With time running out on the deadline for someone to buy the Chicago Sun-Times, a second bidder has emerged, according to a union boss.

Thomas J. Thibeault, executive director of the Chicago Newspaper Guild, said he was approached by an unnamed bidder shortly after a Sept. 15 vote during which the union rejected concessions demanded by Chicago financier Jim Tyree as conditions for his $26.5 million buyout of the paper.

Thisbeault wouldn’t reveal the identity of the interested party other than to say he was someone in the financial world. Officials at Sun-Times Media Group and its bankers said Tyree’s bid is on the only one on the table and that no new bidder has approached them. Final bids are due Sunday.

Tyree had earlier set today as the deadline for unions to agree to his demands, saying that he would drop his offer if his conditions weren’t met. However, a Delaware Bankruptcy Court judge later scrapped that deadline, ruling that the demand amounted to poor-faith bargaining.

The Guild says Tyree’s demands would “gut” its current contract, a position that’s shared by several other unions. Five of the company’s 16 unions have rejected the terms, four have accepted and seven still haven’t voted. Meanwhile, the company continues to burn several hundred thousand dollars a week.

More coverage.

Lawmakers are holding hearings on Capitol Hill to try to figure out solutions to the newspaper industry’s troubles. U.S. Rep. Carolyn Maloney (D-N.Y., at right), who chairs Congress’s Joint Economic Committee, has proposed a bill that would allow community and metropolitan papers to become nonprofit organizations. Similar legislation has also been introduced in the Senate.

At hearing last week, Newspaper Association of America President John Sturm said handouts aren’t the solution but that the government should allow publishers to charge current losses against past profits in order to claim retroactive tax refunds. “Newspapers need cash now to preserve jobs next year,” he said. “It’s really that simple.” Sturm also dismissed an outright government bailout as inappropriate, given newspapers’ governmental watchdog role.

In a statement to the committee (PDF), Princeton University professor Paul Starr noted that government support of the media is nothing new. Starr pointed to pre-First Amendment legislation adopted in 1792 that gave newspaper publishers “cheap, below-cost rates for sending copies to subscribers and a franking privilege that allowed newspaper editors to exchange copies with one another through the mails at no postal charge.” To this day, federal and state governments mostly exempt newspapers from sales taxes, he added.

While scrupulously avoiding the term “newspaper” in his recommendations (subsidies “should be platform-neutral—they should not favor print media over online media, for example”) Starr argued for government subsidies and regulatory relief that would make it easy for media organizations to become nonprofits if they so chose. He also made the case for extending tax benefits uniformly to media companies without regard to their business model or political bias. This model is apparently working well in Scandinavia, the population of which is about 8% that of the US.

Seed Money

Or we could just leave the job to private philanthropists. Alan Mutter tells of a new Bay Area nonprofit that was just funded to the tune of $5 million by a local investor. The startup capital from Warren Hellman is considered “seed money” for a venture that’s being launched in collaboration with public broadcaster KQED and the Graduate School of Journalism at the University of California at Berkeley. Mutter suggests that if the venture could raise money at the same rate as an earlier experiment in Texas, the Bay Area initiative could surpass the size of Pro Publica, which has an annual budget of $9 million and which employs 32 full-time journalists.

Hellman’s decision was motivated in part by McKinsey research that found that newspaper employment and coverage of local news have both fallen by half in the Bay Area over the last five years. The as-yet-unnamed new venture will be different from others in its focus on local news. A base staff of professional journalists will provide the meat and potatoes coverage. Berkeley students will contribute information from a series of hyperlocal blogs they have set up and broadcast partner KQED will contribute its own content as well as rebroadcast the work done by the nonprofit. Hellman said he originally considered buying the distressed San Francisco Chronicle but passed because “the business model may not be there to put a sustainable, for-profit economic foundation under quality, professional journalism.” Comments on Mutter’s blog indicate some skepticism about the venture’s chances of success

Sunset for Sun-Times?

Two weeks ago, Sun-Times Media Group CEO Jeremy Halbriech sent a memo to members of the paper’s unions warning them that if they failed to ratify a proposal for a 15% cut in compensation, the company’s prospective buyer would pull out of the deal and the Sun-Times and its affiliates would close immediately. “No other bidder has emerged who will purchase our assets.  If the current Buyer withdraws its bid, we will shortly run out of cash and we will be forced to shut down all of our publications and Web sites and liquidate the business.  This will result in the loss of all 1,800-plus jobs across the Company,” he wrote.

Well, the union said no. Unlike unions at the Boston Globe and San Francisco Chronicle, which caved in to threats from the parent company, the city of big shoulders likes a good fight. Tomorrow is the deadline imposed by suitor James Tyree for the union to agree to terms. However, Tyree has made it clear that this is a take-it-or-leave-it offer. “I do not want to get into a negotiation,” he said. The unions want to negotiate. The staring match has gone on for two weeks. Presumably, no one is watching more closely than staffers at the rival Chicago Tribune, which would enjoy a business boost from the failure of its competitor.

Miscellany

Judy Sims has a few hundred words of practical advice for creating a profitable hyper-local publishing model. It starts with putting four people – an online product person, an online advertising sales person, an editor and a web developer – in an office that’s completely separate from the print operation. Then get them focused on giving readers stuff that’s hard to find out – such as which emergency room has the shortest waiting time – and crafting packages for advertisers that include a lot more than just display advertising. If you’re thinking of starting a localized news operation, use Sims’ outline as a basis for your business plan.

The executive board of The Boston Globe‘s largest union has canceled president Daniel Totten’s union credit card, suspended his check-signing privileges and ordered a ”comprehensive external audit” of union finances after learning of apparent violations of its financial rules. Totten presided over disastrous negotiations between his union and management at Globe owner New York Times Co. in which the union first rejected a series of concessions in a proposed contract and then settled for an even worse deal after the Times Co. threatened to shutter the paper.

From a graphic on Mint.com. You can find the whole image here.

Two Century-Old Weeklies to Close

The Calhoun City (Miss.) Monitor-Herald will shut down Dec. 31 after 110 years of publication. Its circulation of 811 was no longer enough to sustain it in a battle against the much larger Calhoun County Journal (circ. 4,700).

The Lemoore (Calif.) Advocate published its final issue last week afer 121 years. The staff tapped community contributions to tell the story of Lemoore and of its own rich history as the longest continuously operating business in town. The brief history of the Advocate online has these words about the role of local newspapers:

Small town newspapers seldom cover such mega events as tidal waves, auto industry bailouts or global warming. Small town newspaper staffers are too busy telling readers about lawn watering schedules, a sale at Mom’s Pie Shop and weather hot enough to melt the ice in your lemonade…Small town newspapers write stories that mean everything to their readers. And readers clip those stories to paste into scrapbooks filled with touchdowns and weddings, obituaries and births, yesterdays and tomorrows. There are no scrapbook stories about teamster strikes, golden parachutes or the polar bears’ plight.

Obits

Longtime New York Times columnist William Safire died at 79 of pancreatic cancer. The Pulitzer Prize-winning expert on speech and language was a bulwark of elite conservatism, a speechwriter for Richard Nixon and the author of Vice President Spiro Agnew’s famous phrase, ”nattering nabobs of negativism.” He won the Pulitzer Prize for commentary in 1978 for a series of columns about Carter White House budget director Bert Lance’s financial affairs.

The daughter of slain newspaper heiress Anne Scripps Douglas apparently leapt to her death from the Tappan Zee bridge. Anne Morell Petrillo jumped from the same bridge  her stepfather chose to commit suicide after killing her mother with a claw hammer 15 years ago. Police have yet to make a positive identification. The Douglases founded the Detroit News.

There is a new book out about media disruption and transformative effect of online communities on the way organizations relate to their constituents. The target audience is marketers, but its observations and recommendations are relevant to every single person who works in media.

The book is called The Chaos Scenario, and it’s both devastating in its portrayal of the state of top-down media and intriguing in its examination of new models of communication. What’s more, it’s funny as hell. We haven’t enjoyed reading a book this much in quite a while. The author, Bob Garfield, is a veteran ad critic, a capable journalist and a ruthless tell-it-like-it-is essayist. Here’s our review.

Get this book. Share it with your colleagues. Ponder its conclusions. Prepare for a new world.

The newspaper industry’s malaise has spread to the magazine business. Ad pages were off 20.1% in the most recent month, according to Media Industry Newsletter (Min), and those figures are down from an already depressed October last year. Of the 155 titles tracked by Min, 143 are down for the year. The carnage is worst in luxury titles like Architectural Digest (down 49.4%), Veranda (down 47.4%), W (down 45.5%), Town & Country (down 45.2%), Conde Nast Traveler (down 45.1%) and Gourmet (down 42.7%). Bucking the trend is Family Circle (up 13.9%) and several fitness titles.

