Riske Business

Last month when the Audit Bureau of Circulations released its semi-annual report on newspaper circulation, I wrote a post called "Why Can't they Just Be Honest?"  Former Arizona Capitol Times reporter Phil Riske wrote a comment to that story in which he said:

You're obsessed. Were you hit in the head by a newspaper as a small child?

Actually no, I wasn't his on the head by a newspaper--I was hit in the head by a boot once, but I totally deserved it. 

I cover the newspaper industry because the newspaper industry refuses to cover itself.  On the day the circulation statistics were released, the Republic led with this story in the business section.

Is the hotel slump a real story?  Of course, and it was really well done.  But the slump in tourism and the industry's response to it is nothing compared to the meltdown that is occurring in the newspaper industry. 

Yet the Republic refuses to cover its own travails and when it does so, actually covers them up.  Here's how they manipulated the last two circulation disclosures. 

Frankly, I've done a lot more than simply cover the newspaper industry's decline.  I've been in front of that decline for years.  Maybe it's my accounting background combined with my outsider point of view, but over three years ago when Goldman Sachs was telling newspaper executives that content was simply going to migrate to the web, I was sounding the warning that the web can't support the current newspaper cost structure.  Here's another example.

Then two years ago when the Tribune announced that it was going to be delivered free, I had this to say.

Frankly, it's hard to see how the Tribune survives for another year.  It has a mainstream media cost structure and New Times distribution structure.  Subscription totals will continue to plummet as individual subscriptions expire.

The transition to a free paper will serve as a double whammy.  Advertising rates are built on a multiple of paid subscriptions.  As the subscription number falls, the advertising rate collapses exponentially.  Additionally, advertisers don't value a free newspaper as much as they do a traditional subscription paper, so the overall multiple will fall even faster. 

The Tribune, with a free daily distribution of some 70,000 units, is now the functional equivalent of the State Press.   But the State Press, of course, is written by Journalism Students who are hoping to leverage their experience into a $9 an hour internship with the Republic.   My guess is that the Tribune doesn't enjoy a similar cost structure. 

This is no temporary setback; the Tribune no longer has a viable business model. 

The Tribune's Lee Templar responded in the comments section that my analysis was "hogwash."  Of course my analysis was right on.  Check out this recent post mortem by the Arizona Capitol Times' Matt Bunk.

The East Valley Tribune’s demise was swift; during the past three years, the company went from an 83,000-circulation daily newspaper that was adding staff and trying to expand its coverage across the Valley to a free paper distributed on racks three days per week.

Since the beginning of 2008, more than 40 percent of its staff was fired, pages of news were eliminated and what was once a proud broadsheet became a tabloid.

The changes resulted in drastically reduced revenue figures. Freedom Communications reported its Arizona operations garnered revenue of $70.2 million in 2007, $53.3 million in 2008 and $17.5 million so far in 2009. The bankruptcy filings also show Freedom’s Arizona division hasn’t been profitable for the past two years.

So that's why I cover the decline of the newspaper industry--it's an important story; the papers refuse to cover it themselves and frankly, my analysis has been years ahead of newspaper management or wall street.

See, that boot probably actually did me some good. 
 

Comments

[Jim Torgeson]

The Trib ran a story that it has a buyer. I'm just curious as to why anyone would buy something that is losing money and in bankruptcy. It can't be worth too much. Can it?

[Mark DeSimone]

This was one of the funniest posts ever Greg. You have to give Riske credit too. You guys are both hilarious.

Sometimes people buy things at below assets. It's like scrap dealers.

[Andy]

Yea but if the Trib is in bankruptcy, that *implies* it owes more than the assets are worth.

[mark]

Andy: they buy the assets and leave the debts to die in bankruptcy.

[Jim Torgeson]

Supposedly, they want to operate it.

[Hmm?]

How could anyone expect newspapers to cover themeselves objectively? That'd be like expecting EspressoPundit to cover Republicans objectively.

[ron]

Hmmmm? one of the first points in critical thinking is to know the 'political stance' of the writer.. a point often forgotten by people pushing either side of the agenda...

[Hmm?]

ron: well, duhhh...