Good-ish news for smaller papers

All but one of the largest 25 newspapers in America lost circulation, according to the latest Audit Bureau of Circulations survey. But Editor and Publisher combed through the data and found some papers have made significant circulation gains. Here's the list as compiled by E&P:

MEMPHIS COMMERCIAL APPEAL -- 192,631 -- 30.96%
WISCONSIN STATE JOURNAL -- 96,927 -- 10.32%
YORK (PA.) DAILY RECORD -- 52,330 -- 9.05%
FARGO (N.D.) FORUM -- 52,593 -- 8.90%
WOMEN'S WEAR DAILY -- 50,805 -- 8.72%
MOBILE (ALA.) PRESS-REGISTER -- 106,793 -- 7.40%
SPRINGFIELD (ILL.) STATE JOURNAL-REGISTER -- 51,453 -- 3.23%
RECORD (N.J.) -- 168,508 -- 3.17%
ERIE (PA.) TIMES-NEWS -- 57,096 -- 3.07%
CHATTANOOGA (TENN.) TIMES FREE PRESS -- 73,067 -- 1.88%

The news isn't all good, unfortunately. The spike in circulation at the Commercial Appeal, for example, is almost completely a result of Newspaper in Education programs, E&P reports. Individual paid subscriptions actually dropped 14 percent at the paper.

The real in the deal

So why did Platinum Equity spend between 15 and 50 million dollars to buy the San Diego Union-Tribune? Ken Doctor makes a persuasive argument that it was to get at the real estate - the newspaper just happened to come with the building. Which isn't particularly interesting in and of itself, but is interesting if it's emblematic of a larger trend, which Doctor thinks it just might be. He writes:

Hard as it may be to believe, we may have entered a new rocky period for newspaper companies. It would be a period in which the real estate on which they sit determines their market value. Consequently, their real estate value may determine who wants to sell the newspaper property and who wants to buy it -- to get at the real estate.

And we all know just how strong the real estate market is these days.

Essentially, Doctor is saying that the only companies willing to invest in newspapers right now are ones that think they'll be able to turn a profit once the real-estate market rebounds. They aren't putting much stock in the part of the business that involves words and pictures. Doctor continues:

What is certain is that the real estate gambit further accelerates the changing of the daily newspaper industry as we know it. After all, there will be a recovery -- including a relaxing of credit and a re-valuing of commercial real estate. That recovery will come before newspaper companies find a formula that stabilizes them.

In many cities -- of course depending on the location and value of the real estate -- that means newspaper real estate first, news publishing second. It's a world that is out of order, literally, but it's one we're inheriting.

All of which raises some troubling questions for newspaper that have already sold off their real estate holdings. What are they going to use to raise capital when the creditors come to collect?

An offer they didn't refuse

The union representing workers at the San Francisco Chronicle has agreed to a deal that will cut up to 150 jobs and eliminate certain benefits for those who remain. Chronicle owner Hearst Corp had threatened to cut 225 jobs if the union refused the deal.

Reporting on blogs' reporting

Just how much of the content on the top blog sites constitutes original reporting? Not much at all, according to a spot survey done by Simon Owens at Bloggasm.

TechCrunch tops the list at 37 percent; a few of the blogs, including Daily Kos, tie for bottom with zero percent. Huffington Post checks in at 18 percent.

Of course, no one said blogs need to provide original reporting, but the survey should give pause to those who think Huffington Post and the like will pick up where shuttered and shrunken newspapers leave off.

Also, some might dispute Owens' definition of original reporting, but it would have to be stretched pretty far to improve the numbers much.

Furloughs spread eastward*

MediaNews Group employees in Texas, New Mexico and Minnesota have now been told to take one-week, unpaid furloughs. AP, MPR

*Update: And Massachusetts and New Hampshire (DBJ). MediaNews has papers in 11 states, so I imagine this means six down, five to go.

