Will Norton, Jr., dean of the College of Journalism and Mass Communication at the University of Nebraska-Lincoln
The newspaper business is doing better than it would appear. It is the stewardship of the business that is in question.
Small dailies and weeklies are thriving and setting an example of the need to be careful how much an organization borrows in order to expand.
Moreover, tax law has seriously affected newspapers. If you borrow, you can avoid paying high taxes and you can build corporate equity.
In other words, there are problems in the newspaper industry, but many of the problems are the result of tax law.
Because third and fourth generations of families that owned newspapers had to pay high inheritance taxes, they preferred to sell their newspapers at two or three times their worth (to corporations who had the equity to pay a great deal for them).
Many of these corporations bought newspapers at very high prices and were very highly leveraged. When Lehman Brothers failed and the financial institutions started raising rates on bonds, there often was not enough money to cover day-to-day costs and run the newspapers well.
Two of our outstanding graduates were fired recently from a newspaper that was making 20 percent on gross. [1] Unfortunately, two newspapers in the group were suffering badly and caused the corporation to fire highly paid employees.
Pharmacies make 3 percent on gross. Grocery stores make 1 percent on gross. So newspapers are doing well, but newspaper corporations have borrowed too much in order to expand, and they do not have the cash to sustain their profitable businesses.
It truly has been the wrong model. In a democracy, the economic principles that should guide newspapers are the economic principles of public utilities.
Newspapers are like electric power, water and other public utilities that keep a community operating well.
However, many newspaper companies have treated newspapers as cash cows. They have forgotten the importance of the newspaper itself. Their focus has been on developing profits as high as 40 percent on gross. Indeed, they have been concerned about stockholder earnings and the opinion of Wall Street firms.
This is a short-term view. No great society can survive by ignoring the news and information needs of its people. It is important to remember what Walter Lippmann said back in 1925, that “a free press is not a privilege, but an organic necessity for a great society.” [2]
The economic problems of newspapers have been exacerbated by the increase in use of the Internet. It is important to note that the Internet and bloggers also may increase the demand for newspapers. “What reader will want to search through all the bloggers’ entries and then try to figure out what is true and what is not? That role, of sorting through rumors and separating the wheat from the chaff, used to be played by a solid newspaper and its knowledgeable staff.” [3] Clearly, more people than ever, I believe, are reading newspapers. In fact, Isaacson also reports that: “Newspapers have more readers than ever. Their content, as well as that of newsmagazines and other producers of traditional journalism, is more popular than ever – even (in fact, especially) among young people.” [4] Even during these periods of uncertainties, people need to know about taxes, weather, in-depth analysis of new policies and how they might affect them, etc, and want to read editorials. These things increase the demand for newspapers. However, newspapers were not studying how to make use of this new technology.
Newspapers keep defending the existence of newspapers on paper rather than embracing both paper and the Internet. As a result they generally did not have research to show how to advertise effectively on the Web. Moreover, they had relied on advertising as their main source of revenue. So advertising has been the primary focus of newspapers on paper.
Paid circulation was viewed as being important, but advertisement rather than news was the bait that was used to lure readers, and readers were not charged enough for the news.
In other words, paid circulation was perceived to be what delivered advertising revenue. Thus, the concern about dividends for stockholders was a misplaced emphasis.
In brief, democracies need news and information, and the kind of stewardship some newspaper corporations have demonstrated has led to a period of transition.
What is important to realize is that few small dailies or weeklies have died. Throughout Nebraska and other states these newspapers are thriving. However, “many people believe newspapers, especially hyper-local community newspapers, have a real future, whether it is hold and- fold, ink-on-paper or Web-based.” [5] “Considering the hurricane of change that is buffeting all segments of the news media these days, I’d argue that no part of the business is as firmly anchored as the average daily newspaper.” [6] It is up to these newspapers to find away forward.
I am an owner of three publications in Marshall County, Mississippi. These newspapers are immensely profitable and are offering major news content to the community.
[1] This figure is similar to what Paul Farhi reported in 2005 (June/July 2005; American Journalism Review).
[2] Lauterer, Jock. December 2008. The Future of Newspapers. Quill, Dec2008, Vol. 96 Issue 9, p10-12. Lauterer is the director of the Carolina Community Media Project and a lecturer at the School of Journalism and Mass Communication at University of North Carolina at Chapel Hill.
[3] Darly Moen, quoted by Repps Hudson. May 2008. “The Future of Journalism.” St.
Louis Journalism Review.
[4] Isaacson, Walter. 2009. “How to Save Your Newspaper?”
http://www.time.com/time/printout/0,8816,1877191,00.html
Isaacson, a former managing editor of TIME, is president and CEO of the Aspen Institute and author, most recently, of Einstein: His Life and Universe.
[5] Lauterer, Jock. December 2008
[6] Farhi, Paul (2005)
