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Lauren Rich Fine: Cutting Headcount Is Only Part Of The Solution For Newspapers

This story was written by Lauren Rich Fine.
The rate of dire announcements coming from the newspaper industry is only being exceeded by broad stock market declines, and, in fact, might be related. As our founder Rafat Ali noted in today's post, McClatchy (NYSE: MNI) Newspapers is trimming another 15% from its overall headcount in a new effort to cut costs. Hearst is close to determining the fate of the San Francisco Chronicle and the Seattle Post-Intelligencer. Scripps' Rocky Mountain News has been shuttered. Journal Register (OTCBB: JRCO), Philadelphia Newspapers, and the Minneapolis Star Tribune have filed for bankruptcy.

As ad revenues continue to plummet mostly because of weakness in the economy, more cost containment efforts are likely to follow, although new revenue streams would be preferred. The industry is finally acting quickly but from such an extreme position of defense that we have to presume more obituaries will be forthcoming. While it's tempting to be supportive and suggest no one could have seen this coming, it really isn't the case. More than three years ago, I asked newspaper companies to imagine a future without classified ad revenues; even though it was an extreme suggestion, directionally I knew it was the right way to think. How the industry is getting theremarket-share declines exacerbated by a devastating economic downturnis different than I might have imagined. But just the same, no one has a plan. Self-denial has flourished throughout the industry.

More after the jump

I worry that the industry will cut off its nose to spite its face. Rampant headcount reductions generally sever the wrong heads. True, there probably isn't a lot of fat left, but I would venture to guess that an objective outsider could walk into most newspapers and question editorial processes, numbers of reporters and range of contentand come up with some good suggestions. Something dramatic has to be done. After enough hinting, I am again receiving the iPD, a PDF-like version of the Cleveland Plain Dealer (owned by Newhouse's Advance Publications); it certainly isn't perfect, but it is a step in the right direction as papers try to figure out how to do away with the burden of production and costly newsprint. I prefer a print version of the paper, but if I can't have one, this version will do. It preserves the editorial integrity of the paper, the serendipity, the ability to predictably find content, and, by the way, the ads.
I wish the industry had felt this same pressure before it became real financial pressure. I am frequently asked whether most newspapers are profitable. Forgetting the vagaries of seasonality, the answer is yes. The problem with that answer is that it is a snapshot; newspapers used to be a lot more profitable and many will become money losers at the rate revenues are declining. The bottom line is clear; more announcements are coming.

By Lauren Rich Fine