What Happens Next? Some Scenarios

This week's bankruptcy filing by the Tribune Co. was a landmark event, one of those "it can't really happen" moments that brought renewed attention–especially outside the industry–to the plight of newspapers. While there are unique elements to Tribune's problems, it's nonetheless the first of many similar game-changing shockwaves that are likely to roll through the newspaper industry in coming months. The industry landscape may look very different a year from now.

The structural changes wrought by the Internet are real and will continue; they're being multiplied by the worst advertising market in a generation, which has only begun to rock newspapers' already fragile balance sheets. Anybody in the advertising or media business will tell you that the past couple of months have been devastating; things may get worse after Christmas, as a wave of bankruptcies ripple through retailers who are suffering from poor holiday sales because of the ailing economy. Entire industries that are key sources of advertising, like autos and banks, are down on their heels, and the economic problems are deepening the already bleak outlook for real estate and job classifieds. It's not a pretty sight, and it's going to mean a lot more pain for newspapers as we head into the new year.

So let's look at a few of the doomsday scenarios we're likely to see among the nation's major newspapers (and some of the smaller ones) in 2009.

More downsizing. The excellent PaperCuts newspaper layoffs map is tracking more than 15,000 newspaper layoffs and buyouts in 2008; the pace will continue unabated in 2009. Think there's nothing left to cut? Think again. And this time, there will be very few generous buyouts. The slashing will be done via straight layoffs, aimed at all newspaper departments, as publishers slash costs.

More bankruptcies. Tribune's bankruptcy filing, under the weight of billions of dollars in acquisition debt, won't be the last. Highly leveraged newspapers in Minneapolis and Philadelphia, as well as debt-laden companies like Journal Register and Gatehouse, are more than a little vulnerable to seeking protection from their creditors. Indeed, it's a bit hard to see how they avoid it, especially now that Tribune has paved the way.

Death of two-newspaper towns. We've already seen the plug being pulled in Denver, where the Rocky Mountain News is on its last legs, barring a miracle. Other two-newspaper cities like Seattle, Philadelphia, Chicago, Boston and Honolulu seem ripe for a similar culling, as weaker players succumb. (Probable exception: Three-paper New York City.) Two-newspaper towns, when things are going good, are a joy, because competition makes everybody better. But in this environment, owning the No. 2 paper in a tough market is a luxury. If you can call it that.

Reduced publishing frequency. "Why should we publish on Tuesday if we're losing money publishing on Tuesday?" I've heard that question from two different newspaper managers in recent weeks. It throws into question the whole notion of being a daily newspaper, which is culturally shocking to most newspaper people. But if papers are willing to move readers entirely online certain days of the week to concentrate their resources on more profitable editions, then option is going to be seriously considered in newspaper executive suites. It already is. The only question is which paper is the first to take the leap. (The rumor that the Detroit newspapers will cease home delivery on some days of the week is a variation on this theme.)

Better Web-print balance. A variation on the above–the positive spin, if you will. Forward-thinking papers will do a better job of making their Web sites stand as solid alternatives to the print product, and may reduce the size of the print edition as an alternative to shutting certain days. This goes double, at least, for advertising: Newspaper sites need to get much smarter about Web advertising, to make the Web edition a much more robust contributor to revenue (and a more realistic replacement for lost print revenue). That involves going way beyond the banner ad to make real strides in contextual ads, search ads, targeted ads, non-traditional revenue sources, premium services and, especially, stepping up efforts to sell to small local advertisers that large newspapers traditionally have ignored. The always-pioneering Bakersfield Californian is the latest paper to get religion about this.

Sharing, clustering and consolidation. We've already seen competing newspapers starting to share resources, like the announcement that the Dallas Morning News and Fort Worth Star-Telegram will share arts critics, or the story-sharing among South Florida or North Carolina papers, or papers even printing and distributing their competitors. Good start. Think bigger. Much bigger. We're likely to see outright combinations of newspapers covering contiguous regions, based on central shared editing, sales, marketing and printing resources. MediaNews already is mostly down this track in the Bay Area; throw the San Francisco Chronicle into the mix–with a deal between Hearst and MediaNews–and the whole region has one big newspaper, perhaps distinguished only by locally different front pages and metro sections. The same scenario is possible in South Florida, Southern California and other sprawling markets, as formerly competing owners decide that consolidation under a single regional ownership is better than fighting the fight alone.

Outright closings. The drumbeat of speculation grows louder: Some major city is going to lose its newspaper, probably in the coming year. Wall Street credit-rating firm Fitch Ratings "believes more newspapers and newspaper groups will default, be shut down and liquidated in 2009, and several cities could go without a print newspaper by 2010." Seems impossible? So did the bankruptcy of a major newspaper company, not long ago. Everybody who follows the industry's finances closely has their own bet on which city goes first in the dead pool. Several of the scenarios above contribute to this ultimate bad news. As I've written before, the local news ecosystem will fill the resulting hole more quickly than most people think. Still, it's a shocking thought. 

But after Tribune's bankruptcy, we now know that anything is possible.

Comments

[Howard Witt]

Mr. Potts,
You posit, in your scenario of what happens to a major American city ("Whoville") when its daily newspaper folds, that the newspaper's demise wouldn't ultimately make much difference and that the hole would soon be filled by myriad other bloggers, suburban newspapers, local TV stations, etc.
I suggest you update that scenario by imaging this week's stunning Blagojevich story in Chicago if the Chicago Tribune didn't exist. Oh, that's right--there wouldn't have *been* this week's stunning Blagojevich story if the Tribune hadn't been relentlessly probing the governor's suspicious dealings for the last two years--coverage that relentlessly documented the unfolding federal investigation and in turn, apparently, drove the governor to such distraction that his wild excesses proved to be his ultimate demise.
I can't begin to imagine any combination of pajama'ed bloggers, blow-dried TV news reporters or anonymous Craigslist posters that could have achieved similar results.
Howard Witt

[A reader]

Come on. The Tribune got Blago arrested? I don't think so. I think Fitzgerald got Blago arrested.

[JD Mullane]

The Trib wouldn't even print the Blago story, at Fitzgerald's request.