It is a good time to be a deceitful politician or a pay-for-favors lobbyist or a crooked corporate CEO. That’s because the profession that is charged in a democracy with ferreting out such miscreants is losing some members of its “A” team.
Despite its ills and errors, The New York Times remains the best newspaper in America. But the business model to which the industry remains fanatically obsessed â€” maximize shareholder income at the expense of the quality of its product â€” is about to slip a knife into the muscle and bone of The Times‘ reporting staff.
The Times will trim its newsroom staff of 1,332 by about 100:
The cuts will be achieved â€œby not filling jobs that go vacant, by offering buyouts, and if necessary by layoffs,â€ the executive editor, Bill Keller, said. The more people who accept buyouts, he said, â€œthe smaller the prospect of layoffs, but we should brace ourselves for the likelihood that there will be some layoffs.â€ He said, â€œWe intend to move quickly, to get any cuts past us so that we do not spend a year bleeding slowly.â€
More than any other set of job cuts in the news biz, these are the most troubling. Like it or not, The Times has held fast to its reputation for credibility, accuracy and fearlessness for more than a century. Yes, it’s often too liberal. Yes, Judith Miller’s pro-Iraq reporting left some slime on the masthead. Yes, The Washington Post beat it on Watergate. And yes, The Times can be irritatingly patrician and arrogant. But it’s ability to latch onto a story and extract every last dram of news is unparalleled in American journalism.
The New York Times Co., which owns The Times, has not always been the best-run of American media. But it’s still making money:
For 2007, the Times Company recently reported earnings of $208.7 million on revenue of $3.2 billion. The companyâ€™s newspaper segment had an 8 percent operating margin last year, compared with 13 to 22 percent for several other large newspaper publishers. Newspaper industry ad revenue fell about 7 percent last year, and 4.7 percent at the Times Company, hurt by both the slowing economy and the rise of Internet advertising. Executives around the industry have projected that 2008 will be equally bad. [emphasis added]
By now, it’s an old story â€” falling revenues from print advertising caused, in part, by declining readership. Rapidly increasing online readership has produced dramatic gains in online ad revenue â€” but gross online ad revenue still pales with gross print ad revenue. Apparently, there’s just not enough breathing room, newspaper management believes, between shifting high gross ad revenues from a print-dominated enterprise to an online-dominated one.
And The Times does well online â€” at least in terms of readership:
Revenues are falling even as readership of major newspapers climbs sharply because of the Web. Most major papers set records for Internet traffic last month, Nielsen/NetRatings reported Thursday; the Web site of The Times had more than 20 million unique visitors, more than any other newspaper site. [emphasis added]
But cutting the reporting resources of The Times will have consequences â€” just as newsroom cuts at other newspapers nationally have. Fewer reporters will be available to do the more stories desperatedly needed about an increasingly complex society.
The Times has a newsroom budget of more than $200 million. It is one of a few news organizations that has not reduced its coverage of Iraq, which costs about $3 million a year. Expenses have also been increased by an unusually long and competitive presidential campaign.
Cutting 100 reporters may reduce the effectiveness overall of The Times‘ commitment to Iraq and political coverage. The Times Co.’s shareholders may gain, but we, the readers, will lose some measure of quality in the old Grey Lady’s news columns.
Said editor Keller:
To meet our budget goals, we will have to do a little less, and every time we do less, we cede a bit of advantage. Our challenge will be to set our priorities in such a way that we do less in the areas that damage our competitiveness least.
This is not a positive development for American journalism. If the nation’s best newspaper becomes less effective journalistically, it will be costly in ways we cannot yet predict. At the least, those who seek to hide misdeeds from sunlight will be emboldened.
Here’s hoping that the reporters taking buyouts and being laid off find their ways to other news outlets where they can continue to do their excellent work.
I feel for the reporters, and it sure as hell does the country no good when these kinds of things happen. But I’ve given up hoping that Legacy Journalism can be saved from itself. So maybe the next best thing is to hope for a quick death. Maybe that way we’ll be forced to more quickly evolve What Comes Next.
Maybe I’m too cynical, but it’s not like that cynicism is without cause….
