Anyone picking up a copy of the St. Louis Post-Dispatch from the morning of Sunday, March 22, was greeted with a glum little note.
“We know it is popular in some circles in many cities these days to bash the newspaper industry, to say that nobody is reading us anymore, that we are losing money, that we are dinosaurs, that we will be gone soon,” wrote editors Arnie Robbins and Pam Maples. “No, we are not as thick as we were a couple of years ago. No question.”
The note’s funereal tone was particularly jarring because its occasion—the announcement of a complete redesign of the paper—was once the sort of thing news organizations trumpeted as a rebirth, an opportunity for the masthead to enhance its product and better serve its readership.
Certainly, the outlook for newspapers was far from rosy when the paper underwent its last major redesign in September 2005. The rapidly consolidating industry was already suffering from reduced circulation and advertising revenues. Layoffs were commonplace, and the necessity to achieve online profitability was by then a full-fledged crisis.
Still, few then imagined the warp speed at which the industry would collapse, and editor Ellen Soeteber (who would abruptly resign two months after the announcement) summoned enough chutzpah to boast, “If it’s news around here, it’s news in here.”
Four years later, few daily editors retain Soeteber’s bravado. In February, the Rocky Mountain News ceased publication. In March, the Seattle Post-Intelligencer followed The Christian Science Monitor’s lead when it shuttered its print operations to become an online-only publication. As of this writing, newspapers as varied as the Tucson Citizen, The Boston Globe, and the San Francisco Chronicle are threatened with extinction. Meanwhile, Tribune Co. (owner of both the Los Angeles Times and the Chicago Tribune), Philadelphia Newspapers LLC (owner of The Philadelphia Inquirer and The Philadelphia Daily News), the Sun-Times Media Group Inc. (owner of the Chicago Sun-Times), and the Star Tribune in Minneapolis have all filed for Chapter 11 bankruptcy protection—and that’s just since December.
The Post is far from immune to the afflictions affecting the rest of the industry. Steep declines in circulation and advertising revenue have already forced the paper to shed more than 200 jobs since its acquisition, in 2005, by Davenport, Iowa–based Lee Enterprises. The paper’s news hole seems to shrink by the week, and Lee, which purchased the paper as part of a $1.46 billion bid for Pulitzer Inc., has either bought out or laid off much of the paper’s institutional memory and many of its name-brand reporters.
Enter the most brutal economic climate in 80 years, and the question becomes not whether what we now call the St. Louis Post-Dispatch will become unrecognizable as a newspaper in coming years—but when.
By some measures, the Post-Dispatch and its parent company are faring better than their competitors. Lee Enterprises is a newspaper firm that specializes in small to midrange markets like Bloomington, Ill., or Sioux City, Iowa. These tightknit communities often act as exurban hubs to their surrounding rural regions. Many have strong retail bases (in good times, at least), and their populations are often more engaged by parochial concerns than national issues. What’s more, many of these markets do not offer competing publications, allowing Lee, which prides itself on its intensely local coverage, to dominate.
The strategy has worked so far. At the company’s annual shareholders meeting in March, Lee president and CEO Mary Junck told shareholders that Lee newspapers and affiliated websites reach 70 percent of adults each week in the company’s largest markets. (The Post-Dispatch, by contrast, performed below the chain’s average, reaching only six out of every 10 adults—though that number jumps to 67 percent when you factor in the group of weekly Suburban Journals.)
Junck also presented data that the company’s online presence had grown by 3 percent in the past year, allowing Lee properties to dominate among local Internet news sites. She highlighted that the company has poached $26 million in advertising from its competitors and boasted that Lee Enterprises, known for its take-no-prisoners sales departments, has outperformed the industry average in advertising revenue in every quarter since 2003.
Still, this sunny portrait is dampened by the fact that Lee’s advertising revenue has declined in every quarter since the start of 2007—“outperforming” its competition only in the sense that it has lost less money than the industry average. What’s more, the week that Lee Enterprises announced its purchase of Pulitzer Inc., the company’s stock was trading at more than $44 per share. On September 5, 2008, two days before the Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac were being placed into conservatorship, the company’s stock closed at $3.14. As of this writing, Lee shares hover around $0.35—less than half the newsstand price for a weekday copy of the Post-Dispatch.
