10 December 2008

The Future Of Denver's Newspapers

One of my good college friends works at the Rocky Mountain News, also known as the newspaper that everyone expects to go out of business in the near future. Another of our mutual college friends works at the Los Angeles Times whose parent, the Tribune Co., is currently in bankruptcy. Needless to say, this is also a less than ideal recipe for job security. Few recent events have made the current economic downturn seem more real to me.

In the case of the Rocky, the financial prospects for a reorganization look rather bleak. The Denver Newspaper Agency, which is the joint venture that runs the business and printing and delivery operations of both the Denver Post and the Rocky Mountain News provides each paper with about $7 million after paying the expenses associated with the business operations. The newsroom at the Rocky Mountain News costs about $22 million a year to keep open. Over at the Denver Post the executives claim that they are getting screwed as things stand, and that based upon ad revenue it would be more fair to split DNA revenues closer to $10 million to $4 million, with the Rocky receiving the smaller portion.

The structure of this arrangement leaves little wiggle room for current or prospective owners of the Rocky. The big debt obligations of Denver's dailies are owed by the DNA, rather than by the Rocky (or its parent), so even a bankruptcy filing by the Rocky's parent company would do little to improve the Rocky's bottom line. In contrast, if a the DNA and the newsrooms had been integrated operations of a single paper, a bankruptcy could have forced lenders who financed new printing presses whose debt payments are eating into newspaper profits now, to take some of the hit.

The structure is also not designed to encourage much cooperation from the Denver Post. If it buys out the Rocky's share of the DNA, it is likely to pick up a large share of the Rocky's subscribers, since it is left as the sole big daily newspaper in Denver, leaving it with close to 100% of the current DNA's profits, while not increasing its newsroom expenses at all (why bother when it has no competition?). Also, greater control and a monopoly in the market would give the Denver Post more flexibility to raise its prices, even though the DNA, in theory has similar power now.

This is a situation where the last one left standing wins big. Indeed, it is entirely possible that the Post may have resisted revenue increases that would help have helped both papers survive until now, because it figured that it could outlast the Rocky in a situation that left both papers with losses, allowing it to profit when the Rocky goes out of business.

The shortfall isn't insurmountable. It is less than $2 per week per subscriber, and could be cured with a combination of increased subscription prices and newsroom budget cuts considerably less catastrophic than the two-thirds cut that would be necessary if no revenue increases were secured. But, the shortfall is certainly a challenge to any prospective owner.

I'm not entirely without hope, however. My instinct is that competition with a monopolistic daily paper in the form of a surviving Denver Post may be more profitable when broken into parts, than the Rocky is as a general purpose affair. Without the Rocky, for example, the viability of a specialty metro Denver sports periodical would be considerably greater. And, people who buy the Rocky mostly for sports coverage might be willing to pay almost as much for a local sports periodical as they would for a comprehensive daily paper. Of course, the newsroom costs of a sports only periodical are far lower than those of a comprehensive newspaper.

The Colorado Independent, formerly known as Colorado Confidential similarly shows that it is possible to have a laser beam focus on state and local political news, and to do it quite well, with fairly modest newsroom costs.

Westword, 5280 magazine, 303 magazine, Colorado Parent, and a few other publications have established that there is a market out there for feature and style oriented publications with a local focus beyond the daily newspapers. The Denver Business Journal is already a competitor with the dailies in the premium market for local business coverage. The Denver Daily News also shows that it is possible to produce a basic daily AP feed level of coverage with a little extra local reporting on the side at a very low cost.

The successor to the Rocky may end up being a kaleidoscope of different specialty publications, each with far more revenues per subscription, that thrive in its absence, rather than another daily.

1 comment:

jgogek said...

We need a bailout for newspapers. The auto industry may be vital to the economy, but newspapers — or at least newspaper journalism — are vital to the democracy. Like the auto industry bailout, the newspaper bailout should go only to those that have a workable plan to leave behind the dead tree era and transport themselves into the digital age. Too many newspapers are dragging their feet, and the result is going to be that important newspapers will collapse during the recession. We will soon have big cities with no newspapers. And then there will be no one to adequately confront the special interests and government. Taxpayers who love democracy should be willing to help out these vital institutions that have so often helped out taxpayers.

Read more at http://jgogek.wordpress.com/2008/12/10/bailout-for-newspapers-just-as-auto-industry-and-citibank-are-vital-to-economy-newspapers-are-vital-to-democracy/

…or at blog.jimgogek.com