Getting Bad News Firsthand

By WILLIAM A. HENRY III

When Thomas Geyer started running the New Haven Register in 1986, the paper's Connecticut marketplace was booming. That made it possible to increase profits while simultaneously transforming a lackluster broadsheet into an editorially aggressive and graphically vibrant winner of awards, including the New England Newspaper Association's 1988 prize for the best Sunday paper of its size. But this year, as employment and house sales slowed, classified notices fell off 25%. The biggest display advertiser, the Macy's retail chain, cut its pages 15%. Overall, Register ad linage plummeted 20%.

In an effort to sustain profit margins, Geyer repeatedly imposed layoffs and other economies. Last week, however, when parent company president Robert Jelenic demanded yet another round of dismissals, Geyer warned that further cuts might damage the paper's news content and circulation. Employees were then treated to the unusual spectacle of a chief executive being sacked for fighting to retain jobs for the rank and file. Jelenic imposed the cuts himself, reducing the news staff from a onetime high of 190 to 108.

Geyer was only the most dramatic victim of a recession-induced advertising bust that has hit dailies across the U.S. Although circulation is holding steady, advertisers are skittish, and they normally account for about 70% of newspaper revenues. Hardly a major daily has escaped, from the normally ad-fat Los Angeles Times, where August's classified linage fell 17% below the same month last year, to the New York Times, the parent company of which reported last week that third-quarter profits from continuing operations fell 43.9%, in large part because of a 10.7% drop in ad linage. Says executive director Morley L. Piper of the New England Newspaper Association: "It's an industry- wide slump -- the worst in this region, I think, since the Depression years."

, For readers, any lasting shortfall in advertising leads to a reduction in news coverage. Most publications maintain a more or less fixed ratio between advertising pages and editorial pages, permitting short-term variations but cutting news space and staff if a slump persists. While few papers have scaled down as drastically as the Register, which is also burdened with a reported $200 million in takeover debt, cuts or hiring freezes have come at papers that were faltering even in better times, including the Denver Post, Dallas Times- Herald and Oakland Tribune.

Healthier papers too are questioning the need for some expensive coverage. The Washington Post said last week it will halt a long-standing growth trend in news staff and budget, scrutinize travel more closely and tighten the news space and manpower for nine local weekly sections. The Wall Street Journal announced a budget freeze and limits on news space. Dow Jones chairman Warren Phillips, who built the Journal into a globe-spanning enterprise, told the staff in a memo that "adverse market conditions" would continue, particularly in the U.S., in 1991. Thus, he said, "it's prudent for us to take steps now." Days after the memo, Phillips set a July 1, 1991, date for his already expected retirement.

Although most newspapers this year will retain about 15% of their revenues as profit, a margin that many other businesses would envy, and although the most acute financial problems seem to be cyclical, many editors and analysts fear that the industry faces long-term trouble. The biggest problem is a steady decline in reader interest. In 1946, for every 100 U.S. households, there were 133 newspapers sold. Today that figure is halved. Even more worrisome is the sharp decline in reader interest among the under-30 generation, despite attention getters ranging from high-tech graphics to more coverage of rock music.

The drop in importance to readers has been mirrored among advertisers. In 1946 newspapers accounted for 35% of all ad dollars spent; today they reap just 26%. While newspapers still outsell television in total advertising, TV dominates in national ads, which come prepackaged and are sold in bulk. Newspapers rely on local advertising, which is often less profitable because it must be sold bit by bit and may require costly involvement in makeup and production. In addition, much advertising that traditionally appeared on newspaper pages is now done through preprinted inserts, at lower fees, or has gone over to direct mail.

Many newspapers seek to reinvent the format. But they differ sharply about what tack to take. Some, including the Philadelphia Inquirer and Dallas Morning News, carry more national and international coverage, believing readers have had their horizons broadened by TV. Others, including the Boston Herald and NewarkStar Ledger, seem to feel their best chance at survival is to stay resolutely local.

Dave Burgin, a veteran editor who now runs the Houston Post, argues that newspapers must concede they are no longer the means by which people first learn about events. Therefore, he says, they must become more featurish, with life-style and entertainment moved up to the front page. The New York Times has already moved in that direction, playing up pop sociology and urban angst -- and the gray dowager will introduce color late next year. To compete with broadcasting's once-over-lightly approach, papers such as the St. Paul Pioneer-Press and Providence Journal have experimented with running a highlighted synopsis within some long stories.

Even alarmists concede that newspapers will persist in some form for a long time. Says analyst John Morton of the consultants Lynch Jones & Ryan: "There is still no cheaper or more economic way to deliver a mass amount of news to a mass audience." But in a business accustomed to high profit, a slight slippage can result in cutbacks of coverage. Some editors predict that newspapers will become repackagers, rather than originators, of information, dropping costly foreign bureaus and investigative projects in favor of wire- service copy. Other editors argue that what makes newspapers marketably different is depth and detail. One can only hope the believers in news coverage are right -- and that they prevail.

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With reporting by Christine Gorman/New York and William McWhirter/Chicago