Public Policy and Funding the News

A Project of the USC Annenberg Center on Communication Leadership & Policy

The News Media In Crisis

Ression Signs Mount
Most people did not see the tidal wave coming. In June 2006 McClatchy purchased Knight Ridder for $4.5 billion plus $2 billion in debt.1 It promptly sold off some of Knight-Ridder’s biggest papers (Philadelphia, San Jose, St. Paul and Akron) to investors who also didn’t see it coming. The following year Sam Zell took his own ill-fated leap, acquiring Tribune Co. in a $13 billion deal financed almost entirely by borrowed money. It would take only 12 months for Zell to take Tribune into Chapter 11 bankruptcy court.2 The hometown owners of the Philadelphia Inquirer would make the same choice not quite three months later.3 At about the same time, a private equity firm, Avista Capital Partners, which purchased the Minneapolis Star Tribune from McClatchy, took that newspaper into Chapter 11. (It emerged from bankruptcy court eight months later.) 4

Bad times for ad revenuesThe speed with which these blockbuster deals came back to haunt their buyers suggests the nightmarish conditions that have swamped the newspaper industry in the last few years, and wreaked havoc as well at many magazines and broadcast outlets. More than 100 newspapers shut down in 2009.5 Most were small, but some big newspapers shuttered as well, including the Rocky Mountain News and the Seattle Post-Intelligencer. The casualty list is almost certain to grow.

News businesses have always been susceptible to the ups and downs of the economic cycle, so the violent downturn of 2008 and 2009 was certain to knock them for a loop. But that was only part of what was sending their stock prices, revenues and earnings into a tailspin. All legacy media were buffeted by the rapid advance of Web-based and other digital technology that increasingly pulled consumers from traditional media. In the case of newspapers, the Web’s impact was particularly brutal because it robbed them of most of their classified ads, which were by far their most profitable form of revenue. Jeffrey Klein, a former top executive at the Los Angeles Times, has said that in some years classified ads provided all of the Times‘ profit margin.

These are among the numbers that have rocked the news business and eliminated tens of thousands of jobs:

  • Newspaper advertising revenue, down 9.4 percent in 2007, dropped a dramatic 17.7 percent in 2008. The picture grew even worse in 2009, with ad revenue down 28 percent through the first three quarters.6
  • The decline of newspaper circulation also accelerated, with the number of subscribers falling below pre-World War II totals, when the country’s population was half that of today.7
  • Audiences for network evening news shows also continued to slide, even in a robust presidential election year.The broadcast networks averaged 23 million viewers in 2008. Less than two decades earlier, the networks had double that audience, even with an overall population that was 20 percent smaller.8
  • The major weekly news magazines also experienced falling circulation, though not at the steep levels of many newspapers. Newsweek was down 25 percent, and Time was off 18 percent, between 2002 and 2009. U.S. News & World Report discontinued weekly publication and shifted its traditional news operations to the Web.9

Economic recessions have often resulted in newsroom staff reductions, but this one took a gigantic toll. Editors made round after round of newsroom cuts. Many who survived endured wage freezes, or cuts, or mandatory furloughs, or all of the above. Vacations were reduced. Pensions were eliminated; company matches on 401(k) plans were terminated. According to the Web site Paper Cuts, newspapers eliminated nearly 15,000 jobs in 2009.10 Not atypical was the experience of the Los Angeles Times, whose newsroom in 2009 was less than half its size a decade earlier.

It is possible to imagine a future news ecology that will be much, much richer than the one we are leaving behind. Yet it is unclear whether that vision will really emerge, or if it does, how long it will take to happen.

Most publications also drastically reduced news pages. Editors trimmed stock listings and TV books years ago, but now they were forced to reduce or eliminate many of their prized sections – books, arts, business, local news. Most also took a mighty whack at state, national and foreign bureaus. Newhouse, Copley, Media General and Cox all shut down their Washington bureaus.11 Cox closed its foreign bureaus as well. Virtually every news organization that maintained a state capital presence pulled back. Statehouses like those in Denver and Des Moines, which once housed two to three dozen reporters each, have seen those numbers fall by roughly half. In some places the decline has been greater.

If this were the end of the story, some sort of emergency federal response might be in order. But it is not. New news sources are emerging at a rapid pace, from local community news sites to Facebook news groups to national investigative nonprofits. It is possible to imagine a future news ecology that will be much, much richer than the one we are leaving behind. Yet it is unclear whether that vision will really emerge, or if it does, how long it will take to happen. In the short run, as news resources in legacy media continue to shrink, there are questions about Americans’ ability to get critical news about the government and the world, and, at this moment of uncertainty, what role the government should play.

Notes

  1. David Lieberman, “McClatchy to buy Knight Ridder for $4.5 billion,” USA Today, March 13, 2006. http://bit.ly/5DUldV
  2. James Rainey and Michael A. Hiltzik, “Owner of L.A. Times files for bankruptcy,” Los Angeles Times, Dec. 9, 2008. http://bit.ly/IpMup
  3. Robert MacMillan, “Philadelphia papers’ owner files for bankruptcy rotection,” Reuters, Feb. 23, 2009. http://bit.ly/8xsFDI
  4. David Phelps, “Star Tribune files for Chapter 11 bankruptcy,” Minneapolis Star Tribune, Jan. 16, 2009. http://bit.ly/7GeJ0G
  5. Paper Cuts Web site. http://bit.ly/7UsDQH
  6. “U.S. newspaper ad revenue down 28 percent,” Agence France Press, Nov. 20, 2009.
  7. Alan Mutter, “Record plunge: newspaper circ at pre-WWI level,” Reflections of a Newsosaur, Oct. 26, 2009. http://bit.ly/3OrYu5
  8. The State of the News Media, March 2009. http://bit.ly/IHBVX
  9. Erik Sass, “Weeklies Suffer Big Declines in Paid Circ,” Media Daily News, Sept. 9, 2009. http://bit.ly/5T3cvS
  10. Paper Cuts Web site. http://bit.ly/7UsDQH
  11. Howard Kurtz, “As Mainstream Exits D.C., Niche Media Tide Rises,” The Washington Post, Feb. 11, 2009. http://bit.ly/4dkX