Read all about it
(but not in the mainstream media)

Wall Street controls your local newspaper

by Hannah Clark

Dollars and Sense magazine, September/ October 2001


On Wednesday, June 27, staff of the Grand Forks Herald in Grand Forks, North Dakota, along with other communication workers from around the city, demonstrated outside of the Herald's offices. The reason: Knight Ridder, the Herald's owner, was forcing the newspaper to cut jobs. The cuts were not because of poor journalistic performance, but because the Herald, like virtually all Knight Ridder papers, was not meeting the company's profit goals.

Knight Ridder is not the only company facing massive cutbacks. All over the country, hundreds of newspaper employees - reporters, editors, administrative staff, custodians and sales representatives - are getting the ax. Knight Ridder - owner of 58 newspapers, including the Miami Herald, the Akron Beacon Journal, and the St. Paul Pioneer Press - leads the pack in this spending squeeze, with 2,100 job cuts announced since December 2000. The New York Times Co. - owner of the Boston Globe - is close behind with 1,700 cuts. Dow Jones Co., which operates the Wall Street Journal, is eliminating 500 positions. And dozens of other media companies are cutting their payrolls by anywhere from 3% to 25%, all with the excuse that advertising revenues are down.

Most papers are initially offering buyouts, in hopes that enough people will volunteer to leave. Some are relying on attrition. And some are firing people right off the bat - 40% of the Dow Jones cuts will be layoffs, as will many of Knight Ridder's cuts.

The newspaper industry must be in dire striates, right? Wrong. Newspapers operate regularly at 20% profit margins, double those of the average Fortune 500 company, and triple those of most businesses. Though the numbers have slipped

recently, papers are still immensely profitable. The Boston Globe reported a profit rate of over 20% this year. Meanwhile, Knight Ridder raked in 18.5% in the first quarter of this year; that's 2.3% less than last year but still more than enough for your average entrepreneur.

Even this year's little stumble is hardly a fall, since industry profits have been increasing for years - and 2000 was a year of record highs. The Globe's profit rate was up by more than 7% in 2000; the New York Times by nearly 10%. Ten years ago, newspaper profits averaged less than 15%. And many papers will now employ fewer people than they did in those less prosperous times.

So why is this happening? Once a newspaper sells its shares on the stock exchange, as all the big news companies do, it is beholden to its shareholders and their desire for profits. Companies claim that if they don't keep up the pace, they risk losing big investors. Since labor is the highest cost of production in the newspaper business, labor is the first to go when profits dip.

And what happens to the news when Wall Street controls your local paper? Gannett, owner of 98 daily papers and the country's largest newspaper company, is a prime example. Between 1966, the year before Gannett went public, and 1980, the average number of news staff on a Gannett paper dropped from 45 to 26. And Gannett is not alone - all across the country, newspapers are closing foreign and domestic bureaus, slashing whole sections, and replacing locally produced content with wire service articles and advertising. At the Boston Globe, the "New Hampshire Weekly" and "Sunday New England" sections have both been eliminated and the "Focus" and "Book Review" sections have been cut by almost half. U.S. News and World Report has already eliminated its London and Tokyo bureaus, and Moscow and Beijing might be next. As more and more reporting jobs are eliminated, papers are forced to rely more on the Associated Press (AP) and Reuters for articles. And that means that we get less and less news, from fewer and fewer sources.

But at least the money saved is passed on to consumers, right? Wrong again. Savings are passed on to stockholders, yes. But after gaining monopoly power, Gannett typically raises subscription rates and advertiser prices, and then siphons the enormous (sometimes over 30%) profits out of the home community and into the Gannett bank account. These exorbitant profits then have Wall Street expecting more from other news companies.

Currently, there are laws in place regulating how many media outlets one company can own in any market (e.g., a given city). This curbs concentration of power, and preserves some competition - helping to ensure that a variety of news sources continue to exist. Such laws, however, are in danger. Media tycoons like Rupert Murdoch are already buying more than their allotted share of media outlets in anticipation that legislators will repeal these regulations. In their great book Its the Media, Stupid, John Nichols and Robert W. McChesney propose expanding regulations to limit the total number of media outlets one company can own, rather than simply limiting purchases within a given market. They also advocate increasing government support for non-commercial, community-run media. Good ideas all.

What can you do as an individual? Locally, you can find out who owns your town's newspaper, and work to hold them accountable to the community - especially if they are cutting jobs and content. Nationally, you can join the fight to preserve existing regulations. For more details, check out the website of the Media Access Project


Hannah Clark is a Dollars & Sense intern and a student at Macalester College in St. Paul, Minnesota. She is worried about how the recent layoffs in the newspaper industry will affect her job prospects after graduation, so if you have any leads, give her a call.

Propaganda and Media Control

Index of Website

Home Page