Bad News for Newspapers : Media: Publishers worry that a four-year slump is the start of leaner times for the industry over the long haul. Editors scramble to make changes to lure readers.
Newspaper managing editors who gathered in Detroit for a mid-October convention had plenty of horror stories to swap about the retailing recession, the advertising drought and the downward spiral in once-fat profits.
They also endured a bit of shock therapy, in the form of a session looking at similarities between the Motor City’s beleaguered auto industry and their own.
“It’s thought-provoking to hear a guy from Chrysler say, ‘Here’s how we screwed up,’ ” said Jerome M. Ceppos, managing editor of the San Jose Mercury News. “It makes one wonder, ‘What might I be doing wrong?’ ”
It’s not as though we’ll all soon be reading newspapers made in Japan.
But with America’s newspapers spending their fourth straight holiday season mired in the worst economic slump that anyone in the business can recall, many publishers and editors are asking themselves profound questions.
The most jittery wonder whether newspapers might be making the same sorts of blunders that sent the U.S. auto industry skidding a decade ago: failure to adjust to consumers’ changing habits, arrogance about pricing and slowness in responding to competition.
And all are pondering whether the economic troubles that have battered ad linage and operating margins will prove to be temporary byproducts of a recession or more fundamental, long-lasting changes.
The sudden folding of the Dallas Times Herald last Monday and the decision a few days earlier by the New York Daily News to seek protection from creditors under Chapter 11 of the federal Bankruptcy Code have lent a dramatic urgency to the questions.
As the downturn drags on, a consensus seems to be building that this “white-collar” recession could forever change the newspaper business, much as the auto industry was altered by oil shocks and Japanese imports in the 1970s and ‘80s. Many executives are bracing themselves for the possibility that the coming decade will be a time of immense challenges.
“I’m not sure I view this as a recession anymore,” said Maxwell E. P. King, editor of the Philadelphia Inquirer. “I see it as a change both in my industry and in the way the country’s economy works.”
At the very least, the recession has imposed some harsh new realities on newspaper companies.
With profits and advertising revenue tumbling, papers from Sacramento to Hackensack have been making painful adjustments--closing bureaus, reducing news space, slashing travel budgets and downsizing payrolls through layoffs, attrition and early retirements.
At the same time, many newspapers have experienced gratifying circulation boosts in response to beefed-up coverage of such dramatic stories as the Persian Gulf War and the turmoil in the Soviet Union. And several publications have begun--belatedly, some critics say--to experiment with new formats designed to appeal to younger readers, who are viewed as vital to the industry’s future.
The belt-tightening comes after more than a decade of growth during which newspapers--many of them monopolies or near-monopolies in their home markets--raked in hefty profits year after year, thanks in large part to big jumps in advertising rates and the deaths of weaker afternoon dailies.
In the past two years, more than 2,500 people have been laid off at newspapers, including the 900 at the Dallas Times Herald who got one day’s notice that their paper was shutting down. All told, the industry’s employment has shrunk by more than 20,000 jobs from its 479,000 peak in June, 1990, according to the Bureau of Labor Statistics.
Among papers that have cut work forces are the New York Times, the Wall Street Journal, the Boston Globe, the Chicago Sun-Times, the Los Angeles Times, the Miami Herald, the San Francisco Chronicle and the San Francisco Examiner. When San Diego’s morning Union and afternoon Tribune complete a planned merger in February, 117 to 139 nonmanagement people and 22 to 34 management personnel will lose their jobs.
For publications accustomed to aggressive expansion, adjusting to the new austerity has been tough. And most executives polled in October by the Alex. Brown & Sons investment firm in Baltimore say they don’t expect much relief from the downturn until well into 1992 at the earliest.
Anxious executives point to consumers’ wobbly confidence, the shakeout in debt-laden retail stores--historically newspapers’ biggest advertisers--and fierce competition for declining advertising dollars from direct mailers, cable television, catalogue companies and suburban and weekly publications.
Moreover, readership, which has been on the decline for 30 years, has eroded further in recent months, with higher newsstand prices--imposed to help regain lost revenue--getting much of the blame.
