Many visitors to this website also frequent Reflections of a Newsosaur, a blog written by Alan Mutter, who is “perhaps the only CEO in Silicon Valley who knows how to set type one letter at a time.”

Mutter was a reporter and editor at major metro dailies for 20 years before transitioning to a successful career as a technology CEO in Silicon Valley. His blog combines an executive’s financial acumen with a journalist’s inquisitiveness. Newsosaur offers insight on the media industry’s financial condition that you just can’t get anywhere else. Not surprisingly, it is one of the top 10,000 blogs worldwide, according to Technorati.

Mutter particularly enjoys challenging conventional wisdom with mathematical fact. Early this week he poked holes in the recent excitement over micropayments by creating a likely revenue scenario. Using The New York Times as a subject, he concluded that micropayments would bring in less than $4 million a year, or enough to pay about 2% of its staff.  For small papers, they would amount to beer money. Pundits have come to rely on Mutter for reality checks like that.

Knack for Numbers

His financial analyses are his signature item. Mutter sounded the alarm about the newspaper industry’s growing debt load more than four years ago, and he has methodically documented the damaging role that debt has played in limiting the industry’s options. His Default-O-Matic documents the financial viability of major players, giving early warning of who’s likely to be next off the cliff.

A complete financial restructuring of the industry is likely, Mutter says. Debt has painted publishers into a corner and many will have no choice but to walk away from their obligations and let the banks and investors sort it out. It’s not that the core business model is so bad, he says. It’s that their financials stink.

Having reader Newsosaur for a couple of years, we thought it would be interesting to find out more about the person behind it. So we called up Alan Mutter and spent an hour on the phone with him. Our complete, lightly edited interview is below for you to stream or download.

Show Notes

Download the interview (right-click and save)

Stream the interview:[audio:Alan_Mutter_NDW_Interview.mp3]

It’s the pit of winter and the economy is stuck in molasses, yet the tone in the newspaper business has turned brighter. The few publishers who aren’t weighed down by crushing debt are talking tough and a paid news model is getting renewed attention.

Charlie Rose convenes a panel of industry notables, including The Wall Street Journal‘s Robert Thomson, Time‘s Walter Isaacson and New York Daily News owner Mortimer Zuckerman, who provides comic relief (See “And Finally…” below). The issue is “The Future of Newspapers,” and Poynter has thoughtfully provided a transcript.

Thomson’s comments are the most insightful. He hits the nail on the head with his description of Google as the great leveler: “Google is great for Google, but it’s terrible for content providers, because it divides that content quantitatively rather than qualitatively.” He also has razor-sharp criticism for editorial arrogance. “There’s a great tendency for journalists to be high and mighty, and to underestimate the intelligence of readers. And I think one of the reasons they’re losing readers is for that very reason.” And he says the Journal now “loves” the paid-subscription model it considered abandoning only about a year ago.

Everyone marvels at the new Amazon Kindle (right) and declares that it may be the last chance to create a reader-funded news model. Isaacson says the challenge for newspapers is to “prevent us from giving it away for free on the Kindles…just like we gave it away for free on the Web. We’ve got one more shot at it… Let’s make some really cool…applications we can…actually charge for.”  Tom Foremski and Greg Sterling both have interesting comments on the roundtable.
Watch the video here:

Making the Case

The New York Times has an op-ed by Eduardo Porter that argues that no other entity can take newspapers’ place. Citing numerous historical precedents, he argues that populations with an active media enjoy higher voter turnout, better government services and a higher standard of living. “During the Great Depression, the Federal Emergency Relief Administration doled out more money in counties with more radios,” he writes, in just one example. “Today, Hispanic voter turnout is higher, relative to the non-Hispanic vote, where there is a local Spanish-language TV station.” He also says television has been cited as an important factor in declining voter turnout beginning in the 1950. Porter’s use of these distant mirrors is novel, but his assumption that it takes a newspaper for a population to achieve these benefits is a bit of a stretch.

The former CEO of Cox Newspapers makes a plea for embattled newspaper companies to fight back. Jay Smith retired eight months ago, just as the walls were beginning to cave in, and he recently joined with three top executives from the business to talk about the industry’s plight. “Their passion and enthusiasm contrasted with…the bleak forecasts for newspapers,” he writes. “Their voices have not been heard much, but they should be.” In particular, “Donna Barrett, who runs the 140 newspapers of Birmingham, Ala.-based CNHI Inc., says nothing in the financials of her company resemble the gloom and doom she reads about.” And the publisher of Parade magazine says he’s still delivering a convincing ROI to advertisers.

Smith is right that these publishers aren’t being heard, and why not? If CNHI is bucking the industry trend, we’d think the Newspaper Association of America would be parading her around like a football hero. It’s odd that those individuals are so quiet when their business is under such siege.

Speaking of sieges, check out the comments at the end of this piece. They’re typical of the reactions we see to published commentaries on the industry’s future: political bashing of the media by both left- and right-wing ideologues accusing newspapers of liberal or conservative bias. This response is so common that we wonder if it’s a coordinated campaign. The comments invariably have nothing to do with the original commentary. They seem designed to spread some kind of agenda. Does anyone have a theory as to why this criticism turns up with such mind-numbing frequency?

