We’ve seen the multiple stories of cutbacks, furloughs, salary reductions and other drastic measures being taken by the newspaper industry. Daily newspapers are fighting for their lives in an unprecedented struggle to keep their heads above water. It is a struggle they are losing.
During the 2009 recession, the price of advertising dropped like a rock, which changed the way both newspapers and television stations did business. This crisis is different because the price of advertising is not the problem. Many of the local businesses that support newspapers are closed. Closed businesses are highly unlikely to spend any money on advertising, no matter how big the discount.
Should we believe the press reports saying newspaper advertising has dropped 20 to 30%? I wouldn’t. The problem is actually much worse.
No one can run a newspaper, website or any other kind of business without revenue. During unprecedented times like these, papers have few choices: call on reserves, take out loans or sell assets to survive. But what if one has no reserves, cannot qualify for any more loans and has no assets other than the brick and mortar required to turn out a paper? Dare I even say it? Could this mean bankruptcy and cessation of operations?
There are, of course, the usual calls for government intervention. Some small papers might qualify for the stimulus package, but government money always comes with strings. Frankly, the idea of government influence of any kind over news media is frightening. I’d rather lose a newspaper than destroy the Fourth Estate.
Let’s assume for a moment that it does not get that bad and newspapers somehow avoid bankruptcy? Is their best-case scenario to cease print operations and convert to local online-only services? Could such local services afford to pay for first-class journalistic and editorial staff? The New York Times and Washington Post are often cited as great examples of web success. What no one seems to mention is those websites are still supported by regular print on paper newspaper advertising.
Is it really this bad? How could such a thing possibly happen?
Only 15 years ago daily newspapers were powerful forces in their communities. Their profits were legendary. Then, as now, Gannett was the largest. In 2004 Gannett stock topped $90 a share. Last week it was worth $1.20. As of this writing, it is worth 67 cents and headed down. Sixty-Seven Cents. Would you invest in a company whose stock is worth less than a dollar a share?
I would love to think innovation will save the day for newspapers, but innovation from weakness rarely works. The time for newspaper innovation was 15 years ago. Instead, the industry’s workforce has dropped by 50%.
Television stations are also suffering, and rumors of lender pressure are already making the rounds. Of course, television stations have a second revenue stream in retransmission consent, though retransmission alone will not pay the bills, not with today’s unprecedented levels of multi-billion-dollar debt.
Television stations are in better financial shape than newspapers, but those with the biggest mortgages are also approaching the time that they will be desperate for relief. Tegna’s announcement of company-wide furloughs and salary reductions for executives is probably not the only one we will see.
No one knows how all of this will shake out, but one thing we know for sure. A major crisis always ends with big winners and big losers. Winners from this crisis will likely come in two flavors: whatever traditional media is left standing and outside innovators who see a new business model.
If worse does comes to worst, here is some good news. We know the public not only has a genuine need and desire for accurate local information they are also willing to pay for it. If there is money to be made, that void will be filled, probably by radical innovators. Who will those innovators be? It will be fascinating to watch and find out.
Hank Price is a veteran media executive, educator and author of Leading Local Television (BPP, 2018) and co-author of Managing Today’s News Media: Audience First (Sage, 2015) a management textbook. He is a frequent speaker to television industry groups about the future of media. He currently serves as Director of Leadership Development for the School of Journalism and New Media at Ole Miss. During a 30-year career as a television general manager, Priced specialized in turnarounds, leading television stations for Hearst, CBS and Gannett. During this time, he became known for turning traditional businesses into multi-platform brands. Simultaneously, he spent 15 years as senior director of Northwestern University’s Media Management Center, teaching in both the domestic and international executive education programs.