Wringing Money Out Of The Newspaper Carcass

Jack Shafer writes in the center-left Politico about “vulture capitalist” Randall Smith of Digital First Media, the owner of the Denver Post and several other daily newspapers in mid-sized American cities. Smith is slashing editorial staffs, and victims gripe in public about management’s strategy, Smith’s job made easier as staffers self-identify as the next victims by joining the protest. Smith has halved the newsroom at the Post over five years.

Shafer acknowledges that the daily newspaper is a vestige of a time in which “advertisers needed mass audiences to sell the products of mass production,” quoting industry author Philip Meyer — because technology did not exist to target ads to niche markets. A city had a couple large newspapers, as the nation had exactly three TV networks. Shafer quotes a reporter at the Detroit News, which was not saved by an anti-trust exemption allowing it to merge its printing plant with that of the Free Press, and went on to cut back to three days a week. “The owner didn’t decide to shrink the paper. The reader decided to shrink the paper.”

What Shafer cannot understand is how Smith is raking in profits from his decimated newsrooms.

Alden’s newspapers recorded nearly $160 million in profits during fiscal year 2017….The chain’s 17 percent operating margin makes it one of the industry’s best performers. Over the course of seven years, Alden doubled profits in its Bay Area News Group newspapers, another home to cutbacks. At the Pioneer Press, where its staff is down to 60, the paper produced a $10 million profit at a 13 percent margin.

Shafer’s view is that Smith knows the industry is moribund and is squeezing money out of it before casting its choked carcass to the pavement. Despite the pleas from his newsrooms, Shafer writes, “why on Earth should Smith sell?”

Allow yourself to sympathize with Smith for a moment. He’s deeply invested in a stagnant industry whose primary audience is approaching its own expiration date….Your grandfather is a pretty good stand-in for the average newspaper subscriber, too. Habituated to his morning newspaper, he’ll resist cancelling his subscription no matter how raggedy the paper gets or how high the owners jack up the price.

In other words, Shafer’s thesis is that Smith knows his investment is going down the tubes and wants to cash in. The owner is evil and the customer is stupid. And Smith can’t or won’t sell out, as his staff is begging, not even for a price that is the current value of the string of profits he is squeezing out. Because an enlightened owner would stop trying to choke his baby to death. An enlightened owner would… Would he hire back the newsroom?

You see, an alternative view is that the half of the reporters and editors no longer working at Digital First Media papers were not producing value. In fact, apart from Shafer’s impression that the malevolent Smith fired every other person he passed in the hallway, Smith might have made an effort to identify underperforming writers and might have specifically targeted them for firing. The effect of replacing a newsroom with a newsroom half the size with first-class reporters might be — inexplicable, unexpected profit.

Smith will have to deal with the technological change enabling advertisers to target their message rather than scatter-shoot, as every stationery store on Main Street needs to decide how it intends to compete against Amazon. Human-interest features might be written out-of-town and shared among Smith’s many titles. But results from last night’s Roller Derby will not appear in print; there is no one in the newsroom to cover it. This is as it must be, and why the club has its own web page. There is no one to write about your son making First Class Scout so that you can get a clipping of the story that appeared in print throughout Denver.

Shafer writes, “Go ahead and hate Randall Smith all you want, but do so with the understanding that, like the mortician, he’s figured out a way to make money off of death.” Only, there is no information in the Politico article that making his newsrooms lean is preparing for their death at all. It may be that the Denver Post simply got an owner who does not believe the paper exists for the benefit of its own newsroom.