Thursday, April 14, 2011

Lee's Last Stand (guest essay)

by Mark Wilson

For those who were perplexed last April when The Post-Star doubled newsstand prices from 50¢ to a dollar, the other shoe is now dropping. Lee Enterprise, Inc., owner of the newspaper since the acquisition of Howard Communications in 2002, has announced its intention to float $1 billion worth of corporate bonds. The float is a bid to stave off bankruptcy and retire over $630,000,000 in debt coming due between now and June 2012. The bond issue would, in essence, extend the deadline to 2017 and increase the bottom line of a burden taken on in the 2005 purchase of Pulitzer, Inc. owner of the St. Louis Post-Dispatch, among other properties.

Back in 2005 publishing empire builders who weren't paying close enough attention to their computers or their business pages, believed that print profits would continue to grow, spurred on by hot housing and job markets and the classified revenues that followed. It was before the housing and stock market crashes, and before it became abundantly clear that online behemoths like Google and CraigsList and Monster.com and eBay had made off with the newspaper's classified section, with no intention of giving it back.


Lee Enterprise's stock chart
and a handful of Lee press releases illustrate the dire nature of its plight. From an all-time high of $49.83/share in June 2004 (one year before buying the Pulitzer), the price had slipped to below $42 on the date the sale went through. By the time Bear Stearns collapsed in March 2008, Lee's price was in steady free fall having lost over 77% of its value. The stock spent most of the first half of 2009 trading below one dollar, nearly triggering the NYSE's delisting mechanism (2 consecutive quarters trading below a buck). A temporary goose of stock purchases lifted the stock price through the month of May, prevented delisting. The price bottomed out on Feb 18 at 24¢, less than one half of one percent of its highest value five years earlier. Since then the stock has managed to pull itself off the mat, but only so far. Over the past twelve months of trading the price hasn't surpassed $4.52, roughly one tenth of its 2004 high.

The stock price has amplified a similar, if less dramatic, decline in readership among Lee's newspapers. Circulation numbers for The Post-Star epitomize the rest of the once-robust empire. Figures available through Lee's web site, the Audit Bureau of Circulations, Wikipedia's archives and PostStar.com show a steady downward trend over recent years. (Past circulation numbers are not easy to come by and unaudited figures tend to be unreliably lofty, so please read skeptically.)

In July 2006 Lonnie Spath, at the time a staff illustrator and website monitor, created a Wikipedia entry for the Post-Star stating the circulation to be "approximately 35,000." Though that claim remains on the Post-Star Wiki page, other editors have downgraded the figure three times since then over at the Glens Falls Wiki page. On April 16, 2007, citing Lee's own figures (probably derived from an Audit Bureau report from six months earlier), Wikipedia editors pegged circulation at 33,000 daily/ 36,000 Sunday. They dropped the numbers again on May 21, 2007 to 31,500 daily/ 34,500 Sunday, based on a story from the Albany Times-Union (archive link now dead) which may or may not have repeated the most recent (April 2007) Audit Bureau figures. After Editorial Page Editor Mark Mahoney won the Pulitzer Prize in April 2009, stories run by multiple publications reported circulation of "about 30,000." More extensive stories at that time (namely the Columbia Journalism Review and Ithaca College’s web site) claimed 34,000. In October of last year, six months after the newsstand price hike, the Audit Bureau reported the Post-Star's circulation as 26,798 daily (M-F) and 30,257 Sundays —- figures that lacked the round softness of the previous weather balloons.

Wikipedia’s Glens Falls page and Lee Enterprise’s website have been updated to show the new numbers. PostStar.com on their "About Us" page still claims a higher circulation (29,000), while their advertising sales page puts the weekday print circulation higher still (at 30,500 with 32,000 Sunday).

In the broadest possible terms what the Post-Star figures illustrate is a general decline in print circulation on the order of 23% since about the time Lee's stock price started sliding.

Responding to the dismal prospects underscored by the stock price and circulation figures, the Lee Board of Directors and CEO Mary Junck, refinanced their Pulitzer notes deferring most of the payback to a Hindenburg-sized balloon payment upon maturity. When it became clear that that wouldn’t work they started jettisoning personnel, centralizing service staff, and selling off real estate. If these one-shot fixes constituted desperation tactics on Lee's part (the bloodshed has shown up as modest black ink on Lee's Quarterly reports over the past two years), the float of high-yielding Junck bonds is the company's last ditch, burn-the-house-down-to-stay-warm effort. After the news broke Monday morning, Lee stock price jumped 15.6% to from $2.97 to $3.435 before settling back to $2.87 at the end of trading Wednesday. Message from investors: you still won't be able to repay.

