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Where's the Chaos?/Paper Profits

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Where's the Chaos?

It's rare to see the reaction of Mayor Daley buried at the end of the day's top local story. But the mayor suffered this indignity last Monday, in the page-one account of the Com Ed power failure that the Sun-Times published under the lurid headline: "W. Side chaos."

The mayor's remark, "There was no unusual criminal activity," showed up in the fifth to last paragraph. Many of the article's modest details actually tended to bear Daley out: despite a transformer fire Sunday night that plunged 14 square miles into darkness, "about 16" stores were looted, according to the story, and there were "at least 49 arrests." Three people died in a fire started by a candle. The police chief "didn't set a curfew."

Nevertheless, the Sun-Times, whose strategy is to pick its spots and cover those stories to a fare-thee-well, committed almost four whole pages to the power failure, pages preoccupied with crime and the fear of crime (other headlines: "As lights go out, so do crooks"; "Outage leaves residents insecure"). A paper that orders up blanket coverage of civic disaster doesn't easily settle for a headline screaming "Thousands remain calm." Mayor Daley was lucky to make the paper at all. The Sun-Times set much greater store by a Sergeant Pete Arpaia, who told a reporter, "They shattered windows, ran through the streets with their arms filled with goodies as though it was Christmas. But to us it looked more like the rioting that took place in 1968."

The Sun-Times swallowed this whole. Where has institutional memory gone? The 1968 west-side riot, which brought 12,000 Army troops and 6,000 National Guardsmen into the streets, led to nine deaths, 500 injuries, and more than 2,000 arrests. Entire blocks were in flames.

On Monday, the Police Department, clearly trying to play down the matter, was reporting a total of 79 arrests after two nights without power. The number of places looted was now 11, and it seemed that Sergeant Arpaia did not even join the police force until 1972.

But the police have their own rhetoric to answer for. Early Sunday, another west-side desk sergeant, David Catalano, apparently told a Reuters editor in New York, "It's just been a madhouse. . . . There was mass looting and burglaries at hundreds of stores, mostly liquor and grocery . . ." (Catalano tells us, "I don't remember saying that.")

The Reuters story prompted the Washington desk of another national news organization to call up a black reporter in the Chicago bureau and send her out to cover the riot. After chasing a story that her desk eventually disposed of Sunday evening in a couple of sentences, the bemused reporter talked to us.

She recalled the last big utility collapse around Chicago, a 1988 fire at Illinois Bell that knocked out service in several western suburbs for days. One of the angles the press fastened on then was the effect on businesses of losing telephone service.

"What would happen if the underlying premises were switched?" this reporter said to us. If phones went out on the west side, she wondered, would the media report how hard it was for businesses there to operate? If the western suburbs went dark, would the press's first instinct be to check for looting?

Paper Profits

Spiritually, newspapers stand head and shoulders above mouthwash and frozen pies, to name two other consumer products still made domestically. Which is why press barons constantly defend their profits as proof they have served the public well.

"Ultimately, journalistic quality and financial success go hand in hand," says James Batten, CEO of Knight-Ridder, Inc. "At Thomson Newspapers," says Michael Johnston, the CEO of that huge and wretched chain, "we feel strongly that, over the long term, the market is the arbiter of quality standards, and success in the marketplace is a genuine award of merit."

The Toronto-based Thomson chain owns 206 papers in the U.S. and Canada, and most of them are the only papers in town. They make money hand over fist (a 1981 royal commission called them "a lackluster aggregation of cash boxes"). But so do many other papers in this curious industry, although advertising is slumping, circulation wobbles, and the next generation of newspaper readers doesn't read.

Here's what financial analyst John Morton makes of this odd situation. In 1989, he says, "the average profit margin of the newspaper divisions of publicly owned companies" was 16.9 percent of revenues. "Handsome," says Morton. Handsome indeed. But in 1985 profits were an even handsomer 20.2 percent, and they've been slipping since. On the other hand, acknowledges Morton, 16.9 percent "is misleading." (A few papers lose a ton of money, most of them living on borrowed time in competitive markets.) Morton says, "Most newspapers in my experience fall in the 20 percent to 30 percent range most years, although that likely will be difficult to achieve in 1990."

