Friday, January 09, 2009

The squeeze is on for No. 2 papers

Although there aren’t many two-newspaper towns left in the United States, the few remaining No. 2 papers are the least likely to get out of 2009 alive.

As demonstrated in Denver and Seattle, not even joint-operating agreements have been enough to save the weaker competitors in those two-newspaper markets.

With the worst economy in decades compounding a fierce secular contraction of the newspaper industry, the challenge for No. 2 papers will be stiff for standalone papers in places like Boston, Chicago, Los Angeles, Miami-Fort Lauderdale, Minneapolis-St. Paul, Philadelphia, New York and San Francisco.

No. 2 papers in joint-operating agreements in places like Detroit, Salt Lake City and Tucson also have to be concerned about their long-term viability. (While the partners in Detroit previously announced a curious plan to sustain both papers by eliminating home delivery several days a week, a number of observers [including yours truly], have come to believe the more likely outcome will be the shutdown of the Detroit News).

The reason No. 2 papers are endangered is simple:

When ad dollars shrink in a metropolitan area (as they are doing), they do not shrink proportionately among the competing papers. The largest share of dollars goes to what advertisers and readers perceive to be the stronger of the two papers. This starves the already-lean flow of advertising to the second paper, strangling its profitability to what in many cases may prove to be the breaking point.

In the cases of both the Rocky Mountain News in Denver and the Seattle Post-Intelligencer, the owners of the newspapers engaged in joint-operating agreements have said they will shut their papers if buyers are not located within a matter of weeks. Given that buyers are unlikely to emerge in the most toxic environment for newspapers in history, the announcements amount to death warrants.

With respect to some multi-newspaper towns, it is not clear which of the two competitors might succumb first:

:: The Star Tribune is reported to be on the verge of bankruptcy but the precariously financed MediaNews Group owns the cross-town Pioneer Press.

:: The New York Daily News and New York Post, which both are believed to be losing money, are supported by billionaire patrons. The respective patrons are Mortimer Zuckerman and Rupert Murdoch. If either blinked, his paper would fail.

:: The over-leveraged McClatchy Co. reportedly has put up the Miami Herald up for sale with know known interest. But the Tribune Co., the owner of the neighboring Sun-Sentinel, already has filed for bankruptcy.

:: Both papers in Philadelphia are owned by a home-grown investment partnership that has been struggling to avoide default. In the interests of streamlining the organization to enhance its profitability, the Philadelphia Media Group might find it necessary to fold eiter the Inquirer or the Daily News, which, incongrously in this day and age, compete against each other.

Even in Seattle, as Mark Potts notes, it was a jump ball as to whether the P-I or the Seattle Times would fold first.

13 Comments:

Anonymous Anonymous said...

In the cases of Seattle, Denver and Minneapolis the situation is even more bleak because it will be a very pyrric victory for any newspaper that survives. It is likely in each of those three cities that the surviving newspaper will itself soon collapse. I do not see any future in Billy Dean Singleton's empire, which surely must be really down to auctioning off the typewriters at this point. In the case of New York, you should also have mentioned the New York Times. The current edition of the Atlantic magazine forecasts a NYT bankruptcy by May.

6:13 PM  
Anonymous Michael said...

Well, actually it is the stronger paper which has primarily been affected by what is happening because it was the one supported by big classified revenues. The smaller ones have learned to cope without.
MSP is not a two-newspaper city. It is a two-city metro area.

11:06 PM  
OpenID sadbastards said...

Excellent forecasting.

The number two papers have been limping along for decades. A combination of liberal bias by the reporters, which turns off potential advertisers, and a stale news product on the oppiste end of the spectrum of "green" technology, delivered by smoke spewing junkers, in competition with iPhones that have the Internet in a hand-held device - even a novice can see the end is near for the old smoke stack papers in all but the best markets.

4:58 AM  
Blogger T Heller said...

sadbastards wrote: "in competition with iPhones that have the Internet in a hand-held device"

I hate to break it to you, but "the internet" is not content. In fact, the internet is of NO value without content. When newspapers fail, there's that much less content of interest -- unless your daily fare is You-Tube.

(Sheesh!! Youth these days!)

6:19 AM  
Blogger Michael said...

About eight years ago, I spent a week in Denver on business. I am an avid newspaper reader. Because internet service was not widely deployed, I relied on both papers for my source of international and national news as well as to get a flavor of Colorado and Denver.

Both papers were, and I am being kind here, absolutely terrible. Their national and international coverage was completely absent. Their state bureaus was either closed or refused to file stories. As to local, unless it involved crime, you would be pressed to find a solid story.

