Earlier this month, the Associated Press distributed a story about the last breeding pair of Yangtze giant soft-shell turtles.
“She’s around 80 years old. He’s 100. Breathless scientists watched as the world’s most endangered turtles successfully mated. But the attempt to breed the species’ last known female with the last known male in China has failed because the eggs didn’t hatch …. The elderly pair can try again next year, part of a delicate attempt to keep the species alive.”
We all, I’m sure, wish the turtles well. But the prospects for the survival of the species seem dim. Thanks to hunting and a degraded riparian environment, only four such turtles survive, all in zoos — and three of them are males.
Like the turtles, the daily newspaper industry may be headed for extinction, even before being formally listed as an endangered species.
Every daily newspaper in the country has seen double-digit declines in advertising revenue during the last three years. And advertising is to dailies what an unpolluted Yangtze was to those elderly, insufficiently amorous turtles during their carefree youth.
A couple of decades ago, the fearless entrepreneurs who ran companies like Gannett, McLatchy, Media News Group and Tribune Media saw newspapers as cash cows, able to generate double-digit profits indefinitely.
Want to build a media empire? Borrow money, buy a newspaper, use its constantly increasing cash flow to finance the debt, borrow more money, buy another paper, go public, use the cash to leverage more acquisitions and bingo — you’re a media titan.
The strategy seemed foolproof. Most dailies, in small markets or large, had no competition. Local advertisers had few choices — if you wanted to sell cars, or houses, or restaurant meals or hire new workers, you had to be in the daily. And readers had no choice — if you wanted local news, or the obits, or the movie times, or sports or national news that was more than a headline deep, you needed the daily.
So the entrepreneurs assembled highly leveraged companies that depended upon the rich, advertising-generated cash flows that have now vanished.
They’ve done what all businesses do when sales decline — cut costs. Newsrooms have been decimated, salaries have been frozen, graphic arts and finance have been outsourced to India, and capital investment has been frozen.
Industry stocks have typically declined by between 80 percent and 90 percent, making it impossible for papers to raise cash by selling equity stakes. And thanks to shrinking margins, many companies can no longer service their debt.
In California, the L.A. Times and the Orange County Register have put their headquarters buildings up for sale to raise cash — and other companies are in far worse shape.
Take, for example, the Journal Register Co., whose flagship publication is the New Haven Journal-Register. The company owns 27 dailies, and 327 “non-daily” publications. Corporate debt, now in excess of $640 million, threatens the company’s very survival.
Investors seem to agree. As recently as last year, Journal Register stock was listed on the New York Stock Exchange, but as of last week, the stock was quoted at $0.002 on the pink sheets, valuing stockholder equity at $320,000.
It may seem that newspapers are in the same situation that has bedeviled the airline industry, which has seen companies like United, Delta, Frontier and Northwest go bankrupt, emerge, get hit by rising costs, and take another trip to bankruptcy court.
But there’s a big difference.
If you want to fly, you have to take a commercial airliner and pay for a ticket. If you want information, you can go online and get whatever news you want, when you want, for nothing.
That’s partially because of sites such as Slate, Salon and Politico which generate their own content. But much of the “news” on the Web isn’t new at all — it comes from aggregators such as Huffington Post, Techmeme, Real Clear Politics or Google. Such sites are principally a collection of links to other sites, many of them daily newspapers.
Aggregators are where it’s at these days, as Farhad Manjoo pointed out on Slate.
“In my manic hunt for the freshest stuff on the Web, I reload some of these sites 10 or 20 times each … these sites are click magnets. It’s telling that Tina Brown, the former editor of The New Yorker and Vanity Fair, is now running a Web aggregator (the Daily Beast).”
Just as music download sites, beginning with Napster, made the creative product of musicians available for free, so too do aggregators effectively steal the creative product of newspapers. Absent the ability to link freely to news sites, the aggregators would disappear — but that’s not going to happen.
Newspapers have lost control of the distribution of their most important, and only unique product. Their reaction: cut editorial staff, and by doing so diminish the quantity and quality of that product.
Dailies won’t disappear — they’ll deleverage, shrink, consolidate, and eventually transmogrify into news-free vehicles for the delivery of printed coupons to the elderly.
But who knows? Maybe the industry will come up with a miraculous solution to all of its problems.
And maybe the 100 year-old turtles will successfully mate…
John Hazlehurst can be reached at John.Hazlehurst@csbj.com or 227-5861.