A Year Marked by Change   

The embattled newspaper industry witnessed many significant developments in 2007.

Last year was a momentous one for the newspaper industry: Two major companies changed hands, two others initiated spinoffs of their newspaper operations and a fifth announced that it no longer is a newspaper company. Hovering over all this was a sharp decline in the perceived value of the business.

The largest of these developments was the shift of the Tribune Co. from publicly traded company to private ownership (by its employees) in a deal that will put control in the hands of Chicago billionaire entrepreneur Sam Zell. This deal understandably raised rampant questions about Zell's intentions. A major one: Will he sell off some newspapers or other properties to achieve a quick and huge return on his meager initial investment of a little over $300 million?

So far he has not signaled any such plan (except for his determination to unload the Chicago Cubs). Indeed, he has expressed confidence in the future of newspapers, and told The New Yorker's Connie Bruck that he had received offers "on every single asset in the portfolio."

Still, for those romantics who might have hoped that Zell had warm feelings about owning his hometown newspaper or about newspapers in general, Bruck's New Yorker profile made one thing clear: This is just another business deal, and about business deals Mr. Zell is definitely not sentimental.

"Sentimental about newspapers" perhaps does describe Rupert Murdoch, chief of News Corp., as evidenced by his pursuit of the Wall Street Journal (and the rest of Dow Jones) in the year's second big deal. Murdoch made clear that he had long coveted the Journal, calling it one of the best newspapers in the world.

Remember all the anguish about the storied independence of the Journal during Murdoch's eventually successful campaign to persuade the Bancroft family, which had controlled Dow Jones for more than a century, to sell out to him? Murdoch agreed to an arrangement under which the top editor would independently control coverage and staffing and in other ways insulate the Journal from News Corp.

Well, even before News Corp. took control in late December, Murdoch established an office within Dow Jones, appointed one veteran News Corp. executive to be the company's new chief executive and another to be the Journal's new publisher, and fostered discussions among Dow Jones and News Corp. executives about changes in news coverage and about which staffers to dismiss, which to induce to stay and which to try to lure away from other publications.

None of this exactly rings the bell of independence for the Journal, but then given Murdoch's intense interest in the paper, it's hardly surprising. Much of the Journal's vaunted independence may survive — after all, the paper's reputation is its major asset — but I'll be surprised if the Journal ever again wins Pulitzers for coverage of and commentary about China, where the new owner has extensive business interests.

One of the two companies spinning off newspaper operations into separate publicly owned companies — Belo, which owns newspapers and television stations — cited "the profound yet distinct changes occurring in these industries." My translation: The currently depressed newspaper operations are dragging down Belo's stock price, so what better time to unfetter television than in an election season sure to be heavy with TV political advertising?

Moreover, the share price of the newspaper company might get so low that the family members who control the company through non-trading, super-voting shares could decide to buy back the traded shares and take the newspaper company private. In my opinion this would be a happy result, since I have become convinced that public ownership is mostly inimical to good newspaper journalism.

E.W. Scripps is the other company to do a spinoff, but in a different fashion. The company chose to put its newspapers and television stations in one publicly traded company and its cable programming (Food Network, HGTV) and Internet shopping services into another.

Finally, Donald E. Graham, chief executive of the Washington Post Co., made official what had already become obvious to Wall Street analysts: He now leads an education company that happens to own a newspaper, rather than the other way around. The reason is that Kaplan Inc., an education company acquired by the Post Co. in 1984, has grown so rapidly that its contribution to revenue has jumped from less than 4 percent initially to half the company's revenue, while the Washington Post's (along with that of a small daily in Everett, Washington) has dropped from 52 percent to 21 percent.

Behind all these developments lurks the declining financial performance and value of newspapers. We've seen the New York Times Co. write down its investment in the Boston Globe by more than half. McClatchy sold Minneapolis' Star Tribune for less than half what it paid for it, and the company wrote down nearly $1.4 billion of its assets, chiefly newspapers.

There's no doubt a lot happened last year to change the nature of the newspaper business, setting the stage for more upheaval to come.

John Morton (mortoninc@msn.com), a former newspaper reporter, is president of a consulting firm that analyzes newspapers and other media properties.