Massive Cuts! Unprecedented Turmoil! How Did This Happen to Newspapers?

By Jack Limpert

Robert Sanchez has an interesting piece, “How Massive Cuts Have Remade the Denver Post,” in 5280, the city magazine of Denver.

The story’s deck: “Journalists at the state’s largest newspaper once wondered how much more they’d have to endure. Now they’re finding out.”

The nut graf: “Newspapers across the country have been dealing with unprecedented turmoil for most of this century, but Post staffers can be excused for feeling like the past year has been exceptional for the pain they have had to endure. In addition to buyouts and layoffs and a substantial newsroom restructuring, this past March journalists at the Post saw their beloved editor, Gregory L. Moore, abruptly resign amid rumors he refused corporate orders to cut more jobs from an already gutted staff.”
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How did the newspaper business get into this much trouble?

James O’Shea, in the introduction to his book, The Deal from Hell: How Moguls and Wall Street Plundered Great American Newspapers, explains:

In 1999, as Mark Hinckley Willes [CEO of the Times Mirror Company, owner of the Los Angeles Times, Newsday, Baltimore Sun, Hartford Courant, and other publications] and John Madigan [CEO of the Tribune Company, owner of the Chicago Tribune, Orlando Sentinel, and other publications] exchanged pleasantries in Willes’ room and took the measure of one another, their respective companies were flourishing in an industry flush with cash….Newspapers posted profit margins of 20 percent and more, making them virtual cash machines that Wall Street investors coveted.

But the sky-high stock prices and fat returns…obscured an alarming trend. Newspaper classified advertising was sinking in quicksand….For their part, the journalists turned a blind eye to problems in their own industry, thanks at least in part to the time-honored wall erected between newsrooms and the business side of newspapers to maintain the integrity of the news….

Meanwhile, the news industry’s flailing response to the emerging Internet threat exposed an unwarranted self-confidence. In the early 1990s, Charles Brumback [then CEO of the Tribune Company] tried to interest big publishers in the New Century Network, a consortium of America’s top-nine newspaper companies that would create a national news and information network online, for which customers would pay. In return, the customer would have access to a full-range of national newspaper content and services online. But industry leaders tried to ignore the Internet, fearing it would cause disproportionate damage to their existing business. Their internecine squabbles eventually destroyed the New Century initiative. Cindy Sease, a Sioux City classified ad director who also chaired the NAA’s Classified Ad Federation, warned the publishes, “When we are up against the huge software industry giants, we need to band together as an industry and stop worrying about knocking one another off.”

As it happened, the threat posed to newspapers by software giants like Microsoft would pale in comparison to the one leveled by the little guy, a digital sniper working in an apartment, armed with little more than a dream and a computer….Even as Madigan and Willes sat down for what Willes thought would be a casual chat [about merging the two newspaper companies], a mere five hundred miles up the California coast, Craig Newmark , an ex-computer programmer from Charles Schwab & Co, filed paper to register craigslist as a small for-profit Internet company that would revolutionize classified advertising with free online ads.

Meanwhile, two young Stanford University graduate students an hour plane ride away had just finished solving an equation with 500 million variables and 3 billion terms. Using banks of computers, Sergey Brin and Larry Page created an algorithm called PageRank, which they house in a start-up company they eventually called Google. Two months after Madigan and Willes met, Brin and Page announced initial public funding….
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In July 2000, the Tribune Company bought the Times Mirror Company in a $8.3 billion merger transaction, the largest acquisition in the history of the newspaper industry.

Fast forward: Poynter said yesterday that the Tribune Company, now called Tronc, is about to be acquired by Gannett for a little over $1 billion:

The nation’s largest newspaper chain may be about to get a lot larger.

Gannett’s ongoing pursuit of Tronc and its dominant daily newspapers in Los Angeles, San Diego, Chicago, Orlando, Baltimore and elsewhere follows the industrywide trend toward corporate consolidation of news.

For Gannett, that included the purchase of the Milwaukee Journal Sentinel and 14 other dailies that used to be part of Journal Communications and E.W. Scripps, papers in Texas and Pennsylvania formerly owned by Digital First Media, and the Bergen Record and sister publications in northern New Jersey.

With the Tronc papers, Gannett is unlikely to depart from its formula of reaping profit by quickly hacking away at acquisitions. In the most recent example, the national chain cut 130 local journalism jobs—more than one-third of the total news staff—at the New Jersey papers it purchased.

 

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