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As Newspapers Start to Fold, Industry Seeks Survival Plan

March 16, 2009 at 6:40 PM EDT
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With record numbers of layoffs at newspapers around the country and some other publications, such as the Seattle Post-Intelligencer, moving entire operations online, industry professionals are struggling to find a new business model to carry them through the changing media landscape. Analysts discuss the situation.
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JIM LEHRER: Finally tonight, all that bad news about newspapers. Jeffrey Brown has our Media Unit report.

JEFFREY BROWN: It had been widely expected, and today it became official: After tomorrow, Seattle will become a one-newspaper town, when the 146-year-old Post-Intelligencer puts out its last print edition and becomes a much smaller Web-only operation.

The decision of the parent Hearst Corporation to abandon print for the Internet is the first for a large urban newspaper. Just two weeks ago, Denver’s Rocky Mountain News shut down its presses after close to 150 years of putting out a daily paper.

NEWSPAPER WORKER: It’s absolutely devastating to think that this is over.

JEFFREY BROWN: An executive with Scripps, the chain that owned the paper, explained it this way.

NEWSPAPER EXECUTIVE: The business model and the economy changed, and the Rocky became a victim of that.

JEFFREY BROWN: Indeed, the list of victims is growing ever longer. In Tucson, the Citizen, Arizona’s oldest newspaper, will close this weekend, unless its owner, the Gannett Company, can find a buyer.

And the San Francisco Chronicle is also fighting for its life. In the last few days, employees have offered concessions to keep the paper in business, and negotiations continue. The Chronicle lost more than $1 million a week last year. Its owner, the Hearst Corporation, has threatened to close the paper unless it can get significant savings. That would leave a major American city without a major daily newspaper.

NANETTE ASIMOV, reporter, San Francisco Chronicle: We’re waiting. We don’t know what it’s going to be. And we don’t know. You know, it might be me. It might be the people I sit next to, and it might be the entire paper. So we’re all extremely worried.

Newspapers in 'dire straits'

JEFFREY BROWN: Across the nation, numerous newsroom cutbacks have been announced and the number of pages slashed. Owners of major papers in Philadelphia, Chicago and Minneapolis have declared bankruptcy, while other papers, including the Miami Herald and the Chicago Sun-Times, have been put up for sale with no buyers on the horizon.

The economic downturn has escalated problems that were already tugging at the industry, such as plunging advertising revenues and escalating debt. And consumers continue to turn more and more to free news content online.

According to a recent Pew survey, the Internet moved ahead of newspapers this year as a leading source for national and international news, coming in second behind television.

What do citizens think of all this? In a separate poll conducted by Pew this month, 43 percent of those polled said that, if their local paper were gone, civic life would be damaged, quote, "a lot"; 31 percent said "some"; and 23 percent said "not much" or "none."

And joining me now to look at the state of the industry, Dave Hunke, publisher of the Detroit Free Press and CEO of the Detroit Media Partnership, which manages the business operations of both the Free Press and Detroit News papers. In two weeks, the two papers will stop home delivery on certain days of the week.

Lauren Rich Fine, a long-time newspaper industry analyst on Wall Street, she's now director of research at ContentNext Media, a private company, and teaches classes on the media business at Kent State University.

And Alberto Ibarguen, CEO of John S. and James L. Knight Foundation and former publisher of the Miami Herald and other papers. For the record, the Knight Foundation provides funding to the Online NewsHour.

Well, Lauren Rich Fine, let me start with you. Seattle today, more to come. Let me just put it bluntly: Are newspapers dying? What are we seeing?

LAUREN RICH FINE, newspaper industry analyst: Well, I think they're facing really dire straits right now, and I think some newspapers will fail. I don't think that it had to go this way. I think that newspapers ignored all the warning signs. It was an industry that was built on classified advertising, which has quickly migrated to the Internet, and the newspapers sat there and watched it happen.

JEFFREY BROWN: Dave Hunke in Detroit, does that -- how does it feel there? This move you're making to limit delivery to homes, was it that or close the newspapers?

DAVE HUNKE, publisher, Detroit Free Press: Well, it's actually far more than that. Our goal is to see that we don't end up on any of the lists of markets that you talked about recently. We just simply want to find a different way to retain our talent, our journalism, all of our people.

We absolutely believe in the future of the newspaper business, but we're not going to spend so much money on paper, fuel, manufacturing costs. We're not afraid of digital solutions. And I think you're going to find in Detroit we think there is a different way to go at it, and we think it's going to be a good business.

JEFFREY BROWN: Alberto Ibarguen, do you believe in the future of newspapers?

ALBERTO IBARGUEN, former publisher, Miami Herald: I believe in the future of news. News is absolutely essential to functioning a democracy. And I also believe in markets. And I think the markets will figure out a way, whether it's newspapers -- it may not be news "papers" -- but it will be something that will provide people with the news that we need to function in a democracy.

Digital, mobile, interactive model

JEFFREY BROWN: Well, let me stay with you for a moment, because one of the interesting aspects to the announcement today out of Seattle was that the paper would try to survive as a smaller online operation. Now, can it do that? That's always the question, to make that kind of attempt. What's the record say? What do you think?

ALBERTO IBARGUEN: I think the record is so far inconclusive. I don't think we know what the model is going to be. What I think we do know is that it's going to be digital; it's probably going to be mobile; and it is certainly going to be interactive.

I think what needs to happen is a great deal of experimentation. Some of it is happening in the industry. I think -- I wish a lot more of it had happened when newspaper companies were making considerable profits only a few years ago, but it didn't.

