At Last, Good News About Newsprint Prices    

"Due to rising news-print prices" has been the newspaper industry's universal, irrefutable excuse for just about every newsroom malady since prices began to climb in 1994. The increases sent newsrooms around the country scrambling to save paper any way they could. And when subtle changes couldn't counteract skyrocketing paper prices, many publishers took more drastic measures, like cutting staffs and closing papers.

But now publishers may need to find a new excuse: Newsprint prices are falling. After nearly doubling over the last two years, news-print prices got cheaper this spring when the market finally swung in the newspaper industry's favor.

"Everything implies [prices] are going to be dropping," says Greg Rudder, who reports on newsprint for the newsletter Pulp and Paper Week and supplies analysis of the paper industry to the Newspaper Association of America, among others.

Analysts predict the price of newsprint should drop even more by September, bringing prices down to as low as $625 per metric ton, more than 20 percent below the $800 per metric ton for which many papers had budgeted, Rudder says. But most papers are wary of celebrating the end of their newsprint nightmares just yet.

"We're cautiously optimistic," says Frank Cagle, managing editor of the Knoxville News-Sentinel. Like many midsize papers, the News-Sentinel shrank the point size of headline type and filler ads and eliminated special sections to save paper. But don't expect to see the 125,000-circulation paper suddenly expand because prices have begun to turn around. Any money saved, Cagle says, will go straight to the bottom line.

"We're really nervous about doing anything now, since we got shafted last year," he says. Like many dailies, Cagle says his paper is reluctant to even consider expanding the number of news pages, since increased demand for paper could easily drive prices back up again without warning.

Not that there weren't signs foretelling the 1994 price increase. For years prior, marginal papers survived on newsprint prices kept artificially low by a market saturated with too much paper and not enough demand. While the price of newsprint remained steady at about $400 per metric ton throughout the recession, publishers shouldn't have been as surprised as they were when the newsprint industry eventually began to boost prices up to a more realistic level in 1994.

But many were caught off guard. With newsprint constituting a paper's largest expense after labor, even the slightest fluctuation in price could mean millions of dollars saved or lost.

And now relief is finally in sight. After peaking at around $760 per metric ton late last year, newsprint prices began their descent. Apparently all the newsroom cutbacks and the tendency of newspaper organizations to stockpile paper, along with the lost business from folded dailies, were enough to shift the cyclical market, according to Rudder.

Falling prices are coming in the nick of time for many papers. At the Post and Courier in Charleston, South Carolina, for example, rising newsprint prices led to a smaller newshole, combined editions and angry readers.

"Like many papers, we tightened up too much and got reader complaints," says Bob Clay, the paper's operations director. As a result, management decided in January that in order to hang on to readers, it would open up the newshole again and start using more paper, rising prices be damned.

"We budgeted for the price increase, plus more paper, and looked forward to having a bad year," Clay says. But now he has hope that the unexpected dip in paper prices will soften the blow and help the paper win back disenchanted readers.

The effects of newsprint price hikes were not negative all around, however. Even though soaring newsprint costs were blamed in the decisions to close the Houston Post and to merge Milwaukee's Journal and Sentinel, smaller papers like the North Jersey Herald & News used the newsprint crisis as an opportunity to rethink their direction.

The North Jersey daily chose to narrow the width of its pages as part of a total design overhaul. "The number-crunchers in our company were looking for ways to save on newsprint at the same time we were redesigning," says Editor Ian Shearn. "It coincided quite nicely."

So nicely that even the prospect of cut-rate news-print won't bring back full-size pages at the paper, according to Shearn. "There's no turning back now," he says. "Besides, [newsprint] is getting like the stock market: up, down, up, down."

The recent downswing in the paper market might be just enough to turn the industry's outlook around, according to analyst Kevin Gruneich of CS First Boston. Based partially on the drop in paper prices, Gruneich recently upgraded his ratings of Knight-Ridder, the New York Times Co., Times Mirror and Tribune Co. stock from "hold" to "buy."

This is "the most enthusiastic we have been regarding newspaper stocks in at least eight years," Gruneich told investors in his weekly brief on the newspaper industry. "The wind is now back in these stocks. Surf's up--time to jump in."

So if investors are excited, does that mean reporters will be rehired, prices will drop and papers will reopen?

Don't hold your breath, analysts say--that's not the way the business works. Most analysts surveyed by AJR say that any money saved is more likely to go into new media investments, such as online ventures, than into rehiring reporters and resuscitating papers with thinned newsholes.

And while paper prices may be falling at the moment, the threat of another newsprint crisis always looms, according to Rudder.

"Analysts told me they expect prices to rebound and upshoot by year's end. But it's very unpredictable," Rudder says. "I can't ever see the day when this will stabilize."