Newspapers

Well in the red but still well read

Desperate newspapers are turning to foreign sugar-daddies. But readers remain hungry for news

THE inauguration of President Barack Obama this week triggered a spike in newspapers’ sales as readers clamoured for commemorative issues. But otherwise the news about the newspaper business has been pretty grim, with bankruptcies, job losses and threatened closures as printed papers steadily lose advertising revenue and readers. Papers that have been the lifeblood of their home towns are fighting for their survival. This week, for example, the owners of the Seattle Post-Intelligencer, which has roots back to 1863 but which lost $14m last year, said that all its staff would lose their jobs unless a buyer is found soon.

Newspapers are being forced to sell non-core assets as they struggle to roll over debts. This week Tribune, the owner of the Chicago Tribune and the Los Angeles Times, which is in bankruptcy proceedings, was reported to be close to selling the Chicago Cubs baseball team. The New York Times says that it is near to finding a buyer for part of its Manhattan office building. Some are also resorting to an old tradition among ailing newspapers of seeking a sugar-daddy. Alexander Lebedev, a Russian banker and former KGB spy, this week bought a 75% stake in London’s Evening Standard for £1 ($1.40). The New York Times also got a $250m loan from Carlos Slim, a Mexican telecoms tycoon, in a deal that lets Mr Slim raise his stake in the company to around 17%.

On both sides of the Atlantic concerns have been raised about letting foreign-born businessmen take over important news outlets. The practice has a somewhat chequered history. In the 1980s Australian-born Rupert Murdoch restored the fortunes of Britain’s newspapers through tough labour reforms and cost-cutting at the London Times and its sister papers. In contrast, the Czechoslovak-born Robert Maxwell financially ruined the Mirror with fraud.

But beggars cannot be choosers and newspaper managers have generally preferred to suffer the whims of deep-pocketed proprietors than go out of business. Mr Lebedev says the Standard will now take a more liberal editorial line and he is promising to subsidise 20% of the loss-making paper’s running costs. Mr Slim’s spokesman insists that his loan to the New York Times is simply an investment. It pays interest of more than 14% and Mr Slim will not get a seat on the paper's board. Even so, he may later press for a stronger say in running the business, especially if the paper comes back for more loans.

Such is the pessimism there are now websites such as Newspaper Death Watch devoted to chronicling the alleged demise of papers. Ethan Zuckerman, a Harvard University pundit, recently suggested in his blog that advertisers had long overpaid for print ad space, with no guarantee of how many readers would witness their wares. Online, advertisers can see more precisely how many have viewers they have, and they pay less to place the ads.

Despite the bad news, there are also grounds for optimism. Another media pundit, Jeff Jarvis, notes that the low cost of internet advertising should mean that large numbers of smaller businesses can now afford it. And although fewer people are buying news printed on dead trees, readers are consuming it more avidly than ever, online and on smartphones. Audiences for British news websites surged last year, for example. The editor of the Los Angeles Times, Russ Stanton, says that its website’s revenues now pay for the publication’s entire print and online editorial staff. Publishing news electronically is also cheaper than printing and distributing it on paper. There is still huge demand for newspapers’ product, the question is how to get readers and advertisers to pay for it.

Over the past few years many newspapers (The Economist included) have all but given up charging for content online. Now as recession bites some news bosses are wishing they could find a way to get readers back into the habit of paying for journalism. Re-erecting pay barriers would be a brave move: some readers would be lost, in turn advertisers might be discouraged, potentially costing more in forgone ad revenues than would be gained in subscription fees.

Then again, few people would have guessed how much British viewers would be prepared to pay to watch televised football matches—which used to be on free-to-view channels—before Mr Murdoch’s satellite television bought up the rights and began charging. The popularity of Amazon’s Kindle reader, a hand-held, book-sized device to which books and newspapers can be downloaded, offers a glimmer of hope that some will pay for the convenient delivery of content.

Some newspaper groups, such as Tribune, are also suffering from the borrowing spree they embarked on when credit was easy. If they can cut their debts, through asset sales and bankruptcy proceedings, their chances of survival will improve. They are also finding ways to cut costs without sacrificing quality, such as sharing premises and other facilities with rivals. Old-fashioned money-making sidelines such as inviting readers to join book and wine clubs are getting a new lease of life. And the prestige and influence of being a press baron will continue to attract tycoons. Some papers’ print editions may not be around by the end of this year, but the industry is not quite dead yet.