To right its economic ship, Lee restructured its financing agreements earlier this year. Most pressing was the $306 million in debt it acquired during its bid for Pulitzer Inc. The so-called Pulitzer Notes would have been due this past April, but by paying down the principal to $186 million, Lee Enterprises bought itself a few years. The refinanced loans are now due in 2012, which Lee vice-president and chief financial officer Carl Schmidt assured investors would allow the company to weather the recession.
The newly structured credit arrangements significantly reduce Lee’s near-term debt service. Still, the company is groaning under more than $1 billion in debt, and while many of its holdings remain profitable, Lee has essentially negotiated a balloon loan, and payments at maturity will increase from $83.1 million to more than $502 million.
The gamble here is not only that the economy will improve significantly in the next few years, but also that Lee will manage to both increase revenues and reverse its 99.2 percent slide in share value—a feat that consistently eluded the company during the go-go years just before the crash.
But even if Lee Enterprises does manage to ride out the recession and sidestep bankruptcy, the company’s flagship property, the St. Louis Post-Dispatch, will have been radically transformed to do so.
“In 2009 and 2010, all the two-newspaper markets will become one-newspaper markets, and you will start to see one-newspaper markets become no-newspaper markets,” Mike Simonton, a media analyst and senior director at Fitch Ratings, told The New York Times in March.
This is not to say the Post will cease to exist or become an online-only publication anytime soon. For starters, it remains far from clear whether stltoday.com would be financially viable as a stand-alone entity. According to a recent earnings report, online advertising accounts for less than 7 percent of Lee’s total advertising income. By shifting the Post-Dispatch to a digital-only format, the company would be sacrificing a substantial portion of its ad revenue—and that’s to say nothing of the paper’s income from circulation.
“It’s the print model that pays for everything—not the Internet,” says John Morton, an independent newspaper analyst. “And it’s not real clear right now how the Internet can ever be made successful enough for a newspaper operation to fund a lot of journalism.”
Nor is it likely that Lee will try to sell the paper. Not only would it be hard-pressed to find a buyer, but after having paid top dollar for the Post in 2005, Lee would almost assuredly lose money on the deal.
“They wouldn’t get much for it, considering what they paid,” says Morton. “They bought Pulitzer at the peak of the market and paid a pretty fat multiple to acquire the company. I don’t know what they valued the Post-Dispatch at when they bought it, but I imagine it’s only worth a quarter of that now.”
In other words, Lee (like virtually every other publisher of a large metropolitan daily) needs to stick with the Post and newsprint until someone figures out a way to make Internet operations profitable enough to replace the print model.
The problem, of course, is that no one has a clue how to do that, and so in the meantime, many heavily leveraged newspaper companies are trying to cut their way to fiscal health. Lee has already reduced its pool of full-time employees this year by more than 10 percent (that’s atop a 4.2 percent reduction in 2008). The company is saving millions in printing costs by transitioning all of its papers to an 11-inch-wide format. It has enacted a pay freeze, suspended 401(k) matching contributions, and introduced mandatory unpaid furloughs.
Since its acquisition by Lee, the Post has seen its newsroom shrink from around 340 staffers to roughly 210. Companywide, it’s lost more than 200 jobs, and the broadsheet publishes, on average, 40 fewer pages per week than it did 3 1/2 years ago.
“Do you have to give up some things? Sure, but I don’t think you give up as much as the simple numbers indicate,” Post editor Arnie Robbins says. “I think we can still do high-impact, strong journalism, but we do have to be smarter about our priorities.”
Not everyone agrees. To illustrate this point, members of the St. Louis Newspaper Guild traveled to Iowa in March for Lee’s annual shareholders meeting. While there, they handed out flyers informing stockholders that “Lee’s whacking of staffers [makes] premier journalism harder to create” and has made it “difficult for the Post-Dispatch to claim that it is essential reading.”
