Newspaper closings raise fears about industry

ByABC News
March 17, 2009, 10:59 PM

NEW YORK -- Sometime soon, millions of people may find themselves unwittingly involved in a test that could profoundly change their daily routines, local economies and civic lives.

They'll have to figure out how to keep up with City Hall, their neighborhoods and their kids' schools as well as store openings, new products and sales without a 170-year-old staple of daily life: a local newspaper.

At least one city possibly San Francisco, Miami, Minneapolis or Cleveland likely will soon lose its last daily newspaper, analysts say. And it "could be a lot more widespread than people have been predicting," says Mike Simonton, who tracks media debt for Fitch Ratings.

It's hard to ignore that possibility as the pace of newspaper closings accelerates.

Starting Wednesday, Hearst's 146-year-old Seattle Post-Intelligencer survives as a scaled-down online publication offering mostly commentary. That leaves The Seattle Times as the city's only major paper-and-ink daily.

Are these symptoms of a miserable economy that's pulverizing a handful of high-profile papers, including some owned by companies with unusually crushing debt loads? Or have we reached a tipping point where advertisers and readers are flocking so quickly to digital media that most of the nation's 1,400 dailies may end up in the morgue?

Industry watchers aren't sure, although some say it's too early to start hanging crepe. "Publishers and journalists have become their own worst enemy," says Robert Picard, a media economics scholar who edits the Journal of Media Business Studies. "They are running around arguing that the sky is falling. And they're making the situation appear far worse than it is."

About 80% of newspaper revenue comes from advertising, and the Newspaper Association of America expects those sales to drop 9.7% in 2009 to $34.2 billion, after falling 16.5% in 2008.

"Advertising has fallen off a cliff," says Randy Bennett, senior vice president of business development at the NAA. "The question is how much of that will come back when things pick up again. And the expectation is, certainly not all of it."

Business models

Almost everyone agrees that newspapers must reinvent their business models. Experiments include The New York Times' plan to enlist journalism students to help cover some neighborhoods in Brooklyn and New Jersey. The East Valley Tribune in Mesa, Ariz., recently began to offer free home delivery four days a week to neighborhoods with families that appeal to advertisers.