PEORIA -- If US newspapers, including the Peoria Journal Star are shrinking, don't blame the Internet. Blame their terrible financial management.
Here's an interesting article about the financial state of US newspapers today. The author, Alan Mutter, has his own financial stake/conflict of interest in sinking print newspapers, since he's a Silicon Valley consultant. Nevertheless his facts are facts. Here's what he says about GateHouse, owner of the PJStar:
GateHouse Media owes $1.3 billion in debt, or 14.7 times the $85
million in operating profits it produced in the prior 12 months.
(Operating profits also are known as EBITDA, which stands for earnings
before interest, taxes, depreciation and amortization.)
He also states: Fitch
Ratings, a private agency that analyzes the quality of bonds for
institutional investors, said publishers at this critical point should
not have debt greater than one time their annual operating profits.
GateHouse is at nearly 15 times its operating profits, many of those at the expense of Peoria readers of the PJStar, as staff has been cut and coverage cut back.
Meanwhile others bemoan the fate of newspapers, as if storms they can't control -- not financial malfeasance -- is killing them. Their solution: government vouchers to prop them up. The PBS show NOW devoted its most recent half-hour to a new book on this subject:
NOW's David Brancaccio talks to professor Bob McChesney and journalist
John Nichols about the perils of a shrinking news media landscape, and
their bold proposal to save journalism with government subsidies. Their
new book is "The Death and Life of American Journalism: The Media
Revolution that Will Begin the World Again."
Alas, nobody mentioned the foolish debt the newspapers have run up, so their executives could grow rich at the expense of the public. Yes -- a lot of that money went into high salaries, bonuses and other compensation.
So how would McChesney and Nichols deal with that issue?
Their solution to save journalism is to let the public choose which media to subsidize! They claimed gossip sites would not really benefit. Oh sure.
The alternative is to let the government choose which media would be eligible. Uh oh! That's a terrible idea.
What is the answer? Perhaps the government's role could be in bankruptcy court, so that when overextended media file to ditch their debts, the properties can only be sold to non-profits or cooperatives, less likely to loot the company for executive compensation.
Or maybe not. Look at this post on Gannett's excesses with its not-for-profit.
Meanwhile, it's a very sad day for the readers, for as McChesney and Nichols rightly state, democracy depends on an informed public, and the newspapers, especially, do the basic and vital research upon which electronic media feed endlessly. At least they have done so in the past because they had the resources, unlike blogs, websites and smaller publications.
When the newspapers collapse, nothing likely will the void.
-- Elaine Hopkins
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