The magazine industry’s troubles can be traced to the alarming trends in newsstand sales, which are off 37% since 2001, according to MediaPost. Newsstand sales are important because they’re far more profitable than subscription sales and are also a significant source of circulation promotion. However, it appears that not many people are buying magazines on newsstands any more. Check out these numbers covering total annual newsstand sales:

One title that’s gone against the grain over the last eight years is The Economist, which is up 82% in that time. One reason might be innovations like a new service that enables New York City residents who receive text alerts from the magazine to order single copies delivered overnight. As long as the order is placed by 9 p.m. on Thursday, the customer can have a hard copy of that week’s new issue in hand in time for the Friday commute. That’s before the newsstands are even stocked. The Economist says it can provide the service at no additional charge over the newsstand price because it doesn’t have to pay distribution middlemen.

Not that magazines’ troubles are any solace to beleaguered newspaper publishers. Fitch Ratings says the decline in newspaper ad revenues will continue for at least another year, due to continued weakness in the print advertising market. The forecast is especially dour because it comes off terrible 2008 numbers and because most media markets are expected to enjoy a modest upturn in 2010 off of dismal results this year. PriceWaterhouseCoopers earlier forecast incremental newspaper advertising declines of 4.5% a year through 2013, noting that circulation revenue is falling in line with readership. Meanwhile, publishers are relying more and more upon circulation revenue to boost the bottom line. MediaPost documents several recent price increases by daily publishers and notes that circulation now makes up 39% of The New York Times revenue, compared to 27% five years ago.

Coupon Clipping

We somehow missed writing about this two months ago, when the survey was released, but the Newspaper Association of America just spent a lot of money on research that demonstrates that consumers rely upon newspaper advertising as an essential shopping tool. The survey of more than 3,000 consumers found that 59% cited newspapers as the “medium they use to help plan shopping or make purchase decisions,” while 82% “took action as a result of newspaper advertising.” Other media were way behind.

When you think about it, these results aren’t surprising. Retail purchases are local, and newspapers still do the best job of delivering local advertising. It’s also less convenient for a consumer to print and clip a coupon from the Internet than it is to cut it out of the newspaper. Finally, local display advertising has a better chance of catching the attention of passersby than an online banner ad, which many people block anyway. One thing the research makes clear is the importance of coupons: 90% of respondents said the presence of a coupon made it more likely they would read or look at an ad, making it the single most important influencing factor in stimulating an action. The NAA released the research as a series of short reports, all of which can be downloaded here.

Another Case Against Paid Content

Programmer guru Paul Graham has a pretty good essay on why people won’t pay for content. He notes that the print publishing model is based on selling paper more than it is on selling information. The more paper publishers can produce, the more revenue they generate. This is why the industry is in the doldrums now. He also suggests that the iTunes model is a poor one for publishers to emulate. “iTunes is more of a tollbooth than a store. Apple controls the default path onto the iPod…Basically, iTunes makes money by taxing people, not selling them stuff.” Well, not really. There are other ways to load up an iPod, it’s just that Apple has found the threshold of pain for paid content and manages to squeeze in just under it. The point about tollbooths is important, though. “A toll has to be ignorable to work.” Maybe that’s why micropayments have a chance.

Harkening back to arguments made earlier by Chris Anderson, Graham notes that the worst place to be is in the copying business. Consumers now perceive anything that’s distributed as a “copy” to be of low value. The reason movie and game producers manage to maintain high price points for their products is because they’re in the experience business, not the copy business. Perhaps that’s where publishers need to be, although their background as publishers gives them no particular head start in getting there.

And Finally…

Cuitlacoche, or fungus in a can

Meet Steve. He’s married, has kids, could be your neighbor or your boss or your underling. Steve is a writer, whether he thinks of himself that way or not. Steve proves the point that King Content rules the social media kingdom. Steve is gross and uses foul language. Steve is racy. Steve is one of the funniest bloggers we’ve found on the Internet. You see, Steve finds “food” that no mortal would dare eat (including, but not limited to, Ralph’s Potted Meat Food Product, Dolores Brand Pickled Pork Rinds, Cuitlacoche — “a black fungus that infects corn fields, making the kernels bulbous and swollen as they fill with spores”) and, well, scarfs it down.

How do we know he’s not lying to us? Because he very explicitly reviews each product after he tastes it. Texture, smell, taste, everything. Could he be making up his reviews? Of course, but far be it from us to correct him. We’ll leave the job of testing to him; we just hope his hospital visits are insured.

Masnick

Mark Glaser invites two big thinkers on opposite sides of the micropayment debate – Techdirt’s Mike Masnick and The New York Times‘ David Carr – to spar with each other and try to reach some common ground. The result is what you’d expect when you put two talented writers into competition with each other: Great wordplay and eventual meeting in the middle.

Both combatants agree that putting paywalls in front of existing content is suicidal, although Carr believes that citizens will shell out once they realize that the alternative is cacophony. Masnick wins the award for best imagery: Paywalls are “putting up a tollbooth on a 50-lane highway where the other 49 lanes have no tollbooth,” he writes. He sees no merit in paywalls whatsoever, while Carr believes they can work in some scenarios.

