No Morality Play  | American Journalism Review
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From AJR,   April/May 2006

No Morality Play   


There's an unspoken assumption running through much of the discussion about Knight Ridder and Bruce Sherman both in Charlie Layton's piece ("Sherman's March," February/March) and more generally among journalists (particularly KR alums) that this is all a morality play, with good and bad guys warring over the future of newspapers. That is, the problems facing our industry would go away if only the right people were in charge. If that's what people like former Inquirer Executive Editor Jim Naughton and Layton believe, I wish they would come out and say so, because I'd like to hear them defend it.

Let me suggest an alternative view. Newspapers today are in trouble with both readers and advertisers; both have been drifting away from our medium for years. I don't pretend to know all the reasons, much less how to reverse the trend indeed, my point is exactly that nobody seems to know that, which is precisely why you have people like money manager Sherman demanding that KR go on the block and increasing pressure on other chains as well. Moreover, in the long run it doesn't really matter whether Tony Ridder stays in charge or is replaced by Gannett, McClatchy, Kohlberg Kravis or whoever; anyone who owns a newspaper has to contend with the same question, which is how to increase revenues.

Note I'm not talking about profit margins. Those get all the attention, but they aren't really the issue. Anyone can widen margins, just by cutting costs. But if you have declining revenues top-line sales from circulation, advertising and so on you can cut costs to zero and still go out of business. Wall Street, moreover, doesn't care how wide your margins are; investors want to know if (and how) your earnings will grow into the future. Cost-cutting works to get you over a temporary period of flat or down revenues, but if revenues are projected to fall indefinitely, cost-cutting won't save you, and nobody wants to invest in a doomed company. (By way of illustration, remember how many dotcoms were bid to the skies even though they had no profit margins at all. Why? Because investors believed their revenues would keep growing, justifying all the heavy spending necessary to build the franchise. And when the rosy sales forecasts went away, so did the investors.)

Newspapers have a problem right now because nobody seems able to say convincingly that they know how to make circulation or advertising revenues grow. Until somebody figures that out, we're going to face pressure for cost-cutting, restructuring, consolidation and all the rest. And in the end, it won't matter whether our owners are angels or demons; without a viable plan to grow revenues, we'll still be out of business.

Andrew Cassel
Business columnist
Philadelphia Inquirer
Philadelphia, Pennsylvania

Mr. Layton states that democracy is going to crumble when Knight Ridder is sold. To say that this is a group of worker bees that are full of themselves is indeed an understatement.

First, newspaper work is not even a profession in the classic sense of the term. Second, the worker bees do not understand ownership; they actually think that they are somehow working for a charitable trust.

Folks, to be independent of the government you need to be privately owned. Then you have to produce profits. Your choice: government sponsorship (NPR) or true freedom. Freedom brings risk and up and downs in life, including unemployment. Maybe you need to start teaching that in J-school.

D.J. McClure
Dallas, Texas

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