Helter skelter

Newspapers lost nearly $2 billion in print ad sales in the third quarter of the year when compared with the same period the year before. Classified ad sales alone dropped 31 percent. And it's expected to get worse as the full impact of the economic crisis hits.

Which way, O'Shea?

There are at least three questions to consider in the debate over the future of journalism. 1. How should existing news organizations adapt to ensure they remain viable businesses? 2. How should new newsrooms be organized to ensure they both tell the stories that aren't being told and utilize advances in technology to tell them? 3. What should be the foundational principles of good journalism in these changing times?

The issues are related, but they are distinct. Ignoring any one of them would be shortsighted and conflating them foolhardy. Frustratingly, many of the loudest media voices make either the first mistake or the second. The Sam Zells and Dean Singletons focus almost exclusively on question 1, keep an eye on 2 and claim 3 is an indulgence. Innovation gurus like Jeff Jarvis focus mainly on 2, keep an eye on 1 and seem to expect 3 will follow naturally from 2.

In any case, question 3 is going to get answered - whether or not it's asked.

In some ways this blog is an ongoing argument that question 3 must control. Answering it first does not pay off debts or write a successful business plan, nor does it lessen the immediacy of the other two questions. Answering it does, however, provide guidance on how we deal with them. Before you rescue a business, or start one, you need to define how it differs from other businesses. After all, if you're making red widgets and you learn making blue widgets would be more profitable, why not make the switch if they're the same to you?

Jim O'Shea, immediate past editor of the Los Angeles Times, offers his thoughts about what has gone wrong with newspapers and why the medicine prescribed by his former boss, Sam Zell, is not working. For Zell, question 3 is merely byproduct of question 1. Here's what O'Shea had to say about the recent redesign of Zell's Chicago Tribune:

Accompanying the redesign were all-but-mandatory staff meetings run by a newly-minted masthead editor in which the paper’s journalists received lectures on how to reach their “target audiences” from a marketing department employee who long has tried to downplay serious, in-depth journalism in favor of softer stories that she insists readers really want. Write about disease, she told Tribune journalists, because that’s what “frenzied families” want to read about, not some bomb going off in Beirut.

What the Tribune is doing is like trying to improve education by replacing the teachers and giving the students only the books they want to read.

Zell, as his recent interview in Portfolio made clear, sees little value journalism as a mission. It's an attitude that trickles down to readers. Once they've concluded you're less interested in being a watchdog than in catering to taste, they stop expecting you to uncover wrongdoing and start demanding you give them what they want. They begin value news the way the company values the news; any highfalutin mission statements start to sound silly.

'Clarifying' the news about MediaNews

MediaNews execs Dean Singleton and Jody Ludovich sent out a memo to employees to address concerns about S&P's recent downgrading of the company's debt rating, and analyst predictions that the company risks falling into default.

The execs say recent turmoil in the financial industry has pressured ratings agencies to become more cautious when evaluating debt - extreme even. However, they acknowledge there are "economic headwinds" ahead.

The memo skirts the issue of whether more newsroom cuts will be made, but it certainly leaves the door wide open for additional layoffs. The execs also talk about doing more consolidation and an upcoming "transaction" with Hearst, although they offer no details. The memo appears to dismiss any notion of MediaNews gobbling up more newspapers anytime soon.

Here's the memo:

TO: MediaNews Group Employees
FROM: Jody Lodovic/Dean Singleton
RE: RECENT PRESS

Many of you have probably heard or read the recent negative press surrounding the newspaper industry, including MediaNews Group. The focus on MediaNews Group was prompted by a recent downgrade by Standard & Poors. Given the speculation and innuendo contained in recent stories, we wanted to provide as much clarity to each of you as possible.

