"A cynical owner of a fading newspaper, Meyer writes, will "squeeze the goose to maintain profitability today without worrying about the long term." He'll raise the price of the paper and increase advertising rates. He'll cut the news hole, trim the staff, reduce circulation in remote and low-income areas, and suppress salaries. He'll do whatever is necessary to keep profits as close to the 30 percent margins some dominant papers have recorded. The owner who follows this path is essentially liquidating his publication over time, Meyer writes.
If an owner insists on squeezing the goose ("harvesting market position" in business-speak) he creates an opportunity for a competitor to enter with a new paper. If the competitor builds goodwill (editorial quality and standing) into his paper from scratch that is comparable to that of the established newspaper, he can end up with a paper as profitable as the dominant title but at only 20 percent of the cost (printing plants, trucks, offices, computers, etc.). Meyer explains:
... the challenger can get the same return on investment with a 6 percent margin that the old paper's owners get with a 30 percent margin. Voila! A happy publisher with a 6 percent margin!
There is no way to overstate the complacency or arrogance of the greater newspaper industry. In many markets, the big daily acts like a quasi-monopoly, raising advertising rates annually or semi-annually—anything to reach those historic 30 percent margins. As falling circulation has put a crimp in advertising rates, some newspapers such as Newsday, Hoy, the Dallas Morning News, and the Chicago Sun-Times have padded the numbers to appear healthy, defrauding advertisers in the process. At Newsday, one-sixth of circulation was phony!"
Monday, March 28, 2005
Who is making money from newspapers?
Jack Shafer, writing on newspaper entrepreneur Philip Anschutz, says, "Nobody dumps hundreds of millions of dollars into the movie and exhibition business—or newspapers—to uplift the masses. There's got to be an angle". Shafer refers to Philip Meyer's book The Vanishing Newspaper to illustrate his point: