Tuesday, January 02, 2007

Shaken but not stirred

Although forecasting the newspaper business is as difficult as predicting earthquakes, there probably is enough tension building along the industry’s fault lines to fear we may be headed toward a cluster of newspaper closings.

This is, after all, ’007. And publishers, like the owners of any other business, have a license to kill any asset that can’t meet its performance targets.

In the last 30 years or so, 23 major American metros have been shuttered as the result of poor performance and the conviction of their owners that poorer prospects lay ahead.

While that’s a reasonably comforting average of only two-thirds of a newspaper per year, you will note from the chart below that closings tend to come in clusters during periods of industry distress. Three newspapers were closed in each of 1982 and 1988 and a pair folded in each of 1991 and 1992.

The titles included my beloved Chicago Daily News in 1978, the Washington Star in 1981, the St. Louis Globe Democrat in 1986, the Miami News in 1988, the Los Angeles Herald Examiner in 1989, the Houston Post in 1995 and, well, you get the picture.

All the departed publications were the No. 2 papers in their respective markets and the majority of them had been publishing on the evening cycle. With readership and revenues falling and no hope of an upturn in sight, the shutdowns tended to come in clusters when economic conditions soured.

Although the general economy today is considered to be in strong shape, the audience and advertising market share for newspapers has been constricting for the last few years.

If things don’t turn around quickly, then weak papers in multi-title markets could be at particular risk. Meanwhile, neighboring papers in adjacent markets may become more aggressive about combining ad sales, production and, eventually, the titles themselves.

A new willingness on the part of newspaper executives to deal decisively with ill-performing properties may have been foreshadowed by McClatchy’s decision to sell the Minneapolis Star-Tribune, its largest property. The stealth Strib sale fecthed about half of the $1.2 billion for which the trophy paper was acquired 1998.

The transaction was shocking not just for the method, timing and price, but because it seemed to signal a new desperation, hopelessness or callousness in the largest pure-play publisher in the industry.

Prior to Christmas, McClatchy’s esteemed managers were viewed as the last remaining true believers in the newspaper business. If they have run out of confidence and ideas in Minneapolis, that’s a frightening commentary on the state of the industry.