(April 25, 2006) A couple of weeks ago I posted Part 1 of this report on last month’s release of the third annual “State of The News Media.” report from the Project for Excellence in Journalism at the Columbia University Graduate School of Journalism. (Henceforward referred to as The Report.)
I summarized in Part 1 the “six new trends” highlighted in The Report. Those trends were: More outlets covering fewer stories; circulation losses at almost all levels of media, but especially at big-city metro newspapers; a decline in journalism in the public interest, as news organizations pander to large audiences; increasing technological innovation on the part of traditional media; the rise of “news aggregators” like Google and Yahoo; and, the question of “how long it will take online journalism to become a major economic engine, and if it will ever be as big as print or television.”
That last trend was labeled in The Report as “the central economic question in journalism,” but I beg to differ. A look at the full text of The Report—and the earlier two reports from 2004 and 2005—makes it fairly clear that the “central economic question” is this: Will Wall Street’s demand for exorbitant profits ultimately destroy journalism as we know it? That may sound extreme, but listen to some of the comments from The Report that lead me to phrase the question in such apocalyptic terms.
The Report includes a section on “Ownership,” which begins like this:
“At the end of the 20th century people began to worry about the trend toward public ownership. Not only were such companies not tied to community, they were now beholden to the demands of Wall Street, where the value of the product a company made was purely a matter of money. Making bolts would be measured the same way as creating information that helped forge communities. The market was amoral.”
[Ed. note: “Public ownership,” in this context, means “private ownership.” That is, although the shares in media companies are sold in the public market, they end up being owned by private individuals or other entities.]
This is what the authors of The Report mean when they use the word “amoral”: The owners of corporate news organizations do not wish to, nor do they intend to, produce bad journalism. Rather, in the world of the publicly-owned corporation, it doesn’t matter whether their journalism is “good” or “bad,” as long as it draws in the audience that advertisers desire.
In the section on “Economics,” the authors of The Report tell us that
“On balance, 2005 has to be considered a rough year for journalism financially.” And this is because “Newspaper revenues for the year rose by just 1 percent to 2 percent (without the growth of online operations, revenues “would have been flat.”) They add that, “On Wall Street… stock prices fell … by an average of 20%.”
Declining Audience, “Ridiculous” Profits
So how can it be fair to speak of “exorbitant profits?” Paul Janensch, writing in the March 18, 2004 Hartford Courant, noted that same apparent discrepancy, and asked, “How can that be?” His answer: “Simple. The top managers of most media companies are cutting news expenses to pump up the bottom line and, for publicly-traded companies, to look good on Wall Street.”
In the Executive Summary that accompanied “The State of The News Media 2006,” we read that “The industry still posted profit margins of 20 percent.” The “industry” they’re talking about is the newspaper industry. For local TV news, “Pre-tax profit margins of 40 percent and even 50 percent are not uncommon.” Perspective on this is provided by reporter Lee Drutman, writing in the Daily Breeze of Torrance, California, who points out that the average profit margin for corporate America has been 8.3 percent over the last 25 years.” He adds, “By contrast, last year ExxonMobil—whose record profits have drawn angry calls for a windfall-profits tax on the oil industry—turned only a 10 percent profit margin.”
“By any standard,” Drutman concludes, “newspapers are still ridiculously profitable.”
The same point is underlined, in more colloquial language, by Los Angeles Times reporter Michael Hiltzik, who led off an article with this anecdote:
“Many years ago, a veteran editor at what was then the Chandler-owned Los Angeles Times made the following observation about that family and its dividends from their newspaper: ‘They’re either rolling in it, or they’re really rolling in it. And when they’re only rolling in it, they start to panic.’ The era when insufficiently huge newspaper profits would give the shivers only to the members of a wealthy family seems quaintly distant today. With most major American newspapers, including the Times, now owned by publicly-traded corporations, the conniptions are more likely to be thrown by Wall Street securities analysts and institutional money managers.”
Explaining the results of such “conniptions,” The Report details a continuing reduction in “the resources devoted to original newsgathering: reporters, producers, editors, correspondents, boots on the ground.” In the Executive Summary, the authors sum it up: “By the time the tallies are in later this year, the industry is expected to lose between 1,250 and 1,500 newsroom professionals—editors and reporters. That would mean that the newspaper industry would have lost 3,500 to 3,800 newsroom professionals since 2000, or roughly 7 percent.”
That’s a lot of people, and the fear of an ongoing decline of quality in corporate news reporting was expressed by Los Angeles Times reporter David Shaw, who wrote that:
“Knight Ridder’s Philadelphia Inquirer won 17 Pulitzer Prizes from 1975 to 1989. The Miami Herald [also Knight Ridder] won seven Pulitzers in the 1980s and was generally regarded as the best paper in the Southeast. The Beacon Journal [Knight Ridder], with a circulation today of 141,000, routinely outshone much larger newspapers in its home state, winning four Pulitzers and a reputation for hard-nosed investigative journalism. But changes in the economic climate and in the top management of Knight Ridder have led to significant reductions in news staffs and space at all three of these papers and at other papers throughout the company. These cutbacks have led many inside and outside Knight Ridder to complain that increasing profits have become more important to management than journalistic excellence and community service.”
Shaw was writing in 2001. But despite the “significant reductions” in the capacity to gather and report news, Knight Ridder stockholders were not satisfied with the 19 percent profit being earned by Knight Ridder last year, and forced the sale of the company to another huge newspaper chain, the McClatchy Company. How they will wring sufficient profits out of the newspapers remains to be seen, but worries for the future go deeper than the effects on the newspapers directly affected. In their section on “Ownership” the authors of The Report say, “heading into 2006, there was more worry that the publicly traded corporation may not be positioned to address the problems of journalism to the satisfaction of society.”
And that, I suggest, is the “central economic question” that “The State of The News Media 2006″ raises: Can the economic model upon which we have built our current media industry really carry us into the future? It’s an open question.
One hopeful sign is provided in The Report’s section on “Audience.” There we learn that the apparent decline in the audience for profit-oriented media is being accompanied by an interesting development: “The alternative weekly press,” The Report notes, “continued to thrive. Circulation reached 7.64 million in 2005, the highest since 2001.” What is “alternative” about the “alternative” journalism is, among other things, that it is oriented to journalism first, and money second.
The one fact about the media industry that is indisputable is that things are changing rapidly. “The State of The News Media 2006” is a useful tool to use in assessing the nature of those changes. The full report can be read at the site of “Journalism.org”: http://www.journalism.org/.