But Will They Pay?

Eric Alterman, who penned last spring’s riveting account of the newspaper industry’s problems in The New Yorker, updates the scene in a shorter account on The Nation. Unfortunately, he has no better ideas for saving the industry than anyone else. Alterman recaps the solutions that have been proposed, ranging from micropayments to charitable support, and finds them all wanting. And he points out that the core news section of the typical major metro daily is the part most at risk. “Ironically, it is the sections of the paper most crucial to informed democratic discourse that are in danger of disappearing,”Alterman writes. “Sports news, entertainment news, health news, fashion, celebrity and style reporting will always be with us in one form or another, because they are such delightful places to advertise.” In contrast, no one wants their ad to appear next to a story about an airplane crash.

Writing on Nieman Journalism Lab, Matthew Ingram basically agrees. Ingram recaps the recent debate and says there’s no way readers are going to pay the freight. “Newspapers have never been paid directly by readers for the news,” he writes, adding that subscription and or newsstand fees cover, at best, a few pages worth of production cost. “What newspapers need to do is find ways of creating content that is more valuable than the perishable daily news.” Ah, but that is the problem. No one short of a few specialized publishers has figured that one out.

Miscellany

Three weeks after it pulled the plug on a print advertising program, Google has cancelled a second offline initiative. Google Audio Ads was the second leg of the stool that Google was building to support its expansion into offline advertising. Like Print Ads, the program was meant to upsell airtime to search advertisers. However, the radio industry never much took to the idea, seeing it as a way to commoditize its business. Only one major station owner, Clear Channel Radio, signed on to the program and many smaller networks gave Google the cold shoulder. The search giant still has a similar program to sell television ads and analysts say that one probably isn’t going away soon. About 40 people will lose their jobs.

Have you tried the The New York Times’ new article skimmer? We just did and pronounce it cool. The as-yet-unnamed service (though we like “skimmer” just fine) attempts to recreate the experience of scanning a printed newspaper on a computer screen. Each “page” includes a tiled assortment of summaries and sections slide pleasingly into place. Coolest feature: “Instead of displaying dates, articles gradually fade as they get older,” says a post on the Times‘ First Look blog. ReadWriteWeb notes that it would be nice if you could read the articles in the same interface. But first things first. This is a nice new idea.

And Finally…

Is Mortimer Zuckerman losing it? Or perhaps the collapse in value of his Manhattan real estate holdings has addled his mind just a bit. In this exchange from the Charlie Rose interview referenced above, Zuckerman oulines his plans to turn around the Daily News through the addition of color:

I committed to the new presses out of sheer passion 18 months ago…They will dramatically increase our revenues, because we’ll have all color, and this will increase our advertising revenues, and it will also increase our circulation, because it will be a completely transformed visual product.

The Daily News is one of the last newspapers to go to color. Printing in color isn’t helping anyone right now. But just wait a few years and Zuckerman’s daughter will figure out the solution:

I own The Daily News and I’m determined to keep The Daily News going because my daughter, who is 11, is now committed to be the next publisher…She’s agreed. She liked the working conditions. She liked the demands.

Rose comments, delicately, “Most people would hear you say that, and they would say, you know, he doesn’t — with all due respect, you don’t get it.”

Over the last few weeks, the mood in the news industry has shifted from a kind of morbid resignation to one of fiery indignation over the forces that are tearing apart a once-mighty business. The promising development is that media supporters have stopped trying to resurrect a dying print industry and are now focused on saving the essence of quality journalism. They’re getting creative in their approaches. Below are a few recent opinions.

Lean, Mean Media Machine

Writing in the Dallas Morning News, John Chachas says the time has come for the US government to jettison old cross-ownership rules and grant media companies broad license to prosecute people who steal their content.

Chacas, who co-heads the media practice at Lazard, proposes granting news organization “a finite (36-month) anti-trust law exemption to permit deployment of an industry-wide system to track and charge for re-use of their content.” Today’s bloggers thumb their noses at the organizations whose content they steal, and newspapers’ unwillingness to defend their value is their undoing, he says.

Chacas also calls on the government to repeal laws that prohibit media cross-ownership in regional markets. Information no longer knows geographic boundaries, he says, and laws that make it easier for the Los Angeles Daily News to merge with The New York Times than with the Orange County Register are a set of handcuffs on media businesses. Conversely, it’s no longer relevant for the government to try to preserve multiple voices in a market when readers and advertisers no longer believe they’re needed. His four-point proscription is an intelligent call for legal and legislative change.

Reinvent the Model; Save What’s Best

The New York Times rounds up opinions from thought leaders around the industry. The consensus: stop trying to revive the traditional model and focus on finding places to add value.

MinnPost.com CEO Joel Kramer says news organizations will need to derive more revenue from readers in the future, even if that means shrinking circulation: “A newspaper that sold 400,000 copies at 50 cents daily and $1.25 on Sunday might sell only 100,000 at four times the price. But there would be a business incentive to keep quality high, because each extra copy sold should increase profit, not subtract from it.”

