Just this past week the Hearst Corporation announced from New York that “in an effort to reverse the deepening operating losses of its San Francisco Chronicle, it is seeking significant near-term cost savings that would include deep cuts in both union and non-union staff.” In its statement Hearst said “if the savings cannot be accomplished quickly the company will seek a buyer, and if none comes forward, it will close the Chronicle”.
The Chronicle lost more than $50 million in 2008 and is on a pace to lose more than that this year, Hearst said. The company had announced January 9th that if a buyer is not found by March for one of its other 15 newspaper holdings, the Seattle Post-Intelligencer, it will close that paper, which has lost money since 2000.
The Rocky Mountain News, owned by Scripps, closed shop Friday, after being in business since 1859. It lost $16 million just last year, and with the economy in free fall, pulled the plug before losses mounted in the mountain state.
These are not isolated incidents, but rather we are witnessing the first white-caps in what is becoming a tidal wave of losses threatening to drown many media businesses. And with those deaths the public loses many of its safeguards against corrupt politicians, businesses and individuals.
In a New York Times article published last Monday about Rupert Murdock, executives at his News Corp. owned Wall Street Journal told the Times, “Like the rest of the industry, they have seen a significant decline in advertising revenue.”
Yet the Times reports, “The Journal has outperformed almost all its competitors by maintaining its circulation of more than two million in print and online, in the most recent reporting periods, while nearly every other major paper showed declines.” The San Francisco Chronicle, in business since 1865, has 1.6 million weekly readers, and its SFGate web site is one of the nation’s top 10 news sites. Yet they are losing money by the bucket-full.
Therein lays the conundrum. Circulation is great. Revenues are not. Throw in increased costs for paper and personnel, and the solution becomes clear. Cut or die. (In January the Chronicle raised its subscription and newsstand prices, but not enough to make up substantial losses. And increasing prices could force some readers to quit.)
The Wall Street Journal and San Francisco Chronicle are not the only media businesses in trouble. Broadcast has the same dilemma.
I just played golf with a popular local morning DJ in San Francisco who told me station ratings were through the roof. “Best we’ve ever had!” But ad revenue was down dramatically. A well-known morning radio talk show host told me the same thing over lunch. “Lots of listeners. Fewer advertisers.”
Local TV stations nationwide are cutting budgets and staff, despite good ratings. Long time anchors are being sacrificed on the altar of cost-cutting, despite their popularity with viewers. This of course threatens the very quality of news the public demands.
But there is a sad but true reason for these dis-connects from the traditional media business model. Readers want to know what the experts are saying about the future for the economy. Radio listeners and TV viewers desperately want to be entertained. Unfortunately advertisers can’t afford to help pay for that content.
For years the biggest media clients have been car companies and their dealerships, retailers, financial institutions and airlines. Call them “the big four” that kicked out predictable and expensive ads for media companies. Now the auto industry is in a severe slump, as are retailers. Banks are not lending. Airlines have cut capacity so much that planes are full without advertising.
There is an age-old axiom in advertising that you need to target your clients’ message to those most likely to buy. But in this economy most consumers are sitting on their cash, unwilling to spend it on almost anything. That makes it enormously difficult for advertisers to convince clients to spend. There is simply no jingle they can create that’s good enough to get a consumer to buy right now.
This incredible financial pressure on media companies will force them to make drastic changes that will last well beyond the current recession. Consumers who are switching to so called “free content” may not come back to the “paid models”. The Internet itself will become a far greater content provider, but without content provided by newspapers its quality will certainly suffer. More viewers will turn on their computers and hand-held devices than their TV sets. The future for print is a daily debate in newsrooms and at magazine houses nationwide.
Out of this media carnage survivors who can figure out a way to make money will prosper. New companies will emerge and profit from losers mistakes. But picking those winners is even tougher than selling an ad right now.
Most important, will the survivors be dedicated to providing the public objective and independent news content vital to our democracy? Or will their rush to the bottom line leave the fourth estate behind?
(Brian Banmiller is a national Business Correspondent for CBS News Radio, free lance writer and public speaker. The former television business news anchor in San Francisco can be reached at email@example.com .)
This article originally published on February 28, 2009.
CBS News Radio national business journalist Brian Banmiller has spent more than 40 years in the news industry, covering business, politics and the economy on television, radio and in print. Currently, his “Banmiller on Business” reports are delivered to an audience of millions nationwide.