February 26, 2009

Death On Your Doorstep

There has been no shortage of ink spilled onto the broadsheet pages
of daily newspapers over the collapse of the print industry. It has
become a staple story of the new century and a dramatic one at that: A
single Web site wipes out hundreds of millions of dollars in classified-
ad revenue in a few quick years; legions of anonymous bloggers exert
sway over public opinion equal to that of any self-respecting, war-
mongering newspaper baron. This week, the big story is that Journal
Register Company, which owns The Record, The Saratogian,
Rex Smith
Kingston’s Daily Freeman, and the Community News in Clifton Park—
and which recently shuttered The Independent in Columbia County—
Photo: Alicia Solsman
has filed for bankruptcy protection. According to the Associated Press,
JRC claims its revenues are down 20 percent since 2006, and the
company’s debt surpasses its assets by more than $100 million.

Last year, 21,000 newspaper employees in this country cleared out their desks to join the ranks of the
unemployed, because their jobs just ceased to exist. These editors, photographers, and reporters found that
technology had delivered a way to supplant them, just as it did to the manufacturing sector before them. As
Greg Dahlmann, a former WAMC producer, puts it: “Their job function has been disaggregated.” A rough tally
of the layoffs and early retirements over the past six months throughout the Capital Region’s newspaper
industry totals more than 50 people.

Rex Smith, managing editor of the Times Union, is harried and running late between appointments when he
sits down to discuss the perilous fate of his industry. As one would expect, he doesn’t have much good news
to offer. January was a bad month. Smith had to lay off a couple of part-time employees, and the paper scaled
back its print product by 28 pages a week, cutting out its Monday, Tuesday, and Wednesday feature sections.

“We did a buyout last summer, seven or eight positions,” Smith says, “and then we have had some attrition.
What we’re told is our company doesn’t really believe that the newspaper revenues are going to come back
this year. And I think that it is only a matter of time, unless there is a sudden resurgence in the American
economy, I don’t see how we can avoid anything other than a smaller newsroom in the future.”

At its height in 1997, the TU employed 147 people in its newsroom. The average had been 134, Smith says.
Now they are down to 120.

The Daily Gazette in Schenectady, at its height in 1990, employed 110 newspeople. Now it employs 50
scattered throughout a newsroom filled with empty desks. In one corner of the newsroom, now dark and
unused, is the once-buzzing clips library, where full-time staffers would cut out articles from each issue and
store them away in a wall of metal file cabinets. Reporters and editors now help themselves to the old clips, or
go online for PDFs.

Last month was miserable for Judith Patrick, the managing editor of the Gazette. The paper shed 10
employees in a single round of layoffs. It was a drastic move, made in the hopes that it would stave off any
further layoffs in 2009. Since May of last year, the Gazette has been trapped in a sickening three-month cycle
of layoffs. It was just too crushing for morale.

“All together, since last May,” Patrick says, “we have laid off 19 people—reporters, editors, photographers,
clerks, a receptionist who we loved dearly.”

The Gazette dropped its Lifestyles section three times a week, as well.

“The fact is that the traditional business model for newspapering isn’t working well anymore,” says Smith. “All
those big advertisers who have been buying all those nice, big full-page ads are vanishing.” It is a trend that is
only quickening in this economic downturn. “Circuit City is gone. Off goes Rex Appliance. And you worry about
the department stores. You worry about Macy’s.”

Although Smith does entertain some pet notions for how to “save journalism,” neither he nor his parent
company, Hearst Corp., nor anyone else has yet to offer a compelling strategy for how to reverse the
industry’s steady decline. So far, and for the foreseeable future, truncating against losses appears the only real
strategy.

On the second Friday in February, managing editor Parry Teasdale stood with members of his staff at the
bottom of the steps of his Hillsdale-based newspaper, The Independent, and listened as a JRC representative
told them all that their jobs no longer existed starting at the end of the day. “They came down, and said,
‘You’ve done a good job, people. This is a good paper, but you know that the company is in trouble, so finish
the issue you are doing, clean out your desks and don’t come back,’” says Teasdale. “And then they closed
down a paper that existed for 36 years.’”

The corporation issued its official statement, and handed it off to Teasdale to distribute to his shell-shocked
staff. The only blank that was left on the company’s edict for Teasdale to fill in was how old the paper was. It
appeared that nobody at JRC, he says, “knew how long the paper had been in existence.”

