Decline, debt and the demise of the daily newspapers

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For those of us who work for the 99.99 percent of American newspapers that are not The New York Times, The Washington Post or The Wall Street Journal, it’s always a source of delight and pride when reporters from small, unheralded papers win a Pulitzer Prize.

The big dogs always get their share – this year, the Times took home five Pulitzers. But every so often, the Pulitzer jury throws a bone or two to the scrappy little mutts in the flyovers.

It’s not an equal competition, to say the least. Reporters at major national papers have time, money and clout. If the Washington bureau chief for the Times calls the White House, he’ll get through, regardless of whether the current incumbent is pleased with the Times.

By contrast, local politicians often refuse to speak to reporters whom they deem “unfriendly.” And in today’s economic climate, publishers are concentrating on sheer survival – not prizes.

Reporters for small metro dailies have become semi-automated content providers, continually filing and updating brief stories – and video – for print, Web, e-mail blasts and podcasts.

This year, Arizona’s East Valley Tribune (which is owned by Freedom Communications, The Gazette’s parent company) won a Pulitzer. Here’s what Tribune Editor Chris Coppola wrote last week.

“We learned reporter Ryan Gabrielson and former reporter Paul Giblin had won the Pulitzer Prize in journalism for local reporting. The award was given for the five-part series published in the Tribune last year titled ‘Reasonable Doubt.’

“The series examined tactics used in Maricopa County Sheriff Joe Arpaio’s immigration enforcement roundups, and the impact caused by diverting resources to that effort.

“Just last week, Publisher Julie Moreno announced that by the middle of next month, the Tribune will be going from four to three days of print publication. The changes that have taken place since this series ran (we were a seven-day print product last summer) have been part of a transition …. The changes resulted in the loss of numerous jobs – including key members of the team that helped make ‘Reasonable Doubt’ happen – Paul Giblin among them.”

Giblin co-wrote a story that won a Pulitzer – and got laid off. That’s today’s newspaper industry, which has become the sick man of American business.

Earlier this week, the Audit Bureau of Circulation reported that for 395 newspapers, daily circulation fell 7 percent to 34,439,713 copies, compared with the same March period during 2008.

Even the New York Times’ daily circulation dropped 3.5 percent to 1,039,031, while the Sunday paper declined 1.7 percent to 1,451,233.

Those are grim statistics – but not nearly as grim as the ad revenue stats, which show year-to-year declines of 20 percent to 30 percent, including 27.3 percent at the Times.

So, are daily newspapers dying?

Any product group with 34 million daily users would seem to be fairly robust.

Perhaps, as Cassius said, “The fault, dear Brutus, is not in our stars, but in ourselves, that we are underlings.”

Even compared to the masters of disaster who blew apart General Motors, AIG or Bear Stearns, newspaper execs have been notably inept.

Consider the Times.

During the last 15 years, CEO Arthur Sulzberger made these decisions, which collectively gutted the company.

Borrowed $1.5 billion to buy back shares in the company, at an average price of $53 per share. The purchases were intended to “enhance shareholder value.” Earlier this week, Times shares had declined to $5.37.

Paid $600 million for a “signature” building to house the paper, at the height of the New York real estate boom.

Bought the Boston Globe for $1.1 billion during 1993. Earlier this month, the company announced that it would close the Globe unless unions agreed to $80 million in wage and benefit cuts.

You’d think that after so many bad decisions the Times would be on the verge of bankruptcy. It isn’t – yet – but almost every other major daily newspaper company is either bankrupt or nearly so. And like most bankrupt businesses, be they beauticians, bagel shops or banks, they have one thing in common: debt, and lots of it.

Thanks to stock buybacks and empire building, the once debt-free Times is into the moneylenders for a couple of billion dollars.

Earlier this year, the company borrowed another $250 million in a private deal with Mexico’s richest man, Carlos Slim Helu, for which he charged the company 14 percent annually, as well as a bunch of convertible warrants.

Bad news – but at least it puts employers and employees on an equal footing.

Let’s see – 14 percent. That’s about the rate that a journalist with typically bad credit would pay for a car loan with 20 percent down. And, as Senor Slim would say if he were running the credit department at Chuck’s Used Cars,

“It’s not that we don’t trust you – but the numbers say that you’re a default risk.”

John Hazlehurst can be reached at John.Hazlehurst@csbj.com or 227-5861.