I humbly offer a peek at the reality of daily newspaper publishing in the United States based on personal experience as a publisher as well as conversations with newspaper owners. The time is right because of the brouhaha over the business problems of large daily newspapers and the very real pressures on publicly-traded newspaper companies to keep up obscene profit margins.

Profit margins of US publicly traded companies over the last 25 years averaged 8.3 percent. That means they keep 8.3 percent of the gross income after all expenses. Daily newspapers routinely make 20 to 25 percent, and many make 30 percent and more. The more profitable ones are in so-called “clean” markets without significant print competition and unions. These newspapers tend to be somewhat isolated geographically. Most newspapers that earn below that are considered troubled. (Big city newspapers seldom are able to earn such percentages.)

Most US daily newspaper owners are used to making more than twice as much profit as the average US company. This has been the rule ever since the elimination of composing rooms by computers and automatic offset, high speed typesetting machines. What labor was left the publishers shoved into the editorial department without extra copy desk staffing …

Publishers who fail to meet the high margins are dismissed. I’ve never heard of a publisher being dismissed for putting out a lousy product. OK, that’s the situation today. So what is the result ? Given the opportunity to significantly improve their editorial product with more and better reporters and editors, daily newspaper publishers chose to take the money to enrich themselves, and their shareholders or use it to buy more newspapers.

This practice, however, is never cited as a cause of the decline in readership. Why ? Because publishers, who routinely describe their newspapers as “franchises,” do no not want the general public to know they have been reaping obscene profits out of their papers for decades while grossly underpaying all employees. Even their on-site publishers are paid far less than the industry average for managing same-size operations.

Owners in general are no different than any other greedy capitalist even though they wrap themselves in the First Amendment and speak of the papers as providing a public service. One egregious example: decades ago daily newspaper publishers fought tooth and nail to keep their child carriers out of Worker’s Comp insurance, despite the fact that the children have the most dangerous job at newspapers — seven times more dangerous than the next most dangerous, pressmen, according to Worker’s Comp risk assessments. Remember pressure from publishers allows kids to carry newspapers at a younger age than they can legally perform other work.

Newspapers get enormous breaks on mail fees, with the difference picked up by you and me. The results of the sky-high margins are plain to see: almost all newspapers fail to provide decent local coverage, and the page counts are so squeezed that national and international coverage is minimal. Instead the papers go crazy adding glitz while dumbing down what’s left of the content. See Gannett newspapers (and cry).

Now, faced with real, aggressive competition (using the written word), in the Internet, the publishers worried their honey pot might dry up and they are blaming their problems on everyone but themselves. Finally the new media competition is forcing tight-fisted publishers to spring for defensive measures, but my guess is that they will bring too little imagination to the battle.

Posted by Bill Doolittle at March 19, 2006 04:11 PM

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