Three decades ago, when America’s local newspapers were at their peak, I attended a dinner for publishers at a mid-sized chain. After dinner, the president rose to speak and asked everyone to clap for one publisher whose newspaper had exceeded a 50% profit margin in the previous month.
At a 50% margin, half of every dollar from subscribers and advertisers went directly to the bottom line. Sure, there was depreciation to account for, and some taxes to be paid, but overall that’s a level of profitability that would make a pharmaceutical company blush.
Profits aren’t a bad thing if they’re invested in building the business. Drug companies typically invest in drug discovery, which is an expensive and risky process. But newspapers typically invested in stock buybacks, which rewarded shareholders but starved the business.
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