Salzman: Value of local newspapers must be protected

Ways to keep dailies viable should be explored

Published February 17, 2007 at midnight

Text size

More Opinion Columns & Blogs

More stories »

I like the downsized Rocky Mountain News, but no matter what you think of it, you have to wonder what's next?

What if the Rocky and The Denver Post don't earn enough money to make their owners happy? What else would be cut or shrunk?

And this leads to the question, should newspapers be subject to the same market forces as, say, scented cat litter or any other product?

I don't think so.

Media critics like to write that newspapers are a "civic asset." It's a bit of a pompous phrase, but it expresses the idea that our democracy needs the massive local information we get from dailies - everything from elections to high school sports to important investigative reports.

Other outlets (TV, radio, Web sites) produce local journalism, but the number and breadth of stories from other sources is insignificant compared to what's generated by newspaper reporters.

I mean, imagine the blogosphere if bloggers didn't link to newspaper stories. And they're often the ones who say the dailies are useless, filled with liberal or conservative garbage.

Despite the undeniable importance of newspapers, circulation is sliding, particularly among young people.

And newspapers face other problems: Ad revenue is declining and the costs of newsprint has increased.

So the future of newspaper companies is seen as "uncertain," a hated word on Wall Street, and newspaper stocks are dropping.

In response to Wall Street pressure, newspapers are cutting staff and coverage. Denver's dailies are smaller (e.g., the Rocky has dropped daily TV listings and many stock listings) but have so far been spared the deep cuts that other big-city newspapers have endured.

You'd think newspapers are losing money. But no - the average profit margin for newspaper operations at publicly held companies was 17 percent during the first nine months of last year, according to Morton Research.

Sounds like a good money to me, and ad revenue from newspaper Web sites is climbing.

Yet, it's not good enough for Wall Street.

"Wall Street has punished the stock prices of newspapers disproportionately to the economic performance of the papers," says Mark Jurkowitz of the Project for Excellence in Journalism.

So, clearly, a big part of the economic "problem" with newspapers can be summarized like this: Wall Street is greedy.

This means rough going for newspaper companies. Here's what I mean:

Rocky owner E.W. Scripps announced Jan. 30 that it has no plans to sell its newspaper division, an idea that had been floated previously and sent Scripps stock to a 52-week high. After its announcement, which included lower-than-expected first-quarter earnings, Scripps stock witnessed its biggest single-day decline since 1990.

In light of this, can we protect newspapers from the stockholder pressure that's causing them to cut content, which in turn makes even more people drop their subscriptions, leading to more cuts, and so on?

Here are some possibilities:

• Create tax incentives making it easier for newspapers to be owned by foundations. The St. Petersburg Times and Manchester Union Leader are run by nonprofit entities, and are apparently doing well. But, according to John Morton of Morton Research, the wealthy owners of those newspapers sacrificed big money when foundations took over. So he's pessimistic that this ownership model will become popular anytime soon.

In an Op-Ed in Thursday's Wall Street Journal, Steven Rattner of the Quadrangle Group suggested creating a pool of funds, accumulated through taxation, license fees and major philanthropy, that could be made available to newspapers for this.

He points out that some essential government services, like New York's subways, were established as for-profit businesses, but they eventually became unprofitable.

• Create tax incentives for investment in newspapers. This could make newspaper holdings more attractive to Wall Street, which might help shore up stock prices.

• Create tax structures so it's easier for newspaper employees and unions to own newspapers. A large daily in Omaha has long been employee-owned. Others were sold when faced with the financial burden of buying back employee stock. A company promising to create employee-owned newspapers submitted a credible but losing bid for the San Jose Mercury News and other newspapers last year.

• Provide tax incentives making it easier for "civic-minded" owners, who care about their local community and journalism, to buy newspapers owned by giant chains. This is already occurring, but the journalistic track record of local owners is mixed.

• Provide more public funding for journalism. President Bush wants to cut funding for the Corporation for Public Broadcasting. Actually, it should be increased, with funds added for newspapers.

But Jurkowitz points out a problem with this and other government-funded options: "If you're taking 'taxpayer's money' in any way shape or form, it opens up the institution to criticism that you're biased."

In any case, one thing's clear now: More and more major corporations, most recently the Tribune Co., are unhappy about owning newspapers.

This creates an opening for political leaders to work with media moguls to do the right thing and help create economically viable ways for local journalism to prosper.

Jason Salzman, president of Cause Communications and board chairman of Rocky Mountain Media Watch, is the author of Making the News: A Guide for Activists and Nonprofits. Reach him at salzmanj@RockyMountainNews.com.

Subscribe to the Rocky Mountain News