When I testified at an FCC public interest hearing on media ownership policies earlier in the month, I was stunned to hear the argument (including from Commissioner Copps) that the newspaper business really is still quite profitable in terms of operating revenues, and that it is only debt service that is driving newspaper companies into bankruptcy. That's like saying the airline business would be great if they just didn't have to borrow so much to buy all those damn airplanes.
The days of Ben Franklin running a hand press in the print shop basement are long gone. Running a credible news organization today - locally, nationally, or internationally - requires scope, extensive physical and human assets, and advanced information and communications technologies, all of which cost money. Like other businesses, newspaper companies have tried to amass the scope and scale necessary for success by borrowing money and investing in their businesses. But borrowing is never free; running a profitable business requires revenues sufficient not only to pay operating expenses, but also to cover the cost of capital. It may be news to our friends at Free Press, but newspaper companies around the country are struggling to meet their obligations and remain solvent.
A story last week highlights the difficulties that many papers are having. The Washington Post announced that it is closing all of its national news bureaus. In effect, the Post will cease to be a national news organization and become a local Washington, D.C. paper. Now perhaps that was a better strategy from the outset, and perhaps it should never have aspired to be anything more than that and borrowed in an effort to expand as it did. But it cannot be welcome news, I would think, to those who care about journalism, that one of the most venerable American newspapers is cutting staff and closing bureaus. To carry forward my earlier analogy - it is like an airline shedding planes and terminating service on some routes: it may be good for the airline and its investors, but it doesn't help the flying public.
The analogy is flawed, though, because, unlike the airline business, newspapers are affirmatively prohibited from organizing in ways that might allow them to remain profitable without shedding assets. Combinations that might make economic sense - the common ownership of a newspaper and a local broadcast station in the same market - are specifically proscribed by outdated FCC rules. The time is past to ease those restrictions; we can only hope it is not too late to save print journalism.
