Papers in Peril, Part II: ‘Got to Reduce Our Costs'

Papers in Peril, Part II: ‘Got to Reduce Our Costs'
Eliza Hussman Gaines, managing editor of the Arkansas Democrat-Gazette (Karen E. Segrave)

The bitterest local newspaper joke in these brutal times suggests that Walter Hussman, publisher of the Arkansas Democrat-Gazette, would gladly scrub his name from the University of North Carolina’s journalism school if he could only get back the $25 million his family donated.

The gift to his alma mater was announced in September, back when Hussman’s plan for rescuing the Little Rock paper with a digital replica and Sunday-only print delivery was a bit of a cause celebre — a business model that he’d run through the number crunch and was willing to back with $12 million worth of iPads.

His print cutback strategy was simple. If he could get enough (65,000? 75,000?) print subscribers to keep paying their $35 a month for the digital edition, Hussman could keep the modern luxury of Little Rock’s 100-journalist newsroom.

Would it work? “It has to,” Hussman said, “or we won’t have a paper worth publishing.”

The paper lost money in 2018-19, Hussman said, but his new managing editor, daughter Eliza Hussman Gaines, told Arkansas Business in February that budgets called for a return to profitability this year.

That was, of course, before COVID-19 and the brutal advertising losses that followed mass business shutdowns. Cutbacks at American dailies have been coming, well, daily, and Democrat-Gazette President and General Manager Lynn Hamilton put out a call last Monday for all employees to consider voluntary furloughs or perhaps working four rather than five days a week, at commensurate pay.

Taking a three-month furlough now, with guaranteed enhanced unemployment benefits, might ward off mandatory staff cuts later, and offer a chance to rejoin the workforce when conditions improve, Hamilton said. The paper, which is self-insured, said it would pay full health premiums for the length of workers’ furloughs.

Hamilton conveyed a message from Hussman and Wehco Media CEO Nat Lea that said the coronavirus pandemic had unleashed “the largest collapse of advertising in over 40 years of newspaper publishing.”

Hussman and Lea, his nephew, said many advertisers had closed, and that revenue declines at those still open commonly reached 80%. “While our future is digital and subscriptions, we still need the modestly declining print advertising revenue to fully make the transition to sustainability,” the memo said. “Unfortunately instead of modest drops, we are seeing dramatic drops in advertising.”

They expressed confidence that the economy will rebound when the plague is under control, but added, “we have got to reduce our costs, at least temporarily.”

The paper’s largest cost is payroll, the chairman and CEO said, saying that line item was an obvious choice. “When we were confronted with an economic crisis and recession in 2008-2009, we first asked for voluntary help from our employees. A number of them responded, and that certainly helped us until the economy recovered.”

How deep a hole are we talking about? Consider this:

Total ad revenue at U.S. newspapers had plunged from $46.6 billion in 2000 to $11.8 billion by 2017, a 75% decline, and the trend has only gotten worse in the past few years. (By contrast, Facebook alone had revenue of $55.8 billion in 2018 and $70.7 billion in 2019.)

“Back in 2000, newspapers still got 22% of all the ad revenue spent in the United States. But by 2017, it was down to under 5%,” Hussman said last year.

News also filtered out last week that Paxton Media Group of Paducah, Kentucky, was making cuts at the Searcy Daily Citizen, the Russellville Courier and, most notably, the Jonesboro Sun.

The layoffs and print cutbacks, including a decision by the Paxton-owned Log Cabin Democrat in Conway to cut Sundays from a six-day print schedule, come as some industry followers predict another 50% plunge in ad revenue.

Max Brantley, writing on the newspaper crunch last week, said his paper, the Arkansas Times, faces the same gloom, but with fewer resources than Hussman, whose fortune was estimated at $890 million by Arkansas Business in 2001. “Whatever my net worth is today, it’s a lot less than it used to be,” Hussman told me in 2016.

That statement, with all U.S. newspapers worth a fraction of what they once were, is even more accurate today.