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The Soaring Cost of Dead Trees

4 min read

Dead tree media.

The term casts print publications as fading relics, as doomed in the digital age as the pulverized trees they’re printed on. And those dead trees are now costing publishers more.

New tariffs on Canadian groundwood paper triggered by a single U.S. manufacturer have added roughly 8 percent to the supply costs of Arkansas’ largest newsprint paper buyer, Wehco Media Inc., and its flagship Arkansas Democrat-Gazette.

“The timing couldn’t be worse for an industry that is already struggling,” Democrat-Gazette General Manager Lynn Hamilton told Arkansas Business. “Both U.S. and Canadian producers are raising prices” as a result, and legislation in the U.S. Senate seeks to reverse the duties, which were imposed this year and could go as high as 32 percent.

A final decision on continuing tariffs is expected from the U.S. Department of Commerce on Aug. 2, but the legislation, called the PRINT Act, would pause all effects while the agency reviews the economic health of the printing industry.

Paper is “our largest expense after salaries and wages,” Hamilton said. “Our newsprint expense runs into multi-millions of dollars a year for the ADG and for the entire [Wehco Inc. newspaper] group.” He fears eventual price increases of 15 to 20 percent.

Mitch Bettis, president of Arkansas Business Publishing Group and publisher of this paper, said, “We’ve been notified by some of our printing partners to expect a 3 to 6 percent increase in the immediate future.” He cited the tariffs, consolidation in paper manufacturing worldwide and a surge in global demand.

“Pulp is being used as an alternative in various innovative ways,” Bettis said. “It’s being used as a plastic substitute and in a variety of electronic components. As pulp gets rerouted to new directions there is a lower supply for traditional paper, and the laws of supply and demand kick in.”

The tariffs come as headlines blare about the plight of American dailies. “The Hard Truth at Newspapers: Hedge Funds Are in Charge,” Bloomberg reports, recounting the bone-deep cuts Alden Global Capital has imposed on papers like The Denver Post, where Little Rock native Chuck Plunkett blew the whistle before being ejected as editorial page editor. (Last week Plunkett announced he will direct the CU News Corps at the University of Colorado Boulder, teaching ethics to budding journalists.)

Bloomberg also noted acquisitions by Fortress Investment Group LLC, a global firm that manages New Media Investment Group, for which GateHouse Media Inc. is a holding company. GateHouse, the nation’s largest chain by number of papers, has 26 properties in Arkansas, including the Southwest Times Record in Fort Smith, the Pine Bluff Commercial and The Times of North Little Rock.

Meanwhile, Margaret Sullivan wrote in The Washington Post that local papers “are in a death spiral” that’s gaining velocity, in part because of the “horrors” happening at hedge fund-owned papers.

New Media’s CEO, Michael Reed, denies that investors are wringing every cent out of papers as they collapse. “We’re buying newspapers because we think we have a strategy that can save local journalism,” Reed told Bloomberg. Shares are up by a third over 12 months, and Reed noted a 10 percent profit margin.

Nevertheless, lawmakers fighting the tariffs said in a letter to the International Trade Commission that the duties will “further damage the printed news industry in the United States, which has seen a more than 50 percent decline in advertising revenue over the last 10 years.”

It warns that the trade dispute — “brought by only one company with 400 employees — could accelerate the decline for an entire industry.” Lawmakers say 175,000 jobs are at risk in a sector that has lost more than 200,000 jobs over 20 years.

Paul Boyle, a senior vice president at News Media Alliance, a trade group, explained that North Pacific Paper Co. of Washington state petitioned Commerce for the tariffs. “The rest of the U.S. industry is opposed, as is the American Forest & Paper Association.” He suspects short-term pricing goals were the likely motive.

“The financial deterioration of the U.S. newsprint industry has everything to do with the decades-long shift from print to digital and not unfair pricing from Canada.” Boyle said newspapers are reducing pages, sections and delivery days to absorb costs. “NORPAC is manipulating the trade laws for short-term gain but is ultimately hurting its own industry.” A NORPAC spokesman did not respond to requests for comment.

In parting, Hamilton said that in its editorials, the Democrat-Gazette favors free trade. “The current situation with newsprint is an excellent example of why.”

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