I disagree partly, in that you focus more on the “legacy” aspect than the “journalism.” I think I have arrived at the point that I no longer care if trees die or electrons flow: As a citizen, I need a credible journalist to hold the powerful accountable.
Now, whether that journalist does in in a subjective form, such as what we do here at S&R, or in that nominally “objective” form, is a matter of continuing debate. So why not both?
The longer any form of journalism is deprived of resources to do what the Founders intended, the greater chance this country will be run by forces more devious than Bush & Co. This is what the Times cuts are so troubling to me. It is as if this is the last, great wall to be breached by Satan (insert media mogul’s name here).
New Masthead motto: “All the news that’s fit for the business plan….”
In an age when people file class action lawsuits over football games, it’s a shame that the same isn’t done when corporations cut back on the quality of their product at the expense of their consumers. People pay for subscriptions, expecting a certain level of service. I’m guessing it’d be difficult to objectively prove that the quality of the paper will have diminished since the downsizing.
You know, I’ve begun to think there really is a ray of hope, here. What the newspapers are doing is cutting expenses because revenue is declining, right? Eventually, there will be no more cuts to be made, and owners will want to sell and get out. To whom will they sell? How about non-profit organizations? Non-profits work very well so long as there are margins. They don’t need to pump out particular earnings per share numbers, and no one cares if profits per share continue to grow.
Eventually, we may find that most of our news-producing organizations are non-profit, and that may very well be an improvement.
At the moment, I think that non-profits as owners of newspapers is a wet dream that’s a non-starter. Yes, examples exist of successful papers run by non-profits (such as the St. Pete Times).
But the nation has more than 1,400 dailies and several thousand weeklies. It’s a bit much to expect all to fall under the ownership of non-profits. Even thinking about the principal dailies in the nation’s nearly 300 major media markets switching to non-profit ownership is highly unlikely.
I’m looking into this and will post more soon.
Thanks, all, for your comments.
I don’t think all newspapers will go non-profit, and I don’t think all newspapers will survive. But given the fact that newspapers find it relatively easy to produce positive margins, but not positive enough to produce adequate earnings per share (and, as I’ve said before, I believe it’s not “profit” that is the issue here, but “earning per share”), they seem naturals for the non-profit sector. Heck, the probably produce enough revenue to support leveraged buyouts so long as EPS isn’t a consideration.
You’re gonna make me take more econ and finance courses, aren’t you, JS?
Darn. Thanks for the thought.
The average EPS in the newspaper would probably support a leveraged buyout in normal times. I’ve seen some pretty slippery LBO’s in the past that had no earnings at all, but “Looked good on paper.” However, the sources of credit for such deals has sort of evaporated during the latest banking melt down. Except for market related activities, there seems to be no money out there at a decent price. My friend has a money making business with zero debt and an excellent credit record. He wants to buy out a competitor, but the bank (where he initially financed his business…his bank of record), shined him on as far as a loan, They didn’t even offer him an SBA loan as an alternative. Nobody’s making loans these days. The investment banks that usually do the LBO’s are shrinking themselves due to their own exposure of bad paper. These credit crunches( contractionsactually) happen every decade or so, and need to be allowed to work themselves out. In a year or so, as soon as the credit market wrings out the excess, it will be business as usual.
Thanks for the insights, Jeff. Yeah, I saw an editorial today from Krugman that auction-rate securities no longer have buyers and, as a result, borrowers like the Port Authority of New York are seeing their interest rates jacked from 4.3% to 20%!!
I hope you’re right that this will correct itself and that we’re not seeing a very scary billiard game of cause and effect that will look more like a fission reaction in the end.
About the newspapers: I don’t think we’ll see a massive sell-off soon. They’re still cash cows at the moment, and very useful for financing other business ventures. Only when they have been stripped to the bone and EPS has dropped to near-moribund rates will this happen (I think).
Even though past performance is no predictor of future results, credit meltdowns have occurred 26 different times in the US, and the markets have always found equilibrium and recovered. This little meltdown pales compared to the panic of 1907 when the stock market fell 50% in a couple of days and interest rates approached 200%. Call money was even traded at a higher rate of around 400-500%. There was no money to be had at all in 1907.