Steven Brill mostly agrees. He says the key is to find the crevices where local information needs aren’t being served: “Local newspapers are the best brands, and people will pay a small amount online to get information – whether it be a zoning board meeting or a Little League game – that they can’t get anywhere else.”

Geneva Overholser of the Annenberg School of Journalism is in the same camp. She sees value in a hybrid of community journalists and professional publishers. “These changes will be difficult for newspapers which have considered themselves the primary newsgathers, but they may lead to the next chapter of American journalism,” she writes.

Craig Newmark, whose Craigslist.org is often seen as the Great Satan by the newspaper industry, says media companies need to involve their readers in the process of determining what they do. Quoting David Weinberger, Newmark says, “a paper should be perceived as ‘ours’ (the public) not ‘theirs’ (the owners).” Perhaps the Great Satan is really the newspaper owners.

Author Andrew Keen picks up the thread, suggesting that the future is in a layered model in which community members contribute information that’s then organized by staffs of professional editors. “Rather than slithering into the democratic swamp of crowd-generated content, smart local publishers should focus on their core expertise – the organization and curation of information by professionals,” he writes.

Edward Fouhy of the Pew Center for Civic Journalism tells the story of three small operations that are proud of providing balanced, accurate coverage of local news. “Citizens are inventing a new form of locally based and financed journalism while preserving the values of accuracy, objectivity and independence,” he writes, hopefully.

There are more than 180 comments as of this morning. Thankfully, they are mostly free of the partisan politican ranting that seems to plague this discussion.

BTW, Jack D. Lai thinks micropayments are stupid and he’s got a long list of links to people who agree. It’s an impressive archive and we really hope to get around to reading it all.

Micropayments with a Twist

Steve Outing opens his Editor & Publisher column by dissing micropayments (“that model will only hasten newspapers’ death spiral”) and then goes on to make a passionate case for…micropayments! Okay, we’re oversimplifying. What Outing doesn’t like is the idea that each publisher would have its own system for charging people a few cents to consume its content, sort of like running a PayPal button in the sidebar. He’s right: That’s a dumb idea. The solution may be in a service like Kachingle, a system that distributes payments to website owners based upon their readership.

Kachingle users only have to set up and fund one account. Whenever they visit a site that’s part of the network, Kachingle allocates a portion of their account to that provider. If Newspaper Death Watch gets 20% of your monthly visits, then the owners get 20% of the payment you set aside. Thanks! Readers decide how much they want to pay and Kachingle takes care of the accounting. In theory, the value of the network grows as membership expands. The New York Times may be helping Newspaper Death Watch by joining the network, but the equation also works in reverse. Somehow, we think we’d get the better of that deal.

Steve Outing is nothing if not thought-provoking. Although this column is a tad more enthusiastic than his usual fare, he’s found an interesting model to promote. Hopefully, the column will still be available at SteveOuting.com after E&P inevitably pulls it off its website. You can also comment at SteveOuting.com, but not at E&P.

Miscellany

Last month we told you about The Printed Blog (“Extra! Extra! Blog All About It!”) a startup that’s proposing to reinvigorate print publishing by harvesting content from local bloggers. Simon Owens called up founder Joshua Karp and found an Internet entrepreneur who’s serious about print.

“The print newspaper doesn’t need to go away simply because it’s on paper,” Karp told him. The problem is that publishers haven’t revisited the way they produce their printed products to include the work of the community. The Printed Blog is on thin financial footing unless more funding can be found, Karp said. He’s funding the first issues himself and needs to find venture capital “over the next few weeks.”

They dribble out the news about cuts at the Honolulu Star-Bulletin in this story. The paper will lay off 17 people but wait, there will probably be more. The neighbor island bureaus will be shut down. Oh, and there’ll be a redesign from a broadsheet to a tabloid. Praent Oahu Publications is also discontinuing its Friday edition of the MidWeek tabloid. You have to stick with this story to the end in order to learn everything.

The Charleston Post and Courier has laid off 25 employees after a buyout failed to achieve cost reduction goals. When the company announced its buyout offer in July, the newspaper reported that it had 513 full-time and part-time employees. It will employ 460 people after the latest cuts.

A campaign for micropayments is beginning to gather steam in the news business, so now’s a good time to look at what journalists can learn from the recording industry.

Walter Isaacson’s lead piece in Time about How to Save Your Newspaper has got people talking. Isaacson argues eloquently that the iPod and the Kindle have paved the way for a business model based on “micropayments,” in which readers pay a few cents for content that’s easy to access, legal and convenient:

“We have a world in which phone companies have accustomed kids to paying up to 20 cents when they send a text message but it seems technologically and psychologically impossible to get people to pay 10 cents for a magazine, newspaper or newscast,” he writes. “The key to attracting online revenue, I think, is to come up with an iTunes-easy method of micropayment.”

Isaacson is dead right. The only salvation to newspapers’ current dilemma is to find a way to reverse that tide that has conditioned readers to believe that information should be free. Now is the time to start.

The End of Free

Can you really put the genie back in the bottle? Conventional wisdom is that once newspapers began giving away their stuff for free, the game was over. But history has shown that that isn’t the case.

