Spreading The News

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Media technologies still in their infancy are gaining fast on traditional newspapers. The future for print looks bleak - unless the industry can transform itself.

November 06, 2005|By ANDREW RATNER | ANDREW RATNER,SUN REPORTER

Newton N. Minow says he has seen every side of the media elephant.

He's been a board director of Tribune Co., which owns this newspaper. He chaired the Rand Corp. as it helped develop the Internet - and says, "we didn't understand what it was all about at the time."

He was a director of CBS-TV and chaired the Public Broadcasting System. Most famously, he was head of the Federal Communications Commission when he told a gathering of broadcasters in 1961 that television was a "vast wasteland."

The producer of Gilligan's Island was so incensed, he named the shipwrecked boat in his TV comedy after Minow. But Minow's assessment, at a time when Americans were transfixed by the new, glowing cube in their living rooms, was prescient. So when he frets about the future of newspapers as we know them, it's worth taking notice.

"Where it all ends up nobody knows, but print, in my opinion, is not going to recover. I think we know that," Minow said recently, speaking from his law office in Washington. "When the Senate was holding hearings about Judge Roberts, it seems to me the most important questions they should have been asking were about the role of technology in the next 25 years."

Minow's judgment might seem odd when profits are considered. As the Columbia Journalism Review noted in an editorial agonizing over the future of newspapers last week, the weighted average of profit margins for the newspaper divisions of major media companies as measured by Morton Research Inc. climbed to nearly 20 percent last year - more than double the average profit margin of the Fortune 500.

But that's only one piece of the story. Newspaper readership has been in decline for years, and the pace of decline is accelerating, according to the Audit Bureau of Circulation. Advertising revenues are stagnant, and newspaper profits and stock prices are being propped up by cost cutting and stock buybacks.

Angst about the future of newspapers has swirled for a long time, but concerns gained strength this fall after a succession of job cuts at several large, respected publications, including The New York Times, The Boston Globe, The Philadelphia Inquirer and U.S. News & World Report.

Last week, three large institutional investors that, together, hold more than 36 percent of the stock of Knight-Ridder, one of the nation's largest newspaper chains, expressed dissatisfaction with the price of that company's stock. They suggested that a sale might be necessary for Knight Ridder shareholders to realize a fair return on their investments.

The three - Private Capital Management, Southeastern Asset Management and Harris Associates LP - sent letters to the Knight Ridder board of directors urging talks.

The "board takes its fiduciary duties seriously and will respond in due course," said Knight Ridder spokesman Polk Laffoon.

Industry analysts said the Knight Ridder investors are triggering a showdown that could test the value of local media, where newspapers still dominate.

While investors fret, the traditional media's self-image is increasingly shaped through blogs and Web sites - pieces of the new media that they worry about. Dire signs appear so doubtless, gallows humor has set in: The Society for News Design included 3-D glasses in its recent journal about ideas for survival.

Radio and television, print's old challengers, are facing their own struggles and are trying to reinvent themselves in satellite and high-definition form.

Traditional broadcast television viewership is down, and so are advertising revenues, as the age of the typical viewer moves up and out of the desirable young-adult demographic zone.

Broadcast radio ratings and profits also have been sharply lower in recent quarters as growing numbers of listeners turn to satellite radio and catch their entertainment and news on iPods and cell phones.

Cable television, satellite radio, DVD movies, video games and the Internet are all diverting younger viewers away from their favorite sitcoms.

Most threatening for traditional media companies long-term is an array of huge and well-financed companies in telecommunications and technology with radically different approaches to news and information.

The Wall Street Journal suggested last week that new media companies with local designs - including Yahoo, Google or eBay - might be interested in Knight Ridder. Yahoo "has moved increasingly into original content and would like to develop its local reach," said the paper. "Meanwhile, Google Inc. has expressed interest in entering the classified-ad market, where newspapers have deep relationships and continue to play a dominant role."

Yahoo recently hired a war correspondent to describe his visits to the world's military "hot spots" on its Web site and promoted it like a Vin Diesel action movie.

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