The Parent Company

The News & Record is owned by Landmark Communications of Norfolk, VA, a privately-held company.

According to Forbes, Landmark had 2005 revenues of $1.72 billion and well over 11,000 employees. In addition to the N&R, Landmark owns daily papers in Hampton Roads and Roanoke, VA, and more than 50 community papers in 15 states. In recent years, it hit a gusher with The Weather Channel, a very successful cable television venture, and related businesses.

Frank Batten Sr, head of the company's founding family (his son, Frank Jr, is now chairman and CEO) is listed on the Forbes 400 with net worth of $1.4 billion; he has reportedly given away some $220 million to educational institutions, including a recent gift of $100 million to UVA to found a public policy school with his name on it.

Local Operations

According to the S&P Register of Corporations, the News & Record had sales of $62 million for the latest year recorded, which year is not specified in the report.

The business operations of the News & Record, like any typical publishing operations, are run by the publisher -- NOT the editor. The publisher of the N&R is Robin Saul, who came to Greensboro in 2004 after serving in a similar role at one of Landmark's community papers in Maryland. He's a company man, sent by headquarters to run a local operation; the local operation seems to have enjoyed considerable autonomy over the years, as long as it continued sending rail-cars full of cash to Virginia on a regular basis, and there's the rub.

The newspaper business is under enormous pressure. The problems facing the N&R are not unique -- this is not about indviduals or editorial content and decision-making -- and until this week the N&R had seemed healthier in recent years than many of its peers across the country, in terms of employment and circulation.

Yet even with the very real challenges to the business model, newspaper industry profit margins have remained healthy when compared to margins for American businesses in general, which have averaged about 8.3% over the last quarter-century, with somewhat higher returns in the last couple of years. 

MarketWatch reported in early 2006, "Newspapers have profit margins that average between 20% and 30%."  Broadcasting & Cable reported in April that Tribune Co. papers have profit margins in the 20% range. Columbia Journalism Review writes, "In 2006, supposedly a disastrous year for newspapers, the average profit margins for the newspaper divisions of publicly traded publishing companies was 17.8 percent, according to the Merrill Lynch media analyst Lauren Rich Fine."

Some smart folks still like the business.

What to Do

It appears* that Landmark has chosen to chase its historic profit margins rather than investing in its Greensboro business for sustained product quality and long-term growth. That would seem to be a business decision made in Norfolk, and executed by Robin Saul according to Landmark strategy.   

I think it's a poor choice, and not just because I am pro-Greensboro and pro-quality journalism. As I wrote in late 2005 in the column linked above, "[I]f papers keep responding by cutting their newsroom staffs in an attempt to preserve profit margins from another era, it will be grim. What they need to do instead is invest in improving their product, online and off."

A similar argument is made here: "Twenty years of research have taught me that good journalism is good business, at least in the long run, and that a company can produce good journalism while still producing profit margins much higher than 10%. Perhaps the real myth is that public companies will continue to make 20% to 25% profit margins 25 years from now. But the current managers won't be running the companies in 25 years, which might affect which myths they cling to and which they dismiss."

The decision from Norfolk seems consistent with long-term policy. In my view, the local paper has made two strategic business mistakes in recent years that haunt it today. One, it ceded the free-weekly market to the Rhinoceros Times, starving its own low-budget Triad Style for several years before folding it into the big paper as a listings supplement.

And two, it underinvested in new media and product quality as the market began to change. Yes, it has been smart and forward-looking with blogs, and it made early attempts at becoming an online platform, but I haven't seen the kind of game-changing investments that show long-term emphasis and a deep understanding of the ways the business will continue to be transformed. Where's the meaningful local answer to Google and Craigslist? Where's the local online ad market, and the new-media counterattack on TV and radio?

If the N&R earns at the very low end of industry averages [update: JR says they don't make public-company margins, but I think this math still holds], and that $62 million revenue figure is close to accurate, Greensboro is sending somewhere north of $6 million a year to Norfolk. It would make no huge difference in Landmark's overall numbers to cut profit margins for a while to merely solid rates of return, and to reinvest a few million bucks per year in product and product development,  but it would make a huge difference to the News & Record, and Greensboro, and the future of local journalism.

