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    A Tale of Two Newspapers

    By Doctor Cleveland on Mon, 08/05/2013 - 11:57pm | Politics, Business, Media

    Everyone's talking about Jeff Bezos buying The Washington Post. But it's also been a dramatic week for two newspapers close to my heart in different ways: The Boston Globe and The Cleveland Plain Dealer. Two days ago, The Globe, like the WaPo, was sold to an individual billionaire with a high profile. Today the Plain Dealer, which has not been sold, stopped delivering the newspaper. It will still be printed every morning, but it will only be delivered three days a week. Nearly one third of its reporters were laid off on Wednesday. It's not the first round of buyouts or layoffs at the PD, and it's not the second either. The newsroom is now down to about a third of what it was in the 1990s.

    The Plain Dealer will be "digital-first" from now on. On the first day of this bold step into the future, naturally, the electronic version of the newspaper crashed. Digital-first means you try to log into the website first, and when that doesn't work you go out and see if the drugstore will sell you an actial copy of the paper. But hey, you get what you pay for, right? And the web side of the business is strictly non-union.

    Now, plenty of people will tell you that this is an inevitable consequence of our modern age. The newspaper has to die, because the internet demands it! Also, video killed the radio star, which is why you no longer own a radio. But apparently, it's not inevitable everywhere. The Boston Globe got sold to John Henry, the principal owner of the Boston Red Sox, for a Filene's-bargain-basement price of $70 million, even when other bidders offered more. Henry isn't talking layoffs. Boston is going to stay a two-newspaper town, and the premier newspaper is going to keep competing hard.

    (Anyone who thinks that Henry bought the newspaper to get more or nicer coverage for the Red Sox, by the way, has no idea how the Boston sports media works. The Red Sox are not going to get more attention from Henry's Globe, because it is literally impossible for the Red Sox to get any more attention than they already do. And the coverage is not going to get nicer or softer, because the readers won't read that. The gold standard for Boston sports coverage remains a complex brew of idolatry and hostility. Boston baseball reporters don't play softball.)

    Starting today, Cleveland is a less-than-one-newspaper city, with a Plain Dealer that is somewhat less than a newspaper. And that brings Cleveland one step closer to becoming something less than a city. It is part of a great city's death. Boston, a city that has thrived in the information age, will keep the major newspaper that a major city needs to function and thrive. The New York Times seems to have deliberately sold The Globe to an owner whose other enterprises are tied to Boston's civic health, and who seems motivated to protect the city's basic ecosystem. That's a choice on the Times Company's part. And the way Henry eventually runs his newspaper (or Jeff Bezos runs his) is a choice, just as the Newhouse family's decision to gut The Plain Dealer was a choice.

    There's more than one route to profitability here. John Henry is not stupid with money. But he might have to be content with a lower direct return. A good newspaper in the internet age is only modestly profitable. A gutted newspaper is more profitable for a while, as long as you keep cutting costs faster than you lose revenue, but that's not a sustainable business model. That is selling copper wiring from abandoned houses.

    Cleveland is a city being slowly run to death by economic rationalists whose business model adds up to sheer madness. It illustrates American business's suicidal focus on cost containment, with everyone trying to run the leanest operation in a city suffering economic famine. It is cheaper to lay off workers, and so stores no longer have enough consumers. The stores scale back, and their suppliers go hungry. It no longer "makes sense" to run a department store downtown. It no longer "makes sense" to run a daily newspaper.  And then you are trying to attract new enterprises to a city you have to leave to find a Macy's, trying to recruit employees to a city where you can't get a newspaper delivered on Monday or Tuesday. It makes no sense.

    Cleveland is a city of assets whose value has been allowed to decline, and assets whose value is ignored. It is a city of grand buildings left unrenovated and unoccupied, because no one chooses to value them. It is a city where a great newspaper is allowed to become a part-time enterprise, because no one chooses to see its value. And little by little it has become a place torn down by its owners, stripped down to be sold for parts by people who do not live there, who do not need or wish for the city to thrive. The car that could be rebuilt is sold for scrap metal. The business that could be made profitable is closed.

    Don't cry for the Washington Post. There are worse things than being bought. The worst thing that happened to The Plain Dealer was its out-of-town owners keeping it.