Carr

Carr suggests that micropayments should be looked upon “as payments for news applications instead.” In fact, the Times’ media columnist never suggests that charging readers for what they now get for free is a viable strategy. But since the status quo is no longer viable, shouldn’t publishers experiment aggressively with hybrid models?

In the end, that’s where the debaters end up. Both agree that blended paid and ad-supported models have the greatest chance of success. And if you re-read the first part of the two part series, you see that both basically suggested that approach at the outset. So maybe the “debate” was a bit of a fabrication to begin with, but at least it got our attention. And isn’t that the goal after all?

Media Employment Trend Not All Bleak

Over at BusinessWeek, Michael Mandel is looking at employment in US information industries. Using Bureau of Labor Statistics figures, he finds evidence that “someone is hiring out there,” but it isn’t newspapers, which have seen employment fall by about 40% since 1990. Mandel’s analysis goes beyond newspaper employment to look at job trends in broadcast, Internet and “other information services.” What’s interesting is the growth in the “other” category. It’s the only segment of the market that’s above Internet bubble employment levels (although the actual numbers are quite small). Mandel promises more analysis in future posts.

Jeff Jarvis takes issue with Mandel’s whole premise, calling it “measuring the wrong economy: the old, centralized, big economy. In both cases, he misses new value elsewhere in the small economy of entrepreneurs and the noneconomy of volunteers.” In Jarvis’s view, media isn’t dying so much as restructuring itself in a “post-industry” model characterized by vastly more efficient means of production, a distributed workforce and a decentralized approach to nearly everything. Innovation hasn’t left the building, he says, it has merely left the buildings where priesthoods dwell. To see the new media economy taking shape, you have to look at Wikipedia and eBay for guidance, not The New York Times and Macy’s.

Miscellany

It’s a two-horse race to own the Boston Globe, and one horse just got stronger. Former Globe executive Stephen Taylor has been joined by his cousin Benjamin in a bid for the Globe and its sister Worcester Telegram that’s estimated at $35 million plus the assumption of $59 million in pension obligations. Benjamin Taylor was the last member of the Taylor family to serve as publisher; he was ousted by owner New York Times Co. in 1999. The Taylors are squared off against Platinum Equity Partners, a Beverly Hills-based investment firm that successfully purchased the San Diego Union-Tribune earlier this year and that is bidding on several other newspapers around the country. A third potential bidder headed by private-equity executive Stephen Pagliuca has dropped out of the race, with Pagliuca instead electing to run for Sen. Edward Kennedy’s vacant Senate seat.

Members of the Boston Globe chapter of the Newspaper Guild have launched a petition drive to oust the chapter’s seven-member executive committee. Disgruntled union members seem to think they got a raw deal because negotiators at first rejected management’s call for pay cuts, only to later accept an even worse deal after the New York Times Co. drew a line in the sand.

We’ve been hearing anecdotally for some time that community newspapers are faring better than their big-city brethren. Now the organization called Suburban Newspapers of America has the numbers to back it up. Ad revenue at community papers was off 12.4% in the second quarter compared to a year ago. In contrast, major metros saw declines of 29%. Community papers are also seeing earlier slowing of the rate of decline, which indicates that the worst may be over, at least for now.

A federal judge has cleared the way for the Minneapolis Star Tribune to emerge from bankruptcy next week. The newspaper that McClatchy Corp. paid $1.2 billion for in 1998 is now essentially worthless, its fate being in the hands of a committee of secured creditors who will choose a new publisher to replace Chis Harte, who’s stepping down. New board members include former Wall Street Journal publisher L. Gordon Crovitz and GateHouse Media head Michael E. Reed.

Red-faced board members at The New York Times Co. have had to withdrawn compensation awarded to Chairman Arthur Sulzberger Jr. and CEO Janet Robinson because stock option grants and bonus compensation exceeded company policy. Sulzberger and Robinson will have to give back some stock options and agree to a $3 million cap on bonus compensation if they exceed all their goals, compared to the $3.5 million originally promised.

Robert Niles has an inspiring essay on Online Journalism Review about Eight things that journalism students should demand from their journalism schools. We particularly like #8: “Passion, not excuses.” If you’re associated with a J-school, ask if this description applies to your faculty: “Instructors [who] complain about the state of the news business, griping how much better it used to be and how awful bloggers/forums/websites are.” Pining for the old days isn’t going to help anyone build a career in the new journalism economy. Niles asks for teachers who are fired up about the new model of journalism and who can inspire passion in their students. He also suggests that students use the new tools of publishing to build a base of followers before the job-seek. “Who ya gonna hire?” he asks. “The student with potential… or the student who’s already got 50,000 unique readers a month?”