Too bad that ain't happening.

*I have contributed an opinion column to the N&R for a decade, but have never been an employee, and can count the number of times I've been in the building. I have no inside knowledge of its business. I have no real financial stake in these decisions -- I'm grateful for the space they allot my opinion column, and it's done great things for me as a writer, but beyond any intangible benefits I lose money on it.

Comments

[Elizabeth Wheaton]

Excellent work, Ed. That's just the kind of information that should have run with (instead of?) yesterday's press release on the layoffs.

[Cara Michele]

So can you write this in your next N&R column?

[The CA]

Nice job in tracking that info, Ed. But your argument and the other argument you cite that good journalism is good business contradicts your earlier position that it's not about individuals and/or editorial content. It is the "good journalism" that results in the editorial content. If the journalism isn't good, that effects the business by your application of your own argument. Thus, those who complain that some of the problems are the result of the journalism (read: bias) aren't off base.

The figures you cite tell a little different story about chasing profit margins, but there is some overlap and contradictions in the analysis.

[Ed Cone]

Good journalism means intelligent coverage of important stories. The journalistic lapses of most local newspapers, including the N&R, have much less to do with political bias than depth and focus of coverage.

There's no ideology at work in the gutting of the once-proud sports section, or in the aimless business coverage, and on and on. Instead there is a lack of resources that cycles into lack of interest and fewer resources and so on.

I would not argue for a moment that the N&R has not had its share of missteps on the journalistic side, or that it fails to please every ideological camp at all times, but I do think those factors pale in comparison to the macro issues facing the industry, which fall upon the liberal and conservative and middle-of-the-road alike.

This is also about platforms and delivery methods for journalism, which require investment as well.

[Mark]

First, I'd like to add a few more facts:

* The N&R's circulation has been basically flat since at least the mid- to late-1990s which is as far back as I've looked at the numbers. During that time Guilford County and Greensboro have grown, so the paper has essentially been losing market share, at least in print. And advertising in the print newspaper is still responsible for the bulk of newspaper revenues and profits.

* If the N&R had sales of $62 million, assuming the S&P figure is accurate, we still don't know what kind of profits it had. And whether for the owners at Landmark or for newsroom managers who want to invest in more technology (or more people), profit is what you need.

* Whatever profits the paper has been getting the last few years have been helped by cost cutting, including cutting dozens of jobs through attrition and last year through buyouts.

* Newspaper profit margins may have been at 17.8 percent last year for publicly traded companies, but that was down from 2005, which itself wasn't a particularly good year. And if you look at the profit margins for public newspaper companies now, they're not too impressive, averaging about 6.6 percent.

So we've got the newspaper industry, and quite likely the N&R, too, losing market share, and seeing profits going down. Though print newspapers are still a huge industry, the future prospects don't look good when you consider all the competition, especially online, that's out there. Since investors (at least the rational ones) make decisions based on future expected returns, the price of newspaper stocks are generally declining because it looks like newspapers will continue to see profits stay flat or even drop, even as their businesses shrink.

At the same time, online media is growing like crazy. While newspaper web sites are starting to make some money, they're still just a fraction (i.e. less than 10 percent from the numbers I've seen) of total newspaper revenues. And most newspaper web sites, and certainly the N&R's, are essentially subsidized by all the reporters, ad sales folks and probably even IT support who work for the print side of the business. The big question in newspapers has been whether the online business can grow fast enough, and gain enough size, to support journalism, which is expensive.

I'd like to think that, in fact, newspapers will be able to grow the online business fast enough to at least stay in business and at least continue to do what they've done traditionally: report on happenings at city hall, the state legislature, etc. But online media is very competitive -- it has low barriers to entry, lots of competitors already in the marketplace, etc. -- and I can't imagine that newspapers will ever enjoy the near-monopoly level profits they enjoyed in print a generation ago.