    Topics: 
    Politics
    Business
    Media

    Comments

    It is hard to watch Clark Gable play a newspaperman and not feel nostalgic for the days of the big city newspaper, but at the same time, I find it harder and harder to believe what I read in major media outlets whether online or on paper. Since the Sun went to subscription I stopped browsing there. I saw how they regurgitated Breitbart in their reporting of Occupy Baltimore and have no interest in sending them money to lie to me. The Wash Post is free but I hardly ever read it. I do pay money to read the NYT, but with idiots like Brooks and Friedman on board I am often tempted to cancel that, too.


    by Donal on Tue, 08/06/2013 - 9:51am

    The Wash Post is free

    In the days before this deal went down, I noticed that the Post ended that, instituting a 10-free-article-per-month limit per IP address, and started soliciting for digital subscriptions ("starting @ $0.99"...and .no doubt going up to an unknown figure months later after you've handed over your billing info.)  So did ForeignPolicy.com; I do not know if any other affiliated sites did so.


    by artappraiser on Tue, 08/06/2013 - 11:14am

    So now I'm saving money. smiley


    by Donal on Tue, 08/06/2013 - 11:15am

    Boston baseball reporters don't play softball.

    *cringe*

    As someone who hasn't paid for a physical newspaper for over a decade, I can hardly get upset by a move to digital. That said, if the local quality is suffering, that's a problem. We in the big city of Charlottesville (population: 43,511, according to the US Census Bureau) have two solid competing newspapers here (the C-Ville Weekly and The Hook), which one can get free, either physically or electronically. Of course, these are both "weekly" papers, but their on-line content gets updated more frequently. Oh yeah, we also have a daily paper which I never read, on-line or otherwise: The Daily Progress. However, many long-time residents still pay for the physical version of it, and as far as I know, it's doing well. There's also The Cavalier Daily, but it's actually a UVA-produced paper, so I don't know if it counts.


    by Verified Atheist on Tue, 08/06/2013 - 10:13am

    I still buy a weekend NY Times every six months or so. 


    by Donal on Tue, 08/06/2013 - 11:16am

    Cutting nearly a third of the newsroom is certainly going to effect quality, especially when there have been cuts, attrition, and more cuts over the last ten years.

    And apparently another chunk of of the newsroom has been moved over to the web-only side. So the Plain Dealer is likely under half its recent reporting strength.

    So, it will be a digital newspaper, but won't have nearly as much news. That's another choice. Even if moving to digital is inevitable, cutting payroll and gutting the product is not inevitable. That is an expression of preference.


    by Doctor Cleveland on Tue, 08/06/2013 - 12:28pm

    Absolutely. Cutting staff is the main problem, in my opinion.


    by Verified Atheist on Tue, 08/06/2013 - 12:33pm

    "A gutted newspaper is more profitable for a while, as long as you keep cutting costs faster than you lose revenue, but that's not a sustainable business model. That is selling copper wiring from abandoned houses."

    Word.  And we also hear today that Christie's is coming to appraise the value of the Art Institute of Detroit.  Today's plutocrat's are happy to loot the institutions built by previous generations of plutocrats and taxpayers.  Another phrase that comes to mind when regarding our decaying infrastructure or higher education system is "eating our seed corn."

    I sympathize with you.  We learned recently that the Denver Post is downsizing again--literally, in that the paper edition has shrunk by one inch as of today, but also it's shrunk the content it offers by cramming the world and local news sections together every day but Sunday and it offers just one page of editorial content 6 days of the week.

    I wonder if you or your readers know anything about this, but what I've heard and read is that newspapers today are still profitable.  They're just not nearly as insanely profitable as they were when they were the only way to reach a regional audience in the days before Craig's List, Angie's List, and or the web in general.  Owners could make money and produce the news responsibly if they were willing to take a smaller profit.  I believe that Warren Buffett owns several small-town newspapers--what's his business model?  (And does he have the CPD's phone number?)

    The WaPo has been bleeding money, but is it really the Post that lost the money, or is it Kaplan etc. that ended up being the goose that killed the golden egg for the Graham family?


    by Historiann on Tue, 08/06/2013 - 2:51pm

    Yes, historiann. Profit isn't enough; there has to be profit growth. But at what point do you say that this profit is too steady for anyone to bother making? That makes no sense.