So here we are now. I think organizations like our foundation, like Ford, like MacArthur, Carnegie, are all doing experiments, supporting experiments. I think there are an awful lot of online independent news organizations, the Voice of San Diego, Chi-Town Daily News, Gotham Gazette, MinnPost, and I think there are lots of other experiments that are being done attempting to find models that will -- that will be economically viable.

So far, nothing comes close to the general reach of a newspaper, that ability to blanket a community with the same information that everybody can share, and figure out how to go forward together as a community, nothing yet.

But we also haven't had a major city that hasn't -- that doesn't have a newspaper. And when that happens, I think the market will figure out how to deliver that information. I think it is that important.

JEFFREY BROWN: Well, Lauren Rich Fine, you said at the beginning that newspapers missed lots of opportunities along the way. Given that we are where we are, as Mr. Ibarguen just said, what models, what kinds of experiments do you see out there? What ways should they be going to try to survive?

LAUREN RICH FINE: Well, one very basic idea which most newspapers have yet to try is to go to their core readers that still like them in print and ask how much they're willing to pay to get their paper delivered to their door.

Another would be an interim step, rather than going the direction of Seattle, which is a noble experiment that they're trying to focus on what they can do that's proprietary, would be the middle ground, which is some type of a online electronic newspaper, as opposed to a Web site.

Why not produce the newspaper online so that I can pull it up, read it page by page in the way that it was meant to be formatted, edited, which is a very valuable function, as was just mentioned? I can find the sections in a very predictable manner, and they can deliver it for free.

It would preserve the ad positions. It would preserve the journalists. And it would give us a chance to see if the community would still be willing to support the paper just in an online manner.

Establishing free online content

JEFFREY BROWN: Was it a mistake, Lauren, to go to giving away free content online so readily? The industry jumped into that quickly.

LAUREN RICH FINE: I don't really think that it was. There's a tremendous amount of competition online. A number of consumers are indifferent to where they actually get their news, although I like to believe that they can tell the difference between professional journalism and citizen journalism.

But I think it had to go free. I think that's the model of the Internet. Most media is just ad-supported, and that is still a comfortable place. And if we weren't in a recession right now, we would still be facing these challenges. They just wouldn't be as dire as they are today.

JEFFREY BROWN: Well, Dave Hunke, why stay in print, I guess is the question to you folks there? What about -- oh, I don't know -- there's a lot of people, a lot of organizations, for example, closing Washington bureaus. You still have some. Is that the kind of thing that maybe you could do and concentrate on local news? Are those kinds of things possible?

DAVE HUNKE: Well, I think we did many of those things over the last five years, where we're, frankly, tired of the layoffs and the unending cost-cutting on the news and content and people side of this business.

But you've asked me one question, which is, we still believe there is a great market for great, rich, in our case, Pulitzer Prize-winning newspapers. We just think there's a different way to go about the mechanics of producing them and delivering them.

But to Lauren's point, the most excitement in Detroit that's developing is we're going to do largely -- as she just described, there will be an electronic digital replica version of the newspaper that is embedded in every subscription and it is delivered at 5:30 to every one of our subscribers' e-mail addresses.

And I think you will find, as well, at the end of the month, we have some additional announcements on portable e-readers that are going to make that maybe the story, instead of the fact that we've cut out some delivery on certain days.

How to price news?

JEFFREY BROWN: Well, Alberto Ibarguen, I mean, I know what a lot of people wonder about. You talked about some of the experiments you're funding. Let's say that a major city -- San Francisco seems to be one of the possibilities -- is left without a major daily. Are there alternatives in terms of filling the gap for news-gathering? That's what a lot of people wonder about.

ALBERTO IBARGUEN: I think there are going to be alternatives. There may not be in a particular city, although I think in San Francisco there's a Center for Investigative Reporting that already is beginning to pick up on issues of investigative journalism, something like ProPublica is doing nationally and others at Boston College. There's another experiment that is also looking at investigative journalism done out of a university setting.

I think all of these are the beginning of what eventually will take hold. I don't know, though, how all of this is going to get paid.

I think Lauren's right that that certainly -- that the model of the Internet has certainly been free news, but I don't know that that's necessarily going to be the case. She talks about going back to readers and saying, "How much will you actually pay for the information that you valued before?" I think we're really going to know when there's no print alternative how much people really value.

And do you then price it on subscription? Do you price it on interaction, micro-payments, like Walter Isaacson suggested, in the cover of Time magazine a couple of weeks ago? I think all of these things are to be -- yet to be determined.

JEFFREY BROWN: Well, Lauren Rich Fine, I mentioned that Pew study, for example. Do we know much about how people feel about the prospects of losing papers, their hometown paper altogether?

LAUREN RICH FINE: Well, I think the real problem is everybody knows what they're supposed to say in answer to that question. And it sounds like some people were honest and said they didn't care, but most people like to think of themselves as a newspaper reader.

I'm not optimistic that readers will pay very much for the paper, but if they're given the choice of no paper, online Web site, or print paper, they might be willing to pay more for the print paper.

But what I'm still trying to figure out is why newspapers haven't done a better job of selling local advertising online. Most of the advertising that they do get online is still national in nature or classified. They've yet to really penetrate their own market.

They could be the ones to develop the local ad network. They could create micro-sites for small businesses. There are still some economic opportunities that they could pursue.

JEFFREY BROWN: OK, I'm afraid we have to leave it there. Lauren Rich Fine, Alberto Ibarguen, and Dave Hunke, thank you all very much.