1995 happened to be the first time I did a newspaper internship. One of the first things I learned was that the paper had a 20% profit margin, which was good but not even great for the industry. If that sounds insane, it sort of is; as Meyer pointed out, it’s a luxury-item profit margin. Or a monopoly-product margin, but that monopoly was already slipping away.
In turnover, newspapers are more like supermarkets than yacht dealers. Their product has a one-day shelf life. Consumers and advertisers alike have to pay for a new version every day if they want to stay current. Absent a monopoly, newspaper margins would be at the low end. But because they own the bottleneck, the opposite is true. Before technology began to create alternate toll routes, a monopoly newspaper in a medium-size market could command a margin of 20 to 40 percent.
High profit margins combined with increasing revenues in a bubble economy led tomassive debt acquisitions despite the ongoing decline of newspapers’ circulation:
Prior to the recession, credit availability was virtually unlimited. Lenders were aggressive in lending to consumers and businesses. Newspaper publishing, as well as other traditional media sectors, were widely sought after by lenders because of their ability to generate robust cash flow margins. It was not unusual for lenders on traditional senior loans to lend up to 5 times EBITDA (earnings before interest taxes depreciation and amortization), the primary standard of measuring cash flow. Many banks and finance companies had dedicated media practices that actively competed for newspaper industry business.
But even before that round of acquisitions, management boosted profit margins at the expense of the product. And some of those revenue gains were produced by raising rates even as circulation and the actual amount of advertising in newspapers declined.
In other words, you dipshits, you did it to yourselves, and now you want to blame bloggers and Jezebel and iPhones for it all.
Nice job. Really, well done.
Whet’s experience mirrored my own, in that I watched people who now want to claim helplessness in the face of advancing technology and “shifting digital paradigms” undermine their own bankrolls from the beginning.
Those who warned them they were spraying lighter fluid on the bonfire were either ignored or vilified, and those tasked with forming the future of media looked at the industry’s leadership and panicked right along with them.
Which is how we got to where we’re at.
A little intuition can go a long way, too. When my oldest went crazy for Skyrim I figured he might enjoy Dungeons and Dragons. Since the only way to really learn D&D is to have someone who knows it show you the ropes, I had him invite some friends over, pulled out the old books and had them roll up some characters. Once they got the hang of it, they loved it – and began bringing friends along. (Full disclosure: I did all of this primarily because I am an arrested adolescent and still geek out over D&D as much now as I did when I was fourteen.) We have sessions every week that last several hours. Sure they check their phones, but for the most part they are interacting with each other and having a good time engaging in some improvisational storytelling.
We act like these things are inevitabilities, like we have no control over what happens to us anymore. Like we just have to surrender to the lowest common denominator and not live our lives the way we intend to live them. LIke it all just happens to us, and somebody else is to blame.