Judy Sims’ “Top 10 Lies Newspaper Execs are Telling Themselves” may be painful for newspaper execs to read, but they should read it anyway. In blunt language, she shoots down some of the most common rationalizations newspaper executives use for continuing to do business as usual. Not all of her points are thoroughly supported, but it’s hard to argue with the common-sense thinking behind most of them.

Among our favorite quotes:

The only way newspapers can ensure the survival of their brands and the journalistic principles they hold so dearly is to separate the Web organization completely from the newspaper.

This frames the list’s biggest “myth,” which is that news organizations can prosper online while doing what they’ve always done in print. The nature of online publishing is conversation and community, not top-down communication. Organizations that derive 90% of their revenue from print are never, ever going to give an online division the attention or resources it needs.

Figure out what is truly scarce information to your readers.  Then, maybe you can charge for it.

Yes, yes, yes. Putting pay walls in front of information that doesn’t meaningfully affect people’s lives is a DOA idea, yet it seems to be conventional wisdom right now that readers will pay for stuff like popular columnists and exclusive sports coverage. No they won’t. They will pay for information that saves them money, enhances their appearance or finds them love, and precious little else. Maslow’s Hierarchy wasn’t invalidated by Internet.

We used the paper to help us shop every week…and decide what movie to see at what time and where. How much of the value of the newspaper was derived from news and how much was derived from all these other things?  After all, news has always been free on TV and radio.

See the previous point. Publishers who think readers are going to pay for news are delusional. Not to mention pompous. Half the reason people subscribe to newspapers is for the coupons. News is a commodity. You have to deliver value that affects people’s lives in a meaningful way.

Figure out what is truly scarce information to your readers.  Then, maybe you can charge for it…Do what you do best and link to the rest.

The second part of the quote is from Jeff Jarvis, but the sentiment is appropriate to the “myth” theme. Newspapers have traditionally had to do everything for their readers because readers had no way to find information for themselves. Now that restriction has been lifted, which means publishers should stop spending money on stuff they suck at.

The more cuts are made, the more newspapers are guaranteeing their own demise.

That’s because the people they’re cutting are setting up shop as hyperlocal bloggers and competing against their former employers. Newspaper layoffs are thus giving rise to the next breed of competitors.

If there’s any unifying thesis to Sims’ 10 lies, it is that trying to manage a revolution is futile. Publishers will not iterate themselves to a secure future, nor will they ever bring back the profit margins of the past. The rules have changed forever and that means blowing up a lot of stuff. The process is incredibly painful but it’s necessary for any organization that hopes to make it to the other side of this vortex.

A couple of weeks ago, SeattlePI.com reported that its Web traffic has remained unexpectedly strong after pulling the plug on its print edition and firing 80% of its staff. The Post Intelligencer may have given the rest of the industry a model for completing the transition to the digital world.

Get Comfortable with “Good Enough”

After you’re done reading about 10 lies, head over to Journalism Iconoclast Pat Thornton, who speaks much truth about what he calls the “Down and Dirty Revolution.” Thornton’s main point: Stop thinking like an entity that was the be-all and end-all of information to its community and start thinking like a participant in the digital community. What does that mean? Paraphrasing:

• Make the most of what you’ve got and stop whining about the resources you lack.
• Be satisfied with good enough. You can improve it later. Perfection is the enemy of getting stuff done.
• Stop duplicating effort. “If parents are taking pictures at a high school football game…it makes much more sense to work out a deal with them than to spend staff resources on taking pictures at said game.” So true. Likewise, use Creative Commons photos and stuff people post on Flickr instead of sending your own photographer to shoot the same stuff.

There’s more, but those are the basic themes.

Miscellany

If all goes well, we may soon remove the Claremont (N.H.)  Eagle Times from the R.I.P. list.  A federal judge has given a Sample, Pa. newspaper chain conditional approval to buy the newspaper with the intent to relaunch it. The 7,800-circulation Eagle Times closed abruptly in July when its owner ran out of money. It took with it three small weeklies, which also will be relaunched if new owner Sample News Group has its way. Owner George Sample said his goal is to relaunch the daily before the end of the month with a staff of 25, which would be significantly smaller than the 66 full-timers and 29 part-timers the paper previously employed. Sample also said he plans to relaunch the weeklies at some point. Sample offered just $261,000 for the franchise, which was nearly $4 million in debt when it declared Chapter 7 this summer.

