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The Guardian/UK

Consolidation Won't Save the Media

Allowing a few big companies to swallow up local newspapers created journalism's problems. More of the same can't solve them

Craig Aaron & Joseph Torres

Last week, House speaker Nancy Pelosi, whose hometown San Francisco Chronicle is in trouble, asked attorney general Eric Holder to consider loosening antitrust laws to help out struggling newspapers by allowing more media mergers. Holder responded by saying he is open to revisiting the rules.

Pelosi's request sounds innocuous at first - after all, struggling newspapers seem to need all the help they can get. But opening the door to more media consolidation is not the cure for the crisis in journalism. More of this bad medicine will only weaken reporting and worsen the health of our democracy.

As a few big companies swallowed up more local media outlets, they gutted newsrooms. The Project for Excellence in Journalism reports that the industry lost 5,000 journalists last year and has slashed 16% of its news staff since 2001. Is it any surprise that fewer people are buying newspapers when reporters are being taken off their beats and bureaus are being shuttered?

But media consolidation hasn't been a disaster only for dedicated journalists or the public who rely on reporters to keep an eye on their leaders. It's also been bad for business.

Just a few years ago, the average profit margin for newspapers was over 20% - with some bringing in twice as much or more. But that did not satisfy the newspaper executives or Wall Street. Instead of investing in the quality of their products and innovating for the future, the big media companies have been obsessed with short-term gains. Instead of bolstering their news-gathering or adjusting to the new media landscape, companies like McClatchy, Tribune and Lee Enterprises used these astronomical profits to buy up other properties.

While federal regulators rubber-stamped these mega-mergers, the media giants took on massive amounts of debt. Even though newspapers themselves are still profitable, their corporate bosses are drowning in IOUs.

A recent Advertising Age article reported that McClatchy's newspapers earned a 21% profit margin last year. But struggling under the $2bn it owes after acquiring Knight Ridder in 2006, the company has slashed its work force by nearly a third in the past year. The Tribune Company earned a 5% profit margin in its newspaper division for the first three quarters of 2008, but it still declared bankruptcy in December.

Gannett's newspaper holdings earned an 18% profit margin last year, with some properties earning as much as 42.5%. Nevertheless, Gannett slashed 3,000 jobs and required employees to take a week-long furlough. The company is also expected to sell off or shut down the 139-year-old Tucson Citizen this week. Despite taking pay cuts, Gannett's top executives still received sizeable six-figure bonuses.

Of course, poor leadership and debt aren't the only problems facing the newspaper industry. Ad revenue has been down 23% across the industry in the past two years. Today, advertisers have cheaper options online to reach their target audiences, a major problem for newspapers relying on print advertising for 90% of their revenue. Even though more people are reading newspapers online than ever before, online advertising still makes up just a small percentage of a newspaper's earnings.

We can't put the Internet back in the bottle or restore newspapers' monopoly on local advertising. Instead, what we need to figure out is how to support news-gathering, investigative journalism and beat reporting in a world in which Walmart coupons and car-dealership ads will no longer cover the costs of bureaus in Baghdad or Boise.

But if the same handful of conglomerates now coming to Washington for handouts had been held in check earlier, many of these newspapers and their employees would stand a better chance of weathering the economic storm. And if regulators hadn't looked the other way as these deals went through, newsrooms would probably have 10 years left to experiment, adjust and adapt - instead of what feels like 10 minutes.

Green-lighting more consolidation will only serve to prop up a failing business model. It won't create any new jobs - in fact, more reporters are sure to be sacked. And it won't add any new voices to the marketplace of ideas. Letting Dean Singleton, who already owns multiple dailies throughout the Bay Area, put out the same cookie-cutter content under the Chronicle banner won't bring back readers or help the industry.

If Pelosi and Holder believe that newspapers are critical to our democracy and worth saving, then they have to explore real structural alternatives that give media ownership back to local communities; figure out short-term ways to fund serious reporting during the bumpy transition to the Internet; and look for changes in tax or bankruptcy policy that might encourage local, diverse and non-profit owners who'd be happy to see the 10 to 15% profit margins that are still the industry average.

How to support serious journalism and local coverage in the new media landscape is a complicated question that surely requires a menu of answers, forward-looking policy ideas and lots of experimentation.

But we know what won't work: the exact same policies that got us into this mess in the first place. Media consolidation is the problem, not the answer.

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Craig Aaron is Acting Senior Program Director and Joe Torres is Government Relations Manager for Free Press.

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