Some of the latest bad, bad news from the industry we all love.

The Vultures Are Circling, by Mark Potts.

Earnings: Gannett Q2 Revenue Down 9.9 Percent; Income Down 19.7 Percent; Stock Crushed. The headline, at Paid Content, pretty much says it all.

5 newspaper stocks hit new lows – again. Alan Mutter needs to be on your daily reading list in times like these. See also Just $3.6B: Total value of 10 news stocks, in which Alan calls the recent slashing of newspaper stock prices “an historic rout.”

So what does it all mean?

I’m always wary of anyone who points with any certain to the future of media. And I have no greater insight into this mess, and the ways out of it, than anyone else. But there are some things that I feel relatively certain about, at least at the moment. (My conclusions are, as always, subject to change.)

Here’s what I’m thinking: driven by a recession that has accelerated its decline, the metro daily will be forced into a new, as yet unknown, form that will redefine newspapers not only in the U.S. but in Canada and, likely, other countries.

We’re only halfway through the year, and those tracking such things in the U.S. put the number of journalists who have been laid-off or bought out at over 6,000. We’ve seen a number of newspapers slash sections, cap the number of pages, increase ad-to-editorial ratios. The American recession is, in large part, driving this bus, but it slid behind the wheel at a time when the public’s changing habits, the disruption of the internet and other factors had already started to snip through the brake linings.

When I was the editor of a smallish newspaper, I went through a recession or two. The strategy was straight-forward: hang on, cut what costs you could — and some that you really couldn’t — and then rebuild when things improved. But by the time this current crisis (and that’s not too strong a word) plays out, I can’t see the rebuilding happening to any great degree.

Even if the American economy turns around in a big way, newspaper health won’t magically improve, because of the internet, demographic and societal changes, etc. But newspaper companies are likely to find that their new, slimmer and leaner-staffed newspapers are giving them something closer to the profitability that they enjoyed in the good old days. Increasing page counts, staff, etc. will interfere with that, particularly as newspapers compete against an ever-growing number of folks seeking to suck up ad dollars.

(Note: I’m using the term newspaper here, but I’m meaning it to apply to a newsgathering, advertising-supported medium, whether the results are distributed on paper or a screen.)

It’s inevitable that by the time the American economy improves, some of the metros will have figured out how to remake the slimmer, smaller-staffed newspaper work for both readers and advertisers. Those that are successful will provide the template. Out of that comes the reinvented metro daily.

And it’s the last bit that’s going to spread what happens beyond the U.S. borders.

We’re recession-free in Canada, although our economy wobbles a bit, and our newspapers sail pretty much outside the dire straits. But publishing companies face many of the same problems contributing to the battering over the border: the increasing cost of fuel and newsprint to name two. Many of those companies are also carrying heavy debt and soft shareholder support.

(An example: CanWest, the publisher of dailies across the country, shares rose 24 cents on July 12 because of good third-quarter operating results. But the increase took it to $2.26 a share, down from just over $6 a share in January, and down from a 52-week high of $9.98. The company lost $28 million in the three months ending May 31, compared to an $8 million profit a year earlier. See this CBC report for details.)

It’s inevitable that Canadian newspapers will eventually follow the lead of the successful, smaller-staffed reinvented newspapers in the States, although not out of a drive to survive. The reinvented American daily (whether it is more narrowly and locally focussed, more driven by niche publications, or whatever) will set the new definition for what a daily newspapers is, and the economic appeal of maintaining income while cutting costs (and people are the big cost item for newspapers) will be magnetic. The strong ties between the two countries argue against Canadian newspapers developing in a significantly different way than in the States.

As I wrote above, this is my thinking and I’m not sure I’ve laid it out as well as I should have. Any additions, arguments, rebuttals, etc. are more than welcome.


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