A decade ago, Napster briefly tried to make music free. When the Recording Industry Association of America applied legal pressure to shut down Napster, the wisdom was that music-sharing would simply be driven underground in a maze of peer-to-peer networks like BitTorrent and BearShare. That happened, but only to a degree. Apple’s pay-by-the-drink model has flourished and even BearShare has shed its spyware-ridden past in favor of working with music publishers. Free file-sharing will always exist, but the music industry has successfully convinced fans that swapping copyrighted material is wrong.

The recording industry thought it killed Napster, but what really put the stake through its heart were bands like Metallica, who went directly to their fans with a passionate argument that pirating music was killing the golden goose.

Artists Drove Transformation

The evolving model in the recording industry harnesses the best of both worlds. New bands freely give away their music in hopes of generating a following that can be monetized in paid downloads and concert tickets. Successful indy bands like The Airborne Toxic Event enable their fans to stream songs on their websites but charge for the convenience of downloading. These bands are making money by earning the right to charge for their work.

The reason a legitimate paid model is evolving in the recording industry isn’t because recording companies are driving it. It’s because the bands are. The secret has been a grass-roots campaign by individual artists to convince their fans that music has value and that every 99-cent download is a vote for the band to continue its work.

So what’s the lesson for the news business? For starters, it’s that the solution doesn’t begin with newspaper companies but with individual journalists. Newspaper publishers won’t convince readers to pay for information because their motives are suspect. They’re too invested in the print model, just as the recording industry is too invested in CDs. This is the problem with campaigns like The Newspaper Project. It tries to convince people that newspapers have value, but people don’t care about newspapers; they care about information.

The only way a micropayment model can flourish is if individual journalists carry the flag. It’s up to reporters and the emerging breed of online news organizations like Talking Points Memo to convince their fans to fork over a few pennies to consume their stuff. Perhaps these organizations can steal a lesson from the music industry by giving away their content free on their website but charging for downloads to a Kindle. If readers perceive the value, they’ll pay.

Diversify Revenue

The second lesson is that journalists need to diversify their revenue models. Long Tail author Chris Anderson has proposed that in the future, people who make their living producing digital content will have to give away a version of their products for free and charge for something else: perhaps the convenience of a download, a speaking fee or even a printed version of the same information.

The key is to discard assumptions that news can only be delivered by large monopolistic organizations with legions of journalists whose salaries are funded by advertising. In the future, the brands of individual journalists will be just as important as those of the news organizations they work for. If some prominent columnists and editors can mount a campaign to convince readers that content deserves to be funded, a new model can emerge.

Prior to the dot-com collapse of 2001-2002, a lot of information was being given away for free. The bursting of the venture capital bubble forced the survivors to figure out sustainable business models. Most failed, but those who succeeded kicked off a new round of growth. The same can happen in the news industry. It will take a grass roots effort by those who deliver the news to change the minds of the reading public.

What do you think? Can micropayments save the news business? Post your comments here.

The status of newspapers as essential utilities gets a boost in a narrow-minded NPR report entitled “Imagining A City Without Its Daily Newspaper.” Reporter David Folkenflik takes us to Hartford, Conn., a typical small American city whose daily newspaper is doing as badly as every other typical small city daily newspaper. What would happen, Folkenflik speculates, if the Hartford Courant ceased to be?

In a word: disaster. “[F]ormer Gov. John Rowland wouldn’t have faced corruption charges a few years back,” Folkenflik suggests. Nor is it likely that Hartford’s mayor would have been indicted on bribery charges recently. “The Courant was out ahead on that, too. The paper has exposed polluters and the deployment of mentally ill soldiers to Iraq.” And that’s not even considering its kinder, gentler side. What would local theatre companies do without the vital reviews in the newspaper?

Our guess is that they’d think of something. What makes the NPR report such rubbish is that it fails to consider the possibility that other sources of information could emerge to fill the coverage gaps the story describes. The piece even quotes Trinity College President James F. Jones Jr. furthering the myth that only newspapers can cover local news. “The New York Times is not going to write about the local basketball teams or the local color stories,” the perfesser says. True, but have you considered that maybe somebody else will?

The all-or-nothing scenario outlined in this report is fundamentally flawed. It’s surprising that the usually thorough NPR editors would let such a myopic analysis go through. Maybe the layoffs there are having an impact. 

For a contrasting view, consider a post by Dana Blankenhorn that challenges the evolving wisdom in some parts of the industry that newspaper publishers need public support in order to continue providing their vital public service.

Invoking National Lampoon‘s famous “If You Don’t Buy This Magazine, We’ll Kill This Dog” cover, the blogger dares publishers to follow through on threats to maroon readers without their government watchdogs. “Please do it. Please, please, please… I would gladly go into business against you, giving people access to local government…There are literally thousands of entrepreneurs…anxious to do the same,” he writes. Conventional wisdom is that you have to pay people a salary to cover city council meetings, but maybe there are those who would do it because, you know, they like hanging around city council meetings.

Yesterday was black Thursday in newspaper land as four media companies reported dismal earnings, seven small newspapers shut down and publishers braced the public for more layoffs.

Yet there were some glimmers of hope in the bad news, including signs that deterioration in the advertising business may be slowing and online sales are picking up. We’ll start with the earnings news.

