Abandon ship?

Over the weekend Star-Ledger part-timer Lee Roberts stirred a little ruckus when he passed on an assessment regarding the future of the newspaper industry. The issue wasn’t so much what Lee brought to everyone’s attention, rather it was how he did it. The editorial-all email he dispatched had as subject line: “You should have taken the buyout.”

One responder faulted him for being negative and another for not being sensitive to others. Both seemed to believe that the news from the bond-rating firm Fitch Ratings wasn’t surprising. “I think we’re all very aware of what’s going on in our industry,” was one quote.

Just to make sure we are all aware of what is going in our industry, here is the highlight from that Dec. 3, 2008 rating report: “Fitch believes more newspapers and newspaper groups will default, be shut down and be liquidated in 2009 and several cities could go without a daily print newspaper by 2010.”

Fitch also listed the debt rating for two newspaper groups — McClatchy and Tribune — at junk status because of the likelihood of default. Less than a week after that assessment Tribune company filed for bankruptcy. McClatchy renegotiated it’s billion-plus dollar debt load earlier this year but still may not be able to maintain payments.

However, what is striking these two chains is neither unique or isolated. What’s more, it significantly pre-dated the economic collapse of September. Even before Sam Zell finalized the deal for Tribune, less than a year ago, questions were being raised as to whether the company could service the $13 billion debt (required to finance the purchase) given a steepening decline of advertising revenue and circulation.

But more to the point, what does any of this have to do with us at The Ledger.

First the good news:

• The paper is privately held; there are no shareholders demanding an increase in the value of their stock. (There may, however, be some Newhouse family members concerned about the size of their dividends.)
• While little is known about the Newhouse empire (it’s privately held, so doesn’t have to file annual info with the SEC) it is assumed it carries little debt load.
• The Newhouse family has never demanded the level of profit that has led companies like Gannett and Tribune to gut entire newspapers. Even if you don’t believe what has been said about the financial situation at The Ledger, it seems clear that for some time it has not approached the margins considered SOP by other newspaper companies.

What’s the bad news?

• The relationship between the newspaper and its online entity would have to improve to become dysfunctional. At the moment one could argue they aren’t even working toward the same goals.
• Other than survival it isn’t clear what goals there are for the newspaper or the internet entity. No long-term plan has been mentioned (expectations of a return to profitability are not a plan, they may not even be a realistic goal in this economic climate) and no interim steps have been provided that would guide toward those uncertain goals.
• As the newspaper advertising market continues to collapse The Ledger and NJ.com still lack the infrastructure to efficiently sell ads online or locally should any interested buyers be found. Worse than not recruiting new advertisers, the newspaper and NJ.com may have to turn them away.
• Speaking of NJ.com, Nielsen online reports continue to indicate slippage both in numbers of unique visitors and time of visit. From Oct. ’07 to Oct. ’08, the average time spent per person at our web site fell from nearly 12 minutes to less than 3. Only two of the other top-30 news sites reported such a precipitous decline. Some (NY Times, Houston Chronicle, Politico, Village Voice) reported major gains. Rumors of changes at Advance Internet continue to be just rumors. Given the Soviet-era mindset in Jersey City, changes to address such obvious failings could begin in 2013.
• Editorial management at the newspaper hasn’t finished planning for the future even though it is already here. Meetings continue about how the editorial department will function as departure-day for the last of the buyout-ees looms.
• Instead of using the smaller staff to focus on largest audiences or the newspaper’s core strengths, editorial leaders seem intent on trying to keep the newspaper just as it is (with maybe fewer pages and a couple of cosmetic changes). Rather than reorganize, the newspaper seems to have simply reduced staff.

Does that mean The Ledger is doomed and we should all have jumped ship? No.

Many people love newspapers. Lots think they are necessary (they supply a significant portion of the internet’s best content and may be critical to a functioning democracy). What’s more, privately owned newspapers (like The Ledger) seem a better bet for the future. Publicly held newspapers are much more interested in profit than journalism and much less likely to even want to survive if massive profits are gone forever.

But, if you will pardon my extension of a metaphor, The Ledger is leaking badly and listing to stern. The hand on the helm seems far from certain how to navigate through a screaming gale that is about to become a class 5 hurricane. The time for rearranging deck chairs and waiting to see which way the wind blows is long past. All that may be left is to batten hatches and pump for your lives.

Besides, the lifeboats are already away.

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