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Newspaper Industry Is Running Out of Time to Adapt to Digital Future NYTimes.com

July8,2012

TheFissuresAreGrowingforPapers
ByDAVIDCARR

Whiletherestofuswereburninghotdogsonthegrilllastweek,thenewspaperindustry seemedtobelightingitselfonfire. Therehavebeencracksinpublishingoperationsthatarebothhilariousandterrifying.The TimesTribuneinScranton,Pa.,publishedaboxscoreforabaseballgamethatwasnever played,afteroneofthecoachesmadeuparesulttosparetheotherteamtheembarrassment ofaforfeit. TheUT,thedailynewspaperofSanDiego,publishedatwoweekoldblogpostonitsfront page.Andmostnotoriously,ThisAmericanLiferevealedthatJournatic,acontentfarm ownedinpartbytheTribuneCompanythatproduceslocalarticlesonthecheap,wasusing fakebylines.Someofthosehyperlocalpieces,whichraninnewspaperslikeTheChicago Tribune,TheChicagoSunTimes,TheHoustonChronicleandTheSanFranciscoChronicle, werewritteninthePhilippines. Equallyconfounding,whenTheTimesPicayuneofNewOrleansgotaroundtoofferingjobsto someofitsemployeesinitslowercostdigitalnewsoperationtheprintnewspaperwill comeoutthreetimesaweekmanyofthemoreprominentstaffmemberstookalookatthe businessplanandsaid,Nothanks. Ormaybenotsoconfounding.Maybetheyweremakingachoicetopullbackfromanindustry thatbyallappearanceswasstartingtocomeapart.Betweenoperationalfiascosandflailing attemptstoslashcostsonthefly,itsclearthattheprintnewspaperbusiness,whichhasbeen frettingoveraloomingcrisisforthelast15years,isstrugglingtostayafloat.Therearesmart peopletryingtoinnovate,andtonsofgreatjournalismispublisheddaily,butthefinancial distressismorevisiblebytheweek. Mostnewspapersareinaplacerightnowthattheyaregoingtohavetomakebigcuts
MOREINMEDI

somewhere,andbigseamsareboundtoshowupatsomepoint,saidRickEdmonds,amedia ARTICLES) businessanalystatthePoynterInstitute. TheBest Someofthebiggercrackscantbepaperedoverbyfinancialengineering.Hedgefunds,which

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thoughttheyhadboughtinatthebottom,arescramblingforexitsthatdontexist.Many newspapercompaniesarehugelyoverburdenedwithdebtfromilltimedpurchases.And thoughitisfarlessdiscussed,newspapersarebeingclobberedbypaltryreturnson underfundedpensionplans. Twohighlyplacednewspaperexecutivestoldmelastweekthatwhiletheindustryhadalready experiencedanumberofstrategicbankruptcies,morewillmostlikelytakeplacetodealwith pensionobligations. AsMikeSimontonofFitchRatingspointedouttome,veryfewbondinvestorsareeven willingtolendtopapers.Hesaidthepensionobligationsrepresentacalloncapitalatatime whennewspapersdesperatelyneedtodeploycapitaltowardevolvingtheirbusinessmodels andadaptingtothedigitalworld. TheglobalpensionplanatGannett,whichowns82dailypapers,isunderfundedby$942 million,andMcClatchy,whichowns30dailies,isshort$383million,accordingtoMr. Simonton,eventhoughbothcompanieshavebeenpouringtensofmillionsinpreciouscash intotheplanstoshorethemup.ManyUnitedStatescompanieshaveonerouspension obligations,butthedeclineinrevenuegivesnewspapersatougherhilltoclimb. Theemployeeswhoearnthosepensionsarequicktopointoutthatmanagementinmanyof thecompaniesstillfoundmoneyforilladvisedstockbuybacks,alongwithlucrativedividends andexecutivecompensation,neitherofwhichwassupportedbyresults. Journalistswhoareconstantlybeingaskedtodomorewithlesswonderwhytheowners didntinvesttomeetthecomingthreatandtoaddthefundstohonorcommitmentsto employeesbackwhentheyweremakinggreatgobsofmoney. PeopletakeheartthatWarrenBuffetthasbeenbuyingnewspapers,butitisworthnotingthat whenheboughtMediaGeneralnewspapers,heleftthepensionliabilitieswithMedia Generalsparentcompany. (TheNewYorkTimeshastakenaveryhardlineatthebargainingtableovertheissueof pensions,whichitcitesasarisktoinvestorsinitsforwardlookingstatements.Thepapers pensionplanisshort$522millionevenafterthecompanymadea$151millioncontribution lastyear.) Thoseofuswhoworkinsidetheracketliketothinkofourbusinessasunique,butwith underfundedpensionplans,unserviceabledebtandlegacymanufacturingprocessesandunion