    It's interesting that Bezos did NOT buy the Washington Post's real estate. (Henry did buy the Globe's real estate, and what he paid was basically the market value of the real estate.) And most financialized business models, which focus on assets and despise paying salaries, would focus heavily on the real estate. It's moderately encouraging that Bezos did not.


    by Doctor Cleveland on Tue, 08/06/2013 - 4:46pm

    Tenured Radical weighs in and addresses some of these issues re: profit, obscene profit, and the purpose of journamalism.


    by Historiann on Tue, 08/06/2013 - 10:24pm

    Tenured Radical: 

    "There is no reason why meaningful adaptation to an electronic environment could not have occurred earlier from within the industry, except that it didn’t because corporate owners were too busy firing people and lining their own pockets. These are the same selfish reasons that no one will come to grips with the price of education: many things that are worthwhile, by their very nature, are not profitable. When you try to squeeze profits from them, you destroy them.

    There are some things — like universities and newspapers — that are worth more than money. They should be cultivated for their own sake and for the sake of a healthy, well-informed public, not for the sake of profits. Preserving newspapers in the United States would have required investing money at a moment when  most newspaper heirs, investment bankers, international media conglomerates and the other profiteers wanted to cash out and live the good life.  That advertising dollars diminished at the same time may be true, but it is also true that lots of wealthy people emptied the tanks first and made newspapers vulnerable to the advertising market."

    Sorry for not including the excerpt in my original link to the post.


    by Historiann on Tue, 08/06/2013 - 10:30pm

    Historiann makes an important point re newspaper profitability. I don't have current figures handy, though it's clear the industry is in deep trouble. But 15 or 20 years ago EBITDA for newspapers (at least, Canadian ones) was staggering. I recall profits in the range of 30-35 per cent of revenue.

    Way too tempting for long-time chain-owning families not to sell, and for leveraged acquisitions not to occur. New owners (often with no journalistic background) needed to increase profits simply to pay interest and satisfy other investors -- just as circulation began to slip and advertising began to tank.

    Solution: cut costs by closing bureaus, centralizing operations of different media outlets, and -- most drastically -- getting rid of employees who actually put out the papers. Paper, ink, presses and real estate were all fixed costs, so payroll was the only place to make up the shortfall. Software advances allowed composing rooms to be phased out, helping the bottom line for a time, but couldn't compensate for steadily falling revenues.

    More staff cuts, reduced paper size, and poorer editorial quality accelerated loss of circulation and advertising. I took a buyout in 2008. Canwest, Canada's biggest media company, went bankrupt the following year. I like to think cause-and-effect.

    Newsprint as a medium for delivering up-to-date information is obviously on its deathbed. Television news has failed to pick up the torch, and social media lack all journalistic standards. Some blogs manage to fill niches, but they lack the resources for global news-gathering. Governments, corporations, lobbyists and activists exploit the vacuum for their own advantage.

    Still, the need for quality journalism has never been higher. It's a paradox I have no answer for, but I am confident journalism itself will survive and eventually thrive again. Because it has to.


    by acanuck on Wed, 08/07/2013 - 4:12pm

    The letter from Donald Graham that was published @ WaPo on the sale of the paper does address the point of your blog post; my bold:

    All,

    I have a most surprising announcement. Our company is making it public right now that we have sold The Washington Post to Jeff Bezos, the founder of Amazon. To be clear, the buyer is not Amazon, but a company owned by Jeff personally. The price is $250 million, and what we are selling includes the weekly papers called, for shorthand, the Gazettes and Robinson Terminal.

    This leaves me with two questions: Why are we selling, and why to Jeff? The first question is much the harder.

    All the Grahams in this room have been proud to know since we were very little that we were part of the family that owned The Washington Post. We have loved the paper, what it stood for, and those who produced it.

    But the point of our ownership has always been that it was supposed to be good for The Post. As the newspaper business continued to bring up questions to which we have no answers, Katharine and I began to ask ourselves if our small public company was still the best home for the newspaper. Our revenues had declined seven years in a row. We had innovated, and to my critical eye our innovations had been quite successful in audience and in quality, but they hadn’t made up for the revenue decline. Our answer had to be cost cuts, and we knew there was a limit to that. We were certain the paper would survive under our ownership, but we wanted it to do more than that. We wanted it to succeed.

