Ask almost any veteran reporter to list the challenges facing the profession of journalism, and either at or near the top will be a concern about rapidly shrinking numbers of reporters, editors, and photographers in the newsroom. Although the business models for broadcasters (see Chapters 6 and 8 for more specifics on the radio and TV broadcasting industries) are not quite the same as that for print newsrooms, they do share this common concern: Budget cuts, for whatever reason, mean cuts to newsroom staff. A 2011 Federal Communications Commission report expressed concern that layoffs, cutbacks, and ownership consolidation were leaving too few broadcast reporters to adequately serve as watchdogs over the government and businesses in their local communities. For newspapers, the situation is even more troubling, with full-time U.S. professional newsroom employment down from a peak of 56,900 in 1990 to less than 37,000 in 2014. Almost all of this drop (well over one-third of total newspaper reporters) happened in the seven-year period since the economy began its recession in 2007.¹⁷ Because newspapers are the legacy format for journalism and still represent the lion’s share of reporting in most communities, it’s important to spend some time in this chapter examining the business side of newspapers and consider what recent developments are doing to the ability of newspapers to fulfill their journalistic missions.

96

Money In

For most newspapers, the majority of their revenues derive from selling advertising space. For some papers, ads provide the only source of revenue. Indeed, the majority of large daily papers devote as much as one-half to two-thirds of their pages to advertisements. What remains after the advertising department places the ads in the paper is called the newshole, the space not taken up by ads and devoted to front-page news reports, special regional or topical sections, horoscopes, advice columns, crossword puzzles, and letters to the editor. Newspaper advertising—in print and online—can take forms ranging from expensive full-page spreads for department stores to classifieds, which individual consumers can purchase for a few dollars to sell everything from used cars to furniture to exercise equipment. Of course, one of the biggest problems for print newspapers is that consumers can now place most of these classified ads online free of charge.

The other way newspapers make money is by selling the paper to readers. Readers can buy papers from vending machines, newsstands, or other sources on an individual basis, or subscribe and have every edition of the paper delivered, usually at a somewhat discounted rate.

More and more newspapers are trying to boost income by placing content behind a subscriber-only paywall. The Wall Street Journal was one of the first major papers to put up a paywall in 1997. Other newspapers and newspaper chains have been experimenting with paywalls, which can be controversial and unpopular with potential readers who are used to getting free content online. To balance this, the New York Times and other newspaper operations (like major chain Gannett) have gone to a hybrid model. A person might access a limited number of articles for free each month (typically ten to twenty), but access to any more than that or to other premium products (like online newspaper archives) requires a paid subscription.

97

In addition, news companies are finding ways to cater to readers’ increasingly digital lifestyles, developing material for new digital platforms like the touchscreen tablet or smartphone. In some cases, the digital subscription rates are also tailored, depending on the device (and particular app) the reader is going to use.

Money Out

Like any other enterprise, a newspaper has to spend money to fulfill its mission. Its costs include overhead (such as rent and utilities), salaries and wages, marketing and sales, and any investments in wire services or feature syndication required to offer content for readers.

Salaries and Wages

A major expense for most newspapers comes in the form of salaries and wages paid to the various editors and reporters working for the paper, though in the last five to ten years newspapers have shrunk not only their newshole but the size of their reporting staffs. Traditionally, most large papers have a publisher and an owner, an editor in chief and a managing editor in charge of the daily news-gathering and writing processes, and assistant editors and news managers running different news divisions. These key divisions include features, sports, photos, local news, state news, and a wire service containing much of the day’s national and international news reports.

Reporters work for editors. General assignment reporters handle all sorts of stories that might emerge—or break—in a given day. Specialty reporters are assigned to particular beats (police, courts, schools, local and national government) or topics (education, religion, health, environment, technology). On large dailies, bureau reporters also file reports from other major cities. In addition, large daily papers feature columnists and critics who cover various aspects of culture, such as books, television, movies, and food. Since 2000, some newspapers have added staff solely responsible for online operations, although newsroom cuts have increasingly led to the shifting of these duties to the remaining reporters and editors.

Wire Services and Feature Syndication

To provide adequate coverage of important events from other places, many newspapers rely on wire services and syndicated feature services to supplement local coverage by their own reporters and writers. A few major dailies, such as the New York Times, run their own wire services, selling their stories to other papers to reprint. Other agencies, such as the Associated Press (AP), United Press International (UPI), and Reuters (based in London), have hundreds of staffers stationed throughout major U.S. cities and world capitals. These agencies submit stories, photos, and videos each day for distribution to newspapers, newscasts, and online sites across the country and sometimes internationally.

98

Daily papers generally pay monthly fees for access to all wire stories. Although they use only a fraction of what’s available over the wires, editors carefully monitor wire services each day for important stories and ideas for local angles.

In addition, newspapers may contract with feature syndicates, such as Universal uClick (formerly United Features) and Tribune Media Services, to provide work from the nation’s best political writers, editorial cartoonists, comic-strip artists, and self-help columnists. These companies serve as brokers, distributing horoscopes and crossword puzzles as well as the columns and comic strips that appeal to a wide audience; however, with the downsizing of newspapers in terms of space, most papers today offer less syndicated content than they did in the 1990s.

Consolidation and a Crash

Although the fundamental elements of the business side of newspapers remain the same, the way the money flows into and out of the paper’s coffers and what that has meant for the news has changed dramatically since the early 2000s. Some of these changes are certainly due to convergence with the Internet, but arguably it is the combination of the entry into the digital age with widespread ownership consolidation and the 2007 economic crash that upset the newspaper apple cart.

Newspaper chains—newspapers in different cities owned by the same person or company—have been around since the late 1800s. By the 1980s, more than 130 chains owned an average of nine papers each, with the 12 largest chains accounting for 40 percent of the total circulation in the United States. This trend continued to pick up steam through the end of the twentieth century, and by the early 2000s, the top ten chains controlled over half the nation’s total newspaper circulation. Gannett, the nation’s largest chain, owns over eighty daily papers and hundreds of nondailies worldwide.

As large media corporations were adding up the numbers of newspapers (and often radio and television stations) they owned, they were also adding up the amount of money they were borrowing to make those purchases. Through the 1990s and the first few years of the 2000s, newspapers typically made enough money to make payments on these leveraged purchases. And then the economy started to tank in 2007.

By 2008, the economy was in full recession, and a lot of the major advertisers for high-priced goods like cars cut back their ad spending. By this time newspapers had already lost the revenue from classified ads to free Internet sites like Craigslist. To make matters worse, the decades-long slide in newspaper circulation gathered speed in the 2000s as more and more people canceled subscriptions, in many cases switching to free news sources on the Internet. When newspaper revenues from ads and subscriptions dropped dramatically, large chains went from leveraged to overleveraged, no longer able to keep up with loan payments. In some cases, this meant filing bankruptcy; in other cases, it meant being forced to sell off newspapers; and in still other cases, it meant shutting down altogether. Although some smaller newspaper owners avoided being overleveraged, they still had to deal with the reality of shrinking revenues. Thus, the industry-wide reaction has been to cut costs by laying off huge numbers of editors, reporters, and photographers, and closing bureaus at state and national capitals.

99

More than just bad news for the workers who lost their jobs, this trend raises concerns for the communities they are meant to serve. The newspaper industry as a whole lacks competition nationwide, as almost all the cities that once had multiple competing dailies have lost all but one of those daily papers. Critics and journalists worry about the ability of the remaining journalists to meet the information needs of local communities. Additionally, the coverage of national and state politics has dropped precipitously, as bureaus at the national and state capitols were among the first victims of budget cuts.