As I have posted here ad nauseam, the reason newspapers are failing lies in their product. Most newspapers, outside of about three or four papers, produce a valueless market offering.

Can we bury "Doing more with less" once and for all?

8:30 AM  
Anonymous Evil Pundit said...

Theller, I hate to break it to you, but newspapers offer no content of value.

The Internet provides better advertising and sales through Craigslist, Amazon and eBay, better newsgathering through people on the street with cameraphones and direct access to news sources, and a better spectrum of opinion with blogs. All that, plus free movies, music and online encyclopedias too!

The one area in which newspapers might have had a chance to compete was investigative factual reporting. But they blew that as well, by being so biased and arrogant that their "investigations" became nothing more than partisan political preaching. And the Internet does that better, too.

11:30 AM  
Anonymous Dave D. said...

...Much as Mr. Mutter would like to make this blog about the creative side of creative-destruction, the destruction side gets the eyes. T. Heller : The Internet is not content and you guys will be sorry when we are gone. Oh yeah ?
...Try me. This blog is proof you are wrong. Demand creates supply. Nobody wants your content, they want news. You don't have any news, only opinion which you fob off as news. We have a choice, we ain't buying it. All changed, changed utterly.

11:57 AM  
Blogger Martin Langeveld said...

Just a quibble, Alan. You write:

"When ad dollars shrink in a metropolitan area (as they are doing), they do not shrink proportionately among the competing papers. The largest share of dollars goes to what advertisers and readers perceive to be the stronger of the two papers. This starves the already-lean flow of advertising to the second paper, strangling its profitability to what in many cases may prove to be the breaking point."

But to my knowledge in most JOA situations, profits or losses of the combined operations are shared in a pre-set ratio, though each side pays for their own newsroom. So even if the one partner gets no advertising at all, the combo could be profitable and their could be a payout to that "junior" partner. So generally, either both papers make money, or both are in the red.

7:20 PM  
Anonymous mick said...

T Hellar,

I was comparing the delivery systems of newspapers and iPhones. Newspapers have excons driving around junkers dropping day-old news in oily ink and tree fiber wrapped in plastic. Iphones deliver GPS, restaurant and movie reviews (written by common people) and if you wish, reviews by the New York Times elitists.
The content on iPhones includes bloggers with real discussions, not one-sided elite, AP formula writing.

5:35 AM  
Blogger Newsosaur said...

In re the above comment from Martin Langeveld:

It's true that JOAs generally are structured to split the profits after deducting the costs of ad sales, production and distribution.

But the split is not always even. In Seattle, the P-I gets 40% of the profits. In Detroit, the News gets a fixed dollar amount which declines over a period of time.

When a JOA is unprofitable, as has become the case in certain markets, the owner of each paper is responsible for funding its editorial operation. In Seattle, Hearst says it spent $14 million in 2008 to support the P-I, which it declines to continue to do in the future.

If a JOA partner is unwilling or unable to subsidize ongoing newsroom losses - as evidently is the case at the P-I and at the Rocky Mountain News in Denver - then the paper is in danger of going out of business.

9:22 AM  
Anonymous SeattleBruce said...

sadbastards wrote: "in competition with iPhones that have the Internet in a hand-held device"

T Hellar: I hate to break it to you, but "the internet" is not content. In fact, the internet is of NO value without content. When newspapers fail, there's that much less content of interest -- unless your daily fare is You-Tube.

(Sheesh!! Youth these days!)

>>>>>>>>

Say T Hellar, do you challenge the content of the network or cable news networks? Do you think that if the liberal rags go belly up that other news provisioning won't take its place? Hate to break it to you, but there is demand for news, and those old rags will be replaced by more and better delivery of news.

10:21 AM  
Anonymous Anonymous said...

The unique Las Vegas JOA arrangment could be a viable option to closing the doors of the second newspaper. Maybe someone could give them a push in that direction.

1:11 PM  
Anonymous Anonymous said...

You mentioned Salt Lake City's JOA but didn't really address that city's newspaper rivalry in any detail. I would be interested to know your thoughts on that market. The situation there, to me, seems rather unique. The Deseret News, the No. 2 paper, is owned by the wealthy LDS Church. The church just might be willing to subsidize that paper's losses eternally. I believe the D-News has laid off staffers, and the church itself may be feeling some financial strain in the down economy, but the church still has a strong interest in keeping the newspaper alive.

8:12 AM  

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