POLL FINDS PROFITS RULE AT NEWSPAPER COMPANIES

By: Greg Mitchell

E&P Special Report: Journalism At the Margins


A clear majority of a broad sample of U.S. newspaper publishers
and editors have told E&P that recent cutbacks at their
papers were directed by their parent companies, in most cases
mandated to maintain a certain profit margin. While these
publishers and editors carried out the orders, most of them
believe the cuts will have a negative impact, both in the short
term and long term.

And, by about a 4-to-3 ratio, they feel that margin management is
“bad for the newspaper industry.”

Surprisingly, however, most of the respondents believe that the
worst, in terms of cutbacks, is over. The first cuts may have
been the deepest.

The latest E&P/TIPP poll of 77 publishers and 62 editors
from around the country was commissioned in the midst of the
landmark debate set off by the abrupt resignation of San
Jose (Calif.) Mercury News Publisher Jay T. Harris
last month.

Harris, as nearly everyone must know by now, quit after the
paper’s parent, Knight Ridder, ordered him to hike the Mercury
News’ already hefty profit margin (which has varied from 22%
to 29%), despite a slowing of the national economy and the severe
downturn in Silicon Valley. Harris said the cuts that would have
followed these demands “would have been injurious to both the
journalistic integrity” of his paper and “the vitality of the
franchise in the long term.”

This episode forced to the surface rarely aired fears about how
long the newspaper industry as a whole can expect to maintain
margins double the 10% to 15% norm in other industries – and
what would happen in a recession. Analysts point out that
publicly owned companies are particularly vulnerable, with
impatient shareholders to satisfy.

And so we asked TIPP to survey publishers and editors at both
privately and publicly owned dailies, with responses reflecting
the industry’s proportion of small, midsize, and large papers.
TIPP, a unit of TechnoMetrica Market Intelligence, based in
Oradell, N.J., has carried out several other surveys for
E&P in the past two years.

Raghavan Mayur, TIPP’s president, points out “one silver lining”
in his latest findings. “Over two-thirds of those surveyed,” he
points out, “believe they can still grow their newspapers in
economically slow periods.”

Cutting remarks

Evidence of widespread cuts has been mainly anecdotal, not
quantified. Now, however, TIPP has found that 50% of publicly
owned papers, and 38% of privately owned papers, have cut staff.
The most popular area to slash is the newsroom, with production
and circulation close behind (and the Web and marketing touched
fairly lightly).

But cuts go beyond staffing, eating away at the printed product
– with publicly owned papers (as many have suspected)
leading the way. These cuts are more pervasive than we might have
guessed: 84% of all papers have cut general operating expenses;
70%, the number of pages; 37%, the length of some sections; and
28%, certain sections altogether. In each area, the publicly
owned papers were more prone than the privates to swing the ax.
And in every case, midsize and larger papers were more likely to
cut than smaller papers (with less than 50,000 circulation).

The public/private split again showed up in the question of who
ordered the cutbacks. At the publicly owned papers, cuts were
largely or partly directed by the parent company in 94% of cases,
exactly twice the percentage reported at privately owned papers.

At both types of papers, when orders did come down, the cutbacks
were directed “to help reach a certain profit margin” in more
than 90% of cases. In other words: margin management rules. And
what exactly are those margins? Many publishers and editors would
not disclose these numbers, but among those who did confide in
us, the numbers are eye-popping: nearly four in 10 said their
margin is 30% to 39%, with almost as many pegging it at 20% to
29%.

Given the emphasis on maintaining unusually high margins, what is
the outlook for further staff cuts? Only 28% of our sample feel
they will have to trim staff in the coming six months. Where it
does occur, the newsroom will again bear the brunt, with
production following. (Amazingly, Web workers, from these
results, seem to have less to fear than any of their co-workers.)
Perhaps publishers and editors feel they’ve already trimmed fat
and surely no one will now order them to slice away muscle or
meat.

Feeling marginalized

How do editors and publishers feel about all this? In a word:
worried.

Only 28% claim that current or expected cutbacks will have a
positive impact on their newspapers, with 62% predicting a
negative result (and almost one in 10 saying it will be “very
negative”). The results are fairly uniform across all types and
sizes of papers and among both editors and publishers.

The same finding applies, overall, in regard to long-term
projections, but here a huge gap opens between publishers and
editors. Exactly half of the publishers, apparently endorsing the
lean-and-mean concept, expect cuts to lead to positive long-term
results – but only 15% of editors feel this way.

A widely respected editor for a large-circulation daily who took
part in our survey told us, referring to the industry as a whole,
“We print good papers in good times, and say they are good in bad
times.”

In any case, there is widespread skepticism, possibly even
resentment, about margins calling the tune. About 42% of the
sample consider margin management “bad” for the industry, with
32% saying it’s “good” (the rest offering no opinion). Again, a
chasm divides editors (three out of four say it’s “bad”) and
publishers (a slight majority claim it is “good”).

Profiting by mistake?

Despite the many obstacles, 71% of our sample say that their
newspaper can grow even in a slow economic period. How will they
attempt to do this?

The greatest number cite shoring up circulation and ad revenue
while reducing costs (that’s not exactly rocket science). But a
large number also looks to boost marketing and advertising, forge
cooperative ventures with other media, and “place more accent on
the Web.” Stepping boldly where others fear to tread, 10% say
they will “spend more while competitors scale back.”

Finally, asked to weigh in on two burning industry-related issues
under consideration in Washington, 61% of the sample endorsed the
current move to ease cross-ownership rules – and 72% said
that reducing or eliminating the estate tax would have a
“positive” impact on their industry. In the meantime, as our
survey shows, they will keep one eye on the page, the other on
the margins.

E&P/TIPP Poll

Several hundred editors and publishers of dailies of varying size
(reflecting the overall industry) were faxed questionnaires at
the end of March. Of this sample, 77 publishers and 62 editors
responded, confidentially.

Staff cutbacks in past quarter?
o Yes: 41%
o No: 55%
o N.A.: 4%

Were those cutbacks directed by parent company?
o Yes: 31%
o No: 60%
o N.A.: 9%

What profit margin are you expected to maintain?
o Under 10%: 46%
o 10%-19%: 21%
o 20%-29%: 19%
o 30%-39%: 12%
o N.A.: 2%

Is margin management good or bad for industry?
o Good: 32%
o Bad: 42%
o N.A.: 26%

What do you believe short-term impact of cutbacks will be?
o Positive: 29%
o Negative: 62%
o N.A.: 9%

What do you believe long-term impact of cutbacks will be?
o Positive: 35%
o Negative: 51%
o N.A.: 14%

Do you believe your newspaper can grow in economic
downturn?
o Yes: 71%
o No: 22%
o N.A.: 7%



Greg Mitchell (epic1934@aol.com) is the features editor for E&P.



Copyright 2001, Editor & Publisher.

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