Ryan Chittum runs the numbers and finds that newspaper ad revenues are on track to hit their lowest level since 1965. In real dollars, revenues peaked in 2000. The comeback from the 2001-2002 recession was never very strong and sales have plummeted for the last three years. Real dollar revenue for 2009 will be about half of what it was just nine years ago, a stunning development in an industry that’s been historically known for its stability. Chittum also notes that circulation is the only slice of the revenue pie that’s growing right now while online advertising is declining. In fact, it appears that the online advertising business will only support one spectacularly successful business and that’s Google. A busy comment stream on this month-old piece debates whether online advertising is actually stealing share from print. Right, and global warming is a myth. (If you have trouble reading the chart below, click on it to go to Chittum’s analysis at the Columbia Journalism Review, where you can see an enlarged version.)

PaidContent.org has an interview with Josh Cohen, senior business product manager of Google News. Cohen has been schooled well to say little in a lot of words, so don’t expect any great insights. The main takeaway for us was that Google has no intention of sharing with publishers any revenue generated on Google’s site but that the company really wants to work with news organizations to make sure content behind pay walls is visible to Google’s search engine. In conversations like these, we hear Google executives sounding more and more like Microsoft officials did in the early 90s.

Speaking of Google, have you seen Google Fast Flip? It’s a new Google Labs project that “lets you browse sequentially through bundles of recent news, headlines and popular topics, as well as feeds from individual top publishers,” according to an entry on the Official Google Blog. “As the name suggests, flipping through content is very fast, so you can quickly look through a lot of pages until you find something interesting.” The service is the product of a partnership between Google and “three dozen top publishers, including the New York Times, the Atlantic, the Washington Post, Salon, Fast Company, ProPublica and Newsweek.” The idea is that if people can access news more quickly, they’ll read more news and that will result in more advertising revenue. Google continues to try to extend the olive branch to publishers who see nothing to like in other Google services that they claim steal their intellectual property.

Final bids for BusinessWeek are due today and Bloomberg LP is reported to be the leading contender. Other possible buyers include Bruce Wasserstein, Lazard, OpenGate Capital and ZelnickMedia, but Bloomberg is said to have the top bid. BusinessWeek revenues are on track to be down 43% from last year’s levels.

The Chicago Sun-Times and the Boston Globe, which were both fighting for their lives earlier this year, appear to have turned the corner and may soon be profitable, owners say.

Alan Mutter interviews Jeremy Halbreich, the newly installed CEO of the bankrupt Sun-Times Media Group (STMG). Halbreich (right) says that contrary to popular belief, the Sun-Times is gaining market share against the Tribune and that new owners are ready to invest more than $10 million in streamlining and modernizing the paper’s internal processes.

Halbreich isn’t giving out specifics, but he appears fully confident that the company will emerge from bankruptcy late this year and deliver 5% to 7% operating profit margins by the end of 2011. This hasn’t come without pain, of course. The STMG has gone through two years of aggressive cutbacks and more blood is likely to be shed before the turnaround is complete, but Halbreich appears to have the right attitude. He’s not waiting for the glory days to return but rather is restructing the organization to compete profitably at a smaller size. In an interview with Editor & Publisher, Halbreich provides a bit more detail on the STMG’s burn rate.

Globe May Turn Profit Soon

Meanwhile, The New York Times Co. is now saying it may not sell the Boston Globe and Worcester Telegram after all. It seems that a combination of cost cuts, union concessions and a modestly improving economy have created the possibility that the Globe could actually turn a profit in the foreseeable future. That would be an accomplishment, given that the paper was losing $1.7 million a week at the beginning of this year.

Times Co. CEO Arthur Sulzberger Jr. isn’t making any promises, though. He’s started showing potential buyers around the facilities and is saying nothing to squelch speculation that Platinum Equity, which is considered the Chainsaw Al Dunlap of the newspaper business, may end up owning the New England properties. Employees fear that Platinum could come in as the new owner and make the kind of draconian cuts that have reduced the size of the San Diego Union-Tribune’s staff to a little more than half of what it was two years ago.

National Post Returns on Mondays

And finally, Canada’s National Post will return on Mondays following a summer-long hiatus. The Canwest daily announced in June that it would temporarily discontinue the lightly advertised Monday edition as a cost-cutting move. It didn’t gave a date for the issue’s return, but it appears that the ensuring nine weeks have given Canwest time to find some efficiencies and take a run at the Monday market with a slimmer, redesigned two-section edition (right).

