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Greed And Newspapering

by Randolph T. Holhut

Knight Ridder demanded a 22% profit
(AR) -- Newsprint prices and advertising revenues rise and fall with great regularity and when a recession comes, newspapers cut back. It's something that is as certain as the sun rising in the east every morning.

In nearly two decades of newspapering, I've been through the fat and lean times. When times were fat, publishers stuffed their pockets were cash. Now that we're headed into a lean time with high paper costs and lower ad revenues, the cutbacks have begun.

Some cuts are subtle, like shrinking the physical size of the paper. Hundreds of American newspapers -- including the daily newspaper I now run, the Eagle Times of Claremont, N.H. -- have cut the page width by about an inch. It doesn't sound like much, but the newsprint savings can range from around $50,000 a year for my paper to about $4-5 million a year for papers such as The Washington Post and The Boston Globe.

Some cuts are more obvious, like reducing the number of pages in the paper, dropping certain news features, cutting back on news coverage or reducing the number of staffers in the newsroom. Peruse web sites such as Jim Romenesko's Media News or read the trade magazines such as Editor & Publisher, American Journalism Review or Columbia Journalism Review and you will see a steady parade of cutbacks.

"Original, investigative reporting is expensive, requiring experienced, well-trained reporters, and time and space for their work," wrote Geneva Overholser, former editor of The Des Moines Register and ombusdman at The Washington Post.

"Replace that kind of journalism with crime-blotter rip-offs, barely edited press releases and stenographic pass-alongs from public officials, and news-gathering gets much cheaper. When experienced reporters are let go for low-paid new ones, training is cut or space in the paper is reduced -- and the paper doesn't tell you ... they may be cost-managing you out of what you need to know -- not to mention cost-managing themselves out of a franchise. "

No paper can honestly pretend that will be a better paper by having fewer people covering the news or having less news in the paper, but the chains that own more than 80 percent of the daily newspapers in the U.S., say the cuts are needed to maintain the financial health of their properties.

What most people don't know is how profitable newspapers really are. The profit margins of most American newspapers range from between 20-35 percent, with the average at 22.7 percent. There's scarcely a business in the world that delivers that kind of return. That's why despite all of the obituaries written for the newspaper business over the past 50 years, it continues to be a profitable venture.

"Newspapers are not like industrial concerns that actually lose money in a recession," newspaper analyst John Morton recently told The Washington Post. "All newspapers do is make less."

But profit is usually achieved by cost-cutting and squeezing out every bit out of the downsized staff that remains in order to keep the 20-35 percent return that investors have grown accustomed to.

That's why the recent resignation of Jay Harris, publisher of the San Jose Mercury News, became a big story. Harris chose to quit rather than carry out the cutbacks ordered by Knight Ridder, the paper's owner, to meet 22 percent profit margin they demanded. The Mercury News has been one of Knight Ridder's most profitable papers in recent years, but it's been hit hard in the past year by the dot-com collapse.

Knight Ridder, which has also ordered cutbacks at its other papers such as The Kansas City Star, The Akron Beacon Journal and The Philadelphia Inquirer, saw its profit slip to 20.8 percent in 2000. Harris maintained that any additional cuts to his paper would risk "significant and lasting harm to the Mercury News as a journalistic enterprise."

But as greedy as Knight Ridder's profit demands sound, they are almost generous compared to the real bottom feeders in the industry such as Gannett, Journal Register Corporation and William Dean Singleton's MediaNews Group. Papers belonging to these three groups must deliver profits of 30 percent or more, or else. It's no surprise that the papers owned by these three groups are uniformly mediocre, because he only way you can make that kind of profit is to put almost no money into newsgathering.

Smart papers invest in the product. The Ochs and Sulzberger families that own The New York Times called it "putting more tomatoes in the soup." In other words, they were willing to accept a more modest profit to invest in things that would improve the quality of the newspaper. For example, during World War II when newsprint was rationed by the government, it chose to cut back on ad pages rather than cut back on news. Doing that reduced profits in the short term, but in the long term it established the Times as the preeminent paper in America.

But even the Times now has to answer to its stockholders. Now that The New York Times Company, The Washington Post, Gannett, Knight Ridder and nearly every other newspaper chain (except for Singleton's, which privately held) has to keep the markets happy. They demand constant growth and constant profits; a demand that's always incompatible with the expense of putting out a quality newspaper.

That's why it is up to you, the news consumers, to join in the fight. Let the owners know you're wise to their tricks. Let them know that you know that less isn't more, that less is less. Demand that they put out a news product that serves the community and support the folks who are making an effort to do just that. When editors have the readers backing them up, they can keep the worst of the cuts at bay.

Newspapering is not the same as making widgets. It is more than a business. I still believe it is a public trust. I still believe that newspapers fill a critical role in the civic life of a community. When the folks who run newspapers forget this, the readers, and ultimately our communities, lose.

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Albion Monitor April 2, 2001 (

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