The loss of a newspaper is not a good thing – even a competitor.
The Sun Post ceased publication Friday after nearly a four-year run.
This, of course, prompted some to crank up the broken record and flatly declare newspapers are a dying entity.
It is true the economic slowdown is hurting newspapers just like every other business. Yes, paid circulation in most cases have been dropping or staying steady as the Manteca Bulletin has. The idea, though, that the Internet is killing off newspapers is on par with the prediction in the 1990s that the Internet would eliminate the need for real estate agents and car salesmen.
So why does it seem so many newspapers are biting the dust lately? Paul Volcker would call it “over exuberance.” That’s being nice. I’d call it “greed” and “stupidity” or at the very least bad business practices.
The vast majority of newspapers crashing are owned by corporations - and sometimes private parties – who are severely overleveraged. They often made their purchases with questionable loans. Instead of being conservative, they expected the bubble to keep growing. If it sounds familiar, the buyers of newspapers who paid outrageous prices with little down were acting just like those people who were buying homes with zero down or low introductory mortgage rates on the assumption the value would keep going up and they’d simply sell at one point down the road and pocket a big profit.
Home buyers and newspaper buyers who threw caution to the wind and took the bite out of the forbidden fruit of “free money” and bought into the dream of soaring values that would never retreat weren’t alone. There is a reason why Best Buy is still standing today and Circuit City isn’t.
Think of Kohl’s compared to Mervyn’s.
It comes down to two things – too much debt and not adapting quickly enough to the changing landscape.
McClatchy – once considered invincible – took on debts of Titanic proportions when it went on a newspaper buying spree just before the market for newspapers peaked. They’ve been battling to stay afloat ever since. Even so, many of their newspapers continue to turn solid returns and are profitable on an individual basis.
It is also true of many newspaper firms trying to regroup in bankruptcy court. They have profitable newspapers. The problem is they are being crushed to death by debt.
A conservative approach is the best model not just for business but for people who are trying to build wealth whether it is securing a home or building a nest egg.
The other problem that newspapers often have is a failure to change. I don’t mean getting a higher profile on the web which so far hasn’t proven a way to make money in the long haul for newspapers, but in how you go about doing business.
It amazed me for years that the San Francisco Chronicle has over 300 people in their editorial operations for the longest time especially when you didn’t see it reflected in the day-to-day columns as they’d only be a dozen or so different bylines and the story count didn’t correspond to the manpower.
It may explain why they were at one point losing $70 million a year and actually debated about shutting down “The Oldest Voice in the West.”
Labor costs are a killer. Most in the private sector have known that for years. Government, of course, is just finding that out.
As for the Sun Post specifically, I do not have an inkling of what exactly forced them to pull the plug, as they are not a publically traded company and are family owned.
I do know it is never a good thing to see a newspaper go to the wayside.
Newspapers are more than just a business. They inform, provide a daily or weekly snapshot of a community, and – if they are willing to not be vanilla and play it safe editorially – stimulate debate on issues especially those that are local in nature.
Newspapers are just like any other business. Those ownerships that were lured by the siren song of mega-profits via mega acquisitions put a lot of chips down on taking on debt and ended up setting themselves up for failure.
To contact Dennis Wyatt, e-mail dwyatt@mantecabulletin.com
