Tuesday, January 13, 2009

The Next Bailout Scenario

By Combined Wire Services

WASHINGTON — The seats in the congressional hearing room, previously occupied by the chief executives of the country’s automakers, hadn’t even cooled Thursday when they were immediately filled by America’s leading newspaper executives who were there to do what their colleagues from the auto industry had done — beg for a taxpayer-financed bailout package.

With advertising and circulation revenues hitting new lows every quarter, and newspaper job losses on the rise, the industry is in a precipitous state. As of yet, no one in the newspaper industry appears to know how to correct the situation, which worsens daily.

The newspaper industry’s recent headlines include the faithful at the Church of Christ Science no longer praying to God for a miracle to save the print edition of their prestigious newspaper, The Christian Science Monitor; instead, they’re asking Him to make the newspaper’s Internet edition a far more trafficked Web site than it was before the print edition’s demise.

“We pray every day for our Web site,” said a spokesman for the Church.

Need help

Other headlines include the newspaper industry’s leading supplier of news content, The Associated Press, announcing it would eliminate jobs in 2009; along with the precarious financial position of New Jersey’s leading daily newspaper, The Star-Ledger, few newspaper executives and analysts have hope that the industry can be turned around without government assistance.

“They (the newspaper industry) need help,” said John Morton, a former newspaper analyst.

“I’m … I’m not sure what happened to our revenue,” said Arthur Sulzberger Jr., publisher of The New York Times and chairman of the paper’s holding company, during a Senate Banking Committee hearing on Capitol Hill. “It … it … just seems to have gone away. We’re trying to find it.”

McClatchy Newspaper’s Chief Executive Gary Pruitt; MediaNews Group Chief Executive William Dean Singleton; News Corp.’s Chief Executive Rupert Murdoch; and Gannett Chief Executive Craig Dubow, publisher of USA Today, seeking approval for a government-funded bailout package, joined Sulzberger.

All four executives, who lead some of the largest and most prestigious newspaper companies in the United States, said that unless they received a portion of the $700 billion set aside to save Wall Street banking firms, they would either declare bankruptcy or be forced to shut down in the next six to eight months.

No support

Still, members of the Senate Committee and the House Financial Services Committee harshly criticized the executives’ testimony, where they later appeared, as being short-sighted and failing to address the single greatest issue facing the domestic newspaper industry — providing a newspaper people want to read and advertisers want to buy.

“We’ve been firing as many people as we can,” said MediaNews Group’s Singleton. “We’re going to fire as many people as possible in order to get our profit margins back to where they were in 1982.”

“At Gannett, we’re seriously considering making our newspapers the size of Readers Digest magazine — only thinner — and then increasing the daily cover price to a buck,” said Dubow, the company’s chief executive officer.

“Isn’t that a recipe for disaster,” asked U.S. Sen. Mel Martinez, (R-Fla.), of Dubow.

“It’s revenue maximization,” replied Dubow.

As soon as the four executives had finished their testimony before both committees, congressional members peppered them with questions about their management tactics, styles and abilities.

“Do you guys think you could run my 8-year-old nephew’s lemonade stand,” asked U.S. Rep. Barney Frank, (D-Mass.), chairman of the House Financial Services Committee.

“No, no, I’ll handle this question,” said McClatchy’s Pruitt as he shouted down and pushed Murdoch aside for the opportunity to answer Frank.

Making profit?

“If the economy was robust, and if we were within five feet of a four-way stop, I’m fairly certain we could make a profit,” Pruitt said. “Of course, my answer is predicated on weather conditions, the quality of lemonade served and the amount of traffic at the intersection, none of which we might be able to control.”

“Have you thought about, oh I don’t know, marketing your newspapers and telling people why they should read them or buy advertising in them,” asked U.S. Sen. Richard C. Shelby (R-Ala.), the Senate Banking Committee’s ranking Republican.

“We’re The New York Times, for God’s sake,” Sulzberger said. “We don’t need to tell anyone who we are. America and New York, they know who we are!”

“We eliminated the marketing department five layoffs ago,” answered Pruitt.

“These guys make the auto industry look good,” said House Speaker Nancy Pelosi, (D-Calif.), during a news conference after Thursday’s hearings. “At least Detroit faces real competition; these newspaper guys are a bunch of incompetent monopolists.

“Maybe they need to be replaced by executives from some major utility,” she added.

Some lawmakers, however, were in favor of evaluating a bailout.

“I’m prepared to vote in favor of this funding if I’m allowed to control your editorial pages,” announced U.S. Sen. Christopher Dodd, (D-Conn.), chairman of the Senate Banking Committee, during the hearings.

“While this request doesn’t mean too much of a change to The New York Times, it does have some sharp ramifications for The Wall Street Journal,” Dodd added.

Upon hearing Dodd’s statement, the Journal’s chairman, Rupert Murdoch, collapsed and had to be revived by paramedics. He was later taken to Walter Reed Army Medical Center, where doctors report he’s in stable condition and is scheduled to be released today.

Both congressional chambers are expected to debate the request from the newspaper executives today.

Correspondent's note: This article, written by this correspondent, originally appeared in the January 2009 edition of Newspapers & Technology magazine.

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