 2012, the biggest culprit was soft national advertising, down 11.7% for the year.28 Beginning in the first quarter, according to industry sources, campaigns for several big advertisers, including telecoms (for a second year in a row) and pharmaceuticals, slowed or stopped. National advertisers may also be accelerating the shift of their budgets from print to an array of digital alternatives. (Magazines suffered similar declines for the year.)

2-Print Ad Revenue Continues to Decline - Copy


Losses in classified advertising were more moderate. Automotive, employment and other categories (such as obituaries and legal notices) all appeared to be rallying by year’s end.  Real estate classified losses continued at more than 15% for the year (with more than 80% of classified ad revenue lost since its peak in 2000). Retail ads, larger than national and classified together, were down about 6.5% for the year.29

5-Real Estate Classified Ads Dip Most in 2012


Preprinted insert advertising held up well in 2012 and now accounts for a quarter of print ad revenues. But it could take a crippling hit if retailers begin to shift a big share of their budgets to digital alternatives or direct mail companies, like Vlassis, which is getting a reduced rate from the Postal Service. New and unanticipated competitors – like Groupon and other daily-deal companies in 2011 – could chip away at the remaining ad base.

A sampling of public companies reporting full-year results for 2012 shows operating margins for their newspapers down slightly from a year before: The operating margin for Gannett was 9.9%, New York Times 5.4%, McClatchy 15.1%, E.W. Scripps 6.9% and A.H. Belo 8.1%. The Washington Post operated at a 9.2% loss.30

Assorted special charges and markdown of assets often made net earnings margins significantly lower. McClatchy operated at break-even, the New York Times at a 1.3% loss.31

As companies began to report their full-year results in January and February, they generally forecast more of the same print erosion in 2013 rather than an upturn.

Cost Cutting

Controlling costs, while trying to minimize damage to the news report and other essential functions, remained a critical component of managing newspapers for profitability through 2012 and the first months of 2013. Trends we have noted in recent years continued.

As the industry has contracted to 60% of its size a decade ago as measured by revenues, there are plenty of excess capacity and other legacy costs to address.32

We have reported earlier that many newspapers either are farming out their printing or, if they keep their own presses, aggressively seeking contract printing jobs. When executives from McClatchy or Gannett address investors, they typically note as a sign of progress how many of their papers no longer print on site.

Especially if presses are gone, but even if not, imposing headquarters buildings, often serving as downtown anchors, are relics. In expansionary times, papers and parent companies banked land to prepare for future growth. No need for that anymore – with the real estate market improving, selling makes more sense.

In January 2013, for example, Gannett announced that it was moving from offices that had housed The Detroit News (and now The Detroit Free Press, too) since 1917. Gannett will also be selling its 1927-vinatage former headquarters in Rochester, N.Y., where the company was started and grew to the biggest in the industry. The Philadelphia newspapers have moved out of their iconic white tower into a former department store. That could be the fate of Tribune Tower in Chicago as well, and The Washington Post is exploring moving from its headquarters.

Other organizations are dealing with excess space by staying where they are and leasing out part of their offices, or – in the case of The New York Times and The Boston Globe — carving out room for incubating digital start-ups, which could help their own search for innovations. Other companies are stuck in long-term leases that are difficult to break.

Underfunded pension plans are another challenge (as for many shrinking American companies), especially in big cities with heavily unionized work forces. Legislation in 2012 pushed into the future some required contributions, but the obligation still is there and threatens to eat up future earnings. Unionized papers may also face staffing levels and work rules that no longer make financial sense, though management’s leverage for negotiating concessions is strong.

Some companies are still working through debt taken on with acquisitions made in the middle of last decade — McClatchy for its 2006 purchase of Knight Ridder and Lee for its 2004 buy of Pulitzer.

On an operating level, we have noted for several years that metropolitan papers are voluntarily dropping circulation outside their core areas, since delivering those papers is expensive in proportion to the money they bring in.

Last year also saw the continuation of a trend in chains (and The Associated Press as well) to consolidate design and editing in hubs. The idea is to avoid duplication of efforts and to save money.

Unavoidably, though, staff cuts create a less-is-less impression for readers, whether it be an uncovered news beat or circulation complaints handled by an overseas call center.

Why Small Beats Big

Continuing the trend of recent years, the deepest problems are concentrated at large metro papers. In the heat of a January 2013 labor negotiation, new owners of the unprofitable Philadelphia Inquirer threatened to close the paper within eight days (they didn’t). With particularly weak advertising and circulation results, The Washington Post drew sustained criticism from industry Cassandras despite aggressive experimentation launching many new lines of business and its parent company’s strong TV and cable results. The Boston Globe, which drew insufficiently attractive offers when it was put up for sale by The New York Times in 2009, went back on the block again in early 2013.

The biggest national papers benefit from an elite audience and the scale to roll out a variety of content initiatives on all platforms, but they also have distinct problems of their own. Even as The New York Times reported great subscriber growth and income from its digital pay plans, it missed third-quarter projections because of weak national advertising and lost 22% of its share value in a single day.33 The ad slump also prompted The Times to eliminate roughly 30 newsroom jobs in early 2013, including some high-ranking masthead editors.

Speaking to an investors’ conference in December, The Washington Post’s chief executive, Donald Graham said, “When you get larger, you get challenged by more forms of media competition for advertising delivery.” Papers in smaller markets, like those Warren Buffett is buying, can remain the go-to source for local news and a strong vehicle for local advertisers. Nor is the door closed for various new revenue initiatives as a recent Pew case study of the tiny, 12,000-circulation Columbia (Tenn.) Daily Herald highlighted or the mid-sized Santa Rosa Democrat and Naples Daily News.

