For a preview of the newspaper industry’s coming death, turn your gaze to Colorado, where the withering and emaciated Denver Post finds itself rolling in profits.
The Post’s controlling owner, “vulture capitalist” Randall Smith, has become journalism’s No. 1 villain for having cheapened and starved not just its Denver paper but many of the titles—including the St. Paul Pioneer Press, the San Jose Mercury News and the Orange County Register—that his firm, Alden Global Capital, operates through the Digital First Media chain. At the Post, Smith’s firm cut the newsroom from 184 journalists to 99 between 2012 and 2017, Bloomberg News’ Joe Nocera writes. Over the same time, Smith’s Pottstown Mercury fell from 73 journos to 10 while its Norristown Times-Herald went 45 to 12. And the cuts just keep on coming. For newspaper lovers, the cuts have been a disaster.
Journalists and citizens have protested and rebelled against the Alden cutbacks to no effect. The Post’s editorial page editor resigned recently after writing an editorial calling on its owners to sell. The editorial page editor at the chain’s Boulder Daily Camera just got sacked for self-publishing a critique of his owners and a fund has been established to fund the journalism of Posties that have been let go. This week, employees from several of the chain’s newspapers took their complaint to Manhattan, where they demonstrated outside Smith’s offices to demand that he either invest in his papers or sell them to somebody who will.
But why on Earth should Smith sell? Alden’s newspapers recorded nearly $160 million in profits during fiscal year 2017, analyst Ken Doctor reported in a comprehensive piece recently at NeimanLab. The chain’s 17 percent operating margin makes it one of the industry’s best performers. Over the course of seven years, Alden doubled profits in its Bay Area News Group newspapers, another home to cutbacks. At the Pioneer Press, where its staff is down to 60, the paper produced a $10 million profit at a 13 percent margin.
Smith may be a rapacious fellow, but his primary crime is recognizing that print is approaching its expiration date and is acting on the fact that more value can be extracted by sucking the marrow than by investing more deeply or selling.
Allow yourself to sympathize with Smith for a moment. He’s deeply invested in a stagnant industry whose primary audience is approaching its own expiration date. Think of the Denver Post and most other newspapers as your grandfather who is on dialysis, has a pacemaker and totes an oxygen tank behind him. He looks alive, but he’s overdue. Your grandfather is a pretty good stand-in for the average newspaper subscriber, too. Habituated to his morning newspaper, he’ll resist cancelling his subscription no matter how raggedy the paper gets or how high the owners jack up the price. (Alden is among the most aggressive in boosting subscription prices, Doctor tells the Daily Beast.)
The business-school label for tactics like Alden’s, in which you get fewer customers to pay more for less, as Philip Meyer wrote in his book The Vanishing Newspaper, is “harvesting market position.” By raising prices and lowering quality, a stagnant business can rely on its most loyal customers to continue to buy the product, allowing it to squeeze and squeeze and squeeze its customers as they croak. This slow liquidation of an asset’s value, destroying even its reputation in the process, kills the product. Wherever newspapers can be found reducing page size, cutting news pages, narrowing coverage area, reducing staff, shrinking circulation area, postponing the purchase of new equipment and raising subscription prices, they are harvesting market position. Faced with two business options, earn small sums from his newspapers over an indeterminate time or cash in big all at once, perhaps hastening the end, Smith has chosen the latter.