Meanwhile, over at PostStar.com, Managing Editor Ken Tingley is sunnily proclaiming the growth of online readership (Banner and display ad sales should be picking up any day now. Really.). This "whistling past the graveyard" of course must be done to keep up morale. But the full picture shows just how tough it is for an over-staffed and hardware-heavy medium in decline to keep ahead of the news market and delivery technology (Flash: Post-Star now available on Kindle!).


Further reading:
-Wall St. Journal
-LeeWatch

19 comments:

MARQUIL said...

Clarification to the above:
According to Lee's press release of April 11, (http://www.lee.net/newsreleases/pdf/LEE%20NR%20-%20Offerings%20-%20041111.pdf)
the total amount of corporate debt being refinanced through the bond issue is $1.0258 billion, of which $147 million is the balance of the Pulitzer notes.

tourpro said...

I hope newspapers can work out their debt-issues and find a workable business-model. Even though we like to criticize, I think they do play an important role.

Brian F said...

Pro: I actually agree with you. The new media plays a hugely beneficial role in supplementing the mainstream media, one that old-school journalists should not denigrate or pooh-pooh. But I don’t think new media is yet ready to replace its traditional breathren. Perhaps in the medium-term but not yet.

MARQUIL said...

Best not to make predictions either way. Perhaps the additional 5-6 years will pay off and Lee will be able to find a meaningful revenue stream online and the economy will roar and produce enough print real estate and automobile and retail advertising to compensate for the loss of revenue to online media giants (compensate, too for the additional debt burden brought on by the bond issue).

Or perhaps not. In which case, Lee will be forced to sell off, consolidate or close newspapers in order to remain solvent. If (Heaven forbid!) this happens, any editors and reporters will gravitate to other media—either downsized print periodicals (weeklies, bi-weeklies, monthly regionals where niche advertising still exists) or online, or even (let's not forget) radio.

Given the tremendous fluidity of the news media brought on by new and cheaper digital delivery technologies, it is a safe bet that the next five years will see a lot of dislocation and restructuring (Brian Mann has addressed this point eloquently at the InBox at NCPR.org). The question is which vessel is best positioned to master this swift stream. In this analogy the rigid, broad-beamed dailies seem to be taking on a lot of water. Bloggers might be a cluster of raucous inner-tubers who don't mind getting soaked for the time being. NCPR is some hybrid submersible duckboat or something like that.

There. I just killed a perfectly good analogy.

Will Doolittle said...

Tried to post a long comment -- lost in the ether -- and I'm too lazy to recapture it. Essentially, Brian Mann over at the Inbox says what I was trying to, that newspapers have the professional staff, the name recognition, the standards, the institutional memory and the reputation to do the hard work of reporting and writing that, so far, no one else is doing. So, if there is a front-runner in the race to provide news on the web, it would have to be newspapers. And I did think it odd, Mark -- although I admire all the reporting you did for this piece -- that you used the word "overstaffed." Don't you want newspapers to have editorial staffs large enough to get out into communities and do good reporting? Plenty of papers (Journal Record Co.) have bare-bones staffs and the results speak for themselves. Others, like The Post-Star, have struggled to keep sizable editorial staffs. Nothing is new about newspapers struggling, by the way, either financially or any other way (editorial integrity, etc.). What is new is the current technology and so that is the club used by those who want to criticize community newspapers, whether they are locally owned or, like The Post-Star, owned by public corporations.

Brian F said...

Will,
Thanks for your comments. Mark can clarify for himself by what he meant by “overstaffed,” perhaps he meant in administration or advertising. I don’t know.

My personal opinion, oft expressed here, is that newspapers have to focus on what makes them unique. For the Post-Star, look most outside the orbit of the giants, it’s local news coverage.

Most smaller local papers give a lot of money to the AP and Reuters and syndicates to buy stuff that readers can easily read for free on the Internet. I don’t spend money on the Post-Star for the rantings of theocrat Cal Thomas or yet another warmed over analysis of the governor’s poll ratings going up 0.04 points. I usually skip those over and even if I were interested, I could get those 1000 other places.

I read the Post-Star to find out what elementary school GF is going to close and why, because I can’t get that anywhere else. Every dollar the Post-Star is shelling out to the wire services for “analysis” that largely echoes what cable TV is doing anyways is a dollar they’re not spending on what they do that is (or can be) truly unique... something like the recent bullying series.