Rupert Murdoch’s $5.5 billion acquisition of Dow Jones & Co. in 2007 drew criticism on Wall Street because of the steep 65% premium the newspaper magnate paid for a flagship title in a declining market. It looks like the critics were right. Citing “the worst global economic crisis since News Corp was formed 50 years ago,” Murdoch’s company posted its largest quarterly loss ever and wrote down $8.4 billion in assets yesterday.

While News Corp. didn’t specify the size of the Dow Jones write-down, analysts speculated that it was responsible for much of the $3.6 billion goodwill charge. The company’s net loss was $6.41 billion, compared with a profit of $832 million a year earlier. Of course, write-downs make such comparisons meaningless. Revenues fell 8% to $7.88 billion. Adjusting for the write-downs, News Corp. still badly missed analyst estimates. Its quarterly operating profit was 12 cents per share, well below the consensus of 19 cents.

Murdoch has often been mentioned as a possible suitor for The New York Times, but in an analysts call yesterday, he dismissed speculation that he’s looking to make acquisitions. Ever the optimist, though, Murdoch found a silver lining in the dense clouds overhanging the media industry. “There has never been a greater appetite for news in the community,” he said. ” I have great faith in the newspapers, and if we continue the way we’re going, we may even get lucky and not have so much competition.”

Coincidentally, The shoe finally dropped at News Corp’s Wall Street Journal, which avoided layoffs in 2008. Twenty-five newsroom positions were eliminated, 11 by attrition and 14 by layoff. The Journal‘s New York-based fashion and retail group will be closed and the Los Angeles and Boston bureaus will each lose a job. The editorial staff numbers about 760 people.

Ugly Numbers, But With a Few Bright Spots

If you’re looking for silver linings, you can find a couple of them in otherwise dismal earnings news from McClatchy Co., Belo Corp. and Scripps Networks Interactive. The companies all reported predictably horrible earnings on Thursday, but there are signs that the revenue free-fall is abating. Belo, which has been slashing and burning payroll recently, actually beat Wall Street estimates by a couple of cents on revenues that fell 9%, in line with estimates. Scripps also beat the street on operating earnings of 55 cents a share, compared to forecasts of 51 cents.

Belo said first-quarter ad sales were about the same as the fourth quarter of 2008, indicating that some stability just possibly has taken hold. However, keep in mind that fourth-quarter sales were down 26% from a year earlier. McClatchy, which reported a $21.7 million quarterly loss, said overall sales continued to decline, but online revenues grew a reasonably healthy 10%. Both Belo and McClatchy made some progress toward paying down their debt, though they still owe over $1 billion and $2 billion, respectively. Scripps actually grew revenue in the quarter, although it slightly missed analyst estimates.

McClatchy is getting ready to swallow more bitter medicine. With classified revenues down 36%  and retail advertising off 10% in 2008, the company will cut at least another $100 million in expenses on top of staff reductions that have already trimmed its workforce by a third. Plans include continuing a freeze on executive salaries, eliminating executive bonuses, freezing pension plans and suspensing matching contributions to 401(k) plans. The company didn’t mention layoffs, but you can figure that one out. The Lexington (Ky.) Newspaper Guild doesn’t think McClatchy is going far enough in “declining undeserved bonuses or freezing bloated pay.” It appears to favor a public flogging, too.

Miscellany

The Daily Reporter of the Wichita, Kan. suburb of Derby is shutting down after 47 years. The last issue will be published Feb. 17. The closure puts six people out of work.

The Columbia county (N.Y.) Independent published its last issue today. The twice-weekly paper is owned by beleaguered Journal-Register Co.

The Provo Daily Herald of Utah will stop publishing five weekly newspapers it owns in American Fork, Pleasant Grove, Lehi, Lone Peak and Orem but won’t lay off any employees. Instead, coverage will be folded into a larger Daily Herald, a move intended to “strengthen the company’s core daily product.” The newspaper replaced the lost weeklies with a collection of localized websites that “will present news from all local schools, community groups, churches and local governments, and will feature a social marketplace.”

The Rexburg, Idaho Standard Journal will trim publication from five to three days a week. Starting March 3, the paper will be printed only on Tuesday, Wednesday and Saturday instead of Tuesday through Saturday. No layoffs are planned, since the publisher expects to beef up its online coverage. The move is interesting in light of the fact that most publishers that are cutting production schedules start with the low-margin Tuesday and Saturday editions. The 5,300-circulation Standard Journal is choosing to keep them.

The publisher of the Anchorage Daily News is preparing his staff for more layoffs. In a memo to employees, J. Patrick Doyle said the “unprecedented and deepening financial crisis” will necessitate staffing cuts, but “we will work quickly to notify employees who may be affected. As we have just begun work on these plans now, you may not hear more from us for at least a few weeks.” Which should make for great morale in the newsroom.

