The Value of News

Lee Enterprises for Davenport, Iowa, is a leading US provider of local news. In January, the company paid $140 million to add 31 smaller-circulation newspapers to its burgeoning stable that includes such hallmarks of print as the St Louis Post-Dispatch and The Buffalo News. The timing of the acquisition was particularly unfortunate for an already troubled company. Over the past five years, shares of Lee Enterprises have lost 71 percent of their value even as its earnings per share (EPS) improved by 13 percent annually. However, the profit margin remained razor thin at just 1.9 percent.

Whenever Warren Buffett is selling, it pays to be wary – and keep a distance. Mr Buffett does not usually offload companies that do well or have a promising future. Lee Enterprises procured its latest batch of papers from Berkshire Hathaway, Mr Buffett’s investment vehicle. After the sale, and without an ounce of malice, the Oracle from Omaha called the newspaper business ‘toast’.

Since Mr Buffett sold his rags, things have gone from bad to worse for the newspaper business. Advertising revenue has all but vanished as a result of the pandemic and the associated lockdown measures. Whilst demand for news has probably never been stronger than at present, US mainstream media companies have furloughed or fired some 36,000 reporters, editors, and support personnel.

Local papers, such as the 75 titles owned by Lee Enterprises, have borne the brunt of a crisis affecting the entire industry. Dependent on Main Street for advertising revenue, the closure of shops, restaurants, and car dealerships has deprived these newspapers of their principal source of income.

Just as people everywhere need access to reliable news – as opposed to the fake stuff peddled on social media – journalists are yet again asked to do more with less. The good EPS results posted by Lee Enterprises are not so much the result of management magic as of a ruthless slimming down of local newsrooms and forcing hacks to cover their beat as a reincarnation of Mr Tambourine Man, carrying not just pen and notepad, but microphones, cameras, and other multimedia paraphernalia as well.

Major national news outlets, including those that successfully transitioned from print to online, also suffer from the pandemic’s cruel paradox. Earlier this month, The New York Times reported that it had signed on over 600,000 new online subscribers, pushing the total north of 6 million, but warned that advertising revenue over the second quarter may fall by as much as 55 percent. The iconic newspaper has shuttered its vast mid-town Manhattan newsroom and has its editorial staff working from home.

Whilst The New York Times is financially sound and will not streamline the editorial business end of its operations, others are not so lucky. Yesterday, The Atlantic Monthly announced that it must fire 68 employees – 10 percent of its staff. The magazine, published since 1857 and celebrated for its peerless long form reporting on public and cultural affairs, cited a ‘bracing’ decline in advertising revenue as the reason for its ‘painful’ decision.

Though The Atlantic Monthly’s reporting on the corona pandemic attracted 90,000 new subscribers, that exponential growth in readership cannot compensate the loss of advertising income. Most of the magazine’s in-depth articles reach millions of readers and the company’s chairman, David Bradley, promised that The Atlantic will continue its quality reporting.

Condé Nast, publisher of Vogue, Vanity Fair, and The New Yorker, has cut salaries and mulls layoffs whilst management takes stock of the situation and maps a future path. Fortune magazine, recently bought by Thai businessman Chatchaval Jiaravanon for $150 million, has sent 10 percent of its staff home.

The New York Post tabloid, owned by Rupert Murdoch, fired 20 employees, including newsroom staff. The Plain Dealer, the newspaper of record in Cleveland, Ohio, fired 22 journalists and editors, including its health reporter. The Tampa Bay Times, Florida’s largest-circulation newspaper, adopted a twice-weekly print format after it lost $1 million to the pandemic. In a scarcely believable development, the largest newspaper publisher in the US, Gannett, has seen a staggering 94 percent of its market capitalisation evaporate since August 2019.

Even successful online news outlets such as Slate, Buzzfeed, Vice Media, and Protocol are also suffering and shedding personnel or reducing their pay.

Professor Penny Abernathy, who holds the Knight Chair in Journalism at the University of North Carolina, expects hundreds of newspapers and websites to disappear in the wake of the pandemic: “An extinction-level event will probably hit the smaller ones really hard, as well as the ones that are part of the huge chains.”

Between 2004 and 2018, an estimated 1,800 US print newspapers have ceased publishing as readers moved online and tech giants such as Google and Facebook poached their copy. Prof Abernathy points out that the news industry had little resilience left after watching its revenues decline steadily for close to two decades. The surge in readership as a result of the corona crisis has done little to bolster the bottom line of news organisations and may, indeed, be an example of ‘too little, too late’.

In a landmark study detailing the impact of the demise of local newspapers on 1,300 smaller communities throughout the US, Prof Abernathy discovered large ‘news deserts’ where the fourth estate is completely absent and with it, scrutiny of local officials.

However, Prof Abernathy did find a silver lining. Her 2018 study found that 71 percent of news consumers believe that their local newspaper is doing ‘alright’ financially whilst only 14 percent had actually paid for information. With all the other changes brought by the pandemic, the popular notion that news is free may come to its timely end: “Once people understand that reporting news costs money, they may display more willingness to recognise its value and pay for it,” says Prof Abernathy.

That is already now happening as millions deploy their credit card to break to the paywalls of mainstream media. It may, however, not be enough to save the industry and ensure the diversity by which it thrives.