Before getting into specifics, we want to put the recent S&P downgrade into context. MediaNews is not alone, nor is the newspaper industry unique. Unprecedented turmoil in the financial markets and the economic challenges faced by many industries has resulted in a great deal of dislocation and irrational behavior in the market place. Rating agencies such as S&P and Moody's have been criticized and threatened for not reacting quick enough to update their ratings. It is our opinion (shared by others) that the rating agencies have now gone to an extreme and are being overly conservative with their ratings. As a result, every newspaper company, including MediaNews Group, has been downgraded multiple times during the past year. While we can debate whether these downgrades were warranted, we acknowledge that the economic headwinds we (and many others) face pose a real challenge. Let us assure you, MediaNews Group is up for the challenge!

We also want to address the speculation regarding the recent leadership changes at Hearst. While it is not appropriate for us to address the specific reasons for the change, we can tell you that Hearst remains committed to and supportive of MediaNews Group. In fact, we expect to announce another transaction with Hearst shortly which will better position us to weather the current economic storm. We and Hearst have identified several areas where we can work together for our collective benefit, as well as for the potential benefit of the industry. Some of these strategies, such as our joint Kaango and PSA investment and formation of the Yahoo! consortium, are already underway. We look forward to expanding our efforts with Hearst in the future. Aside from the matters addressed above, we are sure other questions come to mind about the future of newspapers and MediaNews Group. Let us address a few that come to mind.

Is MediaNews Group meeting financial commitments under the terms of its various debt agreements?

Yes, MediaNews is in compliance with the terms of its bank agreements and continues to take steps to reduce its total debt and expect to remain in compliance in the future. As has been the case in the past, MediaNews may from time to time seek amendments of its debt agreements as necessary to provide maximum flexibility.

Is MediaNews concerned about the level of its debt?

Certainly, given the economic environment we are in, we would rather have less debt. But, this is not our first rodeo. In the last newspaper recession (in the early nineties), we operated with higher relative levels of debt. We came out well positioned and led the industry in growth for much of the next decade. With our collective efforts, we will lead the charge again!

Is MediaNews looking to buy more newspapers in the near term?

While Mediapews believes the future of newspapers is bright, MediaNews is not currently looking to acquire more newspapers. We believe our resources should be more internally focused on reinventing our current newspaper model to support future growth plans. That said, we believe that consolidation within the industry is inevitable and will help facilitate the change necessary for newspapers to thrive well into the future. MediaNews expects to be a leader in that consolidation effort.

MediaNews has always been focused on cutting costs. Is there a different strategy for the future?

Unfortunately, all newspapers are faced with making significant cost cuts. Declining revenue and higher newsprint prices, as well as ever increasing benefit costs, simply leave no choice. The recent necessary downsizing at some of our newspapers was a difficult decision, from both a personal and professional perspective, and we will certainly miss our cohorts. Each played an important role in the company, and there departure, through no fault of their own, leaves a whole that the rest of our employees will have to fjnd a way to fill.

MediaNews doesn't believe cost cutting is a long term strategy. However, we recognize that there is a structural change in our business, and we must align our cost structure accordingly. That is precisely why we engaged Bain last Fall - to provide us a roadmap to build the newspaper company of the future by leveraging the vast resources of the entire company. Individual newspapers can only cut costs so far without impacting the perceived value to advertisers arid readers. Accordingly, we must work together (as well as with other companies) to find new and creative ways to streamline operations in ways that are transparent to both readers and advertisers. In fact, we believe it is possible to improve our products and services and operate more efficiently at the same time.

Unfortunately, gone are the days where we can operate as a collection of standalone newspapers. We must leverage our collective resources and position ourselves to reinvest in our business going forward in order to provide the tools and resources to ensure success in the future. And, we are starting to do just that, with significant investments in the sales, marketing and research arenas.

We hope that this addresses many of your questions and conveys MediaNews Group's commitment to taking the necessary steps to ensure our future success. No one said change was easy, and the current economic environment makes it all the, more challenging. But, the rewards for successfully navigating through this period of transformation will be great.

We truly believe in the future of newspapers, the services they perform and the value they provide. You, our employees, are our most valuable asset. And, if we all work together, MediaNews will lead the industry into the future! We recognize and appreciate your efforts and dedication during this challenging time. Remember-together we can!