(Teasdale has signed a non-defamation agreement with JRC as part of his severance package, so he chooses
his words about his former employers carefully.)

He had been the editor of the Woodstock Times for 15 years before taking the managing editor position at The
Independent. When he started in 2000, the twice-weekly community sheet was owned by a local couple who
had bought it from its original owners. In 2001, the paper was sold to JRC. “They sold it,” Teasdale says,
“when newspapers were still being paid for at really high rates. JRC was on an acquisition binge.”

JRC’s acquisition binge is legendary in the business. According to a 1999 American Journalism Review article
by Mary Walton, after going public in 1997, JRC attacked the newspaper industry with a two-prong ownership
strategy: acquire as many properties as possible and squeeze these news operations for as much profit as
they could produce. The company developed a reputation for cutthroat management, Walton’s article
continues, by paying its reporters at the time a base salary of $17,000, straining its employees under the
constant threat of firing, forcing them to perform multiple job functions, even checking reporters’ car odometers
against their expense accounts. A 30-year newspaper veteran told Walton that his stint at JRC was the worst
experience in his career: “I can live with cautious people looking to cut fat, but not bone and muscle. That’s
what JRC does.”

“JRC,” Teasdale says, “became the poster child of financial trouble because it had such a huge debt load.”

“The company made a bet,” he continues. “They bought up a lot of properties. They wanted to grow by
acquisition, because it is very slow to create new companies. But the thing about being the bigger fish that
swallows the smaller fish is that you always have to be worried about the fish behind you. And in the late ’90s,
and in the early part of this century, one of the ways to prevent having the bigger fish from swallowing you up
was by having debt. You would be much less attractive for takeover if the company that buys you would have
to assume a lot of debt. So JRC made a bet in 2004 on buying a large chain of suburban newspapers in
Detroit. Now, maybe it seemed like Detroit was going to come roaring back after two decades of faltering, but
they spent hundreds of millions of dollars.”

This was when the newspapers still had a patina of invincibility, he says, and the financial culture was—as is
now so obvious—deluded by its own equal sense of invincibility. The banks were happy to allow JRC to
leverage itself to the maximum.

“Then the economy turned sour, and the banks wanted their money back,” Teasdale says.

Before JRC was kicked out of the New York Stock Exchange, its shares were trading at 3 cents.

Yet JRC doesn’t stand alone in its ruthless pursuit of profits. Until only the past few years, owning a newspaper
chain had been an extremely lucrative business proposition, providing profit margins upwards of 30 percent.
The industry was once full of properties that were seen, as Warren Buffet described, as “indestructible slot
machines.”

“In the 1990s,” says former Times Union editor Dan Lynch, “there was a fundamental change in the
newspaper business to a wide variety of thinking that was not for the better. A conviction set in at the highest
levels of the newspaper business that daily newspapers were a ‘mature industry.’ And since most of these
newspapers are owned by large multimedia corporations, the thinking was that now is the time to milk these
things for cash, because this is an industry without any realistic possibility of growth. So let’s cut the staff. Let’s
not print anything in the paper that might piss off anybody and disrupt the flow of revenue.”

Lynch worked for the Times Union during the ’80s and ’90s, the modern heyday of the newspaper industry,
and remembers most of that time fondly. But by the time he left the paper, he was happy to be done with the
business. Newspapers were all too willing, he says, to trade their constitutionally protected privilege of “holding
government accountable” for revenue.

“There was an unspoken, but very real, determination on the part of the upper-level managers of the
newspaper industry in general that they wanted to do less and less of the kind of reporting that would piss off
the power structure and would cost them money.” For example, The New York Times, he notes, took a large
state grant for the construction of a new office building in Manhattan. “And it is not unreasonable to presume
that made them less eager to report on corruption in the Pataki administration. That led to an inevitable decline
in the product that is evident to everybody.”

“And that is just one example,” he adds. “There are plenty of others.”

At the same time, in the 1990s, while newspaper owners were looking to maximize profits by gutting the
newsrooms, the captains of this “mature industry” saw in a new technology an opportunity to further cut costs.

“As the Internet came to life,” says Lynch, “publishers all over the country began to believe that it was a
technology that would allow them to abandon the print product. They wouldn’t have to have those big presses.
They wouldn’t have to have all those trucks. They wouldn’t have to pay for paper. We could just put this thing
online and our costs would drop dramatically. All across the country, including at the Times Union, publishers
began to take their prized and very expensive news content and put it online for free.”

