About those "failing" newspapers...

A couple of things jumped out at me in this New York Times story about the sorry state of newspapers. Richard Perez-Pena makes the case that while things have been bad for a while,

what is happening now is something new, something more serious than anyone has experienced in generations. Last year started badly and ended worse, with shrinking profits and tumbling stock prices, and 2008 is shaping up as more of the same, prompting louder talk about a dark turning point.

Most of the evidence is nothing new: circulation keeps dropping; print advertising is falling (especially real estate ads) and online advertising both doesn't make up for that loss and isn't growing as quickly as it was; "Job cuts have become all but universal."

But then there's this, about three-quarters of the way through:

Newspaper profits remain healthy, but they are dropping fast. For example, the newspapers of Media General, a large Southern chain, had a 17 percent operating profit margin last year, but the dollar amount fell 23 percent from the year before. The Gannett Company’s newspaper division, the nation’s largest chain, had a 21 percent margin, but a 10 percent decline.

Excuise me? I baking powder? Profits are healthy, Gannett has a 21 percent margin -- and the fuss is about what now? You want real economic doldrums? Check out the auto industry. Ford lost $2.7 billion in 2007 and $12.6 billion the year before -- and those aren't just losses in market capitalization (that was probably a heck of a lot more), but $15 billion in actual money down the drain. Think they wouldn't kill for that 21 percent margin? (Their 2007 margin: minus-6.8 percent.)

Obviously Wall Street only cares that Gannett's profit fell 10 percent from the year before, not that the company is still making money. And Gannett and Media General undoubtedly maintained those high profit margins by cutting some (or a lot of) news space and firing some (or a lot of) people. But I wish these kinds of stories did a better job of putting the gloom in at least some perspective. In a great New Yorker column a couple years ago, James Surowiecki did just that:

(N)ewspapers remain a surprisingly robust business and generate tremendous amounts of cash every year. Most of them have profit margins that dwarf those of the average company; McClatchy’s operating margin last year was twenty-eight per cent*, while ExxonMobil’s was around sixteen per cent, and the typical supermarket’s is around four per cent. The reach of newspapers remains huge. Daily circulation is around fifty-five million (not including online readers), giving the industry more customers than any other traditional media outlet. And those customers have the kind of demographics that advertisers like; even as circulation has dropped, revenue from print ads has stayed healthy, to the tune of more than forty-seven billion dollars last year. Newspapers are classic cash cows: solidly profitable businesses in a stagnant industry.

(*McClatchy obviously no longer has 28 percent margins, partly thanks to its purchase of Knight Ridder. But replace McClatchy with Gannett and the point still holds.)
Now, Perez-Pena seems to be arguing that a coming tipping point will make Surowiecki's observation moot, that the cash cows' multiple stomachs will collapse. (How's that for a mixed metaphor!) But Perez-Pena's casually tossed-off "Oh, by the way things may not actually be so bad" makes the rest of his piece unpersuasive.

As does the graphic that accompanies the story. First, the graphic shows that the newspaper industry still has circulation revenues greater than $50 billion and ad revenues greater than $40 billion. More significantly, the graphic shows that while Media General and New York Times Co. had respective ad revenue drops of 9.1 and 4.7 percent in 2007, Lee Enterprises -- which owns more than 50 local papers -- only had a 1.1 percent drop in ad revenue. Yet the story quotes a Bear Stearns analyst who claims local advertising has fallen while national ads are doing fine: “Local advertisers have been swallowed up, and there are just fewer," Alexia Quadrani said. "Your local pharmacy becomes CVS; your local hardware store becomes Home Depot.”

How can this be if a local newspaper company fared much better than the six national media companies whose figures the Times reported?

Like the Times video game article I dissected the other day, this story tries to extrapolate a blunt trend from some numbers without really considering all that's going on here -- instead of trying to make sense of the very real problems facing the industry and figure out what the heck we can do about them.

David Simon as journalism's Rip Van Winkle

I'll have more to say about this season of The Wire, its misdiagnoses of journalism's problems, and David Simon's recent nostalgic column in the Washington Post. But for now I wanted to give my general response to Season 5's Baltimore Sun storyline.

At Slate's TV Club conversation about Season 5, David Plotz annoyed David Simon by referencing brief conversations they'd had at parties in which Simon bitched about the Baltimore Sun. Simon criticized Plotz's post, concluding: "The Wire's depiction of the multitude of problems facing newspapers and high-end journalism will either stand or fall on what happens on screen, not on the back-hallway debate over the past histories, opinions passions or peculiarities of those who create it." This is what I wrote to Plotz in a solidarity e-mail after Episode 2 or 3:

Fair enough. But so far his "multitude of problems" are a) Too many Stephen Glasses, b) Pompous idiot editors too dim to see the clearly telegraphed Stephen Glasses and disinterested in getting at the root of social problems, and at a distant third c) Corporate cost-cutting. That is all.

Forget that a plague of fabulists isn't (to my knowledge) currently destroying journalism from within, and that the problem with real fabulists is they aren't usually transparent fakers right from the start. This is his grand diagnosis of the ills of modern journalism?

How about, I don't know, the Internet? Or hemorrhaging ad sales and circulation (partly or largely because of the Internet). Or figuring out how newspapers can appeal to readers and stay relevant in this new competitive-media world. Newspapers are going through their most dire period of upheaval in decades and he thinks the issue is too many fabulists?

The problem with his portrayal isn't just that Simon's fictional newsroom seems like a caricature of a mid-90s newsroom. It's that, despite his response to Plotz's TV Club post, he so clearly framed his fictional view based on his "past histories, opinions passions or peculiarities." What a coincidence that his grand statement, via The Wire, on modern journalism's failures happens to exactly coincide with his oft-stated feelings about his former editors and how they dealt with (or didn't deal with) a fabulist and stories about social issues at the Baltimore Sun 15 years ago.

Jeffrey Goldberg voices similar frustrations in his TV Club post today:

We were meant to be getting a sophisticated look at the demise of daily journalism, besieged by the Internet and by venal media companies. Well, what we've got is a newspaper edited by a pair of impossibly shmucky editors who seem, in 2008, unaware of the existence of the World Wide Web and who have in their employ a reporter who is doing something no fabricator, to the best of my knowledge, has ever done: manufacturing information about an ongoing homicide investigation. Put aside, please, the fact that said investigation is a sham as well; the reporter, Templeton, doesn't know that. Is this what David Simon really wants his viewers to believe happens at major newspapers? Is he that blinded by hate for the Baltimore Sun?

For such a supposedly brilliant guy and show, it's depressing that the answers to the last two questions seem to be yes, and yes.