Taken together, executives say, these factors could make for a much leaner post-recession industry that will have to confront more rivals with diminished resources.
“The newspaper community seems to agree that the downturn is being made worse by long-term changes,” said Kenneth T. Berents, an analyst with Alex. Brown who was among the first to suggest that fundamental changes were under way.
The unsettled climate has led to dramatic shifts in corporate culture.
During the past year-and-a-half, the Los Angeles Times has reduced its staff by the equivalent of 1,000 full-time jobs, primarily through attrition and an early retirement program. However, the newspaper recently decided to lay off or cut the pay of 260 part-time mail room workers. That action was taken, executives said, to preserve full-time jobs of custodians. The Times has vowed not to lay off any full-time staff members.
Meanwhile, a Teamsters local and the Newspaper Guild have attempted to make inroads at the paper, which has a long history of opposing union organizing among its employees. In a Dec. 2 message to employees, David Laventhol, publisher and chief executive of The Times, reiterated the company’s position:
“Let’s be clear about the company’s attitude toward unions. We don’t want them here at The Times and we will do everything we can legally to oppose them, as we have in the past.”
In addition, the usually cordial relations between managers and newsroom employees at The Times recently suffered in some quarters after several longtime staffers were redeployed to outlying bureaus--moves that managers attributed to staffing imbalances resulting from a 17-month-long hiring freeze.
While The Times early this year halted circulation in some outlying areas as a cost-cutting move, it managed to maintain its position as the nation’s largest metropolitan newspaper, with nearly 1.18 million in daily circulation in the six-month period ended Sept. 30.
And The Times spent heavily during the recession on a redesign of its Sunday magazine, a new World Report section and expanded coverage of major world events.
“Whatever we need to do, we do,” said Shelby Coffey III, editor and executive vice president of The Times. “You have to protect the quality of the paper, because that’s what readers are depending on you for.”
The Times is far from the only newspaper having to make choices as it attempts to cut costs while maintaining quality:
* Affiliated Publications, which owns the Boston Globe, said in late November that it plans to sell a controlling interest in its specialty publishing group--which includes Billboard magazine, the Hollywood Reporter and Adweek--for $100 million to pay off debt.
Meanwhile, speculation has it that the Globe itself, which has been particularly hard hit by the severe New England downturn, is being shopped around. Boston Globe Publisher William O. Taylor said in August that the paper is not for sale--a pledge reaffirmed by a spokesman last week.
* The Baltimore Sun last month offered a generous severance package to employees who volunteer to leave. It warned that layoffs or other measures might be necessary if an insufficient number of workers accepted. (The Sun is owned by Times Mirror Co., parent of The Times.)
* Philadelphia Newspapers Inc., owner of the Philadelphia Inquirer and the Philadelphia Daily News, said Dec. 6 that it plans to cut 160 jobs through buyout programs and, in some cases, reduced workweeks. Workers there also have been warned that layoffs might become necessary.
* The Knoxville Journal, an evening paper in Tennessee, said earlier this month that it would cease daily publication, with a loss of 69 jobs, and be resurrected as a weekly.
* In October, Gannett Co. sold the assets of its Arkansas Gazette to its rival, the Democrat, after a bruising, 12-year circulation battle and huge losses.
In short order, even long-profitable newspapers nationwide have lost their reputations as cash cows.
Profit margins have plummeted to single digits from a lofty 20% to 30%, and it appears that many newspapers are struggling just to stay out of the red. In its third quarter, for example, the New York Times’ parent company earned $1.9 million, a 79% drop from a year earlier and a sharp contrast to two years ago, when profit topped $260 million.
At an investment analysts’ meeting in New York last week, Robert F. Erburu, Times Mirror’s chairman and chief executive, said the company expects to post improved operating earnings in 1992, though Erburu indicated that advertising is expected to remain weak. Industrywide, revenues are expected to grow only 1% to 3%--less than the inflation rate, according to Alex. Brown’s Berents.
Industry executives say the profit gains of the 1980s masked a big problem now coming home to roost: declining readership. In the late 1960s, 76% of U.S. adults read a newspaper on a typical weekday. Last year, that figure dropped to 62%, according to the Newspaper Advertising Bureau in New York.
“Newspapers are in trouble, because we think of ourselves as purveyors of information,” said Reid Ashe, publisher of the Wichita Eagle in Kansas. “We overlook the fact that, in contemporary society, information has grown cheap and abundant.”
To compete for the attention of consumers short on time and long on options, newspaper editors and publishers must respond more quickly to shifting needs and demographics, said Cathleen Black, president and chief executive of the American Newspaper Publishers Assn.
“We have historically not tended to put the customer first,” Black said. “For too long, we have bypassed reader concerns and provided the product we wanted to offer, not necessarily what they wanted to receive.”
If there is ample agreement that the newspaper business is in the doldrums, there is widespread disagreement about what needs to be done. But promising experiments are under way.
“Newspapers are feeling their way toward better methods of serving readers and advertisers,” said John S. Reidy, an analyst with Smith Barney, Harris Upham in New York.
In Boca Raton, Fla., newspaper-chain owner Knight-Ridder Inc. has for the last year produced a paper that goes even further than USA Today in providing a tight, colorful news package aimed at baby boomers.
Stories in the Boca Raton News do not jump to other pages. Maps accompany almost every important story. Classified ads are laid out in an easy-to-read grid that makes it easy to compare offerings.
Readers have applauded the changes, but advertisers have been another story. Real estate agents, for example, contend that they get fewer calls about rental properties because readers can easily figure things out for themselves.
P. Anthony Ridder, president of Miami-based Knight-Ridder, said advertisers seem to be saying they “liked it when it was more confusing.” With some taking their business elsewhere, however, Ridder acknowledged: “I don’t know if we will be doing that any place else.”
Ridder said the company is conducting intensive research in two more of its newspaper markets, San Jose and Long Beach, in an effort to better understand the readership.
The Chicago Sun-Times has on the drawing board a series of specialty magazines designed to appeal to specific market segments, including young readers.
“This is one way we know we can serve narrower niches and provide a useful service to readers and advertisers,” said Dennis A. Britton, editor and senior vice president.
Newspapers also are seeking other ways to use the information that they gather at so much expense yet print only once. Several are offering faxed summaries or special telephone lines that provide crossword puzzle answers and other services for a fee. Publications are also investing in direct-mail advertising and electronic services that give up-to-the-minute sports scores and investment information.
Not everyone in journalism buys the theory that the industry is undergoing a dramatic shift.
Eugene L. Roberts Jr., who retired last year as executive editor of the Philadelphia Inquirer, contends that the business’ problems are essentially short-lived and, to some extent, are of newspapers’ own making.
As more newspapers have become publicly owned, “we have become very shortsighted, with the emphasis on quarterly and even monthly and weekly profit goals,” said Roberts, now a journalism professor at the University of Maryland. “That has distracted us from addressing long-term problems.
“More and more decisions,” he added, “are being made further away from the readers and advertisers.”
If metropolitan dailies are being sorely challenged, few would say they are in danger of disappearing.
The Persian Gulf War demonstrated once and for all that newspapers could not match the immediacy of Cable News Network’s coverage of colliding Scud and Patriot missiles. Yet newspaper readership surged during the war, demonstrating that the public was still hungry for the kind of in-depth reporting and analysis that newspapers do best.
“Everywhere you can see that people want to read more, hear more, see more,” said Allen H. Neuharth, who was chairman of Gannett when the company launched USA Today. “But they don’t have the time and will not make the effort to read newspapers that are dull and gray.”
Times researcher Norma Kaufman in San Francisco contributed to this story.
Readership: A Steady Erosion Whereas the number of adults reading newspapers has risen as the population has grown, the readership figure as a percentage of the population has been in decline for two decades. Readership surveys, conducted periodically since the late 1960s, determine how many adults nationwide read a newspaper on a typical weekday.
Source: Simmons market Research bureau