Ownership and Acquisitions

Near the end of 2011, newspapers began changing hands and the buyers were varied. Buffett bought his hometown Omaha World Herald. Real-estate mogul Douglas Manchester bought The San Diego Union Tribune and has used its editorial and news columns to espouse a conservative, pro-development agenda. Halifax Media, a new company whose only holding was The Daytona Beach (Fla.) News Journal, bought The New York Times’ 16-paper regional group for $143 million.34

More of the same followed in 2012, and a number of transactions are coming in 2013. Buffett’s Berkshire Hathaway bought all of Media General’s 63 papers, except for The Tampa Tribune and its weeklies, in May for a modest price of $142 million.35 Buffett added several more small and mid-sized papers later in the year, and explained the bet (small for him) as confidence that newspapers without the competition prevalent in big cities remain dominating information and advertising franchises. Berkshire Hathaway bought The Greensboro (N.C.) News Record and The Tulsa (Okla.) World early in 2013.

Aaron Kushner, a former greeting card executive, had expressed interest in buying The Boston Globe and The Portland (Me.) Press Herald though neither resulted in a deal. In July, he bought The Orange County Register in California and six other Freedom Communications papers for an undisclosed price. Kushner moved to Santa Ana and has embarked on an unorthodox strategy at The Register, hiring about 90 new reporters and editors to strengthen the paper and build circulation. Essentially, he is doubling down on print while giving digital secondary attention (for instance, closing The Register’s year-old tablet app, Peel).36 That approach has generated a lot of industry headlines about Kushner, but it is too early to assess the results of his counter-intuitive strategy.

A local investor group completed acquisition of The Philadelphia Inquirer and Daily News for $55 million in April. That gave the papers its fifth owner in six years and the sales price was almost exactly a tenth of what another local group headed by Brian Tierney had paid in 2006.37

There were a number of other transactions involving individual newspapers. Halifax sold to local investors The Santa Rosa (Calif.) Press-Democrat, one of the largest papers in the New York Times Group that it had bought. A Los Angeles-based investment firm picked up The Tampa Tribune, for just $9.5 million.38 Lee dealt The North County Times in California to Manchester’s San Diego company and The Garden Island in Kauai, Hawaii, to The Honolulu Star-Advertiser.

These transactions have in common low purchase prices, sometimes only a little less or equal to the value of real estate that comes with the deal. Also, in larger transactions, like the multi-paper deals that Halifax and Buffett put together, pension liabilities have been left with the seller.

So the buyers’ biggest risk is absorbing any operating losses, providing money for improvements and taking the organizations to a sustainable business position. Still deeper cuts are the modus operandi for some but not all the new owners.

Newspaper broker Larry Grimes, whose business is mainly in smaller papers, remarked early in 2013 that the marketplace for newspapers will continue to flourish. The dynamic is similar to a real estate thaw – family owners who want out but have been waiting for prices to pick up may choose to sell. A case in point is the family-owned Atlantic City Press, put up for sale in January.

The Tribune Company’s four-year bankruptcy was finally resolved on the last day of 2012. All indications are that some or all of the company’s eight newspapers – including such prominent publications as The Los Angeles Times and The Chicago Tribune – are on the block as Tribune (like Media General) focuses on broadcast and digital businesses. In theory, all could be sold together, though it seems more likely that some, or even all, will go individually to local buyers or expanding chains. The bankruptcy courts appraised the newspaper at $623 million, though the actual sales price is likely to be lower.39

The New York Times’ decision to sell The Boston Globe puts yet another venerable metro in play.

One more transition, not strictly speaking an acquisition, will be closely watched. Rupert Murdoch’s News Corp. will split in two, leaving The Wall Street Journal and other newspapers in the legacy company and spinning off all of its cable and network assets into a new one. Losses in Murdoch’s newspapers have been more than covered by News Corp.’s huge and hugely profitable worldwide cable TV business. While British papers, not The Journal, are the big causes of losses, the reorganization could slow spending on investments to expand The Journal’s news report and build circulation.

The Future

Industry watchers continue to be intrigued by executives like Clark Gilbert at the Deseret News and John Paton of Journal Register and MediaNews who are plunging all in, full speed, into a transformation in which digital is the core of news presentation and revenue.

Paton lost some of his luster as a sage in 2012 when he took Journal Register into bankruptcy for the second time in four years, though he insisted it was the overhang of legacy costs, not failures of the digital strategy that made the move necessary. His owners, led by Alden Global Capital agreed, and are completing repurchase of the company, leaving Paton and his digital strategy in place.

Gilbert and Paton are not alone. As they reduce print frequency, the Advance papers are also placing a bet that with the right focus, digital audience and revenue growth can be accelerated. The once-sleepy Morris Communications, with papers in Savannah, Ga., and Jacksonville, Fla., has a new generation of family leadership and is putting digital transformation foremost in its strategy.

So there is a measure of hope in the industry. Newspaper organizations have made progress in getting readers to pay a bigger share of costs and in turning their competencies into new revenue streams even as print advertising continues to erode and digital advertising continues to disappoint.

As for news, the industry has yet to break the decade-long cycle of doing less and less of what it does best. But while fully evolved digital information do-it-yourselfers see newspapers as passé and irrelevant, there is still substantial demand for original reporting and synthesizing the flood of available content. Doing that well on multiple platforms now seems in reach, making the rise of all things digital plausibly an opportunity, not just a threat.


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