I realize that this “mile wide, inch deep” model has been the standard for newspapers for most of the last 100 years but times are changing. It’s no longer the case that the newspaper is the primary information source for everything. In most places, it’s now only the primary information source for local (and sometimes state) news. Print can’t beat the Internet for immediacy. It can’t beat TV for shock value. It can’t beat either for shallow infotainment. So it really ought to stop trying. People ask themselves why shell out money to see newspapers do the same thing as these free media but not as well. For example, video on newspaper websites? Who cares! The data vault concept? Much more intriguing.

I like newspapers. I always buy newspapers whenever I travel just to get a flavor of what’s on the agenda in other places (though they all run the same stale AP briefs). But I think newspapers are spending too much on that which gives their product too little distinctive value in return and this diverts resources away from what does make it unique: good local reporting. With fewer resources, they have to be allocated better. But this requires some gutsy transformational thinking that seems to be lacking. Right now, it’s mostly re-arranging deck chairs on the Titanic.

Brian F said...

I also don't think there's a darn thing wrong with someone watching the self-appointed watchdogs. Newspapers aren't exempt from the accountability they demand of those they cover.

Will Doolittle said...

Yes, it's a good analysis that, essentially, I agree with. But it's not clear, I don't think, that you are representative of our readers and it's not clear that our readers wouldn't demand national and international news, if we dropped it. We have cut back on wire services, as we have cut back on many things, and we do consider local reporting our primary mission. But there are still a lot of readers out there, I believe, even if they do have computers in their homes, and use them, who like to be able to read it all in one place -- local, national, international -- in news and sports and entertainment. Yes, the local is more important and the reason we exist. But I think a lot of readers like having the other, too. We're not just a weekly -- we're not quite that small.

Brian F said...

Will,
My bet is that a newspaper that was locally focused would gain more readers than it would lose. Why? Because I see a lot of new readers being gained by the attraction of news they can’t get anywhere else with very few readers lost with the subtraction of news that can be found a million other places (often for free).

Keeping news briefs like a paragraph on the resignation of the Mauritanian Central Bank chief or Prince William’s getting a dog adds virtually no unique value, in my opinion, to the paper while no doubt costing it a bit of money. Even if I see something remotely interesting like that, I go to NYT or BBC websites anyways since they’ll give me a better story. Taking money spent on this sort of thing and redirecting toward more and better local reporting, I see that as the carrot to bring in new paying customers and bring back those disgusted by the death spiral. Do you really envision this jettisoning of information with little added value would off a lot of people to the point where they refuse to pay for the paper altogether? I really doubt it.

Think I’m wrong? Of the 10 most commented stories on PS.com right now, 9 are on local issues, 1 is on a state issue with a local angle, all are locally written. Of the 10 most read stories, 9 are on local issues and are locally written. Albeit not as high a percentage as above, most letters to the editor are on local issues and stories as well.

That’s my guess. But one thing I am sure of is that the current industry trend of lower quality, decreasing staff and rising prices, is not sustainable. A fundamental re-think is need, not putting the same, increasingly spurned, product in different wrapping paper. Yes it may be partially funded by taxpayers, but the steady rise in listenership of public radio (both NPR and local affiliates) shows that there remains a DEMAND for good local reporting and that people are willing to voluntarily pay for it. It’s not a coincidence that public radio doesn’t try to replicate Entertainment Tonight or Limbaugh.

Some local journalists do good work. They deserve the opportunity and resources to do more of it.

John Warren said...

"So, if there is a front-runner in the race to provide news on the web, it would have to be newspapers."

Who else would it be? The web has been until just the last few years primarily a "print" medium.

They had a built-in audience, the question ought to be how did they screw it up so bad?

As far as these ideas that newspapers have the professional staff, standards, institutional memory and reputation - I'd say their loss of market share indicates those things may not be really true. The only things local papers have is local news.

The best new media / blogs / citizen journalism sites were mostly built as a reaction to the closed society of newspapers - remember when comments on a story where limited to what the editors decided they would print in letters?

Institutional memory? I'll give you that one, though the same old tired opinions from mostly the same sources is one reason we're having this discussion.

Professional staff - one of my biggest problems with journalism today, and local newspapers in particular is that they try to be (as Brian points out) everything to everyone. One minute these professionals are covering the China trade, the next school budgets, the next teenage drinking, Civil War history - you can't be a professional at all of them at once.

Some will surely say that they are professional at looking at issues and judging what is worth reporting and reporting it fairly, but that is entirely subjective and a self-serving attitude - reporting is not a science, it's an art. Any historian with even a modicum of training would report on a history related story far better than any "professional" journalist. It's the same with any discipline.

