Monday, December 06, 2004

One of the most important pieces of writing about the state of small-town journalism was done by American Journalism Review five years ago.
The magazine, which covers developments in the media, ran a series called "The State of the American Newspaper." One segment of that series dealt with small-town newspapers, including the companies that own The Joplin Globe, the Neosho Daily News, and The Carthage Press.
The article painted a bleak picture of the companies that own small-town daily newspapers, and unfortunately, nothing has improved in the five years since.
Quoting from the article called "The Selling of Small Town America," which was written by Mary Walton, a former Philadelphia Inquirer reporter:
"Deeply rooted as they may be, the nation's hometown papers are vulnerable to outside forces. And these days, they are changing hands like used cars at an auction- more than 380 in the past five years alone."
The article continues, "In one of the biggest shifts in newspaper ownership since chains began devouring independent papers more than a generation ago, bit-city businessmen with deep pockets are flocking to the industry, lured by small papers with generous margins. These new owners are highly leveraged and itching to make money. Indeed, often built into their financial arrangements are 'exit strategies' that force the companies either to sell or go public, generally within five to seven years."
That scenario can be seen in the situation with Liberty Group Publishing, the company which owns The Neosho Daily News, The Carthage Press, the Neosho Post, and the Big Nickel. The company was put on the auction block in August, only six years after it formed.
The American Journalism Review article noted that the companies often keep publishers, something that has been done in Neosho with Randy Cope.
The article notes that two of the top three newspaper companies in the county, as far as number of dailies owned, did not exist five years earlier. These are the Globe's owner, Community Newspaper Holdings, and Liberty.
"The frenzy of buying and selling has produced a new breed of 'financial owner' for whom small newspapers are just another business. Community Newspapers Holdings or CNHI, is bankrolled by a pension fund. Liberty is owned by a Los Angeles leveraged buyout company."
The AJR article hit the nail on the head when it says, "These new companies start out deeply in debt, with rigorous payment schedules based on expectations of steady profits. In the event of an economic downturn, these debt-laden companies have few options beyond cutting costs- which in some cases they've already done with a vengeance."
The article describes the way the companies make money. "The new owners are highly acquisitive. Because the bulk sales from old to new chains typically have involved a large number of leanly run 'mature papers' in no to slow-growth communities, the only way the new owners can increase revenue is to find fresh properties and cut costs."
The next paragraph in the article describes what has happened with the Neosho and Carthage newspapers. "As buyers look for papers that can be clustered around a single printing plant, community weeklies have become as important to the equation as dailies." The weeklies owned by Liberty in this area, for instance, include The Neosho Post, the Miller Press, and The Greenfield Vedette.
One of the major ideas of the article is that this frenzy of buying and selling newspapers has kept them from being able to continue serving their communities.
"Unlike large metros that must compete for news and advertising with suburban dailies, radio and television stations, direct mail and now the internet," the article reads, "many smaller newspapers are genuine monopolies. Because they have fewer pages than metros, small-town newspapers require far less newsprint per copy. Unions are rare, labor is cheap. It is not uncommon to find reporters earning as little as $7 an hour. (That is still the case with most small dailies five years later.)
The article continues, "Moreover, unlike big papers that are vulnerable to economic cycles, little papers have a more stable base. Their advertisers have nowhere else to turn, and even in bad times, people can afford 50 cents for a newspaper."
The article delves deeply into Liberty Group Publishing, beginning with Leonard Green, the head of the investment firm that owns 90 percent of Liberty. Green is an investor, not a newspaper man. He is the first to say that. But to run his company, Green selected former Hollinger International (American Publishing Company) lawyer Ken Serota and not a newspaperman.
The problem with Liberty is that the only way it can continue to make money is by buying more and more newspapers then cutting them to the bone. Some of this can be accomplished through what they call "clustering," buying several newspapers in the same region, then combining services at one place, thus enabling the company to sell of extra machinery and cut personnel, payroll, and benefits.
Liberty officials tried to take the company public a couple of years ago, but then decided against it, leading to the auction that is currently taking place.
There had been some initial hope that a real newspaper company (if such a thing exists now) would buy Liberty and get the newspapers out of this dangerous cycle they have been in for years. But industry sources say that the only companies left in the bidding for Liberty are investment firms. This could lead to another round of cuts, acquisitions, and more cuts.
The sad thing is that newspapers already have a much larger profit margin than most companies. Small-town newspapers can rake in as much as 30 percent profit, while many large, well-known companies are able to survive with single-digit profit margins.
The outlook appears to be bleak, especially for those hoping that the upcoming sale of the Neosho Daily and The Carthage Press is going to lead to some journalistic renaissance. You're most likely going to continue to see poorly paid reporters, tons and tons of special sections and free niche magazines, and cost-cutting measures that continue to eat away at the heart and soul of the newspapers.
I hope I am wrong, but this is the way it has been playing out across America. I don't expect Liberty to become an exception.

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