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The Real Reason Newspapers Are Losing Money, And Why Bailing Out Failing Newspapers Would Create Moral Hazard

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Conventional wisdom is that the Internet is responsible for destroying the profits of traditional print media like newspapers.

But Michael Moore and Sean Paul Kelley are blaming the demise of newspapers on simple greed.

Michael Moore said in September:

It's not the Internet that has killed newspapers ...

Instead, he said, it's corporate greed. "These newspapers have slit their own throats," he said. "Good riddance."

Moore said that newspapers, bought up by corporations in the last generation, have pursued profits at the expense of news gathering. By basing their businesses on advertising over circulation, newspaper owners have neglected their true economic base and core constituency, he said...

And Moore cited newspapers like those in Baltimore or Detroit, his home town, with firing reporters that cover subjects that affect the community.

Ultimately, he said, this was self-defeating. It would be like GM deciding to discourage people from learning how to drive, he said.

"It's their own greed, their own stupidity," he said...

Similarly, Sean Paul Kelley writes:

I don't buy all the hype that the internet is even the primary culprit of the demise of journalism. The primary culprit is the same as it is all over the country, in every industry and in government: equity extraction.

Let me explain, in short: when executives expect unrealistic profits of 20% and higher per annum on businesses something has got to give. It's an unnatural and unsustainable growth rate. For the first ten or so years of a small to medium size company's life? Sure. But when you are 3M, or GE? Unrealistic and ultimately impossible.

So, when such rates cannot be achieved by organic growth in the business, executives start shaving off perceived fat and before they know it they're cutting off the muscle and then shaving off bone chips. And when they've gotten to the bone chips they borrow other people's money to buy new companies, load up those companies with debt and extract equity form them and then because it looks like the parent is still growing award themselves huge bonuses. It's a shell game.

That is what has happened to the news industry in America. The excessive obsession with unnaturally high profits has led to a vicious circle of cutting budgets, providing less services, which is then followed by even more drastic cuts. The local San Antonio paper is a great example of this. Twenty years ago there were two large dailies in my hometown. Both competed with each other for real scoops. Both had book reviews by local writers, providing local jobs. Both covered the local arts and sports scene. Both covered local politics in depth and local and state news in depth. Both had vigorous investigative teams. Both had bureaus in Mexico and both had offices and reporters on the ground in DC.

And then corner offices of Gannet and Harte-Hanks were populated with Kinsey-esque managers and the rout was on ... So, today, San Antonio has one daily that is as flimsy and tiny as the local alternative ... And 80% of this happened before ... the internet. All in the name of higher industry profits--not some overwhelming fear of the world wide inter-tubes. So, who's profiting? Certainly not the intellectual vigor of the locals? And certainly not the writers who are all now 'journalism entreprenuers.' The only people who profited are the executives who obsessed over profits, to lard up their own bonus pool ...

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George Washington


As a political activist for decades, I have rejoiced in victories for the people and mourned in defeats. I chose the pen name "George Washington" because - as Washington's biographies show - he wasn't a (more...)
 

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Thank you for finally highlighting the true causes... by Scott Baker on Wednesday, Dec 23, 2009 at 1:50:56 PM