It turns out that 2010 wasn't quite the bloodbath in the newspaper business that some of us expected. After an initial outbreak of significant cutbacks, bankruptcy filings and closures that largely began in 2009, the vast majority of major papers made it through the year alive, mostly by cutting costs to the bone or by getting protection from their creditors in bankruptcy court. Revenue and circulation continued to decline at most papers, but at least they survived the year.
Still, a flurry of industry headlines in the past few days indicates that the bleeding continues:
- Gannett announced another week of unpaid employee furloughs—and in one case, pay cuts—at most of its papers.
- The Raleigh News and Observer cut another 20 positions.
- The bankers that own MediaNews Group, one of the nation's largest newspaper chains, ousted much of the company's top management.
The management shakeup at MediaNews is a real eyebrow-raiser, because the soon-to-be-deposed CEO, William Dean Singleton, is one of the industry's longtime titans—chairman of the Associated Press and a wheeler and dealer who has assembled a group of more than 50 papers, including the Denver Post and most of the dailies in the San Francisco Bay Area (outside of Hearst's San Francisco Chronicle).
Singleton built his empire on a mountain of debt, always staying one step ahead of his creditors. But MediaNews had to file for bankruptcy protection a year ago, and now it appears the bankers have taken over, ousting Singleton and his handpicked board, forcing company president Joseph Lodovic IV into sudden retirement, putting a bunch of bankers in temporary charge of the company and announcing a search for a new CEO.
That's a big fall for a big name, and it echoes the 2010 toppling of Sam Zell at Tribune Co. and Brian Tierney at Philadelphia Media Holdings—two others who tried to run newspaper companies with large amounts of debt, but ran into the realities of the industry's decline and the lousy economy, and were forced out by their bankers.
The Wall Street Journal is speculating that MediaNews might wind up merging with Freedom Newspapers, the publisher of the Orange County Register, which went bankrupt itself in 2009 and was taken over by its creditors--who happen to include investment firm Alden Global Capital, conveniently a significant owner of MediaNews, as well. Can two sick newspaper companies be combined to create one healthy one? Be skeptical.
The backdrop for the continuing upheaval in the newspaper business is a slowdown in print advertising that has morphed from ongoing to chronic. While the rest of the economy (including other advertising media) is slowly recovering, newspapers are still hurting. As Alan Mutter has pointed out, newspaper revenue dropped 5.4 percent in the third quarter, the latest period for which industry figures are available, the 17th consecutive quarter that newspaper ad sales have been down. As Mutter wrote, "Although the decay in newspaper ad sales has declined in each of the three quarters of 2010, the industry is the only one of the mass media still in negative territory." That's not good.
It doesn't seem very likely that things will get better. Newspaper circulation continues to decline, which in turn makes newspapers less attractive to advertisers. The deep cuts in most newsrooms have had predictable effects on newspaper quality, as well, which turns off readers and advertisers and adds to the vicious cycles of decline in circulation and revenue. A lot of advertising dollars are also shifting to other media, especially online players. There just aren't a lot of positive trends in the newspaper business.
And now, the news from Gannett, the News and Observer and MediaNews may be the canary in the coalmine for continuing problems. While most companies haven't released their fourth quarter results yet (much less aggregated industry totals), the timing of those actions, right after the first of the year, indicates that the numbers continued to be lousy as 2010 wrapped up, requiring still more Draconian measures.
It's painful to watch the newspaper industry get hollowed out like this. But it's hard to see the downward spiral truly being reversed. Cost cutting may restore a measure of profitability, at least temporarily—but it will also continue to make papers less attractive to customers that pay the bills. We may not have seen the barrage of newspaper closings or publication-cycle cutbacks in 2010 that many expected—but that doesn't mean they aren't still to come.
PS: Ken Doctor's got an excellent post on Singleton's demise.