Do newspaper-owners owe journalists a living?

It seems like a ridiculous question on its face.  Do the owners of newspapers – a terminally ill industry – owe journalists a living?

For employees of the Denver Post and many others, the answer is yes.  The owner of the post, a hedge fund-manager named Randall Smith, has cut and cut and cut his properties to the bone: smaller newspapers, far fewer employees, even cutbacks in daily delivery to just a couple of days a week.

The result has been a spike in profits for Smith and much wailing and gnashing of teeth from journalists.

This Politico piece, "This is how a newspaper dies," reveals the sense of entitlement displayed by journalists working in a dying industry:

Journalists and citizens have protested and rebelled against the Alden cutbacks to no effect.  The Post's editorial page editor resigned recently after writing an editorial calling on its owners to sell.  The editorial page editor at the chain's Boulder Daily Camera just got sacked for self-publishing a critique of his owners and a fund has been established to fund the journalism of Posties that have been let go.  This week, employees from several of the chain's newspapers took their complaint to Manhattan, where they demonstrated outside Smith's offices to demand that he either invest in his papers or sell them to somebody who will.

But why on Earth should Smith sell?  Alden's newspapers recorded nearly $160 million in profits during fiscal year 2017, analyst Ken Doctor reported in a comprehensive piece recently at NeimanLab.  The chain's 17 percent operating margin makes it one of the industry's best performers.  Over the course of seven years, Alden doubled profits in its Bay Area News Group newspapers, another home to cutbacks.  At the Pioneer Press, where its staff is down to 60, the paper produced a $10 million profit at a 13 percent margin.

Well, the report is half-right.  Journalists have certainly protested the cutbacks, but few customers have bothered to complain. 

That Smith is able to wring any profit at all out of his properties is remarkable.  The model he is using is referred to as "harvesting market position" or, as editor Lifson points out, "milking a cash cow."

By raising prices and lowering quality, a stagnant business can rely on its most loyal customers to continue to buy the product, allowing it to squeeze and squeeze and squeeze its customers as they croak.  This slow liquidation of an asset's value, destroying even its reputation in the process, kills the product.  Wherever newspapers can be found reducing page size, cutting news pages, narrowing coverage area, reducing staff, shrinking circulation area, postponing the purchase of new equipment and raising subscription prices, they are harvesting market position.  Faced with two business options, earn small sums from his newspapers over an indeterminate time or cash in big all at once, perhaps hastening the end, Smith has chosen the latter.

The Denver Post would have bitten the dust long ago if Smith hadn't intervened.  The fact is, all newspapers today are looking for a deep-pockets investor who believes the delusion that "journalism" is some kind of sacred calling and newspapers should be above such grubby things as profit.  Otherwise, the shrinking number of daily and weekly newspapers will be snapped up by investors like Smith, hoping to cash in on the loyalty of a dwindling number of people who don't mind getting newspaper ink on their fingers every morning.

And if you are looking for "blame" for the death of the industry, don't look at people like Smith.

In 2008, then-Detroit News reporter Charlie LeDuff spotted another villain in the rot and decay of his newspaper as it downsized to three days a week of home delivery.  "The owner didn't decide to shrink the paper.  The reader decided to shrink the paper," LeDuff said.  It was readers who stopped subscribing.  It was readers who stopped using newspaper classifieds.  It was readers who stopped reading.  Readers are the true villains in this murder mystery.

I don't recall ever reading any similar clarion calls for succor coming from journalists to save the blacksmiths industry.  The "creative destruction" that defines capitalism means that as newspapers disappear, something else rises to fill the market niche.  In this case, there are many ways being created to disseminate news and opinion to the public.  They may not be as holy as the noble and vitally important profession of newspaper journalists.  But the people who work at these new media outlets are perfectly capable of performing the exact same "public service" without the nauseating self-righteousness that's coming from newspaper journalists today.

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