Nieman Foundation at Harvard
“We are all going to jump ahead three years,” Mike Orren, chief product officer of The Dallas Morning News, suggested to me last week.
At least. Ask an American newspaper exec a few weeks ago what they thought 2025 would look like, and they’d tell it you it would be much more digital, far less print, and more dependent on reader revenue than advertising. Some of them would have told you they think they had a plan to get there. Others, if they were being candid, would have said they didn’t see the route yet, but they hoped to find one in time.
The COVID-19 crisis has clearly accelerated that timeline — and may have ripped it to shreds altogether, depending on how long the shutdown lasts and how deep the resulting recession gets.
Make no mistake, though: Many of the decisions being made right now and in the next few weeks will be permanent ones. No newspaper that drops print days of publication will ever add them back. Humpty Dumpty won’t put the 20th-century newspaper back together again. There can be no return to status quo ante; the ante was already vanishing.
Will these decisions “save” the local press, as we’re bombarded with stories of systemic, perhaps irreversible failure in North America, the U.K., and Europe? One way or the other, these are now existential decisions that can no longer be avoided or postponed.
Gannett, now by far the largest local news chain, has already announced pay cuts and furloughs, in both the U.S. and U.K. But all publishers, big and small, are now considering their options. Those include layoffs, rapidly eliminating several days of print publishing, reducing their ad sales staff, and questioning their need for large central offices as remote work becomes a workable norm.
All of those ideas have been discussed for years. But now they have to make decisions they’d hoped could wait a few more. The decisions they make, and how they can act on them, will tell us a lot about how much of the local press is left — and how much isn’t — come 2021.
That’s an internal view. Of course, local newspapers operate in a broader media world — including local public media, local TV, and local startups. In some larger cities, public radio stations are taking audience (and sometimes talent) from the dailies. Local commercial TV stations are feeling advertising pain too, but they still have more capacity to sustain themselves — and grab future market share. “They’re expanding more in digital and in social,” says TV business expert Bob Papper, who tracks the industry closely. That’s true even after Michael Bloomberg’s one-man subsidy of local TV ran its course.
Then there’s the nascent independent local press, from VTDigger to Berkeleyside, Charlotte Agenda to The Colorado Sun, The Memphian to MinnPost. Many of these green shoots are finding a little more sunlight — but they’ll be the first to tell you that it’s a tough road replacing their town’s flagging ancestral dailies. Meanwhile, amidst the carnage, some schemers and dreamers are strategizing about what they see as the detritus of a daily industry, waiting to be bought out or taken off by a new generation of local news builders. They’re early in that process; that’s a story for another day.
Let’s step back for a moment and consider the larger society in which local news — and all of us — now all operate. The double whammy of virus terror and economic calamity has made real a whole host of underlying issues — from generational equity to the ragged safety net, affordable child care to cramped housing, the entire panoply of inequities baked into our society.
Perhaps this will be merely a short bout of home detention followed by a fast, v-shaped economic recovery. Maybe these issues will dissolve quickly in the public discourse. For tens of millions, though, they will remain ever-present, defining their lives and their possibilities.
How will the local press of the 2020s cover these realities of life on the ground when we return, blinking, into the sunlight? Will journalism at all levels be strong enough to contribute the deep reporting and analysis that that intelligent fixes require? Will a society shocked by American incompetence in the face of an enemy find its future aided by the press it deserves and requires? Or will a nation of emptied-out newsrooms be unable to meet the moment?
As I wrote Friday, the biggest problem in America isn’t (yet, at least) newspapers going under. It’s ghost papers, strip-mined by ownership, disguised as news sources but actually offering very little in the way of local news or community leadership. The press, whatever its form, finds itself in a classic position: Lead, follow, or get the hell out of the way.
In the shorter term, though, the set of life-or-death questions local newspaper companies face right now is fairly clear.
So let’s look at each of these more deeply to see what a prematurely arriving 2025 means to readers, journalists, newspaper employees, and publishers.
“The retention from digital Saturdays has been nearly total,” Sara Glines, regional publisher for McClatchy’s Carolina properties, told me Monday:
We lost less than a dozen subscribers in each market, in some markets less than a handful. Digital activation went up immediately. E-edition usage went up on Saturdays. In today’s coronavirus environment, those digital activations have gone a long way in bringing more readers to our digital platforms for breaking news and updates. Miami Herald and El Nuevo Herald were our last markets to launch digital Saturdays. Their first digital Saturday was March 21. It went just as smoothly as all other markets.
How well does McClatchy’s Saturday strategy translate to the broader industry? We know the lessons:
But those essential-to-execute guidelines only tell us so much. Dropping Saturdays saves publishers some money — but not that much. With as much as half of their ad money evaporated by COVID-19, publishers will need bigger savings — which means cutting more days.
Readers who might easily adjust to the logic of a weekend paper might also think that saying goodbye to Monday, Tuesday, Thursday, and Saturday, all at the same time, is too much. If it’s too much for readers, and they drop their subscriptions entirely, then the local news business spirals downward even more quickly.
If it works, though, it can save a lot of money.
A huge portion of newspapers’ budgets remains tied up in manufacturing: presses, paper, ink, trucks, and all the people who handle them. (These are the often forgotten newspaper employees, the ones who realize their jobs are going away, but nonetheless like the idea of that happening in 2025 more than 2020. Let’s not forget them.)
“There are so many variables,” one veteran of the trade told me:
Most important: Do you outsource printing or not? If you do, then you can usually cut days and save money. If you own your own presses, it’s harder to manage. Pressmen don’t work just two days. What does it do to your distribution network; can they afford to operate just two days a week? Do you have an agreement to print and distribute other papers like The New York Times or USA Today?
That reckoning — to in-source or outsource — has led to much more regionalized printing, like The Columbus Dispatch being printed 175 miles away in Indianapolis. Those longer distances lead to much earlier editorial deadlines, which means missing late news or sports — often resulting in a print product that’s 36 hours behind the news we read on our smartphones. That’s part of this unending spindown of the newspaper industry.
What’s the 2025 business view here? Expect that most surviving dailies will offer as robust a Sunday print product as they can, and digital through the day, through the week. Or maybe it’s Sunday and Wednesday, for midweek print advertising, depending on individual markets. Or maybe the big Sunday paper shifts back to Friday or Saturday to capture more weekend reading and shopping. Done well, a publisher that shifts from seven days to a couple can expect to retain 75 to 90 percent of existing print advertising. But publishers have been properly wary of that ripcord now dangling in their corner office.
We’ve already seen several titles, most prominently the Tampa Bay Times, announced radical day cuts, within this crisis, and we’ll see more. The question is how many more, and how many days will they be cutting? Even in relatively prosperous California, major publishers are planning to drop Saturday print by early next year, knowledgeable sources tell me.
The national news brands offer the best-practice playbooks here.
Business intelligence forms the foundation of their business, with an ever-evolving understanding of how to win — and keep — paying subscribers. That intel has then led to newsroom staffing expansion. They’re creating a virtual flywheel of more and better content and services to readers, who then pay for subscriptions and build a new — bigger — business.
For the locally oriented companies, though, that model is daunting. Do they have the will, capital, time, and talent to apply proven lessons?
Some smaller chain newspapers were already down to the most skeleton of product-producing staffs, pre-COVID-19. We’ll now see tested the question of how low on staffing they can go — just to get a product out. The more important question, though, is: How many people do they need to produce something readers will pay for?
Having learned that they can produce the news almost entirely remotely (other than printing and distribution), how much will news organizations want to reconfigure their workspaces to generate savings out of reduced office space?
“We’re 100 percent remote,” says Mike Klingensmith, publisher of the Star Tribune. “Nobody is in our office. I don’t know how we are doing it. Everyone may figure out we don’t need an office after all.”
About 20 percent of newspaper employees work in the physical business of print, manufacturing, and distribution. For the rest, this small unthinkable is now thinkable.
Publishers have continued to make and re-make their ad priorities, staffing, and skills as The Duopoly and digital have forever changed the nature of advertising. This crisis — with some portion of that missing advertising likely never to return — will prompt more rethinking. How much inside sales versus how much outside? How much branded? How much direct versus programmatic?
He expresses a global POV; let me add a local one. The future of the local press is in a deep and authentic relationship with its readers and communities. And that means people in close contact, post-coronavirus. Events of all kinds will be a major part of that future for the successful.
The Olympics may have been pushed to 2021, but The Consolidation Games is going ahead as scheduled, virus schmirus. In fact, there’s good reason to believe this crisis is accelerating an M&A process that had already been moving fast.
Share prices for publicly traded chains have dropped dramatically, with Gannett floating just below $2 Monday. When GateHouse bought Gannett — just over four months ago! — this was the deal: “$12.06 a share in cash and stock, based on New Media’s Friday closing price, with a promise of $6.25 in cash and 0.5427 of a New Media share for each Gannett share.” From that to two bucks is quite a fall.
Depending on the duration of this crisis, Gannett’s shares are likely to rise eventually. But its big question remains the $1.8 billion in debt — at 11.5 percent interest — that it took on to make the merger work. Will Gannett be able to keep on schedule with those payments — while, you know, actually operating the company — if the ad exodus extends into summer or fall?
It’s not just future earnings that these companies need to worry about it. It’s also collecting on what’s already been sold, on ads that have already run.
“One of biggest issues is cash flow,” one news industry financial veteran told me. “What if all those SMBs [small to midsize businesses] don’t pay for January and February ads? Even if they have cash, they don’t want to cut checks. Even places like Macy’s may just not pay for January inserts.”
(Here we meet one of the great players in any crisis: attorneys. “In this whole mess, expect full employment of lawyers arguing ‘force majeure’ as a reason not to enforce contracts businesses want to get out of,'” that finance source continued. Is a pandemic an Act of God? It’s a legal “gray area.”)
These are more than abstract concerns. Metro publishers have already told me about major advertisers asking for givebacks and “accommodations.”
Some, including me and much wealthier investor Leon Cooperman, have long doubted Gannett’s ability to pay off that five-year loan while continuing to pay a hefty dividend to shareholders and keep enough people in its newsrooms with the cash flow it could expect.
This crisis only makes those doubts grow stronger.
It’s way too early to mention the “D” word — default — though it is being brought up offline.
One financial source tells me the deal will be a mix of cash and stock: “Tribune is the acquirer. That would leave them with more liquid security, a big beneficiary of all the synergies. Tribune can fit it into their balance sheet, since it has little debt, with no problem.” (At the moment, Tribune debt stands at $37.6 million.)
Financially, it’s a strategy that has worked for Alden. Enough older subscribers have accepted its higher pricing, and it’s found just enough buyers of its minimal digital products to keep the profits coming.
So what will this crisis mean to Alden and its president and chief dealmaker, Heath Freeman? “Heath could use this to run the table,” one observer said.
It’s easy to see why and how that indeed might be possible. Look at what the chain landscape may be by summer. McClatchy, one of the now lonely “independent” chains, will emerge from bankruptcy in four to six months (unless virus-driven delays lengthen the process). At that point, controlling owner Chatham Asset Management will look at its options.
One will be merging with the new Alden+Tribune.
Another, maybe, would be turning to Gannett. That would require a larger financially rejiggering, though, with lender Apollo a key player.
Either way, given the deep declines the industry faced pre-COVID, plus the unknown toll going forward, we could well see this reality: four hedge funds and private equity firms controlling a majority of America’s daily press as 2020 rolls on into darkness.
Chatham, Apollo, Alden, and Fortress Investment Group (which holds a contract to manage Gannett through 2021) may well get to decide amongst themselves how to divvy up the properties that deliver the local news most Americans get.
That’s not the picture Seattle Times owner Frank Blethen has in mind as he has launched his “Save The Free Press Initiative” in December. But it’s a reality we may all soon face.
This extreme moment is forcing publishers’ hands. Undoubtedly, some may look back on the other side of COVID-19 and say: “That worked well. We should have done it earlier.” Others will wish they’d had more time to think about jumping.
If publishers’ can still see any water in the glass at all — it seems to be emptying day by day — they might invoke Rahm Emanuel’s timely advice about the Great Recession at the start of Barack Obama’s presidency: “You never want a serious crisis to go to waste.”
This is a crisis. This is serious. And there’s no time left to waste.