What society got from those high newspaper profit margins was, from time-to-time, expensive but valuable investigative reporting. Reporting that requires having one or more people devoted to a single story for months on end, without producing anything for the daily product. Will the profit margins in online media be high enough to support this?

At least one alternative that's being tried is running investigative reporting out of a nonprofit organization created for that purpose. For example, the Center for Public Integrity, works on just such a model. Any chance we'll ever see such an organization on a state or local level?

Or we could hope that somehow online news organizations manage to generate incredibly high profits OR the owners of media companies are willing to accept significantly lower profit margins in the name of public interest journalism. But owners of other companies who serve significant public interests (pharmaceuticals or health insurance, for example) haven't shown any sign of that. Why should we expect something different from newspapers?

[Bubba]

"Or we could hope that somehow online news organizations manage to generate incredibly high profits OR the owners of media companies are willing to accept significantly lower profit margins in the name of public interest journalism. But owners of other companies who serve significant public interests (pharmaceuticals or health insurance, for example) haven't shown any sign of that. Why should we expect something different from newspapers?"

Indeed.

As a business, there's nothing sacred about print journalism.

If the N&R is returning substantially lower margins than industry as a whole, the owners would need to take a "pet project/not for profit" attitude toward their business.

Most entrepreneurs aren't wired to think that way.

Charity is one thing, but ROI is quite another.

[Ed Cone]

What I think Landmark should be doing is investing in the brand across platforms to make itself the leading provider of news and information for this region.

The historical profit margins for print newspapers aren't really part of the discussion anymore. That doesn't mean info businesses can't be profitable, or even very profitable, just that they won't get there by printing general interest daily newspapers alone.

Legacy owners can recognize that reality and invest in the creation of integrated cross-platform information products; sell to a new generation of risk-takers and entrpreneurs; or milk the old cash cow until it dies.

[Beau Jackson]

Ed...........
Your editorial is a bunch of crap. The N&R doesn't print "news" any more but biased editorial apealing to the Liberal left sgnificantly shrinking thier potential market. Circulation is down because JR doesn't understand the phrase "fair and balanced news." Nice try Ed but your plea for the N&R is full of holes like Swiss Cheese........

[Guilford Native]

Not sure why the far-rightwingers are so fired up about what the paper writes.

They have one of their own choosing the day-to-day stories, slashing jobs from the democratic and moderate writers, and reporting portions of the news that he thinks is relavant.

Sounds kinda John Ashcroft-ish

Guess it shows that no matter who in charge of the print, there will always be a few people whining. (even in a strong Democratic area such as Greensboro)

Click here

[Bubba]

"far right wingers"?

"one of their own"?

"kinder John Ashcroft"?

And YOU have the nerve to complain about some people "whining"?

Sure, friend.....whatever you say.

[Beau Dure]

Mark -- Much of your analysis makes sense, though I'd argue that Guilford isn't growing as fast as other parts of the state. I just ran a few counties through the Census figures and found the growth in Charlotte, the Triangle and Wilmington is outpacing that in the Triad. (But the numbers in Guilford were higher than I expected, perhaps refuting the great contention from a long-ago campaign that Greensboro was moving westward rather than growing.)

Still, the decline in the N&R's market penetration isn't dramatically worse -- in most cases, it's dramatically better -- than it is elsewhere.

Ed -- Until this week, I might've considered Landmark my favorite newspaper chain. (In case anyone from Gannett is reading -- present employer excluded.) Landmark innovated without doing anything wildly extravagant and misguided, say, like Frank Daniels' vain attempt to turn Raleigh into the center of the online news universe. They tinkered with a flatter management structure, attempting to upend the top-down approach. They let the N&R experiment -- though in some cases those experiments (remember the USA TODAY-style design?) weren't well-received. They were ahead of the curve on the Web without flushing away millions and jerking around hundreds of employees.

But the best part of Landmark's oversight from an employee standpoint has been violated. We were always told, "No layoffs."