The newspaper industry is all abuzz about Google’s submission of a micropayment proposal to the Newspaper Association of America (NAA, see latest ad at right). Nieman Journalism Lab first reported Google’s involvement and has been birddogging it the last couple of days. Google basically proposed to make its Google Checkout service available to publishers who want to charge for content. You can read the eight-page Google proposal here. Nieman’s Zachary Seward followed up to try to get Google to elaborate, but was simply told that “we don’t have any specific new services to announce but we’re always looking for ways to make payments online more efficient and user-friendly.”

In fact, the document is pretty standard boilerplate material about Google Checkout, but with one interesting twist. It notes that “micropayments will be a payment vehicle available to both Google and non-Google properties within the next year. The idea is to allow viable payments of a penny to several dollars by aggregating purchases across merchants and over time.” This approach would enable subscribers to set up accounts spanning multiple media properties and would aggregate their charges into a single bill. So, for example, a reader could subscribe to The New York Times, The Economist and Advertising Age and automatically receive access to pay-walled material from those publications without having to jump through registration and sign-on hoops.

Visitors who were not subscribers to those services could choose to pay by the drink for content. The whole process of enabling access and billing a few pennies for it would be handled by Google’s back-end servers. There are even options to enable free-trial access with a paid conversion option. All charges would be aggregated into a single bill. Google also proposes ideas to index content and display search results differently depending on a subscriber’s status. In other words, a subscriber to the Washington Post would see different search results than a non-subscriber and would also be able to click through to a full article without registering.

Journalism Online’s Grand Assumptions

Google is only one of several vendors that submitted bids to the NAA. Journalism Online, the much talked-about Steven Brill venture that has reportedly signed up 500 newspapers as clients for its micropayment service, also submitted a proposal that details its commission structure for the first time. Seward analyzes it here and the entire submission is here. Journalism Online basically proposes to take a 20% commission on subscriber revenues.

Maybe we’re missing something, but the Journalism Online math looks pretty twisted to us. Its proposal includes the business model for a mythical one-million-print-circulation newspaper (now that is a myth) with 800,000 home delivery subscribers and 20 million unique online visitors. Annual print circulation revenue is estimated at $600 million a year, which translates into $750 per subscriber. Our own local paper charges about $400. The model also estimates that the website will have 2.2 million subscribers in year two, which means that 11% of the unique website visitors are paying something for content. Again, this sounds optimistic. Renewal rates are given an equally buoyant estimate of 90%.

The NAA has said it won’t pick any winners but rather is performing a service for its members by inviting submissions. Members are free to do business with anyone they want. Keep an eye on Nieman for continuing coverage of this latest development in the evolution of pay walls.

We’d like to be able to close out the week on a happier note, but the evidence that newspaper executives and union leaders have no friggin’ clue about the enormity of the challenges facing them just keeps on coming. Consider:

Newspaper layoffs have hit young people the hardest, according to a survey by the Associated Press Managing Editors. The survey of 95 editors found that newsroom staffs have shrunk more than 10% in the last year and that workers between the ages of 18 and 35 were the most likely to be shown the door. This information comes at a time when newspapers are desperately struggling to become relevant to precisely that age group. It’s not that the editors want to lay off all the young staff, but union rules require them to preserve the jobs of older – and more change-averse – employees at the expense of younger and cheaper workers. We like Silicon Alley’s graphic accompanying this story. It shows a man aiming a revolver at his foot.

Ken Doctor of Outsell has a new report on the state of newspaper companies’ digital migration efforts and he comes to some pretty bleak conclusions. Newspapers derived just 11% of their revenues from digital sources in 2008, Doctor found. In comparison, the rest of the information industry gets 70% of its revenue online. In other words, the specialty publishing markets have substantially completed their migration to digital business models while newspapers are just beginning.

It gets worse. Online revenue for newspapers is now static or declining while it’s growing nearly everywhere else. And all the major publishers except Dow Jones are losing market share. “The news segment still stands out as the biggest laggard in the information industry overall,” Doctor says. Listen to our August interview with Doctor.

Miscellany

The number of reporters on Capitol Hill isn’t declining, but the profile is changing. There were 819 accredited reporters from mainstream US newspapers and wire services on the Hill in 2009, a decline of 193 – or 19% – from the previous year, according to the Pew Research Center. However, the gap is being filled by reporters from niche and specialty publications. There were 500 of them in the galleries this year, up from 335 a decade ago. As a result, the full Washington press corps has remained fairly stable at between 1,300 and 1,500 souls over the last 20 years. It’s just that newspapers now make up less than half the total, compared to two-thirds a decade ago.

The authors of the study note that ordinary Joes are privy to less and less information about their government, while well-heeled business types can afford to finance on-site reportage that keeps them in the lobbying loop. And the advantage isn’t limited to conservative business interests. “The Washington bureau of Mother Jones, a San Francisco-based, left-leaning non-profit magazine, which had no reporters permanently assigned to the nation’s capital a decade ago, today has seven, about the same size as the now-reduced Time magazine bureau,” the study notes.

