By Rick Edmonds
You have probably read that a number of newspaper companies returned to profitability in the second quarter of this year, and the economy at large may have hit bottom and started back up. Since July 1, newspaper shares have more than doubled from lows on Wall Street. So why does the pace of layoffs and buyouts continue unabated?
That's
disheartening. A number of once-proud, top-ranked regionals, three of
them owned by McClatchy, are on the list. Gannett's JournalNews
a few years ago had the distinction of being the best-staffed paper
over 50,000 circulation in the country (as measured by staff to
circulation ratio) as it pursued a multiple daily zone strategy. This
Tuesday and Wednesday all interested news staffers are being asked to
re-interview for jobs at a Journal News of more modest ambitions.
The apparent disconnect here is not so hard to explain.
Newspapers
were still losing ad revenue at a 25 to 30 percent pace year-to-year in
the second quarter. They managed small profits with very tight expense
control. Third quarter ad revenues will be down 20 to 25 percent
compared to the 2008 period,
which itself was off 18.1 percent compared to third quarter 2007.
So
staying profitable will require continued vigilance on expenses. A
little of that takes care of itself -- reduced paper use since so much
less advertising and news is being printed. But companies targeting
above average profit levels -- like Gannett -- or forced to keep
profits up to handle a high level of debt -- like McClatchy -- will
continue to work the outsourcing and down-sizing option.
As
for the stock market, remember that share prices reflect investor
consensus on future earnings over a year or 18 months and that the low
base indicated investor fear that the companies would fail, now eased
considerably.
If
you are a gambler, the analogy is sitting at the blackjack table down
$1,000. If you have a good run and win $200, you are still well under
water.
The
continued cuts are bad for the skilled journalists put out on the
street, bad for the stretched staff that remains and bad for the level
of civic information American communities are receiving.
"There's
no rule that says newspapers will become smarter or better managed as
they become smaller," Frankel said. "Each contraction of the staff
damages morale and reduces journalistic ambition. Newsrooms are, among
other things, creative enterprises that rely upon committed, restless,
energetic people who are willing to take risks and work extra hard.
They dry up quickly when the creativity and ambition are drained from
their veins ...
"I
fear that the downsizing is becoming so drastic and the search for
younger readers so frantic that many news organizations may lose sight
of their true value and importance. I also fear that the journalism is
being lost or sacrificed in the emphasis on new technologies, social
networks and shiny packaging. If we don't have anything important to
say and no unique journalistic contribution to make, we won't need new
platforms. We won't need to exist at all -- and we won't."
That may be a bleak worst case. As Frankel acknowledges in the interview, the several hundred news professionals left at the Post or
most metros should be able to put out a sparkling paper every day. Some
of what has hit the cutting-room floor in recent year should stay
there. A tighter report with sharp focus on top-tier, added-value
material is more in tune with the attention span of the times.
Still,
I fret that many newspapers are flirting with the tipping point of
seeming expendable to discerning readers who can see the gaps and flaws
caused by cutting too much too fast.
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