And here's the rub. "The dilemma that newspaper companies face," observes Morton, "is that the high level of profits in the past has established a level of expectation for shareholders."

John Morton, James Batten, and Michael Johnston all make their remarks in the current issue of the Washington Journalism Review. All are reacting to a long, provocative article in the previous WJR titled "The High Cost of High Profits." According to the writer, Jonathan Kwitny, "Many editors--and even some publishers--assert a fear that the old idea of profit serving journalism is collapsing under the equally old but formerly limited notion of journalism serving profit."

A notable feature of Kwitny's piece was the bugler leading the charge. Jim Squires, the past editor of the Chicago Tribune, described newspapers as "the most profitable legal business in America."

During this era of huge profits, the portion of revenues budgeted by the industry for news operations has shrunk from 12 to 15 percent to 9 or 10 percent, Squires said. And in a lean year, owners forgo coverage rather than profits. Their duties to readers trail their duties to Wall Street.

"In the 14 years I was in top management," said Squires, "never did anybody come in and say next year's going to be a bad year, we don't have to make as much next year."

He told Kwitny, "There have been businesses like this before, and [the owners] have sucked them dry and killed them. I'm not sure but what they're going to do the same thing with this one."

We called Squires at home and found out that he'll be elaborating on some of these thoughts in a course on business, technology, and the press that he'll be teaching this fall at Harvard, and possibly in a book he's thinking of writing (since leaving the Tribune last winter he's already finished a novel). We also found out that Squires is none too happy with the Kwitny article. Squires thinks Kwitny beat up on big papers like the Tribune and Knight-Ridder's Philadelphia Inquirer even though both are far better than they were back in the 50s, when they were privately owned--while the papers that have really suffered are the ones "bought up by the Thomsons and the half a dozen similar kinds of organizations that don't have the kind of tradition and commitment that these big institutions have . . . "

But Squires wasn't misquoted. And he didn't take anything back. Talking to us, he elaborated.

"My argument is that all American business needs to have a longer performance cycle, and go back to the R & D strategy that built the great American industrial machine," he said. "If you ask me, did the Tribune or New York Times or any of the big papers spend enough money on R & D and a market share strategy--which basically is lower pricing and aggressive promotion--and I'll say no, not one of them did, but neither did the automobile companies or the computer companies, because of the pressure on them from Wall Street for earnings and growth percentages."

For the past 15 years, Squires went on, newspapers have been increasing prices and profits at the expense of readership. For a while, it looks like a good idea. "You sell more things at a nickel than you do for a dime, but when you raise the price you have a double impact on the bottom line." You make more per sale, and when sales dip at the higher price, so do production and distribution costs. "So all along the way you impact the bottom line positively." The problem is that little by little a company or industry doing this surrenders its market.

Perhaps, we said, publishers act in the short run because they don't believe there'll be a long run. "I don't know," said Squires. "They're fighting these long-term trends of declining readership, illiteracy, the computer age--you need a lot of faith and creativity to see a positive future for something that has that kind of trend line. [But] the thing about newspapers is that throughout the history of the country they've been different things at different times. It doesn't mean they'll die. It might mean they won't always be earnings eagles."

We told Squires it sounds as if newspapers are becoming increasingly marginal to society. Editors flounder around trying to lure readers they used to take for granted. Publishers once at the center of civic affairs now do as they're told by headquarters in other states.

Squires is a Tennessean, and something occurred to him.

"There was this sense, under the other system, that some if not all of these newspaper owners and editors and publishers would on occasion make a decision that was not in the financial best interest of the newspaper; they made it on the long-term interest of the community. Certainly newspaper editorials in the south for integration, for civil rights bills, were not taking a position in the best interests of the newspapers.

"That was the best of the free press. I expect you have to see less of that now. If you can't stand up and do that then you lose the special place in society you've always had."

Which is a tragedy, we said.

"That's my position," said Squires. "You get fired if you do that now [take a stand contrary to your paper's economic interests]. Or your stock goes down and everyone looks at you funny at the meeting of CEOs. You have to hang your head and stand in the corner."

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