For want of $1 million, Hearst Corp. has given up the right of first refusal for the Seattle Times for the next 74 years. In a development that is more confusing than illuminating, Hearst missed a regular $1 million payment that it has made for nearly a decade to Times owner Blethen Corp. in order to ensure that Hearst will get the first chance to buy the paper if Blethen ever puts it up for sale. What’s confusing is that Hearst is already bailing out of the Seattle market by putting the Post-Intelligencer up for sale, so why would it want to buy the Times? The two papers work under a joint operating agreement that shares some expenses and profits (losses) between them. There’s now a debate under way over whether the P-I will continue as an online-only entity and whether the terms of the JOA even permit that. Hearst is reportedly trying to wriggle out of the JOA, which neither company likes very much, anyway. Ironically, the existence of a legal agreement that was intended to keep two newspapers in Seattle may now prevent the P-I from continuing to publish. If you really want to untangle this, read the story.

The Sarasota (Fla.) Herald-Tribune Media Group laid off 48 people and eliminated home delivery to Port Charlotte and Punta Gorda. The newspaper has cut its full-time staff to 350 people, which is 40% lower than its peak at the height of the Florida real estate boom. We were in central Florida last week and saw entire office parks with tumbleweeds rolling through them.

Ellen Mrja has a Nov. 17, 2008 memo from Minneapolis Star Tribune publisher Chris Harte outlining 10 steps the newspaper must take to make it through the industry downturn. The goals are laudable but some are contradictory, in particular  “1. We must maintain products that our readers and advertisers will find useful enough to buy” and “2. We must reduce every cost we can.” We’re not sure why this memo hadn’t turned up before before.

The National Labor Relations Board dismissed an appeal of a local board ruling that found that Bay Area News Group didn’t discriminate against employees because of their union organizing activities.  The union had claimed that three of 29 employees laid off last June were unfairly targeted because they were trying to unionize the workforce.

Newspaper companies went on the offensive this week, launching a public relations campaign to rebut forecasts of their impending death and boasting that more people read a newspaper the day after the Super Bowl than watched The Big Game.

The group was conceived by executives from Parade magazine, which wouldn’t exist if it weren’t for its weekly insertion in Sunday newspapers, and people from three other companies: Community Newspaper Holdings, Philadelphia Media Holdings and Cox Newspapers. Philadelphia Media Holdings, which owns the Philadelphia Inquirer, is teetering on the brink of insolvency and Cox has put 29 of its newspapers up for sale. In other words, the group hardly represents the pinnacle of management excellence in a troubled industry.

Nevertheless, the Newspaper Project launched with a website and ads that appeared in 300 newspapers on Monday. Here’s a PDF, if you’re interested. So far, the website appears to be mainly a linklog of material that’s appeared elsewhere, but the slate of authors is impressive. “Future ads will highlight the civic value of news content and how well print advertising continues to work for many businesses,” says Poynter’s Rick Edmonds.

It’s good to see the industry standing up for itself, but it’s depressing to see this initiative so focused on print. We agree with Ken Doctor, who was quoted applauding the project by the AP but who pointed out correctly that a name like “Newspaper Project” demonstrates a backward-looking perspective at a time when the industry really needs to talk about the future. Running kickoff adds in 300 newspapers strikes us as a recursive exercise to promote the industry to its existing audience, although the decision was no doubt heavily influenced by the availability of free ad space. Perhaps the group will focus future messages on the essential role newspapers play as sources of online news. That message is more likely to resonate with the disconnected under-40 audience.

P.S. Speaking of Philadelphia Media Holdings, owner Brian Tierney has reportedly asked the governor of Pennsylvania for state aid to keep the Inquirer and Daily News afloat. State aid may be the only option, since the company already missed a debt payment last September and survives at the benevolence of its creditors.

P.P.S. Monday was “National Buy a Newspaper Day.” The grass-roots effort was conceived by reporter Chris Freiberg of the Fairbanks Daily News-Miner, who set up a Facebook group and recruited 20,000 people to pledge to do their part for at least one day. We did by picking up a copy of the Orlando Sentinel. Another Facebook group has now formed targeting Feb. 13 for a similar action.

Gillmor Weighs in On Nonprofit Debate

Last week’s New York Times op-ed promoting the idea of funding newspapers as non-profit ventures continues to draw the ire of new-media advocates. Dan Gillmor, who practically fathered the citizen journalism movement, bluntly dismisses the proposal by two Yale financial analysts as “shallow thinking” and says that plenty of innovative for-profit business models are emerging. Expanding on comments we reported earlier (see “Voice of Reason in Nonprofit Debate”) Gillmor argues that the flaw in current save-the-industry thinking is that the industry as we know it deserves to be saved. Newspapers “have been systematically looted over the years, to send money to far-off corporate headquarters to pay fat executive salaries and boost stock prices. Preserve them? Why would we want to do that?” he asks.

The role of non-profits is to preserve worthwhile markets that can’t support profitable ventures, notes Gillmor, a veteran newspaperman. There are certainly some unprofitable newspaper functions that deserve to be supported, such as covering city council meetings, but “a great deal of the community information we’ll get in a few years will come from for-profit sources… We’re seeing an explosion of innovation now.”

Gillmor is right on the money. Endowments, public trusts and government funding shouldn’t be dismissed as a means to fund journalism in the public interest, but to use charitable contributions to fund a badly broken business model is, you know, paving the cowpaths.

