Presses stopped forever at 140+ papers in 2009

The presses stopped forever at no less than 142 daily and weekly newspapers in 2009, a nearly threefold increase over the number of titles succumbing in the prior year.

The reasons, of course, were the double whammy of the worst economy since the 1930s and a dramatic secular shift in the habits of readers and advertisers.

Bad as things were – and they were plenty bad if you lost your job at the Rocky Mountain News, the Washington (DC) Blade, El Dia in Houston, the Boca Raton (FL) News, the Hopi Tutuveni in Arizona or the Derby (KS) Daily Reporter – the toll seemed smaller than some observers expected.

There are three reasons for that, as discussed more fully below: the residual monopoly power of the industry, the magic of the bankruptcy system and the irrepressible optimism of publishers.

Though things might have been worse, the year was bleak enough for newspapers – and the newspaper workers who were among the more than 90,000 people who lost their jobs in the various print publishing industries in the last 12 months.

The contours of the carnage come into particularly stark relief at Paper Cuts, an invaluable website produced by the talented and indefatigable Erica Smith.

Smith has put a black pin on a map of the United States for just about every paper shuttered since 2008. Last year, the map contained 37 pins. This year, it was filled with 106 pins in every corner of the country, including several single pins representing the shutdown of multiple weeklies published by a common owner.

Although Smith’s count may not be absolutely inclusive, the dozens of black dots on her map dramatically illustrate the breadth and depth of the industry crisis.

In all, Smith tallied 142 daily and non-daily shutdowns in 2009, or 2.7 times more than the 53 papers she listed in 2008. At yearend 2008, there were 1,408 dailies published in the United States, according to the Newspaper Association of America.

The black pins include not only the high-profile Rocky Mountain News, but also such smaller dailies as the Tucson Citizen, the Philadelphia Bulletin, the Baltimore Examiner and the East Iowa Herald.

The Seattle Post-Intelligencer, the Christian Science Monitor, the Ann Arbor News and Asian Week abandoned print in favor of scaled-back online operations in the hopes of carrying their franchises forward on the web.

More than 100 non-daily publications were closed, ranging from tiny independent publications in places like Iraan, TX and Kykotsmovi, AZ, to weeklies operated as satellites to dailies owned by Journal Register Co., the Sun-Times Media Group, Lee Enterprises, Hearst and Gannett.

Smith is reporting that nearly 15,000 newspaper jobs were lost this year on top of a like number in 2009. But the federal employment statistics suggest the toll may well be higher. As of the end of November, the U.S. Bureau of Labor Statistics said 90,000 jobs were lost in the non-Internet publishing industries, which would include books and magazines, as well as newspapers. Pink slips continued to fly even as Christmas approached.

Tough as things were, some observers wonder that they weren’t worse. One of them is Dan Kennedy, a journalism professor at Northeastern University, who observed in an email query over the weekend that “it seems as though fewer newspapers went out of business than might have been expected.”

There are three are major reasons why the papers carrying on are still carrying on. They are:

:: The residual monopoly power of the industry.

While newspaper profits have been bludgeoned by an epic and accelerating downturn in advertising sales since April, 2006, most publications continue to make substantial sums of money, owing to their monopoly position in most of the markets they serve. Essentially unrivaled control of print publishing over the years enabled publishers to build highly profitable businesses by extracting high prices for advertising.

Even though increased competition from the interactive media in recent years has been exacerbated by an unprecedented decline in the economy, most papers continue to operate profitably – though nothing like the nearly 30% operating margins many formerly enjoyed – by cutting headcount, squeezing newshole, trimming circulation and outsourcing a wide variety of functions to cheaper vendors.

These one-time-only savings cannot be replicated in future years and, in fact, may serve to weaken demand for the hollowed-0ut products now produced by most publishers. If advertising demand returns when the economy recovers, publishers may be able to reconstitute their publications to reinvigorate consumer and advertiser demand. The risk is that increasingly compelling interactive media, combined with the self-cannibalization of newspapers, have turned off many readers and advertisers forever.

:: The magic of the bankruptcy system.

Instead of investing in the creation of new Internet and mobile businesses, publishers took advantage of the cheap interest rates in the middle years of this decade to borrow billions of dollars to either purchase other newspapers or take publishing companies private. The success of this strategy depended on robust and reliable increases in sales and profits in subsequent years, which, as we know now, spectacularly failed to materialize.

While many newspapers continue to turn out respectable profits in even these straitened times, a half dozen publishing companies landed in bankruptcy court when they were unable to generate sufficient profits to keep up with payments on the enormous debt they had assumed. The magic of bankruptcy is that the court has the power to wipe the slate clean, relieving publishers of debts they cannot pay, unpaid invoices accumulated prior to the bankruptcy filing, leases they no longer need and, in certain cases, obligations under union contracts.

Companies like Journal Register, Sun-Times and Minneapolis Star Tribune got a fresh start in bankruptcy court in 2009 to try to build businesses that can profitably sustain themselves in an era when newspaper readership and advertising appear to be in an irreversible decline. Economists call this a secular contraction, which is different than a cyclical contraction that reverses when business conditions improve.

The Tribune Co. and Philadelphia Newspapers LLC are hoping to be discharged from bankruptcy court in 2010 so the very same managers who unwisely piled too much debt on the companies can get a fresh whack at running them again. Some of the unwise lenders who lost billions at Tribune and hundreds of millions in Philly are wisely petitioning the court to install new leadership at each company.

:: The irrepressible optimism of publishers.

Hope springs eternal among publishers that the woes of the newspaper industry are not a secular shift in their business but nothing more than a severe by-product of the worse economic downturn since the 1930s.

By cutting costs, renegotiating debt or seeking bankruptcy protection, newspaper executives have done a masterful job of staying afloat (albeit by throwing tens of thousands of colleagues over the side) during the most treacherous business conditions most of them have ever seen. They are counting on an uptick in the economy next year to stop on a dime the four-year skid in advertising sales that began well before the economy tanked.

Like the construction industry, manufacturers, retailers and people in every other type of business but Goldman Sachs, newspaper publishers have kept their battered companies on life support in the hopes that a turn in the economy will rescue them. While you can imagine the day that construction will revive, manufacturing will pick up and consumer optimism will return, newspapers face a set of more profound fundamental challenges than most other industries.

If unbridled cost cutting and raw optimism are enough to save newspapers, they will be just fine. If it takes more than chopping expenses and praying for the economy to rebound – which seems to be the prevailing industry strategy – then, unfortunately, we haven’t seen the last newspaper close.