A textbook example of the problems with newspapers

The McClatchy Co. is selling the Minneapolis Star Tribune for $530 million, which might seem a remunerative coup until you get the ouch news: Just eight years ago McClatchy paid $1.2 billion for the newspaper.

For McClatchy, the deal still seems logical. Analysts note the newspaper’s circulation and revenue are heading southward and that McClatchy needs to pay off its own purchase of the Knight Ridder chain earlier this year. The more interesting issue for the citizenry is Goldman Sachs’ judgment that the price is “a vivid reminder of the (newspaper) industry’s declining fortunes.”

I know it’s counter-intuitive to some — including to a guest at my home recently — but newspapers are in steep trouble.

The guest had difficulty accepting the assertion because of all the ads she encounters in the daily newspaper. But she failed to calculate the price-lowering competition for those ads, the high cost of newsprint and the fact that it takes major capital investments and lots of labor to produce newspapers. These papers are also delivered door-to-door each day at considerable cost, I observed, and then there’s the most important business negative — household penetration has been dwindling for decades.

Go back to 1950 and you find that almost every home got a newspaper, many more than one. That’s down to roughly half of all households today for a long list of reasons. One is that society has been changing and newspapers haven’t, at least not enough to keep up with new lifestyles. But don’t put all the blame on editors and publishers who thought the old ways were always the right ways or didn’t invest enough in their futures.

It’s no easy matter, after all, for newspaper managers to persuade new immigrant groups to take up a habit they never had, to deal with sweeping, newspaper-shedding shifts in the composition of families or to persuade TV-bred generations with a plethora of entertainment possibilities that reading a daily publication for a half an hour or more a day is crucial both for their own grasp of the world and for the democracy in which they live.

Nor can these managers erect stop signs that will be heeded by new technologies that don’t have to invest in printing plants, buy tons of paper or drive cars or trucks through snow, sleet and rain to put their products in your homes. While editors have been smart enough to create Internet sites for their newspapers, those sites don’t generate nearly the revenues needed to compensate for real or possible losses or to maintain a level of operations required to keep readers thoroughly informed.

Meanwhile, in addition to seducing audiences that might otherwise be spending more time with newspapers, Internet competitors are capturing revenues once only minimally at risk. Years ago, it would have taken huge amounts of money to compete for a major share of the classified advertising market that accounts for maybe a third of a paper’s revenue, but no more. Some ingenuity, personal computers and a relative handful of employees will get you off and running in this era.

Many newspapers remain highly profitable. When the Knight Ridder chain was sold under pressure from Wall Street, critics pointed out that its profit margin was 19 percent and angrily maintained that shareholding interests were acting out of greed. They missed the point. Shareholders have to look to what lies ahead, and as drooping circulation numbers for the nation’s largest newspapers again confirmed this year, newspapers are in retreat. “Newspaper readers are heading into the cemetery, while newspaper non-readers are just getting out of college,” investing genius Warren Buffet said in an interview I read — where else? — on the Internet.

I know something about this: Two of the four dailies on which I have worked in my 40-year career are now defunct and, to me, this is worse than sad. I confess to something that is next door to contempt for people who brag about not reading newspapers on or off the Internet, especially including some college professors who have smugly told me as much. The contribution of the daily press to our society and to the individuals within it is very nearly immeasurable, and a radical reduction in resources could be disastrous.

Perhaps that won’t happen; all sorts of possibilities lie ahead as newspaper corporations branch out in various ways and as still more technological advances make current truths less evident even as bright, innovative minds search out answers. Watch the headlines for developments.

(Jay Ambrose, formerly Washington director of editorial policy for Scripps Howard newspapers and the editor of dailies in El Paso, Texas, and Denver, is a columnist living in Colorado. He can be reached at SpeaktoJay(at)aol.com.)