I can see the argument that the N&R was comparably overstaffed, sports excluded. I don't understand why buyouts weren't offered, at least as a prelude to layoffs. If morale was already sagging at the N&R, that would've been the best way to go. Give the most disaffected employees, or those simply seeking a change, a nice parachute. Let the others stay.

I don't live in the area, so I can't judge the overall quality of the paper, but I'll say that what I read about it seems to miss the point. The paper has plenty of critics, and some of them would love to believe the N&R is suffering because of the Wray case or other supposedly slanted coverage. Unlikely. When you see the numbers of what people actually read in a newspaper, you find that such things don't have the universal impact the bias hounds might think, even if the bias accusations were true. I'd bet that for everyone who canceled a subscription over Wray, there are many more who quietly let their subscriptions lapse because they didn't see enough of the things they liked -- college sports, local arts coverage, even whatever comic the paper last dropped.

The paper also has plenty of fans who are enamored of the Web 2.0 approach -- the blogs, the Town Square, etc. Seems to me they're also missing it. (JR posted an e-mail exchange between me and Jay Rosen on this topic.) Has the region, beyond the 50-100 people most active in the local blogosphere, really embraced all this?

Personally, I'm quite sorry for all the talented and terrific people I know there. I worked with Tom Taylor and Maria Johnson, and I'm sorry to see them go. I'm sorry for Margaret Banks, Rob Daniels and all the copy desk survivors who are working in a demoralized newsroom.

But beyond how I feel about it, this may have a bit of a chilling effect throughout newspaper journalism. The N&R and Landmark were doing a lot of things "right." And then this happens.

[JAT]

I'm with Beau. Mostly.

I too don't see that vital hard copy everyday, but the stories and the Web ver usually seemed to be value-add.

I could even see the top heavy sports side as making some sense in that G-boro is the de facto "capital" of the ACC. However, blame expansion for making it impossible to cover developments from Boston to Miami in a meaningful, cost-effective way.

But rather than dimiss reader complaints of bias, I'd recast them as complaints about TIRED story lines, tired themes, a tired package. Nothing worse is going out to get the morning paper and soon realizing that there is not a single story in it worth reading, not a single story that you cannot safely predict its lede, focus, and conclusion.

The folks who place ads must feel this way too, or we would not see the fall off in ad revenue that we now see.

[Joe Killian]

I certainly wish there's been something like this - the information, if not the commentary -- either by a reporter or an ombudsman in the paper. I argued for it.

[Beau Dure]

JAT -- Interesting point about ACC expansion making it more difficult to cover the league. In 1990, N&R writers could drive to every ACC venue, file a story, spend a night in a hotel and drive back the next morning. Now they'd need to shell out a lot of air miles.

If there's not enough variety in the N&R, that's definitely a problem. Of course, they've just made it more difficult to solve.

[Outdated]

In trying to understand the industry, does anyone else find it remarkable that the newspaper industry, which documented the demise of American manufacturing industries over the past couple of decades and chronicled the birth of, “The New Economy,” didn’t hear its own words? The industry had access to wealth, technology, information, and well-educated management in its organizations. Was there anyone in the industry, back in 1982 when Time Magazine’s, Man of the Year, was the Computer, saw storm clouds on the horizon? Fifty years from now when the historians look back on this time who or what will get the blame? Will it be journalism schools? Will it be management that might be labeled, lazy, inept, arrogant, and absent courage? Will it be a corporate financial controls and direction that discouraged innovation, creativity and strategic thinking? Will it be the internet and 24/7 connectivity, or perhaps a combination of all? A now a once influential and proud newspaper has been reduced to begging its readers to become citizen journalists and supply ideas and suggestions for stories because the newspaper no longer has the staff, budget, and expertise to help citizens participate in their democracy.

[Jeffrey Sykes]

Hubris has a lot to do with it.

[Jeffrey Sykes]

Poynter Institute analysis of newsroom cuts.

[Beau Dure]

Jeffrey -- No, hubris has nothing to do with it. These days, hubris sells.