By David Carr
USA Today and other Gannett newspapers will be spun off into a stand-alone print company. Jake Naughton / The New York Times
Media companies spin off newspapers, to uncertain futures
A year ago last week, it seemed as if print newspapers might be on the verge of a comeback, or at least on the brink of, well, survival.
Jeff Bezos, an avatar of digital innovation as the founder of Amazon, came out of nowhere and plunked down $250 million for The Washington Post. His vote of confidence in the future of print and serious news was seen by some — including me — as a sign that an era of “optimism or potential” for the industry was getting underway.
Turns out, not so much — quite the opposite, really. The Washington Post seems fine, but recently, in just over a week, three of the biggest players in American newspapers — Gannett, Tribune Company and E. W. Scripps, companies built on print franchises that expanded into television — dumped those properties like yesterday’s news in a series of spinoffs.
The recent flurry of divestitures scanned as one of those movies about global warming where icebergs calve huge chunks into churning waters.
The persistent financial demands of Wall Street have trumped the informational needs of Main Street. For decades, investors wanted newspaper companies to become bigger and diversify, so they bought more newspapers and developed television divisions. Now print is too much of a drag on earnings, so media companies are dividing back up and print is being kicked to the curb.
Setting aside the brave rhetoric — as one should — about the opportunity for a “renewed focus on print,” those stand-alone print companies are sailing into very tall waves. Even strong national newspapers like The Wall Street Journal and The New York Times are struggling to meet Wall Street’s demands for growth; the regional newspapers that make up most of the now-independent publishing divisions have a much grimmer outlook.
As it turns out, the journalism moment we are living in is more about running for your life than it is about optimism. Newspapers continue to generate cash and solid earnings, but those results are not enough to satisfy investors.
Even the most robust evangelism is belied by the current data. Robert Thomson, chief executive of News Corporation, espoused the “power of print” on Thursday even as he announced that advertising revenue at the company plunged 9 percent in the most recent quarter.
And remember that it was Mr. Thomson’s boss, Rupert Murdoch, who started the wave of print divestitures when his company divorced its newspapers last year, although it did pay out $2 billion in alimony, which gave the publications, including The Journal, a bit of a cash cushion. (News Corporation’s tepid earnings report came two days after Mr. Murdoch, who has swashed more buckles and cut more deals than almost anyone, was forced by the market to let go of his latest prey, Time Warner.)
The people at the magazine business Time Inc. were not so lucky, burdened with $1.3 billion in debt when Time Warner threw them from the boat. Swim for your life, executives at the company seemed to be saying, and by the by, here’s an anchor to help you on your way.
E. W. Scripps and Journal Communications put a twist on the situation just over a week ago by marrying, then promptly orphaning the print assets that each company owned. On Tuesday, when the embattled, post-bankruptcy Tribune Company officially introduced a separate publishing division so that it could concentrate on television, it handed the new company $350 million in debt as a parting gift.
Many industry observers sucked in their breath and wondered what Gannett, the last big operation featuring both newspapers and television, would do. We didn’t have to wait long. On Tuesday, Gannett said its print division would go it alone.
No debt was built into the arrangement, but the broadcast division hung onto two lucrative digital sites, CareerBuilder.com and Cars.com.
In the main, it’s been like one big, long episode of “Divorce Court,” with various petitioners showing up and citing irreconcilable differences with their print partners. It’s not that television is such a spectacular business — there are plenty of challenges on that front — but newspapers and magazines are clearly going to be smaller, less ambitious businesses and journalistic enterprises regardless of how carefully they are operated.
Even if the writing has been on the wall for some time, let’s play a bit of sad trombone for the loss of reporting horsepower that will accompany the spinoffs.
Newspapers will be working without a net as undiversified pure-play print companies. Most are being cut loose after all the low-hanging fruit, like valuable digital properties, have been plucked. Many newspapers have sold their real estate, where much of their remaining value was stored.
More ominous, most of the print and magazine assets have already been cut to the bone in terms of staffing. Reducing costs has been the only reliable source of profits as overall revenue has declined. Not much is left to trim.
The Tribune Company, which is to be run by Jack Griffin, who had a short, unsuccessful stint overseeing the pre-spin Time Inc., has cut $250 million in costs since 2011, according to the media analyst Ken Doctor. Businesses have to either peddle a growth story — a tough sell for any print enterprise — or produce a reliable cash flow that reaps dividends for shareholders. Gannett has eliminated more than a third of its employees since 2005.
And with ads declining at a steep rate, newspapers (and magazines) are trying to turn toward readers for digital revenue at the same time that they have denuded their products of much of their value. It’s a little like trashing a house by burning all the furniture to stay warm and then inviting people in to see if they want to buy the joint.
At Gannett newspapers, reader metrics will drive coverage and journalists will work with dashboards of data to guide reporting. After years of layoffs, many staff members were immediately told that they had to reapply for jobs when the split was announced. In an attempt to put some lipstick on an ugly pivot, Stefanie Murray, executive editor of The Tennessean, promised readers “an ambitious project to create the newsroom of the future, right here in Nashville.
We are testing an exciting new structure that is geared toward building a dynamic, responsive newsroom.” (Jim Romenesko, who blogs about the media industry, pointed out that Gannett also announced “the newsroom of the future” in 2006.)
The Nashville Scene noted that readers had to wait only one day to find out what the news of the future looks like: a Page 1 article in The Tennessean about Kroger, a grocery store and a major advertiser, lowering its prices.
If this is the future — attention news shoppers, Hormel Chili is on sale in Aisle 5 — what is underway may be a kind of mercy killing.
So whose fault is it? No one’s. Nothing is wrong in a fundamental sense: A free-market economy is moving to reallocate capital to its more productive uses, which happens all the time. Ask Kodak. Or Blockbuster. Or the makers of personal computers. Just because the product being manufactured is news in print does not make it sacrosanct or immune to the natural order.
It’s a measure of the basic problem that many people haven’t cared or noticed as their hometown newspapers have reduced staffing, days of circulation, delivery and coverage.
Will they notice or care when those newspapers go away altogether? I’m not optimistic about that.
Email: firstname.lastname@example.org; Twitter: @carr2n
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