Detroit. Now, maybe it seemed like Detroit was going to come roaring back after two decades of faltering, butthey spent hundreds of millions of dollars.”This was when the newspapers still had a patina of invincibility, he says, and the financial culture was—as isnow so obvious—deluded by its own equal sense of invincibility. The banks were happy to allow JRC toleverage itself to the maximum.
“
Then the economy turned sour, and the banks wanted their money back,” Teasdale says.Before JRC was kicked out of the New York Stock Exchange, its shares were trading at 3 cents.Yet JRC doesn’t stand alone in its ruthless pursuit of profits. Until only the past few years, owning a newspaper chain had been an extremely lucrative business proposition, providing profit margins upwards of 30 percent.The industry was once full of properties that were seen, as Warren Buffet described, as “indestructible slotmachines.”
“
In the 1990s,” says former
Times Union
editor Dan Lynch, “there was a fundamental change in thenewspaper business to a wide variety of thinking that was not for the better. A conviction set in at the highestlevels of the newspaper business that daily newspapers were a ‘mature industry.’ And since most of thesenewspapers are owned by large multimedia corporations, the thinking was that now is the time to milk thesethings for cash, because this is an industry without any realistic possibility of growth. So let’s cut the staff. Let’snot print anything in the paper that might piss off anybody and disrupt the flow of revenue.”Lynch worked for the
Times Union
during the ’80s and ’90s, the modern heyday of the newspaper industry,and remembers most of that time fondly. But by the time he left the paper, he was happy to be done with thebusiness. Newspapers were all too willing, he says, to trade their constitutionally protected privilege of “holdinggovernment accountable” for revenue.
“
There was an unspoken, but very real, determination on the part of the upper-level managers of thenewspaper industry in general that they wanted to do less and less of the kind of reporting that would piss off the power structure and would cost them money.” For example,
The New York Times
, he notes, took a largestate grant for the construction of a new office building in Manhattan. “And it is not unreasonable to presumethat made them less eager to report on corruption in the Pataki administration. That led to an inevitable declinein the product that is evident to everybody.”
“
And that is just one example,” he adds. “There are plenty of others.”At the same time, in the 1990s, while newspaper owners were looking to maximize profits by gutting thenewsrooms, the captains of this “mature industry” saw in a new technology an opportunity to further cut costs.
“
As the Internet came to life,” says Lynch, “publishers all over the country began to believe that it was atechnology that would allow them to abandon the print product. They wouldn’t have to have those big presses.They wouldn’t have to have all those trucks. They wouldn’t have to pay for paper. We could just put this thingonline and our costs would drop dramatically. All across the country, including at the
Times Union
, publishersbegan to take their prized and very expensive news content and put it online for free.”
“
The thought,” Rex Smith adds, “seven or eight years ago was, here comes this Internet thing. We’re gonnaimprove our Web site, and people will buy ads, and we’re just going to go for lots of traffic, and the traffic willattract the advertising, and the advertising will support our staff.”Lynch disagreed with that strategy. His argument at the time: “We paid a lot of money for this content. This iswhat distinguishes us from our competition. If you are going to put it online for free, especially at a time whenyou don’t know how you will transfer ad revenue from the paper product to the online product, you will be
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