    Don

     


    by artappraiser on Tue, 08/06/2013 - 3:15pm

    And as Matt Buchanan at the New Yorker points out, among Bezos' qualities, is that while ruthless about making all sorts of change to systems, he has also been known to be very patient about expecting profit from the things he invests in.


    by artappraiser on Tue, 08/06/2013 - 3:30pm

    The New Yorker article claims they were profitable in some quarters, but Democracy Now! had several guests discussing Bezos today, and publisher Dennis Johnson said:

    The other thing to remember about Amazon is it’s a company that feels no pain. They’ve, as far as I can tell, never made money. Their quarterly statements are consistently sales are up—they’re astronomical numbers; they made $15.7 million last quarter alone—but their losses are up every quarter, as well. It’s a phenomenal track record, where—and, you know, in the retail market, how do you compete with that? How—in the book business, how does Barnes & Noble, how do the little indie booksellers compete with a company that can consistently lose money like that? Well, they can’t. They just can’t. So, when you see him taking over The Washington Post and you wonder is he going to be able to monetize it, is he going to make it profitable, he probably doesn’t care. That’s obviously not what it’s about. His business is to not operate as if they intend to make a profit.

    AMY GOODMAN: But he did make $28 billion—I mean, he’s got $28 billion.

    DENNIS JOHNSON: Personally. Sure, he’s a wealthy man, one of the most wealthy men in the country, if not the world. But the company, quarter after quarter after quarter, does not post a profit.

    Actually they have posted profits in the past, but according to the Guardian, lately Bezos is rolling everything back into the company:

    The thing is, companies don't pay tax on sales, but on profits. And Amazon is a company with a very strange attitude to profit: it doesn't seem to like it. In the year 2012, it made a worldwide loss of $39m, even as it had sales totalling $61bn. That year was an aberration, with a costly acquisition weighing the company down, but previous years have been similar. 2011 saw just $631m net income on worldwide sales of $48bn, and in 2010 – the company's most profitable year to date – it scraped $1.15bn of profit on revenue of $34bn.

    by Donal on Wed, 08/07/2013 - 1:54pm

    I don't know why I find all this intriguing, but I do. Did you also see the thing about the pension plan that I posted on the news thread?

    I am reminded of that old TV commercial for an investment advisor with the slogan they make money the old-fashioned way, they EARN it. Bezos: not old-fashioned.

    Almost seems like too high expectations now, as if he has all these secret tricks and ideas up his sleeve, is going to be the savior of the journalistic media in the digital age....


    by artappraiser on Wed, 08/07/2013 - 3:15pm

    Reminds me of the strategy in Hearts of "shooting the moon." You have to take all the bad cards, any Hearts and the Queen of Spades to give those points to your opponents.

    Bezos can't compete on price unless he drives everyone else out of business first.


    by Donal on Wed, 08/07/2013 - 3:29pm

    We mourn the loss of these "family owned" newspapers and perhaps the death of the journalism they've supported.

    But it's worth pointing out that the industrial titan heads of those families weren't journalists and didn't know squat about journalism (such as it was) when they bought or founded these papers back in the day. They were very rich men, much as Bezos is, who wanted to own papers, probably for less noble reasons than Bezos has.

    (Murdoch is probably closer to these newspaper titans of yore in his outlook and intentions than Bezos is.)

    The Graham Family will no longer own WaPo...the Bezos Family will. It will still be family owned. And if Bezos discovers a way to make a news organization financially viable, he will be doing everyone a big service.


    by Peter Schwartz on Wed, 08/07/2013 - 6:19pm

    This is a great comment, Peter, along the lines of "let's get real here."

    I checked up on the history when this news came out, and the Graham family period @ WaPo starts with The newspaper was purchased in a bankruptcy auction in 1933 by a member of the Federal Reserve's board of governors, Eugene Meyer, who restored the newspaper's health and reputation. In 1946, Meyer was succeeded as publisher by his son-in-law Philip Graham....

    By the way, the Sulzberger family has announced it is holding tight for now on the NYT.


    by artappraiser on Sat, 08/10/2013 - 9:11pm

    The Cleveland Plain Dealer is read here on a regular basis in this Florida household on line.  I just wonder how many others still read this paper that don't live in the Cleveland area.  It is a shame to let it die a slow death.  Why can't newspapers become non profit trusts? 


    by trkingmomoe on Wed, 08/07/2013 - 10:23pm