Summer Woes Force Core News Publisher Choices
Important Details: The news from news companies has turned from bad to worse, as a series of developments point to how dire the summer has turned:
- In the US, the Newspaper Association of America released its latest official numbers: total ad spending down 13% in the first quarter of 2008 compared to a year earlier.
- The ugly prospect of debt default is now in the air. Less than two years ago, Brian Tierney’s Philadelphia Media Holdings bought the two Philadelphia dailies, the Philadelphia Inquirer and the Philadelphia Daily News, amid public hopes that savvy, marketing-oriented local ownership could turn the papers’ prospects around. That turnaround hasn’t appeared, as ad revenues have plummeted. Now word is that the local company has failed to make an $85 million debt payment, according to S&P. A Bloomberg news report raised similar default concerns about Media News, Tribune and Journal Register companies, all highly leveraged with debt and suffering reduced cash flows.
- Gannett, the leading global news publisher, wrote down its 2005 Newsquest acquisition by $2.5-3 billion. The reason: “Newsquest, our publishing operation in the U.K., has been significantly impacted and many regions of the US continue to struggle.” It also surprised its employees by immediately freezing its pension funds, transitioning wholly to a largely employee-funded (401-k) retirement system.
- McClatchy, the third largest US publisher, announced a 10% staff cutback across the chain of 30 newspapers. The Miami Herald’s coming cut is almost one in five, at 17%. Even McClatchy’s flagship Sacramento Bee is taking a 9% cut.
- Hearst CEO Victor Ganzi abruptly resigned. The company cited irreconcilable differences between Ganzi, who’d been CEO since 2005, and the board. Among the points of contention were Hearst’s minority investments in Media News and in its investments in Internet technology companies including Brightcove and Pandora.
That’s just a short list of recent news.
Implications:
Plainly, any hope of plateauing is out the window. Publishers live in a swirl of souring consumer confidence, a real estate market that won’t revive for a while, a car market in turmoil and an acceleration of rethinking ad budget allocations generally.
Plainly put, the kinds of moves we’re seeing among publishers say one thing: “It’s the end of the world as we know it.”
In the short term, publishers seek basic survival, as some wrestle with default and all look to shore up their finances for the rough times still ahead. Further cost reductions, of course, are inevitable.
Outsell believes that when we look back at this news publishing era, we’ll separate news companies into two groups. One of those introduce cuts, while managing to keep their core content production and sales production assets strong and newly retrained and reenergized for the digital future. The second will be companies who shrank from the task. These are the companies that in their financial stress and panic are “frightsizing,” pushing out and away key people and initiatives key to their future.
The decisions being made in this hot summer are unprecedented. The level of thinking and of care brought to those decisions needs to be precedent-setting as well.