The Pittsburgh Post-Gazette is the latest newspaper to jump on the pay-wall bandwagon. Its new PG+ section went live this week, offering bonus features like “social networking, live chats, videos, blogs and behind-the-scenes” look at the daily news,” according to president Christopher H. Chamberlain. Standard daily fare will remain free, but for $3.99/month or $36/year, readers will get exclusive access to the thoughts of Steelers reporter Ed Bouchette, as well as undefined special offers. We’ll see. You can tour the “PG+ Experience” here.

The folks at North America’s largest French-language daily must have liked what they saw in Boston, where The New York Times Co. successfully stared down unions at the Boston Globe and won significant cost reductions. Montreal’s La Presse will shut down Dec. 1 if the newspaper’s eight unions don’t help it cut $26 million in operating expenses. Among the concessions management is seeking are the end of a four-day work week for full-time pay and elimination of as many as 100 of the 700 jobs at the newspaper. The union says it’s open to discussion if it can see the paper’s books. La Presse cut out Sunday publication earlier this year in order to save money.

Jeff vonKaenel has spent more than 30 years in alternative weekly publishing and he has some interesting observations about the paradox of publishing success. The CEO of the News & Review newspapers in central California is a student of media history, and he notes that the trend toward consolidation and monopolization that began in the 1970s dumbed down newspapers’ editorial product and set them up for failure when the rules changed.

The real demon was blandness. Alternative weekly publishers know that advertisers don’t like to run next to controversial editorial content. This is one market dynamic that keeps the alternative press small. Monopoly newspaper publishers aren’t small, however. They thrive on big-ticket schedules built on co-op ad dollars from giant national brands. They can’t afford to piss off million-dollar clients, so they intentionally keep the product inoffensive.

“It’s safer to make an outrageous statement about Saddam Hussein than to make a mild criticism of a local car dealer,” vonKaenel writes. “It’s something newspapers don’t like to admit. It has always mattered who pays the bills.” This is true. How many times can you remember the automotive section of your daily newspaper offering advice on how to get a better deal on a used car?

This dilemma creates a scenario that we’ve seen play out again and again: big industries and big companies collapse hard on the heels of their most successful years. That’s because success creates risk-aversion which leads to mediocre products (see General Motors). That strategy works fine until the rules change, and it served newspaper publishers very well for more than 30 years. But, as Bill Wyman pointed out in a recent essay, it also led them to create mediocre, inoffensive and bland products. When a low-cost alternative medium emerged, newspapers were poorly equipped to retain readers because, well, they sucked.

VanKaenel’s essay has one interesting twist: It implies that the current fascination with hyperlocal media could be in for a hard reality check. Noting that alternative weeklies’ coverage of music and nightlife topics has been heavily influenced by the willingness of those kinds of advertisers to run in those papers, he suggests that hyperlocal publishing will by driven by market forces. In other words, don’t expect a lot of critical stories about local merchants if those merchants are paying the bills. This reality actually could drive new-media publishers to broaden their scope. After all, they can’t afford to piss off thousand-dollar clients.

Orange County Register Owner in Bankruptcy

The small print of the bankruptcy filing by Freedom Communications Holdings Inc. contains a startling figure: circulation at the Orange Country Register is off 23% in the past four years. How can any business survive when it’s on a run rate to lose more than half its customers in a decade? The problem is made worse by the fact that the newspaper business model scales down so badly. The Register can’t cut back by 23% on printing or delivery expenses because of the high fixed costs involved. That means that operational expenses must be chopped to a disproportionate degree in order to make up for the shortfall. That comes directly out of the quality of the product, which leads to reader dissatisfaction, which creates bigger circulation declines.

This is why the newspaper industry is in a death spiral. The only way to turn the situation around is to dramatically improve the quality of the product, but economics demand that quality must take the biggest hit in order to keep the operation afloat. And so another noble publishing franchise falls into the hands of its bankers. They are always the owners of last resort for businesses whom, in their misguided greed, they chose to support.

Divide by 2

Did we say spiral? Alan Mutter has some sobering statistics. He projects that US newspaper revenues will fall $10 billion this year, making the industry about half the size it was in 1986. The most devastating collapse has been in classified advertising. For example, recruitment advertising was a billion-dollar quarterly business as recently as 2006. In the most recent quarter, it generated $202 million in revenue. The story is similar in automotive and real-estate advertising. While the recession has hit these categories hard, it’s hard to believe that they will ever again resemble their former size now that the Web provides nearly limitless advertising inventory.