Commentary by Albert R. Hunt
March 23 (Bloomberg) -- The survival of Bank of America Corp. and American International Group Inc. may be critical to resolving the global financial crisis. A guess is that the bank will emerge as considerably smaller and stable, and AIG, like the Hindenburg zeppelin, will splinter into many pieces.
The fate of the New York Times, Los Angeles Times and other American newspapers, much less important economically, may more profoundly affect the destiny of the U.S.
Many industries are reeling these days. Austrian economist Joseph Schumpeter wrote of capitalism’s creative destruction where innovation generates new industries and companies and destroys older ones. A similar process takes place during slumps, where the economically unfit don’t survive.
The value of major banks and financial institutions has fallen some 75 percent during the economic decline; the devastation of American newspapers appears as great.
The Tribune Co. -- whose holdings include two once- towering papers, the L.A. Times and the Chicago Tribune -- has declared bankruptcy; so has the Philadelphia Inquirer. In the last month, a major newspaper in Seattle ended its print edition and another in Denver closed.
Survivors are floundering. The Star-Ledger of Newark, New Jersey’s largest newspaper, cut its staff almost in half; McClatchy Co., arguably the highest-quality chain, with papers in places like Miami and Charlotte, North Carolina, has reduced its editorial staff by a third since the middle of last year.
Overseas and Washington coverage has been decimated. The Baltimore Sun and Boston Globe have closed their foreign bureaus. In Washington, major organizations such as Newhouse, Copley and Media General have eliminated their bureaus, while others have downsized dramatically.
Borrowing From Slim
The New York Times, considered by many the world’s greatest newspaper, has seen its market value decline to about $635 million, less than one-tenth of what it once was. The company had to turn to Mexican billionaire Carlos Slim for a loan.
Some political conservatives thoughtlessly relish the prospect of a world without the New York Times and L.A. Times. What they ignore is that “about 85 percent of the news people get is initially generated by newspapers,” says Alex Jones, director of Harvard’s Shorenstein Center on the Press, Politics and Public Policy.
As much as Rush Limbaugh may say he hates the New York Times, the newspaper is a feeder for him.
Many younger, upscale consumers say this isn’t a big deal, because the Internet is producing a plethora of news and information.
Walter Reed
There’s a two-word rejoinder: Walter Reed. A couple of years ago, two of the Washington Post’s best reporters spent nine months probing the maltreatment of wounded veterans of the Iraq and Afghanistan wars at the Walter Reed Medical Center, supposedly the military’s finest rehabilitation center.
The stories generated outrage and produced real reforms. Disabled military men and women, as a result, receive far better care today.
No Internet outlets have the resources to do that story. Most scandals and revelations of corruption are exposed by newspapers. The crooked congressman, Randall “Duke” Cunningham of California, was sent to prison because of exposes by Copley News Service’s Washington bureau.
“In a world where power always seeks advantage, there is a critical need for a counter, and that takes resources,” says Jones, who’s publishing a book, “Losing the News.” Under current trends, he says, “it’s hard to calculate the damage that will be done to society by stories that aren’t done.”
Beyond Scandals
More than uncovering scandals is at stake. New York Times Managing Editor Jill Abramson says the newspaper has spent millions of dollars to maintain its Iraq coverage with multiple correspondents, photographers, videographers and Iraqi assistants. No Web site will do that.
What Web sites and blogs often do, for all their value, is polarize; liberals gravitate toward sites on the left, conservatives on the right.
Solutions are plentiful and thin. For newspapers, online services haven’t attracted the advertising that print editions enjoyed, and probably never will. Critics say news organizations made a mistake in not charging for content.
Sobering Reality
That may be, but the model for that approach is the Wall Street Journal, which started charging for its online site 13 years ago, attracted readers and didn’t cannibalize the print edition. Yet a sobering reality is that the Journal’s parent company, Dow Jones, not too long ago had a market capitalization of almost $7 billion; it was bought by Rupert Murdoch a year and half ago for $5.2 billion and experts say today its value is about 20 percent of that.
The French government is talking about subsidizing newspapers. Most newspaper people are adamant about keeping the government out of the business; some say that’s more rhetoric than reality.
“Whether it’s postal rates or exemptions from child-labor laws or joint-operating agreements, government has been involved,” says Jack Hamilton, dean of the School of Mass Communication at Louisiana State University in Baton Rouge. “With today’s problems, we may have to think of where government can be helpful in encouraging newsgathering.” This might include targeted tax breaks or a new look at antitrust provisions on information sharing.
Looking to Foundations
Others look to the largess of foundations or wealthy individuals. The Poynter Institute has long run the St. Petersburg Times and Congressional Quarterly, two high-caliber newsgathering organizations, and the Christian Science church published the prestigious Christian Science Monitor.
Yet this year the print edition of the Monitor went out of business, and Poynter is looking to sell Congressional Quarterly. Grants for foreign coverage or specialized reporting might help, though only minimally.
Conceivably, new economic models will evolve. (Bloomberg News, where I work, is one of the few flourishing news organizations in the world, as readers pay a premium for Bloomberg’s data, analytics and news.)
Or maybe when the economy rebounds, newspapers will get a bounce, too, although the structural problems predated the financial crisis. And there may be costly casualties in the interim. That may not matter much for a vibrant economy. It matters a lot for a vibrant democracy.
(Albert R. Hunt is the executive editor for Washington at Bloomberg News. The opinions expressed are his own.)
To contact the writer of this column: Albert R. Hunt in Washingtont .
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