Newspapers: The Search for A Killer Saviour

The publishers and staffs of many daily newspapers would love to think of themselves as hip bloggers, tweeting to an eager and mobile public. But the reality is that newspapering came of age with railroads and steel mills, and the balance sheets of many companies are heavy with long-term debt, inflated valuations, unfunded pension liabilities, and the usual write-downs of smokestack America.

It does not take a degree from Harvard Business School or a partnership at McKinsey to explain why newspapers and many magazines are struggling: readers don’t want to pay for anything, and advertisers, as was said of Chicago Bears owner George Hallas, “throw nickels around like manhole covers.”

Newspaper companies cling to the illusion that Amazon’s Kindle reader or perhaps the Apple iPad will give the industry a killer technology that will allow readers to surf for news and the companies to collect money for providing it. But even charging four dollars a month to deliver an electronic file to subscribers probably does not cover the pension, salary, and real estate costs that are associated with old media. (The new headquarters of the New York Times has a birch forest in the lobby.)

Which brings us to one of the more absurd suggestions of the recent stimulus debate: the consideration that newspapers might themselves be in line for some bailout money, in the interests of maintaining a free press and a vibrant democracy. Maybe taxpayers could check a box indicating whether they want to save the Detroit Free Press, the city of Detroit, or just General Motors?

Everyone has their own theories on why newspapers are failing — internet pricing models, to postage rates, and the cost of paper — but mine center on the written content. Many daily papers have read for years like a variation on a collection of press releases.

Too often, articles are self-serving political messages out of Washington, or based on anonymous and biased sources. For readers, there's no recourse in the cases where the paper has got things wrong. Is it any wonder that they've migrated to vibrant, interactive Web sites?

For models of editorial salvation, newspapers should look to the formulas that allowed them to prosper in the first place, and serve as showcases for lively local coverage and debates, with writing that comes from correspondents in the true sense of the word: letter writers.

Many newspapers confine their opinion sections to two pages, and then fill up the rest of the paper with stale news which today's readers know by the time they stumble to the front porch. Add to that the celebrity-driven features (“Dateline Bradgelina” or "Tiger Hunting").

Most newspaper readers of my acquaintance have reversed their reading habits, and now start with the opinion columns and the letters-to-the-editor, and then glance over the news headlines. Why not fill a newspaper with what the readers look for and enjoy? Would it not be a pleasure to read twenty columnists, not simply three or four?

Needless to say, newspapers are run for their shareholders, and investors take more pleasure in full-page ads than in lively or argumentative columns. But in my mind, a newspapers run and financed by the readers, and not by corporate hierarchs, could succeed financially. If you are looking for a working model, think of a privately-funded university or even a mutual savings bank (one owned by its depositors).

Under these models, a newspaper would have revenue (more like tuition) from subscribers, its own capital (assuming any is left), advertising (but it would not be the lifeblood, as is the case now), and contributions (fund raising campaigns).

With whatever money is available annually to the editors, they would produce a newspaper that most closely matches the charter of the association or trust. It could report on local news, support Democrats or Republicans, devote itself to sports or foreign reporting, or cover the arts or fashion. That would be for the reader-members to decide.

In the current market, readers own few newspapers. Since 1936 a trust has owned the Guardian (London), which may explain its consistent editorial independence and the high quality of its writing. That said, the Guardian loses money annually, and the trust needs third-party assets to make up the losses.

Similarly, the ownership structure of The Economist, via several classes of its shares, insures that the magazine (technically it calls itself a newspaper) reports to a board of trustees, rather than to its shareholders, to insure editorial independence. In 2009, when the rest of the industry was looking for a handout, The Economist increased its worldwide circulation (by 6.4 %) to 1.4 million, its revenue (by 17 %), and its profits (by 26 %, to £56 million).

Nor could anyone accuse The Economist editors of dumbing down the product, given the publication’s relentless coverage of foreign affairs, finance, business, and economics. By comparison, the New York Post reportedly loses about $50 million a year for Rupert Murdoch. So much for pandering.

The problem for many large American newspapers—such as the New York Times—is that, while operating profits shrink, they are hoping to whistle past all sorts of electronic graveyards. In the last decade, for example, the Times squandered more than $2 billion to buyback its own overpriced shares rather than pay down debt or find a model that would sustain the paper in the age of what George W. Bush called “the Internets.”

Now it faces falling advertising, dropping circulation, higher paper and delivery costs, unfunded pension liabilities, and convertible debt and warrants due to a Mexican oligarch. Meanwhile, its competition is the ethereal and cost-free World Wide Web.

Regarding so called “pay walls” — the idea of charging Internet readers, lately embraced by the Times — columnist Michael Kinsley has written: “Every English-language paper published anywhere in the world is now in competition with every other. Competition is what has driven the price down to zero and kept it there.”

The same points are made in “The Curse of the Mogul” by Jonathan A. Knee, Bruce C. Greenwald, and Ava Seave, authors affiliated with Columbia University who make the point that “the Internet may be somebody’s friend — most notably, the consumers of media — but it is not the friend of incumbent media companies.” They believe that only those print franchises with a locally dominate position will make it, writing “...if print newspapers are to survive, it will be through single-minded focus on the only area of coverage in which they have an advantage.”

Their thesis on “what’s wrong with the world’s leading media companies” is that the dealmakers behind many companies made a string of terrible acquisitions that have wiped away $200 billion in shareholder value. (The Times contributed $1 billion to this figure, when it had to write down its investment in the Boston Globe.)

Will I miss the morning newspaper as we knew it? Not very much, I confess. I grew up in a world of monopoly-voice journalism, where getting a letter to the editor of the New York Times printed was not unlike receiving a papal indulgence.

As for regional or small town papers that only publish hints from Heloise or boosterism for local teams: have you ever spent a Saturday morning with the Bangor Daily News or the Kansas City Star? It strikes me that many American newspapers bailed out years ago.

Does anyone out there have a formula that will save the traditional daily? I didn’t think so. If you did, instead of reading this online, you would be in a closed-door conference with the publisher of the New York Times or the Baltimore Sun, explaining how web-site hits or those Pulitzer Prizes from 1987 can be transmuted into gold.

Matthew Stevenson is author of the recently published Remembering the Twentieth Century Limited. He lives in Europe.