There are topics that the papers have been notoriously inept at reporting - third party candidates for example, corporate welfare, poverty, gender and race issues, weapons of mass destruction in Iraq. Unless your newsroom is made up of journalist with graduate degrees - which it's probably mostly not - you don't own "professional" in any serious way.

Standards - what standards? Obviously makers of this claim haven't been reading the NY Post, or the Denton papers (which I'll say have gotten better lately). The best standards are upheld by the marketplace of ideas, and free speech through comments and other media. As Brain noted, there is nothing wrong with someone watching the self-appointed watchdogs. Until people got the ability to easily and cheaply publish their own news and opinions newspapers had no accountability whatsoever. None.

Reputation? I think it's fair to say that local newspapers have lousy reputations. I guess that's simply a debatable point and we'll never know the truth. Claiming some stellar reputation is, again, self-serving rhetoric.

There are things that local newspapers do very well - cover local news. If newspapers hadn't been so busy trying to be opinion makers and shapers and offered instead a truly wide range of opinions and perspectives, and focused on their own coverage areas, they wouldn't be in the straits they are in now.

In a world where I can, in about three minutes, find insightful, well-crafted stories on just about any topic (save very local news), from people with a greater breadth of knowledge and deeper or differing perspectives it's really tiresome to hear this constant drumbeat of "we're professional!"

It sounds a lot like the last refuge of a scoundrel.

MARQUIL said...

Will,
I readily surrender the poorly-chosen word "overstaffed." The loss of seasoned reporters, copy editors (& proofreaders), research departments, etc. is certainly a contributing factor to the declining fortunes of the daily paper.

What I intended to convey is that newspapers had developed a sclerosis common to most institutions heading into the digital age. While technological change has been the industry rule ever since Guttenberg's day, no period could compete with the past twenty years for introducing so many staff-displacing innovations (business, editorial, and production staffs combined). Certainly no period has introduced such a direct competition for production and delivery of the written word and graphic image.

For all its institutional advantages in efforts to master the age of digital type, newspapers are also saddled with the tremendous task of downsizing and adapting their equipment and personnel as they reach whatever equilibrium the market will dictate. We'll have to wait and see if this is easier to do than building new digitized news delivery vehicles from the ground up.

I may be wrong about the folks in Davenport. But the choice Lee Enterprises has made in recent years do not strike me as terribly forward-thinking.

MARQUIL said...

Editor & Publisher has an interesting take on the old-vs-new publishing:
http://www.editorandpublisher.com/Columns/editorial-free-press-doesnt-mean-free-content-64646-.aspx

The message is simply, if someone else is going to make off with your free content (and profits) online, then just get out of the game.

I don't know how well this works for a daily (Daily Gazette doesn't seem to be faring much better than newspapers with open sites). But it seems to be working out for less frequent periodicals like the Lake George Mirror and Hill Country Observer.

Pete Klein said...

Several good comments here, especially those from Brian F.
For the Post Star to blow money on the AP when those stories can be had for free from Yahoo just doesn't make much sense.
Better to spend money on local reporters doing local news.
Also, too much fluff in most papers. I include poll numbers as fluff.
I often pick on the Post Star by saying I subscribe only so I can read the comics while having breakfast. This is true but not true. I read the comics to start the day on a positive note.
I wish the Post Star the best of luck. The paper does try.
My biggest objection is with some of its causes and its tendency to editorialize way too much over bullying, taxes, the APA and other hot button issues.
I wish it would do more reporting in the tradition of Joe Friday - just the facts - and let me decide what I want to get upset about.

Zoe said...

Sclerosis is a good word, and accurate, I think. And yet newspapers are doing a lot of good work on the web. I think, if you're talking about news, newspapers are doing most of the best work that is being done on the web. Not that they haven't been sclerotic, and slow, and stupid. But it's tricky. If you give away your product, and spend a lot of money doing it (good web sites are expensive), you have a hard time paying bills. But if you shun the pay-nothing model (Schenectady Gazette), then you run the risk of, eventually, being left behind. No one knows where the technology, and the customers, will go. I do think that now it's clear that, eventually, customers will go to a more advanced technological news product of some sort (tablet?), so newspapers have to put some resources into the web. At the same time, we're making less money, so we're stretched thin. Lee is hardly the only news company to struggle -- some are in bankruptcy, some have disappeared -- so I think it's hard to blast Lee as more than normally short-sighted. Everyone's stabbing in the dark. For decades, news technology was quite stable -- the newspapers of the 1920s weren't much different from the newspapers of the early 1990s, except for photos and color printing, the shift to offset printing. Those were incremental changes.
By professional, I meant people who have been trained in an acknowledged, defined set of skills and taught a body of knowledge particular to the profession. I certainly did not mean people who have graduate degrees. A historian would only do better reporting on a history story than a journalist, if the historian were also a trained reporter. Usually, experts in a field make poor reporters, because they write for an expert audience, and use the jargon of their field.
The little papers -- the Lake Placid News, for example -- have always had only community news, and that model works. But, in larger communities, people have wanted a broader mix. Yes, the Internet is hurting newspapers there, and I don't think newspapers have figured out the best way to respond. Going all local -- hyperlocal, some call it -- is one response that some have tried, but I don't think that has proven to be a magic strategy.
I believe newspapers will continue to struggle, probably for years, until they get established on a different technological platform. Meanwhile, we're going to be flailing. It's difficult, but not boring.

