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PART 2: SHOW US THE MONEY

Breaking the News: How MediaNews is causing a seismic shift in Bay Area newspapers

While there has been minimal local coverage of consolidation, daily newspapers in general have been especially tuned in to the story of their own financial plight and have covered it as a major story in recent years.

Daily newspaper readership is down mostly because younger adults are increasingly getting their information online or from sources other than newspapers. The circulation of daily newspapers is dropping across the country, down more than 11 percent from 1990 to 2005.

The local dailies are prime examples. The San Francisco Chronicle recently topped the list of 20 major dailies in percentage circulation decline, dropping 15 percent between March 2005 and March 2006, according to Editor and Publisher magazine. (The next largest decline was The Boston Globe at 8.5 percent.)

Paid circulation declines coupled with decreased advertising revenue have clouded the future of daily newspapers. Craigslist and other online competition have drastically cut classified advertising revenues, which had been the major profit center for most daily newspapers. Much other advertising is also shrinking or moving online.

The value of daily newspapers as businesses has also declined. The stock of McClatchy Co., owner of the Sacramento, Fresno and Modesto Bees and other media holdings across the country, was recently downgraded to junk bond status by Standard & Poor's ratings service.

MediaNews' Dean Singleton was quoted in his own Denver Post on Aug. 14 as saying that while advertising dollars may be falling away from large metropolitan dailies, newspapers with circulations between 20,000 and 250,000 are thriving. His rosy big-picture view isn't echoed locally.

Where daily newspaper journalism is headed is unclear. Reports appear almost daily regarding cutbacks in newsroom staffs across the country. Major papers have cut back foreign and Washington bureaus as well as in their backyards. Locally, the San Jose Mercury News has cut its newsroom staff by about half over the last seven years.

On May 19, the Chronicle announced one of the biggest cuts of any newspaper in the country. It planned to cut 25 percent of its newsroom staff by the end of the summer -- 100 positions from a staff of 400. (The Chron has a poignant tribute to departed staffers called "Colleagues Remembered" on its Web site.) Publisher Frank Vega said revenue from advertising and other sources wasn't keeping pace with the cost of running the paper.

An example of what's happening in the industry is contained in a statement from publisher David Hiller of the Los Angeles Times, the daily paper generally regarded as best in the West. The April announcement said the Times would offer voluntary buyouts in hopes of cutting its staff of 2,625 by up to 150 employees. Revenue for the Times and related units dropped 4 percent in the first quarter, compared to the previous year.

"The fact is we have to take actions to keep staffing in line with the revenue picture, which currently is falling in the core print business," Hiller said. "Up to 70 jobs could be cut from the newspaper's news operations, which would bring the newsroom staff to roughly 850. The Times news operation employed about 1,200 when the paper was purchased by Tribune Co. of Chicago in 2000."

In May, the Times announced an additional cut of 57 more newsroom positions. Two consecutive Times editors, Dean Baquet and John Carroll, had resigned rather than preside over additional staff cuts.

Newspapers are dead! Long live newspapers!

Some popular wisdom has most print newspapers folding in the near future and news shifting online. Many in the blogosphere are already waving good-bye.

There is one particularly troubling problem with that: If you trace the source of most serious news online, it generally leads back from Google or Yahoo or sites such as Digg.com to newspapers. One survey of 100 bloggers found that 59 said their primary source of information is newspapers. Another 19 said their primary source is other bloggers -- so 78 percent of bloggers get their information from newspapers or other bloggers. Of the remaining 22 percent, it's unclear how much, if any, of it is original news. Most, it seems, is opinion and reaction in response to the news.

Newspapers, to compete with online sources, are transforming themselves into "information" companies and increasingly reporting news, when it happens, online. According to the Newspaper Association of America, more than 59 million people (37.3 percent of all active Internet users) visited newspaper Web sites during the second quarter of 2007, a 7.7 percent increase over the same period a year ago.

However, with a few exceptions, the revenue to support online newspaper sites still largely comes from print. No one has figured out how the brave new world of multi-platform information providers can produce enough revenue, presumably from online advertising, to ensure the survival of serious journalism.

At the same time that daily newspapers are failing due to online competition, they are feeding the beast that is devouring them. MediaNews, Hearst and McClatchy announced in April of this year that they were joining with Yahoo and other leading U.S. newspaper companies in a "definitive agreement that expands a growing partnership combining the newspapers' unmatched local news and advertising reach with the technologies and audience of Yahoo." Most of the newspapers will feature Yahoo's "HotJobs" online employment listings.

There's an element of schizophrenic behavior here. The question these companies must be asking themselves is, "Do we join them and share some revenue -- even if it's not enough to keep us going -- but risk providing enough content to allow them to continue their growth which undermines our basic business?" The trend is clearly toward joining, which may be based on the theory that if they don't, someone else will, and they won't share any of the revenue.

Monopoly, anyone?

San Jose State's John McManus, the primary force behind "Grade the News," a project focused on examining the quality of news delivered by Bay Area media, believes that as newspapers decline, we suffer a loss of civic vitality. Staffers in government departments, for example, who had been accustomed to reporters hanging around, begin to cut corners because they operate in the dark.

The result, McManus says, is that investigative and enterprise reporting suffers and news becomes more public-relations and entertainment driven. The public is not upset by this, he says, because it simply hasn't noticed.

As an example, he analyzed the Mercury News coverage of the "finger in the bowl of chili" story, and says it ran for 33 days from the day it broke to the day Anna Ayala was arrested. It was in the paper every day and on the front page 11 times. Iraq made the front page once, and that was a human interest story.

McManus is author of "Market-Driven Journalism: Let the Citizen Beware?" in which he argues that the formerly revered practice of news reporting for the public interest is being superseded by the corporate driven "commodification" of news, treating it like any other product. He served as an expert witness in the Reilly lawsuit challenging the McClatchy-Hearst-MediaNews deal, and believes that Reilly succeeded in exposing and delaying the Bay Area consolidation but didn't stop it.

He says MediaNews argued to the Bush Justice Department that they shouldn't stop the acquisition because news is no longer a monopoly of newspapers. Television, radio and the Internet provide a wealth of different sources for news. While this argument has surface validity, McManus' response is: "Name some." With minor exceptions, no solely Internet-based sources are really reporting on your local community.

Peter Phillips, an associate professor at Sonoma State University and director of Project Censored, argues that "Media consolidation is creating a new form of censorship in the United States and undermining democracy in the process." He describes a system where fewer than 10 major media corporations now dominate the U.S. news and information systems. Ninety-eight percent of all cities have only one daily newspaper and these are increasingly controlled by huge chains.

According to Phillips, "Censorship in the United States today is seldom deliberate, but rather comes under the heading of lost opportunities. Mega-merged corporate media are predominately interested in the entertainment value of news and the maintenance of high audience viewing/reading levels that equate to profitable advertising sales. Non-sexy or complex stories tend to receive little attention within these corporate media systems."

Pulitzer Prize-winning investigative reporter Lowell Bergman has a more critical perspective on the current state of Bay Area journalism. A UC Berkeley professor (and one who has focused on the national picture), Bergman makes pointed comments about a variety of local media operations, says the public's interest is in jeopardy:

On the San Francisco Chronicle: "The people who are running the Chronicle have lost sight of why they're running a newspaper."

On Dean Singleton: "He's into making money. He's like Murdoch."

On local TV: "Most local stations in San Francisco are making 30 percent profits." Federal FCC licensing standards at one time required more serious reporting, but "The FCC now says that's what's in the public interest is whatever the public is interested in."

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Go to PART 3: THE FUTURE IS UNWRITTEN

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