Blaming Google

Recovering Journalist Mark Potts takes a machete to a recent column by former Washington Post editor Peter Osnos in which Osnos blames Google for profiting from links to newspaper content. Google has replaced Craigslist as the industry bogeyman in recent months, despite the fact that it has tried harder than any other successful Internet company to find ways to shore up the print business. Complaints that Google is harvesting the hard work of newspapers through links from Google News ring hollow, Potts says, when you consider that Google News doesn’t carry any advertising. Newspapers fail to appreciate the fact that Google sends them 20% to 30% of their online volume, he notes, and they ignore the fact that many do a lousy job of optimizing their pages for Google Adsense, the result being that the search giant ends up serving generic ads with poor click-through performance to stories that deserve better.

In a comments exchange, Potts piles on further, noting that the newspaper industry is uncomfortable with the notion of real competition. “Google and Yahoo control more than half of local online advertising spending,” he notes. “That’s disgraceful–and the shame lies entirely at the feet of newspapers, for failing to adequately pursue local online ad opportunities.”

Murdoch has NYT Envy

Rupert Murdoch “sits around all day and thinks about buying The New York Times,” said Murdoch biographer Michael Wolff in a Tuesday session at the Harvard Business School Club of New York. Murdoch also thinks the Times‘ financial saga will play out soon and there’s a fair chance Murdoch will end up with his trophy, Wolff said. That won’t necessarily be a bad thing for the Old Gray Lady, since Murdoch’s Wall Street Journal has managed to avoid layoffs until now.

Wolff had few kind words for Carlos Slim, the Mexican billionaire who recently invested $250 million in the New York Times Co. at generous financial terms. “He’s our national embarrassment. He’s a crook,” the author said, quoting a source in the Mexican media. In contrast, Murdoch is a pure newspaperman, he said. And despite Murdoch’s reputation for exploiting sex and violence to sell newspapers, he hasn’t messed with the Journal’s editorial quality.

That argument isn’t satisfying Pali Research analyst Rich Greenfield, a vocal critical of newspapers who has neverthelss been a staunch supporter of Rupert Murdoch. Not any more. Greenfield has cut his guidance on News Corp. a rare two levels from “buy” to “sell,” citing lack of strategy. “While we have long viewed Rupert Murdoch as the most visionary CEO in the media sector…we are increasingly surprised/frustrated with his lack of strategic direction related to News Corp’s television station, newspaper and book publishing assets.”

Meanwhile, Portfolio magazine says two sources say there will be 50 layoffs at the Journal next wek.

Miscellany

Two Canadian newspapers – including the giant Globe and Mail of Toronto – announced layoffs. The deepest cuts come at the 110,000-circulation Halifax Chronicle Herald, which is idling 24 of its 103 staff members, or almost a quarter of the workforce. “The numbers just kept getting worse and worse and worse and we just don’t know where they’re going to end,” said Dan Leger, the Chronicle Herald‘s director of news content, in a dour summary. The Globe and Mail laid off 30 people on top of the 60 who had taken an earlier buyout offer. That’s about 11% of the total workforce.

More newspapers are trimming publishing schedules to cope with the advertising downturn. In Ohio, the Troy Daily News, Piqua Daily Call and Sidney Daily News all announced plans to cut out Tuesday editions. The publisher said the reduced frequency will help avoid layoffs, adding that about 10% of the combined staffs at the three dailies had been cut in recent months. Group Publisher Frank Beeson has details on how the transition will be handled on one of the more hideous-looking newspaper websites we’ve ever seen (via Martin Langeveld).

A.H. Belo will lay off 500 employees, or about 14% of its workforce. Combined with 590 layoffs in two rounds last summer and fall, Belo has cut its total workforce by an astounding 25% in less than a year. Belo is also seeking to recover more cash by suspending a savings plan matching fund program, raising parking and transportation charges to employees and reducing cell phone reimbursements. The company owns several major daily newspapers, including the Dallas Morning News, Providence Journal, Riverside (Calif.) Press-Enterprise and the Denton (Texas) Record-Chronicle. Belo stock slipped about 4% on the news amid a general pounding of newspaper stocks on Friday. Gannett said fourth quarter net fell 36% and Media General said it would suspend its dividend. This quarterly malaise has become so common that it barely even merits mention any more, particularly with most of these stocks trading in the two-dollar range.

Jeff Pijanowski has started a running tally of newspaper layoffs. The 2009 total is already 1,399. Erica Smith has been doing the same thing since early 2008, and her total for the new year is 2,002. Let’s hope they’re staying in touch.

Voice of Reason in Nonprofit Debate

We’re tempted to shout “Hear, hear!” to Jonathan Weber’s superbly argued comeback to the doom-sayers who argue that going the nonprofit route is the only viable way to save American journalism.

In 1,400 words of unusual clarity, the publisher of the proudly for-profit NewWest.net makes these cogent points:

• The people making the strongest case for taking news organizations nonprofit mostly work for nonprofits themselves (a reference to David Swensen and Michael Schmidt’s op-ed in The New York Times last week);
• Nonprofit news organizations still have to meet their numbers, and that makes them subject to the same pressures to feed their audiences celebrity pabulum as profit-making organizations;
• Nonprofits will actually hurt profit-making news organizations by competing for advertising revenues while enjoying the benefit of tax-exempt status;
• The argument that readers are losing out because US newspapers have cut foreign bureaus is hokum. Americans have access to more foreign reporting than ever thanks to the Internet;
• There are successful profit-making ventures emerging online right now;
• The profit motive encourages innovation;
• To discard profitable business models as unworkable right now is to give up any hope that new models can emerge.