The irony is that while the Post is struggling with a shrinking news hole, layoffs, and budget cuts, the product itself is likely reaching more people than ever. Whereas the physical paper has a daily circulation of around 240,000 subscribers (down from its 1990 peak of 392,000), the paper’s combined print and digital operations reach an estimated 1.3 million people each week.
Of course, that figure of 1.3 million readers is somewhat misleading. Whereas subscribers to the physical paper experience the omnibus news package with its full host of stories, news aggregators like Google and Yahoo! bypass the rest of the paper, directing readers instead to individual stories.
It’s this disaggregating feature of the Internet that most threatens the physical and cultural existence of newspapers: Whereas the Post has managed for decades to field bureaus in Washington, D.C., Springfield, and even St. Charles by selling readers (and advertisers) on the omnibus publication, that sale becomes infinitely more difficult when readers access single articles and leave the rest of the publication untouched.
“The days are gone of print being the be-all and end-all,” says Robbins, adding that one of the models the paper is exploring would be akin to cable television, in which subscribers choose only those services they want. “There will still be [a newspaper], but the challenge for us is to develop other print products that people want and will pay for—so if people want more business news, we can produce a weekly or monthly business publication.”
Robbins further envisions that the paper’s online component could someday mimic social networking sites like Facebook and cater to individual subscribers’ interests.
“Instead of you having to search for things you’re interested in, we would know, for instance, that you love the Cardinals, theater, and Cajun restaurants,” Robbins says. “Ultimately, you’d get the news delivered to you the way you want it and how you want it. What we have to figure out is—it has to be valuable enough that people will pay for it.”
But getting readers to “pay for it” goes against the very ethos of Internet publishing. Moreover, unless the paper greatly increases its subscription costs, this model continues to rely on circulation and print advertising as the Post’s main revenue sources.
And while a cable-like model may shore up the paper’s circulation figures, subscriptions account for only a portion of any publication’s revenue. The real money comes from advertising, and in today’s punishing bear market, many businesses have stopped buying advertising altogether.
“After every past recession, the newspaper industry was able to recapture almost all that it had lost,” says Morton. “But the Internet has become far more competitive for eyeballs and advertising. So there’s a very large question of how successful newspapers will be in the coming recovery at recapturing what they’ve lost. They’ll have lost some forever.”
The soft advertising market has caught many news executives flat-footed. They’re now playing catch-up, batting around ideas as varied as a government bailout, a micropayment system that charges on a per-article basis, and even handing newspapers over to nonprofit foundations so that they may forge relationships like that between the St. Petersburg Times and The Poynter Institute.
All of these solutions seem hastily conceived, and there’s no industry-wide consensus on the best course of action. But amid all this uncertainty, one thing remains glaringly obvious: It’s less and less likely we’ll be reading about it in the paper.
National Numbers Tell a Grim Story
- More than 500 newspapers have closed in the U.S. since January 1, 2008. —Paper Cuts, March 19, 2009
- Roughly 5,000 full-time newsroom jobs were cut, or about 10 percent, in 2008. By the end of this year, American daily newspapers may employ somewhere between 20 percent and 25 percent fewer people than in 2001. —The State of the News Media 2009, Project for Excellence in Journalism (PEJ)
- Total ad revenue for newspapers fell 16 percent in 2008. Online ads fell 0.4 percent and amounted to less than 10 percent of revenue. —PEJ
- Newspaper stock prices fell 83 percent in 2008. —PEJ
- Thirty-nine percent of respondents to a Pew poll said they read a newspaper yesterday—either print or online—down from 43 percent in 2006. The percentage reporting that they read just the print version fell by roughly a quarter, from 34 percent to 25 percent. —Pew Research Center’s 2008 news consumption survey
- Forty-three percent of Americans say that losing their local newspaper would hurt civic life in their community “a lot.” Thirty-three percent say they would personally miss reading the local newspaper a lot if it were no longer available. —Pew Research Center, March 12, 2009
Malcolm Gay is the magazine’s editor-at-large. He writes frequently for The New York Times.