“The thought,” Rex Smith adds, “seven or eight years ago was, here comes this Internet thing. We’re gonna
improve our Web site, and people will buy ads, and we’re just going to go for lots of traffic, and the traffic will
attract the advertising, and the advertising will support our staff.”

Lynch disagreed with that strategy. His argument at the time: “We paid a lot of money for this content. This is
what distinguishes us from our competition. If you are going to put it online for free, especially at a time when
you don’t know how you will transfer ad revenue from the paper product to the online product, you will be
creating a free competitor to us, which will be ourselves. It will be like taking a rattlesnake to bed with you.”

At the beginning of 2009, Rex Smith started his weekly column with the retelling of an otherwise pleasant chat
he had with an old pal, sitting by a fireplace, drinks in hand, on the unpleasant subject of the death of the
printed newspaper. “He mentioned a prediction he had read online, suggesting that The New York Times
would stop publishing this year,” Smith wrote. “And if that’s true, he seemed to wonder, what kind of 2009
could the Times Union have?”

Smith assured his friend that the TU would be OK, regardless of the fact that the industry’s leading trade
magazine posited that 2008 had been the worst year in the history of the industry, with no reason to think 2009
would be much better. Smith continued: “Fact is, we’re still at the dawn of the Internet Age, so disruptions in
communications industries, in particular, shouldn’t surprise us.”

A week later, it seemed the Internet Age was still weighing on Smith’s mind.

“Yes,” he wrote again in his column, “the Web is a great democratizing tool. A tiny investment of time and
virtually no cash can turn every one of us into publishers, able to reach further than the greatest press tycoon
of the last century could have dreamed. Yet the very diversity of the Web presents its limitation, for it stages an
anarchy of ideas vying for our attention.”

The day before this column ran, the Hearst Corp., which owns the TU, announced that it would be putting the
Seattle Post-Intelligencer up for sale, and that if it couldn’t find a buyer in six months, the paper would either be
closed down or migrated to an online-only model.

Smith was working on the 2009 budget when he wrote those columns, he says, and jokes that he was thinking
“a lot about the end of time.” Facing further budget cuts and continued layoffs, with news that one of the TU’s
sister papers could simply be turned off, he says, he was “quite torn, and I was asking myself, ‘How are we
going to preserve journalism?’ ”

How are we going to preserve journalism? That’s the question that the
newspaper industry has been asking itself incessantly over the past
year. Smith says there are two popular trends of thinking making the
rounds among the media moguls and intelligentsia.

One is the nonprofit model. The benefit of this model, says Smith, is
that it would relieve newspapers from the burden of producing 20-
percent profit margins, free them from worrying about Macy’s, and with
the proper support of a foundation, allow them to return, guns ablaze,
to the mission of journalism.
Greg Dahlman and Mary Darcy

There are newsrooms that have successfully adopted this model. Pro Photo: Alicia Solsman
Publica, a nonprofit newsroom in New York City run by Stephen
Engelberg, a former New York Times investigative reporter, is a
leading example, producing acclaimed pieces of in-depth journalism that are then offered to daily newspapers
to publish. The TU, Smith says, was the first paper in America to run an article generated out of Engelberg’s
shop.

There are other, locally focused examples of the nonprofit model, whether online-only—the St. Louis Beacon,
the Voice of San Diego—or in the traditional sense, such as the Poynter Institute-owned St. Petersburg Times.
“So maybe there is some hope for great reporting in that,” Smith says, but the argument for nonprofit
ownership is an old one—the Associated Press is a nonprofit—and has its own inherent flaws.

For one thing, Smith says, nonprofits are prohibited by law from endorsing candidates. “They are not allowed
to advocate for candidates or try to influence legislation. Well that’s not a good posture for the press, either.”
But more to the point, it seems very unlikely that there is enough money for widespread support of that model.
Steve Coll, a former managing editor for Washington Post, once did a calculation to determine the size of
foundation it would take to run a newsroom such as the Post’s. He figured that it would need to be worth $2
billion. “Well, there are 1,500 daily newspapers in America,” Smith says. “That’s a lot of billions of dollars that
have to be donated to support the current infrastructure.”

And simply being a nonprofit does nothing to insulate a newsroom from the economic pressures that face for-
profit ventures. According to the World Editors Forum, St. Petersburg Times has failed to meet its goal of
producing a profit margin of at least 10 percent since 2006, and has suffered its own rounds of layoffs.

