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Tuesday, September 20, 2005

Inky to Decline and Fall

The Philadelphia Inquirer (known to Philly residents as the Inky) and its companion Daily News today announced another round of newsroom downsizing.  According to the publisher:

"[Previous cost reductions] have not been nearly enough to offset revenue shortfalls and we face new challenges as we head into 2006, particularly the loss of one of our largest advertisers, Strawbridge's, due to its purchase by Federated Department Stores, and significant cost increases for newsprint and fuel....

This isn't a step we took lightly. Over the last year, we have done everything we could to try to avoid getting to this point. We've cut presses and single copy routes. Reduced management. Trimmed the Technology department. Had our first Inquirer home-delivery price increase in several years. We've added advertising sales pressure, expanded the research and presentations department, and created more targeted preprint zones to help us better compete for that business.

Despite these and many other initiatives, our financial results have been disappointing. Total PNI revenue -- that is, the total money coming in the door, including Philly.com and other subsidiary operations - is running below prior year. More concerning, our revenues have been essentially flat for the last several years."

I don't know much about the newspaper business.  But I do know that the Inky is reputed to be shooting for a 25% profit margin (up from 16-20% over the last several years.)  I also know that my earliest memories of reading the newspaper are of the Inky, back in the early 1980s when it was, well, good.  No longer.  There is no national section to speak of apart from that culled from the wires; the metro section is puffery at best; and the sports pages are rarely riveting (despite the glory and pathos of Philly sports.)

Just another example, in case we needed one, of how managers' obsession with short term profits can destroy a company.  And, it's also fair to wonder: with profit margins that high for the taking, why aren't I out there starting a new paper?  [Oh yeah: my readers wouldn't like my single minded focus on strange intersections between securities law, economics and the Philadelphia Eagles.]

Posted by Dave Hoffman on September 20, 2005 at 11:14 PM in Current Affairs | Permalink


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I think another question is why the paper has to be connected with its larger corporate parent in the first place. If it wasn't connected to the corporate parent, I doubt that it'd have to shoot for margins so high because it wouldn't really be "exposed" to fuel prices (except in the really broad sense that they might decrease disposable income) or have to make up for other businesses that are losing revenue.

But I think the problem goes beyond the Inky: why are any of the major news outlets run by larger corporate parents? What does NBC gain by being a part of the GE empire? Does it get cheaper toasters? What about the MSNBC thing? Does MSNBC get nicer computers? It seems to me that the corporate parents usually are the entities that stand to gain in these relationships; by controlling a major media outlet, they can subtly influence public opinion. Perhaps they pay their blowhorns for this purpose, adding investment or some such other crap. I just wonder if the whole process ends up screwing society over in favor of better public appreciation of Bill Gates and/or cheaper toasters.

Posted by: Jeff V. | Sep 21, 2005 1:52:50 AM

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