KC Confidential.com

Former Star publisher Art Brisbane with fellow publishers Mac Tully, Tom Leathers and Steve Rose

The economic condition of daily newspapers today: abysmal…

That said for all the shots at the “dead tree industry” from basement-dwelling bloggers, when it comes to local news – as opposed to off the cuff zingers and unsubstantiated “news tips” – the information highway starts and ends for the most part with papers like the Kansas City Star.

The question is, for how long and in what form? What is the state of the daily newspaper industry today?

“I think it’s in a tailspin, a very serious tailspin,” says industry veteran and former Star publisher Art Brisbane. “I mean the problem is the advertisers are moving to the Internet and because of the very weak economy they’re cutting back as well.”

As evidenced by the shrinking size of the local paper and a seemingly endless succession of layoffs and cutbacks – one of which resulted in me taking a bullet last November.

“There’s another dimension that makes it very difficult for newspapers and that’s that it’s not going to be easy to shift from print side revenues and profits to the online side,” Brisbane says. “A lot of companies are trying to do that, to (convert) the loss of print revenues to Internet revenues and it makes a lot of sense to try to do that. But the reality is the profits from Internet revenue are a lot less. The problem is that newspapers had a virtual monopoly over print advertising, but on the Internet there is virtually no barrier to entry, so they cannot leverage their rates up because there’s so much competition. And because of that it’s hard to generate profits and what’s happening is the decline of the print side is so much greater than the rise on the Internet side.”

All of which makes for a potential financial train wreck.

“The danger is that because of the decline in print revenues, (companies) may not be able to sustain an enterprise the size of a newspaper,” Brisbane says. “Because you’re going to need big revenues to sustain all the things a newspaper does – and that’s a lot – and you need those big fat revenues to sustain all that.”

The $64 million question: can papers like The Star live to tell the story?

“They’re trying to thin it out but there’s still an enormous amount of expenses on the print side,” Brisbane says. “People talk about the decline of circulation, but you’re still talking about very large numbers.”

Reportedly 200,000 plus weekdays and 300,000 plus Sundays.

Brisbane’s take on the possibility of daily printed papers going bye-bye?

“That seems to be a current idea,” he says. “They’re chopping away at the print side expenses. The question is can they chop fast enough and what’s left when they do? The problem is there’s this decline on the print side and there’s a natural desire or belief that the business can be supported on the online side, but the way things are working out it doesn’t look like that’s going to be the great savior – at least not in the short haul.”

Home sweet home?

The flip side of that unhappy coin: the Star remains one of the more profitable papers in the game.

“What I’m saying has already happened to the point of papers being unprofitable in a number of cities,” Brisbane says. “But The Star is a more profitable paper so it has a better chance of making it through the crisis. So it has more time to sort things out and make it through the current difficulty. Even in 2006 the San Francisco Chronicle was losing money and I’m under the impression that there are a number of papers losing money.”

The Chronicle announced yesterday that it lost more than $50 million in 2008 and that staff reductions and other cost cutting measures would be implemented.

Back to our Star…

“The essential ingredient is that because The Star had a monopoly it could demand premium advertising rates,” Brisbane notes. “The Star is still doing a very good job on the Internet but the problem is there’s been a fairly long slide in the pricing power of print and it’s costing every newspaper a lot of revenue and a lot of profit. For instance there was a time if you had a help-wanted ad – this was before Craigslist – you might charge $250 a time and the ad might run five times. Before the advent of the Internet the profit on each $250 was enormous, increasing with each repetition. But people (then) had to come to the press to get their ads out there. Now they can’t charge $250 or whatever it is – it’s slim.”

And classified advertising until recently “was by far the most profitable part of the business,” Brisbane notes.

Armageddon aftermath

So is there light at the end of the current dark and foreboding newspaper tunnel?

“I think the answer to that is yes,” Brisbane says. “But the question that’s kind of intriguing to think about is what does it all look like at that point.”

All that said, were daily papers guilty of fiddling while Rome began to burn?

“I don’t think this was something newspapers could see coming and there wasn’t much they could do in order to completely respond to the situation,” Brisbane says. “They would have had to have a staff of brilliant engineers on the staff assigned to all this and beat Google to the punch.”

Brisbane’s prediction: “I don’t want to make a prediction about The Star but in general a number of newspapers will probably close and some of the newspaper companies will go bankrupt. And when that happens – let’s say some newspaper that has become unprofitable – the question is will anybody step up and buy it and try to run it successfully. You would think they would but we haven’t had a situation that has tested that prospect yet.”

How low can it go?

How few times a week can a daily paper publish and remain viable?

“Obviously there’s something known as a weekly out there, but I don’t know the answer to that,” Brisbane says. “They could have a daily printed product, but maybe look at doing it differently.  Maybe print a free six-days-a-week paper but with only 40,000 copies a day and on Sunday you have a mega paper with 300,000 or greater circulation. That way you preserve the single most profitable part of the paper which is the Sunday paper – that is overwhelmingly the most profitable part of the paper. The problem though is, you reduce your visibility and the newspaper reading habit.”

The bottom line: an additional 30 or-so newsroom staff cuts are anticipated along with the closing of three of the four outlying Star offices (the Olathe bureau is expected to stay). That, after the decimation that was last year. A news staff meeting is expected to go down this afternoon. However you cut the cake, the look and content of The Star and other daily papers is pretty much a slam dunk to change like never before in the weeks, months, years to come.