Thursday, December 15, 2011

Good for newspapers, maybe, but for journalism?

Thanks to Lou Phelps of the Savannah Daily News in a column this week for making brutally clear that newspapering is a business - a cutthroat one - that's not necessarily good for journalism.

 Phelps, a media consultant whose company also publishes the Daily News, seeks to make the point that, when looked at from a cash-flow perspective, newspapering is still a pretty decent business and that "we are far from dead," especially smaller community papers:

For smaller publishers still operating their own presses who need to spend $150,000 for computer-to-plate equipment, or $250,000 on press improvements, these incentives will help them cut their payrolls and newsprint waste, helping to make their companies even stronger in future years.

I agree with Phelps, who also looks at Lee, McClatchy and Gannett and finds that they would be in decent shape if it weren't for their crushing debt and depreciation payments. Traditional media companies are going to have to move earnings before interest, taxes, depreciation, amortization (EBITDA) closer to bottom-line earnings.

This month's Common Sense Journalism column is going to use an example out of Iowa to argue that if trad media companies want to thrive among the nimblest of new-media companies, they are going to have to write down and throw off more of the real estate, "big iron" and "big silicon" they find themselves writing down and tied to. They have become storefronts on the information highway, and, frankly, they probably ought to be operating out of storefronts, or close to it.

Phelps, however, takes it a step further, nicely drawing the distinction between newspapering as a business and journalism:

Unlike many business sectors, our expenses are tied very tightly to revenue. And, our industry, generally, is not burdened with significant research and development costs or patent attorneys, such as those in the drug or manufacturing sectors.

Take a restaurant, for example. It has to have employees standing there to cook and serve, and has to purchase the food items listed on the menu whether customers come in the door on Friday night or not.

Not so with the newspaper business. If our ad revenues decline, we cut newsprint/ink usage, we buy fewer stories and photographs, and we don't pay sales commissions (particularly optimum if sales reps are on straight commission.) Well-run newspaper companies have controlled all of their overhead and operating expenses, and changed their staffing strategies to be able to adjust to these vagaries.

Granted, some companies were late to that party and paid dearly in 2008 and 2009 as they struggled to believe that advertising revenues would not rebound - and took too long to cut.

But by 2010, most newspaper companies came to grips with the future, and began to admit to each other ... "It's amazing how few people it actually takes to run a newspaper company, isn't it?" as one distinguished newspaper owner in Georgia said to me last year.

And, we all began to cut like crazy.
 Exactly. Newspapering doesn't take (relatively) a lot of resources. Journalism does.

To keep things in perspective, The Savannah Daily News is not the traditionally dominant paper (the Savannah Morning News, daily circulation about 35,000, is). It's a free, low-staff operation (perhaps it's significant that the paper's "about us" page is blank, though this is on the subscription form: Welcome to readership of Savannah Daily News, locally owned and edited by professional journals. Be sure to sign up your family members...and we how you will consider recommending us to your friend and associates. ---Founded in 2004, Savannah Daily News is the region's FREE daily news source. SDN is locally owned, with news stories written daily by respected journalists who live in and love the Savannah, Coastal Georgia and the Lowcountry.)

I couldn't readily find any circulation figures, but it doesn't matter, because I think the sentiments Phelps expresses are shared by many others in the industry looking for low-cost, turn key solutions to what ails them (which Phelps will happily supply through her Community Daily News LLC).

As Phelps notes, newspaper companies are "not burdened with significant research and development costs." Which goes a long way to explaining why newspaper companies are finding it so hard to merge onto the new information - and journalism - highway.

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