We particularly commend Weber for pointing out that much of the argument for giving up the profitability ghost is predicated on the belief that news organizations must continue to work they way they always have. As we’ve noted here many times, innovation flourishes when people discard assumptions. Paving the cowpaths of old newsgathering models will simply keep us marching in the same direction.

At the same time, we do want to acknowledge laid-off Providence Journal reporter David Scharfenberg’s well-argued case for a national journalism fund in a Boston Globe op-ed. The federal government already invests in public radio and public television, he notes; why shouldn’t online journalism be afforded the same benefit? Scharfenberg suggests a $100 million fund would “seed low-cost, Internet-based news operations in cities large and small – combining vigorous, professional reporting with blogging, video posts, citizen journalism, and aggregation of stories from other sources.” It’s not clear how he arrived at the $100 million figure or how these new Web projects would be different from the hybrids that are emerging as the media melts together into a single pool, but the amount seems modest enough in light of the billions being given to bail out the financial industry, whose misdeeds may never be publicly known because there are no journalist watchdogs around to report them.

Miscellany

The contentious dispute between the Hawaii Newspaper and Printing Trades Council and the Honolulu Advertiser has been resolved, with the Advertiser apparently getting the upper hand. Employees will have their wages cut 10 percent cut under a deal announced Friday. Union members will also give up two holidays a year. Just eight months ago, the union rejected management’s offer of a flat pay package with modest bonus increases. After looking at the company’s books and witnessing more layoffs, the union agreed to a much worse deal than the one it rejected earlier, with the sole added provision that it can see management’s books twice a year and the empty promise that the Advertiser will make “every practical effort to avoid involuntary layoffs.” There could be some grumbling in the ranks come dues-paying time in Honolulu.

E.W. Scripps is accusing partner MediaNews Group of behaving badly in borrowing $13 million from its Denver Newspaper Agency partnership to meet payroll at the Denver Post. Scripps is on its way out of Denver as it works to sell or close the Rocky Mountain News. Despite its lame duck status, Scripps will apparently miss the $13 million, which it can’t recover through loans due to the terms of its joint operating agreement with MediaNews.

Writing on Wired.com, Bruce Sterling analyzes French President Nicolas Sarkozy’s newspaper bailout and sees nefarious motives. Sarkozy announced last week that the French government will move to bail out its ailing print media (see There’ll Always Be a France)  by boosting support for newspaper deliveries, doubling government advertising and giving every 18-year-old French citizen a free one-year newspaper subscription. Is Sarkozy concerned about the disappearance of a free press? Hardly, Sterling theorizes. Rather, the collapse of the industry on the continent will raise the French President’s visibility as he becomes one of the few politicians who generates any media coverage at all. “While political rivals are scrabbling with bloody fingertips for a few grams of serious public attention, Sarkozy still has a regional empire of conventional media,” Sterling writes. Cynical indeed.

Sam Zell has had plenty of negative attention for under-estimating the enormity of the problems facing Tribune Co., but he’s still got admirers in the real estate industry. Another big-city publisher, Mortimer Zuckerman of the New York Daily News, says three Manhattan skyscrapers his company purchases lost $165 million in value in just seven months. It turns out Zuckerman’s Boston Properties acquired the buildings shortly after Zell exited the office property market in February 2007 for $39 billion. It was basically the peak of the market. In comparison, Zell’s personal losses on Tribune Co. amount to only about $300 million, according to most estimates. Our calculator tells us that’s about four months’ interest on the proceeds from his real estate sales.

Chicago Tribune associate editor Joycelyn Winnecke has earned plenty of derision for a Jan. 19 memo stating that attitude will now be a factor in employee performance reviews.  The idea that skeptical reporters should be expected to present a positive mental attitude strikes some journalists as just wrong. BusinessWeek‘s Catherine Arnst sums up some of the reactions in a blog entry. “The beatings will continue until the morale improves,” notes one predictable comment, and several other visitors weigh in with perspectives on both sides of the issue.

Layoff Log

• The Wenatchee (Wash.) World announced the first layoffs in the daily’s 104-year history.  The 12 furloughs will reduce the newspaper’s workforce from 145 to 133. “We hung on as long as we could,” said Publisher Rufus Woods.
• The Pioneer Press of Minnesota has laid off eight employees since a 14-month contractual provision against layoffs expired Dec. 31.

And Finally…

Yes, that really is Olympic gold medal swimmer Michael Phelps smoking a bong pipe in a photo taken last November during a house party at the University of South Carolina. Phelps has admitted that he “engaged in behavior which was regrettable and demonstrated bad judgment.” Observers said he knew exactly what to do with the pipe. To be fair, Phelps was taking a long hiatus from training at the time. Fox Sports has more, along with a link to a photo gallery of “Sports’ top tokers.”