Stars, cows, dogs and newspapers

When I reported on business for the Rochester (NY) Democrat and Chronicle in the 1980s and 199os, there was a business management philosophy which held that all lines of businesses could be classified in one of four ways:

(1) Stars, with high profitability and high growth

(2) Cows, with high profitability and low, zero or negative growth

(3) Dogs, with low, zero or negative profitability and low, zero or negative growth

(4) Question marks, with low, zero or negative profitability, but high growth

The job of a manager was to (1) feed the stars, (2) milk the cows, (3) shoot the dogs and (4) answer the questions.

Back then the owners of the nation’s great newspapers treated them as cash cows. Newspaper circulation did not keep up with population growth, but newspaper companies typically had profits exceeding 20 percent, greater than oil companies. Profits were not typically put back into the newspaper to improve the product. Instead, newspapers shrank their circulation areas, published fewer editions, allowed news staffs to shrink and sought to maintain profits by cutting costs and staff.

Now the newspaper industry is in crisis. The Tribune Co. is reorganizing under bankruptcy, but at this point it appears it will continue publishing the Chicago Tribune, Los Angeles Times, Baltimore Sun and other properties. Other famous newspapers have gone to less-than-daily publication, replaced print editions with Internet-only presence or gone out of business entirely.

I would like to believe that this need not have happened if the big newspaper chains had put professionalism above profits. Unfortunately the facts don’t seem to support this belief.

The McClatchy Co., the third-largest U.S. newspaper chain, which bought Knight-Ridder newspapers in 2005, has done just what I want.  They have set an example of journalistic excellence, but financially they are down with Gannett Co. Inc. and all the others. The newspaper chains that are doing best, or least bad, are the ones that have diversified away from print journalism.

Click on this and this for reports (written before the current collapse) on newspapers as cash cows.

I am like most newspaper reporters in that I didn’t go into reporting for the money.  My motives were partly to learn interesting things, partly out of vanity in seeing my words and byline in print, and partly because I thought I was performing a public service and helping people to be better informed.

I thought my personal goals aligned with the goal of the newspaper publisher to make a profit and stay in business.  I thought that if I wrote articles that were interesting, informative and fair, readers would trust the newspaper and buy it.

People once depended on newspapers for information on breaking news, but then radio and TV came along. People once depended on newspapers for data on sports scores, stock prices, livestock auctions, the weather and much else, but then the Internet came along.

It seemed to me that the best business strategy for newspapers would be to double down on good reporting, good writing, investigations and analysis. Instead most newspapers allowed their newsrooms to shrink and channeled resources away from hard news to lifestyle reporting, specialty publications and the Internet.

The Democrat and Chronicle, when I worked for it, was in many ways a good newspaper. In many ways it is a good newspaper still.  But in the years I worked for it, it became harder and harder to do a good job with the resources available.  I am no longer in touch with the newspaper, but I suspect it is harder still.

I would like to believe that I was right and the prevailing wisdom of the newspaper industry was wrong, but I am not sure.  The only example I can find to support my argument is Walter E. Hussman, publisher of the Arkansas Democrat-Gazette.  He was a brilliant and hard-driving entrepreneur, and no business strategy is feasible that requires extraordinary qualities in those who carry it out.

Click on this for Hussman’s story.

Back when I worked for the D&C, I talked to a reporter for the Buffalo News, which was owned by Warren Buffett.  She has formerly worked for the Buffalo Courier-Express, which closed in 1982. Rupert Murdoch, whose News Corp. owned the New York Post and Fox broadcasting network, offered to acquire the Courier-Express in return for concessions from the newspaper unions. She said she was present at the meeting in which the union rejected Murdoch’s demand.  The thinking was that if there was room in Buffalo for only one newspaper, it was better that it not be a Murdoch newspaper.

As she described it, the Buffalo News was an ideal workplace from the standpoint of a reporter. Buffett invested in the salaries of his staff more than technology. As a result, unlike most newspapers, there was little turnover in staff. The Buffalo News reporters stayed long enough to sink roots into the community. They understood what people in the Buffalo area cared about and they understood how things worked. This seemed to me, as I listened to her, a great formula for newspaper success.

Maybe the Buffalo News was really like that, and maybe not; I am drawing on a memory of one person’s words more than 20 years ago. I am not a regular reader of the Buffalo News, but it seemed to me back then that it was a highly interesting newspaper back then and gave a good sense of Buffalo as a community.

Whatever was the case back then, Warren Buffett in recent years has given up on newspapers.  He is trying to downsize his way to profitability, just like any other businessman. The few times I read the Buffalo News recently, it seemed  bland and generic, although it had nice photographs and an attractive layout.

Click on this and this for Warren Buffett’s current view of the economics of newspapers.

Click on this for an excellent Wikipedia article on the economics of newspapers.

In a democracy, citizens need a source of accurate information, and I hope and believe this need will be filled some way or other – possibly even by daily publications printed on paper.

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