The U-T's New Owners Face a Chilling Challenge | Voice of San Diego

Economy

The U-T's New Owners Face a Chilling Challenge

Newspapers will keep consolidating to maintain profitability while they figure out how to make money in the digital world as print revenues continue plunge.

Los Angeles has nabbed our newspaper and is coming for our football team and our Comic-Con.

Yikes! What’s next? Are those sea lions taking La Jolla Cove actually scouts from L.A., too?

I kid. Yes, the L.A. Times’ publisher is now the Union-Tribune’s publisher too. And yes, both papers are now part of something called the California News Group. But this is not about L.A. or San Diego or Chicago. What we’ve just witnessed is another sign of the creative destruction of the newspaper industry.

To understand it, start here. Mark Perry updates this graph every year.

newspaperrev

Newspaper revenues have been in a free-fall for many years. To be certain, newspapers made a lot of money during those good years. And they can still be profitable now — they just have to keep cutting costs and finding efficiencies.

One way to do that is to, for instance, print the L.A. Times in the same place as you print the Union-Tribune. As the man who broke the news yesterday, Ken Doctor, wrote, this type of consolidation was expected and probably isn’t over.

It might be the only way for newspapers to hold onto profitability while they try to transition to digital products.

In other words, newspapers are consolidating to give themselves some space, like a group of mountain climbers trying to create an airpocket after they’ve been buried in an avalanche — it will give them some time to keep trying to find the real solution to their problem.

The real problem is chilling. Check out this presentation from Jim Moroney, the publisher of the Dallas Morning News, for a tour of it. In print, newspapers are selling fewer ads for less money. On their websites, money from ads is not growing as fast as the other side is collapsing. Look at this slide from Moroney. Digital revenue is growing but not at the pace the other side is falling:

naarevdig

 

With internet advertising, newspapers are competing with Facebook and Google and thousands of other upstart apps, all of whom say they can create a better experience, target populations better and deliver more direct value for advertisers.

Thus, as it stands, newspapers are marching toward a cliff — that spot where print revenue sinks so low the operation is not viable but the bridge to the digital future is not yet complete.

The U-T’s new publisher is Austin Beutner. He is well aware of the cliff. For the U-T, it just got even clearer. No longer will the newspaper have another buffer on its balance sheet: real estate. Doug Manchester has stripped that away.

Beutner is a low-key guy — he doesn’t come off as someone who panics easily. He said he’ll be looking for money wherever he can find it — from events to other partners. Newspapers, he said, used to have it too easy.

“As a monopolist in print, it worked pretty well. Newspaper organizations have had real trouble shedding that heritage — learning to compete, learning to look for pennies and nickels where you used to be satisfied with dollars,” he told me.

“So we’re going to look to every source of revenue,” he said. When you wonder what might change about the U-T, I bet you’ll see little immediate change in the content and major long term changes in the paper’s relationship with the community through various new products and experiences.

We’re not watching the takeover of a San Diego institution by a Los Angeles institution. We’re seeing one big company, the Tribune Company, try to put together the right collection of brains and assets to solve that real problem. If all goes well, its leaders and reporters will create products with the power to sustain quality public service journalism long into the future.

At least that’s what we hope they’re doing. We’ve seen a preview of another route this could take when the U-T purchased the North County Times. It chewed off the meat of North County Times and tossed away what was left like a chicken bone.

Beutner assured me that wasn’t his plan. Tribune Publishing is a newspaper company, committed to newspapering. Never before in this modern struggle, he said, have two big newspapers like this, so close together, joined to face the future.

Consolidating the U-T and the L.A. Times might deliver profits to the Tribune Company, at least in the short term.

Only time will tell if they invest them wisely.

What do you think?
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