By paulgillin | June 17, 2008 - 12:16 pm - Posted in Business News, BusinessModel, Layoffs, NewMedia, Newspapers, OnlineMedia, Solutions

Perhaps hoping that no one would notice bad news if it was released on a post-Memorial Day Friday afternoon, the Newspaper Association of America quietly reported that advertising sales by US newspapers fell a record 14% in the first quarter, with real estate and recruitment ads both shrinking 35%. The results are worse than even the most pessimistic skeptics predicted and may indicate that the industry has entered an irreversible death spiral.

BusinessWeek’s Jon Fine thinks the unthinkable: one or more major metro dailies will go under within the next 18 months. It isn’t such an outrageous idea. Rising newsprint and gasoline prices are layering more burdens on top of an already troubled industry that distributes its product by truck. Some publishers have seriously floated the idea of cutting out unprofitable Monday and Tuesday editions. MediaNews CEO Dean Singleton recently estimated that 19 of the top 50 US newspapers are losing money.

If more than a third of top US titles are losing money, then the spiral has probably begun. The only way to stop it is to cut deeply and painfully, with staff cuts of 40% or more and a primary focus on online delivery.

However, that’s not likely to happen. Businesses in trouble rarely have the stomach or the investor support for substantive change. Instead, they do what all of them are doing today: cut 5% to 10% here and there until they slowly bleed to death. I outlined this scenario in my 2006 essay on the collapse of newspapers and the reinvention of journalism:

Newspapers will be forced to lay off staff in order to maintain margins. Cuts in services will lead to cuts in editorial coverage, making papers less relevant to subscribers. As circulation declines, advertising rates will have to come down to remain competitive. This will put more pressure on margins, leading to more layoffs, more cost cuts, more circulation declines and more pressure on margins. Once this spiral begins, it will accelerate with breathtaking speed.

If you look at Alan Mutter’s analysis of the McClatchy layoffs, you can see how this scenario could play out. In Mutter’s view, the cuts won’t even cover a quarter of McClatchy’s revenue shortfall. That means more cuts will have to be made, further hobbling the capacity for its papers to produce a quality product. Reader attrition continues. And so on and so on.

Each of these trends is playing out right now, only a lot faster than I predicted. The longer publishers fiddle with hiring freezes and redesigns, the longer they put off the tough decisions that could still save some of them. Unfortunately, for the majority of US newspapers, it’s already too late.

Big Changes in Store at the LA Times?

Speculation has swirled for a few weeks that Los Angeles Times Publisher David Hiller won’t last the summer, but now the rumors are getting louder. After losing out in an attempt to undermine his own editor last week, Hiller now looks vulnerable, and there are reports that he could be gone as early as July. The changes could also be accompanied by deep cuts in the LA Times editorial staff. We’ve heard up to 19% of the newsroom could be let go, though no decision has been made yet. The LA Times was one of the papers recently singled out by Tribune Co. CEO Sam Zell and COO Randy Michaels for poor journalist productivity.

And Finally…

CNN reports on a Yahoo employee who Twittered his layoff in February and gained an eager following. Ryan Kuder recently took a job from the hundreds of leads contributed by his Twitter followers . His story was covered on prominent blogs and has now jumped to mainstream media. All of which shows how one person can make a difference these days.

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This entry was posted on Tuesday, June 17th, 2008 at 12:16 pm and is filed under Business News, BusinessModel, Layoffs, NewMedia, Newspapers, OnlineMedia, Solutions. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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  1. June 17, 2008 @ 2:19 pm



    […] under: Don’t panic, USA, figures — privatefraser @ 7:19 pm From the wonderfully titled Newspaper Death Watch: “advertising sales by US newspapers fell a record 14% in the first quarter, with real estate […]

  2. June 19, 2008 @ 3:34 pm



    So what is the answer? What are the drastic changes that newspaper companies should be making now? I love reading your site for updates and analysis on the newspaper industry, but it would be great to also see some perspective on what might actually work!

    Not that anyone has the answer… it’s been called the toughest problem in business today!

    Keep it up.

    Posted by Chris
  3. June 22, 2008 @ 2:58 am



    […] spiegare perché Gillin ha appena pubblicato sul suo sito – che non a caso ha chiamato Newspaperdeathwatch – un articolo dal titolo “Has the death spiral begun?” Gillin cita in […]

  4. August 4, 2008 @ 4:18 am



    Has Anyone ever considered the fact that 40-to-60% of all newspapers are delivered by carriers who make $0.10 to $0.16 Per Paper and PAY THEIR OWN GAS, wear & tear on their cars, etc.

    With declining circulation and customers tipping less, the newspaper industry could wake up one morning with half it’s carriers not showing up because they’re making less than $3.00 Per Hour.

    One carrier posted on http://www.newspapercarriersunited.com that 57 carriers quit in the last few months at The Observer Dispatch in Utica New York. The managers are trying to deliver the routes but she said most of the route go UNDELIVERED and the customers get credit.

    Posted by Betty Hoelzer
  5. August 4, 2008 @ 5:12 am



    Good point, and this is one of the perfect storm of problems buffeting the industry. Newspaper delivery is gasoline-intensive and carriers traditionally live on thin margins. The Atlanta Journal-Constitution actually cited this as one factor in its decision to cut some local editions. I worked as a carrier in my teens but quit when I realized that some weeks I was actually losing money!

    Posted by Paul Gillin
  6. April 5, 2009 @ 5:29 pm



    […] Has the death spiral begun? — June 17, 2008 […]