Whatever happened to newspapers?

By Al Portner

A column blasting management for the decline of newspapers just crossed my desk. It repeats an argument made frequently by legions of newspaper journalists and could as easily be applied to general distribution magazines, radio, and television. The continual whining and desperate rending of clothing is exhausting and serves no purpose.

Newspapers, as we have known them, are at the end of a business cycle that started around 1880 with the introduction of the Mergenthaler Linotype and is completing a natural arc. The old business model is broken. Traditional revenue streams have dried up and newer technologies are not sufficiently monetized. Publishers struggle to identify revenue streams, but no financially viable template has yet emerged.

Circulation was never more than 19 percent of revenue. Classified receipts in big-city newspapers contributed around 40 percent. The remaining 40 percent of cash streamed from display, national, and legal advertising. Much of this is gone.

Rather than ruminate “on the good old days” and damn the perceived misdeeds of those to whom we reported, it is far more important to ask fundamental questions on the future of news, technology, and distribution.

Given:
Democracy requires its citizens have access to “The News” as a condition to it being able to flourish.

Questions:
What will be the method(s) for transmission of this information?
How will reader convenient information be gathered and sculpted?
Who will pay the gatherers and sculptors (i.e. the journalists)?

Ever since 1880, new technical iterations have allowed publishers to become continually more efficient. Production of the product required fewer and fewer people behind the scenes. Initially, the changes were invisible.

Coincidently, advertising rates and circulation penetration increased as the literate population boomed and the economy expanded. For a relatively short period, editorial staffs also grew as production staffs shrank. Media companies threw off obscene rates of investment return sometimes exceeding 40 percent of “Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA).”

Newspapers became valuable -- cash cows selling for more than twenty times EBITDA. The next generation couldn’t afford to take over. Inheritance taxes, growing lines of descendents, and high company taxes encouraged consolidation into a few corporate owners. Individuals were priced out of a market unwittingly subsidized by government.

Stock analysts (funding all this consolidation) worked from historical earnings expectations. Although technology continued to evolve, revenues shrank or got divided up among more mediums and more players. To satisfy the analysts’ expectations, staffs were further reduced and facilities closed. These reductions included writers, editors, and photographers. No one else was left to downsize.

A Connecticut state legislator recently proposed government extend financial help to newspapers. This suggestion was met with fierce opposition from interference-phobic journalists. On the other hand, the well respected B.B.C. is funded at least in part by government. Here in America, the Federal government once believed distribution of news information was so important, it subsidized newspapers with free mail delivery service in the early years of the republic.

Events have caught up to media industries. Even Draconian amputations won’t allow service on massive consolidation debt. A new business model will be developed, but it won’t afford the profitability of the old model.

If we, as a nation, believe “News” is important, then accommodations must be made. Somehow, the news/editorial department must be walled off from the rest of the business. New paradigms should encourage local owner/operators of media. These folks tend to be satisfied with more modest ROIs and sensitive to their readers/viewers concerns then are managers accountable to a distant headquarters. Law must allow family businesses to pass from one generation to the next without a penalty for success. Finally, financing decisions must be based on the actual perceived value of the asset rather than on future currency devaluations and exit strategies. Reasonable performance should afford companies the ability to repay lines of credit.

There is a future for “News,” but an adequate way must be found to compensate the news-gathers. The future lies in helping to formulate the new model.

Al Portner is a former daily newspaper editor and publisher who has operated newspapers in seven states from Maryland on the east to Hawaii on the west. He is currently the proprietor of The Assignment Desk, LLC, an editorial services consortium with over 200 affiliate writers, photographers, and designers.

Portner is also the author of hundreds of articles and the forthcoming non-fiction book “Mark Twain and the Tale of Grant’s Memoir.” He can be reached at alanportner@theassignmentdesk.net. The Assignment Desk URL address is http://www.theassignmentdesk.net/.