Alan Mutter, The Newsosaur, returns with another smack-in-the-face post this morning, which analyzes the numbers from 12 newspaper companies and notes, with some horror, how much faster profits are falling than revenues.
The average profitability of newspapers tumbled 18½ times faster than sales fell in the third quarter of this year, according to an analysis of a dozen companies that segment their financial statements in sufficient detail to isolate the performance of their newspaper divisions.
In a three-month period when advertising and circulation sales among the 12 publishers dropped by an average of 10.3% from the prior year’s level, the average operating profits of the group in the third quarter plunged by a staggering 198.3%.
What I appreciate about Mutter’s posts is how he 1) does original reporting and 2) often bases that reporting on numbers.
Numbers may prompt emotion, but they’re not emotional themselves. They tell an ugly story, but there’s little doubt that the story is true.
For at least a year, if not longer, it’s been clear to anyone who would look at the numbers that the old cliche is especially true now: Newspapers can’t simply cut their way to profit. There needs to be a reset of the business, a fresh look at the business model and the cost structure.
There will be more cuts, but if they’re not strategic cuts, executed as part of a rebuilding process, the blood will be wasted and, like Tribune’s payday loans to itself, merely forestall the inevitable.
But if the business (or just one brave paper) doesn’t heed the warnings of such events as the recent CUNY summit on business models or (one would hope) this week’s API summit, then the circling of the drain is only going to accelerate once the advertising money starts drying up in Q1.