The other popular thread, Smith says, is micropayments. This month, Walter Isaacson, the former managing
editor of Time magazine, returned to the magazine to stand on his old soapbox and pitch for an industrywide
adoption of a system of micropayments.

“We need something like digital coins or an E-ZPass digital wallet” Isaacson wrote, “a one-click system with a
really simple interface that will permit impulse purchases of a newspaper, magazine, article, blog or video for a
penny, nickel, dime or whatever the creator chooses to charge.”

“Under a micropayment system,” he continued, “a newspaper might decide to charge a nickel for an article or
a dime for that day’s full edition or $2 for a month’s worth of Web access. Some surfers would balk, but I
suspect most would merrily click through if it were cheap and easy enough.”

Smith is cautiously optimistic about this prospect, he says, as what the TU has found in trying to implement
free registration is that online readers don’t want roadblocks.

“You are probably like me,” he says. “If I have to register, I will usually just back up and go somewhere else,”
he says. “But, if we have content that is really desirable, if people know that it is behind this little wall, and the
wall is not that hard—it’s a cheap wall—then maybe there’s a future in that.”

“So I don’t think we have the model figured out,” Smith concludes. “But the solution seems to be, well, it’s
probably not going to be in our traditional core product.”

Newspapers, as the traditional core product, won’t be what saves journalism. Instead, as Dan Lynch muses,
the future might look a lot like the journalism of the 19th century. “I think that it might be, essentially,” he says,
“a fiercely competitive environment of Web sites doing what newspapers used to do, and the newspaper will
probably be one of those competitors, but just one of those competitors.”

Multiple business models battling it out online, he guesses, for local readers, and local money.

It isn’t a bad guess. Already, hundreds of such sites have flickered into existence across the country, stepping
into the vacuum left by the news industry’s contraction. Some of these sites are blogs—collaborative blogs,
insiders’ blogs, professionals’ blogs. Some sites are small community-news outfits based on citizen journalism
or discussions forums for a local community. Some are professional journalistic endeavors supported by local
philanthropy.

In Albany, WAMC alums Greg Dahlmann and Mary Darcy have stepped into the breach with their own version
of a hyper-local news site, All Over Albany. The model of AOA is half Web aggregation—crawling cyberspace
for anything that might interest readers—and half original content. The original content that they produce is
lighthearted, written by themselves or by freelancers, and it covers the Capital Region’s restaurants and
shopping, with profiles of people from Albany neighborhoods.

“This is the content that we wanted to read,” Darcy says, “but that we couldn’t find anywhere else.”
They have been doing AOA for about a year now. So far, AOA is not a moneymaker. For Dahlmann and
Darcy, it’s a second job, supported by their small production business.

“We wake up, and we work, and we go to bed,” Dahlmann half-jokes.

“We are livin’ it, right now. It’s not a job,” Darcy says, “it’s a way of life.”

“But the fact is that a lot of people have failed at this already,” Dahlmann says. He points to Dan Gilmore, an
early proponent of citizen journalism, author of the seminal book We the People, and co-founder of
Bayosphere. Bayosphere began in 2005 with an ambitious agenda to be the voice of San Francisco, written by
San Franciscans, and it failed after seven months. “If there is anybody who knows what is up, it is him. And it
didn’t work. We are already through an iteration of people trying this and failing. I don’t think that you can
criticize them for failing. That is a totally natural part of this process. Good for them, they went and tried and
now we know that it didn’t work, and we can move on.”

In New York City, Dahlmann jokes, every block has a Web site. In Brooklyn, each neighborhood has at least
one site, sometimes more, competing to be the voice of their community. Small, grassroots news sites
increasingly are becoming a part of local Web communities.

“It just goes to show you that people have a thirst for local information,” Dahlmann says. Dahlmann says that
he believes that AOA, and sites like it, are well-positioned to reach further into their local communities, and
expand into a more thorough newsgathering organizations. But the grim reality behind most of these sites is
that they face the same economic challenges that the larger, well-funded newspaper chains face: The Web
has yet to prove profitable for any but the widest-reaching news sites. “Whether there is a future here for any
of them, or if there is a future for us, we have no idea.”

chardin@metroland.net

Chet Hardin, Metroland’s news editor, was employed by The Saratogian from 2005 to 2006.