Business

Black and white and red all over, newspapers bleed cash as revenues shrink

2008 may have been the worst year ever in newspaper publishing. In the U.S., newspaper shares lost nearly $65 billion US of their value. Canadian newspapers cut jobs in their newsrooms and their advertising departments. Whither the North American daily?

The very first story in the very first newspaper to be published in Canada concerned a man who threw a rock at the Pope's head, "which narrowly missed."

Nowadays, of course, the March 23, 1752, edition of the Halifax Gazette would be badly scooped on a story like that. The near-stoning would be covered live on the television news networks and cut to rap music on YouTube. Web surfers could play a java-based game throwing digital rocks at the Bishop of Rome, and a Facebook group would be dedicated to the finer points of pontiff-beaning. And each website would have its own advertisements — for helmets, for rosaries, for trips to Rome — all specifically targeted at readers interested in the assault on the Pope.
When the Daily News folded last year, Halifax became a one daily newspaper town. ((CBC))

Newspapers might pick up what advertising dollars were left, but the likelihood of a paper attracting ads specifically related to the assault would be a chance "narrowly missed."

And the recession has only intensified this problem of declining newspaper ad revenues.

"Companies are tightening their ad budgets, and the impact of that is widening fast," said Rob Young, senior vice-president of planning services at Toronto-based research agency PHD Canada.

He predicts that newspaper advertising revenues will slump in 2009 at a staggering pace, possibly worse than in the last three recessions he's witnessed as a media observer. "This one, I suspect, will be deeper in terms of ad revenue impact than the other three," he said.

Predicting the death of the newspaper is a game as old as moveable type. Still, this time there are some fairly prestigious corpses to count. The following list is long and in no sense comprehensive.

The Baltimore Examiner, Cincinnati Post, Albuquerque Tribune and San Juan Star are all gone since 2007. The Chicago-based Tribune sought bankruptcy protection in December, and the Star Tribune of Minneapolis followed suit in January. The Journal Register of Pennsylvania filed for Chapter 11 on Feb. 21, and the owner of the Philadelphia Inquirer and Philadelphia Daily News filed for bankruptcy protection the next day. The Washington Post's fourth-quarter profit plunged 77 per cent. The Seattle Post-Intelligencer will likely close in April if a buyer isn't found. And the Hearst Corporation says if it can't reduce expenses dramatically within the next few weeks, it will close or sell the San Francisco Chronicle.

"Our current situation dictates that we accomplish these cost savings quickly," Chronicle publisher Frank Vega wrote in a memo to staff. "Business as usual is no longer an option."

Canada has a stake in this one: the Chronicle is published by Transcontinental of Montreal, which signed a $228-million contract with Hearst in November to open a new printing facility specifically for the Chronicle.

The Rocky Mountain News of Denver closed last week after losing $16 million US in 2008. 33 U.S. dailies  have sought Chapter 11 bankruptcy protection in the past 2 1/2 months

In this country, Torstar just reported a fourth-quarter loss of $211.2 million compared to a $47.2 million profit last year. It warned that this 2009 would be difficult. The Waterloo Region Record and Hamilton Spectator plan to lay off seven per cent of their employees. Corner Brook, N.L.'s Western Star cut seven positions this month. The Halifax Daily News wrapped its last fish a year ago. Earlier this month, the Globe and Mail announced plans to lay off about 10 per cent of its workforce — or about 80 jobs.  And it's not just newsrooms that are shrinking. The newspapers themselves are physically contracting. The Globe and Mail trimmed 1.5 inches off its page width in 2007 to save on newsprint costs.

The Krugman paradox

Newspaper industry analyst Robert Ivan calls it the Krugman paradox: a newspaper website's inability to produce sustainable advertising revenue despite the huge audience. He pointed out the New York Times columnist Paul Krugman had recently won a Nobel Prize for economics, but for three days, his column ran on the Times website accompanied by one ad: for PetMeds.com.

Costs and wages get paid in dollars, but the ad revenues come in by the pennies.

The recession accelerated the industry's troubles, but it's amazing how fast it all unwound.

Statistics Canada says Canada's newspaper industry experienced modest growth and stable profits when the agency last filed on the industry in 2006. Operating revenues amounted to $5.34 billion in 2006, up 2.6 per cent from $5.21 billion in 2005.

And the Canadian Newspaper Association reported the revenue picture for Canada’s daily newspapers remained stable through 2007, "with robust growth in online ad sales offsetting a mild decline in print advertising. "

Total revenues for Canadian newspapers, including online operations, dropped slightly from the year before but were still $3.576 billion. The slightly sharper decline in print advertising (down 2.4 per cent) was offset by vigorous growth in online revenues, up 29 per cent.

And then 2008 happened.

Statistics Canada doesn't yet have the numbers for Canadian newspapers, but former newspaper columnist Alan Mutter tracks the U.S. numbers on his blog, Reflections of a Newsosaur. 

"[2008] was the worst year in history for publishers. Newspaper shares dropped an average of 83.3 per cent, wiping out $64.5 billion [US] in market value in just 12 months," he writes. "The decline among the newspaper shares last year was more than twice as deep as the 38.5 per cent drop suffered by the Standard and Poor’s average of 500 stocks."

Writing in Slate, Jacob Weisberg suggested there were basically three models for keeping the grey ladies publishing.

  • Rely on micro-fees charged to users reading the newspaper content on the web. 
  • Rely on philanthropists or foundations to keep the paper's going. 
  • Rely on internet advertising.

But, he says, each of these models has problems.

  • Internet users are used to getting their information "free" or at least believe they pay enough already in monthly internet bills.
  • Philanthropists' pockets are only so deep.
  • The New York Times posted weaker quarterly Internet ad sales for the first time ever earlier this month, suggesting that going online might not be enough to protect the traditional media.

Weisberg suggests that these funding options miss the point since newspaper journalism "has seldom been about the straightforward pursuit of profit."

Just a look at a few of Canada's newspapers shows he may be on to something.

The National Post made its first profit ever in the last three months of 2008 – after it stopped publishing print editions in Manitoba and Saskatchewan. From the very moment the paper began, it has relied on the deep pockets of its owners – Conrad Black, then Canwest — to keep it going. Few "normal" companies could last a decade without making money.

Voting shares at the Toronto Star are controlled by the same families that ran the paper when it was registered as a charity. The sole shareholder of Britain's Guardian newspaper is the Scott Trust, whose mandate is to "preserve the financial and editorial independence of the Guardian in perpetuity … [and] sustain journalism that is free from commercial or political interference." The foundation model flourishes.   

The Canadian Community Newspapers Association praised the federal government's last budget for providing "$30 million over the next two years to support the Publications Assistance Program" and creating the Canada New Media Fund. The fund is "designed to encourage the production of Canadian interactive digital cultural content." 

And while funding a newspaper by internet micro-fees remains an elusive dream, it's not entirely incredible. The Christian Science Monitor is developing a fee-based daily electronic newsletter.

And whatever happened to the Halifax Gazette, the very first Canadian newspaper and the one that reported on the near-braining of the Pope?

It continues to publish, even thrive, as the Royal Gazette. Published by the Queen's Printer in Nova Scotia, its prime purpose is to notify the public of the law. It's survived as a government publication.

Reporting changes to the Bulk Haulage Act might not be as interesting as assaults on Benedict XIV, but there's no competition from the internet, and it is recession proof.

With files from the Canadian Press

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