A Major City Without a Newspaper? It Might Happen.

Another major newspaper is in financial trouble. As pointed out in the World Vue Letter post dated February 12, 2009, newspaper profits are dropping rapidly and major changes are taking place in the mass media industry. Now comes word that the San Francisco Chronicle may possibly close its doors. That which was once unthinkable might happen. What's going on?

The San Francisco Chronicle was purchased by the Hearst Corp. in 2000 for $600 million. Hearst owns Cosmopolitan, Esquire, Good Housekeeping and has an investment in ESPN. Since then the Chronicle has been a financial drain. According to The Wall Street Journal, Hearst will seek significant cost-savings within weeks or possibly sell the newspaper. If it decides to sell and cannot find a buyer quickly, the Chronicle will shut down. That means San Francisco will be the first major city without a major daily paper.

Note also these trends cited in the World Vue Letter's February 12 post :

• The Tribune Company, owner of the Chicago Tribune, Los Angeles Times, and Los Angeles television station KTLA, recently filed for bankruptcy. It also owns the Baltimore Sun, South Florida Sun-Sentinel and the Sentinel of Hartford.
• The Christian Science Monitor has ceased publishing in print, relying solely on electronic publishing.
• The average number of viewers watching network TV is dropping. TV station revenues dropped 8% or more in 2008.
• Media payrolls are declining with only the biggest names earning more pay.

Since December, three other newspaper organizations have filed for bankruptcy:

• Philadelphia Inquirer and Philadelphia Daily News (both owned by Philadelphia Newspapers, LLC);
• Star Tribune - Minneapolis; and
• Journal Register Co. - owns 20 daily newspapers in Connecticut, Michigan, New York, Ohio and Pennsylvania.

Why all the troubles?

The problem is declining display ad revenues as the economy has slowed, plus the loss of classified ad revenues to Internet-based services such as Craigslist. Classifieds traditionally have been highly profitable. Some pundits also point to the fact that newspapers unwisely gave away access to their product, the newspaper content, for free on the Internet. Many people now turn to the Internet as their primary news source. Newspapers have tried to keep their readers by posting content for free in order to compete. But it's an economic model that is not sustainable.

Now there is a growing sense that newspaper editors and publishers have to start asking themselves some new questions. It's not just a case of asking how to charge readers for Internet access. It's more a matter of determining what content can a newspaper create that readers will want to buy. It's a very different perspective, one that reminds us how markets drive innovation and how it is the consumer who defines value.

Perhaps we can expect to see some very different types of headlines and reporting in the near future.

Quick Vue: Here's a more in-depth look at the newspaper industry including interviews with representatives of the San Francisco Chronicle.

Sources for this post included MSNBC.