Although no one in their right mind would ever hire me to run a business, as The Columbian’s former business editor, I like to keep tabs on what some companies are doing.
Specifically, I like to see what newspaper companies are doing. Two recent stories in the news left me a little confused and wondering whether I see a silver lining in those financial clouds, or just another five years of dense fog for our industry.
Let’s start with the silver. The New York Times just reported it generated more than $800 million in digital revenue last year, achieving its 2020 goal a year early.
Only five years ago, The Times’ online revenue was half that figure. Now, $400 million in digital revenue isn’t bad (although President Donald Trump once labeled the company as “failing,”) but doubling it in four years is amazing.
It’s especially amazing for a company in an industry that overall continues to experience reduced revenues, particularly in advertising.
To put it another way, The Times added 1 million new digital subscribers, bringing its paid audience to 5.25 million across all platforms. The digital audience is particularly lucrative for news publishers, because additional subscribers can be served with very few increases in cost to the business. You don’t have to buy newsprint and ink, print a paper every day and then drive it to a digital subscriber’s home.
To its credit, The Times has apparently reinvested a lot of its revenue into its news operation. It now employs 1,700 journalists, the most it’s ever had, and up from 1,300 a few years ago.
Despite its success, there were some bumps. Starbucks’ decision to quit selling newspapers at its U.S. stores hurt The Times’ single-copy sales revenue (it hurt ours, too) and the company’s advertising revenue fell last year, reflecting the industrywide trend. “The Times is a subscription-first publisher,” CEO Mark Thompson said in a conference call with happy stock analysts. “Woe betide the newspaper that isn’t.”
At the rate it is going, The New York Times is more giddyap than woe.
More woeful is what happened to the newspapers owned by Warren Buffett, the “Oracle of Omaha” whose business sense and investments made him into one of the world’s richest people. I have long admired him, and when he declared a few years ago that he believed in local newspapers and put some of his money into buying more of them, it made me feel great.
Alas, the oracle no longer foresees such a bright future. Recently, Buffett’s Berkshire Hathaway holding company sold its newspapers to Lee Enterprises, a midsized chain of community papers that includes The Daily News in Longview and several small-town dailies in Oregon.
From what I can tell, it looks like Lee got a great deal. Lee has been managing BH’s newspapers under a contract for the last year or two, and it now will own them at a bargain price. On top of that, Buffett’s company also refinanced all of Lee’s debt, which was around $400 million, and provided some operating capital, to boot.
Though Lee and its stockholders will benefit, I can’t see it as a boost for local newspapers. Lee says it expects $20 million to $25 million in “synergies” from the merger, which sounds to me like some employees will be losing their jobs.
These kinds of deals make me very happy to work for The Columbian, one of the increasingly rare examples of a locally owned newspaper. The Campbells will celebrate their 100th anniversary of family ownership next year. Four of the five owners — Scott, Jody, Ben and Will — work here, so you can see their level of commitment to their business and to Southwest Washington.
It’s still a tough go for the newspaper business, but some of the premier players are finding their way. It will be up to us smaller fry to do the same in the next few years.