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agreements,thenewspaperindustrylooksalotlike,well,steel,autosandtextiles. Thebreadandbutterformostoftheindustryislocalinformation.Butithasbecome seeminglyimpossibletomakemoneycreatingdailycompendiumsandthrowingitonpeoples doorsteps.Journatic,thecontentprovider,proceedsfromtheboldpremisethatgenerating communitynewscanfunctiononacallcentermodel,whereastaffunrelatedbygeographyor affiliationwillservecustomerneeds.Thecompanyallowedemployeestoginupfakebylines togivetheappearanceofaconnection. Anditsnotjustnewspapers.AOLsambitiouslocalnewseffort,calledPatch,islosing$150 millionayear,bysomeestimates,andisnoclosertocrackingthecode. Giventhatcontext,itsnothardtoseewhyAdvancePublicationsismakinghugemovesin someofthe25citieswhereitpublishesnewspapers,mostnotablyinNewOrleans,whereitis spendingthesummerreducingthestaff. AdvancesregionalWebsiteshavegeneratedtrafficandhaveactiveforums,buttheyarea miserableplacetoconsumenews.Balkyandugly,withadigitalrevenuebasebelowmuchof therestoftheindustry,theyseemlikeashakyplatformonwhichtobuildabusiness.Some recenttraffictrendsarenotencouraging.AccordingtoNielsen,TheTimesPicayunessite, Nola.com,had639,000uniquevisitorsinMay,comparedwithoveramillioninthatmontha yearago. Onceuponatime,theNewhousefamilykeptunionsatbaybypromisinglifetimeemployment, butnowthecompanywantstoshedpeople,andlegacycosts,asquicklyasitcan.Theplanis builtonaccounting,notstrategy,whichiswhysomeofthenewspapersheavyhittershave declinedoffersfromthenewlyreconfiguredenterprise. DavidHammer,whoplayedalargeroleinTheTimesPicayunescoverageoftherebuilding effortsafterHurricaneKatrinain2005,tookajobwiththeNewOrleansCBSaffiliate,WWL TV,doinginvestigativeworkhewillbejoinedbyBrendanMcCarthy,oneofthenewspapers youngstars. StephanieGrace,aformerstatewidecolumnist,declinedajobasareporter,andBillBarrow,a longtimereporterwhocoveredhealthcare,isgoingtoworkforTheAssociatedPress.Bob Marshall,aPulitzerPrizewinnerandthenewspapersoutdoorseditor,tookapassaswell. TheyarethekindofpeoplethatseparateTheTimesPicayunefrom,well,Journatic.When youlookatit,theywereaskingustotakeajobwheretherevenuesarestillverydependenton

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theprintproduct,Mr.Barrowsaid.Butthatnewspaperisnolongerapriorityandnoone knowswhatitisgoingtolooklikeorwhatitwillhaveinthewayofnewswhenitcomesout. Therearetoomanyunknowns. ThediminutionofTheTimesPicayuneisaprofoundlossandabetonsomeverywobbly assets.Still,whoistosaythattheNewhousefamilyisanymoremisguidedthantherestofan industrythatisscramblingforsafeground?Afterall,themathisdaunting,andthereisa shortageofmagicbullets. Butastheyproceed,theNewhousesshouldrememberthatcuttingcornersignoresa fundamentalfact:greatjournalism,onanyplatform,istheonesurehedgeagainstirrelevancy.

Email:carr@nytimes.com Twitter:@carr2n

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