John Warren said...

This notion right here points out why pulling the professionalism card is so wrong-headed:

"A historian would only do better reporting on a history story than a journalist, if the historian were also a trained reporter. Usually, experts in a field make poor reporters, because they write for an expert audience, and use the jargon of their field. "

It's not a one way street, reporters almost always do a lousy (unprofessional) job when it comes to covering history, historic preservation, and related topics. Why? Because they don't have a clue about issues involved and they don't even know which questions to ask. But here, we have the journalists telling us that no, in fact, journalists would/do a better job - and not just on history, on EVERYTHING.

That's outrageous and silly. If someone can write well, they can be a local journalist - just ask all the local journalists who have no training whatsoever in journalism. That doesn't make them professionals.

I'm a professional filmmaker by experience and training, but when I see a newspaper's laughable attempts at video, I giggle quietly, I don't start screaming that film is dying and non-professionals are killing my industry (which BTW, is suffering the same kinds of issues as newspapers).

Also, suggesting that this is some mystery - "No one knows where the technology, and the customers, will go" - is simply making excuses.

This isn't 1991 when the first newspaper went online, this is 20 years later! We've known that readers were headed to smaller and smaller electronic delivery for the past 50 years! If a newspaper doesn't understand those trends, they ought to hire a professional historian.

Newspapers, like other monopolies, got greedy. They dominated the market for local news and thought there would never be a challenge. They practiced monopoly tactics, tried to force us all to pay for what was mostly the opinions of a few, they even tried to sue people who linked to their stories online! Now some - like the Gazette, which will be among the first to go unfortunately - try to block their online readers altogether.

If it wasn't for their built-in audience (if they had to start from scratch on the web like the rest of us) newspapers, and outlets like NCPR wouldn't have a relevant place online at all.

The biggest problem newspapers have faced is their arrogant attitude towards their readers. Pretending your the only professional is just one example.

The culture of the web is exactly opposite the culture of the newsroom. That is why, except for some boutique print products, most newspapers will eventually be dead, or shrunken - though not for many years.

I think there is a good chance that the Post Star will be a weekly by 2020.

That won't hurt the news, since all the readable news could fit into a weekly from the 19th century now.

Anonymous said...

Imagine if Egyptian protesters had refrained from toppling Mubarak because it was "not clear" what would replace it. Change is constant. Newspapers will either adapt or die and something else will fill the vacuum. Fret all you wish but fretting is not evolving.

MARQUIL said...

At the parallel discussion over at NCPR.org, Brian Mann quotes Editor Ken Tingley trumpeting the growth of the Post-Star's online audience:

"The unique visitors were close to a half-million for the month, page views were well over 5 million."

Which is to say that in the past month nearly 500,000 distinct individuals visited poststar.com.

Many web site traffic monitors track unique visitors on a daily basis, counting the individual IP addresses of visitors. Unique visitors over any greater time period does not equal the sum of unique daily visitors within that period, as a unique visitor on any given day is likely to return (and be counted again as unique) on another day.

While The Post-Star numbers may already account for this common calculating error, for a newspaper with a 26,798 daily circulation, a 19:1 ration of online readers does seem a bit high.

Perhaps the more important number to cite as far as the Post-Star's (and Lee's) bottom line is concerned is the number of online readers who have subscribed to the newspaper's e-edition, which launched last year. At this point, growing numbers of visitors to the free site are more likely to represent readers who have migrated away from the paid print publication. Certainly nothing to brag about.

Brian F said...

I swear, if you eliminated Jimmer and the Yankees from Tingley’s blog and Twitter feed, he’d have nothing to write about.

Brian F said...

Interesting... I notice that Pro Publica, the exclusively online news organization, won its second Pulitzer Prize.